Form 8-K
8-K — ADI GLOBAL DISTRIBUTION INC.
Accession: 0001213900-26-084882
Filed: 2026-08-04
Period: 2026-07-31
CIK: 0002105139
SIC: 5072 (WHOLESALE-HARDWARE)
Item: Entry into a Material Definitive Agreement
Item: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
Item: Unregistered Sales of Equity Securities
Item: Material Modifications to Rights of Security Holders
Item: Changes in Control of Registrant
Item: Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers
Item: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
Item: Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics
Item: Regulation FD Disclosure
Item: Other Events
Item: Financial Statements and Exhibits
Documents
8-K — ea0300190-8k_adiglobal.htm (Primary)
EX-2.1 — SEPARATION AND DISTRIBUTION AGREEMENT, DATED JULY 31, 2026, BY AND BETWEEN ADI GLOBAL DISTRIBUTION INC. AND RESIDEO TECHNOLOGIES, INC (ea030019001ex2-1.htm)
EX-3.1 — AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF ADI GLOBAL DISTRIBUTION INC (ea030019001ex3-1.htm)
EX-3.2 — AMENDED AND RESTATED BYLAWS OF ADI GLOBAL DISTRIBUTION INC (ea030019001ex3-2.htm)
EX-3.3 — CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK OF ADI GLOBAL DISTRIBUTION INC (ea030019001ex3-3.htm)
EX-4.1 — FIRST SUPPLEMENTAL INDENTURE, DATED AS OF AUGUST 3, 2026, BY AND AMONG ADI GLOBAL DISTRIBUTION FUNDING LLC, ADI GLOBAL DISTRIBUTION INC., THE OTHER GUARANTORS NAMED THEREIN AND U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE (ea030019001ex4-1.htm)
EX-10.1 — EMPLOYEE MATTERS AGREEMENT, DATED JULY 31, 2026, BY AND BETWEEN ADI GLOBAL DISTRIBUTION INC. AND RESIDEO TECHNOLOGIES, INC (ea030019001ex10-1.htm)
EX-10.2 — TAX MATTERS AGREEMENT, DATED JULY 31, 2026, BY AND BETWEEN ADI GLOBAL DISTRIBUTION INC. AND RESIDEO TECHNOLOGIES, INC (ea030019001ex10-2.htm)
EX-10.3 — TRANSITION SERVICES AGREEMENT, DATED JULY 31, 2026, BY AND BETWEEN ADI GLOBAL DISTRIBUTION INC. AND RESIDEO TECHNOLOGIES, INC (ea030019001ex10-3.htm)
EX-10.4 — INTELLECTUAL PROPERTY MATTERS AGREEMENT, DATED JULY 31, 2026, BY AND BETWEEN ADI GLOBAL DISTRIBUTION INC. AND RESIDEO TECHNOLOGIES, INC (ea030019001ex10-4.htm)
EX-10.5 — REGISTRATION RIGHTS AGREEMENT, DATED AUGUST 3, 2026, BY AND AMONG ADI GLOBAL DISTRIBUTION INC., CD&R CHANNEL HOLDINGS, L.P. AND CD&R CHANNEL HOLDINGS II, L.P (ea030019001ex10-5.htm)
EX-10.6 — SHAREHOLDERS AGREEMENT, DATED AUGUST 3, 2026, BY AND AMONG ADI GLOBAL DISTRIBUTION INC., CD&R CHANNEL HOLDINGS, L.P., CD&R CHANNEL HOLDINGS II, L.P., WILLIAM GALVIN AND, SOLELY FOR PURPOSES OF SECTION 3.6, CLAYTON, DUBILIER & RICE FUND XII, L.P (ea030019001ex10-6.htm)
EX-99.1 — INFORMATION STATEMENT OF ADI GLOBAL DISTRIBUTION INC., DATED JULY 20, 2026 (ea030019001ex99-1.htm)
EX-99.2 — PRESS RELEASE, DATED AUGUST 4, 2026 (ea030019001ex99-2.htm)
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8-K — CURRENT REPORT
8-K (Primary)
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UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 31, 2026
ADI Global Distribution
Inc.
(Exact name of
registrant as specified in its charter)
Delaware
001-43281
41-3033245
(State or other jurisdiction
of incorporation)
(Commission File Number)
(IRS Employer
Identification No.)
275 Broadhollow Rd
Suite 400
Melville, New York
11747
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including
area code: (631) 692-1000
Registrant’s Former Name or Address, if
changed since last report: N/A
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.
below):
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which
registered
Common Stock, $0.001 Par Value
ADIG
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry Into a Material Definitive Agreement.
Agreements with Resideo
On July 31, 2026, ADI
Global Distribution Inc. (“ADI” or the “Company”) entered into a Separation
and Distribution Agreement by and between ADI and Resideo Technologies, Inc. (“Resideo”), pursuant to which, among other things,
Resideo and ADI agreed to undertake certain actions in order to transfer or contribute the ADI Global Distribution business to ADI or
its subsidiaries (the “Separation”) and distribute all of the outstanding common stock of ADI to Resideo common stockholders
as of the close of business on the record date, July 20, 2026 (the “Distribution”).
In connection with the
Separation and the Distribution, on July 31, 2026, ADI entered into several agreements with Resideo that govern the relationship of the
parties following the Separation and Distribution, including an Employee Matters Agreement, a Tax Matters Agreement, a Transition Services
Agreement and an Intellectual Property Matters Agreement.
A summary of the Separation and Distribution Agreement
and other Separation-related agreements can be found in ADI’s information statement, dated July 20, 2026 (the “Information
Statement”), which is included as Exhibit 99.1 to this Current Report on Form 8-K, under the section entitled “Certain Relationships
and Related Person Transactions” and is incorporated herein by reference. The foregoing description of the Separation-related agreements
is qualified in its entirety by reference to the full text of the Separation and Distribution Agreement, the Employee Matters Agreement,
the Tax Matters Agreement, the Transition Services Agreement and the Intellectual Property Matters Agreement, which are included as Exhibits
2.1, 10.1, 10.2, 10.3 and 10.4 to this Current Report on Form 8-K and incorporated herein by reference.
Agreements with CD&R
On August 3, 2026, in connection with the consummation
of the Separation and Distribution, the Company entered into (i) a Registration Rights Agreement (the “Registration Rights Agreement”)
with CD&R Channel Holdings, L.P., a Cayman Islands exempted limited partnership (the “CD&R Stockholder”) and CD&R
Channel Holdings II, L.P., a Cayman Islands exempted limited partnership (“CD&R II”), and (ii) a Shareholders Agreement
(the “Shareholders Agreement”) with the CD&R Stockholder, CD&R II, William Galvin, one of the Company’s directors,
and solely for the purposes of Section 3.6 thereof, Clayton, Dubilier & Rice Fund XII, L.P., a Cayman Islands exempted limited partnership.
A summary of the Registration Rights Agreement
and the Shareholders Agreement can be found in the Information Statement under the section entitled “Certain Relationships and Related
Person Transactions,” which is incorporated herein by reference. The foregoing description of the Registration Rights Agreement
and the Shareholders Agreement is qualified in its entirety by reference to the full text of these agreements, which are included as Exhibits
10.5 and 10.6 to this Current Report on Form 8-K and incorporated herein by reference.
Supplemental Indenture
As previously disclosed, ADI Escrow Issuer LLC,
a direct, wholly-owned subsidiary of ADI (the “Escrow Issuer”), issued $400 million aggregate principal amount of the Escrow
Issuer’s 7.125% Senior Notes due 2034 (the “Notes”) pursuant to an Indenture, dated June 30, 2026 (the “Indenture”),
between the Escrow Issuer and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The proceeds from
the Notes offering were held in escrow until satisfaction of certain escrow release conditions.
On August 3, 2026, the Escrow Issuer merged with
and into ADI Global Distribution Funding LLC (“ADI Funding”), a direct, wholly-owned subsidiary of ADI, with ADI Funding as
the surviving entity (the “Assumption Merger”). In connection with the Assumption Merger, ADI Funding, ADI and certain of
ADI’s other subsidiaries (collectively, the “Guarantors”) entered into a First Supplemental Indenture with the Trustee
(the “Supplemental Indenture”), pursuant to which ADI Funding assumed the obligations of the Escrow Issuer under the Indenture
and the Notes and the Guarantors guaranteed ADI Funding’s obligations under the Indenture and the Notes. In connection therewith,
the proceeds from the Notes offering were released from escrow. ADI used a portion of such net proceeds, together with borrowings under
the Term Facility (as defined below), to make a one-time cash dividend of $900 million to Resideo as partial consideration for the contribution
and transfer of assets and liabilities to ADI by Resideo in connection with the Separation (the “Cash Consideration”).
1
A description of the Notes offering and the Indenture
can be found in the Information Statement under the section entitled “Description of Material Indebtedness” and such description,
along with the Indenture (which includes the form of Notes) filed as Exhibits 4.1 and 4.2 to Amendment No. 3 to the Registration Statement
on Form 10 filed by the Company with the Securities and Exchange Commission (the “SEC”) on July 1, 2026 (the “Form 10”),
is incorporated herein by reference. The foregoing description of the Supplemental Indenture does not purport to be complete and is qualified
in its entirety by reference to the complete text of the Supplemental Indenture, a copy of which is filed as Exhibit 4.1 to this Current
Report on Form 8-K and incorporated herein by reference.
Joinder to the Guarantee Agreement and the
Asset Pledge
As previously reported, on July 1, 2026, ADI entered
into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate
of banks, providing for term loans in an aggregate principal amount of $600 million (the “Term Facility”) and a $500 million
revolving credit facility. On August 3, 2026, the Guarantors other than ADI entered into supplements with respect to (a) the Guarantee
Agreement, dated July 1, 2026, by and among ADI, ADI Funding and the Administrative Agent (the “Guarantee Agreement”) and
(b) the Collateral Agreement, dated July 1, 2026, by and among ADI, ADI Funding and the Administrative Agent. In connection with the execution
of such supplements, (i) the Term Facility was funded in full and ADI used such borrowings, in part, to fund the Cash Consideration and
(ii) the Guarantors provided guarantees of the obligations under the Credit Agreement and related documents and pledges of their respective
assets, subject to certain exceptions, to secure their respective obligations under the Guarantee Agreement, in each case in a manner
consistent with the requirements of the Credit Agreement.
A description of the Credit Agreement can be found
in the Information Statement under the section entitled “Description of Material Indebtedness” and such description, along
with the Credit Agreement that was filed as Exhibit 10.22 to the Form 10, is incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of
a Registrant.
The information included under Item 1.01 of this
Current Report on Form 8-K is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
On August 3, 2026, ADI
issued to Resideo 150,000 shares of its Series A Cumulative Convertible Participating Preferred Stock, par value $0.001 per share (the
“ADI Preferred Stock”), as partial consideration for the transfer and contribution of assets and liabilities to ADI or its
subsidiaries by Resideo in connection with the Separation. The offer and sale of the shares of ADI Preferred Stock were not registered
under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on Section 4(a)(2) thereof as the transaction
did not involve any public offering.
A summary of the rights,
preferences, privileges and restrictions of the ADI Preferred Stock can be found in the Information Statement under the section entitled
“Description of Capital Stock” and is incorporated herein by reference. The foregoing description of the ADI Preferred Stock
does not purport to be complete and is qualified in its entirety by reference to the complete text of the Certificate of Designations
(defined below), a copy of which is filed as Exhibit 3.3 to this Current Report on Form 8-K and incorporated herein by reference.
Item 3.03 Material Modifications to Rights of Security Holders
The information included
under (i) Item 1.01 of this Current Report on Form 8-K regarding the Shareholders Agreement and (ii) Item 5.03 of this Current Report
on Form 8-K regarding the Amended and Restated Certificate of Incorporation and the Certificate of Designations (each defined below) is
incorporated herein by reference.
2
Item 5.01 Changes in Control of Registrant
Prior to August 3, 2026,
ADI was a wholly-owned subsidiary of Resideo. On August 3, 2026, Resideo delivered 150,000 shares of ADI Preferred Stock to holders of
its Series A Cumulative Convertible Participating Preferred Stock, par value $0.001 per share (“Resideo Preferred Stock”)
in exchange for a like amount of Resideo Preferred Stock. In addition, the Distribution was completed on August 3, 2026. Following the completion of
the Distribution, ADI became an independent public company trading under the symbol “ADIG” on the New York Stock Exchange.
The Distribution was made to holders of Resideo common stock as of the close of business on July 20, 2026 (the “Record Date”),
who received one share of ADI common stock for every two shares of Resideo common stock held as of the Record Date. Resideo did not issue
fractional shares of ADI common stock in the Distribution. Fractional shares that holders of Resideo common stock would otherwise have
been entitled to receive were aggregated and will be sold in the public market by the distribution agent. The aggregate net cash proceeds
of these sales will be distributed ratably to those holders of Resideo common stock who would otherwise have been entitled to receive
fractional shares.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers
Appointment of Directors
As of July 29, 2026, the size of the Board of
Directors (the “Board”) of the Company was two directors. On July 29, 2026, the appointment of Christine Gorjanc to the Board
as a director, joining Robert Aarnes, and as a member
and chair of the Audit Committee of the Board became effective.
Effective as of the consummation of the
Distribution, the size of the Board was expanded from two directors to eight directors, and the appointments to the Board of each of
William Galvin, Cynthia Hostetler, Michael Kaufmann, Stephen O. LeClair, Nathan Sleeper and Brian Walker became
effective.
Biographical
information for each of the directors appointed to the Board can be found in the Information Statement under the section entitled “Management—Directors,”
which is incorporated by reference into this Item 5.02.
The Board is comprised of three classes, as follows:
● Class I: Messrs. Kaufmann and Aarnes and Ms. Gorjanc are Class I directors, whose terms expire at the
first annual meeting of the Company’s stockholders following the Distribution;
● Class II: Messrs. Galvin and Walker and Ms. Hostetler are Class II directors, whose terms expire at the
second annual meeting of the Company’s stockholders following the Distribution; and
● Class III: Messrs. LeClair and Sleeper are Class III directors, whose terms expire at the third annual
meeting of the Company’s stockholders following the Distribution.
In addition, as of August 3, 2026:
● the appointments of Messrs. LeClair and Walker as additional members of the Audit Committee of the Board
became effective;
● the appointments of Messrs. LeClair and Galvin and Ms. Hostetler as members of the Compensation Committee
of the Board became effective. The appointment of Ms. Hostetler as the Chair of the Compensation Committee became effective;
● the appointments of Ms. Hostetler and Messrs. Kaufmann and Sleeper as members of the Nominating and Governance
Committee of the Board became effective. The appointment of Ms. Hostetler as the Chair of the Nominating and Governance Committee became
effective; and
● the appointment of Mr. Kaufmann as Chair of the Board became effective.
Each of the non-employee directors of the Company
will receive compensation for their service as a director or committee member, including any additional compensation for services as Chair
of the Board or a committee, in accordance with plans and programs more fully described in the Information Statement under the section
entitled “Director Compensation,” which is incorporated herein by reference, except that the Company expects arrangements
to be put in place such that the compensation to which Mr. Sleeper is otherwise entitled will ultimately be paid to CD&R Channel Holdings,
L.P. or an affiliate thereof. Such description is qualified in its entirety by reference to the 2026 Stock Incentive Plan of ADI Global
Distribution Inc. and its Affiliates (the “2026 Equity Plan”), a form of which was filed as Exhibit 10.5 to the Form 10, and
the ADI Deferred Compensation Plan for Non-Employee Directors, a form of which was filed as Exhibit 10.11 to the Form 10 and both are
incorporated herein by reference.
3
Other than as noted below, there are no arrangements
or understandings between any of the individuals listed above and any other person pursuant to which such individuals were selected as
directors. Messrs. Galvin and Sleeper were appointed pursuant to the terms of the Company’s Certificate of Designations, Preferences
and Rights of Series A Cumulative Convertible Participating Preferred Stock (the “Certificate of Designations”), which provides
that, subject to the terms and conditions thereof, the CD&R Stockholder may initially designate two directors to the Board.
There are no family relationships
between any of the directors and any other director or executive officer of the Company and, other than as described above, the Company
is not aware of any transaction or proposed transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K promulgated
by the SEC.
Appointment of Certain
Executive Officers
Effective as of the consummation
of the Distribution, the following individuals are now serving as executive officers of ADI in the positions noted below:
● Robert Aarnes, as President and Chief Executive Officer
● Michael Carlet, as Executive Vice President, Chief Financial
Officer
● Jeannine Lane, as Executive Vice President, General Counsel,
Corporate Secretary and Chief Compliance Officer
● Alicia Copeland, as Executive Vice President, Chief Operating
Officer
● Marco Cardazzi, as Executive Vice President, Chief Merchandising
Officer
● James Olender, as Executive Vice President, Chief Information
Officer
Biographical
information for each of the executive officers can be found in the Information Statement under the section entitled “Management—Executive
Officers,” which is incorporated herein by reference.
The plans and programs in which the executive
officers may participate at ADI are substantially similar to those plans and programs offered by Resideo to executive officers of Resideo
prior to the Separation, as described in the Information Statement under the section entitled “Executive Compensation,” which
is incorporated herein by reference. Such description is qualified in its entirety by reference to the 2026 Equity Plan and the ADI Employee
Stock Purchase Plan, a form of which was filed as Exhibit 10.12 to the Form 10, which is incorporated herein by reference.
Each of the executive
officers has entered into an offer letter (“ADI Offer Letters”) that sets forth the initial base salary and target incentive
compensation opportunity that became effective on the date of the Separation. The foregoing description of the ADI Offer Letters does
not purport to be complete and is subject to, and qualified in its entirety by, the full text of each of the ADI Offer Letters, copies
of which were filed for Messrs. Aarnes, Carlet and Cardazzi and Mses. Lane and Copeland as Exhibits 10.15 through 10.19, respectively,
to the Form 10 and are incorporated herein by reference.
Further, in connection
with the Separation and as described in the Information Statement under the heading “Executive Compensation,” the Company
adopted the ADI Global Distribution Inc. Severance Plan for Designated Officers (the “Severance Plan”). The foregoing description
of the Severance Plan does not purport to be complete and is subject to, and qualified in its entirety by, the full text of such plan,
a copy of which was filed as Exhibit 10.14 to the Form 10 and is incorporated herein by reference.
There are no family relationships
between any of the executive officers and any other director or executive officer of the Company and the Company is not aware of any transaction
or proposed transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K promulgated by the SEC.
4
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
Effective as of August 3, 2026, the certificate
of incorporation of the Company was amended and restated (the “Amended and Restated Certificate of Incorporation”) and the
bylaws of the Company were amended and restated (the “Amended and Restated Bylaws”). The Certificate of Designations became
effective upon filing with the Secretary of State of the State of Delaware on August 3, 2026.
A description of the material provisions of the
Amended and Restated Certificate of Incorporation, the Amended and Restated Bylaws and the Certificate of Designations can be found in
the Information Statement under the section entitled “Description of Capital Stock,” and such section is incorporated herein
by reference. The description set forth under this Item 5.03 is qualified in its entirety by reference to the Amended and Restated Certificate
of Incorporation, the Amended and Restated Bylaws and the Certificate of Designations, which are filed as Exhibits 3.1, 3.2 and 3.3 hereto,
respectively, and incorporated herein by reference.
Item 5.05 Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics
In connection with the Distribution, the Board
adopted a Code of Conduct effective as of August 3, 2026. A copy of the Company’s Code of Conduct is available under the Investor
Relations—Governance section of ADI’s website at www.adiglobal.com. The information
on ADI’s website does not constitute part of this Current Report on Form 8-K and is not incorporated by reference herein.
Item 7.01 Regulation FD Disclosure.
On August 4, 2026, the
Company issued a press release announcing the completion of the Distribution. A copy of the press release is furnished herewith as Exhibit
99.2 and incorporated by reference herein.
The information furnished
under this Item 7.01, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act or the Exchange
Act, except as shall be expressly set forth by specific reference in such a filing.
Item 8.01 Other Events.
In connection with the Separation, the Board adopted
Corporate Governance Guidelines effective as of August 3, 2026. A copy of the Company’s Corporate Governance Guidelines is available
under the Investor Relations—Governance section of the Company’s website at www.adiglobal.com. The
information on the Company’s website does not constitute part of this Current Report on Form 8-K and is not incorporated
by reference herein.
5
Item 9.01.
Financial Statements and Exhibits
(d) Exhibits
Exhibit No.
Description
2.1+
Separation and Distribution Agreement, dated July 31, 2026, by and between ADI Global Distribution Inc. and Resideo Technologies, Inc.
3.1
Amended and Restated Certificate of Incorporation of ADI Global Distribution Inc.
3.2
Amended and Restated Bylaws of ADI Global Distribution Inc.
3.3
Certificate of Designations, Preferences and Rights of Series A Cumulative Convertible Participating Preferred Stock of ADI Global Distribution Inc.
4.1
First Supplemental Indenture, dated as of August 3, 2026, by and among ADI Global Distribution Funding LLC, ADI Global Distribution Inc., the other guarantors named therein and U.S. Bank Trust Company, National Association, as trustee
10.1
Employee Matters Agreement, dated July 31, 2026, by and between ADI Global Distribution Inc. and Resideo Technologies, Inc.
10.2+
Tax Matters Agreement, dated July 31, 2026, by and between ADI Global Distribution Inc. and Resideo Technologies, Inc.
10.3+
Transition Services Agreement, dated July 31, 2026, by and between ADI Global Distribution Inc. and Resideo Technologies, Inc.
10.4+
Intellectual Property Matters Agreement, dated July 31, 2026, by and between ADI Global Distribution Inc. and Resideo Technologies, Inc.
10.5+
Registration Rights Agreement, dated August 3, 2026, by and among ADI Global Distribution Inc., CD&R Channel Holdings, L.P. and CD&R Channel Holdings II, L.P.
10.6+
Shareholders Agreement, dated August 3, 2026, by and among ADI Global Distribution Inc., CD&R Channel Holdings, L.P., CD&R Channel
Holdings II, L.P., William Galvin and, solely for purposes of Section 3.6, Clayton, Dubilier & Rice Fund XII, L.P.
99.1
Information Statement of ADI Global Distribution Inc., dated July 20, 2026
99.2
Press Release, dated August 4, 2026
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
+ Schedules have been omitted pursuant to Item 601(a)(5) of Regulation
S-K. The Registrant undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC.
6
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
ADI GLOBAL DISTRIBUTION INC.
By:
/s/ Jeannine J. Lane
Name:
Jeannine J. Lane
Title:
Executive Vice President, General Counsel,
Corporate Secretary and Chief Compliance Officer
Date: August 4, 2026
7
EX-2.1 — SEPARATION AND DISTRIBUTION AGREEMENT, DATED JULY 31, 2026, BY AND BETWEEN ADI GLOBAL DISTRIBUTION INC. AND RESIDEO TECHNOLOGIES, INC
EX-2.1
Filename: ea030019001ex2-1.htm · Sequence: 2
Exhibit 2.1
Execution Version
SEPARATION AND DISTRIBUTION AGREEMENT
by and between
RESIDEO TECHNOLOGIES, INC.
and
ADI GLOBAL DISTRIBUTION INC.
Dated as of July 31, 2026
TABLE OF CONTENTS
Page
Article I
DEFINITIONS AND INTERPRETATION
Section 1.1
Definitions
2
Section 1.2
Other Defined Terms
18
Section 1.3
References; Interpretation
20
Article II
THE SEPARATION
Section 2.1
General
21
Section 2.2
Restructuring; Transfer of Assets; Assumption of Liabilities
21
Section 2.3
Treatment of Shared Contracts
23
Section 2.4
Termination of Agreements
24
Section 2.5
Transfers Not Effected at or Prior to the Effective Time; Transfers Deemed Effective as of the Effective Time
24
Section 2.6
Conveyancing and Assumption Instruments
26
Section 2.7
Further Assurances; Ancillary Agreements
26
Section 2.8
Novation of Liabilities; Indemnification
28
Section 2.9
Guarantees; Credit Support Instruments
29
Section 2.10
Disclaimer of Representations and Warranties
31
Section 2.11
ADI Financing Arrangements
32
Section 2.12
Cash Management; Consideration; Cash Adjustment
32
Article III
THE DISTRIBUTION AND ACTIONS PENDING THE DISTRIBUTION;OTHER TRANSACTIONS
Section 3.1
Distribution
33
Section 3.2
Fractional Shares
34
Section 3.3
Actions in Connection with the Distribution
34
Section 3.4
Sole Discretion of Resideo
35
Section 3.5
Conditions to Distribution
35
Section 3.6
Organizational Documents
37
Section 3.7
Directors
37
Section 3.8
Officers
37
Section 3.9
Resignations and Removals
37
Section 3.10
Cooperation Regarding the Distribution
38
i
Article IV
CERTAIN COVENANTS
Section 4.1
Cooperation
38
Section 4.2
Resideo Retained Names
38
Section 4.3
ADI Retained Names
40
Article V
INDEMNIFICATION
Section 5.1
Release of Pre-Effective Time Claims
41
Section 5.2
Indemnification by Resideo
43
Section 5.3
Indemnification by ADI SpinCo
44
Section 5.4
Procedures for Indemnification
44
Section 5.5
Cooperation in Defense and Settlement
46
Section 5.6
Management of Existing Actions
47
Section 5.7
Indemnification Payments
48
Section 5.8
Indemnification Obligations Net of Insurance Proceeds and Other Amounts
48
Section 5.9
Contribution
49
Section 5.10
Additional Matters; Survival of Indemnities; Coordination
49
Article VI
PRESERVATION OF RECORDS; ACCESS TO INFORMATION;CONFIDENTIALITY; PRIVILEGE
Section 6.1
Preservation of Corporate Records
49
Section 6.2
Access to Information
50
Section 6.3
Witness Services
53
Section 6.4
Reimbursement; Other Matters
53
Section 6.5
Confidentiality
54
Section 6.6
Privilege Matters
55
Section 6.7
Ownership of Information
57
Section 6.8
Processing of Personal Information
57
Section 6.9
Other Agreements
57
Article VII
DISPUTE RESOLUTION
Section 7.1
Arbitration
57
Section 7.2
Specific Performance
59
Section 7.3
Treatment of Arbitration
60
Section 7.4
Continuity of Service and Performance
60
Section 7.5
Consolidation
60
Section 7.6
Coordination
60
ii
Article VIII
INSURANCE
Section 8.1
Insurance Matters
60
Section 8.2
Certain Matters Relating to Organizational Documents
63
Section 8.3
Indemnitor of First Resort
64
Article IX
MISCELLANEOUS
Section 9.1
Entire Agreement; Construction
64
Section 9.2
Ancillary Agreements
65
Section 9.3
Counterparts
65
Section 9.4
Survival of Agreements
65
Section 9.5
Expenses
65
Section 9.6
Notices
66
Section 9.7
Amendments
67
Section 9.8
Assignment
67
Section 9.9
Successors and Assigns
67
Section 9.10
Termination
67
Section 9.11
Payment Terms
68
Section 9.12
Subsidiaries
69
Section 9.13
Third Party Beneficiaries
69
Section 9.14
Title and Headings
69
Section 9.15
Exhibits and Schedules
69
Section 9.16
Governing Law
70
Section 9.17
Severability
70
Section 9.18
Interpretation
70
Section 9.19
No Duplication; No Double Recovery
70
Section 9.20
Tax Treatment of Payments
70
Section 9.21
No Waiver
70
Section 9.22
No Admission of Liability
70
Section 9.23
Advisors
71
Section 9.24
Authority
71
Section 9.25
Publicity
71
iii
List of Exhibits
Exhibit A
Data Privacy Agreement
Exhibit B
Employee Matters Agreement
Exhibit C
Intellectual Property Matters Agreement
Exhibit D
Tax Matters Agreement
Exhibit E
Transition Services Agreement
Exhibit F
Amended and Restated Certificate of Incorporation of ADI SpinCo
Exhibit G
Amended and Restated Bylaws of ADI SpinCo
Exhibit H
Certificate of Designations for ADI SpinCo Preferred Stock
iv
SEPARATION AND DISTRIBUTION AGREEMENT
This SEPARATION AND DISTRIBUTION
AGREEMENT (this “Agreement”), dated as of July 31, 2026, is entered into by and between Resideo Technologies, Inc.,
a Delaware corporation (“Resideo”), and ADI Global Distribution Inc., a Delaware corporation and, as of the date hereof,
a wholly owned Subsidiary of Resideo (“ADI SpinCo”). For purposes of this Agreement, “Party” or
“Parties” means Resideo or ADI SpinCo, individually or collectively, as the case may be. Capitalized terms used in
this Agreement and not otherwise defined herein shall have the meaning set forth in Article I hereof.
W I T N E S S E T H:
WHEREAS, Resideo, acting through
its direct and indirect Subsidiaries, currently conducts the Resideo Retained Business and the ADI Business;
WHEREAS, the Board of Directors
of Resideo (the “Resideo Board”), has determined that it is appropriate, desirable and in the best interests of Resideo
and its stockholders to separate Resideo into two separate, publicly traded companies, one for each of (i) the Resideo Retained
Business, which shall be owned and conducted, directly or indirectly, by Resideo and the Persons that will be Subsidiaries thereof immediately
following the Distribution (as defined below) and (ii) the ADI Business, which shall be owned and conducted, directly or indirectly,
by ADI SpinCo and the Persons that will be Subsidiaries thereof immediately following the Distribution (the “Separation”);
WHEREAS, in order to effect
the Separation, the Resideo Board has determined that it is appropriate, desirable and in the best interests of Resideo and its stockholders
for Resideo to undertake the Internal Reorganization;
WHEREAS, in connection with
and as part of the Internal Reorganization, and pursuant to the Separation Plan, Resideo will contribute, or cause to be contributed,
to ADI SpinCo or a Subsidiary thereof the assets of, and entities conducting, the ADI Business and, in exchange therefor, ADI SpinCo shall,
or shall cause a Subsidiary thereof to, as applicable, (i) issue to Resideo shares of ADI SpinCo Common Stock and ADI SpinCo Preferred
Stock (which issuances may be actual or constructive), (ii) assume (directly or indirectly) certain Liabilities of Resideo and its
Subsidiaries associated with the ADI Business, and (iii) pay Resideo an amount of cash equal to the ADI Cash Payment (and any Cash
Adjustment payable by ADI SpinCo to Resideo), each as more fully described and subject to the terms and conditions set forth herein (collectively,
the “Contribution”);
WHEREAS, on the terms and
subject to the conditions hereof, following the completion of the Internal Reorganization, the Contribution and the receipt of the Consideration,
and pursuant to the Separation Plan, Resideo shall distribute, on a pro rata basis, to the Record Date Holders, in accordance with the
Distribution Ratio, an aggregate of 100% of the issued and outstanding shares of ADI SpinCo Common Stock (such distribution, the “Distribution”);
WHEREAS, Resideo, CD&R
Channel Holdings, L.P. (“CD&R”) and the other party thereto (the other party thereto that holds shares of Resideo
Preferred Stock as of the date hereof, together with CD&R, the “Preferred Holders”) are parties to that certain
Exchange Agreement, dated as of the date hereof (as may be amended, restated or modified from time to time, the “Exchange Agreement”),
pursuant to which, subject to the terms and conditions set forth therein, substantially concurrent with the Distribution, Resideo will
exchange all of the shares of ADI SpinCo Preferred Stock held by it for the number of shares of Resideo Preferred Stock held by the Preferred
Holders as set forth in the Exchange Agreement, and all such shares of Resideo Preferred Stock transferred to Resideo by the Preferred
Holders in connection with such exchange shall be retired and cease to be outstanding as of immediately following the Distribution;
1
WHEREAS, (i) the Resideo
Board has, among other things, (x) determined that the transactions contemplated by this Agreement and the Ancillary Agreements
have a valid business purpose, are in furtherance of and consistent with its business strategy and are in the best interests of Resideo
and its stockholders and (y) approved this Agreement, each of the Ancillary Agreements and the transactions contemplated by this
Agreement and each Ancillary Agreement and (ii) the Board of Directors of ADI SpinCo (the “ADI SpinCo Board”),
has approved this Agreement, each of the Ancillary Agreements (to the extent ADI SpinCo is a party thereto) and the transactions contemplated
by this Agreement and each Ancillary Agreement;
WHEREAS, the Parties desire
to set forth the principal corporate transactions required to effect the Internal Reorganization, the Contribution and the Distribution,
and certain other agreements relating to the relationship of Resideo and ADI SpinCo and their respective Subsidiaries following the Distribution;
WHEREAS, the Parties acknowledge
that this Agreement and the Ancillary Agreements represent the integrated agreement of Resideo and ADI SpinCo and their respective Subsidiaries
relating to the Internal Reorganization, the Contribution and the Distribution, are being entered into together, and would not have been
entered into independently;
WHEREAS, it is the intention
of the Parties that the Contribution, the transactions contemplated by the Exchange Agreement and the Distribution (except to the extent
of any cash received in lieu of fractional shares of ADI SpinCo Common Stock), taken together, will qualify as a transaction that is tax-free
for U.S. federal income Tax purposes under Section 355 and Section 368(a)(1)(D) of the Internal Revenue Code of 1986,
as amended (the “Code”); and
WHEREAS, this Agreement, together
with the relevant portions of the Separation Plan, is intended to be a “plan of reorganization” within the meaning of Treas.
Reg. Section 1.368-2(g).
NOW, THEREFORE, in consideration
of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:
Article
I
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions.
As used in this Agreement, the following terms shall have the following meanings:
(1) “Action”
shall mean any demand, action, claim, suit, countersuit, arbitration, inquiry, subpoena, case, litigation, proceeding or investigation
(whether civil, criminal, administrative or investigative) by or before any grand jury, any Governmental Entity or any arbitration or
mediation tribunal.
(2) “ADI
Asset Transferee” shall mean any Person that is or, following the Effective Time, will be a member of the ADI Group to which
ADI Assets shall be or have been Transferred at or prior to the Effective Time, or to which a Transfer is contemplated by the Internal
Reorganization, the Separation Plan, this Agreement or the Ancillary Agreements to occur after the Effective Time, by an Asset Transferor
in order to consummate the transactions contemplated hereby.
2
(3) “ADI
Assets” shall mean:
(i) all
interests in the capital stock of, or any other equity interests in, the Persons set forth on Schedule 1.1(3)(i), and which
are held, directly or indirectly, by Resideo immediately prior to the Effective Time;
(ii) the
Assets set forth on Schedule 1.1(3)(ii);
(iii) any
and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets which have been or are to be Transferred
to or retained by any member of the ADI Group;
(iv) any
and all Assets (other than Cash Equivalents, which shall be governed solely by Section 2.12) reflected on the ADI Balance
Sheet or the accounting records supporting such balance sheet and any Assets acquired by or for ADI SpinCo or any other member of the
ADI Group subsequent to the date of the ADI Balance Sheet which, had they been so acquired on or before such date and owned as of such
date, would have been reflected on the ADI Balance Sheet if prepared on a consistent basis, excluding any dispositions of any of such
Assets subsequent to the date of the ADI Balance Sheet;
(v) all
rights, title and interest in and to the owned real property set forth on Schedule 1.1(3)(v), including all land and land
improvements, structures, buildings and building improvements, other improvements and appurtenances located thereon (the “ADI
Owned Real Property”);
(vi) all
rights, title and interest in, and to and under the leases or subleases of the real property set forth on Schedule 1.1(3)(vi)
and, to the extent provided for in such leases or subleases, any land and land improvements, structures, buildings and building improvements,
other improvements and appurtenances located thereon (the “ADI Leased Real Property”);
(vii) all
(A) Contracts exclusively related to the ADI Business (and any rights or claims arising thereunder), and (B) Contracts (and any rights
or claims arising thereunder) that are not exclusively related to the ADI Business which are set forth on Schedule 1.1(3)(vii)(B) (collectively,
the Contracts referred to in the immediately preceding clauses (A) and (B), the “ADI Contracts”);
(viii) the
Intellectual Property applications and registrations (including issued patents) set forth on Schedule 1.1(3)(viii), together
with all unregistered Intellectual Property exclusively related to the ADI Business (collectively, the “ADI Intellectual Property”),
together with all rights of priority arising from any ADI Intellectual Property, all goodwill associated with any ADI Intellectual Property,
and all rights to sue, and to seek and retain damages, for any past, present or future infringement, misappropriation or other violation
of any ADI Intellectual Property. For the avoidance of doubt, Intellectual Property that relates to the product and commercial brands
listed in Schedule 1.1(5) shall be considered to exclusively relate to the ADI Business;
3
(ix) all
licenses, permits, registrations, approvals and authorizations, in each case, which have been issued by any Governmental Entity that relate
exclusively to or are used exclusively in the ADI Business, and to the extent held by a member of the Resideo Group as of the Effective
Time, are transferrable in accordance with their respective terms. For the avoidance of doubt, all licenses, permits, registrations, approvals
and authorizations that relate to the product and commercial brands listed in Schedule 1.1(5) shall be considered to exclusively
relate to the ADI Business;
(x) all
Information, including Personal Information, exclusively related to, or exclusively used in, the ADI Business, or any data that has been
collected by a member of the ADI Group in respect of the ADI Business (collectively, “ADI Information”). For the avoidance
of doubt, Information that relates to the product and commercial brands listed in Schedule 1.1(5) shall be considered to
exclusively relate to the ADI Business;
(xi) excluding
any Intellectual Property (which is addressed in Section 1.1(3)(viii) above), all other IT Assets that are exclusively
used or exclusively held for use in the ADI Business. For the avoidance of doubt, IT Assets that relate to the product and commercial
brands listed in Schedule 1.1(5) shall be considered to exclusively relate to the ADI Business;
(xii) all
office equipment and furnishings located at the physical site of which the ownership or a leasehold or sub leasehold interest is being
Transferred to or retained by a member of the ADI Group (excluding any office equipment and furnishings owned by Persons other than members
of the Resideo Group);
(xiii) other
than as set forth in this Agreement, all rights relating to, arising out of or resulting from (A) any Action exclusively related to the
ADI Business, including all Actions listed on Schedule 1.1(12)(viii)(A), or (B) any Action that is not exclusively related
to the ADI Business to the extent (but solely to the extent) such rights relate to the ADI Business, including all Actions listed on Schedule 1.1(12)(viii)(B);
and
(xiv) all
other Assets (other than any Assets relating to the ADI Intellectual Property, ADI Owned Real Property, ADI Leased Real Property, ADI
Contracts or Assets that are of the type that would be listed in clauses (ix) through (xiii)) that are held
by the ADI Group or the Resideo Group immediately prior to the Effective Time and that are primarily used and primarily held for use in
the ADI Business as conducted immediately prior to the Effective Time.
Notwithstanding anything to the contrary herein,
the ADI Assets shall not include (i) any Assets that are expressly contemplated by this Agreement or by any Ancillary Agreement
(or the Schedules hereto or thereto) as Assets to be retained by or Transferred to any member of the Resideo Group, or (ii) any Assets
that are determined by Resideo, in good faith prior to the Distribution, to arise primarily from the business or operations of the Resideo
Retained Business.
4
(4) “ADI
Balance Sheet” shall mean ADI SpinCo’s most recent unaudited pro forma combined balance sheet, including the notes thereto,
included in the Form 10 of ADI SpinCo that is declared effective by the Commission.
(5) “ADI
Business” shall mean the business comprising Resideo’s ADI Global Distribution segment as such business is expressly described
in the Distribution Disclosure Documents and conducted by Resideo and its Subsidiaries (including, for the avoidance of doubt, members
of the ADI Group) prior to the Effective Time, as well as any former businesses previously conducted by Resideo and its Subsidiaries (including,
for the avoidance of doubt, members of the ADI Group) prior to the Effective Time that would have been part of Resideo’s ADI Global
Distribution segment had such businesses been conducted by Resideo and its Subsidiaries as of the Effective Time, with any determination
thereof to be made reasonably by Resideo. For the avoidance of doubt, the “ADI Business” (i) includes the distribution of
products and solutions designed, manufactured or developed by Resideo’s Products and Solutions segment as of the Effective Time,
but does not include the design, manufacture or development of any such products or solutions or any related software, and (ii) includes
the design, manufacture, development and distribution of the products, platforms, software and services sold under the exclusive brands
set forth on Schedule 1.1(5), except to the extent any such product contains Resideo Retained IP. For the avoidance of doubt,
(x) subsection (i) above shall not be interpreted as a continued right to distribute any such products or services and (y) the sale of
any of Resideo’s Products and Solutions products through or under any brand set forth on Schedule 1.1(5) shall not result
in a transfer or grant of any rights, title or interest in or to any such Resideo Products and Solutions products.
(6) “ADI
Disclosure” shall mean (i) any form, statement, schedule or other material (other than the Distribution Disclosure Documents)
filed with or furnished to the Commission, including in connection with ADI SpinCo’s obligations under the Securities Act and the
Exchange Act, any other Governmental Entity, or holders of any securities of any member of the ADI Group, in each case, on or after the
Distribution Date by or on behalf of any member of the ADI Group whether in connection with the registration, sale, or distribution of
securities or disclosure related thereto or otherwise (including periodic disclosure obligations), and (ii) any ADI Financing Documents.
(7) “ADI
Environmental Liabilities” shall mean any and all Environmental Liabilities, whether arising before, at or after the Effective
Time, to the extent relating to or resulting from or arising out of the past, present or future operation, conduct or actions of the ADI
Business or the past, present or future use of the ADI Assets, it being understood that the Liabilities set forth on Schedule 1.1(7)
shall not constitute “ADI Environmental Liabilities.”
(8) “ADI
Financing Arrangements” shall mean the financing arrangements described on Schedule 1.1(8).
(9) “ADI
Financing Documents” shall mean any documents relating to any debt issuance of ADI SpinCo or any other member of the ADI Group
whether prior to, on, or after the Distribution Date or otherwise relating to the ADI Financing Arrangements, including any offering memorandum,
confidential information memorandum, lender presentation, credit agreement or other bank financing arrangement, exchange agreement, purchase
agreement, indenture or notes (including, in each case, the representations, warranties and covenants contained therein), and any other
agreements or arrangements entered into in connection with the foregoing.
5
(10) “ADI
Group” shall mean (i) ADI SpinCo, (ii) each other Person that is set forth on Schedule 1.1(3)(i), and (iii) each Person
that becomes a Subsidiary of ADI SpinCo after the Effective Time.
(11) “ADI
Indemnitees” shall mean each member of the ADI Group and each of their respective Affiliates from and after the Effective Time
and each member of the ADI Group’s and such respective Affiliates’ respective current, former and future directors, officers,
employees and agents (solely in their respective capacities as current, former and future directors, officers, employees or agents of
any member of the ADI Group or their respective Affiliates) and each of the heirs, administrators, executors, successors and assigns of
any of the foregoing, except, for the avoidance of doubt, the Resideo Indemnitees.
(12) “ADI
Liabilities” shall mean:
(i) any
and all Liabilities to the extent relating to, arising out of or resulting from (a) the operation or conduct of the ADI Business,
as conducted at any time prior to, at or after the Effective Time (including any Liabilities relating to, arising out of or resulting
from any act or failure to act (x) that creates Liability under the Honeywell Separation Agreements to the extent relating to, arising
out of or resulting from the operation or conduct of the ADI Business, or (y) by any director, officer, employee, agent or representative
(whether or not such act or failure to act is or was within such Person’s authority) of the ADI Group); (b) the operation
or conduct of any business conducted by any member of the ADI Group at any time after the Effective Time (including any Liabilities relating
to, arising out of or resulting from any act or failure to act (x) that creates Liability under the Honeywell Separation Agreements to
the extent relating to, arising out of or resulting from the operation or conduct of any member of the ADI Group), or (y) by any director,
officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority)
of the ADI Group; or (c) any ADI Asset, whether arising before, at or after the Effective Time (including any Liabilities relating
to, arising out of or resulting from ADI Contracts or Shared Contracts (to the extent, in the case of Shared Contracts, such Liabilities
relate to the ADI Business));
(ii) the
Liabilities set forth on Schedule 1.1(12)(ii);
(iii) any
and all Liabilities that are expressly provided by this Agreement or any of the Ancillary Agreements as Liabilities to be Assumed by ADI
SpinCo or any other member of the ADI Group, and all agreements, obligations and Liabilities of ADI SpinCo or any other member of the
ADI Group under this Agreement or any of the Ancillary Agreements;
(iv) without
limitation of clause (i) immediately above, any and all Liabilities reflected on the ADI Balance Sheet or the accounting records supporting
such balance sheet and any Liabilities incurred by or for ADI SpinCo or any member of the ADI Group subsequent to the date of the ADI
Balance Sheet which, had they been so incurred on or before such date, would have been reflected on the ADI Balance Sheet if prepared
on a consistent basis, subject to any discharge of any of such Liabilities subsequent to the date of the ADI Balance Sheet;
6
(v) without
limitation of clause (i) immediately above, any and all Liabilities to the extent relating to, arising out of, or resulting from, whether
prior to, at or after the Effective Time, any infringement, misappropriation or other violation of any Intellectual Property of any other
Person related to the conduct of the ADI Business;
(vi) without
limitation of clause (i) immediately above, any and all ADI Environmental Liabilities;
(vii) any
and all Liabilities (including under applicable federal and state securities Laws) relating to, arising out of or resulting from (A) the
Distribution Disclosure Documents, (B) any ADI Disclosure, or (C) any statements (whether oral or written), press releases or other
public disclosures made on or prior to the Distribution Date by or on behalf of any member of the Resideo Group or the ADI Group, including
by any officer thereof, in respect of the transactions contemplated by this Agreement and the Ancillary Agreements;
(viii) without
limitation of clause (i) immediately above, any Liabilities relating to, arising out of or resulting from (A) any Action exclusively related
to the ADI Business, including all Actions listed on Schedule 1.1(12)(viii)(A), or (B) any Action that is not exclusively
related to the ADI Business to the extent (but solely to the extent) such Liabilities relate to the ADI Business, including all Actions
listed on Schedule 1.1(12)(viii)(B); and
(ix) without
limitation of clause (i) immediately above, any product liability claims or other claims of third parties, including any and all product
liabilities, whether such product liabilities are known or unknown, contingent or accrued, or relating to loss of life or injury to persons,
in each case, to the extent relating to, arising out of or resulting from any product developed, designed, manufactured, marketed, distributed,
leased or sold by the ADI Business.
Notwithstanding the foregoing, the ADI Liabilities
shall not include any Liabilities that are (A) expressly contemplated by this Agreement or by any Ancillary Agreement (or the Schedules
hereto or thereto) as Liabilities to be Assumed by any member of the Resideo Group, (B) expressly discharged pursuant to Section 2.4
of this Agreement or (C) Resideo Retained Liabilities. Without limiting the foregoing, the fact that a Liability shall constitute
an ADI Liability hereunder shall not affect the rights and Liabilities of the ADI Group or the Resideo Group, as applicable, in respect
of products of the Resideo Group distributed by the ADI Group pursuant to any Ancillary Agreement or Contract, whether prior to, at or
after the Effective Time.
7
(13) “ADI
Retained Names” shall mean the names and marks set forth in Schedule 1.1(13) and any other names or marks that
are included within the ADI Intellectual Property, together with any Trademarks containing or comprising any of such names or marks, and
any Trademarks derivative thereof or confusingly similar thereto, or any telephone numbers or other alphanumeric addresses or mnemonics
containing any of the foregoing names or marks.
(14) “ADI
SpinCo Common Stock” shall mean shares of common stock, par value $0.001 per share, of ADI SpinCo.
(15) “ADI
SpinCo Preferred Stock” shall mean shares of Series A Cumulative Convertible Participating Preferred Stock, par value $0.001
per share, of ADI SpinCo.
(16) “Affiliate”
shall mean, when used with respect to a specified Person and at a point in, or with respect to a period of, time, a Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person
at such point in or during such period of time. For the purposes of this definition, “control,” when used with respect to
any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities or other interests, by Contract or otherwise. It is expressly
agreed that, (a) from and after the Effective Time, solely for purposes of this Agreement or any Ancillary Agreement, (i) no member
of the ADI Group shall be deemed an Affiliate of any member of the Resideo Group and (ii) no member of the Resideo Group shall be
deemed an Affiliate of any member of the ADI Group, and (b) whether before or after the Effective Time, solely for purposes of this Agreement
or any Ancillary Agreement, neither CD&R nor any of its Affiliates (other than Resideo, ADI SpinCo and their respective Subsidiaries,
as applicable) will be deemed an Affiliate of any member of the Resideo Group or the ADI Group, and vice versa.
(17) “Ancillary
Agreements” shall mean the Transition Services Agreement, the Employee Matters Agreement, the Tax Matters Agreement, the Intellectual
Property Matters Agreement, the Data Privacy Agreement, the Exchange Agreement, any Continuing Arrangements, any and all Conveyancing
and Assumption Instruments, and any other agreements to be entered into by and between any member of the Resideo Group, on one hand, and
any member of the ADI Group, on the other hand, at, prior to or after the Effective Time in connection with the Distribution, Internal
Reorganization, Contribution or the other transactions contemplated by this Agreement or the other Ancillary Agreements referred to herein.
(18) “Asset
Transferors” shall mean the Persons (including Resideo and ADI SpinCo, as applicable) Transferring Assets to ADI SpinCo or Resideo,
as the case may be, or one of their respective Subsidiaries in order to consummate the transactions contemplated hereby.
(19) “Assets”
shall mean all rights, title and ownership interests in and to all properties, claims, Contracts, businesses, entities or assets (including
Intellectual Property, goodwill and all direct or indirect interests in the capital stock of, or any other equity interests in, any Person),
wherever located (including in the possession of vendors or other third parties or elsewhere), of every kind, character and description,
whether real, personal or mixed, tangible or intangible, whether accrued, contingent or otherwise, in each case, whether or not recorded
or reflected on the books and records or financial statements of any Person.
8
(20) “Assume”
shall have the meaning set forth in Section 2.2(c), and the terms “Assumed” and “Assumption”
shall have their correlative meanings.
(21) “Business”
shall mean the Resideo Retained Business or the ADI Business, as applicable.
(22) “Business
Day” shall mean any day other than Saturday or Sunday and any other day on which commercial banking institutions located in
New York, New York are required, or authorized by Law, to remain closed.
(23) “Cash
Equivalents” shall mean, as of any date of determination, cash and cash equivalents as determined in accordance with GAAP, and
to the extent consistent with GAAP, utilizing the accounting principles, methods, policies, practices, procedures, classifications and
methodologies used in the preparation of the consolidated balance sheet of Resideo as of the fiscal year ended December 31, 2025 included
in the Form 10-K of Resideo for fiscal year ended December 31, 2025.
(24) “Commission”
shall mean the United States Securities and Exchange Commission.
(25) “Company
Policies” shall mean all Policies of Resideo or any of its Subsidiaries, which are in effect at the Effective Time, except all
Policies acquired prior to the Effective Time in anticipation of the Distribution directly by and in the name of ADI SpinCo or a member
of the ADI Group and that provide coverage solely for one or more members of the ADI Group or the ADI Business.
(26) “Confidential
Information” shall mean all nonpublic, confidential or proprietary Information to the extent concerning a Party, its Group or
its Subsidiaries or with respect to ADI SpinCo, the ADI Business, any ADI Assets or any ADI Liabilities or with respect to Resideo, the
Resideo Retained Business, any Resideo Retained Assets or any Resideo Retained Liabilities, including any such Information that was acquired
by any Party after the Distribution pursuant to Article VI or otherwise in accordance with this Agreement, or that was provided
to a Party by a third party in confidence; except for any Information that is (i) in the public domain or generally known to the
public through no fault of the receiving Party or its Subsidiaries in violation of this Agreement, (ii) lawfully acquired after
the Distribution by such Party or its Subsidiaries from other sources not known to be subject to confidentiality obligations with respect
to such Information or (iii) independently developed by the receiving Party after the Distribution without reference to or use of
any Confidential Information. As used herein, by example and without limitation, Confidential Information shall mean any Information of
a Party marked as confidential, proprietary or nonpublic.
(27) “Consents”
shall mean any consents, waivers, notices, reports or other filings to be obtained from or made, including with respect to any Contract
or any registrations, licenses or permits, any authorizations to be obtained from, or approvals from, or notification requirements to,
any third parties or any Governmental Entity.
(28) “Continuing
Arrangements” shall mean those arrangements set forth on Schedule 1.1(28).
9
(29) “Contract”
shall mean any agreement, contract, subcontract, note, indenture, instrument, lease, license, sublicense, benefit plan, purchase order
or other legally binding commitment or undertaking of any nature (whether written or oral and whether express or implied).
(30) “Conveyancing
and Assumption Instruments” shall mean, collectively, the various Contracts, including the related local asset transfer agreements
and local stock transfer agreements, and other documents entered into prior to the Effective Time or to be entered into prior to or after
the Effective Time to effect the Transfer of Assets and the Assumption of Liabilities in the manner contemplated by this Agreement, the
Internal Reorganization and the Separation Plan, or otherwise relating to, arising out of or resulting from the transactions contemplated
by this Agreement, in such form or forms as the applicable Parties thereto agree.
(31) “Credit
Support Instruments” shall mean any letters of credit, performance bonds, surety bonds, bankers acceptances, or other similar
arrangements.
(32) “Data
Privacy Agreement” shall mean the Data Privacy Agreement by and between Resideo and ADI SpinCo, in the form attached hereto
as Exhibit A.
(33) “Data
Protection Requirements” shall mean (i) all applicable Laws governing privacy, data protection, cybersecurity, or data security
in all relevant jurisdictions, including, without limitation, those Laws relating to the collection, processing, use, disclosure, transfer,
security, deletion and retention of Personal Information; (ii) Resideo policies and procedures, published prior to the Distribution Date,
regarding collection, processing, use, disclosure, transfer, security, deletion and retention of Personal Information; and (iii) the privacy,
data protection, cybersecurity, or data security requirements of any Contracts, codes of conduct, or industry standards by which Resideo
or its Subsidiaries has been legally bound prior to the Distribution Date.
(34) “Distribution
Agent” shall mean Broadridge Corporate Issuer Solutions, LLC.
(35) “Distribution
Date” shall mean the date, as shall be determined by the Resideo Board, on which the Distribution occurs.
(36) “Distribution
Date Cash Amount” shall mean Resideo’s calculation of the amount of Cash Equivalents of the ADI Group as of the Effective
Time (after giving effect to (i) the payment by ADI SpinCo of the Consideration to Resideo pursuant to Section 2.12(b), (ii)
the payment (or reimbursement) by ADI SpinCo of any costs and expenses incurred by the ADI Group or Resideo Group in respect of the ADI
Financing Arrangements pursuant to Section 2.11, and (iii) the payment by ADI SpinCo of certain costs and expenses set forth on
Schedule 1.1(36)).
(37) “Distribution
Disclosure Documents” shall mean the Form 10 and all exhibits thereto (including the Information Statement), any current
reports on Form 8-K and other registration statements (including the registration statement on Form S-8 related to securities
to be offered under ADI SpinCo’s employee benefit plans), in each case as filed or furnished by ADI SpinCo with or to the Commission
in connection with the Distribution or filed or furnished by Resideo with or to the Commission, solely (in the case of such documents
filed or furnished by Resideo with or to the Commission) to the extent such documents relate to ADI SpinCo or the Distribution.
10
(38) “Distribution
Ratio” shall mean one share of ADI SpinCo Common Stock for every two shares of Resideo Common Stock.
(39) “Effective
Time” shall mean 12:01 a.m., New York time, on the Distribution Date.
(40) “Employee
Matters Agreement” shall mean the Employee Matters Agreement by and between Resideo and ADI SpinCo, in the form attached hereto
as Exhibit B.
(41) “Environmental
Laws” shall mean all Laws relating to (i) pollution or protection of human health or safety or the environment, including Laws
relating to the exposure to, or Release, threatened Release or the presence of, Hazardous Substances, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, transport or handling of Hazardous Substances, (ii) recordkeeping, notification, disclosure
and reporting requirements respecting Hazardous Substances, and (iii) endangered or threatened species of fish, wildlife and plants and
the management or use of natural resources.
(42) “Environmental
Liabilities” shall mean Liabilities relating to Environmental Law or the Release or threatened Release of or exposure to Hazardous
Substances, including the following: (i) actual or alleged violations of or non-compliance with any Environmental Law, including
a failure to obtain, maintain or comply with any Environmental Permits; (ii) obligations arising under or pursuant to any applicable
Environmental Law or Environmental Permit; (iii) the presence of Hazardous Substances or the introduction of Hazardous Substances
to the environment at, in, on, under or migrating from any of the building, facility, structure or real property, including Liabilities
relating to, resulting from or arising out of the investigation, remediation, or monitoring of such Hazardous Substances; (iv) natural
resource damages, property damages, personal or bodily injury or wrongful death relating to the presence of or exposure to Hazardous Substances
(including asbestos-containing materials), at, in, on, under or migrating to or from any building, facility, structure or real property;
(v) the transport, disposal, recycling, reclamation, treatment or storage, Release or threatened Release of Hazardous Substances
at Off-Site Locations; and (vi) any agreement, decree, judgment, or order relating to the foregoing. The term “Environmental
Liabilities” does not include Liabilities arising in connection with claims for injuries to persons or property from products sold
by or services provided by the ADI Group, the Resideo Group or their predecessors, including claims related to exposure to asbestos with
respect to such products or services.
(43) “Environmental
Permit” shall mean any permit, license, approval or other authorization under any applicable Environmental Law or of any Governmental
Entity relating to Environmental Laws or Hazardous Substances.
(44) “Exchange
Act” shall mean the United States Securities Exchange Act of 1934, as amended, together with the rules and regulations
promulgated thereunder.
(45) “Final
Determination” shall have the meaning set forth in the Tax Matters Agreement.
11
(46) “GAAP”
shall mean generally accepted accounting principles in the United States in effect from time to time.
(47) “Governmental
Approvals” shall mean any notices or reports to be submitted to, or other registrations or filings to be made with, or any consents,
approvals, licenses, permits or authorizations to be obtained from, any Governmental Entity.
(48) “Governmental
Entity” shall mean any nation or government, any state, municipality or other political subdivision thereof and any entity,
body, agency, commission, department, board, bureau or court, whether domestic, foreign, multinational, or supranational exercising executive,
legislative, judicial, regulatory, self-regulatory or administrative functions of or pertaining to government and any executive official
thereof.
(49) “Government
Import/Export Accounts” means certain accounts established with the United States Customs and Border Protection agency as set
forth on Schedule 1.1(49).
(50) “Group”
shall mean (i) with respect to Resideo, the Resideo Group and (ii) with respect to ADI SpinCo, the ADI Group.
(51) “Hazardous
Substances” shall mean (i) any substances defined, listed, classified or regulated as “hazardous substances,”
“hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous
wastes,” “toxic substances,” “toxic pollutants,” “contaminants,” “pollutants,” “wastes,”
“radioactive materials,” “petroleum,” “oils” or designations of similar import under any Environmental
Law, or (ii) any other chemical, material or substance that is regulated or for which liability can be imposed under any Environmental
Law.
(52) “Honeywell
Separation Agreements” shall mean each of the agreements listed on Schedule 1.1(52).
(53) “Indebtedness”
shall mean, with respect to any Person, (i) the principal amount, prepayment and redemption premiums and penalties (if any), unpaid
fees and other monetary obligations in respect of any indebtedness for borrowed money, whether short term or long term, and all obligations
evidenced by bonds, debentures, notes, other debt securities or similar instruments, (ii) any indebtedness arising under any capital
leases (excluding, for the avoidance of doubt, any real estate leases), whether short term or long term, (iii) all liabilities secured
by any Security Interest on any assets of such Person, (iv) all liabilities under any interest rate, currency, commodity or other
swap, collar, cap or other hedging or similar agreements or arrangements, (v) all liabilities under any interest rate protection
agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement or other similar agreement designed
to protect such Person against fluctuations in interest rates, (vi) all interest-bearing indebtedness for the deferred purchase
price of property or services, (vii) all liabilities under any Credit Support Instruments, (viii) all interest, fees and other
expenses owed with respect to indebtedness described in the foregoing clauses (i) through (vii), and (ix) without duplication,
all guarantees of indebtedness referred to in the foregoing clauses (i) through (viii).
12
(54) “Indemnifiable
Loss” and “Indemnifiable Losses” shall mean any and all damages, losses, deficiencies, Liabilities, obligations,
penalties, judgments, settlements, claims, payments and fines.
(55) “Information”
shall mean information (including Personal Information), content and data in written, oral, electronic, computerized, digital or other
tangible or intangible media, including books and records, whether accounting, legal or otherwise, ledgers, studies, reports, surveys,
designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, marketing plans, customer names and
information (including prospects), product costs, margins and pricing, product marketing studies and strategies, all other methodologies,
procedures, techniques and Know-How related to research, engineering, development and manufacturing, communications, correspondence, materials,
product literature, artwork, files, documents, and all other technical, financial, employee or business information, content or data,
in each case excluding any Intellectual Property therein.
(56) “Information
Statement” shall mean the Information Statement attached as Exhibit 99.1 to the Form 10, to be distributed to the
holders of shares of Resideo Common Stock in connection with the Distribution, including any amendment or supplement thereto.
(57) “Insurance
Proceeds” shall mean those monies (i) received by an insured from an insurance carrier or (ii) paid by an insurance
carrier on behalf of an insured, in either case net of any applicable deductible or retention.
(58) “Insured
Claims” shall mean those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of
any of the Company Policies, whether or not subject to deductibles, co-insurance, uncollectability or retrospectively rated premium adjustments,
but only to the extent that such Liabilities are within applicable Company Policy limits, including aggregates.
(59) “Intellectual
Property” shall mean all intellectual property rights arising in any jurisdiction of the world, including in or with respect
to, or arising from, any of the following: (i) trademarks, trade dress, service marks, certification marks, logos, slogans, design
rights, names, corporate names, trade names, Internet domain names, social media accounts and addresses and other similar designations
of source or origin, together with the goodwill symbolized by any of the foregoing (collectively, “Trademarks”); (ii) patents
and patent applications, and any and all related national or international counterparts thereto, including any divisionals, continuations,
continuations-in-part, reissues, reexaminations, substitutions and extensions thereof (collectively, “Patents”); (iii) copyrights
and copyrightable subject matter, excluding Know-How; (iv) trade secrets, and all other confidential or proprietary information,
know-how, inventions, processes, formulae, models, and methodologies, excluding Patents (collectively, “Know-How”);
and (v) all applications and registrations for any of the foregoing.
13
(60) “Intellectual
Property Matters Agreement” shall mean the Intellectual Property Matters Agreement by and between Resideo and ADI SpinCo, in
the form attached hereto as Exhibit C.
(61) “Internal
Reorganization” shall mean the allocation and transfer or assignment of Assets and Liabilities (including entities holding Assets
or Liabilities), including by means of the Conveyancing and Assumption Instruments, resulting in (i) the ADI Group owning and operating
the ADI Business, and (ii) the Resideo Group continuing to own and operate the Resideo Retained Business, as described in the global
plan of internal reorganization provided to ADI SpinCo by Resideo prior to the date hereof, as updated from time to time by Resideo in
its sole discretion (the “Separation Plan”), including, for the avoidance of doubt, subject to Section 2.5,
the Transfer, directly or indirectly, of all of Resideo’s or its Subsidiaries’ right, title and interest in and to the ADI
Assets, from Resideo or its Subsidiaries to the ADI Group and the Assumption of all of the ADI Liabilities, directly or indirectly, by
the ADI Group in connection with or as a result of the transactions contemplated by this Agreement.
(62) “IT
Assets” shall mean all software, computer systems, telecommunications equipment, databases, Internet Protocol addresses,
data rights and documentation, reference, resource and training materials relating thereto, and all Contracts (including Contract rights)
relating to any of the foregoing (including software license agreements, source code escrow agreements, support and maintenance agreements,
electronic database access contracts, domain name registration agreements, website hosting agreements, software or website development
agreements, outsourcing agreements, service provider agreements, interconnection agreements, governmental permits, radio licenses and
telecommunications agreements).
(63) “Law”
shall mean any applicable U.S. or non-U.S. federal, national, supranational, state, provincial, local or similar statute, law, ordinance,
regulation, rule, code, treaty (including any income tax treaty), order, approval, consent, decree, injunction, license, permit, administrative
interpretation, requirement or rule of law (including common law) or other binding directives promulgated, issued, entered into
or taken by any Governmental Entity.
(64) “Liabilities”
shall mean any and all Indebtedness, liabilities, costs, expenses, interest and obligations, whether accrued or fixed, absolute or contingent,
matured or unmatured, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law (including
Environmental Law), Action, whether asserted or unasserted, or order, writ, judgment, injunction, decree, settlement, compromise, stipulation,
determination or award entered by or with any Governmental Entity and those arising under any Contract or any fines, damages or equitable
relief which may be imposed and including all costs and expenses related thereto (including the costs and expenses of attorneys’,
accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense of any
of the foregoing or the enforcement of rights hereunder or under any Ancillary Agreement).
(65) “NYSE”
shall mean the New York Stock Exchange.
14
(66) “Off-Site
Location” shall mean any third party location that is not now nor has ever been owned, leased or operated by the Resideo Group
or the ADI Group or any of their respective predecessors. “Off-Site Location” does not include any property that is adjacent
to or neighboring any property formerly, currently or in the future owned, leased or operated by the Resideo Group, the ADI Group, or
their respective predecessors that has been impacted by Hazardous Substances released from such properties.
(67) “Person”
shall mean any natural person, firm, individual, corporation, business trust, joint venture, association, bank, land trust, trust company,
company, limited liability company, partnership, or other organization or entity, whether incorporated or unincorporated, or any Governmental
Entity.
(68) “Personal
Information” shall mean the same as “personal information,” “personally identifiable information,” “personal
data” or any term of similar intent, in each case, as defined under Data Protection Requirements.
(69) “Policies”
shall mean insurance policies and insurance contracts of any kind (other than life and benefits policies or contracts), including primary,
excess and umbrella policies, commercial general liability policies, fiduciary liability, directors and officers liability, automobile,
property and casualty, workers’ compensation, crime, cargo, business travel accident and employee dishonesty insurance policies
and bonds, together with the rights, benefits and privileges thereunder.
(70) “Prime
Rate” shall mean the rate last quoted as of the time of determination by The Wall Street Journal as the “Prime
Rate” in the United States or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate
published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank
prime loan” rate as of such time, or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by
Resideo) or any similar release by the Federal Reserve Board (as determined by Resideo).
(71) “Record
Date” shall mean the date determined by the Resideo Board as the record date for determining the holders of Resideo Common Stock
entitled to receive ADI SpinCo Common Stock in the Distribution.
(72) “Record
Date Holders” shall mean holders of Resideo Common Stock on the Record Date.
(73) “Release”
shall mean any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration into
the indoor or outdoor environment (including ambient air, surface water, groundwater and surface or subsurface strata) or into or out
of any property, including the movement of Hazardous Substances through or in the air, soil, surface water, groundwater or property.
(74) “Resideo
Asset Transferee” shall mean any Person that is or, following the Effective Time, will be a member of the Resideo Group to which
Resideo Retained Assets shall be or have been Transferred, directly or indirectly, at or prior to the Effective Time, or to which a Transfer
is contemplated by the Internal Reorganization, the Separation Plan, this Agreement or the Ancillary Agreements to occur after the Effective
Time, by an Asset Transferor in order to consummate the transactions contemplated hereby.
15
(75) “Resideo
Common Stock” shall mean the common stock of Resideo, par value $0.001 per share.
(76) “Resideo
Group” shall mean (i) Resideo and each Person that is a direct or indirect Subsidiary of Resideo other than any Subsidiary
that is a member of the ADI Group and (ii) each Person that becomes a Subsidiary of Resideo after the Effective Time.
(77) “Resideo
Indemnitees” shall mean each member of the Resideo Group and each of their respective Affiliates from and after the Effective
Time and each member of the Resideo Group’s and such respective Affiliates’ respective current, former and future directors,
officers, employees and agents (solely in their respective capacities as current, former and future directors, officers, employees or
agents of any member of the Resideo Group or their respective Affiliates) and each of the heirs, administrators, executors, successors
and assigns of any of the foregoing, except, for the avoidance of doubt, the ADI Indemnitees.
(78) “Resideo
Preferred Stock” shall mean the Series A Cumulative Convertible Participating Preferred Stock of Resideo, par value $0.001 per
share.
(79) “Resideo
Retained Assets” shall mean:
(i) any
and all Assets that are owned, leased or licensed, at or prior to the Effective Time, by Resideo or any of its Subsidiaries, that are
not ADI Assets, including (for the avoidance of doubt) any and all Assets that are expressly contemplated by this Agreement or
any Ancillary Agreement as Assets which have been or are to be Transferred to or retained by Resideo or any other member of the Resideo
Group, including all Resideo Retained IP (including all rights of priority arising from any Resideo Retained IP, all goodwill associated
with any Resideo Retained IP, and all rights to sue, and to seek and retain damages, for any past, present or future infringement, misappropriation
or other violation of any Resideo Retained IP) and Resideo Retained Information;
(ii) without
limitation of clause (i) immediately above, each Honeywell Separation Agreement;
(iii) the
Assets listed or described on Schedule 1.1(79)(iii); and
(iv) any
and all Assets that are acquired or otherwise become Assets of the Resideo Group after the Effective Time.
(80)
“Resideo Retained Business” shall mean (i) those businesses operated by Resideo or any of its Subsidiaries prior
to the Effective Time other than the ADI Business, and (ii) those businesses acquired or established by or for any member of the
Resideo Group after the Effective Time.
(81) “Resideo
Retained Information” shall mean any and all Information (including Personal Information) owned, used or held for use by Resideo
or any of its Subsidiaries that does not comprise ADI Information.
(82) “Resideo
Retained IP” shall mean all Intellectual Property of Resideo or any of its Subsidiaries other than ADI Intellectual Property,
including the Resideo Retained Names.
16
(83) “Resideo
Retained Liabilities” shall mean:
(i) any
and all Liabilities to the extent relating to, arising out of or resulting from (a) the operation or conduct of the Resideo Retained
Business, as conducted at any time prior to, at or after the Effective Time (including any Liabilities relating to, arising out of or
resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure
to act is or was within such Person’s authority) of the Resideo Group); (b) the operation or conduct of any business conducted
by any member of the Resideo Group at any time after the Effective Time (including any Liabilities relating to, arising out of or resulting
from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act
is or was within such Person’s authority) of the Resideo Group); or (c) any Resideo Retained Asset, whether arising before,
at or after the Effective Time (including any Liabilities relating to, arising out of or resulting from Shared Contracts (to the extent
such Liabilities relate to the Resideo Retained Business));
(ii) any
and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be Assumed by Resideo
or any other member of the Resideo Group, and all agreements, obligations and other Liabilities of Resideo or any member of the Resideo
Group under this Agreement or any of the Ancillary Agreements; and
(iii) the
Liabilities listed on Schedule 1.1(83)(iii).
Notwithstanding the foregoing and for the avoidance
of doubt, the Resideo Retained Liabilities shall not include any Liabilities (including for Taxes) for which ADI SpinCo or a member of
the ADI Group is responsible pursuant to this Agreement or the Ancillary Agreements (including the Tax Matters Agreement).
(84) “Resideo
Retained Names” shall mean the names and marks set forth on Schedule 1.1(84) and any other names or marks that
are included within the Resideo Retained IP, together with any Trademarks containing or comprising any of such names or marks, and any
Trademarks derivative thereof or confusingly similar thereto, or any telephone numbers or other alphanumeric addresses or mnemonics containing
any of the foregoing names or marks.
(85) “Securities
Act” shall mean the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.
(86) “Security
Interest” shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other
restriction or similar encumbrance, excluding restrictions on transfer under securities Laws. For the avoidance of doubt, licenses, covenants
not to sue and similar rights granted with respect to Intellectual Property (other than as a security interest or lien) are not “Security
Interests” as defined hereunder.
(87) “Shared
Contract” shall mean any Contract (other than leases and Company Policies) of any member of Resideo Group or ADI Group, as applicable,
that relates in any material respect to both the ADI Business and the Resideo Retained Business, including those set forth on Schedule
1.1(87).
17
(88) “Subsidiary”
shall mean with respect to any Person (i) a corporation, fifty percent (50%) or more of the voting or capital stock of which is,
as of the time in question, directly or indirectly owned by such Person and (ii) any other Person in which such Person, directly
or indirectly, owns fifty percent (50%) or more of the equity or economic interest thereof or has the power to elect or direct the election
of fifty percent (50%) or more of the members of the governing body of such entity. It is expressly agreed that, from and after the Effective
Time, solely for purposes of this Agreement, neither ADI SpinCo nor any other member of the ADI Group shall be deemed a Subsidiary of
Resideo or any other member of the Resideo Group, or vice versa.
(89) “Target
Cash Amount” shall mean $150,000,000.
(90) “Tax”
or “Taxes” shall have the meaning set forth in the Tax Matters Agreement.
(91) “Tax
Contest” shall have the meaning as set forth in the Tax Matters Agreement.
(92) “Tax
Matters Agreement” shall mean the Tax Matters Agreement by and between Resideo and ADI SpinCo, in the form attached hereto as
Exhibit D.
(93) “Tax
Records” shall have the meaning set forth in the Tax Matters Agreement.
(94) “Tax
Returns” shall have the meaning set forth in the Tax Matters Agreement.
(95) “Transfer”
shall have the meaning set forth in Section 2.2(b); and the term “Transferred” shall have its correlative
meaning.
(96) “Transition
Services Agreement” shall mean the Transition Services Agreement by and between Resideo and ADI SpinCo, in the form attached
hereto as Exhibit E.
Section 1.2 Other Defined
Terms. In addition, the following terms shall have the meanings ascribed to them in the corresponding section of this Agreement:
AAA
7.1
ADI Cash Payment
2.12(b)
ADI Contracts
see Definition of ADI Assets, 1.1
ADI CSIs
2.9(e)
ADI Intellectual Property
see Definition of ADI Assets, 1.1
ADI Leased Real Property
see Definition of ADI Assets, 1.1
ADI Owned Real Property
see Definition of ADI Assets, 1.1
ADI Released Liabilities
5.1(a)(B)
ADI Released Parties
5.1(a)(A)
ADI SpinCo
Preamble
18
ADI SpinCo Board
Recitals
Agreement
Preamble
Appeal Tribunal
7.1(h)
Appellate Rules
7.1(h)
Arbitral Tribunal
7.1(a)
Assume
2.2(c)
Assumed
see Definition of Assume, 1.1
Assumption
see Definition of Assume, 1.1
Bylaws
3.6
Cash Adjustment
2.12(c)(i)(2)
Cash Adjustment Notification Date
2.12(c)(i)(1)
Charter
3.6
Code
Recitals
Consideration
2.12(b)
Contribution
Recitals
Decision on Interim Relief
7.1(d)
Deferred Assets
2.5(a)
Deferred Liabilities
2.5(a)
DGCL
3.5(j)
Disputes
7.1
Distribution
Recitals
Emergency Arbitrator
7.1(d)
First Post-Distribution Report
9.25
Indemnifying Party
5.4(a)
Indemnitee
5.4(a)
Indemnity Payment
5.8(a)
Interim Relief
7.1(d)
Joint Actions
5.6(c)
Know-How
see Definition of Intellectual Property, 1.1
Liable Party
2.8(b)
Managing Party
5.6(c)
Non-Managing Party
5.6(c)
Other Party
2.8(a)
Parties
Preamble
Party
Preamble
Patents
see Definition of Intellectual Property, 1.1
Privilege
6.6(a)
Privileged Information
6.6(b)
Released Insurance Matters
8.1(k)
Resideo
Preamble
Resideo Board
Recitals
Resideo CSIs
2.9(d)
Resideo D&O Indemnitees
8.3
Resideo Indemnitors
8.3
Resideo Released Liabilities
5.1(a)(A)
Resideo Released Parties
5.1(a)(B)
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Rules
7.1
Separation
Recitals
Separation Plan
see Definition of Internal Reorganization, 1.1
Third Party Claim
5.4(b)
Third Party Proceeds
5.8(a)
Trademarks
see Definition of Intellectual Property, 1.1
Transfer
2.2(b)
Transferred
see Definition of Transfer, 1.1
Section 1.3 References;
Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include
references to the plural and vice versa. Unless the context otherwise requires, the words “include,” “includes”
and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation.”
Unless the context otherwise requires, references in this Agreement to Articles, Sections, Annexes, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement. Unless the context otherwise requires,
the words “hereof”, “hereby” and “herein” and words of similar meaning when used in this Agreement
refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement. The word “or”
shall have the inclusive meaning represented by the phrase “and/or.” Any reference to any agreement, instrument or other document
means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by
the provisions thereof and by this Agreement. Any reference to any Law (including statutes and ordinances) means such law (including all
rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at
the time of determining compliance or applicability. The words “written request” or “in writing” when used in
this Agreement shall include email. Reference in this Agreement to any time shall be to New York City, New York time unless otherwise
expressly provided herein. Unless the context requires otherwise, references in this Agreement to “Resideo” shall also be
deemed to refer to the applicable member of the Resideo Group, references to “ADI SpinCo” shall also be deemed to refer to
the applicable member of the ADI Group and, in connection therewith, any references to actions or omissions to be taken, or refrained
from being taken, as the case may be, by Resideo or ADI SpinCo shall be deemed to require Resideo or ADI SpinCo, as the case may be, to
cause the applicable members of the Resideo Group or the ADI Group, respectively, to take, or refrain from taking, any such action. Unless
otherwise expressly provided herein, whenever a Party’s consent is required under this Agreement, such consent may be withheld,
delayed or conditioned by such Party in its sole and absolute discretion, and whenever any action hereunder is at a Party’s discretion,
such action shall be at such Party’s sole and absolute discretion. In the event of any inconsistency or conflict which may arise
in the application or interpretation of any of the definitions set forth in Section 1.1 and Section 1.2, for
the purpose of determining what is and is not included in such definitions, any item explicitly included on a Schedule referred to in
any such definition shall take priority over any provision of the text thereof.
20
Article
II
THE SEPARATION
Section 2.1 General.
Subject to the terms and conditions of this Agreement, the Parties shall use, and shall cause their respective Affiliates to use, their
respective reasonable best efforts to consummate the transactions contemplated hereby.
Section 2.2 Restructuring;
Transfer of Assets; Assumption of Liabilities.
(a) Internal
Reorganization. At or prior to the Effective Time, except, if applicable, for Transfers contemplated by the Internal Reorganization,
the Separation Plan, this Agreement or the Ancillary Agreements to occur after the Effective Time, the Parties shall complete the Internal
Reorganization, including by taking the actions referred to in Sections 2.2(b) and 2.2(c) below.
(b) Transfer
of Assets. At or prior to the Effective Time (it being understood that some of such Transfers may occur following the Effective Time
in accordance with Section 2.2(a) and 2.5), subject to Section 2.5 and pursuant to the Separation
Plan, the Conveyancing and Assumption Instruments and in connection with the Contribution, ADI SpinCo and Resideo shall, and shall cause
the applicable other Asset Transferors to, transfer, contribute, distribute, assign or convey or cause to be transferred, contributed,
distributed, assigned or conveyed (“Transfer”), to (A) Resideo or the respective Resideo Asset Transferees, all
of the applicable Asset Transferors’ direct or indirect right, title and interest in and to the applicable Resideo Retained Assets,
including all of the outstanding shares of capital stock of, or other ownership interests in, any Person that are included in the Resideo
Retained Assets, and the applicable Resideo Asset Transferees shall accept from such applicable Asset Transferors such applicable Asset
Transferors’ respective direct or indirect right, title and interest in and to the applicable Resideo Retained Assets, and (B) ADI
SpinCo or the respective ADI Asset Transferees, all of the applicable Asset Transferors’ direct or indirect right, title and interest
in and to the applicable ADI Assets, including all of the outstanding shares of capital stock of, or other ownership interests in, any
Persons that are included in the ADI Assets, and the applicable ADI Asset Transferees shall accept from such applicable Asset Transferors
such applicable Asset Transferors’ respective direct or indirect right, title and interest in and to the applicable ADI Assets.
(c) Assumption
of Liabilities. At or prior to the Effective Time (it being understood that some of such assumptions may occur following the Effective
Time in accordance with Section 2.2(a) and Section 2.5), subject to Section 2.5 and pursuant
to the Separation Plan, the Conveyancing and Assumption Instruments and in connection with the Contribution, (i) Resideo shall, or shall
cause a member of the Resideo Group to, accept, assume (or, as applicable, retain) and perform, discharge, fulfill and satisfy, in accordance
with their respective terms (“Assume”), all of the Resideo Retained Liabilities and (ii) ADI SpinCo shall, or shall
cause a member of the ADI Group to, Assume all of the ADI Liabilities, in each case, regardless of (A) when or where such Liabilities
arose or arise, (B) whether the facts upon which they are based occurred prior to, at or subsequent to the Effective Time, (C) whether
accruals for such Liabilities have been Transferred to ADI SpinCo or Resideo or their respective Subsidiaries or included on a combined
balance sheet of the ADI Business or the Resideo Retained Business or whether any such accruals are sufficient to cover such Liabilities,
(D) where or against whom such Liabilities are asserted or determined, (E) whether arising from or alleged to arise from negligence, gross
negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the Resideo Group or the ADI Group, as the case
may be, or any of their past or present respective directors, officers, employees, agents, Subsidiaries or Affiliates, (F) which Person
is named in any Action associated with any Liability, or (G) any benefits, or lack thereof, that have been or may be obtained by the Resideo
Group or the ADI Group in respect of such Liabilities. Without prejudice or limitation to any of the indemnification or liability allocation
provisions contained in this Agreement, the Parties acknowledge and agree that, on the basis of all facts and circumstances as of the
date hereof and through the Effective Time, (i) ADI SpinCo shall, and is expected to, satisfy any Liability or other obligation (or portion
thereof) it Assumes pursuant to this Agreement, whether or not Resideo (or another member of the Resideo Group) has been legally relieved
of such Liability, and (ii) Resideo shall, and is expected to, satisfy any Liability or other obligation (or portion thereof) it Assumes
pursuant to this Agreement, whether or not ADI SpinCo (or another member of the ADI Group) has been legally relieved of such Liability.
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(d) The
Parties shall use their reasonable best efforts to obtain the Consents required to Transfer any Assets (including any Contracts and all
licenses, permits and authorizations issued by any Governmental Entity) or parts thereof as contemplated by this Agreement; provided,
that any such efforts to obtain a Consent shall be subject to Section 9.5(c). Notwithstanding anything herein to the contrary,
no Contract or other Asset shall be transferred if it would violate applicable Law or, in the case of any Contract, the rights of any
third party to such Contract or otherwise result in a breach of such Contract; provided that Section 2.5, to the extent
provided therein, shall apply thereto.
(e) It
is understood and agreed by the Parties that certain of the Transfers referenced in Section 2.2(b) or Assumptions referenced in
Section 2.2(c) have occurred prior to the date hereof and, as a result, no additional Transfers or Assumptions of such Assets or
Liabilities, as applicable, by any member of the Resideo Group or the ADI Group, as applicable, shall be deemed to occur after the date
hereof and prior to the Effective Time with respect thereto. Moreover, to the extent that any member of the Resideo Group or the ADI Group,
as applicable, is liable for any Resideo Retained Liability or ADI Liability, respectively, by operation of Law immediately following
any Transfer in accordance with this Agreement or any Conveyancing and Assumption Instruments, there shall be no need for any other member
of the Resideo Group or the ADI Group, as applicable, to take further action to Assume such Liability in connection with the operation
of Section 2.2(c).
(f) Except
to the extent otherwise required by applicable Tax Law (as determined by Resideo in good faith), each of Resideo and ADI SpinCo shall,
and shall cause the members of its respective Group to, treat for all U.S. federal (and applicable state and local) income Tax purposes
any Liabilities of Resideo that are Assumed by ADI SpinCo (whether such Liabilities are Assumed by ADI SpinCo directly or treated as Assumed
by ADI SpinCo as a result of a transfer by Resideo to ADI SpinCo of equity interests in an entity treated as a “disregarded entity”
for U.S. federal income Tax purposes) pursuant to this Agreement in accordance with Section 5.4(a) of the Tax Matters Agreement. For purposes
of this Section 2.2(f), all references to Resideo and ADI SpinCo shall include a reference to any member of the Resideo Group and
the ADI Group that is, for U.S. federal income Tax purposes, disregarded as separate from Resideo
and ADI SpinCo, respectively.
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Section 2.3 Treatment
of Shared Contracts. Without limiting the generality of the obligations set forth in Sections 2.2(a) and (b):
(a) Unless
the Parties otherwise agree in writing or the benefits of any Contract described in this Section 2.3 are expressly conveyed to
the applicable Party pursuant to an Ancillary Agreement, any Shared Contract shall be assigned in part to the applicable member(s) of
the applicable Group, if so assignable, or appropriately amended prior to, at or after the Effective Time, so that each Party or the members
of their respective Groups as of the Effective Time shall be entitled to the rights and benefits, and shall Assume the related portion
of any Liabilities, inuring to their respective Businesses; provided, however, that (x) in no event shall any member of
any Group be required to assign (or amend) any Shared Contract in its entirety or to assign (or amend) a portion of any Shared Contract
which is not assignable (or cannot be amended) by its terms (including any terms imposing consents or conditions on an assignment where
such consents or conditions have not been obtained or fulfilled, subject to Section 2.2(d)), and (y) if any Shared Contract cannot
be so partially assigned by its terms or otherwise cannot be amended or has not for any other reason been assigned or amended, or if such
assignment or amendment would impair the benefit the parties thereto derive from such Shared Contract, (A) at the reasonable request of
the Party (or the member of such Party’s Group) to which the benefit of such Shared Contract inures in part, the Party for which
such Shared Contract is, as applicable, a Resideo Retained Asset or ADI Asset shall, and shall cause each of its respective Subsidiaries
to, for a period ending not later than twelve (12) months after the Distribution Date, take such other reasonable and permissible actions
to cause such member of the ADI Group or the Resideo Group, as the case may be, to receive the benefit of that portion of each Shared
Contract that relates to the ADI Business or the Resideo Retained Business, as the case may be (in each case, to the extent so related)
as if such Shared Contract had been assigned to (or amended to allow) the applicable member of the applicable Group pursuant to this Section
2.3 and to bear the burden of the corresponding Liabilities (including any Liabilities that may arise by reason of such arrangement)
as if such Liabilities had been Assumed by a member of the applicable Group pursuant to this Section 2.3 (such that the Parties
are in the same net economic position as they would have been in had such Liabilities been Assumed by the applicable member of the applicable
Group pursuant to this Section 2.3); provided that the Party for which such Shared Contract is a Resideo Retained Asset
or an ADI Asset, as applicable, shall be indemnified for all Indemnifiable Losses or other Liabilities arising out of any actions (or
omissions to act) of such retaining Party taken at the direction of the other Party (or relevant member of its Group) or otherwise pursuant
to this Section 2.3(a) in connection with and relating to such Shared Contract, as the case may be, and (B) the Party to which
the benefit of such Shared Contract inures in part shall use reasonable best efforts to enter into a separate contract pursuant to which
it procures such rights and obligations as are necessary such that it no longer needs to avail itself of the arrangements provided pursuant
to this Section 2.3(a); provided that the Party for which such Shared Contract is, as applicable, a Resideo Retained Asset
or ADI Asset, and such Party’s applicable Subsidiaries shall not be liable for any actions or omissions taken in accordance with
clause (y) of this Section 2.3(a).
(b) Unless
otherwise determined by Resideo in good faith, each of Resideo and ADI SpinCo shall, and shall cause the members of its Group to, (i)
treat for all Tax purposes the portion of each Shared Contract inuring to its respective Businesses as Assets owned by, or Liabilities
of, and that had been Assumed by, as applicable, such Party as of the Effective Time and (ii) neither report nor take any Tax position
(on a Tax Return or otherwise) inconsistent with such treatment (except to the extent otherwise required by applicable Law or good-faith
resolution of a Tax Contest).
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Section 2.4 Termination
of Agreements.
(a) Except
as set forth in Section 2.4(b), in furtherance of the releases and other provisions of Section 5.1, ADI SpinCo and each
member of the ADI Group, on the one hand, and Resideo and each member of the Resideo Group, on the other hand, hereby terminate any and
all Contracts between or among ADI SpinCo or any member of the ADI Group, on the one hand, and Resideo or any member of the Resideo Group,
on the other hand, effective as of the Effective Time. No such terminated Contract (including any provision thereof which purports to
survive termination) shall be of any further force or effect after the Effective Time. Each Party shall, at the reasonable request of
the other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.
(b) The
provisions of Section 2.4(a) shall not apply to any of the following Contracts (or to any of the provisions thereof): (i) this
Agreement or any of the Ancillary Agreements; (ii) any Contracts to which any Person other than the Parties or any members of their respective
Groups is a party; (iii) any intercompany accounts payable, accounts receivable or other indebtedness accrued or otherwise outstanding
as of the Effective Time that are reflected in the books and records of the applicable Party or otherwise documented in writing in accordance
with past practices, which shall be settled in the manner contemplated by Section 2.4(c); and (iv) any Shared Contracts.
(c) All
of the intercompany accounts receivable, accounts payable and other indebtedness between any member of the Resideo Group, on the one hand,
and any member of the ADI Group, on the other hand, accrued or otherwise outstanding as of the Effective Time shall, as of the Effective
Time, be repaid, settled or otherwise eliminated by means of cash payments, a dividend, capital contribution, a combination of the foregoing,
or otherwise as determined by Resideo in good faith, but the foregoing shall not effect or impact the rights and obligations of the Parties
under this Agreement and the Ancillary Agreements.
Section 2.5 Transfers
Not Effected at or Prior to the Effective Time; Transfers Deemed Effective as of the Effective Time.
(a) To
the extent that any Transfers of any Assets (including the capital stock or equity interest of any members of the ADI Group or the Resideo
Group) or Assumptions of any Liabilities contemplated by this Article II shall not have been consummated at or prior to the Effective
Time (such Assets subject to such delayed Transfer, the “Deferred Assets” and such Liabilities subject to such delayed
Assumptions, the “Deferred Liabilities”), the Parties shall, except as contemplated by the Internal Reorganization
or the Separation Plan, use reasonable best efforts to effect such Transfers or Assumptions as promptly as practicable following the Effective
Time. Nothing herein shall be deemed to require or constitute the Transfer of any Assets or the Assumption of any Liabilities which by
their terms or operation of Law cannot be Transferred or Assumed; provided, however, that the Parties and their respective
Subsidiaries shall cooperate and use reasonable best efforts to seek to obtain, in accordance with applicable Law, any necessary Consents
or Governmental Approvals for the Transfer of all Assets and Assumption of all Liabilities contemplated to be Transferred and Assumed
pursuant to this Article II to the fullest extent permitted by applicable Law. In the event that any such Transfer of Assets or
Assumption of Liabilities has not been consummated by the Effective Time, from and after the Effective Time, (i) the Party (or relevant
member in its Group) retaining such Deferred Assets shall thereafter, insofar as reasonably possible and to the extent permitted by applicable
Law, hold (or shall cause such member in its Group to hold) such Deferred Assets in trust for the use and benefit of the Party entitled
thereto (at the expense of the Party entitled thereto), and (ii) the Party intended to Assume such Deferred Liabilities shall, or shall
cause the applicable member of its Group to, pay or reimburse the Party retaining such Deferred Liabilities for all amounts paid or incurred
in connection with the retention of such Deferred Liabilities, as if the Party intended to Assume such Deferred Liabilities had Assumed
such Deferred Liabilities at the Effective Time and such that the Parties are in the same net economic position as they would have been
in if the Party intended to Assume such Deferred Liabilities had Assumed such Deferred Liabilities. To the extent the foregoing applies
to any Contracts (other than Shared Contracts, which shall be governed solely by Section 2.3) to be assigned for which any necessary
Consents or Governmental Approvals are not received prior to the Effective Time, the treatment of such Contracts shall, for the avoidance
of doubt, be subject to Section 2.7 and Section 2.8, to the extent applicable. In addition, the Party retaining such Deferred
Assets or Deferred Liabilities (or relevant member of its Group) shall (or shall cause such member in its Group to) treat or operate,
insofar as reasonably possible and to the extent permitted by applicable Law, such Deferred Assets or Deferred Liabilities in the ordinary
course of business and take such other actions as may be reasonably requested by the Party to which such Deferred Assets are to be Transferred
or the Party to be Assuming such Deferred Liabilities, in order to place such Party, insofar as reasonably possible and to the extent
permitted by applicable Law, in the same position as if such Deferred Assets or Deferred Liabilities had been Transferred or Assumed as
contemplated hereby and so that all the benefits and burdens relating to such Deferred Assets or Deferred Liabilities, including possession,
use, risk of loss, potential for income and gain, and dominion, control and command over such Deferred Assets or Deferred Liabilities,
are to inure from and after the Effective Time to the relevant member or members of the Resideo Group or the ADI Group, as applicable,
entitled to the receipt of such Deferred Assets or required to Assume such Deferred Liabilities. In furtherance of the foregoing, the
Parties agree that, as of the Effective Time, subject to Section 2.2(c) and Section 2.8(b), each Party shall be deemed to
have acquired complete and sole beneficial ownership over all of the Deferred Assets, together with all rights, powers and privileges
incident thereto, and shall be deemed to have Assumed in accordance with the terms of this Agreement all of the Deferred Liabilities,
and all duties, obligations and responsibilities incident thereto, which such Party is entitled to acquire or required to Assume pursuant
to the terms of this Agreement.
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(b) If
and when the Consents, Governmental Approvals or conditions, the absence or non-satisfaction of which caused the deferral of Transfer
of any Asset or deferral of Assumption of any Liability pursuant to Section 2.5(a), are obtained or satisfied, the Transfer, assignment,
Assumption or novation of the applicable Asset or Liability shall be effected without further consideration in accordance with and subject
to the terms of this Agreement (including Section 2.2) or the applicable Ancillary Agreement, and shall, to the extent possible
without the imposition of any undue cost on any Party, be deemed to have become effective as of the Effective Time.
(c) The
Party (or relevant member of its Group) retaining any Deferred Assets or Deferred Liabilities pursuant to Section 2.5(a) or otherwise,
shall (i) not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced, assumed, or
agreed in advance to be reimbursed by the Party (or relevant member of its Group) entitled to such Deferred Assets or the Party (or relevant
member of its Group) intended to Assume such Deferred Liabilities, other than reasonable attorneys’ fees and recording or similar
or other incidental fees, all of which shall be promptly reimbursed by the Party (or relevant member of its Group) entitled to such Deferred
Assets or the Person intended to be subject to such Deferred Liabilities and (ii) be indemnified for all Indemnifiable Losses or other
Liabilities arising out of any actions (or omissions to act) of such retaining Party taken at the direction of the other Party (or relevant
member of its Group) in connection with and relating to such retained Deferred Assets or Deferred Liabilities, as the case may be.
(d) After
the Effective Time, each Party (or any member of its Group) may receive mail, packages, electronic mail and any other written communications
properly belonging to another Party (or any member of its Group). Accordingly, at all times after the Effective Time, each Party (or any
member of its Group) is hereby authorized to receive and, if reasonably necessary to identify the proper recipient in accordance with
this Section 2.5(d), open all mail, packages, electronic mail and any other written communications received by such Party (or any
member of its Group) that belongs to such other Party (or any member of its Group), and to the extent that they do not relate to the business
of the receiving Party (or any member of its Group), the receiving Party (or any member of its Group) shall promptly deliver such mail,
packages, electronic mail or any other written communications (or, in case the same also relates to the business of the receiving Party
or another Party, copies thereof) to such other Party (or any member of its Group) as provided for in Section 9.6; it being understood
that if a Party (or any member of its Group) receives a telephone call that relates to the business of the other Party (or any member
of its Group), then the receiving Party (or any member of its Group) shall inform the person making such telephone call to contact the
other Party (or any member of its Group). The provisions of this Section 2.5(d) are not intended to, and shall not, be deemed to
constitute an authorization by any Party (or any member of its Group) to permit the other to accept service of process on its behalf and
no Party (or any member of its Group) is or shall be deemed to be the agent of any other Party (or any member of its Group) for service
of process purposes.
(e) Unless
otherwise determined by Resideo in good faith, with respect to Assets and Liabilities described in Section 2.5(a), each of Resideo
and ADI SpinCo shall, and shall cause the members of its respective Group to, (i) treat for all Tax purposes (A) the Deferred Assets as
Assets having been Transferred to and owned by the Party entitled to such Deferred Assets not later than the Effective Time and (B) the
Deferred Liabilities as liabilities having been Assumed and owned by the Person intended to be subject to such Liabilities not later than
the Effective Time and (ii) neither report nor take any Tax position (on a Tax Return or otherwise) inconsistent with such treatment (except
to the extent otherwise required by applicable Law or good-faith resolution of a Tax Contest).
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Section 2.6 Conveyancing
and Assumption Instruments. In connection with, and in furtherance of, the Transfers of Assets and the Assumptions of Liabilities
contemplated by this Agreement, the Ancillary Agreements and the Separation Plan, the Parties shall execute or cause to be executed, on
or after the date hereof by the appropriate entities to the extent not executed prior to the date hereof, any Conveyancing and Assumption
Instruments necessary to evidence the valid Transfer to the applicable Party or member of such Party’s Group of all right, title
and interest in and to its accepted Assets and the valid and effective Assumption by the applicable Party or member of such Party’s
Group of the applicable Liabilities to be Assumed hereunder for Transfers and Assumptions to be effected pursuant to Delaware Law or the
Laws of one of the other states of the United States or, if not appropriate for a given Transfer or Assumption, and for Transfers or Assumptions
to be effected pursuant to non-U.S. Laws, in such form as the Parties shall reasonably agree, including the Transfer of real property
by mutually acceptable conveyance deeds as may be appropriate and in form and substance as may be required by the jurisdiction in which
the real property is located. The Transfer of capital stock shall be effected by means of executed stock powers and notation on the stock
record books of the corporation or other legal entities involved, or by such other means as may be required (including in any non-U.S.
jurisdiction) to Transfer title to stock and, only to the extent required by applicable Law, by notation on public registries.
Section 2.7 Further
Assurances; Ancillary Agreements.
(a) In
addition to and without limiting the actions specifically provided for elsewhere in this Agreement and subject to the limitations expressly
set forth in this Agreement, including Section 2.5, each of the Parties shall cooperate with each other and use (and shall cause
each other member of its Group to use) reasonable best efforts, at and after the Distribution Date, to take, or to cause to be taken,
all actions, and to do, or to cause to be done, all things reasonably necessary on its part under applicable Law or contractual obligations
to consummate and make effective the transactions contemplated by this Agreement, the Ancillary Agreements and the Separation Plan.
(b) Without
limiting the foregoing, at and after the Distribution Date, subject to Section 9.5(c), each Party shall (and shall cause each other
member of its Group to) cooperate with the other Party (and each other member of its Group) to execute and deliver, or use reasonable
best efforts to cause to be executed and delivered, all instruments, including instruments of Transfer or title, and to make all filings
with relevant Governmental Entities or other Persons, and to obtain all Consents or Governmental Approvals with respect to any permit,
license or Contract, and to take all such other actions as such Party (or other member of its Group) may reasonably be requested to take
by the other Party (or other member of its Group) from time to time, consistent with the terms of this Agreement and the Ancillary Agreements,
in order to effectuate the provisions and purposes of this Agreement, the Ancillary Agreements, the Separation Plan and the Transfers
of the applicable Assets and the assignment and Assumption of the applicable Liabilities and the other transactions contemplated hereby
and thereby. Without limiting the foregoing, subject to Section 9.5(c), each Party shall (and shall cause each other member of
its Group to) take such other actions as may be reasonably necessary to vest in such other Party (or other member of its Group) such title
and such rights as possessed by the transferring Party (or other member of its Group) to the Assets allocated to the other Party (or other
member of its Group) under this Agreement or any of the Ancillary Agreements, free and clear of any Security Interest.
26
(c) Without
limiting the foregoing, in the event that any Party (or member of such Party’s Group) receives any Assets (including the receipt
of payments made pursuant to Contracts and proceeds from accounts receivable with respect to such Asset) or is liable for any Liability
that is otherwise allocated to any Person that is a member of the other Group pursuant to this Agreement or the Ancillary Agreements,
such Party agrees to promptly Transfer, or cause to be Transferred such Asset or Liability to the other Party so entitled thereto (or
member of such other Party’s Group as designated by such other Party) at such other Party’s expense. Prior to any such Transfer,
such Asset or Liability, as the case may be, shall be held in accordance with the provisions of Section 2.5.
(d) On
or prior to the Distribution Date, each of Resideo and ADI SpinCo shall enter into, or (where applicable) shall cause a member or members
of their respective Group to enter into, the Ancillary Agreements and any other Contracts reasonably necessary or appropriate in connection
with the transactions contemplated hereby and thereby.
(e) On
or prior to the Distribution Date, Resideo and ADI SpinCo in their respective capacities as direct or indirect stockholders of their respective
Subsidiaries, shall each ratify any actions that are reasonably necessary or desirable to be taken by any Subsidiary of Resideo or Subsidiary
of ADI SpinCo, as the case may be, to effectuate the transactions contemplated by this Agreement and the Ancillary Agreements.
(f) The
Parties agree that any and all determinations as to whether an Asset or Liability is an ADI Asset, Resideo Retained Asset, ADI Liability
or Resideo Retained Liability, as applicable, (i) shall be made by Resideo after reasonable inquiry and in good faith to the extent the
value of such Asset or Liability (as reasonably determined by Resideo) is $500,000 or less and such determination shall be binding on
the Parties, and (ii) shall be discussed in good faith with the intent of agreeing on the allocation of such Asset or Liability between
the Parties to the extent the value of such Asset or Liability (as reasonably determined by Resideo) is in excess of $500,000, it being
understood that if the Parties are unable to mutually agree on the allocation of such Asset or Liability after a reasonable period of
time, the Parties shall resolve such disagreement in accordance with the dispute resolution provisions set forth in Article VII
of this Agreement.
(g) Following
the Distribution Date, the Parties acknowledge that the Government Import/Export Accounts will remain with the applicable Group as set
forth on Schedule 1.1(49), provided, that, (i) any Assets, benefits, rights, claims or Liabilities in connection therewith
will be apportioned between the ADI Group and Resideo Group pursuant to the terms of this Agreement (including the Schedules hereto),
(ii) Resideo shall have access to, and control of, the portion of the Government Import/Export Accounts in respect of the Resideo Retained
Business, including any necessary login credentials and the ability to upload any required documentation to any customs portal associated
with the Government Import/Export Accounts, and (iii) ADI SpinCo shall have access to, and control of, the portion of the Government Import/Export
Accounts in respect of the ADI Business, including any necessary login credentials and the ability to upload any required documentation
to any customs portal associated with the Government Import/Export Accounts. To the extent there are any claims in respect of the Resideo
Retained Business or ADI Business (including any administrative claims, drawback and refund claims), as applicable, or Resideo or ADI
SpinCo wishes to make any such claims in respect of its respective Business, in each case, related to the Government Import/Export Accounts,
Resideo or ADI SpinCo, as applicable, shall act at the direction of the other Party with respect thereto and the Party acting at the direction
of the other Party shall be indemnified for all Indemnifiable Losses arising out of any such actions. The Parties acknowledge and agree
that (i) any documentation relating to the Resideo Retained Business uploaded to any customs portal in respect of the Government Import/Export
Accounts shall be deemed “Confidential Information” of Resideo hereunder, and (ii) any documentation relating to the ADI Business
uploaded to any customs portal in respect of the Government Import/Export Accounts shall be deemed “Confidential Information”
of ADI SpinCo hereunder.
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Section 2.8 Novation
of Liabilities; Indemnification.
(a) Subject
to Section 9.5(c), each Party, at the request of any member of the other Party’s Group (such other Party, the “Other
Party”), shall use reasonable best efforts to obtain, or to cause to be obtained, any Consent, Governmental Approval, substitution
or amendment required to novate or assign to the fullest extent permitted by applicable Law all obligations under Contracts (other than
Shared Contracts, which shall be governed by Section 2.3) and Liabilities (other than with regard to guarantees or Credit Support
Instruments, which shall be governed by Section 2.9), but solely to the extent that the Parties (or applicable members of their
respective Groups) are jointly or each severally liable with regard to any such Contracts or Liabilities and such Contracts or Liabilities
have been, in whole, but not in part, allocated to the first Party, or, if permitted by applicable Law, to obtain in writing the unconditional
release of the applicable Other Party so that, in any such case, the members of the applicable Group shall be solely responsible for such
Contracts or Liabilities. In addition, with respect to any Action where any Party hereto is a defendant, when and if requested by such
Party, the Other Party at its own expense will use commercially reasonable efforts to remove the requesting Party as a defendant to the
extent that such Action relates solely to Assets or Liabilities that the Other Party (or any member of such requesting Party’s Group)
has been allocated pursuant to this Article II, and the Other Party will cooperate and assist in any required communication with
any plaintiff or other related third party.
(b) If
the Parties are unable to obtain, or to cause to be obtained, any required Consent, Governmental Approval, release, substitution or amendment
referenced in Section 2.8(a), the Other Party or a member of such Other Party’s Group shall continue to be bound by such
Contract, license or other obligation that does not constitute a Liability of such Other Party and, unless not permitted by applicable
Law or the terms thereof, as agent or subcontractor for such Party, the Party or member of such Party’s Group who Assumed or retained
such Liability as set forth in this Agreement (the “Liable Party”) shall, or shall cause a member of its Group to,
pay, perform and discharge fully all the obligations or other Liabilities of such Other Party or member of such Other Party’s Group
thereunder from and after the Effective Time. For the avoidance of doubt, in furtherance of the foregoing, the Liable Party or a member
of such Liable Party’s Group, as agent or subcontractor of the Other Party or a member of such Other Party’s Group, to the
extent reasonably necessary to pay, perform and discharge fully any Liabilities, or retain the benefits (including pursuant to Section
2.5) associated with such Contract, license or other obligation, is hereby granted the right to, among other things, (i) prepare,
execute and submit invoices under such Contract or license in the name of the Other Party (or the applicable member of such Other Party’s
Group), (ii) send correspondence relating to matters under such Contract, license or other obligation in the name of the Other Party (or
the applicable member of such Other Party’s Group), (iii) upon prior written notice, file Actions in the name of the Other Party
(or the applicable member of such Other Party’s Group) in connection with such Contract, license or other obligation and (iv) otherwise
exercise all rights in respect of such Contract, license or other obligation in the name of the Other Party (or the applicable member
of such Other Party’s Group); provided that (x) such actions shall be taken in the name of the Other Party (or the applicable
member of such Other Party’s Group) only to the extent reasonably necessary or advisable in connection with the foregoing, (y) to
the extent that there shall be a conflict between the provisions of this Section 2.8(b) and the provisions of any more specific
arrangement between a member of such Liable Party’s Group and a member of such Other Party’s Group, such more specific arrangement
shall control, and (z) the Liable Party, on behalf of itself and the members of its Group, agrees not to renew or extend the term of,
increase its obligations under, or Transfer to a third party, any such Contract, license or other obligation for which the Other Party
or member of such Party’s Group is or may be liable without the prior written consent of the Other Party, unless all obligations
of the Other Party and the other members of such Party’s Group with respect thereto are thereupon terminated by documentation reasonably
satisfactory in form and substance to the Other Party. The Liable Party shall indemnify each Other Party and hold each of them harmless
against any Liabilities (other than Liabilities of such Other Party) arising in connection therewith; provided, that the Liable
Party shall have no obligation to indemnify the Other Party with respect to any matter to the extent that such Liabilities arise from
such Other Party’s willful breach, knowing violation of Law, fraud, misrepresentation or gross negligence in connection therewith,
in which case such Other Party shall be responsible for such Liabilities; it being understood that any exercise of rights under this Agreement
by such Other Party shall not be deemed to be willful breach, knowing violation of Law, fraud, misrepresentation or gross negligence.
The Other Party shall, without further consideration, promptly pay and remit, or cause to be promptly paid or remitted, to the Liable
Party or, at the direction of the Liable Party, to another member of the Liable Party’s Group, all money, rights and other consideration
received by it or any member of its Group in respect of such performance by the Liable Party (unless any such consideration is an Asset
of such Other Party pursuant to this Agreement). If and when any such Consent, Governmental Approval, release, substitution or amendment
shall be obtained or such agreement, lease, license or other rights or obligations shall otherwise become assignable or able to be novated,
the Other Party shall, to the fullest extent permitted by applicable Law, promptly Transfer or cause the Transfer of all rights, obligations
and other Liabilities thereunder of such Other Party or any member of such Other Party’s Group to the Liable Party or to another
member of the Liable Party’s Group without payment of any further consideration and the Liable Party, or another member of such
Liable Party’s Group, without the payment of any further consideration, shall Assume such rights and Liabilities to the fullest
extent permitted by applicable Law. Each of the applicable Parties shall, and shall cause their respective Subsidiaries to, take all actions
and do all things reasonably necessary on its part, or such Subsidiaries’ part, under applicable Law or contractual obligations
to consummate and make effective the transactions contemplated by this Section 2.8.
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Section 2.9 Guarantees;
Credit Support Instruments.
(a) Except
as otherwise specified in any Ancillary Agreement, on or prior to the Distribution Date or as soon as practicable thereafter, (i) Resideo
shall (with the reasonable cooperation of the applicable member of the ADI Group) use its reasonable best efforts to have each member
of the ADI Group removed as guarantor of any Resideo Retained Liability to the fullest extent permitted by applicable Law, including in
respect of those guarantees set forth on Schedule 2.9(a)(i), and (ii) ADI SpinCo shall (with the reasonable cooperation of the
applicable member of the Resideo Group) use reasonable best efforts to have each member of the Resideo Group removed as guarantor of any
ADI Liability, to the fullest extent permitted by applicable Law, including in respect of those guarantees set forth on Schedule 2.9(a)(ii).
(b) On
or prior to the Distribution Date or as soon as practicable thereafter, to the extent required to obtain a release from a guaranty:
(i) of
any member of the Resideo Group, ADI SpinCo shall execute a guaranty agreement substantially in the form of the existing guaranty or such
other form as is agreed to by the relevant parties to such guaranty agreement, except to the extent that such existing guaranty contains
representations, covenants or other terms or provisions either (A) with which ADI SpinCo would be reasonably unable to comply or (B) which
would be reasonably expected to be breached; and
(ii) of
any member of the ADI Group, Resideo shall execute a guaranty agreement substantially in the form of the existing guaranty or such other
form as is agreed to by the relevant parties to such guaranty agreement, except to the extent that such existing guaranty contains representations,
covenants or other terms or provisions either (A) with which Resideo would be reasonably unable to comply or (B) which would be reasonably
expected to be breached.
(c) If
Resideo or ADI SpinCo is unable to obtain, or to cause to be obtained, any such required removal as set forth in clauses (a) and
(b) of this Section 2.9, (i) Resideo, to the extent a member of the Resideo Group has assumed the underlying Liability with
respect to such guaranty, or ADI SpinCo, to the extent a member of the ADI Group has assumed the underlying Liability with respect to
such guaranty, as the case may be, shall indemnify and hold harmless the guarantor for any Indemnifiable Loss arising from or relating
thereto (in accordance with the provisions of Article V) and shall or shall cause one of its Subsidiaries, as agent or subcontractor
for such guarantor to pay, perform and discharge fully all the obligations or other Liabilities of such guarantor thereunder, (ii) ADI
SpinCo or Resideo, as applicable, shall reimburse the applicable member of the Resideo Group or ADI Group, as applicable, for all documented
out-of-pocket expenses incurred by it arising out of or related to any such guaranty; and (iii) each of Resideo and ADI SpinCo, on behalf
of themselves and the members of their respective Groups, agree not to renew or extend the term of, increase its obligations under, or
Transfer to a third party, any loan, guaranty, lease, Contract or other obligation for which another Party or member of such Party’s
Group is or may be liable as a guarantor without the prior written consent of such other Party, unless all obligations of such other Party
and the other members of such Party’s Group with respect thereto are thereupon terminated by documentation reasonably satisfactory
in form and substance to such Party.
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(d) Resideo
and ADI SpinCo shall reasonably cooperate with respect to the replacement of, and ADI SpinCo shall use reasonable best efforts to replace,
all Credit Support Instruments issued by Resideo or other members of the Resideo Group on behalf of or in favor of any member of the ADI
Group or the ADI Business (the “Resideo CSIs”) with Credit Support Instruments from ADI SpinCo or a member of the ADI
Group, such replacement to occur as promptly as practicable prior to, on or following the Distribution Date. With respect to any Resideo
CSIs that remain outstanding after the Distribution Date, (i) ADI SpinCo shall, and shall cause the members of the ADI Group to, indemnify
and hold harmless the Resideo Indemnitees for any Liabilities arising from or relating to such Resideo CSIs, including any fees in connection
with the issuance and maintenance thereof and any funds drawn by (or for the benefit of), or disbursements made to, the beneficiaries
of such Resideo CSIs in accordance with the terms thereof, (ii) ADI SpinCo shall reimburse the applicable member of the Resideo Group
for all documented out-of-pocket expenses incurred by it arising out of or related to any such Resideo CSIs, and (iii) without the prior
written consent of Resideo, ADI SpinCo shall not, and shall not permit any member of the ADI Group to, enter into, renew or extend the
term of, increase its obligations under, or transfer to a third party, any loan, guaranty, lease, Contract or other obligation in connection
with which Resideo or any member of the Resideo Group has issued any Resideo CSIs which remain outstanding. Neither Resideo nor any member
of the Resideo Group will have any obligation to renew any Resideo CSIs issued on behalf of or in favor of any member of the ADI Group
or the ADI Business after the expiration of any such Resideo CSIs.
(e) Resideo
and ADI SpinCo shall reasonably cooperate with respect to the replacement of, and Resideo shall use reasonable best efforts to replace,
all Credit Support Instruments issued by ADI SpinCo or other members of the ADI Group on behalf of or in favor of any member of the Resideo
Group or the Resideo Retained Business (the “ADI CSIs”) with Credit Support Instruments from Resideo or a member of
the Resideo Group, such replacement to occur as promptly as practicable prior to, on or following the Distribution Date. With respect
to any ADI CSIs that remain outstanding after the Distribution Date, (i) Resideo shall, and shall cause the members of the Resideo Group
to, indemnify and hold harmless the ADI Indemnitees for any Liabilities arising from or relating to such ADI CSIs, including any fees
in connection with the issuance and maintenance thereof and any funds drawn by (or for the benefit of), or disbursements made to, the
beneficiaries of such ADI CSIs in accordance with the terms thereof, (ii) Resideo shall reimburse the applicable member of the ADI Group
for all documented out-of-pocket expenses incurred by it arising out of or related to any such ADI CSIs, and (iii) without the prior written
consent of ADI SpinCo, Resideo shall not, and shall not permit any member of the Resideo Group to, enter into, renew or extend the term
of, increase its obligations under, or transfer to a third party, any loan, guaranty, lease, Contract or other obligation in connection
with which ADI SpinCo or any member of the ADI Group has issued any ADI CSIs which remain outstanding. Neither ADI SpinCo nor any member
of the ADI Group will have any obligation to renew any ADI CSIs issued on behalf of or in favor of any member of the Resideo Group or
the Resideo Retained Business after the expiration of any such ADI CSIs.
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Section 2.10 Disclaimer
of Representations and Warranties.
(a) EACH
OF RESIDEO (ON BEHALF OF ITSELF AND EACH MEMBER OF THE RESIDEO GROUP) AND ADI SPINCO (ON BEHALF OF ITSELF AND EACH MEMBER OF THE ADI GROUP)
UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, IN ANY ANCILLARY AGREEMENT OR IN ANY CONTINUING ARRANGEMENT, NO PARTY
TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, ANY ANCILLARY AGREEMENT
OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY, AND HEREBY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES AS TO THE ASSETS, BUSINESSES
OR LIABILITIES CONTRIBUTED, TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR GOVERNMENTAL APPROVALS REQUIRED
IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, AS TO NONINFRINGEMENT, VALIDITY OR ENFORCEABILITY
OR ANY OTHER MATTER CONCERNING, ANY ASSETS OR BUSINESS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM
FROM COUNTERCLAIM WITH RESPECT TO ANY ACTION OR OTHER ASSET, INCLUDING ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY
OF ANY CONTRIBUTION, ASSIGNMENT, DOCUMENT, CERTIFICATE OR INSTRUMENT DELIVERED HEREUNDER OR THEREUNDER TO CONVEY TITLE TO ANY ASSET OR
THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN, IN ANY ANCILLARY
AGREEMENT OR IN ANY CONTINUING ARRANGEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS, WHERE IS” BASIS (AND, IN THE
CASE OF ANY REAL PROPERTY, BY MEANS OF A QUITCLAIM OR SIMILAR FORM DEED OR CONVEYANCE) AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC
AND LEGAL RISKS THAT (I) ANY CONVEYANCE SHALL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD TITLE, FREE AND CLEAR OF ANY SECURITY
INTEREST AND (II) ANY NECESSARY CONSENTS OR GOVERNMENTAL APPROVALS ARE NOT OBTAINED OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE
NOT COMPLIED WITH.
(b) Each
of Resideo (on behalf of itself and each member of the Resideo Group) and ADI SpinCo (on behalf of itself and each member of the ADI Group)
further understands and agrees that if the disclaimer of express or implied representations and warranties contained in Section 2.10(a)
is held unenforceable or is unavailable for any reason under the Laws of any jurisdiction outside the United States or if, under the Laws
of a jurisdiction outside the United States, both Resideo or any member of the Resideo Group, on the one hand, and ADI SpinCo or any member
of the ADI Group, on the other hand, are jointly or severally liable for any Resideo Retained Liability or any ADI Liability, respectively,
then, the Parties intend that, notwithstanding any provision to the contrary under the Laws of such foreign jurisdictions, the provisions
of this Agreement and the Ancillary Agreements (including the disclaimer of all representations and warranties, allocation of Liabilities
among the Parties and their respective Subsidiaries, releases, indemnification and contribution of Liabilities) shall prevail for any
and all purposes among the Parties and their respective Subsidiaries.
(c) Resideo
hereby waives compliance by itself and each and every member of the Resideo Group with the requirements and provisions of any “bulk-sale”
or “bulk transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or
all of the Resideo Retained Assets to Resideo or any member of the Resideo Group.
(d) ADI
SpinCo hereby waives compliance by itself and each and every member of the ADI Group with the requirements and provisions of any “bulk-sale”
or “bulk transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or
all of the ADI Assets to ADI SpinCo or any member of the ADI Group.
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Section 2.11 ADI Financing
Arrangements. On or prior to the Distribution Date, ADI SpinCo (or other relevant members of the ADI Group) shall enter into the ADI
Financing Arrangements, on such terms and conditions as determined by Resideo in good faith (including the amount that shall be borrowed
pursuant to the ADI Financing Arrangements and the terms and interest rates for such borrowings) and the ADI Financing Arrangements shall
have been consummated in accordance therewith. Resideo and ADI SpinCo shall participate in the preparation of all materials and presentations
as may be reasonably necessary to secure funding pursuant to the ADI Financing Arrangements, including rating agency presentations necessary
to obtain the requisite ratings needed to secure the financing under any of the ADI Financing Arrangements. The Parties agree that ADI
SpinCo or other applicable members of the ADI Group, and not Resideo or other applicable members of the Resideo Group, shall be responsible
for all costs and expenses associated with the ADI Financing Arrangements incurred by, and for reimbursement of such costs and expenses
to, any member of the Resideo Group or the ADI Group.
Section 2.12 Cash Management;
Consideration; Cash Adjustment.
(a) Cash
Management. Subject to any adjustment in accordance with this Section 2.12, all Cash Equivalents held by any member of the
ADI Group as of the Effective Time shall be an ADI Asset and all Cash Equivalents held by any member of the Resideo Group as of the Effective
Time shall be a Resideo Retained Asset. To the extent that following the Effective Time any Cash Equivalents are required to be transferred
from any member of the Resideo Group to any member of the ADI Group or from any member of the ADI Group to any member of the Resideo Group
to make effective the Internal Reorganization or the Contribution pursuant to this Agreement and the Ancillary Agreements (including if
required by Law or regulation to effect the foregoing, but excluding for the avoidance of doubt, the transfer of Cash Equivalents contemplated
by Section 2.12(b)), the Party receiving such Cash Equivalents shall promptly transfer an amount in cash equal to such transferred
Cash Equivalents back to the transferring Party so as not to override the allocations of Assets, Liabilities and expenses related to the
Internal Reorganization and the Contribution contemplated by this Agreement and the Ancillary Agreements.
(b) Consideration.
In exchange for the Contribution, ADI SpinCo agrees to, on or prior to the Distribution Date, (i) issue to Resideo 75,918,198 newly issued,
fully paid and non-assessable shares of ADI SpinCo Common Stock, (ii) issue to Resideo 150,000 newly issued, fully paid and non-assessable
shares of ADI SpinCo Preferred Stock, and (iii) subject to any adjustment in accordance with Section 2.12(c), pay to Resideo $900,000,000
out of the net proceeds of the ADI Financing Arrangements received by ADI SpinCo at or prior to the consummation of the Distribution (the
“ADI Cash Payment”) (such issuances and payment, collectively, the “Consideration”). The payment
of cash made by ADI SpinCo to Resideo pursuant to this Section 2.12(b) shall be made by wire transfer of immediately available
funds to an account designated by Resideo to ADI SpinCo in writing.
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(c) Cash
Adjustment.
(i) Adjustment.
(1) As
promptly as practicable following the Distribution Date, Resideo shall calculate the Distribution Date Cash Amount and
shall promptly notify ADI SpinCo of such calculation (the date on which such notification is delivered, the “Cash Adjustment
Notification Date”). The calculation of the Distribution Date Cash Amount shall be made by Resideo in good faith and
shall be final and binding on ADI SpinCo, and shall not be subject to any challenge or dispute (pursuant
to the procedures set forth in Article VII or otherwise). ADI SpinCo shall provide Resideo with such information and access as
is reasonably requested by Resideo to calculate the Distribution Date Cash Amount.
(2) If
Resideo determines that (A) the Distribution Date Cash Amount exceeds the Target Cash Amount, the amount of such excess shall be paid
by ADI SpinCo to Resideo in accordance with Section 2.12(c)(i)(3), or (B) the Target Cash Amount exceeds the Distribution Date
Cash Amount, the amount of such excess shall be paid by Resideo to ADI SpinCo in accordance with Section 2.12(c)(i)(3) (the amount
of any such payment under clause (A) or (B), as the case may be, the “Cash Adjustment”). If
the Cash Adjustment is equal to zero, no payment in respect of such amount shall be made by either Party.
(3) If
payment is required to be made by ADI SpinCo in accordance with Section 2.12(c)(i)(2)(A), ADI SpinCo shall, within five (5) Business
Days of the Cash Adjustment Notification Date, make payment to Resideo by wire transfer in immediately available funds to
an account designated in writing by Resideo within five (5) Business Days after the Cash Adjustment Notification Date of an amount
equal to the Cash Adjustment. If payment is required to be made by Resideo in accordance with Section 2.12(c)(i)(2)(B), Resideo
shall, within five (5) Business Days of the Cash Adjustment Notification Date, make payment to ADI SpinCo by wire transfer in immediately
available funds to an account designated in writing by ADI SpinCo within five (5) Business Days
after the Cash Adjustment Notification Date of an amount equal to the Cash Adjustment.
Article
III
THE DISTRIBUTION AND ACTIONS PENDING THE DISTRIBUTION; OTHER TRANSACTIONS
Section 3.1 Distribution.
At or prior to the Distribution Date, in connection with the Contribution, ADI SpinCo shall pay or issue the Consideration to Resideo
(or Resideo and ADI SpinCo shall take or cause to be taken such other appropriate actions to ensure that Resideo has the requisite number
of shares of ADI SpinCo Common Stock and ADI SpinCo Preferred Stock) and take any other action as may be requested by Resideo in order
to effect the Distribution. Subject to the conditions and other terms set forth in this Article III, Resideo shall cause the Distribution
Agent on the Distribution Date to make the Distribution, including by crediting the appropriate number of shares of ADI SpinCo Common
Stock to book-entry accounts for each Record Date Holder. For Record Date Holders who own Resideo Common Stock through a broker or other
nominee, their shares of ADI SpinCo Common Stock will be credited to their respective accounts by such broker or nominee. No action by
any Record Date Holder (or such Record Date Holder’s designated transferee or transferees) shall be necessary to receive the applicable
number of shares of ADI SpinCo Common Stock (and, if applicable, cash in lieu of any fractional shares) such stockholder is entitled to
in the Distribution.
33
Section 3.2 Fractional
Shares. Record Date Holders who, after aggregating the number of shares of ADI SpinCo Common Stock (or fractions thereof) to which
such stockholder would be entitled on the Record Date, would be entitled to receive a fraction of a share of ADI SpinCo Common Stock in
the Distribution, will receive cash in lieu of fractional shares. Fractional shares of ADI SpinCo Common Stock will not be distributed
in the Distribution nor credited to book-entry accounts. As soon as practicable after the Distribution Date, Resideo shall direct the
Distribution Agent to (a) determine the number of whole shares and fractional shares of ADI SpinCo Common Stock allocable to each Record
Date Holder, (b) aggregate all such fractional shares into whole shares and sell the whole shares obtained thereby in open market transactions
at then-prevailing trading prices on behalf of holders who would otherwise be entitled to fractional share interests, and (c) distribute
to each Record Date Holder, such holder’s ratable share of the net proceeds of such sale, based upon the average gross selling price
per share of ADI SpinCo Common Stock after making appropriate deductions for any Taxes required to be withheld and applicable transfer
Taxes, and after deducting the costs and expenses of such sale and distribution, including brokerage fees and commissions. Such sales
shall occur as soon after the Distribution Date as practicable and as determined by the Distribution Agent. None of Resideo, ADI SpinCo
or the applicable Distribution Agent will guarantee any minimum sale price for the fractional shares of ADI SpinCo Common Stock. Neither
Resideo nor ADI SpinCo will pay any interest on the proceeds from the sale of fractional shares. The Distribution Agent will have the
sole discretion to select the broker-dealers through which to sell the aggregated fractional shares and to determine when, how and at
what price to sell such shares. Neither the Distribution Agent nor the selected broker-dealers will be Affiliates of Resideo or ADI SpinCo.
Section 3.3 Actions
in Connection with the Distribution.
(a) Prior
to the Distribution Date, ADI SpinCo shall file such amendments and supplements to the Form 10 as Resideo may reasonably request, and
such amendments as may be necessary in order to cause the same to become and remain effective as required by Law, including filing such
amendments and supplements to the Form 10 as may be required by the Commission or federal, state or foreign securities Laws. Resideo shall,
or at Resideo’s election, ADI SpinCo shall, mail (or deliver by electronic means where not prohibited by Law) to the holders of
Resideo Common Stock, at such time on or prior to the Distribution Date as Resideo shall determine, the Information Statement (or a Notice
of Internet Availability of the Information Statement). Promptly after receiving a request from Resideo, ADI SpinCo shall prepare and,
in accordance with applicable Law, file with the Commission any such documentation that Resideo reasonably determines is necessary or
desirable to effectuate the Distribution, and Resideo and ADI SpinCo shall each use reasonable best efforts to obtain all necessary approvals
from the Commission with respect thereto as soon as practicable.
(b) ADI
SpinCo shall use reasonable best efforts in preparing, filing with the Commission and causing to become effective, as soon as reasonably
practicable, a registration statement or amendments thereof which are required in connection with the establishment of, or amendments
to, any employee benefit plans of ADI SpinCo.
34
(c) To
the extent not already approved and effective, ADI SpinCo shall use reasonable best efforts to have approved and made effective, the application
for the original listing on the NYSE of the ADI SpinCo Common Stock to be distributed in the Distribution, and the shares of ADI SpinCo
Common Stock to be reserved for issuance pursuant to any director or employee benefit plan or arrangement on the NYSE, subject to official
notice of distribution.
(d) To
the extent not already completed, ADI SpinCo shall use its reasonable best efforts to take all actions to effectuate the transactions
contemplated by the ADI Financing Arrangements, pursuant to the terms and conditions of the agreements governing the foregoing.
(e) Nothing
in this Section 3.3 shall be deemed to shift or otherwise impose Liability for any portion of ADI SpinCo’s Form 10 or Information
Statement to Resideo, it being understood that all such Liabilities shall constitute ADI Liabilities hereunder.
Section 3.4 Sole Discretion
of Resideo. Resideo, in its sole and absolute discretion, shall be entitled to determine the Distribution Date and all other terms
of the Distribution, including the form, structure and terms of any transactions to effect the Distribution and the timing of and conditions
to the consummation thereof. In addition, Resideo may, in accordance with Section 9.10, at any time and from time to time until
the completion of the Distribution, decide to abandon the Distribution or modify or change the terms of the Distribution, including by
accelerating or delaying the timing of the consummation of all or part of the Distribution. Without limiting the foregoing, Resideo shall
have the right not to complete the Distribution if, at any time prior to the Effective Time, the Resideo Board shall have determined,
in its sole discretion, that the Distribution is not in the best interests of Resideo or its stockholders, that a sale or other alternative
is in the best interests of Resideo or its stockholders or that it is not advisable at that time to separate the ADI Business from Resideo.
Section 3.5 Conditions
to Distribution. Without limiting Section 3.4, the obligation of Resideo to consummate the Distribution is subject to the prior
or simultaneous satisfaction or, to the extent permitted by applicable Law, waiver by Resideo, in its sole and absolute discretion, of
the following conditions. None of ADI SpinCo, any other member of the ADI Group, or any third party shall have any right or claim to require
the consummation of the Distribution, which shall be effected at the sole discretion of the Resideo Board. Any determination made by Resideo
prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 3.5 shall
be conclusive and binding on the Parties hereto. The conditions are for the sole benefit of Resideo and shall not give rise to or create
any duty on the part of Resideo or the Resideo Board to waive or not waive any such condition. Each Party will use its reasonable best
efforts to keep the other Party apprised of its efforts with respect to, and the status of, each of the following conditions:
(a) the
Commission shall have declared effective the Form 10, of which the Information Statement forms a part, and no stop order relating to the
registration statement will be in effect, no proceedings seeking such stop order shall be pending before or threatened by the Commission,
and the Information Statement (or the Notice of Internet Availability of the Information Statement) shall have been distributed to holders
of Resideo Common Stock;
35
(b) the
ADI SpinCo Common Stock to be distributed in the Distribution shall have been approved and accepted for listing by the NYSE, subject to
official notice of issuance;
(c) Resideo
shall have received an opinion from a qualified tax advisor (which opinion continues to be valid), in form and substance acceptable to
the Resideo Board, regarding the qualification of the Distribution and the transactions contemplated by the Exchange Agreement, together
with certain related transactions, as a “reorganization” within the meaning of Sections 368(a)(1)(D) and 355 of the Code,
and which ruling or opinion, as applicable, shall not have been withdrawn, rescinded, or modified in any material respect;
(d) all
registrations, consents and filings required under the securities or blue sky laws of states or other political subdivisions of the United
States or of other foreign jurisdictions in connection with the Distribution shall have been received or made;
(e) no
order, injunction or decree issued by any Governmental Entity of competent jurisdiction, or other legal restraint or prohibition, preventing
the consummation of the Distribution or any of the related transactions shall be pending, threatened, issued or in effect, and no other
event outside of Resideo’s control shall have occurred or failed to occur that prevents the consummation of all or any portion of
the Distribution or any related transactions contemplated hereby, including the Internal Reorganization;
(f) the
Internal Reorganization shall have been effectuated prior to the Distribution, except for such steps (if any) as Resideo in its sole discretion
shall have determined need not be completed or may be completed after the Effective Time;
(g) the
Resideo Board shall have declared the Distribution and approved all related transactions (and such declaration or approval shall not have
been withdrawn);
(h) ADI
SpinCo and Resideo shall have executed and delivered all Ancillary Agreements contemplated by this Agreement to be entered into prior
to or concurrently with the Distribution;
(i) the
transactions contemplated by the Exchange Agreement shall have consummated in accordance with its terms;
(j) an
independent appraisal firm shall have delivered an opinion to the Resideo Board that (i) after giving effect to the ADI Cash Payment and
immediately prior to giving effect to the Separation and pursuant to Section 170 of the Delaware General Corporation Law (as may be amended
from time to time, the “DGCL”), the surplus of Resideo exceeds the value of the ADI SpinCo Common Stock being distributed
to Resideo common stockholders pursuant to the Distribution; (ii) after giving effect to the financing contemplated by the ADI Financing
Arrangements and immediately prior to giving effect to the ADI Cash Payment and pursuant to Section 170 of the DGCL, the surplus of ADI
SpinCo exceeds the ADI Cash Payment; and (iii) after giving effect to the Separation, (a) the assets of each of Resideo and ADI SpinCo,
at a fair valuation, exceed its respective debts (including contingent liabilities), (b) each of Resideo and ADI SpinCo will be able to
pay its respective debts (including contingent liabilities) as they become due, and (c) each of Resideo and ADI SpinCo will not have an
unreasonably small amount of assets (or capital) for the businesses in which it is engaged or in which management has indicated it intends
to engage;
36
(k) the
ADI Financing Arrangements shall have been consummated and the ADI Cash Payment shall have been paid to Resideo; and
(l) no
events or developments shall have occurred or shall exist that, in the sole and absolute judgment of the Resideo Board, make it inadvisable
to effect the Internal Reorganization, Distribution and other transactions contemplated by this Agreement or would result in the Internal
Reorganization, Distribution and other transactions contemplated by this Agreement not being in the best interest of Resideo or its stockholders.
Section 3.6 Organizational
Documents. On or prior to the Distribution Date, Resideo and ADI SpinCo shall each take all actions that may be required to provide
for the adoption by ADI SpinCo of the Amended and Restated Certificate of Incorporation of ADI SpinCo substantially in the form attached
as Exhibit F (the “Charter”), the Amended and Restated Bylaws of ADI SpinCo substantially in the form attached
as Exhibit G (the “Bylaws”), and the Certificate of Designations for the Series A Cumulative Convertible Participating
Preferred Stock of ADI SpinCo substantially in the form attached hereto as Exhibit H, in each case, to be effective as of or prior
to the Distribution Date.
Section 3.7 Directors.
On or prior to the Distribution Date, Resideo and ADI SpinCo shall each take all necessary actions to cause the ADI SpinCo Board to include,
as of the Distribution Date, the individuals identified in the Distribution Disclosure Documents as directors of ADI SpinCo upon completion
of the Distribution.
Section 3.8 Officers.
On or prior to the Distribution Date, Resideo and ADI SpinCo shall each take all necessary action to cause the individuals identified
as officers of ADI SpinCo in the Distribution Disclosure Documents to be officers of ADI SpinCo as of the Distribution Date.
Section 3.9 Resignations
and Removals.
(a) Except
as provided in Section 3.9(b), on or prior to the Distribution Date or as soon thereafter as practicable, (i) Resideo shall cause
all its employees and any employees of its Subsidiaries (excluding any employees of any member of the ADI Group) to resign or be removed,
effective as of the Effective Time, from all positions as officers or directors of any member of the ADI Group in which they serve, and
(ii) ADI SpinCo shall cause all its employees and any employees of its Subsidiaries to resign, effective as of the Effective Time, from
all positions as officers or directors of any members of the Resideo Group in which they serve. Each Party shall reasonably cooperate
with the other to effect the resignations and removals contemplated in the preceding sentence, including by delivering or causing to be
delivered such documentation as may be reasonably necessary to effect the foregoing.
(b) No
Person shall be required by any Party to resign or be removed from any position or office with another Party if such Person is disclosed
in the Distribution Disclosure Documents as a Person who is to hold such position or office following the Distribution Date.
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Section 3.10 Cooperation
Regarding the Distribution. ADI SpinCo shall cooperate with Resideo in all respects to accomplish the Distribution and shall, at Resideo’s
direction, promptly take any and all actions necessary or desirable to effect the Distribution, including the filing of any necessary
documents pursuant to the Exchange Act and the prompt provision of such financial and other information that may be requested by Resideo
pursuant to Section 6.2(b) of this Agreement. Resideo shall select any investment bank(s), manager(s), underwriter(s) or dealer-manager(s)
in connection with the Distribution, as well as any financial printer, solicitation or exchange agent and financial, legal, accounting,
tax and other advisors and service providers in connection with the Distribution, as applicable. ADI SpinCo and Resideo, as the case may
be, will provide to the Distribution Agent all share certificates (to the extent certificated) or book-entry authorizations (to the extent
not certificated) and ADI SpinCo will provide to Resideo and the Distribution Agent (as directed by Resideo) any information required
in order to complete the Distribution.
Article
IV
CERTAIN
COVENANTS
Section 4.1 Cooperation.
From and after the Distribution Date, and subject to the terms of and limitations contained in this Agreement and the Ancillary Agreements,
including Section 9.5(d), each Party shall, and shall cause each other member of its Group and employees to, (i) reasonably
assist the other Party in the orderly and efficient transition to becoming a separate company to the extent set forth in the Transition
Services Agreement or as otherwise set forth herein (including, but not limited to, complying with Articles V, VI and VIII)
and (ii) reasonably assist the other Party to the extent such Party is providing or has provided services, as applicable, pursuant to
the Transition Services Agreement in connection with requests for information from, audits or other examinations of, such other Party
by a Governmental Entity.
Section 4.2 Resideo
Retained Names.
(a) ADI
SpinCo acknowledges and agrees that, except for the licensed rights expressly set forth in this Section 4.2 or pursuant to any
Ancillary Agreement or Continuing Arrangement, neither ADI SpinCo nor any of its Subsidiaries shall have any right, title or interest
in any of the Resideo Retained Names. Other than as set forth on Schedule 4.2, no later than ninety (90) days following the Distribution
Date, ADI SpinCo shall, and shall cause the members of the ADI Group to, change their names and cause their certificates of incorporation
and bylaws (or equivalent organizational documents), as applicable, to be amended to remove any reference to the Resideo Retained Names.
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(b) Without
limitation of the terms of any Ancillary Agreement or Continuing Arrangement, Resideo, on behalf of itself and the other members of the
Resideo Group, hereby grants to the ADI Group, effective as of the Distribution Date, a limited, temporary, non-exclusive, non-transferable,
non-sublicensable, worldwide, royalty-free license under the Resideo Retained Names that are used in the ADI Business immediately prior
to the Distribution Date, to use and display such Resideo Retained Names, for a period of up to six (6) months (or such other period of
time set forth in Schedule 4.2 in respect of the applicable member of the ADI Group set forth therein) immediately following the
Distribution Date, solely in a manner that complies with all applicable Laws and is consistent with the manner used in the operation of
the ADI Business immediately prior to the Distribution Date, and in the case of any Resideo Retained Name that is licensed by any member
of the Resideo Group from a third party (including pursuant to the Honeywell Separation Agreements), solely to the extent such license
permits Resideo (or any other member of its Group) to license such Resideo Retained Name as contemplated herein, and ADI SpinCo shall,
and shall cause each other member of the ADI Group to comply with the terms of each such license; provided, that, following the
Distribution Date, unless otherwise directed by Resideo or as otherwise permitted pursuant to any Ancillary Agreement or Continuing Arrangement,
ADI SpinCo shall, and shall cause the members of the ADI Group to: (i) immediately cease to hold themselves out as having any affiliation
with Resideo or any members of the Resideo Group; (ii) as soon as practicable, but in no event later than six (6) months (or such other
period of time set forth in Schedule 4.2 in respect of the applicable member of the ADI Group set forth therein) following the
Distribution Date, (A) cease to make any use of any Resideo Retained Names, and (B) remove, strike over, or otherwise obliterate all Resideo
Retained Names from all assets and other materials displayed or intended for distribution by any member of the ADI Group, including any
vehicles, business cards, schedules, stationery, packaging materials, displays, signs, promotional materials, manuals, forms, websites,
email, computer software and other materials and systems; and (iii) promptly after the Distribution Date post a disclaimer in a form and
manner reasonably acceptable to Resideo on the “www.adiglobal.com” and “www.snapav.com” websites for up to six
(6) months informing its customers that ADI SpinCo or the applicable member(s) of the ADI Group is responsible for the operation of the
ADI Business, including such websites. Notwithstanding anything to the contrary, and for greater clarity, nothing in this Section 4.2(b)
shall prohibit or prevent the ADI Group’s use of Resideo Retained Names (i) on internal historical documents held as of the Distribution
Date, in a descriptive or factually accurate manner constituting fair or other permitted non-trademark use, or for similar purposes, in
each case, that would not, even in the absence of a license or similar permission, constitute infringement or any other violation of a
Trademark under applicable Law and, in the case of any such Resideo Retained Name that is licensed by any member of the Resideo Group
from a third party (including pursuant to the Honeywell Separation Agreements), solely to the extent such license permits Resideo (or
any other member of its Group) to license such Resideo Retained Name as contemplated herein, or (ii) as permitted by any Ancillary Agreement
or Continuing Arrangement.
(c) Without
limitation of any obligations set forth in any Ancillary Agreement or Continuing Arrangement, ADI SpinCo shall, and shall cause the other
members of the ADI Group to, (i) use the Resideo Retained Names following the Distribution Date only in a form and manner, and with standards
of quality, of that in effect for the Resideo Retained Names as of the Distribution Date, and (ii) not use the Resideo Retained Names
in a manner that reflects negatively on the Resideo Retained Names or the goodwill associated therewith or on Resideo or any member of
the Resideo Group. ADI SpinCo shall indemnify, defend and hold harmless Resideo and the members of the Resideo Group from and against
any and all Indemnifiable Losses arising from or relating to the use by any member of the ADI Group of the Resideo Retained Names pursuant
to Section 4.2(b), including for the avoidance of doubt any Indemnifiable Losses arising from the ADI Group’s use of the
Resideo Retained IP that is licensed by a member of the Resideo Group from a third party.
39
(d) Each
of the Parties acknowledges and agrees that the remedy at Law for any breach of the requirements of this Section 4.2 would be inadequate
and agrees and consents that without intending to limit any additional remedies that may be available, Resideo and the members of the
Resideo Group shall be entitled to a temporary or permanent injunction, without proof of actual damage or inadequacy of legal remedy,
and without posting any bond or other undertaking, in any Action which may be brought to enforce any of the provisions of this Section
4.2.
Section 4.3 ADI Retained
Names.
(a) Resideo
acknowledges and agrees that, except for the licensed rights expressly set forth in this Section 4.3 or pursuant to any Ancillary
Agreement or Continuing Arrangement, neither Resideo nor any of its Subsidiaries shall have any right, title or interest in any of the
ADI Retained Names. No later than ninety (90) days following the Distribution Date, Resideo shall, and shall cause the members of the
Resideo Group to, change their names and cause their certificates of incorporation and bylaws (or equivalent organizational documents),
as applicable, to be amended to remove any reference to the ADI Retained Names.
(b) ADI
SpinCo, on behalf of itself and the other members of the ADI Group, hereby grants to the Resideo Group, effective as of the Distribution
Date, a limited, temporary, non-exclusive, non-transferable, non-sublicensable, worldwide, royalty-free license under the ADI Retained
Names that are used in the Resideo Retained Business immediately prior to the Distribution Date, to use and display such ADI Retained
Names, for a period of up to six (6) months immediately following the Distribution Date, solely in a manner that complies with all applicable
Laws and is consistent with the manner used in the operation of the Resideo Retained Business immediately prior to the Distribution Date,
and in the case of any ADI Retained Name that is licensed by any member of the ADI Group from a third party, solely to the extent such
license permits ADI SpinCo (or any other member of its Group) to license such ADI Retained Name as contemplated herein, and Resideo shall,
and shall cause each other member of the Resideo Group to, comply with the terms of each such license; provided that following
the Distribution Date, unless otherwise directed by ADI SpinCo or as otherwise permitted pursuant to any Ancillary Agreement or Continuing
Arrangement, Resideo shall, and shall cause the members of the Resideo Group to: (i) immediately cease to hold themselves out as having
any affiliation with ADI SpinCo or any members of the ADI Group; (ii) as soon as practicable, but in no event later than six (6) months
following the Distribution Date, (A) cease to make any use of any ADI Retained Names, and (B) remove, strike over, or otherwise obliterate
all ADI Retained Names from all assets and other materials displayed or intended for distribution by any member of the Resideo Group,
including any vehicles, business cards, schedules, stationery, packaging materials, displays, signs, promotional materials, manuals, forms,
websites, email, computer software and other materials and systems; and (iii) promptly after the Distribution Date, post a disclaimer
on the “www.resideo.com” website for up to six (6) months informing its customers that Resideo and the other members of the
Resideo Group is responsible for the operation of the Resideo Retained Business, including such website. Notwithstanding anything to the
contrary, and for greater clarity, nothing in this Section 4.3(b) shall prohibit or prevent the Resideo Group’s use of ADI
Retained Names (i) on internal historical documents held as of the Distribution Date, in a descriptive or factually accurate manner constituting
fair or other permitted non-trademark use, or for similar purposes, in each case, that would not, even in the absence of a license or
similar permission, constitute infringement or any other violation of a Trademark under applicable Law, and, in the case of any such ADI
Retained Name that is licensed by any member of the ADI Group from a third party, solely to the extent such license permits ADI SpinCo
(or any other member of its Group) to license such ADI Retained Name as contemplated herein or (ii) as permitted by any Ancillary Agreement
or Continuing Arrangement.
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(c) Without
limitation of any obligations set forth in any Ancillary Agreement or Continuing Arrangement, Resideo shall, and shall cause the other
members of the Resideo Group to, (i) use the ADI Retained Names following the Distribution Date only in a form and manner, and with standards
of quality, of that in effect for the ADI Retained Names as of the Distribution Date, and (ii) not use the ADI Retained Names in a manner
that reflects negatively on the ADI Retained Names or the goodwill associated therewith or on ADI SpinCo or any member of the ADI Group.
Resideo shall indemnify, defend and hold harmless ADI SpinCo and the members of the ADI Group from and against any and all Indemnifiable
Losses arising from or relating to the use by any member of the Resideo Group of the ADI Retained Names pursuant to Section 4.3(b),
including for the avoidance of doubt any Indemnifiable Losses arising from the Resideo Group’s use of the ADI Intellectual Property
that is licensed by a member of the ADI Group from a third party.
(d) Each
of the Parties acknowledges and agrees that the remedy at Law for any breach of the requirements of this Section 4.3 would be inadequate
and agrees and consents that without intending to limit any additional remedies that may be available, ADI SpinCo and the members of the
ADI Group shall be entitled to a temporary or permanent injunction, without proof of actual damage or inadequacy of legal remedy, and
without posting any bond or other undertaking, in any Action which may be brought to enforce any of the provisions of this Section
4.3.
Article
V
INDEMNIFICATION
Section 5.1 Release of Pre-Effective Time
Claims.
(a) Except
(i) as provided in Section 5.1(b), (ii) as may be otherwise expressly provided in, or any rights or remedies arising pursuant to,
this Agreement or in any Ancillary Agreement and (iii) for any matter for which any Party is entitled to indemnification pursuant to this
Article V:
A. Effective
as of the Effective Time, Resideo, for itself and each member of the Resideo Group, its Affiliates as of the Effective Time and, to the
extent permitted by Law, all Persons who at any time prior to the Effective Time were directors, officers, agents or employees of any
member of the Resideo Group (in their respective capacities as such), in each case, together with their respective heirs, executors, administrators,
successors and assigns, does hereby remise, release and forever discharge ADI SpinCo and the other members of the ADI Group, their respective
Affiliates as of the Effective Time and all Persons who at any time prior to the Effective Time were directors, officers, agents or employees
of any member of the ADI Group (in their respective capacities as such), in each case, together with their respective heirs, executors,
administrators, successors and assigns (collectively, the “ADI Released Parties”), from any and all Liabilities, whether
at Law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, in each
case, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur
or any conditions existing or alleged to have existed on or before the Distribution Date (such liabilities, the “Resideo Released
Liabilities”) and, except as set forth in clauses (i)-(iii) of this Section 5.1(a), in any event shall not, and shall
cause the other members of the Resideo Group not to, bring any Action against any ADI Released Party in respect of any Resideo Released
Liabilities. Notwithstanding the foregoing, any Liability relating to, arising out of, or resulting from the fraud or willful misconduct
of any directors, officers, agents or employees of any member of the ADI Group shall not be deemed a Resideo Released Liability for any
purpose hereunder and nothing in this Agreement shall be deemed to limit Resideo, any member of the Resideo Group, or their respective
Affiliates from commencing any Actions against any such Persons with respect thereto.
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B. Effective
as of the Effective Time, ADI SpinCo, for itself and each member of the ADI Group, its Affiliates as of the Effective Time and, to the
extent permitted by Law, all Persons who at any time prior to the Effective Time were directors, officers, agents or employees of any
member of the ADI Group (in their respective capacities as such), in each case, together with their respective heirs, executors, administrators,
successors and assigns, does hereby remise, release and forever discharge Resideo and the other members of the Resideo Group, their respective
Affiliates as of the Effective Time and all Persons who at any time prior to the Effective Time were directors, officers, agents or employees
of any member of the Resideo Group (in their respective capacities as such), in each case, together with their respective heirs, executors,
administrators, successors and assigns (collectively, the “Resideo Released Parties”), from any and all Liabilities,
whether at Law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise,
in each case, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed
to occur or any conditions existing or alleged to have existed on or before the Distribution Date (such liabilities, the “ADI
Released Liabilities”) and, except as set forth in clauses (i)-(iii) of this Section 5.1(a), in any event shall not,
and shall cause the other members of the ADI Group not to, bring any Action against any Resideo Released Party. Notwithstanding the foregoing,
any Liability relating to, arising out of, or resulting from the fraud or willful misconduct of any directors, officers, agents or employees
of any member of the Resideo Group shall not be deemed an ADI Released Liability for any purpose hereunder and nothing in this Agreement
shall be deemed to limit ADI SpinCo, any member of the ADI Group, or their respective Affiliates from commencing any Actions against any
such Persons with respect thereto.
(b) Nothing
contained in this Agreement, including Section 5.1(a), shall impair or otherwise affect any right of any Party and, as applicable,
a member of such Party’s Group, as well as their respective heirs, executors, administrators, successors and assigns, to enforce
this Agreement, any Ancillary Agreement or any agreements, arrangements, commitments or understandings contemplated in this Agreement
or in any Ancillary Agreement to continue in effect after the Effective Time. In addition, nothing contained in Section 5.1(a)
shall release any Person from:
(i) any
Liability Assumed, Transferred or allocated to a Party or a member of such Party’s Group pursuant to or as contemplated by, or any
other Liability of any member of such Group under, this Agreement or any Ancillary Agreement, including (A) with respect to Resideo, any
Resideo Retained Liability and (B) with respect to ADI SpinCo, any ADI Liability;
(ii) any
Liability provided for in or resulting from any other Contract or arrangement that is entered into after the Effective Time between any
Party (or a member of such Party’s or Parties’ Group), on the one hand, and any other Party or Parties (or a member of such
Party’s or Parties’ Group), on the other hand;
(iii) any
Liability with respect to any Continuing Arrangements; and
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(iv) any
Liability the release of which would result in a release of any Person other than the Persons released in Section 5.1(a); provided
that the Parties agree not to bring any Action or permit any other member of their respective Group to bring any Action against a Person
released in Section 5.1(a) with respect to such Liability.
In addition, nothing contained in Section 5.1(a)
shall release: (i) Resideo from indemnifying any director, officer or employee of the ADI Group who was a director, officer or employee
of Resideo or any other member of the Resideo Group prior to the Distribution Date, as the case may be, to the extent such director, officer
or employee is or becomes a named defendant in any Action with respect to which he or she was entitled to such indemnification in accordance
with the organizational documents of Resideo or the applicable member of the Resideo Group; it being understood that if the underlying
obligation giving rise to such Action is an ADI Liability, ADI SpinCo shall indemnify Resideo for such Liability (including Resideo’s
costs to indemnify the director, officer or employee) in accordance with the provisions set forth in this Article V; and (ii) ADI
SpinCo from indemnifying any director, officer or employee of the Resideo Group who was a director, officer or employee of ADI SpinCo
or any other member of the ADI Group prior to the Distribution Date, as the case may be, to the extent such director, officer or employee
is or becomes a named defendant in any Action with respect to which he or she was entitled to such indemnification in accordance with
the organizational documents of ADI SpinCo or the applicable member of the ADI Group; it being understood that if the underlying obligation
giving rise to such Action is a Resideo Retained Liability, Resideo shall indemnify ADI SpinCo for such Liability (including ADI SpinCo’s
costs to indemnify the director, officer or employee) in accordance with the provisions set forth in this Article V.
(c) Following
the Effective Time, to the extent a Party has released claims on behalf of another Person pursuant to Section 5.1 and such other
Person initiates any Action with respect to claims released by this Section 5.1, the Party with which such Person is associated
shall be responsible for the fees and expenses of counsel of the other Party (or the members of such Party’s Group, as applicable)
and such other Party shall be indemnified for all Liabilities incurred in connection with such Action in accordance with the provisions
set forth in this Article V.
Section 5.2 Indemnification
by Resideo. In addition to any other provisions of this Agreement or any Ancillary Agreement requiring indemnification and except
as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, following the Effective Time, Resideo
shall, and shall cause the other members of the Resideo Group to, indemnify, defend and hold harmless the ADI Indemnitees from and against
any and all Indemnifiable Losses of the ADI Indemnitees to the extent relating to, arising out of, by reason of or otherwise in connection
with (a) the Resideo Retained Liabilities, including the failure of any member of the Resideo Group or any other Person to pay, perform
or otherwise discharge any Resideo Retained Liability in accordance with its respective terms, whether arising prior to, at or after the
Effective Time, (b) any Resideo Retained Asset or the Resideo Retained Business, whether arising prior to, at or after the Effective Time,
or (c) any breach by Resideo or any other member of the Resideo Group of any provision of this Agreement or any Ancillary Agreement unless
such Ancillary Agreement expressly provides for separate indemnification therein, in which case any such indemnification claims shall
be made thereunder.
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Section 5.3 Indemnification
by ADI SpinCo. In addition to any other provisions of this Agreement or any Ancillary Agreement requiring indemnification and except
as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, following the Effective Time, ADI
SpinCo shall, and shall cause the other members of the ADI Group to, indemnify, defend and hold harmless the Resideo Indemnitees from
and against any and all Indemnifiable Losses of the Resideo Indemnitees to the extent relating to, arising out of, by reason of or otherwise
in connection with (a) the ADI Liabilities, including the failure of any member of the ADI Group or any other Person to pay, perform or
otherwise discharge any ADI Liability in accordance with its respective terms, whether arising prior to, at or after the Effective Time,
(b) any ADI Asset or the ADI Business or any other business of the ADI Group, whether arising prior to, at or after the Effective Time,
or (c) any breach by ADI SpinCo or any other member of the ADI Group of any provision of this Agreement or any Ancillary Agreement unless
such Ancillary Agreement expressly provides for separate indemnification therein, in which case any such indemnification claims shall
be made thereunder.
Section 5.4 Procedures
for Indemnification.
(a) Other
than with respect to Third Party Claims, which shall be governed by Section 5.4(b), each Resideo Indemnitee and ADI Indemnitee
(each, an “Indemnitee”) shall notify in writing, with respect to any matter that such Indemnitee has determined has
given or could give rise to a right of indemnification under this Agreement or any Ancillary Agreement (unless such Ancillary Agreement
expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder), the
Party which is or may be required pursuant to this Article V or pursuant to any Ancillary Agreement to make such indemnification
(the “Indemnifying Party”), within forty-five (45) days of such determination, stating in such written notice the amount
of the Indemnifiable Loss claimed, if known, and, to the extent practicable, the method of computation thereof, and referring to the provisions
of this Agreement or such Ancillary Agreement in respect of which such right of indemnification is claimed by such Indemnitee or arises;
provided, however, that the failure to provide such written notice shall not release the Indemnifying Party from any of
its obligations except and solely to the extent the Indemnifying Party shall have been actually materially prejudiced as a result of such
failure. The Indemnifying Party will have a period of forty-five (45) days after receipt of a notice under this Section 5.4(a)
within which to respond thereto. If the Indemnifying Party fails to respond within such period, the Liability specified in such notice
from the Indemnitee shall be deemed rejected by the Indemnifying Party and the disputed matter shall be resolved in accordance with Article
VII. If such Indemnifying Party responds within such period and rejects such claim in whole or in part, the disputed matter shall
be resolved in accordance with Article VII.
(b) If
a claim or demand is made against an Indemnitee by any Person who is not a Party (or otherwise a member of its Group) to this Agreement
or any Ancillary Agreement (a “Third Party Claim”) as to which such Indemnitee is or may be entitled to indemnification
pursuant to this Agreement or any Ancillary Agreement (unless such Ancillary Agreement expressly provides for separate indemnification
therein, in which case any such indemnification claims shall be made thereunder), such Indemnitee shall notify the Indemnifying Party
in writing, and in reasonable detail, of the Third Party Claim promptly (and in any event within forty-five (45) days) after the receipt
of notice by such Indemnitee of the Third Party Claim or after the Indemnitee has determined such claim has given or could give rise to
a right of indemnification under this Agreement or any Ancillary Agreement (unless such Ancillary Agreement expressly provides for separate
indemnification therein, in which case any such indemnification claims shall be made thereunder), but in no event after two (2) Business
Days prior to the final date of the applicable response period in respect of such Third Party Claim; provided, however,
that the failure to provide notice of any such Third Party Claim pursuant to this sentence shall not release the Indemnifying Party from
any of its obligations except and solely to the extent the Indemnifying Party shall have been actually materially prejudiced as a result
of such failure. Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within five (5) Business
Days) after the Indemnitee’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee
relating to the Third Party Claim, and the proviso to the immediately preceding sentence shall apply, mutatis mutandis, to this
sentence. For all purposes of this Section 5.4(b), each Party shall be deemed to have notice of the matters set forth on Schedule
5.6(a), Schedule 5.6(b), and Schedule 5.6(c) for which it is an Indemnifying Party.
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(c) Other
than in the case of (i) Taxes addressed in the Tax Matters Agreement, which shall be addressed as set forth therein, or as otherwise set
forth in this Agreement or any other Ancillary Agreement, or (ii) any Third Party Claim set forth on Schedule 5.6(a), Schedule
5.6(b), and Schedule 5.6(c), the Indemnifying Party shall be entitled, if it so chooses, to assume the defense thereof, and
if it does not assume the defense of such Third Party Claim, to participate in the defense of any Third Party Claim in accordance with
the terms of Section 5.5 at such Indemnifying Party’s own cost and expense and by such Indemnifying Party’s own counsel,
that is (if the Indemnifying Party assumes such defense) reasonably acceptable to the Indemnitee, within thirty (30) days of the receipt
of an indemnification notice from such Indemnitee (it being understood that if the Indemnifying Party does not elect to assume the defense
within such thirty (30) day period, it shall no longer have the right to assume the defense with respect to such Third Party Claim); provided,
however, that the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim to the extent such Third
Party Claim (x) is an Action by a Governmental Entity, (y) involves an allegation of a criminal violation or (z) seeks injunctive relief
against the Indemnitee other than injunctive relief that is ancillary to the primary relief sought and not reasonably likely to be material
to the Indemnitee. In connection with the Indemnifying Party’s defense of a Third Party Claim, such Indemnitee shall have the right
to employ separate counsel and to reasonably participate in (but not control) the defense, compromise or settlement thereof, at its own
expense and, in any event, shall reasonably cooperate with the Indemnifying Party in such defense and make available to the Indemnifying
Party, at the Indemnifying Party’s expense, all witnesses, pertinent Information, materials and information in such Indemnitee’s
possession or under such Indemnitee’s control relating thereto as are reasonably required by the Indemnifying Party; provided,
however, that in the event of a conflict of interest between the Indemnifying Party and the applicable Indemnitee(s) or in respect
of any matter for which the Indemnifying Party is not entitled to assume the defense as set forth herein, such Indemnitee(s) shall be
entitled to retain, at the Indemnifying Party’s expense, separate counsel with respect to such matter. The Indemnifying Party shall
have the right to compromise or settle a Third Party Claim the defense of which it shall have assumed pursuant to this Section 5.4(c)
and any such settlement or compromise made or caused to be made of a Third Party Claim in accordance with this Article V shall
be binding on the Indemnitee, in the same manner as if a final judgment or decree had been entered by a court of competent jurisdiction
in the amount of such settlement or compromise. Notwithstanding the foregoing sentence, the Indemnifying Party shall not settle any such
Third Party Claim without the written consent of the Indemnitee unless such settlement (A) completely and unconditionally releases the
Indemnitee in connection with such matter, (B) provides relief consisting solely of money damages borne by the Indemnifying Party and
(C) does not involve any admission by the Indemnitee of any wrongdoing or violation of Law.
(d) If
an Indemnifying Party fails for any reason to assume responsibility for defending a Third Party Claim within the period specified in this
Section 5.4, such Indemnitee may defend such Third Party Claim at the cost and expense of the Indemnifying Party to the extent
the Indemnifying Party is determined to be required to provide indemnification hereunder in respect thereof. If an Indemnifying Party
has failed to assume the defense of the Third Party Claim within the time period specified in clause (c) above, subject to compliance
with the terms set forth in Section 5.5 and the terms set forth in the immediately preceding sentence and, as applicable, any relevant
Ancillary Agreement, it shall not be a defense to any obligation to pay any amount in respect of such Third Party Claim that the Indemnifying
Party was not consulted in the defense thereof, that such Indemnifying Party’s views or opinions as to the conduct of such defense
were not accepted or adopted, that such Indemnifying Party does not approve of the quality or manner of the defense thereof or that such
Third Party Claim was incurred by reason of a settlement rather than by a judgment or other determination of liability. No Indemnitee
may settle, compromise or admit liability with respect to any Third Party Claim without the consent of the Indemnifying Party, which consent
shall not be unreasonably withheld, conditioned or delayed.
(e) Except
as otherwise set forth herein, or to the extent set forth in any Ancillary Agreement, absent fraud or willful misconduct by an Indemnifying
Party, the indemnification provisions of this Article V shall be the sole and exclusive remedy of an Indemnitee for any monetary
or compensatory damages or Indemnifiable Losses resulting from any breach of this Agreement or any Ancillary Agreement or any other matter
subject to indemnification under this Article V, and each Indemnitee expressly waives and relinquishes any and all rights, claims
or remedies such Person may have with respect to the foregoing other than under this Article V against any Indemnifying Party,
without limitation (for the avoidance of doubt) for any rights, claims or remedies under other provisions of this Agreement or the Ancillary
Agreements. For the avoidance of doubt, all disputes in respect of this Article V shall be resolved in accordance with Article
VII.
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(f) Each
Party hereby covenants and agrees that none of it or its Subsidiaries or any Person claiming through it shall bring suit or otherwise
assert any claim against any Indemnitee, or assert a defense against any claim asserted by any Indemnitee, before any court, arbitrator,
mediator or administrative agency anywhere in the world, alleging that: (a) the Assumption or retention of any ADI Liabilities by the
ADI Group pursuant to the terms and conditions set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any
reason; (b) the Assumption or retention of any Resideo Retained Liabilities by the Resideo Group pursuant to the terms and conditions
set forth in this Agreement and the Ancillary Agreements is void or unenforceable for any reason, or (c) the provisions of this Article
V are void or unenforceable for any reason.
(g) Notwithstanding
the foregoing, to the extent (i) any claim for indemnification is made pursuant to an Ancillary Agreement and such Ancillary Agreement
provides procedures for indemnification that differ from the provisions set forth in this Section 5.4, the terms of such Ancillary
Agreement will govern, and (ii) any claim for indemnification is made pursuant to any other provisions of this Agreement or any Ancillary
Agreement and such provision or Ancillary Agreement is silent on procedures for indemnification, the terms of this Section 5.4
shall apply mutatis mutandis in respect of such indemnification matters.
(h) The
Parties acknowledge that Liabilities for Actions or other matters subject to indemnification pursuant to this Article V (regardless
of the parties to the Actions or nature of such other matters) may be partly the responsibility and/or Liability of the Resideo Group
and partly the responsibility and/or Liability of the ADI Group, as further set forth in this Agreement or the Ancillary Agreements. If
the Parties cannot agree on the allocation of any such responsibilities or Liabilities, they shall resolve the matter pursuant to the
procedures set forth in Article VII.
Section 5.5 Cooperation
in Defense and Settlement.
(a) Other
than as set forth in Section 5.6 with respect to any Third Party Claim addressed therein, with respect to any Third Party Claim
that implicates both Parties in any material respect due to the allocation of Liabilities, responsibilities for management of defense
and related indemnities pursuant to this Agreement or any of the Ancillary Agreements, the Parties agree to use reasonable best efforts
to cooperate fully and maintain a joint defense (in a manner that, to the extent reasonably practicable, will preserve for all Parties
any Privilege with respect thereto). The Party that is not responsible for managing the defense of any such Third Party Claim shall, upon
reasonable request, be consulted with respect to significant matters relating thereto and may, if necessary or helpful, retain counsel
to assist in the defense of such claims. Notwithstanding the foregoing, nothing in this Section 5.5(a) shall derogate from any
Party’s rights to control the defense of any Action in accordance with Section 5.4 or as set forth in an Ancillary Agreement.
(b) Each
of Resideo and ADI SpinCo agrees that at all times from and after the Distribution, if an Action is commenced by a third party naming
two (2) or more Parties (or any member of such Parties’ respective Groups) as defendants and with respect to which one or more named
Parties (or any member of such Party’s respective Group) is a nominal defendant or such Action is otherwise not a Liability allocated
to such named Party under this Agreement or any Ancillary Agreement, then the other Party or Parties shall use reasonable best efforts
at its own expense to cause such nominal defendant to be removed from such Action, as soon as reasonably practicable.
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Section 5.6 Management
of Existing Actions. This Section 5.6 shall govern the management and direction of pending Third Party Claims set forth in
Schedule 5.6(a), Schedule 5.6(b) or Schedule 5.6(c), in which members of the Resideo Group or ADI Group are named
as parties, but shall not alter the allocation of Liabilities which are deemed to be Resideo Retained Liabilities or ADI Liabilities,
as applicable, unless otherwise expressly set forth in this Section 5.6.
(a) From
and after the Distribution, the Resideo Group shall control and direct the defense or prosecution of any Third Party Claims set forth
on Schedule 5.6(a).
(b) From
and after the Distribution, the ADI Group shall control and direct the defense or prosecution of any Third Party Claims set forth on Schedule
5.6(b).
(c) From
and after the Distribution, with respect to the Third Party Claims set forth on Schedule 5.6(c) (“Joint Actions”),
the Party specified on such Schedule 5.6(c) shall be solely responsible for controlling and directing the defense and prosecution
of any such Third Party Claim (the “Managing Party”) and the Parties shall, and shall cause members of their Group
to, cooperate in good faith and take all reasonable actions to permit the applicable Managing Party to control and direct each such Third
Party Claim. The Party who hereunder is, or whose member of its Group is, the Managing Party, shall consult with the other Party (the
“Non-Managing Party”) from time to time with respect to the Joint Actions; provided that the Managing Party shall have
sole authority to select counsel for any Joint Action and be reimbursed for reasonable fees and expenses of such counsel in accordance
with the allocation of Liability for such Joint Action as set forth in this Agreement or any Ancillary Agreement, as applicable, and the
Non-Managing Party, if it elects to retain its own counsel, shall do so solely at its own expense.
(d) To
the maximum extent permitted by applicable Law, the rights to recovery of each Party’s Subsidiaries in respect of any past, present
or future Third Party Claim is hereby delegated to such Party. It is the intent of the Parties that the foregoing delegation shall satisfy
any Law requiring such delegation to be effected pursuant to a power of attorney or similar instrument. The Parties and their respective
Subsidiaries shall execute such further instruments or documents as may be necessary to effect such delegation.
(e) With
respect to any Third Party Claim managed pursuant to this Section 5.6 that involves both a Resideo Retained Liability and an ADI
Liability, no Party managing such Third Party Claim pursuant to this Section 5.6 shall consent to entry of any judgment or enter
into any settlement of any such Third Party Claim without the prior written consent of the other Party (not to be unreasonably withheld,
conditioned or delayed), provided no such consent shall be required if the judgment or settlement (i) contains no finding or admission
of any violation of Law or any violation of the rights of any Person, (ii) involves only monetary relief which the Managing Party has
agreed to pay and (iii) includes a full and unconditional release of the Non-Managing Party and other members of its Group.
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Section 5.7 Indemnification
Payments. Subject to Section 9.11(b), indemnification required by this Article V shall be made by periodic payments
of the amount of Indemnifiable Losses in a timely fashion during the course of the investigation or defense, as and when bills are received
or an Indemnifiable Loss incurred; provided, that, any Party receiving any such amounts undertakes to promptly reimburse the other
Party in respect of such amounts to the extent it is finally determined pursuant to the dispute resolution provisions set forth in Article
VII of this Agreement that such amounts are not Indemnifiable Losses that are subject to indemnification hereunder.
Section 5.8 Indemnification
Obligations Net of Insurance Proceeds and Other Amounts.
(a) Any
recovery by any Indemnitee for any Indemnifiable Loss subject to indemnification pursuant to this Article V shall be calculated
(i) net of Insurance Proceeds actually received by such Indemnitee with respect to any Indemnifiable Loss and (ii) net of any proceeds
actually received by such Indemnitee from any unaffiliated third party with respect to any such Liability corresponding to the Indemnifiable
Loss (“Third Party Proceeds”). Accordingly, the amount which any Indemnifying Party is required to pay pursuant to
this Article V to any Indemnitee pursuant to this Article V shall be reduced by any Insurance Proceeds or Third Party Proceeds
theretofore actually recovered by or on behalf of the Indemnitee corresponding to the related Indemnifiable Loss. If an Indemnitee receives
a payment required by this Agreement from an Indemnifying Party corresponding to any Indemnifiable Loss (an “Indemnity Payment”)
and subsequently receives Insurance Proceeds or Third Party Proceeds, then the Indemnitee shall pay to the Indemnifying Party an amount
equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance
Proceeds or Third Party Proceeds (in each case, net of any documented out-of-pocket costs or expenses
incurred in the collection thereof or taxes imposed with respect thereto) had been received, realized or recovered before the Indemnity
Payment was made.
(b) Any
Indemnity Payment shall be adjusted in accordance with Section 5.4(d) of the Tax Matters Agreement as necessary so that after making
all payments corresponding to Taxes imposed on or attributable to such Indemnity Payment (but net of any Tax benefits resulting from the
payment of such Taxes), the Indemnitee receives an amount equal to the sum it would have received had no such Taxes been imposed.
(c) The
Parties hereby agree that an insurer or other third party that would otherwise be obligated to pay any amount shall not be relieved of
the responsibility with respect thereto or have any subrogation rights with respect thereto by virtue of any provision contained in this
Agreement or any Ancillary Agreement, and that no insurer or any other third party shall be entitled to a “windfall” (e.g.,
a benefit they would not otherwise be entitled to receive, or the reduction or elimination of an insurance coverage obligation that they
would otherwise have, in the absence of the indemnification or release provisions) by virtue of any provision contained in this Agreement
or any Ancillary Agreement. Each Party shall, and shall cause its Subsidiaries to, use reasonable best efforts to collect or recover,
or allow the Indemnifying Party to collect or recover, or cooperate with each other in collecting or recovering, any Insurance Proceeds
or Third Party Proceeds that may be collectible or recoverable respecting the Liabilities for which indemnification may be available under
this Article V. Notwithstanding the foregoing, an Indemnifying Party may not delay making any indemnification payment required
under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the outcome of any Actions to collect
or recover Insurance Proceeds or Third Party Proceeds, and an Indemnitee need not attempt to collect any Insurance Proceeds or Third Party
Proceeds prior to making a claim for indemnification or receiving any Indemnity Payment otherwise owed to it under this Agreement or any
Ancillary Agreement.
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Section 5.9 Contribution.
If the indemnification provided for in this Article V or elsewhere in this Agreement or any Ancillary Agreement is unavailable
for any reason to an Indemnitee (other than failure to provide notice with respect to any Third Party Claims in accordance with Section
5.4(b)) in respect of any Indemnifiable Loss, then the Indemnifying Party shall, in accordance with this Section 5.9, contribute
to the Indemnifiable Losses incurred, paid or payable by such Indemnitee as a result of such Indemnifiable Loss in such proportion as
is appropriate to reflect the relative fault of ADI SpinCo and each other member of the ADI Group, on the one hand, and Resideo and each
other member of the Resideo Group, on the other hand, in connection with the circumstances which resulted in such Indemnifiable Loss,
it being understood that with respect to any Indemnifiable Losses arising out of or related to information contained in the Distribution
Disclosure Documents or other securities law filing, the relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact relates to information supplied
by the ADI Business or a member of the ADI Group, on the one hand, or the Resideo Retained Business or a member of the Resideo Group,
on the other hand.
Section 5.10 Additional
Matters; Survival of Indemnities; Coordination.
(a) The
indemnity agreements contained in this Article V or elsewhere in this Agreement or any Ancillary Agreement shall remain operative
and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee; and (ii) the knowledge by the
Indemnitee of Indemnifiable Losses for which it might be entitled to indemnification hereunder. The indemnity agreements contained in
this Article V or elsewhere in this Agreement or any Ancillary Agreement shall survive the Distribution.
(b) The
rights and obligations of any member of the Resideo Group or any member of the ADI Group, in each case, under this Article V or
elsewhere in this Agreement or any Ancillary Agreement shall survive (i) the sale or other Transfer by any Party or its Affiliates of
any Assets or businesses or the assignment by it of any Liabilities and (ii) any merger, consolidation, business combination, restructuring,
recapitalization, reorganization or similar transaction involving either Party or any of its Subsidiaries.
Article
VI
PRESERVATION OF RECORDS; ACCESS TO INFORMATION; CONFIDENTIALITY; PRIVILEGE
Section 6.1 Preservation
of Corporate Records. Except as otherwise required by applicable Law or agreed in writing signed by the Parties, or as otherwise provided
in any Ancillary Agreement, with regard to any Information referenced in Section 6.2 or otherwise in a Party’s possession,
each Party shall use its reasonable best efforts, at such Party’s sole cost and expense, to retain such Information, until the latest
of, as applicable, (i) the date on which such Information is no longer required to be retained pursuant to the applicable record retention
policy of Resideo or such other member of the Resideo Group, respectively, as in effect immediately prior to the Distribution, including
pursuant to any “litigation hold” issued by Resideo or such other member of the Resideo Group prior to the Distribution, (ii)
the concluding date of any period as may be required by any applicable Law or Data Protection Requirement, (iii) the concluding date of
any period during which such Information relates to a pending or threatened Action which is known to the members of the Resideo Group
or the ADI Group, as applicable, in possession of such Information at the time any retention obligation with regard to such Information
would otherwise expire, and (iv) the concluding date of any period during which the destruction of such Information could interfere with
a pending or threatened investigation by a Governmental Entity which is known to the members of the Resideo Group or the ADI Group, as
applicable, in possession of such Information at the time any retention obligation with regard to such Information would otherwise expire;
provided, that with respect to any pending or threatened Action arising after the Distribution, clause (iii) of this sentence applies
only to the extent that whichever member of the Resideo Group or the ADI Group, as applicable, is in possession of such Information has
been notified in writing pursuant to a “litigation hold” by the other Party of the relevant pending or threatened Action.
The Parties agree that upon written request from the other that certain ADI Information, Resideo Retained Information, or other Information
relating to the transactions contemplated hereby be retained in connection with an Action, the Parties shall use reasonable best efforts
to preserve and not to destroy or dispose of such Information without the consent of the requesting Party.
49
Section 6.2 Access to
Information. Other than in circumstances in which indemnification is sought pursuant to Article V or elsewhere in this Agreement
or any Ancillary Agreement (in which event the provisions of such Article V or such other provisions of this Agreement or any such
Ancillary Agreement shall govern) or for matters related to provision of Tax Records (in which event the provisions of the Tax Matters
Agreement shall govern) and subject to appropriate restrictions for Privileged Information or Confidential Information as agreed to amongst
the Parties:
(a) After
the Distribution, and subject to compliance with the terms of the Ancillary Agreements, upon the prior written reasonable and bona fide
request by, and at the expense of, ADI SpinCo for specific and identified Resideo Retained Information:
(i) that
(x) relates to ADI SpinCo or the ADI Business, as the case may be, prior to the Distribution or (y) is necessary for ADI SpinCo to comply
with the terms of, or otherwise perform under, this Agreement or any Ancillary Agreement to which Resideo or ADI SpinCo are parties, Resideo
shall provide (or cause to be provided), as soon as reasonably practicable following the receipt of such request, appropriate copies of
such Information (or the originals thereof if ADI SpinCo has a reasonable need for such originals) in the possession or control of Resideo
or any other member of the Resideo Group, but only to the extent such items so relate and are not already in the possession or control
of ADI SpinCo or other members of the ADI Group; provided, that to the extent any originals are delivered to ADI SpinCo pursuant
to this Agreement or the Ancillary Agreements, ADI SpinCo shall, at its own expense, return them to Resideo within a reasonable time after
the need to retain such originals has ceased; provided, further, that such obligation to provide any requested Information
shall terminate and be of no further force and effect on the date that is the second anniversary of the Distribution Date; provided,
further, that in the event that Resideo, in its sole discretion, determines that any such access or the provision of any such Information
would violate any Law or Contract with a third party or could reasonably result in the waiver of any Privilege, Resideo shall not be obligated
to provide such Information requested by ADI SpinCo; provided, however, that Resideo will reasonably cooperate with ADI
SpinCo to provide such Information in a manner that would not result in violation of such Law or Contract or the loss or waiver of such
Privilege.
(ii) that
(x) is required by ADI SpinCo with regard to reasonable compliance with reporting, disclosure, filing or other requirements imposed on
ADI SpinCo (including under applicable securities laws) by a Governmental Entity having jurisdiction over ADI SpinCo, or (y) is for use
in any other judicial, regulatory, administrative or other proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation,
Action or other similar requirements, as applicable, Resideo shall provide (or cause to be provided), as soon as reasonably practicable
following the receipt of such request, appropriate copies of such Information (or the originals thereof if ADI SpinCo has a reasonable
need for such originals) in the possession or control of Resideo or any other member of the Resideo Group, but only to the extent such
items so relate and are not already in the possession or control of ADI SpinCo or other members of the ADI Group; provided, that
to the extent any originals are delivered to ADI SpinCo pursuant to this Agreement or the Ancillary Agreements, ADI SpinCo shall, at its
own expense, return them to Resideo within a reasonable time after the need to retain such originals has ceased; provided, further,
that in the event that Resideo, in its sole discretion, determines that any such access or the provision of any such Information would
violate any Law or Contract with a third party or waive any Privilege, Resideo shall not be obligated to provide such Information requested
by ADI SpinCo; provided, however, that Resideo will reasonably cooperate with ADI SpinCo to provide such Information in
a manner that would not result in violation of such Law or Contract or the loss or waiver of such Privilege.
50
(b) After
the Distribution, and subject to compliance with the terms of the Ancillary Agreements, upon the prior written reasonable and bona fide
request by, and at the expense of, Resideo for specific and identified ADI Information:
(i) that
(x) relates to matters prior to the Distribution or (y) is necessary for Resideo to comply with the terms of, or otherwise perform under,
this Agreement or any Ancillary Agreement to which Resideo or ADI SpinCo are parties, ADI SpinCo shall provide (or cause to be provided),
as soon as reasonably practicable following the receipt of such request, appropriate copies of such Information (or the originals thereof
if Resideo has a reasonable need for such originals) in the possession or control of ADI SpinCo or any other member of the ADI Group,
but only to the extent such items so relate and are not already in the possession or control of Resideo or other members of the Resideo
Group; provided, that to the extent any originals are delivered to Resideo pursuant to this Agreement or the Ancillary Agreements,
Resideo shall, at its own expense, return them to ADI SpinCo within a reasonable time after the need to retain such originals has ceased;
provided, further, that such obligation to provide any requested Information shall terminate and be of no further force
and effect on the date that is the second anniversary of the Distribution Date; provided, further, that in the event that
ADI SpinCo, in its sole discretion, determines that any such access or the provision of any such Information would violate any Law or
Contract with a third party or could reasonably result in the waiver of any Privilege, ADI SpinCo shall not be obligated to provide such
Information requested by Resideo; provided, however, that ADI SpinCo will reasonably cooperate with Resideo to provide such
Information in a manner that would not result in violation of such Law or Contract or the loss or waiver of such Privilege.
(ii) that
(x) is required by Resideo with regard to reasonable compliance with reporting, disclosure, filing or other requirements imposed on Resideo
(including under applicable securities laws) by a Governmental Entity having jurisdiction over Resideo, or (y) is for use in any other
judicial, regulatory, administrative or other proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation, Action
or other similar requirements, as applicable, ADI SpinCo shall provide (or cause to be provided), as soon as reasonably practicable following
the receipt of such request, appropriate copies of such Information (or the originals thereof if Resideo has a reasonable need for such
originals) in the possession or control of ADI SpinCo or any other member of the ADI Group, but only to the extent such items so relate
and are not already in the possession or control of Resideo or other members of the Resideo Group; provided, that to the extent
any originals are delivered to Resideo pursuant to this Agreement or the Ancillary Agreements, Resideo shall, at its own expense, return
them to ADI SpinCo within a reasonable time after the need to retain such originals has ceased; provided, further, that
in the event that ADI SpinCo, in its sole discretion, determines that any such access or the provision of any such Information would violate
any Law or Contract with a third party or waive any Privilege, ADI SpinCo shall not be obligated to provide such Information requested
by Resideo; provided, however, that ADI SpinCo will reasonably cooperate with Resideo to provide such Information in a manner
that would not result in violation of such Law or Contract or the loss or waiver of such Privilege.
(c) Each
of Resideo and ADI SpinCo shall inform their respective officers, employees, agents, consultants, advisors, authorized accountants, counsel
and other designated representatives who have had or have access to the other Party’s Confidential Information or other information
provided pursuant to this Article VI of their obligation to hold such information confidential in accordance with the provisions
of this Agreement.
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(d) Without
limiting the generality of the foregoing, until the end of the first full fiscal year for Resideo occurring after the Distribution Date
(and for a reasonable period of time afterwards or as required by Law for Resideo to prepare consolidated financial statements or complete
a financial statement audit for any period during which the financial results of the ADI Group were consolidated with those of Resideo),
ADI SpinCo shall use its reasonable best efforts to cooperate with Resideo so as to enable Resideo to meet its timetable for dissemination
of its financial statements pursuant to applicable Law and to enable Resideo’s auditors to timely complete their annual audit and
quarterly reviews of financial statements, including by providing such access to ADI Information as may be appropriate and necessary to
that end. As part of such efforts, to the extent reasonably necessary for the preparation of financial statements or completing an audit
or review of financial statements or an audit of internal control over financial reporting, (i) ADI SpinCo shall authorize and direct
its auditors to make available to Resideo’s auditors, within a reasonable time prior to the date of Resideo’s auditors’
opinion or review report, both (x) the personnel who performed or will perform the annual audits and quarterly reviews of ADI SpinCo and
(y) work papers related to such annual audits and quarterly reviews, to enable Resideo’s auditors to perform any procedures they
consider reasonably necessary to take responsibility for the work of ADI SpinCo’s auditors as it relates to Resideo’s auditors’
opinion or report and (ii) until such audits are complete, ADI SpinCo shall provide reasonable access during normal business hours for
Resideo’s internal auditors, counsel and other designated representatives to (x) the premises of ADI SpinCo and its Subsidiaries
and all Information (and duplicating rights) within the knowledge, possession or control of ADI SpinCo and its Subsidiaries and (y) the
officers and employees of ADI SpinCo and its Subsidiaries, so that Resideo may conduct reasonable audits relating to the financial statements
provided by ADI SpinCo and its Subsidiaries; provided, however, that such access shall not be unreasonably disruptive to
the business and affairs of the ADI Group.
(e) Without
limiting the generality of the foregoing, until the end of the first full fiscal year for ADI SpinCo occurring after the Distribution
Date (and for a reasonable period of time afterwards or as required by Law), Resideo shall use its reasonable best efforts to cooperate
with ADI SpinCo so as to enable ADI SpinCo to meet its timetable for dissemination of its financial statements pursuant to applicable
Law and to enable ADI SpinCo’s auditors to timely complete their annual audit and quarterly reviews of financial statements, including
by providing such access to Resideo Retained Information as may be appropriate or necessary to that end. As part of such efforts, to the
extent reasonably necessary for the preparation of financial statements or completing an audit or review of financial statements or an
audit of internal control over financial reporting, (i) Resideo shall authorize and direct its auditors to make available to ADI SpinCo’s
auditors, within a reasonable time prior to the date of ADI SpinCo’s auditors’ opinion or review report, both (x) the personnel
who performed or will perform the annual audits and quarterly reviews of Resideo and (y) work papers related to such annual audits and
quarterly reviews, to enable ADI SpinCo’s auditors to perform any procedures they consider reasonably necessary to take responsibility
for the work of Resideo’s auditors as it relates to ADI SpinCo’s auditors’ opinion or report and (ii) until such audits
are complete, Resideo shall provide reasonable access during normal business hours for ADI SpinCo’s internal auditors, counsel and
other designated representatives to (x) the premises of Resideo and its Subsidiaries and all Information (and duplicating rights) within
the knowledge, possession or control of Resideo and its Subsidiaries and (y) the officers and employees of Resideo and its Subsidiaries,
so that ADI SpinCo may conduct reasonable audits relating to the financial statements provided by Resideo and its Subsidiaries; provided,
however, that such access shall not be unreasonably disruptive to the business and affairs of the Resideo Group.
52
(f) In
order to enable the principal executive officer(s) and principal financial officer(s) (as such terms are defined in the rules and regulations
of the Commission) of Resideo to make any certifications required of them under Section 302 or 906 of the Sarbanes-Oxley Act of 2002,
ADI SpinCo shall, within a reasonable period of time following a request from Resideo in anticipation of filing such reports, cause its
principal executive officer(s) and principal financial officer(s) to provide Resideo with certifications of such officers in support of
the certifications of Resideo’s principal executive officer(s) and principal financial officer(s) required under Section 302 or
906 of the Sarbanes-Oxley Act of 2002 with respect to Resideo’s Quarterly Report on Form 10-Q filed with respect to the fiscal quarter
during which the Distribution Date occurs (unless such quarter is the fourth fiscal quarter), each subsequent fiscal quarter through the
third fiscal quarter of the year in which the Distribution Date occurs and Resideo’s Annual Report on Form 10-K filed with respect
to the fiscal year during which the Distribution Date occurs. Such certifications shall be provided in substantially the same form and
manner as such ADI SpinCo officers provided prior to the Distribution (reflecting any changes in certifications necessitated by the Distribution
or any other transactions related thereto) or as otherwise agreed upon between Resideo and ADI SpinCo.
Section 6.3 Witness
Services. At all times from and after the Distribution, each of Resideo and ADI SpinCo shall use its reasonable best efforts to make
available to the other, upon reasonable written request, its and its Subsidiaries’ officers, directors, employees and agents (taking
into account the business demands of such individuals) as witnesses to the extent that (i) such Persons may reasonably be required to
testify in connection with the prosecution or defense of any Action in which the requesting Party may from time to time be involved (except
for claims, demands or Actions in which one or more members of one Group is adverse to one or more members of the other Group) and (ii)
there is no conflict in the Action between the requesting Party and the other Party. A Party providing a witness to the other Party under
this Section 6.3 shall be entitled to receive from the recipient of such witness services, upon the presentation of invoices therefor,
payments for documented out-of-pocket expenses, including travel and lodging costs and expenses (but such costs and expenses shall not
include the costs of salaries and benefits of employees who are witnesses or any pro rata portion of overhead or other costs of employing
such employees which would have been incurred by such employees’ employer regardless of the employees’ service as witnesses),
as may be reasonably incurred as part of the provision of such services and properly paid under applicable Law.
Section 6.4 Reimbursement;
Other Matters. Except to the extent otherwise contemplated by this Agreement or any Ancillary Agreement, a Party providing Information
or access to Information to the other Party under this Article VI shall be entitled to receive from the recipient, upon the presentation
of invoices therefor, payments for such amounts, relating to supplies, disbursements and other documented out-of-pocket expenses (which
shall not include the costs of salaries and benefits of employees of such Party or any pro rata portion of overhead or other costs of
employing such employees which would have been incurred by such employees’ employer regardless of the employees’ service with
respect to the foregoing), as may be reasonably incurred in providing such Information or access to such Information.
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Section 6.5 Confidentiality.
(a) From
and after the Distribution until the three (3) year anniversary following the Distribution, except as otherwise provided in the Ancillary
Agreements, each of Resideo and ADI SpinCo shall hold, and shall cause their respective Affiliates and their officers, employees, agents,
consultants and advisors to hold, in strict confidence (and not to disclose or release or, except as otherwise permitted by this Agreement
or any Ancillary Agreement, use, without the prior written consent of the Party to whom the Confidential Information relates (which may
be withheld in such Party’s sole and absolute discretion, except where disclosure is required by applicable Law)), any and all Confidential
Information concerning or belonging to the other Party or its Affiliates; provided, that each Party may disclose, or may permit
disclosure of, Confidential Information (i) to its respective employees, officers, directors, auditors, attorneys, financial advisors,
lenders, bankers, counsel and other consultants and advisors who have a need to know such Information for auditing or other bona fide
business purposes and who are informed of the obligation to hold such Information confidential and in respect of whose failure to comply
with such obligations, the applicable Party will be responsible, (ii) if any Party or any of its respective Subsidiaries is required or
compelled to disclose any such Confidential Information by judicial or administrative process or by other requirements of Law or stock
exchange rule or is advised by outside counsel in connection with a proceeding brought by a Governmental Entity that it is advisable to
do so, (iii) as required in connection with any legal or other proceeding by one Party against the other Party or in respect of claims
by one Party against the other Party brought in a proceeding, (iv) as necessary in order to permit a Party to prepare and disclose its
financial statements in connection with any regulatory filings or Tax Returns, (v) as necessary for a Party to enforce its rights or perform
its obligations under this Agreement or an Ancillary Agreement, or (vi) to other Persons in connection with their evaluation of, and negotiating
and consummating, a potential strategic or investment transaction, to the extent reasonably necessary in connection therewith, provided
that an appropriate and customary confidentiality agreement has been entered into with the Person receiving such Confidential Information.
Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made by a third party
pursuant to clause (ii) or (iii) above, each Party, as applicable, shall promptly notify (to the extent permissible by Law) the
Party to whom the Confidential Information relates of the existence of such request, demand or disclosure requirement and shall provide
such affected Party a reasonable opportunity to seek an appropriate protective order or other remedy, which, at the expense of the affected
Party, such Party will cooperate in obtaining to the extent legally permissible and commercially practicable. In the event that such appropriate
protective order or other remedy is not obtained, the Party which faces the disclosure requirement shall furnish only that portion of
the Confidential Information that is required to be disclosed and shall take commercially reasonable steps, at the other Party’s
expense, to ensure that confidential treatment is accorded such Confidential Information.
(b) Each
Party acknowledges that it and the other members of its Group may have in its or their possession confidential or proprietary Information
of third parties that was received under confidentiality or non-disclosure agreements with such third party while such Party or members
of its Group were Subsidiaries of Resideo. Each Party shall comply, and shall cause the other members of its Group to comply, and shall
cause its and their respective officers, employees, agents, consultants and advisors to comply, with all terms and conditions of any such
third-party agreements entered into prior to the Distribution, with respect to any confidential and proprietary Information of third parties
to which it or any other member of its Group has had access.
(c) Notwithstanding
anything to the contrary set forth herein, (i) the Parties shall be deemed to have satisfied their obligations hereunder with respect
to keeping Confidential Information confidential if they exercise at least the same degree of care that applies to Resideo’s confidential
and proprietary information pursuant to policies in effect as of the Effective Time and (ii) confidentiality obligations provided for
in any Contract between each Party or its Subsidiaries and their respective employees that survive the consummation of the Distribution
on the terms set forth herein shall remain in full force and effect. Notwithstanding anything to the contrary set forth herein, Confidential
Information of any Party in the possession of and used by any other Party as of the Effective Time may continue to be used by such Party
in possession of the Confidential Information in and only in the operation of the ADI Business (in the case of the ADI Group) or the Resideo
Retained Business (in the case of the Resideo Group); provided, that such Confidential Information may only be used by such Party
and its officers, employees, agents, consultants and advisors in the specific manner and for the specific purposes for which it is used
as of the Effective Time; and provided, further, that such Confidential Information may be used only so long as the Confidential
Information is maintained in confidence and not disclosed in violation of Section 6.5(a).
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(d) For
the avoidance of doubt and notwithstanding any other provision of this Section 6.5, (i) the disclosure and sharing of Privileged
Information shall be governed solely by Section 6.6, and (ii) Information that is subject to any confidentiality provision or other
disclosure restriction in any Ancillary Agreement shall be governed by the terms of such Ancillary Agreement.
(e) For
the avoidance of doubt and notwithstanding any other provision of this Section 6.5, following the Distribution Date, the confidentiality
obligations under this Agreement shall continue to apply to any and all Confidential Information concerning or belonging to each Party
or its Group that is shared or disclosed with the other Party or its Group, whether or not such Confidential Information is shared pursuant
to this Agreement, any Ancillary Agreement or otherwise.
Section 6.6 Privilege
Matters.
(a) The
Parties recognize that legal and other professional services that have been and will be provided prior to the Distribution (whether by
or on behalf of outside counsel, in-house counsel or other legal professionals) have been and will be rendered for the collective benefit
of the Resideo Group and the ADI Group, and that each of the members of the Resideo Group and the ADI Group shall be deemed to be the
client in connection with such services with respect to periods prior to the Distribution for the purposes of asserting all privileges,
immunities or other protections from disclosure which may be asserted under applicable Law, including attorney-client privilege, business
strategy privilege, joint defense privilege, common interest privilege, and protection under the work-product doctrine (“Privilege”).
The Parties recognize that legal and other professional services will be provided following the Distribution, which services will be rendered
solely for the benefit of the Resideo Group or the ADI Group, as the case may be.
(b)
Resideo shall be entitled to control the assertion or waiver of all privileges and immunities in connection with any Information subject
to Privilege (“Privileged Information”) that relates solely to the Resideo Retained Business or the Distribution and
not to the operations of the ADI Business, whether or not the Privileged Information is in possession or under the control of any member
of the Resideo Group or any member of the ADI Group. Resideo shall also be entitled to control the assertion or waiver of all privileges
and immunities in connection with any Privileged Information that relates solely to any Resideo Retained Assets or Resideo Retained Liabilities,
and not any ADI Assets or ADI Liabilities, in connection with any Actions that are now pending or may be asserted in the future, whether
or not the Privileged Information is in the possession or under the control of any member of the Resideo Group or any member of the ADI
Group.
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(c) ADI
SpinCo shall be entitled to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information
that relates solely to the operations of the ADI Business and not to the Resideo Retained Business or the Distribution, whether or not
the Privileged Information is in possession or under the control of any member of the ADI Group or any member of the Resideo Group. ADI
SpinCo shall also be entitled to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information
that relates solely to any ADI Assets or ADI Liabilities, and not any Resideo Retained Assets or Resideo Retained Liabilities, in connection
with any Actions that are now pending or may be asserted in the future, whether or not the Privileged Information is in the possession
or under the control of any member of the ADI Group or any member of the Resideo Group.
(d) Subject
to the remaining provisions of this Section 6.6, the Parties agree that Resideo shall be entitled to control the assertion or waiver
of all privileges and immunities in connection with any Actions, or threatened or contemplated Actions, or other matters that involve
both Parties (or one or more members of their respective Groups) and in respect of which both Parties have Liabilities under this Agreement.
(e) If
any dispute arises between the Parties or any members of their respective Group regarding whether a privilege or immunity should be waived
to protect or advance the interests of either Party or any member of their respective Groups, each Party agrees that it shall: (i) negotiate
with the other Party in good faith; (ii) endeavor to minimize any prejudice to the rights of the other Party and the members of its Group;
and (iii) not unreasonably withhold, delay or condition consent to any request for waiver by the other Party.
(f) Upon receipt by
either Party, or by any member of its respective Group, of any subpoena, discovery or other request (or of written notice that it
will receive or has received such subpoena, discovery or other request) that may reasonably be expected to result in the production
or disclosure of Privileged Information subject to a shared privilege or immunity or as to which the other Party has the sole right
hereunder to assert a privilege or immunity, or if either Party obtains knowledge or becomes aware that any of its, or any member of
its respective Group’s, current or former directors, officers, agents or employees have received any subpoena, discovery or
other requests (or have received written notice that they will receive or have received such subpoena, discovery or other request)
that may reasonably be expected to result in the production or disclosure of such Privileged Information, such Party shall promptly
notify the other Party of the existence of any such subpoena, discovery or other request and shall provide the other Party a
reasonable opportunity to review the Privileged Information and to assert any rights it or they may have, under this Section
6.6 or otherwise, to prevent the production or disclosure of such Privileged Information; provided that if such Party is
prohibited by applicable Law from disclosing the existence of such subpoena, discovery or other request, such Party shall provide
written notice of such related information for which disclosure is not prohibited by applicable Law and use reasonable best efforts
to inform the other Party of any related information such Party reasonably determines is necessary or appropriate for the other
Party to be informed of to enable the other Party to review the Privileged Information and to assert its rights, under this Section
6.6 or otherwise, to prevent the production or disclosure of such Privileged Information.
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(g) The
transfer of all Information pursuant to this Agreement is made in reliance on the agreement of Resideo or ADI SpinCo as set forth in Section
6.5 and this Section 6.6, to maintain the confidentiality of Privileged Information and to assert and maintain any applicable
Privilege. The access to Information being granted pursuant to Section 5.5 and Section 6.2, the agreement to provide witnesses
and individuals pursuant to Section 5.5 and Section 6.3, the furnishing of notices and documents and other cooperative efforts
contemplated by Section 5.5, and the transfer of Privileged Information between the Parties and their respective Subsidiaries pursuant
to this Agreement shall not be deemed a waiver of any Privilege that has been or may be asserted under this Agreement or otherwise. The
Parties further agree that: (i) the exchange by one Party to the other Party of any Information that should not have been exchanged pursuant
to the terms of Section 6.5 shall not be deemed to constitute a waiver of any privilege or immunity that has been or may be asserted
under this Agreement or otherwise with respect to such Privileged Information; and (ii) the Party receiving such Privileged Information
shall promptly return such Privileged Information to the Party who has the right to assert the privilege or immunity.
Section 6.7 Ownership
of Information. Any Information owned by one Party or any of its Subsidiaries that is provided to a requesting Party pursuant to this
Article VI shall be deemed to remain the property of the providing Party. Unless expressly set forth herein, nothing contained
in this Agreement shall be construed as granting a license or other rights to any Party with respect to any such Information, whether
by implication, estoppel or otherwise.
Section 6.8 Processing
of Personal Information. The Parties acknowledge and agree that certain matters concerning the processing, sharing, transfer and security
of Personal Information may arise in connection with the transactions contemplated by this Agreement and the Ancillary Agreements. As
of the Distribution Date, the Data Privacy Agreement shall govern such matters solely for the period and in the manner set out therein.
Section 6.9 Other Agreements.
The rights and obligations granted under this Article VI are subject to any specific limitations, qualifications or additional
provisions on the sharing, exchange or confidential treatment of Information set forth in any Ancillary Agreement.
Article
VII
DISPUTE RESOLUTION
Section 7.1 Arbitration.
Unless an Ancillary Agreement provides for an alternative dispute resolution mechanism (in which case, such alternative dispute resolution
shall apply in respect of any Dispute under such Ancillary Agreement), any controversy, dispute or Action arising out of, in connection
with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or the Ancillary Agreements
or otherwise arising out of, or in any way related to, this Agreement or the Ancillary Agreements or the transactions contemplated hereby,
including any Action based on contract, tort, statute or constitution (collectively, “Disputes”) shall be submitted
to final and binding arbitration administered in accordance with the Commercial Arbitration Rules and Mediation Procedures of the American
Arbitration Association (“AAA”) then in effect (the “Rules”), except as modified herein.
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(a) Unless
otherwise agreed by the Parties in writing, any Dispute to be decided pursuant to this Section 7.1 will be decided (x) before a
sole arbitrator if the amount in dispute, inclusive of all claims and counterclaims, totals less than $2,500,000, or (y) by a panel of
three (3) arbitrators if the amount in dispute, inclusive of all claims and counterclaims, totals $2,500,000 or more (such arbitrator,
collectively, the “Arbitral Tribunal”), it being understood that if the Parties cannot agree on whether the threshold
in clause (y) has been satisfied, the Arbitral Tribunal shall consist of three (3) arbitrators. The panel of three (3) arbitrators shall
be selected as follows: (1) the claimant shall nominate one arbitrator in accordance with the Rules, (2) the respondent shall nominate
one arbitrator in accordance with the Rules within twenty-one (21) days after the appointment of the first arbitrator, and (3) the third
arbitrator, who shall serve as chair, shall be jointly nominated by the two party-nominated arbitrators within twenty-one (21) days of
the confirmation of the appointment of the second arbitrator. If any arbitrator is not appointed within the time limit provided herein,
such arbitrator shall be appointed by the AAA in accordance with the listing, striking and ranking procedure in the Rules.
(b) The
arbitration shall be held, and the award shall be rendered, in New York, New York, in the English language.
(c) For
the avoidance of doubt, by submitting their dispute to arbitration under the Rules, the Parties expressly agree that all issues of arbitrability,
including all issues concerning the propriety and timeliness of the commencement of the arbitration (including any defense based on a
statute of limitation, if applicable), the jurisdiction of the Arbitral Tribunal, and the procedural conditions for arbitration, shall
be finally and solely determined by the Arbitral Tribunal.
(d) Without
derogating from Section 7.1(e) below, the Arbitral Tribunal shall have the full authority to grant any pre-arbitral injunction,
pre-arbitral attachment, interim or conservatory measure or other order in aid of arbitration proceedings (“Interim Relief”).
The Parties shall submit any application for Interim Relief to: (A) the Arbitral Tribunal; or (B) prior to the constitution of the Arbitral
Tribunal, an emergency arbitrator appointed in the manner provided for in the Rules (the “Emergency Arbitrator”). Any
Interim Relief so issued shall, to the extent permitted by applicable Law, be deemed a final arbitration award for purposes of enforceability,
and, moreover, shall also be deemed a term and condition of this Agreement subject to specific performance set forth in Section 7.2
below. The Arbitral Tribunal shall have the power to continue, review, vacate or modify any Interim Relief granted by an Emergency Arbitrator.
In the event an Emergency Arbitrator or the Arbitral Tribunal issues an order granting, denying or otherwise addressing Interim Relief
(a “Decision on Interim Relief”), any Party may apply to enforce or require specific performance of such Decision on
Interim Relief in any court of competent jurisdiction. Notwithstanding the foregoing, the Parties specifically reserve the right to seek
a judicial temporary restraining order, preliminary injunction, or other similar short-term equitable relief, and grant the Arbitral
Tribunal the right to make a final determination of the Parties’ rights, including whether to make permanent or dissolve such court
order.
(e) The
Arbitral Tribunal shall have the power to grant any remedy or relief that it deems just and equitable and that is in accordance with the
terms of this Agreement, including specific performance and temporary or final injunctive relief, provided, however, that
the Arbitral Tribunal shall have no authority or power to limit, expand, alter, amend, modify, revoke or suspend any condition or provision
of this Agreement or any Ancillary Agreement, nor any right or power to award punitive, exemplary or treble damages. The limitations on
the Arbitral Tribunal’s authority and powers set forth in this Section 7.1(e) shall also apply to any Appeal Tribunal constituted
under Section 7.1(h) below.
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(f) The
Arbitral Tribunal shall have the power to allocate the costs and fees of the arbitration, including reasonable attorneys’ fees and
costs as well as those costs and fees addressed in the Rules, between the Parties in the manner it deems fit.
(g) Other
than as set forth in Section 7.1(d), Arbitration under this Article VII shall be the sole and exclusive remedy for any Dispute,
and any award rendered thereby shall be final and binding upon the Parties as from the date rendered, subject to the appellate review
rights set forth in Section 7.1(h). Judgment on the award rendered by the Arbitral Tribunal may be entered in any court having
jurisdiction thereof, including any court having jurisdiction over the relevant Party or its Assets, provided that no Party shall
seek entry of judgement on an award that remains subject to appellate review under Section 7.1(h).
(h) Notwithstanding
Section 7.1(g), any award rendered by the Arbitral Tribunal pursuant to this Article VII (other than any Decision on Interim
Relief rendered under Section 7.1(d)) shall be subject to appellate review in accordance with the Optional Appellate Arbitration
Rules of the AAA then in effect (the “Appellate Rules”). The appeal tribunal shall be constituted in accordance with
the Appellate Rules and shall consist of a panel of three arbitrators, none of whom shall have served on the Arbitral Tribunal that rendered
the underlying award (the “Appeal Tribunal”). The substantive standard for review shall be as set forth in the Appellate
Rules. The Appeal Tribunal shall have the power to allocate the costs and fees of the entire arbitration, including any appellate review
process under this Section 7.1(h), and may modify any award of costs by the Arbitral Tribunal under Section 7.1(f). For
the avoidance of doubt, no award subject to this Section 7.1(h) shall be considered final and binding for purposes of Section
7.1(g), and no Party shall seek to confirm or enforce such award in any court, until (i) the time for filing a notice of appeal under
the Appellate Rules has expired without any Party having filed such notice, or (ii) if an appeal is filed, the Appeal Tribunal has rendered
a final decision on the appeal.
Section 7.2 Specific
Performance. From and after the Distribution Date, in the event of any actual or threatened default in, or breach of, any of the terms,
conditions and provisions of this Agreement or any Ancillary Agreement, the Parties agree that the Party or Parties to this Agreement
or such Ancillary Agreement who are or are to be thereby aggrieved shall, subject and pursuant to the terms of this Article VII
(including for the avoidance of doubt, after compliance with all notice and negotiation provisions herein), have the right to specific
performance and injunctive or other equitable relief of its or their rights under this Agreement or such Ancillary Agreement, in addition
to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree
that, from and after the Distribution Date, the remedies at law for any breach or threatened breach of this Agreement or any Ancillary
Agreement, including monetary damages, are inadequate compensation for any Indemnifiable Loss, that any defense in any action for specific
performance that a remedy at law would be adequate is hereby waived, and that any requirements for the securing or posting of any bond
with such remedy are hereby waived.
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Section 7.3 Treatment
of Arbitration. The Parties agree that any arbitration hereunder shall be kept confidential, and that the existence of the proceeding
and all of its elements (including any pleadings, briefs or other documents submitted or exchanged, any testimony or other oral submissions,
and any awards) shall be deemed confidential, and shall not be disclosed beyond the Arbitral Tribunal, the Parties, their counsel, and
any Person necessary to the conduct of the proceeding, except as and to the extent required by Law and to defend or pursue any legal right.
In the event any Party makes application to any court in connection with this Section 7.3 (including any proceedings to enforce
a final award or any Interim Relief), that Party shall take all steps reasonably within its power to cause such application, and any exhibits
(including copies of any award or decisions of the Arbitral Tribunal or Emergency Arbitrator) to be filed under seal, shall oppose any
challenge by any third party to such sealing, and shall give the other Party immediate notice of such challenge. The confidentiality obligations
set forth in this Section 7.3 shall apply to any appellate proceeding conducted in accordance with Section 7.1(h), including
all briefs, submissions, and decisions rendered on appeal.
Section 7.4 Continuity
of Service and Performance. Unless otherwise agreed in writing, the Parties shall continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this
Article VII with respect to all matters not subject to such dispute resolution.
Section 7.5 Consolidation.
The arbitrator may consolidate an arbitration under this Agreement with any arbitration arising under or relating to the Ancillary Agreements
or any other agreement between the Parties entered into pursuant hereto, as the case may be, if the subject of the Disputes thereunder
arises out of or relates essentially to the same set of facts or transactions. Such consolidated arbitration shall be determined by the
arbitrator appointed for the arbitration proceeding that was commenced first in time.
Section 7.6 Coordination.
Except to the extent provided in Article IX of the Tax Matters Agreement, the provisions of this Article VII (other than this Section
7.6) shall not apply with respect to the resolution of any dispute, controversy or claim arising out of or relating to Taxes or Tax
matters, which shall be governed by the Tax Matters Agreement.
Article
VIII
INSURANCE
Section 8.1 Insurance
Matters.
(a) ADI
SpinCo acknowledges and agrees that, from and after the Effective Time, neither ADI SpinCo nor any member of the ADI Group shall have
any rights to or under any Company Policies other than as expressly provided in Section 5.8 or this Article VIII.
(b) Notwithstanding
Section 8.1(a), from and after the Effective Time, with respect to any Liability accrued or incurred by ADI SpinCo or its predecessors
prior to the Effective Time, ADI SpinCo shall have access to the Company Policies if and solely to the extent that the terms of such policies
provide for such coverage to ADI SpinCo or its predecessors with respect to any ADI Liabilities accrued or incurred prior to the Effective
Time, and subject to the terms and conditions of such insurance policies, including any limits on coverage or scope, any deductibles and
other fees and expenses, and subject to the following additional conditions:
(i) ADI
SpinCo shall inform Resideo of any potential claim under any of the Company Policies with regard to any ADI Liability and Resideo shall
determine whether and at what time to report any such claims under such Company Policies directly to the applicable insurance company,
and to submit a claim for coverage thereunder, and Resideo shall provide a copy of all such claim reports and submissions to ADI SpinCo;
provided, that with respect to any such claims, ADI SpinCo shall provide Resideo with the information regarding the claims and
provide recommendations with regard to the reporting and submission of such claims, and Resideo shall consult with ADI SpinCo with regard
to the timing thereof;
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(ii) If
and to the extent that ADI SpinCo is the sole entity recovering insurance proceeds under one or more of the Company Policies in respect
of a particular claim for coverage, ADI SpinCo shall exclusively bear and be responsible for (and Resideo shall have no obligation to
repay or reimburse ADI SpinCo for) and pay the applicable insurers as required under the applicable Company Policies for any and all costs
as a result of having access to, or making claims under, such Company Policies, including any amounts of deductibles and self-insured
retention associated with such claims, claim handling and administrative costs, collateral requirements and costs, Taxes, surcharges,
additional premiums, state assessments, reinsurance costs, and other related costs, relating to all open, closed or re-opened claims covered
by the applicable Company Policies, whether such claims are made by ADI SpinCo, its employees or third parties, and ADI SpinCo shall indemnify,
hold harmless and reimburse Resideo for any such amounts incurred by Resideo to the extent resulting from any access to, any claims made
by ADI SpinCo under, any Company Policies provided pursuant to this Section 8.1. If Resideo and ADI SpinCo jointly make a claim
for coverage under the Company Policies for amounts that have been or may in the future be incurred partially by Resideo and partially
by ADI SpinCo, each of Resideo and ADI SpinCo shall proportionally bear (based on the relative losses experienced by each in respect of
such claim) the amount of any deductibles under any such Company Policies and any insurance recovery resulting therefrom shall first be
allocated to reimburse Resideo and ADI SpinCo for their respective costs, legal and consulting fees, and other documented out-of-pocket
expenses incurred in pursuing such insurance recovery, with the remaining net proceeds from the insurance recovery to be allocated as
between Resideo and ADI SpinCo in proportion to the relative losses experienced by each in respect of such claim;
(iii) ADI
SpinCo shall exclusively bear (and Resideo shall have no obligation to repay or reimburse ADI SpinCo for) and shall be liable for all
uninsured, uncovered, unavailable or uncollectible amounts, incurred from and after the Effective Time, of all such claims pursued by
ADI SpinCo under the Company Policies as provided for in this Section 8.1(b); and
(iv) in
connection with making any joint claim under any Company Policies pursuant to this Section 8.1(b), Resideo shall control the administration
of all such claims, including the timing of any assertion and pursuit of coverage (provided that Resideo shall reasonably consult with
ADI SpinCo in the administration of such claims), and ADI SpinCo shall not take any action that would be reasonably likely to: (A) have
an adverse impact on the then-current relationship between Resideo and the applicable insurance company; (B) result in the applicable
insurance company terminating or reducing coverage to Resideo or ADI SpinCo, or increasing the amount of any premium owed by Resideo under
the applicable Company Policies; (C) otherwise compromise, jeopardize or interfere with the rights of Resideo under the applicable Company
Policies; or (D) otherwise compromise or impair Resideo’s ability to enforce its rights with respect to any indemnification under
or arising out of this Agreement, and Resideo shall have the right, in its sole discretion, to cause ADI SpinCo to desist from any action
that Resideo determines, in its sole discretion, would compromise or impair Resideo’s rights in accordance with this clause (D).
Notwithstanding the foregoing, if Resideo shall have acted in bad faith in connection with the administration of any claim, ADI SpinCo
shall be permitted to administer such particular claim subject to the limitations set forth herein.
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At all times, Resideo and ADI SpinCo shall, subject
to the limitations set forth in Section 6.5, cooperate with reasonable requests for information by the other Party or the insurance
companies regarding any such insurance policy claim.
(c) Notwithstanding
Section 8.1(b), from and after the Effective Time, any director or officer of ADI SpinCo or any member of the ADI Group who served
as a director or officer of Resideo or any member of the Resideo Group prior to the Effective Time shall be entitled to pursue coverage
under the director and officer liability insurance policies maintained by Resideo or any member of the Resideo Group to the extent that
such policies provide coverage for such director’s or officer’s acts and omissions in his or her respective capacity as director
or officer of Resideo or any member of the Resideo Group prior to the Effective Time, subject to the terms and conditions of such policies
(including but not limited to any limits on coverage or scope, any deductibles or retention amounts and other fees and expenses). On or
prior to the Distribution Date, Resideo shall purchase and obtain directors and officers liability “tail” insurance, and may
in its reasonable discretion purchase fiduciary liability and employment practices liability insurance, covering the ADI Group and its
respective insured persons with respect to claims or other matters arising out of acts, omissions or other matters occurring at or prior
to the Distribution Date.
(d) Any
payments, costs and adjustments required pursuant to Section 8.1(b) shall at Resideo’s election either be billed by Resideo
to ADI SpinCo on a monthly basis and ADI SpinCo shall pay such billed payments, costs and adjustments to Resideo within sixty (60) days
from receipt of invoice, or billed directly by the applicable third party to ADI SpinCo. If Resideo incurs costs to enforce ADI SpinCo’s
obligations under this Section 8.1, ADI SpinCo agrees to indemnify Resideo for such enforcement costs, including reasonable attorneys’
fees.
(e) Notwithstanding
anything to the contrary in this Agreement, from and after the Effective Time, neither ADI SpinCo nor any member of the ADI Group shall
have any rights or claims against or with respect to any self-insurance arrangement of Resideo or any member of the Resideo Group. In
addition, as of the Effective Time, ADI SpinCo, for itself and each member of the ADI Group does hereby remise, release and forever discharge
Resideo and the other members of the Resideo Group of any rights or claims against or with respect to any self-insurance arrangement of
Resideo or any member of the Resideo Group.
(f) On
the Distribution Date, ADI SpinCo shall have in effect all insurance programs required to comply with ADI SpinCo’s statutory obligations
as of the Distribution Date.
(g) This
Agreement shall not be considered as an attempted assignment of any policy of insurance in its entirety, nor is it considered to be itself
a contract of insurance, and further this Agreement shall not be construed to waive any right or remedy of Resideo under or with respect
to any of the Company Policies and programs or any other contract or policy of insurance, and Resideo reserves all of its rights under
such Policies.
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(h) Resideo
shall not be liable to ADI SpinCo for claims (or portions thereof) not reimbursed by insurers for any reason, including coinsurance provisions,
deductibles, quota share deductibles, exhaustion of aggregates, self-insured retentions, bankruptcy or insolvency of an insurance carrier,
Company Policy limitations or restrictions, any coverage disputes, any failure to timely claim by Resideo or any defect in such claim
or its processing.
(i) In
the event that Insured Claims of more than one Party exist relating to the same occurrence, the relevant Parties shall jointly defend
and waive any conflict of interest to the extent necessary to the conduct of the joint defense. Nothing in this Section 8.1(i)
shall be construed to limit or otherwise alter in any way the obligations of the Parties, including those obligations under Article
V, those created by this Agreement, by operation of law or otherwise.
(j) In
the event of any Action by any Party (or both of the Parties) to recover or obtain insurance proceeds, or to defend against any Action
by an insurance carrier to deny any Policy benefits, both Parties may join in any such Action and be represented by joint counsel and
both Parties shall waive any conflict of interest to the extent necessary to conduct any such Action. Nothing in this Section 8.1(j)
shall be construed to limit or otherwise alter in any way the obligations of the Parties, including those created under Article V
of this Agreement or otherwise, by operation of Law, or otherwise.
(k) Notwithstanding
anything contained in this Section 8.1, to the extent Resideo has entered into or agrees to enter into, whether on its own or with
respect to any arrangement provided for under this Section 8.1, any settlement agreement or other arrangement with any insurance
provider regarding coverage under any Company Policy that provides for any limitation of coverage or release of such insurance provider
with regard to any coverage thereunder, whether in whole or in part (collectively, the “Released Insurance Matters”),
ADI SpinCo agrees that it shall (i) abide by the terms of and, to the extent required, consent to, any such settlement or arrangement
relating to the Released Insurance Matters as a condition to receiving any coverage under any Company Policy related thereto, (ii) have
no rights to any such coverage under the Company Policies with respect to any Released Insurance Matters and (iii) make no claims under
any Company Policies with respect to any Released Insurance Matters.
Section 8.2 Certain
Matters Relating to Organizational Documents. From the Distribution Date until six (6) years following the Distribution Date, the
certificate of incorporation and bylaws of ADI SpinCo shall contain provisions no less favorable with respect to indemnification of directors
and officers than those set forth in the Charter or Bylaws, which provisions shall not be amended, repealed or otherwise modified for
such period in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the Effective Time, were
indemnified under the Charter or Bylaws, unless such amendment, repeal, or other modification shall be required by Law and then only to
the minimum extent required by Law or approved by ADI SpinCo’s stockholders.
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Section 8.3 Indemnitor
of First Resort. As a result of agreements or obligations arising out of this Agreement, certain of the directors and officers of
ADI SpinCo and its Subsidiaries designated by Resideo or its Affiliates (the “Resideo D&O Indemnitees”) have or
will have rights to indemnification, advancement of expenses or insurance provided by Resideo or certain of its Affiliates (collectively,
the “Resideo Indemnitors”) in connection with their service as directors or officers of ADI SpinCo or its Subsidiaries.
Notwithstanding any such rights to indemnification, advancement of expenses or insurance provided by any Resideo Indemnitor, (a) ADI SpinCo
is the indemnitor of first resort (i.e., ADI SpinCo’s obligations to the Resideo D&O Indemnitees are primary, and any obligation
of the Resideo Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by any Resideo
D&O Indemnitee are secondary), (b) ADI SpinCo shall be required to advance the full amount of expenses incurred by the Resideo D&O
Indemnitees and shall be liable for the full amount of all Indemnifiable Losses paid in settlement to the extent legally permitted and
as required by the terms of this Agreement, any other agreement between ADI SpinCo and the Resideo D&O Indemnitees or the certificate
of incorporation or bylaws of ADI SpinCo and (c) ADI SpinCo hereby irrevocably waives, relinquishes and releases each of the Resideo Indemnitors
from any and all claims against any of the Resideo Indemnitors for contribution, subrogation or any other recovery of any kind in respect
thereof. In addition, notwithstanding any advancement or payment by the Resideo Indemnitors to or on behalf of any Resideo D&O Indemnitee
with respect to any claim for which a Resideo D&O Indemnitee has sought or may seek indemnification from ADI SpinCo, (i) ADI SpinCo’s
obligations hereunder shall not be affected, (ii) the Resideo Indemnitors shall have a right of contribution or be subrogated to the extent
of such advancement or payment to all of the rights of recovery of such Resideo D&O Indemnitee, as applicable, against ADI SpinCo
and (iii) for the avoidance of doubt, all damages, costs, losses, and other Liabilities incurred by any Resideo D&O Indemnitee in
connection with his or her service as a director or officer of ADI SpinCo or any of its Subsidiaries shall constitute ADI Liabilities.
Article
IX
MISCELLANEOUS
Section 9.1 Entire Agreement;
Construction. This Agreement, including the Exhibits and Schedules, and the Ancillary Agreements shall constitute the entire agreement
between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments, course of dealings
and writings with respect to such subject matter. In the event of any inconsistency between this Agreement and any Schedule hereto, this
Agreement shall prevail. In the event and to the extent that there shall be a conflict or inconsistency between the provisions of (a)
this Agreement and the provisions of any Ancillary Agreement or Continuing Arrangement, such Ancillary Agreement or Continuing Arrangement
shall control with respect to the subject matter addressed by such Ancillary Agreement or Continuing Arrangement to the extent of such
conflict or inconsistency (except with respect to any Conveyancing and Assumption Instruments, in which case this Agreement shall control)
and (b) this Agreement and any agreement which is not an Ancillary Agreement, this Agreement shall control unless specifically stated
otherwise in such agreement. For the avoidance of doubt, the Conveyancing and Assumption Instruments are intended to be ministerial in
nature and only to effect the transactions contemplated by this Agreement with respect to the applicable local jurisdiction and shall
not expand or modify the rights and obligations of the Parties or their Affiliates under this Agreement or any of the Ancillary Agreements
that are not Conveyancing and Assumption Instruments. Notwithstanding anything herein to the contrary, except as expressly set forth otherwise
in this Agreement or any Ancillary Agreement, all matters relating to Taxes and Tax Returns of the Parties and their respective Subsidiaries
shall be governed exclusively by the Tax Matters Agreement.
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Section 9.2 Ancillary
Agreements. Except as expressly set forth herein, this Agreement is not intended to address, and should not be interpreted to address,
the matters specifically and expressly covered by the Ancillary Agreements.
Section 9.3 Counterparts.
This Agreement may be executed in more than one counterpart, all of which shall be considered one and the same agreement, and shall become
effective when one or more such counterparts have been signed by each of the Parties and delivered to each of the Parties.
Section 9.4 Survival
of Agreements. Except as otherwise contemplated by this Agreement or any Ancillary Agreement, all covenants and agreements of the
Parties contained in this Agreement and each Ancillary Agreement shall survive the Effective Time and remain in full force and effect
in accordance with their applicable terms.
Section 9.5 Expenses.
(a) Except
as otherwise expressly provided in this Agreement or any Ancillary Agreement, or as otherwise agreed to in writing by the Parties, all
out-of-pocket fees and expenses incurred at or prior to the Distribution by any member of the Resideo Group or the ADI Group that are
in connection with, or as required by, the preparation, execution, delivery and implementation of this Agreement, any Ancillary Agreement
and the Distribution Disclosure Documents and the consummation of the Internal Reorganization, the Contribution and the Distribution shall
be borne and paid by Resideo; it being understood that if any member of the ADI Group pays any such fees and expenses on behalf of Resideo
following the Distribution, including any one-time spin-off transaction costs, upon presentment of invoices or other reasonable documentation
to Resideo, Resideo shall promptly thereafter remit such amounts to the applicable member of the ADI Group.
(b) The
Resideo Group shall have no responsibility for, and ADI SpinCo shall indemnify the Resideo Group in respect of, any out-of-pocket fees
and expenses incurred by any member of the ADI Group following the Distribution in connection with, or as required by, the preparation,
execution, delivery and implementation of this Agreement, any Ancillary Agreement and the Distribution Disclosure Documents and the consummation
of the Internal Reorganization, the Contribution and the Distribution (except to the extent such fees and expenses were incurred in connection
with services expressly requested by Resideo in writing following the Distribution).
(c) Except
as otherwise expressly provided in this Agreement or any Ancillary Agreement, or as otherwise agreed to in writing by the Parties, any
costs and expenses incurred in obtaining any Consents or novation from a third party in connection with the Transfer by a Party or its
Subsidiary of any Contracts (or portions thereof) contemplated by this Agreement (including Sections 2.2, 2.3, 2.5,
and 2.8) shall be borne by the Party or its Subsidiary to which such Contract (or portion thereof) is being assigned, and no Party
nor any of its Subsidiaries in exercising any efforts to obtain any such Consent pursuant to this Agreement shall be required to incur
any material obligation or grant any material concession for the benefit of any other Person in order to obtain such Consent.
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(d) Except
as otherwise expressly provided in this Agreement or any Ancillary Agreement, or as otherwise agreed to in writing by the Parties, with
respect to any expenses incurred pursuant to a request for further assurances granted under Section 2.7 or a request in connection
with cooperation under this Agreement, including under Section 4.1, the Parties agree that any and all fees and expenses incurred
by either Party shall be borne and paid by the requesting Party; it being understood that no Party shall be obliged to incur any third-party
accounting, consulting, advisor, banking or legal fees, costs or expenses, and the requesting Party shall not be obligated to pay such
fees, costs or expenses, unless such fee, cost or expense shall have had the prior written approval of the requesting Party. Notwithstanding
the foregoing, each Party shall be responsible for paying its own internal fees, costs and expenses (e.g., salaries of personnel).
Section 9.6 Notices.
All notices, requests, claims, demands and other communications under this Agreement and, to the extent applicable and unless otherwise
provided therein, under each of the Ancillary Agreements shall be in English, shall be in writing and shall be given or made (and shall
be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by email or by facsimile
with receipt confirmed (followed by delivery of an original via overnight courier service) to the respective Parties at the following
addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 9.6):
To Resideo:
Resideo Technologies, Inc.
16100 N 71st St, Suite 550
Scottsdale, AZ 85254
Attention: General Counsel
Email:
legalnotices@resideo.com
joshua.foster@resideo.com
with a copy (which shall not constitute notice) to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019-6099
Attention: Russell L. Leaf; Jared N. Fertman; Tej Prakash
Email:
rleaf@willkie.com
jfertman@willkie.com
tprakash@willkie.com
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To ADI SpinCo:
ADI Global Distribution Inc.
275 Broadhollow Rd, Suite 400
Melville, NY 11747
Attention:
General Counsel
Email:
jeannine.lane@adiglobal.com
with a copy (which shall not constitute notice) to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019-6099
Attention:
Russell L. Leaf; Jared N. Fertman; Tej Prakash
Email:
rleaf@willkie.com
jfertman@willkie.com
tprakash@willkie.com
Section 9.7 Amendments.
No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement
or modification is in writing and signed by the authorized representatives of the Parties against whom it is sought to enforce such waiver,
amendment, supplement or modification.
Section 9.8 Assignment.
This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party without the prior written consent of
the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void.
Notwithstanding the foregoing, this Agreement shall be assignable to (i) with respect to Resideo, an Affiliate of Resideo, or (ii) a bona
fide third party in connection with a merger, reorganization, consolidation or the sale of all or substantially all the assets of a Party
so long as the resulting, surviving or transferee entity assumes all the obligations of the relevant Party by operation of law or pursuant
to an agreement in form and substance reasonably satisfactory to the other Party to this Agreement; provided, however, that
in the case of each of the preceding clauses (i) and (ii), no assignment permitted by this Section 9.8 shall release the assigning
Party from liability for the full performance of its obligations under this Agreement.
Section 9.9 Successors
and Assigns. The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit
of and be enforceable by (and against) the Parties and their respective successors and permitted assigns.
Section 9.10 Termination.
This Agreement (including Article V hereof) may be terminated at any time prior to the Effective Time by and in the sole discretion
of Resideo without the approval of ADI SpinCo or the stockholders of Resideo. In the event of such termination prior to the Effective
Time, no Party (nor any of its directors, officers or employees) shall have any liability of any kind to the other Party or any other
Person by reason of this Agreement. After the Effective Time, this Agreement may not be terminated except by an agreement in writing signed
by Resideo and ADI SpinCo.
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Section 9.11 Payment
Terms.
(a) Except
as set forth in Article V or as otherwise expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any
amount to be paid or reimbursed by a Party (or a member of such Party’s Group), on the one hand, to the other Party (or a member
of such Party’s Group), on the other hand, under this Agreement shall be paid or reimbursed hereunder within sixty (60) days after
presentation of an invoice or a written demand therefor and setting forth, or accompanied by, reasonable documentation or other reasonable
explanation supporting such amount.
(b) Notwithstanding
anything to the contrary herein, any amount to be paid by ADI SpinCo in respect of an ADI Liability or other Liability or obligation of
Resideo that is Assumed, or otherwise treated as a Liability or obligation of Resideo that is Assumed by ADI SpinCo within the meaning
of Section 357(d) of the Code, pursuant to this Agreement, in each case, as determined by Resideo in its sole discretion, shall be paid,
at Resideo’s option and in its sole discretion, in the following manner:
(i) to
the applicable third-party creditor or obligor of such Liability or obligation directly;
(ii) to
an independent trustee or escrow agent that is not affiliated with Resideo, which agent shall pay the applicable third-party creditor
or obligor of such Liability or obligation directly; provided that (x) the payment is not made to any account of Resideo or any
member of the Resideo Group or any person through which Resideo or any member of the Resideo Group could direct the payment, (y) Resideo
and ADI SpinCo shall treat any income, gain or loss for U.S. federal income Tax purposes on the payment proceeds as income, gain or loss
of ADI SpinCo, and (z) any excess of the payment amount (and any income or gain thereon) over the amount paid to satisfy such Liability
or obligation shall revert and be repaid to ADI SpinCo;
(iii) to
Resideo; provided that (x) Resideo has made in its sole discretion a determination that ADI SpinCo is prohibited from assuming such Liability
or obligation, (y) Resideo has already satisfied or paid such Liability or obligation to the applicable third-party creditor or obligor
of such Liability or obligation directly, and (z) after receiving such payment from ADI SpinCo, Resideo is in the same net economic position
that it would have been in if ADI SpinCo were able to assume such obligation; or
(iv) in
any other manner as determined by Resideo in its sole discretion.
(c) The
Parties acknowledge and agree that, for U.S. federal (and applicable state and local) income Tax purposes, the payment procedures described
in Section 9.11(b) are intended to comply with Section 357(a) of the Code (and the Treasury Regulations promulgated thereunder
as of the date of this Agreement) with respect to the Contribution. Each Party shall, and shall cause each of its respective Affiliates
and employees to, reasonably cooperate to cause any applicable payments to be made by ADI SpinCo pursuant to this Agreement to be made
in accordance with Section 9.11(b) or otherwise as directed by Resideo so as to be in accordance with the tax treatment described
in the immediately preceding sentence.
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(d) Except
as set forth in Article V or as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount
not paid when due pursuant to this Agreement (and any amount billed or otherwise invoiced or demanded and properly payable that is not
paid within sixty (60) days of such bill, invoice or other demand) shall bear interest at a rate equal to the Prime Rate, from time to
time in effect, calculated for the actual number of days elapsed, accrued from the date on which such payment was due up to the date of
the actual receipt of payment.
(e) Unless
otherwise consented to by the Party receiving any payment under this Agreement specifying otherwise, all payments to be made by either
Resideo or ADI SpinCo under this Agreement shall be made in US Dollars. Except as expressly provided herein, any amount which is not expressed
in US Dollars shall be converted into US Dollars by using the exchange rate published on Bloomberg at 5:00 p.m. Eastern time (ET) on the
day before the relevant date or in The Wall Street Journal on such date if not so published on Bloomberg. Except as expressly provided
herein, in the event that any indemnification payment required to be made hereunder or under any Ancillary Agreement may be denominated
in a currency other than US Dollars, the amount of such payment shall be converted into US Dollars on the date in which notice of the
claim is given to the Indemnifying Party.
Section 9.12 Subsidiaries.
Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set
forth herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party at and after the
Effective Time, to the extent such Subsidiary remains a Subsidiary of the applicable Party.
Section 9.13 Third Party
Beneficiaries. Except (i) as provided in Article V relating to Indemnitees and for the release under Section 5.1 of
any Person provided therein and (ii) as specifically provided in any Ancillary Agreement, this Agreement is solely for the benefit of
the Parties and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of Action or other
right in excess of those existing without reference to this Agreement.
Section 9.14 Title and
Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement. Unless otherwise indicated, all “Section” references in this
Agreement are to sections of this Agreement.
Section 9.15 Exhibits
and Schedules.
(a) The
Exhibits and Schedules shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set
forth verbatim herein. Nothing in the Exhibits or Schedules constitutes an admission of any liability or obligation of any member of the
Resideo Group or the ADI Group or any of their respective Affiliates to any third party, nor, with respect to any third party, an admission
against the interests of any member of the Resideo Group or the ADI Group or any of their respective Affiliates. The inclusion of any
item or liability or category of item or liability on any Exhibit or Schedule is made solely for purposes of allocating potential liabilities
among the Parties and shall not be deemed as or construed to be an admission that any such liability exists.
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(b) Subject
to the prior written consent of the other Party (not to be unreasonably withheld or delayed), each Party shall be entitled to update the
Schedules from and after the date hereof until the Effective Time.
Section 9.16 Governing
Law. This Agreement and any dispute arising out of, in connection with or relating to this Agreement shall be governed by and construed
in accordance with the Laws of the State of Delaware, without giving effect to the conflicts of laws principles thereof.
Section 9.17 Severability.
In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or
impaired thereby. The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
Section 9.18 Interpretation.
The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard
to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.
Section 9.19 No Duplication;
No Double Recovery. Nothing in this Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement,
obligation or recovery with respect to any matter arising out of the same facts and circumstances (including with respect to the rights,
entitlements, obligations and recoveries that may arise out of Article V).
Section 9.20 Tax Treatment
of Payments. Unless otherwise required by a Final Determination, for U.S. federal income Tax purposes and all other applicable Tax
purposes, any payment made pursuant to this Agreement (other than any payment of interest pursuant to Section 9.11) shall be treated
in accordance with Section 5.4 of the Tax Matters Agreement.
Section 9.21 No Waiver.
No failure to exercise and no delay in exercising, on the part of any Party, any right, remedy, power or privilege hereunder or under
the other Ancillary Agreements shall operate as a waiver hereof or thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
Section 9.22 No Admission
of Liability. The allocation of Assets and Liabilities herein (including on the Schedules hereto) is solely for the purpose of allocating
such Assets and Liabilities between Resideo and ADI SpinCo and is not intended as an admission of liability or responsibility for any
alleged Liabilities vis-à-vis any third party, including with respect to the Liabilities of any non-wholly owned subsidiary of
Resideo or ADI SpinCo.
70
Section 9.23 Advisors.
It is acknowledged and agreed by each of the Parties that Resideo, on behalf of itself and the other members of the Resideo Group, has
retained each of the Persons identified on Schedule 9.23 to act as counsel or an advisor in connection with this Agreement, the
Ancillary Agreements, the Internal Reorganization, the Contribution, the Distribution and the other transactions contemplated hereby and
thereby and that the Persons listed on Schedule 9.23 have not acted as counsel or advisor for ADI SpinCo or any other member of
the ADI Group in connection with this Agreement, the Ancillary Agreements, the Internal Reorganization, the Contribution, the Distribution
and the other transactions contemplated hereby and thereby and that none of ADI SpinCo or any member of the ADI Group has the status of
a client of the Persons listed on Schedule 9.23 for conflict of interest or any other purposes as a result thereof. ADI SpinCo
hereby agrees, on behalf of itself and each other member of the ADI Group that, in the event that a dispute arises after the Effective
Time in connection with this Agreement, the Ancillary Agreements, the Internal Reorganization, the Contribution, the Distribution or any
of the other transactions contemplated hereby and thereby between Resideo and ADI SpinCo or any of the members of their respective Groups,
each of the Persons listed on Schedule 9.23 may represent any or all of the members of the Resideo Group in such dispute even though
the interests of the Resideo Group may be directly adverse to those of the ADI Group. ADI SpinCo further agrees, on behalf of itself and
each other member of the ADI Group that, with respect to this Agreement, the Ancillary Agreements, the Internal Reorganization, the Contribution,
the Distribution and the other transactions contemplated hereby and thereby, the attorney-client privilege and the expectation of client
confidence belongs to Resideo or the applicable member of the Resideo Group and may be controlled by Resideo or such member of the Resideo
Group and shall not pass to or be claimed by ADI SpinCo or any member of the ADI Group. Without limiting the foregoing, ADI SpinCo acknowledges
and agrees that Willkie Farr & Gallagher LLP is representing Resideo, and not ADI SpinCo, in connection with the transactions contemplated
hereby.
Section 9.24 Authority.
Resideo represents on behalf of itself and each other member of the Resideo Group, and ADI SpinCo represents on behalf of itself and each
other member of the ADI Group, as follows:
(a) each
such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to
execute, deliver and perform this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated
hereby and thereby; and
(b) this
Agreement and each Ancillary Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding
agreement of it enforceable in accordance with the terms thereof.
Section 9.25 Publicity.
Each of Resideo and ADI SpinCo shall consult with the other, and shall, subject to the requirements of Section 6.5, provide the
other Party the opportunity to review and comment upon, any press releases or other public statements in connection with transactions
contemplated hereby and any filings with any Governmental Entity or national securities exchange with respect thereto, in each case prior
to the issuance or filing thereof, as applicable (including the Information Statement, the Parties’ respective Current Reports on
Form 8-K to be filed on the Distribution Date, the Parties’ respective Quarterly Reports on Form 10-Q filed with respect to the
fiscal quarter during which the Distribution Date occurs, or if such quarter is the fourth fiscal quarter, the Parties’ respective
Annual Reports on Form 10-K filed with respect to the fiscal year during which the Distribution Date occurs (each such Quarterly Report
on Form 10-Q or Annual Report on Form 10-K, a “First Post-Distribution Report”)). Each Party’s obligations pursuant
to this Section 9.25 shall terminate on the date on which such Party’s First Post-Distribution Report is filed with the Commission.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have caused this
Agreement to be duly executed as of the day and year first above written.
RESIDEO TECHNOLOGIES, INC.
By:
/s/ Thomas Surran
Name:
Thomas Surran
Title:
President
ADI GLOBAL DISTRIBUTION INC.
By:
/s/ Robert Aarnes
Name:
Robert Aarnes
Title:
President and Chief Executive Officer
EX-3.1 — AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF ADI GLOBAL DISTRIBUTION INC
EX-3.1
Filename: ea030019001ex3-1.htm · Sequence: 3
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ADI GLOBAL DISTRIBUTION INC.
ADI GLOBAL DISTRIBUTION INC.,
a corporation organized and existing under the laws of the State of Delaware, DOES HEREBY CERTIFY AS FOLLOWS:
1. The
name of the corporation is ADI Global Distribution Inc. The original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on December 10, 2025 (as amended and in effect immediately prior to the adoption and effectiveness
hereof, the “Original Certificate of Incorporation”).
2. This
Amended and Restated Certificate of Incorporation has been duly adopted in accordance with Sections 242 and 245 of the General Corporation
Law of the State of Delaware (the “DGCL”), and by the written consent of its sole stockholder in accordance with Section
228 of the DGCL, and shall be effective as of 12:01 a.m., New York City time, on August 3, 2026.
3. The
Original Certificate of Incorporation is hereby amended and restated to read in its entirety as follows:
ARTICLE I
The name of the corporation
(hereinafter called the “Corporation”) is ADI Global Distribution Inc.
ARTICLE II
The address of the Corporation’s
registered office in the State of Delaware is 251 Little Falls Drive, Wilmington, New Castle County, Delaware 19808. The name of the Corporation’s
registered agent at such address is Corporation Service Company.
ARTICLE III
The purpose of the Corporation
is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
ARTICLE IV
SECTION 1. The total
number of shares of all classes of stock which the Corporation shall have authority to issue is 800,000,000 shares of capital stock,
consisting of (1) 100,000,000 shares of Preferred Stock, par value $0.001 per share (“Preferred Stock”), and (2)
700,000,000 shares of Common Stock, par value $0.001 per share (“Common Stock”). The number of authorized shares
of either the Preferred Stock or the Common Stock may be increased or decreased (but not below the number of shares thereof then
outstanding) by a vote of the stockholders entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL
(or any successor provision thereto), voting as a single class, and no vote of the holders of either the Preferred Stock or the
Common Stock voting separately as a class shall be required therefor, subject to the rights, if any, of the holders of any
outstanding series of Preferred Stock.
1
SECTION 2. The Board of
Directors of the Corporation (the “Board of Directors”) is hereby expressly authorized, by resolution or resolutions
and without stockholder approval, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock and, with respect
to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers (if any)
of the shares of such series, and the preferences and relative, participating, optional or other special rights, if any, and any qualifications,
limitations or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other
special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.
SECTION 3. (a) Each
holder of Common Stock, as such, shall be entitled to one vote for each share of Common Stock held of record by such holder on all
matters on which stockholders generally are entitled to vote; provided, however, that, except as otherwise
required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Amended and Restated
Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) that relates
solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either
separately or together with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated
Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) or pursuant to the
DGCL.
(b) Except
as otherwise required by law, holders of a series of Preferred Stock, as such, shall be entitled only to such voting rights, if any, as
shall expressly be granted to such holders by this Amended and Restated Certificate of Incorporation (including any Certificate of Designation
relating to such series).
(c) Subject
to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock, dividends may be declared and paid
on the Common Stock at such times and in such amounts as the Board of Directors in its discretion shall determine.
(d) Upon
the dissolution, liquidation or winding up of the Corporation, subject to the rights, if any, of the holders of any outstanding series
of Preferred Stock, the holders of the Common Stock, as such, shall be entitled to receive the assets of the Corporation available for
distribution to its stockholders ratably in proportion to the number of shares held by them. For the avoidance of doubt, a dissolution,
liquidation or winding up shall not be deemed to be occasioned by or to include, without limitation, any voluntary consolidation, reorganization,
conversion or merger of the Corporation with or into any other corporation or entity or other corporation or entities or a sale, lease,
transfer, exchange or conveyance of all or a part of the Corporation’s assets.
(e) Shares
of Common Stock shall not entitle any holder thereof to any pre-emptive, subscription, redemption or conversion rights.
2
ARTICLE V
SECTION 1. (a)
The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Except as
otherwise fixed pursuant to the terms of any outstanding series of Preferred Stock pursuant to this Amended and Restated Certificate
of Incorporation (including any Certificate of Designation relating to such series of Preferred Stock), the number of directors of
the Corporation shall be fixed from time to time by the Board of Directors. In no event shall a decrease in the number of directors
constituting the Board of Directors shorten the term of any incumbent director.
(b) The
directors, other than those who may be elected by the holders of any series of Preferred Stock voting separately pursuant to this Amended
and Restated Certificate of Incorporation (including any Certificate of Designation relating to such series of Preferred Stock), shall
be elected by the stockholders entitled to vote thereon at each annual meeting of the stockholders. From the effective date of this Amended
and Restated Certificate of Incorporation until the election of the directors at the 2032 annual meeting of stockholders, the directors
of the Corporation shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly
as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. If the number of directors
has changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class
shall hold office for a term that shall coincide with the remaining term of that class. The initial assignment of directors to each such
class shall be made by the Board of Directors. The term of office of the initial Class I directors shall expire at the 2027 annual meeting
of stockholders. At the 2027 annual meeting of stockholders, the successors of the Class I directors shall be elected for a term expiring
at the 2030 annual meeting of stockholders. At the 2030 annual meeting of stockholders, the successors of the Class I directors shall
be elected for a term expiring at the 2032 annual meeting of stockholders. The term of office of the initial Class II directors shall
expire at the 2028 annual meeting of stockholders. At the 2028 annual meeting of stockholders, the successors of the Class II directors
shall be elected for a term expiring at the 2031 annual meeting of stockholders. At the 2031 annual meeting of stockholders, the successors
of the Class II directors shall be elected for a term expiring at the 2032 annual meeting of stockholders. The term of office of the initial
Class III directors shall expire at the 2029 annual meeting of stockholders. At the 2029 annual meeting of stockholders, the successors
of the Class III directors shall be elected for a term expiring at the 2032 annual meeting of stockholders. Each director in each such
class shall hold office until his or her respective successor shall have been duly elected and qualified or until his or her earlier resignation
or removal. Commencing with the 2032 annual meeting of stockholders, each director shall be elected annually and shall hold office until
the next annual meeting of stockholders and until his or her respective successor shall have been duly elected and qualified or until
his or her earlier resignation or removal. Pursuant to such procedures, commencing with the 2032 annual meeting of stockholders, the Board
of Directors will no longer be classified under Section 141(d) of the DGCL and directors shall no longer be divided into three classes.
The election of directors need not be by written ballot.
SECTION 2. Advance
notice of nominations for the election of directors shall be given in the manner and to the extent provided in the By-laws of the
Corporation.
3
SECTION 3. (a) Except as
otherwise provided for or fixed by or pursuant to the provisions of this Amended and Restated Certificate of Incorporation relating
to the rights of the holders of any outstanding series of Preferred Stock (including any Certificate of Designation relating to such
series of Preferred Stock), newly created directorships resulting from any increase in the number of directors and any vacancies on
the Board of Directors resulting from death, resignation, removal or other cause shall only be filled by the Board of Directors by
the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of
Directors, or by a sole remaining director, or if not so filled, by the stockholders at the next annual meeting thereof. Any
director elected in accordance with the first sentence of this Section 3 shall hold office for a term that shall coincide with the
remaining term of the class such director is elected to and until such director’s successor shall have been duly elected and
qualified or until his or her earlier resignation or removal.
(b) From
the effective date of this Amended and Restated Certificate of Incorporation until the election of directors at the 2032 annual meeting
of stockholders, any director or the entire Board of Directors may only be removed for cause, such removal to require the affirmative
vote of shares representing at least a majority of the votes entitled to be cast by the then outstanding shares of all classes and series
of capital stock of the Corporation entitled generally to vote on the election of directors of the Corporation. From and after the 2032
annual meeting of stockholders, any director or the entire Board of Directors may be removed with or without cause, and, in either case,
such removal shall require the affirmative vote of shares representing at least a majority of the votes entitled to be cast by the then
outstanding shares of all classes and series of capital stock of the Corporation entitled generally to vote on the election of directors
of the Corporation. Notwithstanding the foregoing, whenever holders of outstanding shares of one or more series of Preferred Stock voting
separately are entitled to elect directors of the Corporation pursuant to the provisions of this Amended and Restated Certificate of Incorporation
(including any Certificate of Designation relating to such series of Preferred Stock), any such director of the Corporation so elected
may be removed in accordance with this Amended and Restated Certificate of Incorporation (including such Certificate of Designation).
ARTICLE VI
Subject to the rights of the
holders of any outstanding series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation
must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent
in writing by such stockholders. Except as otherwise required by law and subject to the rights of the holders of any outstanding series
of Preferred Stock, special meetings of stockholders of the Corporation may only be called by the Chairman of the Board of Directors or
the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors (the entire Board of Directors
being the total number of authorized directors, whether or not there exist any vacancies or unfilled previously authorized directorships)
or as otherwise provided in the By-laws of the Corporation.
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ARTICLE VII
In furtherance and not in
limitation of the powers conferred upon it by law, the Board of Directors is expressly authorized to adopt, repeal, alter or amend the
By-laws of the Corporation by the vote of a majority of the entire Board of Directors. In addition to any requirements of law and any
other provision of this Amended and Restated Certificate of Incorporation (and notwithstanding the fact that a lesser percentage may be
specified by law), the affirmative vote of the holders of at least a majority of the combined voting power of the then outstanding shares
of all classes and series of capital stock of the Corporation entitled generally to vote in the election of directors of the Corporation,
voting together as a single class, shall be required for stockholders to adopt, amend, alter or repeal any provision of the By-laws of
the Corporation.
ARTICLE VIII
The Corporation reserves the
right to amend, alter or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders herein are subject to this reservation.
ARTICLE IX
SECTION 1. To the
fullest extent permitted by the DGCL as it now exists or may hereafter be amended, no director or officer of the Corporation shall
be personally liable to the Corporation or its stockholders for monetary damages arising from a breach of fiduciary duty as a
director or officer, as applicable. If the DGCL is amended after approval by the stockholders of this Article IX to authorize
corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of a director
or officer of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended,
automatically, and without further action, upon the date of such amendment.
SECTION 2. To the
fullest extent that the DGCL or any other law of the State of Delaware as it exists or as it may hereafter be amended permits,
including to the extent that such law or amendment permits the Corporation to provide broader indemnification rights than permitted
prior to such law or amendment, the Corporation may provide indemnification of (and advancement of expenses to) its current and
former directors, officers and agents (and any other persons to which the DGCL permits the Corporation to provide indemnification)
through By-law provisions, agreements with such agents or other persons, votes of stockholders or disinterested directors or
otherwise.
SECTION 3. No amendment
to or repeal of any Section of this Article IX, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation
inconsistent with this Article IX, shall eliminate or reduce the effect of this Article IX in respect of any matter occurring, or any
action or proceeding accruing or arising, prior to such amendment, repeal or adoption of an inconsistent provision.
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ARTICLE X
SECTION 1. Unless the
Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for any current or former
stockholder (including a current or former beneficial owner) to bring (a) any derivative action, suit or proceeding brought on
behalf of the Corporation, (b) any action, suit or proceeding asserting a claim that is based upon a violation of a duty owed by any
current or former director, officer or stockholder of the Corporation to the Corporation or the Corporation’s stockholders,
(c) any action, suit or proceeding asserting a claim against the Corporation, or any current or former director, officer or
stockholder of the Corporation, arising pursuant to any provision of the DGCL (or any successor provision thereto), this Amended and
Restated Certificate of Incorporation or the By-laws of the Corporation (as either may be amended from time to time), (d) any
action, suit or proceeding asserting a claim related to or involving the Corporation that is governed by the internal affairs
doctrine or (e) any action, suit or proceeding asserting an “internal corporate claim” as that term is defined in
Section 115 of the DGCL shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have, or
declines to accept, jurisdiction, the federal court for the District of Delaware). To the fullest extent permitted by law, if any
action the subject matter of which is within the scope of this Section is filed in a court other than the Court of Chancery of the
State of Delaware (or, if the Court of Chancery does not have, or declines to accept, jurisdiction, the federal court for the
District of Delaware) (a “foreign action”) by or on behalf of any current or former stockholder (including a
current or former beneficial owner), such stockholder shall be deemed to have consented to (x) the personal jurisdiction of the
Court of Chancery (or the federal court for the District of Delaware, as applicable) in connection with any action brought in any
such court to enforce this Section and (y) having service of process made upon such stockholder in any such action by service upon
such stockholder’s counsel in the foreign action as agent for such stockholder.
SECTION 2. Unless the
Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States shall be
the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as
amended.
SECTION 3. Any person or
entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice
of and consented to the provisions of this Article X. Failure to enforce the foregoing provisions would cause the Corporation
irreparable harm and the Corporation shall be entitled to equitable relief, including injunction and specific performance, to
enforce the foregoing provisions.
ARTICLE XI
The Corporation is to have
perpetual existence.
ARTICLE XII
If any provision (or any part
thereof) of this Amended and Restated Certificate of Incorporation shall be held invalid, illegal or unenforceable as applied to any circumstance
for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining
provisions of this Amended and Restated Certificate of Incorporation (including, without limitation, each portion of any section of this
Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not
itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (ii) to the fullest extent
possible, the provisions of this Amended and Restated Certificate of Incorporation (including, without limitation, each such portion of
any section containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation
to protect its directors, officers, employees and agents from personal liability in respect of their good faith service or for the benefit
of the Corporation to the fullest extent permitted by law.
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IN WITNESS WHEREOF, the undersigned
has executed this Amended and Restated Certificate of Incorporation on the date set forth below.
ADI GLOBAL DISTRIBUTION INC.
By:
/s/ Jeannine Lane
Name: Jeannine Lane
Title: Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer
Date:
July 31, 2026
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EX-3.2 — AMENDED AND RESTATED BYLAWS OF ADI GLOBAL DISTRIBUTION INC
EX-3.2
Filename: ea030019001ex3-2.htm · Sequence: 4
Exhibit 3.2
ADI GLOBAL DISTRIBUTION INC.
AMENDED AND RESTATED BY-LAWS
Effective as of August 3, 2026
Article I
Offices
SECTION 1.1 Registered
Office. The registered office of ADI Global Distribution Inc. (hereinafter, the “Corporation”) in the State of
Delaware shall be at 251 Little Falls Drive, Wilmington, New Castle County, Delaware 19808, and the registered agent shall be Corporation
Service Company, or such other office or agent as the Board of Directors of the Corporation (the “Board”) shall from
time to time select.
SECTION 1.2 Other Offices.
The Corporation may also have an office or offices, and keep the books and records of the Corporation, except as may otherwise be required
by law, at such other place or places, either within or outside of the State of Delaware, as the Board may from time to time determine
or the business of the Corporation may require.
Article II
Meetings of Stockholders
SECTION 2.1 Place of
Meeting. All meetings of the stockholders of the Corporation (the “stockholders”) shall be at a place either within
or outside of the State of Delaware, or by means of remote communication, to be determined by the Board and as specified in the notice
of meeting. In the absence of such a determination, a meeting of stockholders shall be held at the principal executive office of the Corporation.
SECTION 2.2 Annual Meetings.
The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come
before the meeting shall be held on such date and at such hour as shall from time to time be fixed by the Board. Any previously scheduled
annual meeting of the stockholders may be postponed, rescheduled or cancelled by action of the Board taken prior to the time previously
scheduled for such annual meeting of the stockholders.
SECTION 2.3 Special
Meetings.
(a) Except
as otherwise required by law or the Amended and Restated Certificate of Incorporation of the Corporation (the “Certificate”),
and subject to the rights of the holders of any outstanding series of Preferred Stock, special meetings of the stockholders for any purpose
or purposes may be called only by (i) the Chairman of the Board, (ii) a majority of the Whole Board (as defined below), or (iii) subject
to the provisions of this Section 2.3, the Secretary (as defined below) upon the written request (a “Stockholder Requested Special
Meeting”) of one or more stockholders of record of the Corporation that together hold for their own account or on behalf of
others, beneficial ownership of at least a 25% “net long position” of the outstanding shares of the Corporation’s common
stock (the “Requisite Percent”) for at least 30 days as of the Delivery Date (as defined below). Only such business
as is specified in the Corporation’s notice of any special meeting of stockholders shall come before such meeting; provided, that
the Board shall have the authority in its discretion to submit additional matters to the stockholders and to cause other business to be
transacted pursuant to the Corporation’s notice of meeting for any Stockholder Requested Special Meeting.
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For purposes of determining
the Requisite Percent, “net long position” shall be determined with respect to each requesting stockholder in accordance with
the definition thereof set forth in Rule 14e-4 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”);
provided, that (x) for purposes of such definition, (1) “the date that a tender offer is first publicly announced or otherwise made
known by the bidder to the stockholders of the security to be acquired” shall be the date of the relevant Special Meeting Request
(as defined below), (2) the “highest tender offer price or stated amount of the consideration offered for the subject security”
shall refer to the closing sales price of the Corporation’s common stock on the New York Stock Exchange (or such other securities
exchange designated by the Board if the Corporation’s common stock is not listed for trading on the New York Stock Exchange) on
such date (or, if such date is not a trading day, the next succeeding trading day), (3) the “person whose securities are the subject
of the offer” shall refer to the Corporation, and (4) a “subject security” shall refer to the outstanding common stock
of the Corporation; and (y) the “net long position” of such stockholder shall be reduced by the number of shares of common
stock of the Corporation as to which the Board determines that such stockholder does not, or will not, have the right to vote or direct
the vote at the special meeting or as to which the Board determines that such stockholder has entered into any derivative or other agreement,
arrangement or understanding that hedges or transfers, in whole or in part, directly or indirectly, any of the economic consequences of
ownership of such shares.
Whether the requesting stockholders
have complied with the requirements of this Section 2.3 shall be determined in good faith by the Board.
(b) In
order for a Stockholder Requested Special Meeting to be called, one or more requests for a special meeting (each, a “Special
Meeting Request,” and collectively, the “Special Meeting Requests”) must be signed by the Requisite Percent
of stockholders submitting such request and by each of the beneficial owners, if any, on whose behalf the Special Meeting Request is being
made and must be delivered to the Secretary. The Special Meeting Request(s) shall be delivered to or mailed to and received by the Secretary
at the principal executive offices of the Corporation. Each Special Meeting Request shall (i) set forth a statement of the specific purpose(s)
of the meeting and the matters proposed to be acted upon at such meeting, (ii) bear the date of signature of each such stockholder signing
the Special Meeting Request, (iii) set forth (1) the name and address, as they appear in the Corporation’s books, of each stockholder
signing such request and the beneficial owners, if any, on whose behalf such request is made, and (2) the class, if applicable, and the
number of shares of the Corporation’s common stock that are owned of record and beneficially (within the meaning of Rule 13d-3 under
the Exchange Act) by each such stockholder and the beneficial owners, if any, on whose behalf such request is made, (iv) include documentary
evidence that the stockholders requesting the special meeting own the Requisite Percent as of the date that the Special Meeting Request
is delivered to the Secretary (the “Delivery Date”); provided, that if the stockholders of record submitting the Special
Meeting Request are not the beneficial owners of the shares constituting all or part of the Requisite Percent, then to be valid, the Special
Meeting Request must also include documentary evidence (or, if not simultaneously provided with the Special Meeting Request, such documentary
evidence must be delivered to the Secretary within 10 days after the Delivery Date) that the beneficial owners on whose behalf the Special
Meeting Request is made beneficially own such shares as of the Delivery Date, (v) an agreement by each of the stockholders requesting
the special meeting and each beneficial owner, if any, on whose behalf the Special Meeting Request is being made to notify the Corporation
promptly in the event of any decrease in the “net long position” held by such stockholder or beneficial owner following the
delivery of such Special Meeting Request and prior to the special meeting and an acknowledgement that any such decrease shall be deemed
to be a revocation of such Special Meeting Request by such stockholder or beneficial owner to the extent of such reduction, (vi) contain
all of the information required by (A) Section 2.7(c) if the purpose of the Special Meeting Request relates to any business other than
nominations for election of directors and (B) Section 3.3 if the purpose of the Special Meeting Request relates to nominations for election
of directors, including, in each case, with respect to each requesting stockholder. The Corporation will provide the requesting stockholders
with notice of the record date for the determination of stockholders entitled to vote at the special meeting. Each requesting stockholder
is required to update the notice delivered pursuant to this Section 2.3(b) not later than 10 business days after such record date to provide
any material changes in the foregoing information as of such record date and, with respect to the information required under clause (iv)
above, also as of a date not more than five business days before the scheduled date of the Stockholder Requested Special Meeting. Any
requesting stockholder may revoke his, her or its Special Meeting Request at any time prior to the special meeting by written revocation
delivered to the Secretary at the principal executive offices of the Corporation. If at any time after such revocation (whether by specific
written revocation by the stockholder or pursuant to clause (v) of this Section 2.3(b)) there are unrevoked valid Special Meeting Requests
representing in the aggregate less than the Requisite Percent, then the requesting stockholder(s) or beneficial owner(s) shall be deemed
to have withdrawn such request (in connection with which the Board may cancel the meeting).
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In determining whether a special
meeting of stockholders has been requested by stockholders holding in the aggregate at least the Requisite Percent, multiple Special Meeting
Requests delivered to the Secretary will be considered together only if (i) each Special Meeting Request identifies substantially the
same purpose or purposes of the special meeting and substantially the same matters proposed to be acted on at the special meeting (in
each case as determined in good faith by the Board), and (ii) such Special Meeting Requests have been delivered to the Secretary within
60 days of the earliest dated Special Meeting Request.
(c) Except
as provided in the next sentence, any special meeting of stockholders shall be held at such place (or remotely), and at such time as the
Board shall fix; provided, however, that the date of any such Stockholder Requested Special Meeting shall be not more than 90 days after
the Delivery Date. The Board may postpone or reschedule any such meeting. Notwithstanding the foregoing, the Secretary shall not be required
to call a special meeting of stockholders if (i) the Board calls an annual meeting of stockholders, or a special meeting of stockholders
at which a Similar Item (as defined below) is to be presented pursuant to the notice of such meeting, in either case to be held not later
than 60 days after the Delivery Date; (ii) the Delivery Date is during the period commencing ninety 90 days prior to the first anniversary
of the date of the immediately preceding annual meeting and ending on the earlier of (1) the date of the next annual meeting and (2) 30
days after the first anniversary of the date of the immediately preceding annual meeting; or (iii) the Special Meeting Request(s) (1)
contain an identical or substantially similar item (as determined in good faith by the Board, a “Similar Item”) to an item
that was presented at any meeting of stockholders held not more than 120 days before the Delivery Date (and for purposes of this clause
(c), the election of directors shall be deemed a Similar Item with respect to all items of business involving the election or removal
of directors); (2) relate to an item of business that is not a proper subject for action by the stockholders under applicable law and
this Section 2.3; (3) were made in a manner that involved a violation of Regulation 14A under the Exchange Act or other applicable law;
or (4) do not comply with the provisions of this Section 2.3.
(d) Notwithstanding
the foregoing provisions of this Section 2.3, if none of the stockholders who submitted a Special Meeting Request appears at or sends
a duly authorized representative to the Stockholder Requested Special Meeting to present the matters submitted by such stockholders for
consideration and that were specified in the Special Meeting Request, the Corporation need not present such matters for a vote at such
meeting.
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SECTION 2.4 Notice of
Meetings. Except as otherwise provided by law, notice, including by electronic transmission in the manner provided by the General
Corporation Law of the State of Delaware (the “DGCL”), of each meeting of the stockholders, whether annual or special,
shall be given by the Corporation not less than 10 days nor more than 60 days before the date of the meeting to each stockholder of record
entitled to notice of the meeting. If mailed, such notice shall be deemed given when deposited in the United States mail, postage prepaid,
directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation. Each such notice shall
state the place (or, if applicable, that the meeting will be held remotely), the date and the hour of the meeting, and, in the case of
a special meeting, the purpose or purposes for which the meeting is called. Notice of any meeting of the stockholders shall not be required
to be given to any stockholder who shall attend such meeting in person or by proxy without protesting, prior to or at the commencement
of the meeting, the lack of proper notice to such stockholder, or who shall waive notice thereof as provided in Article X of these By-laws.
Notice of adjournment of a meeting of the stockholders need not be given if the time and place, if any, to which it is adjourned are announced
at such meeting, unless the adjournment is for more than 30 days or, after adjournment, a new record date is fixed for the adjourned meeting.
SECTION 2.5 Quorum.
Except as otherwise provided by law or by the Certificate, the holders of a majority in voting power of the shares of capital stock of
the Corporation entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum at any meeting of the stockholders;
provided, however, that in the case of any vote to be taken by classes or series, the holders of a majority in voting power
of the shares of any such class or series of capital stock of the Corporation entitled to vote at the meeting, present in person or by
proxy, shall constitute a quorum of such class or series. A quorum, once established, shall not be broken by the withdrawal of enough
votes to leave less than a quorum.
SECTION 2.6 Adjournments.
The chairman of the meeting or the holders of a majority in voting power of the shares of capital stock of the Corporation entitled to
vote and who are present in person or by proxy may adjourn the meeting from time to time whether or not a quorum is present. In the event
that a quorum does not exist with respect to any vote to be taken by a particular class or series, the chairman of the meeting or the
holders of a majority in voting power of the shares of such class or series who are present in person or by proxy may adjourn the meeting
with respect to the vote(s) to be taken by such class or series. At any such adjourned meeting at which a quorum may be present, any business
may be transacted which might have been transacted at the meeting as originally called.
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SECTION 2.7 Order of
Business.
(a) At
each meeting of the stockholders, the Chairman of the Board or, in the absence of the Chairman of the Board, the Chief Executive Officer
or, in the absence of the Chairman of the Board and the Chief Executive Officer, such person as shall be selected by the Board, shall
act as chairman of the meeting. The order of business at each such meeting shall be as determined by the chairman of the meeting. The
chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts
and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures
for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation,
restrictions on entry to such meeting after the time prescribed for the commencement thereof and the opening and closing of the voting
polls.
(b) At
any annual meeting of the stockholders, only such business (other than nominations for election of directors, which are governed by Sections
3.3 and 3.15) shall be conducted as shall have been brought before the annual meeting (i) by or at the direction of the chairman of the
meeting or (ii) by any stockholder who is a holder of record at the time of the giving of the notice provided for in this Section 2.7,
who is entitled to vote at the meeting and who complies with the procedures set forth in this Section 2.7 (such business, “Stockholder
Business”). This Section 2.7 is the exclusive means by which a stockholder may bring such business before a meeting of stockholders.
(c) For
business (other than nominations for election of directors, which are governed by Sections 3.3 and 3.15) properly to be brought before
an annual meeting of stockholders by a stockholder, the stockholder must have given timely notice thereof (a “Notice of Business”)
in proper written form to the Secretary of the Corporation (the “Secretary”). To be timely, a Notice of Business must
be delivered to or mailed and received by the Secretary at the principal executive offices of the Corporation not less than 90 days nor
more than 120 days prior to the first anniversary of the date of the immediately preceding annual meeting as first specified in the Corporation’s
notice of meeting (without regard to any postponements or adjournments of such meeting after such notice was first sent); provided,
however, that in the event that the date of the annual meeting is more than 30 days earlier or more than 60 days later than such
anniversary date, a Notice of Business to be timely must be so delivered or received not earlier than the 120th day prior to such annual
meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made; provided, further, that for the purpose of calculating
the timeliness of a Notice of Business for the 2027 annual meeting of stockholders, the date of the immediately preceding annual meeting
shall be deemed to be June 3, 2026. In no event shall the public announcement of an adjournment or postponement, or an adjournment or
postponement, of a meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described
above. To be in proper written form, the Notice of Business must set forth:
(i) the
name and address of each stockholder proposing to bring business before the annual meeting (each, a “Proponent”), as
they appear on the Corporation’s books;
(ii) the
name and address of each Stockholder Associated Person (as defined below);
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(iii) as
to each Proponent and each Stockholder Associated Person, (A) the class or series and number of shares of stock directly or indirectly
held of record and beneficially by such Proponent and Stockholder Associated Person, (B) a description of any agreement, arrangement or
understanding, direct or indirect, with respect to the business to be brought before the annual meeting, between or among any Proponent
and any Stockholder Associated Person, or between or among any Proponent and/or Stockholder Associated Person, on the one hand, and any
other person or entity on the other hand, (C) a description of any agreement, arrangement or understanding (including any derivative or
short positions, profit interests, options, hedging transactions and borrowed or loaned shares) that has been entered into, directly or
indirectly by, or on behalf of, any Proponent or any Stockholder Associated Person, the effect or intent of which is to mitigate loss
to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, any Proponent or any Stockholder Associated
Person with respect to shares of stock of the Corporation (a “Derivative”), (D) a description in reasonable detail
of any proxy (including revocable proxies), contract, arrangement, understanding or other relationship pursuant to which any Proponent
or any Stockholder Associated Person has a right to vote any shares of stock of the Corporation and (E) any profit-sharing or any performance-related
fees (other than an asset-based fee) that any Proponent or any Stockholder Associated Person is entitled to, based on any increase or
decrease in the value of stock of the Corporation or Derivatives thereof, if any. The information specified in Section 2.7(c)(i) to (iii)
of this Article II is referred to herein as “Stockholder Information”;
(iv) a
representation that each Proponent is a holder of record of stock of the Corporation entitled to vote at the annual meeting and intends
to appear in person or by proxy at the annual meeting to propose such proposed business;
(v) a
brief description of the business desired to be brought before the annual meeting, the text of the proposal (including the text of any
resolutions proposed for consideration and, if such business includes a proposal to amend the By-laws, the language of the proposed amendment)
and the reasons for conducting such business at the annual meeting;
(vi) any
material interest of any Proponent and any Stockholder Associated Person in such proposed business;
(vii) a
representation as to whether the Proponent(s) intend (A) to deliver a proxy statement and form of proxy to holders of at least the percentage
of the Corporation’s outstanding capital stock required to approve or adopt such Stockholder Business or (B) otherwise to solicit
proxies from stockholders in support of such Stockholder Business;
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(viii) all
other information that would be required to be filed with the U.S. Securities and Exchange Commission (“SEC”) if the
Proponent(s) or Stockholder Associated Persons were participants in a solicitation subject to Section 14 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) (or any successor of such Section); and
(ix) a
representation that each Proponent shall provide any other information reasonably requested by the Corporation.
(d) In
addition, each Proponent shall affirm as true and correct the information provided to the Corporation in the Notice of Business or at
the Corporation’s request pursuant to Section 2.7(c)(ix) of this Article II (and shall update or supplement such information as
needed so that such information shall be true and correct) as of (i) the record date for the meeting and (ii) the date that is 10 business
days prior to the announced date of the annual meeting to which the Notice of Business relates. Such affirmation, update and/or supplement
must be delivered personally or mailed to, and received at the principal executive offices of the Corporation, addressed to the Secretary,
by no later than five business days after the applicable date specified in clause (i) and (ii) of the foregoing sentence.
(e) The
person presiding over the meeting shall, if the facts warrant, determine and declare to the meeting, that business was not properly brought
before the meeting in accordance with the procedures set forth in this Section 2.7, and, if he or she should so determine, he or she shall
so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
(f) If
the Proponent (or a qualified representative of the Proponent) does not appear at the meeting of stockholders to present the Stockholder
Business such business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.
A “qualified representative” of the Proponent or any stockholder means a person who is a duly authorized officer, manager
or partner of such stockholder or has been authorized by a writing executed by such stockholder or an electronic transmission delivered
by such stockholder to act for such stockholder as proxy with respect to the specific matter to be considered at the meeting of stockholders
and such person must produce such writing or electronic transmission, or a reliable reproduction (to the reasonable satisfaction of the
person presiding over the meeting) of the writing or electronic transmission, at the meeting of stockholders prior to the taking of action
by such person on behalf of the stockholder.
(g) “Stockholder
Associated Person” means with respect to any Proponent or Nominating Stockholder, (i) any other beneficial owner of stock of
the Corporation owned of record or beneficially by such Proponent or Nominating Stockholder and (ii) any person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, is under common control with such Proponent or Nominating Stockholder.
(h) “Control”
(including the terms “controlling,” “controlled by” and “under common control with”) means the possession,
direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership
of voting securities, by contract or otherwise.
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(i) The
notice requirements of this Section 2.7 shall be deemed satisfied with respect to stockholder proposals that have been properly brought
under Rule 14a-8 of the Exchange Act (or any such successor rule) and that are included in a proxy statement that has been prepared by
the Corporation to solicit proxies for such annual meeting. Further, nothing in this Section 2.7 shall be deemed to affect any rights
of the holders of any series of preferred stock of the Corporation pursuant to any applicable provision of the Certificate.
SECTION 2.8 List of
Stockholders. It shall be the duty of the Secretary or other officer who has charge of the stock ledger to prepare and make, at least
10 days before each meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares registered in such stockholder’s name. Such list shall
be produced and kept available at the times and places required by law.
SECTION 2.9 Voting.
(a) Except
as otherwise provided by law or by the Certificate, each stockholder of record of any series of Preferred Stock shall be entitled at each
meeting of the stockholders to such number of votes, if any, for each share of such stock as may be fixed in the Certificate (or relevant
Certificate of Designation) or in the resolution or resolutions adopted by the Board providing for the issuance of such stock, and each
stockholder of record of Common Stock shall be entitled at each meeting of the stockholders to one vote for each share of such stock,
in each case, registered in such stockholder’s name on the books of the Corporation:
(i) on
the date fixed pursuant to Section 7.6 of these By-laws as the record date for the determination of stockholders entitled to notice of
and to vote at such meeting; or
(ii) if
no such record date shall have been so fixed, then at the close of business on the day before the day on which notice of such meeting
is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held.
(b) Each
stockholder entitled to vote at any meeting of the stockholders may authorize another person or persons to act for such stockholder by
proxy. Any such proxy shall be delivered to the secretary of such meeting at or prior to the time designated for holding such meeting,
but in any event not later than the time designated in the order of business for so delivering such proxies. No such proxy shall be voted
or acted upon after three years from its date, unless the proxy provides for a longer period. Any stockholder directly or indirectly soliciting
proxies from other stockholders must use a proxy card color other than white, which shall be reserved for the exclusive use by the Board.
(c) Except
as otherwise required by law and except as otherwise provided in the Certificate, these By-laws, the rules or regulations of any stock
exchange applicable to the Corporation, or any law, rule or regulation applicable to the Corporation or its securities, at each meeting
of the stockholders, all corporate actions to be taken by vote of the stockholders shall be authorized by holders of a majority in voting
power of the shares of capital stock of the Corporation entitled to vote thereon and who are present in person or represented by proxy,
and where a separate vote by class or series is required, by holders of a majority in voting power of the shares of such class or series
who are entitled to vote thereon and are present in person or represented by proxy shall be the act of such class or series.
(d) Unless
required by law or determined by the chairman of the meeting to be advisable, the vote on any matter, including, without limitation, the
election of directors, need not be by written ballot.
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SECTION 2.10 Inspectors.
The chairman of the meeting shall appoint one or more inspectors to act at any meeting of the stockholders. Such inspectors shall perform
such duties as shall be required by law or specified by the chairman of the meeting. Inspectors need not be stockholders. No director
or nominee for the office of director shall be appointed such inspector.
SECTION 2.11 Public
Announcements. For the purpose of Section 2.7 of this Article II and Section 3.2(d), “public announcement” shall
mean disclosure (i) in a press release reported by the Dow Jones Newswire, Business Wire, Reuters Information Service or any similar or
successor news wire service or (ii) in a communication distributed generally to stockholders and in a document publicly filed by the Corporation
with the SEC pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
Article III
Board of Directors
SECTION 3.1 General
Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all
such powers of the Corporation (or grant authority to exercise such powers) and do all such lawful acts and things as are not by law or
by the Certificate directed or required to be exercised or done by the stockholders.
SECTION 3.2 Number,
Qualification and Election.
(a) The
number of directors constituting the Whole Board shall be determined in accordance with the Certificate. The term “Whole Board”
shall mean the total number of authorized directors, whether or not there exist any vacancies or unfilled previously authorized directorships.
The terms of office of directors shall be governed by the Certificate.
(b) Each
director shall be at least 21 years of age. Directors need not be stockholders of the Corporation. No person shall qualify for service
as a director of the Corporation (i) if he or she is a party to any compensatory, payment, indemnification or other financial agreement,
arrangement or understanding with any person or entity other than the Corporation, or has received any such compensation or other payment
from any person or entity other than the Corporation, in each case in connection with candidacy or service as a director of the Corporation,
unless he or she discloses such compensatory, payment or other financial agreement, arrangement or understanding, or receipt of any such
compensation or other payment, to the Corporation pursuant to the requirements and procedures set forth in Section 3.3(a)(iv) of this
Article III as if such person were a Stockholder Nominee thereunder or (ii) unless such person agrees to submit upon appointment, election
or re-nomination to the Board an irrevocable resignation effective upon (x) such person’s failure to receive a majority of the votes
cast in an uncontested election and (y) the acceptance of such resignation by the Board.
(c) In
any uncontested election of directors, each person receiving a majority of the votes cast shall be deemed elected. For purposes of this
paragraph, a “majority of the votes cast” shall mean that the number of votes cast “for” a director must exceed
the number of votes cast “against” that director (with “abstentions” and “broker non-votes” not counted
as a vote cast with respect to that director). In any contested election of directors, the persons receiving a plurality of the votes
cast, up to the number of directors to be elected in such election, shall be deemed elected. A contested election is one in which, as
of the date that is 14 calendar days in advance of the date the Corporation files its definitive proxy statement with the SEC (regardless
of whether or not it is thereafter revised or supplemented), the number of nominees exceeds the number of directors to be elected. An
uncontested election is any election that is not a contested election.
(d) With
respect to a resignation provided pursuant to Section 3.2(b)(ii), the Board shall consider such resignation and may either (i) accept
the resignation or (ii) reject the resignation and seek to address the underlying cause(s) of the majority-withheld vote. While the Board
may delegate to a committee the authority to assist the Board in its review of the matter, the Board shall decide whether to accept or
reject the resignation within 90 days following the certification of the stockholder vote. Once the Board makes this decision, the Corporation
will promptly make a public announcement of the Board’s decision in the manner described in Section 2.11 or pursuant to a filing
made with the SEC. If the Board rejects the resignation, the public announcement will include a statement regarding the reasons for its
decision.
(e) The
chairman of the nominating and governance committee established pursuant to Section 4.1 will have the authority to manage the Board’s
review of the resignation. In the event it is the chairman of the nominating and governance committee who received a majority-withheld
vote, the independent directors who did not receive majority-withheld votes shall select a director or group of directors to manage the
process, and such director or directors shall have the authority otherwise delegated to the chairman of the nominating and governance
committee by this Section 3.2. Any director whose resignation is being considered as a result of a majority-withheld vote shall not participate
in the committee’s or the Board’s deliberations or vote on whether to accept or reject his or her resignation; provided
that any director, regardless of whether such director received a majority-withheld vote, may participate in such deliberations or vote
regarding another director’s resignation.
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SECTION 3.3 Notification
of Nominations.
(a) Subject
to the rights of the holders of any outstanding series of Preferred Stock, nominations for the election of directors may be made by the
Board or by any stockholder pursuant to (i) this Section 3.3 who is a stockholder of record at the time of giving of the notice of nomination
provided for in this Section 3.3 and who is entitled to vote for the election of directors or (ii) Section 3.15. This Section 3.3 and
Section 3.15 are the exclusive means by which a stockholder may nominate a person for election to the Board. Any stockholder of record
entitled to vote for the election of directors at a meeting may nominate persons for election as directors only if timely written notice
(a “Notice of Nomination”) of such stockholder’s intent to make such nomination is given in proper written form
to the Secretary. To be timely, a Notice of Nomination must be delivered to or mailed and received at the principal executive offices
of the Corporation (i) with respect to an election to be held at an annual meeting of the stockholders, not less than 90 days nor more
than 120 days prior to the first anniversary of the date of the immediately preceding annual meeting as first specified in the Corporation’s
notice of meeting (without regard to any postponements or adjournments of such meeting after such notice was first sent); provided,
however, that in the event that the date of the annual meeting is more than 30 days earlier or more than 60 days later than such
anniversary date, a Notice of Nomination to be timely must be so delivered or received not earlier than the 120th day prior to such annual
meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made; provided, further, that for the purpose of calculating
the timeliness of stockholder notices for the 2027 annual meeting of stockholders, the date of the immediately preceding annual meeting
shall be deemed to be June 3, 2026 and (ii) with respect to an election to be held at a special meeting of the stockholders for the election
of directors, not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of the
60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the
special meeting. In no event shall the public announcement of an adjournment or postponement, or an adjournment or postponement, of a
meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. To be
in proper written form, the Notice of Nomination shall set forth:
(i) the
Stockholder Information with respect to each stockholder nominating persons for election to the Board (each, a “Nominating Stockholder”)
and each Stockholder Associated Person;
(ii) a
representation that each Nominating Stockholder is a holder of record of stock of the Corporation entitled to vote at the meeting and
intends to appear in person or by proxy at the meeting to propose such nomination;
(iii) all
information regarding each Nominating Stockholder, each nominee (each, a “Stockholder Nominee”) and each Stockholder
Associated Person that would be required to be disclosed in a solicitation of proxies subject to Section 14 of the Exchange Act;
(iv) (A)
each Stockholder Nominee’s written consent to being named in any proxy materials as a nominee and to serving as a director if elected;
(B) a completed and duly executed written questionnaire completed and signed by each Stockholder Nominee with respect to the background,
qualifications and independence of such Stockholder Nominee (in the form provided by the Secretary upon written request); (C) a completed
and duly executed written questionnaire with respect to the background and qualification with respect to such Nominating Stockholder and
any other person or entity on whose behalf, directly or indirectly, the nomination is being made (in the form provided by the Secretary
upon written request); and (D) each Stockholder Nominee’s written representation and agreement (in the form provided by the Secretary
upon written request), (i) that if elected as a director of the Corporation, such person will submit an irrevocable resignation effective
upon (x) such person’s failure to receive a majority of the votes cast in an uncontested election and (y) the acceptance of such
resignation by the Board, (ii) that such person currently intends to serve as a director for the full term for which such person is standing
for election, (iii) that such person is not and will not become party to any agreement, arrangement or understanding with, and has not
given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act
or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or any Voting
Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with
such person’s fiduciary duties under applicable law, (iv) that such person is not and will not become a party to any agreement,
arrangement, or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation,
reimbursement, or indemnification in connection with service or action as a director that has not been disclosed to the Corporation, and
(v) that in the person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made,
would be in compliance, if elected as a director of the Corporation, and will comply with all applicable corporate governance, conflict
of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation, and any other Corporation policies
and guidelines applicable to Corporation directors;
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(v) a
description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the
past three years, and any other material relationships, between or among a Stockholder Nominee, Nominating Stockholder, Stockholder Associated
Person or others acting in concert therewith, including all information that would be required to be disclosed pursuant to Rule 404 promulgated
under Regulation S-K (or any such successor rule) if such Stockholder Nominee, Nominating Stockholder, Stockholder Associated Person or
any person acting in concert therewith, were the “registrant” for purposes of such rule and the Stockholder Nominee were a
director or executive of such registrant;
(vi) a
duly executed representation as to whether the Nominating Stockholder(s) intend (A) to deliver a proxy statement and form of proxy to
holders of at least the percentage of the Corporation’s outstanding capital stock required to approve the nomination or (B) otherwise
to solicit proxies from stockholders in support of such nomination;
(vii) all
other information that would be required to be filed with the SEC if the Nominating Stockholder(s) and Stockholder Associated Person were
participants in a solicitation subject to Section 14 of the Exchange Act (or any such successor section); and
(viii) a
duly executed representation that each Nominating Stockholder shall provide any other information reasonably requested by the Corporation.
(b) In
addition, each Nominating Stockholder shall affirm as true and correct the information provided to the Corporation in the Notice of Nomination
or, at the Corporation’s request, such information provided pursuant to Section 3.3(a) (viii) of this Article III (and shall update
or supplement such information as needed so that such information shall be true and correct) as of (i) the record date for the meeting
and (ii) the date that is 10 business days prior to the announced date of the meeting to which the Notice of Nomination relates. Such
affirmation, update and/or supplement must be delivered personally or mailed to, and received at the principal executive offices of the
Corporation, addressed to the Secretary, by no later than five business days after the applicable date specified in clause (i) and (ii)
of the foregoing sentence. A Nominating Stockholder who intends to solicit proxies in support of director nominees other than the Corporation’s
director nominees and who has delivered a Notice of Nomination pursuant to this Section 3.3 shall promptly certify to the Corporation,
and notify the Corporation in writing, that such Nominating Stockholder has complied with or will comply with the requirements of Rule
14a-19 under the Exchange Act, and upon request of the Corporation, shall, not later than five business days prior to the date of the
applicable meeting of stockholders, deliver to the Corporation reasonable evidence of such compliance.
(c) The
person presiding over the meeting shall, if the facts warrant, determine and declare to the meeting, that the nomination was not made
in accordance with the procedures set forth in this Section 3.3, and, if he or she should so determine, he or she shall so declare to
the meeting and the defective nomination shall be disregarded. Unless otherwise required by law, if any Nominating Stockholder (i) provides
notice pursuant to Rule 14a-19 under the Exchange Act and (ii) subsequently (A) notifies the Corporation that such Nominating Stockholder
no longer intends to solicit proxies in support of director nominees other than the Corporation’s director nominees in accordance
with Rule 14a-19, (B) fails to comply with the requirements of Rule 14a-19, or (C) fails to provide reasonable evidence sufficient to
satisfy the Corporation that such requirements have been met, then such Nominating Stockholder’s nominations shall be deemed null
and void and the corporation shall disregard any proxies or votes solicited for any nominee proposed by such Nominating Stockholder.
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(d) If
the Nominating Stockholder (or a qualified representative of the stockholder) does not appear at the applicable stockholder meeting to
nominate the Stockholder Nominees, such nomination shall be disregarded and such business shall not be transacted, notwithstanding that
proxies in respect of such vote may have been received by the Corporation.
(e) Nothing
in this Section 3.3 shall be deemed to affect any rights of the holders of any series of preferred stock of the Corporation pursuant to
any applicable provision of the Certificate or any Certificate of Designation.
(f) Notwithstanding
anything in paragraph (a) of this Section 3.3 to the contrary, in the event that the number of directors to be elected to the Board at
an annual meeting of the stockholders is increased and there is no public announcement specifying the size of the increased Board made
by the Corporation at least 90 days prior to the first anniversary of the date of the immediately preceding annual meeting, a stockholder’s
notice required by this Section 3.3 shall also be considered timely, but only with respect to nominees for any new positions created by
such increase, if it shall be delivered to or mailed to and received by the Secretary at the principal executive offices of the Corporation
not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.
SECTION 3.4 Quorum and
Manner of Acting. Except as otherwise provided by law, the Certificate or these By-laws, a majority of the Whole Board shall constitute
a quorum for the transaction of business at any meeting of the Board, and, except as so provided, the vote of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the Board. The chairman of the meeting or a majority of the directors
present may adjourn the meeting to another time and place, if any, whether or not a quorum is present. At any adjourned meeting at which
a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called.
SECTION 3.5 Place of
Meeting. Subject to Sections 3.6 and 3.7 of this Article III, the Board may hold its meetings at such place or places, if any, either
within or outside of the State of Delaware, as the Board may from time to time determine, or as shall be specified or fixed in the respective
notices or waivers of notice thereof.
SECTION 3.6 Regular
Meetings. Regular meetings of the Board shall be held at such times as the Board shall from time to time determine, at such locations
as the Board may determine. No fewer than four meetings of the Board shall be held per year.
SECTION 3.7 Special
Meetings. Special meetings of the Board shall be held whenever called by the Chairman of the Board, the Chief Executive Officer or
by a majority of the non-employee directors, and shall be held at such place, if any, on such date and at such time as he, she or they,
as applicable, shall fix.
SECTION 3.8 Notice of
Meetings. Notice of regular meetings of the Board or of any adjourned meeting thereof need not be given. Notice of each special meeting
of the Board shall be given by overnight delivery service or mailed to each director, in either case addressed to such director at such
director’s residence or usual place of business, at least 48 hours before the day on which the meeting is to be held or shall be
sent to such director at such place by telecopy or by electronic transmission or shall be given personally or by telephone, not later
than 24 hours before the meeting is to be held, but notice need not be given to any director who shall, either before or after the meeting,
submit a waiver of such notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice
to such director. Unless otherwise required by these By-laws, every such notice shall state the time and place, if any, but need not state
the purpose of the meeting.
SECTION 3.9 Rules and
Regulations. The Board may adopt such rules and regulations not inconsistent with the provisions of law, the Certificate or these
By-laws for the conduct of its meetings and management of the affairs of the Corporation as the Board may deem proper.
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SECTION 3.10 Participation
in Meeting by Means of Communications Equipment. Any one or more members of the Board or any committee thereof may participate
in any meeting of the Board or of any such committee by means of conference telephone or other communications equipment by means of which
all persons participating in the meeting can hear each other or as otherwise permitted by law, and such participation in a meeting shall
constitute presence in person at such meeting.
SECTION 3.11 Action
Without Meeting. Any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without
a meeting if all of the members of the Board or of any such committee consent thereto in writing and, if required by law, the writing
or writings are filed with the minutes or proceedings of the Board or of such committee.
SECTION 3.12 Chairman.
The Board of Directors shall annually select one of its members to be Chairman and shall fill any vacancy in the position of Chairman
at such time and in such manner as the Board of Directors shall determine.
SECTION 3.13 Resignations.
Any director of the Corporation may at any time resign by giving written notice to the Board, the Chairman of the Board, the Chief Executive
Officer or the Secretary. Such resignation shall take effect at the time specified therein or, if the time be not specified therein, upon
receipt thereof; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 3.14 Compensation.
Each director, in consideration of such person serving as a director, shall be entitled to receive from the Corporation such amount per
annum and such fees (payable in cash or stock-based compensation) for attendance at meetings of the Board or of committees of the Board,
or both, and for acting as a chair of a committee of the Board, and/or any other compensation in each case as the Board or a committee
thereof shall from time to time determine. In addition, each director shall be entitled to receive from the Corporation reimbursement
for the reasonable expenses incurred by such person in connection with the performance of such person’s duties as a director. Nothing
contained in this Section 3.14 shall preclude any director from serving the Corporation or any of its subsidiaries in any other capacity
and receiving compensation therefor.
SECTION 3.15 Proxy Access.
(a) The
Corporation shall include in its proxy statement and on its form of proxy for an annual meeting of stockholders the name of, and the Required
Information (as defined below) relating to, any nominee for election or reelection to the Board who satisfies the eligibility requirements
in this Section 3.15 (a “Proxy Access Nominee”) and who is identified in a notice that complies with Section 3.15(f)
of this Article III and that is timely delivered pursuant to Section 3.15(g) of this Article III (the “Stockholder Notice”)
by one stockholder, or a group of no more than twenty stockholders, who:
(i) elects
at the time of delivering the Stockholder Notice to have such Proxy Access Nominee included in the Corporation’s proxy materials;
(ii) as
of the date of the Stockholder Notice and the record date for determining stockholders entitled to vote at the annual meeting of stockholders,
Owns (as defined below in Section 3.15(c) of this Article III) a number of shares of the Corporation that represents at least 3% of the
outstanding shares of the Corporation entitled to vote generally in the election of directors (the “Required Shares”)
and has Owned continuously the Required Shares (as adjusted for any stock splits, stock dividends or similar events) for at least three
years; and
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(iii) satisfies
the additional requirements in these By-laws (such stockholder or group of stockholders, collectively, an “Eligible Stockholder”).
(b) For
purposes of satisfying the Ownership requirement under Section 3.15(a) of this Article III:
(i) the
outstanding shares of the Corporation Owned by a group of one or more stockholders may be aggregated (for the avoidance of doubt, the
number of stockholders and other beneficial owners whose ownership of shares is aggregated for such purpose shall not exceed twenty);
and
(ii) two
or more funds that are (A) under common management and investment control, (B) under common management and funded primarily by the same
employer, or (C) a “group of investment companies,” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company
Act of 1940, as amended, shall, in each case, be treated as one stockholder.
(c) For
purposes of this Section 3.15, an Eligible Stockholder “Owns” only those outstanding shares of the Corporation as to which
the stockholder or group of stockholders possesses both:
(i) the
full voting and investment rights pertaining to the shares, and
(ii) the
full economic interest in (including, without limitation, the opportunity for profit and risk of loss on) such shares;
provided that the number of shares calculated
in accordance with clauses (i) and (ii) of this Section 3.15(c) shall not include any shares:
(A) sold
by such stockholder or any affiliate (as defined below in this Section 3.15(c)) in any transaction that has not been settled or closed,
including, without limitation, any short sale;
(B) borrowed
by such stockholder or any affiliate for any purposes or purchased by such stockholder or any affiliate pursuant to an agreement to resell;
or
(C) subject
to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder
or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount
or value of outstanding shares of the Corporation, in any such case which instrument or agreement has, or is intended to have, or if exercised
would have, the purpose or effect of:
(1) reducing
in any manner, to any extent or at any time in the future, such stockholder’s or any of its affiliates’ full right to vote
or direct the voting of any such shares; and/or
(2) hedging,
offsetting or altering to any degree gain or loss arising from the full economic interest in such shares by such stockholder or affiliate.
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A stockholder “Owns” shares held in
the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect
to the election of directors and possesses the full economic interest in the shares. A stockholder’s Ownership of shares shall be
deemed to continue during any period in which the stockholder has delegated any voting power by means of a proxy, power of attorney or
other instrument or arrangement that is revocable at any time by the stockholder. A stockholder’s Ownership of shares shall be deemed
to continue during any period in which the stockholder has loaned such shares, provided that the stockholder has the power to recall
such loaned shares on five business days’ notice and has recalled such loaned shares as of the date of the Stockholder Notice and
through the date of the annual meeting of stockholders. The terms “Owned,” “Owning” and other variations of the
word “Own” shall have correlative meanings. Whether outstanding shares of the Corporation are “Owned” for these
purposes shall be determined by the Board.
For purposes of this Section 3.15, the term “affiliate”
or “affiliates” shall have the meaning ascribed thereto under the General Rules and Regulations under the Exchange Act.
(d) No
stockholder may be a member of more than one group of stockholders constituting an Eligible Stockholder under this Section 3.15, and no
shares of the Corporation may be attributed to more than one Eligible Stockholder or group constituting an Eligible Stockholder.
(e) For
purposes of this Section 3.15, the “Required Information” that the Corporation will include in its proxy materials is:
(i) the
information concerning the Proxy Access Nominee and the Eligible Stockholder that is required to be disclosed in the Corporation’s
proxy materials by the applicable requirements of the Exchange Act and the rules and regulations thereunder; and
(ii) if
the Eligible Stockholder so elects, a written statement of the Eligible Stockholder, not to exceed 500 words, in support of its Proxy
Access Nominee, which must be provided at the same time as the Stockholder Notice for inclusion in the Corporation’s proxy materials
for the annual meeting of stockholders.
Notwithstanding anything to the contrary contained
in this Section 3.15, the Corporation may omit from its proxy materials any information or statement that it, in good faith, believes
would violate any applicable law, rule, regulation or listing standard. Nothing in this Section 3.15 shall limit the Corporation’s
ability to solicit against a stockholder nominee and include in its proxy materials its own statements relating to any Eligible Stockholder
or Proxy Access Nominee.
(f) The
Stockholder Notice shall set forth the information required under Section 3.3(a) of this Article III (replacing the term “Nominating
Stockholder” with “Eligible Stockholder” and the term “Stockholder Nominee” with “Proxy Access Nominee”),
including the questionnaire, agreement and other materials required by Section 3.3(a)(iv), and, in addition, shall include:
(i) a
copy of the Schedule 14N that has been or concurrently is filed with the SEC under Exchange Act Rule 14a-18 (or any successor schedule
or rule); and
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(ii) the
written agreement of the Eligible Stockholder (or in the case of a group, each stockholder whose shares are aggregated for purposes of
constituting an Eligible Stockholder) addressed to the Corporation (in the form provided by the Secretary upon written request), setting
forth the following additional agreements, representations and warranties:
(A) a
certification as to the number of shares of the Corporation it Owns and has Owned continuously for at least three years as of the date
of the Stockholder Notice and agreeing to continue to Own such shares through the date of the annual meeting of stockholders, which statement
shall also be included in the written statements set forth in Item 4 of the Schedule 14N (or any successor schedule) filed by the Eligible
Stockholder with the SEC;
(B) the
Eligible Stockholder’s agreement to provide the information required under Section 3.3(a) of this Article III and the written statements
from the record holder and intermediaries as required under Section 3.15(h) of this Article III verifying the Eligible Stockholder’s
continuous Ownership of the Required Shares through and as of the business day immediately preceding the date of the annual meeting of
stockholders;
(C) the
Eligible Stockholder’s representation and agreement that the Eligible Stockholder (including each member of any group of stockholders
that together is an Eligible Stockholder under this Section 3.15):
(1) acquired
the Required Shares in the ordinary course of business and not with the intent to change or influence control of the Corporation, and
does not presently have such intent;
(2) will
provide facts, statements and other information in all communications with the Corporation and stockholders of the Corporation that are
true and correct in all material respects and do not omit to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading;
(3) has
not nominated and will not nominate for election to the Board at the annual meeting of stockholders any person other than the Proxy Access
Nominee(s) being nominated pursuant to this Section 3.15;
(4) has
not engaged and will not engage in a, and has not been and will not be a “participant” (as defined in Item 4 of the Exchange
Act Schedule 14A) (or any successor schedule) in other person’s, “solicitation” within the meaning of Exchange Act Rule
14a-1(l) (or any successor rule), in support of the election of any individual as a director at the annual meeting of stockholders other
than its Proxy Access Nominee or a nominee of the Board; and
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(5) will
not distribute to any stockholder any form of proxy for the annual meeting of stockholders other than the form distributed by the Corporation.
(D) the
Eligible Stockholder’s agreement to:
(1) assume
all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder’s communications with the
stockholders of the Corporation or out of the information that the Eligible Stockholder provided to the Corporation;
(2) indemnify
and hold harmless the Corporation and each of its directors, officers and employees individually against any liability, loss or damages
in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation
or any of its directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section
3.15; provided, however, that the indemnification by the Eligible Stockholder under this Section 3.15(f)(ii)(D)(2) shall
no longer be required or apply with respect to any acts or omissions by the Proxy Access Nominee that occur after such Proxy Access Nominee’s
election to the Board;
(3) comply
with all other laws, rules, regulations and listing standards applicable to any solicitation in connection with the annual meeting of
stockholders;
(4) file
all materials described below in Section 3.15(h)(iii) of this Article III with the SEC, regardless of whether any such filing is required
under Exchange Act Regulation 14A (or any successor regulation), or whether any exemption from filing is available for such materials
under Exchange Act Regulation 14A (or any successor regulation);
(5) provide
to the Corporation prior to the annual meeting of stockholders such additional information as necessary or reasonably requested by the
Corporation;
(6) promptly
disclose to the Corporation if the Eligible Stockholder does not intend to continue to Own the Required Shares for at least one year following
the annual meeting of stockholders; and
(7) in
the case of a nomination by a group of stockholders that together is an Eligible Stockholder, the designation by all group members of
one group member that is authorized to act on behalf of all such members with respect to the nomination and matters related thereto, including,
without limitation, any withdrawal of the nomination.
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(g) To
be timely under this Section 3.15, the Stockholder Notice must be delivered to or mailed and received at the principal executive offices
of the Corporation (i) with respect to an election to be held at an annual meeting of the stockholders, not less than 120 days nor more
than 150 days prior to the first anniversary of the date the definitive proxy statement was first released to stockholders in connection
with the previous year’s annual meeting of stockholders; provided, however, that in the event that the date of the
annual meeting of stockholders is more than 30 days earlier or more than 60 days later than such anniversary date, the Stockholder Notice
to be timely must be so delivered or received not earlier than the 150th day prior to such annual meeting of stockholders and not later
than the close of business on the later of the 120th day prior to such annual meeting of stockholders or the 10th day following the day
on which public announcement of the date of such meeting is first made; provided, further, that for the purpose of calculating
the timeliness of the Stockholder Notice for the 2027 annual meeting of stockholders, the date of the immediately preceding annual meeting
of stockholders shall be deemed to be June 3, 2026 and (ii) with respect to an election to be held at a special meeting of the stockholders
for the election of directors, not earlier than the 90th day prior to such special meeting and not later than the close of business on
the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of
the date of the special meeting. In no event shall any adjournment or postponement of an annual meeting of stockholders, or the announcement
thereof, commence a new time period (or extend any time period) for the giving of the Stockholder Notice as described above. For purposes
of Rule 14a-18 under the Exchange Act (or any successor rule), the applicable “date specified by the registrant’s advance
notice provision” shall be the date determined pursuant to this Section 3.15(g).
(h) An
Eligible Stockholder (or in the case of a group, each stockholder whose shares are aggregated for purposes of constituting an Eligible
Stockholder) must:
(i) within
five business days after the date of the Stockholder Notice provide one or more written statements from the record holder(s) of the Required
Shares and from each intermediary through which the Required Shares are or have been held, in each case during the requisite three-year
holding period, verifying that the Eligible Stockholder Owns, and has Owned continuously for the preceding three years, the Required Shares;
(ii) include
in the written statements provided pursuant to Item 4 of Schedule 14N (or any successor schedule) filed with the SEC a statement certifying
that it Owns and continuously has Owned the Required Shares for at least three years;
(iii) file
with the SEC any solicitation or other communication relating to the current year annual meeting of stockholders, one or more of the Corporation’s
directors or director nominees or any Proxy Access Nominee, regardless of whether any such filing is required under Exchange Act Regulation
14A (or any successor regulation) or whether any exemption from filing is available for such solicitation or other communication under
Exchange Act Regulation 14A (or any successor regulation); and
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(iv) as
to any group of funds whose shares are aggregated for purposes of constituting an Eligible Stockholder, within five business days after
the date of the Stockholder Notice, provide documentation reasonably satisfactory to the Corporation that demonstrates that the funds
satisfy Section 3.15(b)(ii) of this Article III.
(i) Notwithstanding
anything to the contrary contained in this Section 3.15, the Corporation may omit from its proxy materials any Proxy Access Nominee, and
such nomination shall be disregarded and no vote on such Proxy Access Nominee will occur, notwithstanding that proxies in respect of such
vote may have been received by the Corporation, if:
(i) the
Secretary receives notice that a stockholder intends to nominate a person for election to the Board which stockholder does not elect to
have its nominee(s) included in the Corporation’s proxy materials pursuant to this Section 3.15;
(ii) the
Eligible Stockholder or Proxy Access Nominee breaches any of its respective agreements, representations or warranties set forth in the
Stockholder Notice or otherwise required by this Section 3.15, or if any of the information in the Stockholder Notice (or otherwise submitted
pursuant to this Section 3.15) was not, when provided, true, correct and complete or the requirements of this Section 3.15 have otherwise
not been met;
(iii) the
Proxy Access Nominee or the stockholder or group of stockholders (including any member thereof) who has nominated such Proxy Access Nominee
has engaged in or is currently engaged in, or has been or is a “participant” in another person’s, “solicitation”
within the meaning of Rule 14a-1(l) under the Exchange Act, in support of the election of any individual as a director at the meeting
other than such Proxy Access Nominee or a nominee of the Board;
(iv) the
Proxy Access Nominee (A) is not independent under the listing standards of the principal U.S. exchange upon which the shares of the Corporation
are listed, any applicable rules of the SEC and any publicly disclosed standards used by the Board in determining and disclosing the independence
of the Corporation’s directors, (B) does not qualify as independent under the audit committee independence requirements set
forth in the rules of the principal U.S. exchange on which shares of the Corporation are listed or as a “non-employee director”
under Exchange Act Rule 16b-3 (or any successor rule), (C) is or has been, within the three years preceding the date the Corporation first
mails to the stockholders its notice of the meeting that includes the Proxy Access Nominee, an officer or director of a competitor, as
defined in Section 8 of the Clayton Antitrust Act of 1914, as amended, (D) is an officer, director or general partner of any legal entity
where a fellow officer, director or general partner of such legal entity is an officer or director of a competitor, as defined in Section
8 of the Clayton Antitrust Act of 1914, as amended, (E) is a named subject of a pending criminal proceeding (excluding traffic violations
and other minor offenses) or has been convicted in a criminal proceeding within the 10 years preceding the date the Corporation first
mails to the stockholders its notice of the meeting that includes the Proxy Access Nominee, or (F) is subject to any order of the type
specified in Rule 506(d) of Regulation D (or any successor rule) promulgated under the Securities Act of 1933, as amended; or
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(v) the
election of the Proxy Access Nominee to the Board would cause the Corporation to be in violation of the Certificate, these By-laws or
any applicable state or federal law, rule, regulation or listing standard.
Any such determination by the Board (or any other
person or body authorized by the Board) regarding a nomination’s satisfaction of this Section 3.15(i) shall be binding on the Corporation
and its stockholders.
(j) The
maximum number of Proxy Access Nominees appearing in the Corporation’s proxy materials with respect to an annual meeting of stockholders
pursuant to this Section 3.15 (including, without limitation, any Proxy Access Nominee whose name was submitted for inclusion in the Corporation’s
proxy materials for such annual meeting of stockholders but who is nominated by the Board as a Board nominee for such annual meeting of
stockholders), together with:
(i) any
nominees who were previously elected to the Board as (A) Proxy Access Nominees pursuant to this Section 3.15 (including, without limitation,
any Proxy Access Nominee whose name was submitted for inclusion in the Corporation’s proxy materials for such prior annual meeting
of stockholders but who was nominated by the Board as a Board nominee for such prior annual meeting of stockholders) or (B) a nominee
of any stockholder in any other manner, in either case at any of the preceding two annual meetings of stockholders and who are re-nominated
for election at such annual meeting of stockholders by the Board, and
(ii) any
Proxy Access Nominee who was qualified for inclusion in the Corporation’s proxy materials for such annual meeting of stockholders
but whose nomination is subsequently withdrawn, shall not exceed the greater of (x) two or (y) 20% of the number of directors in office
as of the last day on which a Stockholder Notice may be delivered pursuant to this Section 3.15 with respect to such annual meeting of
stockholders, or if such amount as calculated in clause (y) of this Section 3.15(j) is not a whole number, the closest whole number below
20%; provided that if there is a vacancy on the Board and the number of directors is decreased prior to such annual meeting of
stockholders, then the 20% of the number of directors shall be calculated based on the number of directors in office as of the date of
such decrease in the number of directors. In the event that the number of Proxy Access Nominees submitted by Eligible Stockholders pursuant
to this Section 3.15 exceeds this maximum number, each Eligible Stockholder will select one Proxy Access Nominee for inclusion in the
Corporation’s proxy materials until the maximum number is reached, going in order of the number (largest to smallest) of shares
of the Corporation each Eligible Stockholder disclosed as Owned in its respective Stockholder Notice submitted to the Corporation. If
the maximum number is not reached after each Eligible Stockholder has selected one Proxy Access Nominee, this selection process will
continue as many times as necessary, following the same order each time, until the maximum number is reached.
(k) Notwithstanding
the foregoing provisions of this Section 3.15, unless otherwise required by law or otherwise determined by the person presiding over the
meeting, if none of (i) the Eligible Stockholder or (ii) a qualified representative of the Eligible Stockholder appears at the annual
meeting of stockholders to present such Eligible Stockholder’s Proxy Access Nominees, such nomination or nominations shall be disregarded
and conclusively deemed withdrawn, notwithstanding that proxies in respect of the election of the Proxy Access Nominees may have been
received by the Corporation.
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(l) Any
Proxy Access Nominee who is included in the Corporation’s proxy materials for a particular annual meeting of stockholders but either
(i) withdraws from or becomes ineligible or unavailable for election at the annual meeting of stockholders, or (ii) does not receive at
least 25% of the votes cast in favor of the Proxy Access Nominee’s election, will be ineligible to be a Proxy Access Nominee pursuant
to this Section 3.15 for the next two annual meetings of stockholders.
(m) The
Corporation may request such additional information as necessary to permit the Board to determine if each Proxy Access Nominee is independent
under the listing standards of the principal United States exchange upon which the shares of the Corporation are listed, any applicable
rules of the SEC and any publicly disclosed standards used by the Board in determining and disclosing the independence of the Corporation’s
directors.
(n) This
Section 3.15 shall be the exclusive method for stockholders to include nominees for director election in the Corporation’s proxy
materials (including, without limitation, any proxy card or written ballot), other than with respect to Rule 14a-19 under the Exchange
Act to the extent applicable with respect to form of proxies).
Article IV
Committees of the
Board of Directors
SECTION 4.1 Committees
of the Board. The Board shall designate such committees as may be required by the listing standards of the principal United States
exchange upon which the shares of the Corporation are listed and may from time to time designate other committees of the Board (including,
without limitation, an executive committee), with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure
of the Board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member
or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any
meeting of the committee.
SECTION 4.2 Conduct
of Business. Any committee, to the extent allowed by law and provided in the resolution establishing such committee or the charter
of such committee, shall have and may exercise all the duly delegated powers and authority of the Board in the management of the business
and affairs of the Corporation. The Board shall have the power to prescribe the manner in which proceedings of any such committee shall
be conducted. In the absence of any such prescription, any such committee shall have the power to prescribe the manner in which its proceedings
shall be conducted. Unless the Board or such committee shall otherwise provide, regular and special meetings and other actions of any
such committee shall be governed by the provisions of Article III applicable to meetings and actions of the Board. Each committee shall
keep regular minutes and report on its actions to the Board.
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Article V
Officers
SECTION 5.1 Number;
Term of Office. The officers of the Corporation shall be elected by the Board and may consist of: a Chief Executive Officer, a President,
a Chief Operating Officer, a Chief Financial Officer and one or more Vice Presidents (including, without limitation, Senior Vice Presidents)
and a Treasurer, Controller and Secretary and such other officers and agents with such titles and such duties as the Board may from time
to time determine, each to have such authority, functions or duties as in these By-laws provided or as the Board may from time to time
determine, and each to hold office for such term as may be prescribed by the Board and until such person’s successor shall have
been chosen and shall qualify, or until such person’s death or resignation, or until such person’s removal in the manner hereinafter
provided. One person may hold the offices and perform the duties of any two or more of said officers; provided, however,
that no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law, the
Certificate or these By-laws to be executed, acknowledged or verified by two or more officers. The Board may require any officer or agent
to give security for the faithful performance of such person’s duties.
SECTION 5.2 Removal.
Subject to Section 5.13 of this Article V, any officer may be removed, either with or without cause, by the Board at any meeting thereof
called for the purpose, by the Chief Executive Officer, or by any other superior officer upon whom such power may be conferred by the
Board.
SECTION 5.3 Resignation.
Any officer may resign at any time by giving notice to the Board, the Chief Executive Officer or the Secretary. Any such resignation shall
take effect at the date of receipt of such notice or at any later date specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 5.4 Chief Executive
Officer. The Chief Executive Officer shall have general supervision and direction of the business and affairs of the Corporation,
subject to the control of the Board, and shall report directly to the Board.
SECTION 5.5 President.
The President shall perform such senior duties as he or she may agree with the Chief Executive Officer (if the position is held by an
individual other than the Chief Executive Officer) or as the Board shall from time to time determine.
SECTION 5.6 Chief Operating
Officer. The Chief Operating Officer shall perform such senior duties in connection with the operations of the Corporation as he or
she may agree with the Chief Executive Officer or as the Board shall from time to time determine. The Chief Operating Officer shall, when
requested, counsel with and advise the other officers of the Corporation.
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SECTION 5.7 Chief Financial
Officer. The Chief Financial Officer shall perform all the powers and duties of the office of the chief financial officer and in general
have overall supervision of the financial operations of the Corporation. The Chief Financial Officer shall, when requested, counsel with
and advise the other officers of the Corporation and shall perform such other duties as he or she may agree with the Chief Executive Officer
or as the Board may from time to time determine.
SECTION 5.8 Vice Presidents.
Any Vice President shall have such powers and duties as shall be prescribed by his or her superior officer or the Board. A Vice President
shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as he or she
may agree with the Chief Executive Officer or as the Board may from time to time determine. A Vice President need not be an officer of
the Corporation and shall not be deemed an officer of the Corporation unless elected by the Board.
SECTION 5.9 Treasurer.
The Treasurer shall supervise and be responsible for all the funds and securities of the Corporation; the deposit of all moneys and other
valuables to the credit of the Corporation in depositories of the Corporation; borrowings and compliance with the provisions of all indentures,
agreements and instruments governing such borrowings to which the Corporation is a party; the disbursement of funds of the Corporation
and the investment of its funds; and in general shall perform all of the duties incident to the office of the Treasurer. The Treasurer
shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as he or she
may agree with the Chief Executive Officer or the Chief Financial Officer or as the Board may from time to time determine.
SECTION 5.10 Controller.
The Controller shall be the chief accounting officer of the Corporation. The Controller shall, when requested, counsel with and advise
the other officers of the Corporation and shall perform such other duties as he or she may agree with the Chief Executive Officer or the
Chief Financial Officer or as the Board may from time to time determine.
SECTION 5.11 Secretary.
It shall be the duty of the Secretary to act as secretary at all meetings of the Board, of the committees of the Board and of the stockholders
and to record the proceedings of such meetings in a book or books to be kept for that purpose; the Secretary shall see that all notices
required to be given by the Corporation are duly given and served; the Secretary shall be custodian of the seal of the Corporation and
when deemed necessary shall affix the seal or cause it to be affixed to all certificates of stock, if any, of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these By-laws; the Secretary
shall have charge of the books, records and papers of the Corporation and shall see that the reports, statements and other documents required
by law to be kept and filed are properly kept and filed; and in general shall perform all of the duties incident to the office of Secretary.
The Secretary shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties
as he or she may agree with the Chief Executive Officer or as the Board may from time to time determine.
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SECTION 5.12 Assistant
Treasurers, Assistant Controllers and Assistant Secretaries. Any Assistant Treasurers, Assistant Controllers and Assistant Secretaries
shall perform such duties as shall be assigned to them by the Board or by the Treasurer, Controller or Secretary, respectively, or by
the Chief Executive Officer. An Assistant Treasurer, Assistant Controller or Assistant Secretary need not be an officer of the Corporation
and shall not be deemed an officer of the Corporation unless elected by the Board.
SECTION 5.13 Additional
Matters. The Chief Executive Officer, the President, the Chief Operating Officer and the Chief Financial Officer of the Corporation
shall have the authority to designate employees of the Corporation to have the title of Vice President, Assistant Vice President, Assistant
Treasurer, Assistant Controller or Assistant Secretary. Any employee so designated shall have the powers and duties determined by the
officer making such designation. The persons upon whom such titles are conferred shall not be deemed officers of the Corporation unless
elected by the Board or appointed by any duly elected officer or assistant officer authorized by the Board to appoint such person.
Article VI
Indemnification
SECTION 6.1 Right to
Indemnification. The Corporation, to the fullest extent permitted or required by the DGCL or other applicable law, as the same exists
or may hereafter be amended (but, in the case of any such amendment and unless applicable law otherwise requires, only to the extent that
such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior
to such amendment), shall indemnify and hold harmless any person who is or was a director or officer of the Corporation and who is or
was involved in any manner (including, without limitation, as a party or a witness) or is threatened to be made so involved in any threatened,
pending or completed investigation, claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (including,
without limitation, any action, suit or proceedings by or in the right of the Corporation to procure a judgment in its favor) (a “Proceeding”)
by reason of the fact that such person, or another person of whom such person is the legal representative, is or was a director, officer
or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer or agent of another corporation,
partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) (a “Covered
Entity”), whether the basis of such Proceeding is alleged action in an official capacity as a director, officer or agent or
in any other capacity while serving as a director, officer or agent, against all expenses, liabilities and losses (including, without
limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) actually and reasonably
incurred by such person in connection with such Proceeding and such indemnification shall continue as to a person who has ceased to be
a director, officer or agent of the Corporation or a Covered Entity; provided, however, that, except as provided in Section
6.4(d) of this Article VI with respect to an adjudication of entitlement to indemnification, the Corporation shall indemnify and hold
harmless any such Indemnitee in connection with a Proceeding initiated by such Indemnitee only if such Proceeding was authorized by the
Board. Any person entitled to indemnification as provided in this Section 6.1 is hereinafter called an “Indemnitee”.
Any right of an Indemnitee to indemnification shall be a contract right and shall include the right to receive, prior to the conclusion
of any Proceeding, payment of any expenses incurred by the Indemnitee in connection with such Proceeding, consistent with the provisions
of the DGCL or other applicable law, as the same exists or may hereafter be amended (but, in the case of any such amendment and unless
applicable law otherwise requires, only to the extent that such amendment permits the Corporation to provide broader rights to payment
of expenses than such law permitted the Corporation to provide prior to such amendment), and the other provisions of this Article VI;
provided that payment of expenses incurred by a person other than a director or officer of the Corporation prior to the conclusion
of any Proceeding shall be made, unless otherwise determined by the Board, only upon delivery to the Corporation of an undertaking by
or on behalf of such person to the same effect as any undertaking required to be delivered to the Corporation by any director or officer
of the Corporation pursuant to the DGCL or other applicable law.
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SECTION 6.2 Insurance,
Contracts and Funding. The Corporation may purchase and maintain insurance to protect itself and any director, officer, employee or
agent of the Corporation or of any Covered Entity against any expenses, liabilities or losses as specified in Section 6.1 of this Article
VI or incurred by any such director, officer, employee or agent in connection with any Proceeding referred to in Section 6.1 of this Article
VI, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.
The Corporation may enter into contracts with any director, officer, employee or agent of the Corporation or of any Covered Entity in
furtherance of the provisions of this Article VI and may create a trust fund, grant a security interest or use other means (including,
without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided
or authorized in this Article VI.
SECTION 6.3 Indemnification
Not Exclusive Right. The right of indemnification provided in this Article VI shall not be exclusive of any other rights to which
an Indemnitee may otherwise be entitled, and the provisions of this Article VI shall inure to the benefit of the heirs and legal representatives
of any Indemnitee under this Article VI and shall be applicable to Proceedings commenced or continuing after the adoption of this Article
VI, whether arising from acts or omissions occurring before or after such adoption.
SECTION 6.4 Advancement
of Expenses; Procedures; Presumptions and Effect of Certain Proceedings; Remedies. In furtherance, but not in limitation, of
the foregoing provisions, the following procedures, presumptions and remedies shall apply with respect to advancement of expenses and
the right to indemnification under this Article VI:
(a) Advancement
of Expenses. All reasonable expenses (including, without limitation, attorneys’ fees) incurred by or on behalf of the Indemnitee
in connection with any Proceeding shall be advanced to the Indemnitee by the Corporation within 20 days after the receipt by the Corporation
of a statement or statements from the Indemnitee requesting such advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably evidence the expenses incurred by the Indemnitee and, if
required by law or the provisions of this Article VI at the time of such advance, shall include or be accompanied by an undertaking by
or on behalf of the Indemnitee to repay the amounts advanced if ultimately it should be determined that the Indemnitee is not entitled
to be indemnified against such expenses pursuant to this Article VI.
(b) Procedure
for Determination of Entitlement to Indemnification.
(i) To
obtain indemnification under this Article VI, an Indemnitee shall submit to the Secretary a written request including such documentation
and information as is reasonably available to the Indemnitee and reasonably necessary to determine whether and to what extent the Indemnitee
is entitled to indemnification (the “Supporting Documentation”). The determination of the Indemnitee’s
entitlement to indemnification shall be made not later than 60 days after receipt by the Corporation of the written request for indemnification
together with the Supporting Documentation. The Secretary shall, promptly upon receipt of such a request for indemnification, advise the
Board in writing that the Indemnitee has requested indemnification.
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(ii) The
Indemnitee’s entitlement to indemnification under this Article VI shall be determined in one of the following ways: (A) by a majority
vote of the Disinterested Directors (as hereinafter defined in Section 6.4(e) of this Article VI), whether or not they constitute a quorum
of the Board, or by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors; (B) by a written
opinion of Independent Counsel (as hereinafter defined in Section 6.4(e) of this Article VI) if there are no Disinterested Directors or
a majority of such Disinterested Directors so directs; (C) by the stockholders of the Corporation; or (D) as provided in Section
6.4(c) of this Article VI.
(iii) In
the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6.4(b)(ii) of this
Article VI, a majority of the Disinterested Directors shall select the Independent Counsel, but only an Independent Counsel to which the
Indemnitee does not reasonably object.
(c) Presumptions
and Effect of Certain Proceedings. If the person or persons empowered under Section 6.4(b) of this Article VI to determine entitlement
to indemnification shall not have been appointed or shall not have made a determination within 60 days after receipt by the Corporation
of the request therefor, together with the Supporting Documentation, the Indemnitee shall be deemed to be, and shall be, entitled to indemnification
unless (A) the Indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law. The termination of any Proceeding described in Section 6.1 of this Article
VI, or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, adversely affect the right of the Indemnitee to indemnification or create a presumption that the
Indemnitee did not act in good faith and in a manner which the Indemnitee reasonably believed to be in or not opposed to the best interests
of the Corporation or, with respect to any criminal proceeding, that the Indemnitee had reasonable cause to believe that such conduct
was unlawful.
(d) Remedies
of Indemnitee. (i) In the event that a determination is made pursuant to Section 6.4(b) of this Article VI that the Indemnitee is
not entitled to indemnification under this Article VI, (A) the Indemnitee shall be entitled to seek an adjudication of entitlement to
such indemnification either, at the Indemnitee’s sole option, in (x) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (y) an arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration
Association and (B) any such judicial proceeding or arbitration shall be de novo and the Indemnitee shall not be prejudiced by
reason of such adverse determination.
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(i) If
a determination shall have been made or deemed to have been made, pursuant to Section 6.4(b) or (c) of this Article VI, that the Indemnitee
is entitled to indemnification, the Corporation shall be obligated to pay the amounts constituting such indemnification within 45 days
after such determination has been made or deemed to have been made and shall be conclusively bound by such determination unless (A) the
Indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification or in the Supporting Documentation
or (B) such indemnification is prohibited by law. In the event that (X) advancement of expenses is not timely made pursuant to Section
6.4(a) of this Article VI or (Y) payment of indemnification is not made within 45 days after a determination of entitlement to indemnification
has been made or deemed to have been made pursuant to Section 6.4(b) or (c) of this Article VI, the Indemnitee shall be entitled to seek
judicial enforcement of the Corporation’s obligation to pay to the Indemnitee such advancement of expenses or indemnification. Notwithstanding
the foregoing, the Corporation may bring an action, in an appropriate court in the State of Delaware or any other court of competent jurisdiction,
contesting the right of the Indemnitee to receive indemnification hereunder due to the occurrence of an event described in sub-clause
(A) or (B) of this clause (ii) (a “Disqualifying Event”); provided, however, that in any such action
the Corporation shall have the burden of proving the occurrence of such Disqualifying Event.
(ii) The
Corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 6.4(d) that
the procedures and presumptions of this Article VI are not valid, binding and enforceable and shall stipulate in any such court or before
any such arbitrator that the Corporation is bound by all the provisions of this Article VI.
(iii) In
the event that the Indemnitee, pursuant to this Section 6.4(d), seeks a judicial adjudication of or an award in arbitration to enforce
rights under, or to recover damages for breach of, this Article VI, or in the event of a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the Indemnitee shall be entitled to recover from the Corporation, and
shall be indemnified by the Corporation against, any expenses actually and reasonably incurred by the Indemnitee if the Indemnitee prevails
in such judicial adjudication, arbitration or suit. If it shall be determined in such judicial adjudication, arbitration or suit that
the Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred
by the Indemnitee in connection with such judicial adjudication, arbitration or action shall be prorated accordingly.
(e) Definitions.
For purposes of this Article VI:
(i) “Disinterested
Director” means a director of the Corporation who is not or was not a party to the Proceeding in respect of which indemnification
is sought by the Indemnitee.
27
(ii) “Independent
Counsel” means a law firm or a member of a law firm that neither presently is, nor in the past five years has been, retained
to represent: (x) the Corporation or the Indemnitee in any matter material to either such party or (y) any other party to the Proceeding
giving rise to a claim for indemnification under this Article VI. Notwithstanding the foregoing, the term “Independent Counsel”
shall not include any person who, under the applicable standards of professional conduct then prevailing under the law of the State of
Delaware, would have a conflict of interest in representing either the Corporation or the Indemnitee in an action to determine the Indemnitee’s
rights under this Article VI.
SECTION 6.5 Indemnification
of Agents. Notwithstanding any other provision or provisions of this Article VI, the Corporation, to the fullest extent of the provisions
of this Article VI with respect to the indemnification of directors, officers and employees of the Corporation or any Covered Entity,
may indemnify any person other than a director, officer or employee of the Corporation or any Covered Entity, who is or was an agent of
the Corporation or a Covered Entity and who is or was involved in any manner (including, without limitation, as a party or a witness)
or is threatened to be made so involved in any threatened, pending or completed Proceeding by reason of the fact that such person, or
another person of whom such person is the legal representative, is or was a director, officer, employee or agent of the Corporation or
of a Covered Entity, whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer, employee or agent, against all expenses, liabilities and losses (including,
without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) actually
and reasonably incurred by such person in connection with such Proceeding. The Corporation may also advance expenses incurred by such
employee or agent in connection with any such Proceeding, consistent with the provisions of this Article VI with respect to the advancement
of expenses of directors, officers and employees of the Corporation.
Article VII
Capital Stock
SECTION 7.1 Certificates
for Shares and Uncertificated Shares.
(a) The
shares of stock of the Corporation shall be uncertificated shares that may be evidenced by a book-entry system maintained by the registrar
of such stock, or shall be represented by certificates, or a combination of both. To the extent that shares are represented by certificates,
such certificates whenever authorized by the Board shall be in such form as shall be approved by the Board. The certificates representing
shares of stock of each class shall be signed by, or in the name of, the Corporation by any two authorized officers of the Corporation,
and sealed with the seal of the Corporation, which may be a facsimile thereof. Any or all such signatures may be facsimiles if countersigned
by a transfer agent or registrar. Although any officer, transfer agent or registrar whose manual or facsimile signature is affixed to
such a certificate ceases to be such officer, transfer agent or registrar before such certificate has been issued, it may nevertheless
be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still such at the date of its
issue. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered
owner thereof a written notice in accordance with Section 151(f) of the DGCL.
(b) The
stock ledger and blank share certificates, if any, shall be kept by the Secretary or by a transfer agent or by a registrar or by any other
officer or agent designated by the Board.
28
SECTION 7.2 Transfer
of Shares. Transfers of shares of stock of each class of the Corporation shall be made only on the books of the Corporation upon authorization
by the registered holder thereof, or by such holder’s attorney thereunto authorized by a power of attorney duly executed and filed
with the Secretary or a transfer agent for such stock, if any, and if such shares are represented by a certificate, upon surrender of
the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power (or by proper
evidence of succession, assignment or authority to transfer) and the payment of any taxes thereon; provided, however, that
the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer. The person in whose name shares are registered
on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation; provided, however,
that whenever any transfer of shares shall be made for collateral security and not absolutely, and written notice thereof shall be given
to the Secretary or to such transfer agent, such fact shall be stated in the entry of the transfer. No transfer of shares shall be valid
as against the Corporation, its stockholders and creditors for any purpose, except to render the transferee liable for the debts of the
Corporation to the extent provided by law, until it shall have been entered in the stock records of the Corporation by an entry showing
from and to whom transferred.
SECTION 7.3 Registered
Stockholders and Addresses of Stockholders.
(a) The
Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to
receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments a person registered on its records
as the owner of shares of stock, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares
of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by
the laws of the State of Delaware.
(b) Each
stockholder shall designate to the Secretary or transfer agent of the Corporation an address at which notices of meetings and all other
corporate notices may be given to such person, and, if any stockholder shall fail to designate such address, corporate notices may be
given to such person by mail directed to such person at such person’s post office address, if any, as the same appears on the stock
record books of the Corporation or at such person’s last known post office address.
SECTION 7.4 Lost, Destroyed
and Mutilated Certificates. The holder of any certificate representing any shares of stock of the Corporation shall immediately notify
the Corporation of any loss, theft, destruction or mutilation of such certificate; the Corporation may issue to such holder a new certificate
or certificates for shares, upon the surrender of the mutilated certificate or, in the case of loss, theft or destruction of the certificate,
upon satisfactory proof of such loss, theft or destruction; the Board, or a committee designated thereby, or the transfer agents and registrars
for the stock, may, in their discretion, require the owner of the lost, stolen or destroyed certificate, or such person’s legal
representative, to give the Corporation a bond in such sum and with such surety or sureties as they may direct to indemnify the Corporation
and said transfer agents and registrars against any claim that may be made on account of the alleged loss, theft or destruction of any
such certificate or the issuance of such new certificate.
29
SECTION 7.5 Regulations.
The Board may make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificated
or uncertificated shares of stock of each class and series of the Corporation and may make such rules and take such action as it may deem
expedient concerning the issue of certificates in lieu of certificates claimed to have been lost, destroyed, stolen or mutilated.
SECTION 7.6 Fixing Date
for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or
to vote at any meeting of the stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose
of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 days nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action. A determination of stockholders entitled to notice of or to
vote at a meeting of the stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
SECTION 7.7 Transfer
Agents and Registrars. The Board may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one
or more registrars.
Article VIII
Seal
The Board shall approve a
suitable corporate seal. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
Article IX
Fiscal Year
The fiscal year of the Corporation
shall be as fixed by the Board from time to time. If the Board makes no determination to the contrary, the fiscal year of the Corporation
shall end on the 31st day of December in each year.
Article X
Waiver of Notice
Whenever any notice whatsoever
is required to be given by these By-laws, by the Certificate or by law, the person entitled thereto may, either before or after the meeting
or other matter in respect of which such notice is to be given, waive such notice in writing or as otherwise permitted by law, which shall
be filed with or entered upon the records of the meeting or the records kept with respect to such other matter, as the case may be, and
in such event such notice need not be given to such person and such waiver shall be deemed equivalent to such notice.
30
Article XI
Amendments
These By-laws may be altered,
amended or repealed, in whole or in part, or new By-laws may be adopted by the stockholders or by the Board at any meeting thereof; provided,
however, that notice of such alteration, amendment, repeal or adoption of new By-laws is contained in the notice of such meeting
of the stockholders or in the notice of such meeting of the Board and, in the latter case, such notice is given not less than 24 hours
prior to the meeting. Unless a higher percentage is required by the Certificate, all such amendments must be approved by either the holders
of a majority of the combined voting power of the outstanding shares of all classes and series of capital stock of the Corporation entitled
generally to vote in the election of directors of the Corporation, voting as a single class, or by a majority of the directors present
at any meeting of the Board.
Article XII
Miscellaneous
SECTION 12.1 Execution
of Documents. The Board or any committee thereof shall designate the officers, employees and agents of the Corporation who
shall have power to execute and deliver deeds, contracts, mortgages, bonds, debentures, indentures, notes, checks, drafts and other orders
for the payment of money and other documents for and in the name of the Corporation and may authorize (including, without limitation,
authority to redelegate) by written instrument to other officers, employees or agents of the Corporation. Such delegation may be by resolution
or otherwise and the authority granted shall be general or confined to specific matters, all as the Board or any such committee may determine.
In the absence of such designation referred to in the first sentence of this Section, the officers of the Corporation shall have such
power so referred to, to the extent incident to the normal performance of their duties.
SECTION 12.2 Deposits.
All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise
as the Board or any committee thereof or any officer of the Corporation to whom power in respect of financial operations shall have been
delegated by the Board or any such committee or in these By-laws shall select.
SECTION 12.3 Checks.
All checks, drafts and other orders for the payment of money out of the funds of the Corporation, and all notes or other evidences of
indebtedness of the Corporation, shall be signed on behalf of the Corporation in such manner as shall from time to time be determined
by resolution of the Board or of any committee thereof or by any officer of the Corporation to whom power in respect of financial operations
shall have been delegated by the Board or any such committee thereof or as set forth in these By-laws.
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SECTION 12.4 Proxies
in Respect of Stock or Other Securities of Other Corporations. The Board or any committee thereof shall designate the officers of
the Corporation who shall have authority from time to time to appoint an agent or agents of the Corporation to exercise in the name and
on behalf of the Corporation the powers and rights which the Corporation may have as the holder of stock or other securities in any other
corporation or other entity, and to vote or consent in respect of such stock or securities; such designated officers may instruct the
person or persons so appointed as to the manner of exercising such powers and rights; and such designated officers may execute or cause
to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, such written proxies, powers of
attorney or other instruments as they may deem necessary or proper in order that the Corporation may exercise its said powers and rights.
SECTION 12.5 Subject
to Law and Certificate of Incorporation. All powers, duties and responsibilities provided for in these By-laws, whether or not explicitly
so qualified, are qualified by the provisions of the Certificate and applicable laws.
SECTION 12.6 Severability.
If any provision or provisions of these By-laws shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining provisions of these By-laws (including, without limitation, all portions of any
paragraph of these By-laws containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions
of these By-laws (including, without limitation, all portions of any paragraph of these By-laws containing any such provision held to
be invalid, illegal or unenforceable, that are not themselves invalid, illegal or enforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or unenforceable.
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EX-3.3 — CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK OF ADI GLOBAL DISTRIBUTION INC
EX-3.3
Filename: ea030019001ex3-3.htm · Sequence: 5
Exhibit 3.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RIGHTS OF
SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK
OF ADI GLOBAL DISTRIBUTION INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned, pursuant
to the provisions of Section 151 of the General Corporation Law of the State of Delaware (the “DGCL”), does hereby
certify that, pursuant to the authority expressly vested in the Board of Directors of ADI Global Distribution Inc., a Delaware corporation
(the “Corporation”), by the Certificate of Incorporation, the Board of Directors has by resolution duly provided for
the issuance of and created a series of preferred stock of the Corporation, par value $0.001 per share, and in order to fix the designation
and amount and the voting powers, preferences and relative, participating, optional and other special rights, and the qualifications,
limitations and restrictions, of such series of preferred stock, has duly adopted resolutions setting forth such rights, powers and preferences,
and the qualifications, limitations and restrictions thereof, of such series of preferred stock as set forth in this Certificate of Designations,
Preferences and Rights of Series A Cumulative Convertible Participating Preferred Stock (this “Certificate”).
Section 1. Number of
Shares and Designation. 150,000 shares of preferred stock of the Corporation shall constitute a series of preferred stock designated
as Series A Cumulative Convertible Participating Preferred Stock (the “Preferred Stock”). Subject to and in accordance
with the provisions of Section 11(b), the number of shares of Preferred Stock may be increased (to the extent of the Corporation’s
authorized and unissued preferred stock) by further resolution duly adopted by the Board of Directors and the filing of a certificate
of increase with the Secretary of State of the State of Delaware.
Section 2. Rank.
Each share of Preferred Stock shall rank equally in all respects and shall be subject to the provisions herein. The Preferred Stock
shall, with respect to payment of dividends, redemption payments, rights (including as to the distribution of assets) upon
liquidation, dissolution or winding up of the affairs of the Corporation, or otherwise (i) rank senior and prior to the
Corporation’s common stock, par value $0.001 per share (the “Common Stock”), and each other class or series
of equity securities of the Corporation, whether currently issued or issued in the future, that by its terms does not expressly rank
senior to, or on parity with, the Preferred Stock as to payment of dividends, redemption payments, rights (including as to the
distribution of assets) upon liquidation, dissolution or winding up of the affairs of the Corporation, or otherwise (all of such
equity securities, including the Common Stock, are collectively referred to herein as “Junior Securities”),
(ii) rank junior to each class or series of equity securities of the Corporation, whether currently issued or issued in the
future without violation of this Certificate, that by its terms expressly ranks senior to the Preferred Stock as to payment of
dividends, redemption payments, rights (including as to the distribution of assets) upon liquidation, dissolution or winding up of
the affairs of the Corporation, or otherwise (all of such equity securities are collectively referred to herein as “Senior
Securities”), and (iii) rank on parity with each class or series of equity securities of the Corporation, whether
currently issued or issued in the future without violation of this Certificate, that expressly provides that it ranks on parity with
the Preferred Stock as to payment of dividends, redemption payments or rights (including as to the distribution of assets) upon
liquidation, dissolution or winding up of the affairs of the Corporation (all of such equity securities are collectively referred to
herein as “Parity Securities”). The respective definitions of Junior Securities, Senior Securities and Parity
Securities shall also include any securities, rights or options exercisable or exchangeable for or convertible into any of the
Junior Securities, Senior Securities or Parity Securities, as the case may be.
Section 3. Definitions.
(a) As
used herein, the following terms shall have the meanings set forth below or in the section cross-referenced below, as applicable, whether
used in the singular or the plural:
“Acceptable Exchanges”
means The NASDAQ Global Select Market and NYSE (or either of their respective successors).
“Accrued Dividends”
means, as of any date, with respect to any share of Preferred Stock, all dividends that have accrued pursuant to Section 4(a)(ii),
whether or not declared, but that have not, as of such date, been paid as Cash Dividends. “Accrued Dividends” shall include
Interim Accrued Dividends and Compounded Dividends on such share. For the avoidance of doubt, for all purposes of this Certificate, any
Preferred Dividends that accrue in a Payment Period shall be Interim Accrued Dividends prior to the Preferred Dividend Payment Date and,
to the extent not paid as Cash Dividends on a Preferred Dividend Payment Date, shall as of such Preferred Dividend Payment Date be Compounded
Dividends and added to the Accumulated Amount.
“Accumulated Amount”
means, with respect to any share of Preferred Stock, as of any date of determination, the sum of (a) the Liquidation Preference plus (b)
the Compounded Dividends with respect to such share of Preferred Stock as of such date.
“Affiliate” has the meaning given
to such term in the Shareholders Agreement.
“As-Converted Common
Stock” means at the time of determination (i) the issued and outstanding Common Stock, (ii) shares of Common Stock issuable
upon conversion of all issued and outstanding shares of Preferred Stock (including shares of Preferred Stock issued as dividends thereon
pursuant to this Certificate), and (iii) shares of Common Stock issuable upon the conversion, exchange or settlement of any other issued
and outstanding securities or rights of or issued by the Corporation but only to the extent at the time of determination the holder thereof
has the right to so convert, exchange or settle such securities or rights.
“Beneficially Own”
and “Beneficial Ownership” has the meaning given such term in Rule 13d-3 under the Exchange Act, and a Person’s
beneficial ownership of Capital Stock of any Person shall be calculated in accordance with the provisions of such rule, but without taking
into account any contractual restrictions or limitations on voting or other rights; provided, however, that for purposes
of determining beneficial ownership, a Person shall be deemed to be the beneficial owner of any security which may be acquired by such
Person, whether within sixty (60) days or thereafter, upon the conversion, exchange or exercise of any warrants, options, rights or other
securities.
2
“Board of Directors”
means the board of directors of the Corporation or (other than for purposes of Section 12 of this Certificate) any committee thereof
duly authorized to act on behalf of such board of directors for the purposes in question.
“Business Day”
means any day that is not a Saturday, a Sunday or any other day on which commercial banks are generally required or authorized by Law
to be closed in New York City, New York.
“By-laws”
means the Amended and Restated By-Laws of the Corporation, as amended from time to time.
“Capital Stock”
of any Person means any and all shares, interests (including partnership interests), rights to purchase, warrants, options, participations
or other equivalents of or interests in (however designated) equity of such Person, including any preferred stock, but excluding any debt
securities convertible into such equity.
“Cash Dividend” has the meaning
set forth in Section 4(a)(ii).
“CD&R”
shall mean Clayton, Dubilier & Rice, LLC or a successor thereto.
“CD&R Affiliate”
shall mean any of CD&R, any private equity fund managed or advised by CD&R or any general partner thereof, or any of their respective
Affiliates.
“CD&R Designee”
has the meaning set forth in Section 12(a).
“CD&R Group”
shall mean the CD&R Shareholder together with its Affiliates, including CD&R Affiliates.
“CD&R Person”
has the meaning given to such term in the Shareholders Agreement.
“CD&R Shareholder” has the
meaning given to such term in the Shareholders Agreement.
“CD&R Shareholder
Parties” has the meaning given to such term in the Shareholders Agreement.
“Certificate” has the meaning
set forth in the preamble.
“Certificate of Incorporation”
means the Amended and Restated Certificate of Incorporation of the Corporation, as amended from time to time.
3
“Change of Control”
means, following the Distribution Date the occurrence, directly or indirectly, of any of the following:
(i) any purchase, merger,
acquisition or other transaction or series of related transactions immediately following which any Person or Group (excluding the Investor
or its Affiliates or any Group including the Investor or its Affiliates) shall Beneficially Own, directly or indirectly, Voting Stock
entitling such Person or Group to exercise more than 50% of the total voting power of all classes of Voting Stock of the Corporation,
other than as a result of any such transaction in which (x) the holders of securities that represented 100% of the Voting Stock of the
Corporation immediately prior to such transaction are substantially the same as the holders of securities that represent a majority of
the total voting power of all classes of Voting Stock of the surviving Person or any parent entity thereof immediately after such transaction
and (y) the holders of securities that represented 100% of the Voting Stock of the Corporation immediately prior to such transaction own
directly or indirectly Voting Stock of the surviving Person or any parent entity thereof in substantially the same proportion to each
other as immediately prior to such transaction;
(ii) any transaction or series
of related transactions immediately following which the Persons who Beneficially Own 100% of the Voting Stock of the Corporation immediately
prior to such transaction or transactions cease to Beneficially Own more than 50% of the Voting Stock of the Corporation, any successor
thereto or any parent entity thereof immediately following such transaction or transactions; or
(iii) (x) the Corporation
merges or consolidates with or into any other Person, another Person merges with or into the Corporation, or the Corporation conveys,
sells, transfers or leases (including through a division) all or substantially all of the Corporation’s assets to another Person
or (y) the Corporation engages in any recapitalization, reclassification or other transaction in which all or substantially all
of the Common Stock is exchanged for or converted into cash, securities or other property, in each case other than any such transaction:
(A) which is effected solely
to change the Corporation’s jurisdiction of incorporation and results in a reclassification, conversion or exchange of outstanding
shares of Common Stock solely into shares of common stock of the surviving entity;
(B) a
sale, lease or transfer to a Subsidiary or a Person that becomes a Subsidiary of the Corporation; or
(C) where the Voting Stock outstanding
immediately prior to such transaction is converted into or exchanged for Voting Stock of the surviving or transferee Person constituting
a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such
merger or consolidation).
“Change of Control Effective Date”
has the meaning set forth in Section 10(b).
“Change of Control Redemption”
has the meaning set forth in Section 10(b).
“COC Redemption Date” has the
meaning set forth in Section 10(b).
“COC Redemption Notice” has the
meaning set forth in Section 10(b).
“COC Redemption Price” has the
meaning set forth in Section 10(b).
4
“Code” means the U.S. Internal
Revenue Code of 1986, as amended.
“Common Stock” has the meaning
set forth in Section 2.
“Common Stock Dividend
Record Date” has the meaning set forth in Section 4(a)(iv).
“Common
Stock Liquidity Conditions” will be satisfied if and only if:
(a) the offer and sale of all shares of Common Stock by such Holder are registered pursuant to an effective
registration statement under the Securities Act and such registration statement is reasonably expected by the Corporation to remain effective
and usable, by such Holder to sell all such shares of Common Stock, continuously during the period from, and including, the Conversion
Option Date or Redemption Date, as applicable, to, and including, the two (2) year anniversary after the date each such share of
Common Stock is issued;
(b) each share of Common Stock referred to in clause (a) above (i) will, when issued and
when sold or otherwise transferred pursuant to the registration statement referred to in such clause (a) (1) be admitted for
book-entry settlement through The Depository Trust Company with an “unrestricted” CUSIP number; and (2) unless sold to
the Corporation or an Affiliate of the Corporation, not be evidenced by any certificate that bears a legend referring to transfer restrictions
under the Securities Act or other securities laws, and (ii) will, when issued, be listed and admitted for trading, without suspension
or material limitation on trading, on an Acceptable Exchange;
(c) the Corporation has not received any written threat or notice of delisting or suspension by the applicable
exchange referred to in clause (b)(ii) for which the applicable or threatened delisting or suspension has not been cured, remediated or
otherwise removed; and
(d) the number of shares of Common Stock issuable upon conversion of all shares of Preferred Stock pursuant
to such Conversion Option, or at the time of such Redemption Notice, would not exceed the number of authorized, but unissued, shares of
Common Stock then available to be issued by the Corporation.
“Common Stock Trading
Price” means, as of any Trading Day, the closing price of a share of Common Stock on such Trading Day (as reported on Bloomberg,
based on composite transactions for the Acceptable Exchange on which the Common Stock is then listed).
“Compounded Dividends”
means, with respect to any share of Preferred Stock, as of any date of determination, (a) if a Preferred Dividend Payment Date has occurred
since the Issuance Date, the aggregate Accrued Dividends with respect to such share as of the Preferred Dividend Payment Date immediately
preceding such date of determination (determined, for the avoidance of doubt, after giving effect to the payment of Cash Dividends, if
any, on such immediately preceding Preferred Dividend Payment Date) or (b) if no Preferred Dividend Payment Date has occurred since the
Issuance Date of such share, zero.
5
“control”
(including the terms “controlling”, “controlled by” and “under common control with”),
with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct
or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor,
by contract or otherwise.
“Conversion Date” has the meaning
set forth in Section 6(b)(iii).
“Conversion Notice” has the meaning
set forth in Section 6(b)(ii).
“Conversion Option” has the meaning
set forth in Section 6(a)(i)(A).
“Conversion Option Date” has the
meaning set forth in Section 6(a)(i)(A).
“Conversion Option
Measurement Period” has the meaning set forth in Section 6(a)(i)(A).
“Conversion Price”
means, as of any date, the Initial Conversion Price, as adjusted pursuant to Section 9.
“Conversion Right” has the meaning
set forth in Section 6(a)(i)(B).
“Convertible Securities”
means indebtedness or shares of Capital Stock convertible into or exchangeable for Common Stock.
“Corporation” has the meaning
set forth in the preamble.
“Covered Persons” has the meaning
set forth in Section 12(d).
“Debt Financing Documents”
means (i) the Indenture dated June 30, 2026, among ADI Global Distribution Funding LLC (as successor in interest to ADI Escrow Issuer
LLC), the guarantors from time to time party thereto and U.S. Bank Trust Company, National Association, as trustee and (ii) the Credit
Agreement dated July 1, 2026, among the Corporation, ADI Global Distribution Funding LLC, the lenders and issuing banks party thereto
and JPMorgan Chase Bank, N.A., as administrative agent..
“DGCL” has the meaning set forth
in the preamble.
“Distribution Date” has the meaning
set forth in the Separation Agreement.
“Dividend Rate”
means 7.00% per annum; provided that, upon the occurrence and during the continuation of a Triggering Event, the Dividend Rate
shall be increased to 10.00% per annum (the “Noncompliance Additional Rate”) in accordance with Section 4(b).
“Ex-Date”
means, with respect to an issuance, dividend or distribution on shares of Common Stock, the first date on which shares of Common Stock
trade on the applicable exchange or in the applicable market, regular way, without the right to receive such issuance, dividend or distribution
(including pursuant to due bills or similar arrangements required by the relevant stock exchange).
6
“Exchange Act” means the Securities
Exchange Act of 1934, as amended from time to time.
“Exchange Agreement”
has the meaning given to such term in the Shareholders Agreement.
“Exchange Property” has the meaning
set forth in Section 7(a).
“Exempted Securities”
has the meaning given to such term in the Shareholders Agreement.
“Group” means
any “group” as such term is used in Section 13(d)(3) of the Exchange Act.
“Holder”
means, at any time, any Person in whose name shares of Preferred Stock are registered, which may be treated by the Corporation as the
absolute owner of such shares of Preferred Stock for the purpose of making payment and settling the related conversions and for all other
purposes.
“Implied Quarterly
Dividend Amount” means, with respect to any share of Preferred Stock, as of any date, the product of (a) the Accumulated Amount
of such share on the first day of the applicable Payment Period (or in the case of the first Payment Period for such share, as of the
Issuance Date of such share) multiplied by (b) one-fourth of the Dividend Rate applicable on such date; provided that if the Dividend
Rate adjusts in accordance with the definition thereof, clause (b) of this definition shall be appropriately adjusted to reflect such
adjusted Dividend Rate.
“Initial Conversion Price” means
$16.152 per share of Common Stock.
“Interim Accrued Dividends”
means with respect to any share of Preferred Stock outstanding during a Payment Period with respect to which the Preferred Dividend Payment
Date has not yet occurred, the aggregate Preferred Dividends that have accrued on such share of Preferred Stock as of the date of determination.
“Investor”
means, collectively, one or more CD&R Affiliates (as defined in the Shareholders Agreement) who acquire shares of Preferred Stock
pursuant to the Exchange Agreement.
“Issuance Date”
means, with respect to a share of Preferred Stock, the date of issuance of such share of Preferred Stock, it being understood that with
respect to the shares of Preferred Stock received by the Holders pursuant to the terms of the Exchange Agreement, the date of issuance
in respect of such shares of Preferred Stock shall be deemed the Distribution Date.
“Junior Securities” has the meaning
set forth in Section 2.
7
“Law” has the meaning set forth
in the Shareholders Agreement.
“Liquidation”
means the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, including any reorganization or liquidation
of the Corporation pursuant to applicable federal, state or local bankruptcy or insolvency law.
“Liquidation Preference”
means, with respect to each share of Preferred Stock, $1,000.00 per share, as appropriately adjusted for any stock split, stock division
or stock combination affecting the Preferred Stock.
“Majority Vote”
means the vote or written consent of holders of outstanding shares of Preferred Stock, voting as a separate class on an as-converted basis,
representing a majority of the aggregate Accumulated Amount on all outstanding shares of Preferred Stock.
“Market Price”
means, with respect to any particular security on any particular date, (i) if such security is listed or quoted on a principal
U.S. national or regional securities exchange or traded on an over-the-counter market, the volume weighted average price per share (as
reported on Bloomberg based, in the case of a listed security, on composite transactions for the principal U.S. national or regional securities
exchange on which such security is listed or quoted) of such security for the period of ten (10) consecutive Trading Days preceding the
date of determination (or for any other period specified for this purpose in the applicable provision of this Certificate), or (ii)
if such security is not listed or quoted on a principal U.S. national or regional securities exchange or traded on an over-the-counter
market, the fair market value of such security on the date of determination, as determined by a nationally recognized independent investment
banking firm that has for this purpose (x) been selected by the Board of Directors and (y) been consented to by Majority
Vote.
“NYSE” means the New York Stock
Exchange (or its successor).
“Options”
means rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
“Original Issuance
Date” means the date of closing of the transactions contemplated by the Exchange Agreement, it being understood that such date
is the Distribution Date.
“Parity Securities” has the meaning
set forth in Section 2.
“Participating Dividends” has
the meaning set forth in Section 4(a)(i).
“Payment Period”
means, with respect to a share of Preferred Stock, the period beginning on the day after the preceding Preferred Dividend Payment Date
(or if no Preferred Dividend Payment Date has occurred since the Issuance Date of such share of Preferred Stock, the day that would have
been the day after the preceding Preferred Dividend Payment Date had the Issuance Date with respect to such share of Preferred Stock occurred
prior to such date) to and including the next Preferred Dividend Payment Date.
“Person”
means an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).
8
“Preferred Dividend
Payment Date” means, with respect to any share of Preferred Stock, January 15, April 15, July 15 and October 15 of each year
(each, a “Quarterly Date”), commencing on the first Quarterly Date immediately following the Issuance Date; provided,
that if any such Quarterly Date is not a Business Day then the “Preferred Dividend Payment Date” shall be the next Business
Day immediately following such Quarterly Date.
“Preferred Dividends” has the
meaning set forth in Section 4(a)(ii).
“Preferred Stock” has the meaning
set forth in Section 1.
“Pro Rata Repurchase”
means any purchase of shares of Common Stock by the Corporation or any Affiliate thereof (other than, if applicable, the Investor or any
of its Affiliates) pursuant to any tender offer or exchange offer subject to Section 13(e) of the Exchange Act, or pursuant to any other
offer available to substantially all holders of Common Stock, whether for cash, shares of capital stock of the Corporation, other securities
of the Corporation, evidences of indebtedness of the Corporation or any other Person or any other property (including shares of capital
stock, other securities or evidences of indebtedness of a Subsidiary of the Corporation), or any combination thereof, effected while any
shares of Preferred Stock are outstanding; provided, however, that “Pro Rata Repurchase” shall not include any
purchase of shares by the Corporation or any Affiliate thereof made in accordance with the requirements of Rule 10b-18 as in effect under
the Exchange Act. The “Effective Date” of a Pro Rata Repurchase means the date of acceptance of shares for purchase
or exchange under any tender or exchange offer which is a Pro Rata Repurchase or the date of purchase with respect to any Pro Rata Repurchase
that is not a tender or exchange offer.
“Purchased Shares” has the meaning
set forth in Section 9(a)(iv).
“Redemption Date” has the meaning
set forth in Section 10(b).
“Redemption Notice” has the meaning
set forth in Section 10(b).
“Redemption Price” has the meaning
set forth in Section 10(b).
“Register”
means the securities register maintained in respect of the Preferred Stock by the Corporation, or to the extent the Corporation has engaged
a transfer agent, such transfer agent.
“Reorganization Event” means any
of the following transactions, but in all cases shall not include a spin-off transaction:
(i) any reorganization, consolidation,
merger, share exchange, statutory exchange, tender or exchange offer or other similar business combination involving the Corporation and
another Person, in each case, pursuant to which the Common Stock will be converted into, or exchanged for, cash, securities or other property
of the Corporation or another Person;
(ii) any reclassification,
recapitalization or reorganization of the Common Stock into securities other than the Common Stock; or
9
(iii) any direct or indirect
sale, assignment, conveyance, transfer, lease or other disposition (including in connection with any Liquidation and including by division)
by the Corporation of all or substantially all of its assets or business, in each case under this clause (iii), pursuant to which
the Common Stock will be converted into cash, securities or other property.
“Securities Act” means the Securities
Act of 1933, as amended.
“Senior Securities” has the meaning
set forth in Section 2.
“Separation Agreement”
has the meaning given to such term in the Shareholders Agreement; provided that solely for purposes hereof, any amendment, modification,
supplement or waiver of the Separation Agreement shall be disregarded unless consented to in writing by the CD&R Shareholder.
“Shareholders Agreement”
means that certain Shareholders Agreement, dated as of August 3, 2026, by and among the Corporation, the CD&R Shareholder, Clayton,
Dubilier & Rice Fund XII, L.P. (solely for purposes of Section 3.6 thereof), CD&R Channel Holdings II, L.P. and the other
party named therein, as the same may be amended from time to time in accordance with its terms.
“Stockholder
Voting Power” means the aggregate number of shares of Voting Stock of the Corporation (on an as-converted to Common Stock
basis), with the calculation of such aggregate number of shares of Voting Stock being conclusively
made for all purposes under this Certificate and the Certificate of Incorporation, absent manifest error, by the Corporation based on
the Corporation’s review of the Register, the Corporation’s other books and records, each Holder’s public filings pursuant
to Section 13 or Section 16 of the Exchange Act and any other written evidence reasonably satisfactory to the Corporation regarding
any Holder’s beneficial ownership of any securities of the Corporation.
“Subsidiary”
or “Subsidiaries” means, with respect to any Person, any other Person of which (i) if a corporation, a majority
of the total voting power of shares of capital stock entitled (without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association
or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more other Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons owns a majority ownership interest in such a business entity (other than a corporation) if such
Person or Persons shall be allocated a majority of such business entity’s gains or losses or shall be or control any managing director
or general partner of such business entity (other than a corporation). For the purposes hereof, the term “Subsidiary” shall
include all Subsidiaries of such Subsidiary.
“Trading Day”
means a day on which the Acceptable Exchange on which the Common Stock is then listed is open for the transaction of business.
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“Transfer Restrictions”
means, when and as applicable to such Transfer, the restrictions on Transfer (as defined in the Shareholders Agreement) set forth in Section
3.3 of the Shareholders Agreement.
“Triggering Event”
means: (i) the Corporation’s failure to pay any Participating Dividends when required pursuant to, and in accordance with,
Section 4(a)(i) or to pay (or accrue and compound, as applicable) Preferred Dividends on each Preferred Dividend Payment Date pursuant
to, and in accordance with, Section 4(a)(ii) and Section 4(a)(iii); (ii) the Corporation’s failure to comply
with its obligations to effect the conversion of shares of Preferred Stock (including to reserve and keep available for issuance the requisite
number of shares of Common Stock and Preferred Stock) in compliance with Section 6, (iii) the Corporation’s violation
of any restrictions set forth in this Certificate relating to payment of dividends or distributions to the holders of Common Stock or
other Capital Stock, (iv) the Corporation taking any action described in Section 11(b) without the prior Majority Vote,
or (v) the Corporation’s failure to maintain the listing of the Common Stock on an Acceptable Exchange (or, in the case of
any Exchange Property in connection with any Reorganization Event (other than a Reorganization Event that (a) constitutes a Change of
Control and (b) results in the equity securities of the Corporation (or any successor thereto) being exchanged or, in the case of the
Preferred Stock, redeemed for cash), such applicable Exchange Property).
“Voting
Stock” means (a) with respect to the Corporation, the Common Stock, the Preferred Stock and any other Capital Stock of
the Corporation having the right to vote generally in any election of directors of the Board of Directors and (b) with respect to
any other Person, all Capital Stock of such Person having the right to vote generally in any election of directors of the board of directors
of such Person or other similar governing body.
(b) In addition
to the above definitions, unless the context requires otherwise:
(i) any
reference to any statute, regulation, rule or form as of any time shall mean such statute, regulation, rule or form as amended or modified
and shall also include any successor statute, regulation, rule or form from time to time;
(ii) the
word “including” shall be deemed to be followed by the words “without limitation”;
(iii) references
to “$” or “dollars” means the lawful coin or currency the United States of America;
(iv) the
phrase “to the extent” means the degree to which something extends (and not “if”); and
(v) references
to “Section” are references to Sections of this Certificate.
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Section 4. Dividends.
(a) Holders
of the issued and outstanding shares of Preferred Stock shall be entitled to receive dividends on the terms described below:
(i) Holders
of shares of Preferred Stock shall be entitled to participate equally and ratably with the holders of shares of Common Stock in all dividends
paid on the shares of Common Stock (other than dividends paid in the form of Common Stock, Convertible Securities or Options with respect
to which adjustments to the Conversion Price shall be made in accordance with this Certificate) as if immediately prior to each Common
Stock Dividend Record Date, all shares of Preferred Stock then outstanding were converted into shares of Common Stock. Dividends payable
pursuant to this Section 4(a)(i) (the “Participating Dividends”) shall be payable on the same date that such
dividends are payable to holders of shares of Common Stock, and no dividends shall be payable to holders of shares of Common Stock unless
the full dividends contemplated by this Section 4(a)(i) are paid at the same time to the Holders of the Preferred Stock.
(ii) In
addition to any dividends pursuant to Section 4(a)(i), dividends on each share of Preferred Stock shall accrue and accumulate on
a daily basis, whether or not declared and whether or not the Corporation has funds legally available for the payment of such dividends,
at the Dividend Rate multiplied by the Accumulated Amount on such share from and after the Issuance Date of such share until the redemption,
conversion or other cancellation thereof (the “Preferred Dividends”). At the election of the Corporation with respect
to each Preferred Dividend Payment Date, all Preferred Dividends accrued on a share of Preferred Stock since the immediately preceding
Preferred Dividend Payment Date (as determined in accordance with the remaining provisions of this clause (ii) and clause (iii) below)
shall either (x) if, as and when so authorized and declared by the Board of Directors, be paid in cash to the holder thereof on such Preferred
Dividend Payment Date (any Preferred Dividend or portion of a Preferred Dividend paid in such manner, a “Cash Dividend”),
or (y) to the extent not so paid in cash in accordance with the foregoing clause (x) automatically become Compounded Dividends and added
to the Accumulated Amount for such share as of such Preferred Dividend Payment Date. The amount of Preferred Dividends accruing with respect
to any share of Preferred Stock for any day shall be determined by dividing (x) the Implied Quarterly Dividend Amount as of such day by
(y) the actual number of days in the Payment Period in which such day falls; provided, however, that if during any Payment Period
the Dividend Rate is increased, then after the date of such increase the amount of Preferred Dividends accruing with respect to any share
of Preferred Stock for any day shall be determined by dividing (x) the Implied Quarterly Dividend Amount (recalculated to take into account
such increased Dividend Rate) by (y) the actual number of days in such Payment Period. The amount of Preferred Dividends payable with
respect to any share of Preferred Stock for any Payment Period shall equal the sum of the daily Preferred Dividends amounts calculated
in accordance with the prior sentence of this Section 4(a)(ii) with respect to such share during such Payment Period; provided,
that, (i) to the extent the Issuance Date in respect of a share of Preferred Stock falls within such Payment Period, the Preferred Dividends
payable in respect of such share of Preferred Stock for such Payment Period shall equal the sum of the daily Preferred Dividends calculated
in accordance with the prior sentence of this Section 4(a)(ii) in respect of such share from and after the Issuance Date through the end
of such Payment Period, and (ii) the amount of Preferred Dividends payable with respect to any share
of Preferred Stock for any Payment Period shall be reduced by the amount of Preferred Dividends previously paid on such share of Preferred
Stock in respect of such Payment Period. Preferred Dividend payments shall be aggregated per Holder and shall be made to the nearest
cent (with $.005 being rounded upward).
(iii) Any
election by the Corporation to pay a Cash Dividend with respect to any Payment Period shall be applied consistently to all Preferred Dividends
paid to all Holders with respect to such Payment Period. For the avoidance of doubt, it is understood that no Preferred Dividends may
be declared and paid in securities or otherwise “in kind.”
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(iv) Each
Participating Dividend or Preferred Dividend shall be paid pro rata to the Holders of shares of Preferred Stock entitled thereto based
on the ownership of such Preferred Stock. Each Participating Dividend or Preferred Dividend shall be payable to the Holders of Preferred
Stock as they appear on the Register at the close of business on the record date designated by the Board of Directors for such dividends,
which (i) with respect to Participating Dividends, shall be the same day as the record date for the payment of dividends to the
holders of shares of Common Stock (the “Common Stock Dividend Record Date”), and (ii) with respect to Preferred
Dividends, shall be not more than thirty (30) days nor less than ten (10) days preceding the applicable Preferred Dividend Payment Date.
(b) Upon
the occurrence of a Triggering Event, the Dividend Rate shall increase to the Noncompliance Additional Rate from and including the date
on which the Triggering Event shall occur and be continuing through but excluding the date on which all then occurring Triggering Events
are no longer continuing. The Dividend Rate shall not be increased further pursuant to this Section 4(b) for a subsequent Triggering
Event occurring while the Noncompliance Additional Rate is in effect pursuant to this Section 4(b).
(c) At
any time during which a Triggering Event shall occur and be continuing, without the consent of the Holders by Majority Vote, no dividends
shall be declared or paid or set apart for payment, or other distributions declared or made, upon any Junior Securities, nor shall any
Junior Securities be redeemed, purchased or otherwise acquired for any consideration (nor shall any moneys be paid to or made available
for a sinking fund for the redemption of any shares of any such Junior Securities) by the Corporation, directly or indirectly (except,
subject to and in accordance with the provisions of Section 6 hereof, by conversion into or exchange for Junior Securities or the
payment of cash in lieu of fractional shares in connection therewith) (other than repurchases of shares of Common Stock from applicable
employees, officers or directors of the Corporation, in the ordinary course of business, following such employees’, officers’
and directors’ termination of employment or engagement with the Corporation and its Subsidiaries). Without limiting the foregoing,
without the consent of the Holders by Majority Vote, the Corporation shall not (i) declare, pay or set aside for payment any dividends
or distributions upon any Junior Securities or (ii) repurchase, redeem or otherwise acquire any Junior Securities (other than repurchases
of shares of Common Stock from employees, officers or directors of the Corporation in the ordinary course of business) for any consideration
or pay any moneys or make available for a sinking fund for the redemption of any shares of such Junior Securities, unless, in each case,
the Corporation, in its good faith judgment, reasonably determines that (A) immediately before and after the taking of such action,
the fair value of the Corporation’s assets would exceed the sum of its debts (including, for this purpose, the aggregate Accumulated
Amount and the aggregate Interim Accrued Dividends of the Preferred Stock), (B) immediately after the taking of such action, the
Corporation would be able to pay all of its debts (including, for this purpose, the aggregate Accumulated Amount and the aggregate Interim
Accrued Dividends of the Preferred Stock) as they are reasonably expected to come due and (C) such action is otherwise in compliance
with applicable Law.
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Section 5. Liquidation Rights.
(a) In
the event of any Liquidation, each Holder shall be entitled to receive liquidating distributions out of the assets of the Corporation,
before any payment or distribution of any assets of the Corporation shall be made or set apart for holders of any Junior Securities, including
the Common Stock, for such Holder’s shares of Preferred Stock in an amount equal to the greater of (i) the sum of (A)
the aggregate Accumulated Amount and (B) the aggregate Interim Accrued Dividends of such shares as of the date of the Liquidation
and (ii) the amount such Holder would have received had such shares of Preferred Stock, immediately prior to such Liquidation,
been converted into shares of Common Stock pursuant to Section 6, without regard to any of the limitations on conversion or convertibility
contained therein; provided that, any such distributions or payments shall be made solely to the extent of funds legally available for
distribution to its stockholders.
(b) In
the event the assets of the Corporation available for distribution to stockholders upon a Liquidation shall be insufficient to pay in
full the amounts payable with respect to all outstanding shares of Preferred Stock pursuant to Section 5(a), such assets, or the
proceeds thereof, shall be distributed among the Holders ratably in proportion to the full respective liquidating distributions to which
they would otherwise be respectively entitled upon such Liquidation.
(c) Neither
the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all
of the assets, capital stock or business of the Corporation (other than in connection with the liquidation, dissolution or winding up
of the Corporation) nor the merger, consolidation, share exchange, statutory exchange or any other business combination transaction of
the Corporation into or with any other Person shall by itself be deemed to be a Liquidation for purposes of this Section 5.
Section 6. Conversion.
(a) Conversion
of Preferred Stock.
(i) Subject
to and in accordance with the provisions of this Section 6 (including in the case of clause (A), subject to the proviso
to the first sentence of clause (A)), shares of Preferred Stock may be converted into shares of Common Stock as follows:
(A) If
(a) at any time after the Original Issuance Date, the Common Stock Trading Price exceeds 200% of the then applicable Conversion
Price for at least 20 Trading Days (whether or not consecutive) during any 30 consecutive Trading Day period (such period, the “Conversion
Option Measurement Period”) and (b) the Corporation, at its option, delivers a written notice of conversion to the Holders
of the Preferred Stock within 10 Business Days following the conclusion of the applicable Conversion Option Measurement Period, then each
share of Preferred Stock outstanding shall be converted (the “Conversion Option”), as of the date of such notice (the
“Conversion Option Date”), into such number of fully paid and non-assessable shares of Common Stock (calculated as
to each conversion to the nearest 1/10,000th of a share) equal to the quotient of (A) the sum of (1) the Accumulated Amount
and (2) the Interim Accrued Dividends on such share as of the Conversion Option Date, divided by (B) the Conversion Price
of such share in effect as of the Conversion Option Date; provided that the Corporation shall not be entitled to exercise the Conversion
Option unless (x) as of the Conversion Option Date all of the Common Stock Liquidity Conditions are satisfied and (y) the Lock-Up Period
(as defined in the Shareholders Agreement) has terminated (or deemed to have terminated in respect of a portion of the Preferred Stock
in accordance with the terms set forth in the Shareholders Agreement) or expired in accordance with the terms set forth in the Shareholders
Agreement. The election by the Corporation not to exercise the Conversion Option with respect to any Conversion Option Measurement Period
shall not limit the right of the Corporation to make such an election with respect to any subsequent Conversion Option Measurement Period.
14
(B) Each
Holder of shares of Preferred Stock shall have the right (the “Conversion Right”), at any time and from time to time,
at such Holder’s option, to convert all or any portion of such Holder’s shares of Preferred Stock into fully paid and non-assessable
shares of Common Stock. Upon a Holder’s election to exercise its Conversion Right, each share of Preferred Stock for which the Conversion
Right is exercised shall be converted into such number of shares of Common Stock (calculated as to each conversion to the nearest 1/10,000th
of a share) equal to the quotient of (A) the sum of (1) the Accumulated Amount and (2) the Interim Accrued Dividends
on such share as of the Conversion Date, divided by (B) the Conversion Price of such share in effect at the time of conversion.
(ii) No
fractional shares of Common Stock shall be issued upon the conversion of any shares of Preferred Stock. If more than one share of Preferred
Stock subject to conversion is held by the same Holder, the number of full shares of Common Stock issuable upon conversion thereof shall
be computed on the basis of the sum of (A) the aggregate Accumulated Amount and (B) the aggregate Interim Accrued Dividends
as of the Conversion Date on all shares of Preferred Stock so subject. If the conversion of any share or shares of Preferred Stock results
in a fractional share of Common Stock issuable after application of the immediately preceding sentence, the Corporation shall pay a cash
amount in lieu of issuing such fractional share in an amount equal to the amount of such fractional interest multiplied by the Market
Price of a share of Common Stock on the Trading Day immediately prior to the Conversion Date.
(iii) The
Corporation will at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting
conversions of the Preferred Stock into shares of Common Stock, a number of shares of Common Stock equal to 110% of the number of shares
of Common Stock issuable upon conversion of all then outstanding shares of Preferred Stock. The Corporation shall take all action permitted
by Law, including calling meetings of stockholders of the Corporation and soliciting proxies for any necessary vote of the stockholders
of the Corporation, to amend the Certificate of Incorporation to increase the number of authorized and unissued shares of Common Stock,
if at any time there shall be insufficient authorized and unissued shares of Common Stock to permit such reservation. The Corporation
covenants that the Preferred Stock and all Common Stock that may be issued upon conversion of Preferred Stock shall upon issuance be duly
authorized, fully paid and non-assessable and will not be subject to preemptive rights or subscription rights of any other stockholder
of the Corporation. The Corporation further covenants that the Corporation shall, at its sole expense, cause to be authorized for listing
or quotation on an Acceptable Exchange, all Common Stock issuable upon conversion of the Preferred Stock, subject to official notice of
issuance. The Corporation will use its reasonable best efforts to ensure that such Common Stock may be issued without violation of any
applicable Law.
15
(b) Mechanics
of Conversion.
(i) If
the Corporation exercises the Conversion Option and delivers notice thereof in accordance with Section 6(a)(i)(A), the Corporation
shall promptly following the Conversion Option Date update or cause to be updated the Register, effective as of the Conversion Option
Date, to reflect the shares of Common Stock held by such Holders as a result of the Conversion Option and shall comply with clause (b)
of Common Stock Liquidity Conditions.
(ii) The
Conversion Right of a Holder of Preferred Stock pursuant to Section 6(a)(i)(B) shall be exercised by such Holder by delivering
written notice to the Corporation that such Holder elects to convert all or a portion of the shares of Preferred Stock held by such Holder
(a “Conversion Notice”) and specifying the name or names (with address or addresses) in which shares of Common Stock
are to be issued and (if so required by the Corporation or the Corporation’s transfer agent) by a written instrument or instruments
of transfer in form reasonably satisfactory to the Corporation or the transfer agent, as applicable, duly executed by such Holder or its
legal representative. As promptly as practicable after the receipt of the Conversion Notice, and the payment of required taxes or duties
pursuant to Section 14(a), if applicable, and in no event later than three Trading Days thereafter, the Corporation shall update
or cause to be updated the Register to reflect the shares of Common Stock held by such Holder as a result of such conversion and shall
issue and shall deliver or cause to be issued and delivered to such Holder, or to such other Person on such Holder’s written order
(A) evidence of such issuance reasonably satisfactory to such Holder, and (B) cash for any fractional interest in respect
of a share of Common Stock arising upon such conversion settled as provided in Section 6(a)(ii).
(iii) The
conversion of any share of Preferred Stock shall be deemed to have been made (i) in connection with any Conversion Option, at the close
of business on the Conversion Option Date, and (ii) in connection with any exercise of the Conversion Right, at the close of business
on the date of giving the Conversion Notice or, if later, the payment of required taxes or duties pursuant to Section 14(a), if
applicable (the “Conversion Date”). Until the Conversion Date with respect to any share of Preferred Stock has occurred,
such share of Preferred Stock will remain outstanding and will be entitled to all of the powers, designations, preferences and other rights
provided herein, including that such share shall (A) accrue and accumulate Preferred Dividends and participate in Participating
Dividends pursuant to Section 4 and (B) entitle the applicable Holder thereof to the voting rights provided in Section
11; provided, however, that any such shares that are redeemed pursuant to Section 10 shall not be entitled to
be converted.
(c) Corporation’s
Obligations to Issue Common Stock. Subject to Section 6(a)(i)(A) and the compliance with the terms and conditions of this Certificate
applicable to the conversion of Preferred Stock, the Corporation’s obligations to issue and deliver shares of Common Stock upon
conversion of shares of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by any Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by any Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of Law
by any Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation
to any Holder in connection with the issuance of such shares of Common Stock.
16
Section 7. Reorganization Events.
(a) Treatment
of Preferred Stock Upon a Reorganization Event. Subject to applicable Law and Section 7(f), upon the occurrence of any Reorganization
Event, (i) if the Corporation is the surviving company in such Reorganization Event, each share of Preferred Stock outstanding
immediately prior to such Reorganization Event shall remain outstanding following such Reorganization Event (or be exchanged for an equivalent
share of another class or series of preferred stock having rights, powers and preferences, and the qualifications, limitations and restrictions
substantially identical to those set forth herein); provided, that (x) each share of Preferred Stock or any such replacement
preferred stock as applicable shall become convertible into the kind and amount of securities, cash and other property that the applicable
Holder of such share of Preferred Stock (other than the counterparty to the Reorganization Event or an Affiliate of such other party)
would have received in such Reorganization Event had such share of Preferred Stock, immediately prior to such Reorganization Event, been
converted into the applicable number of shares of Common Stock using the Conversion Price immediately prior to such Reorganization Event
(such securities, cash and other property, the “Exchange Property”), without interest on such Exchange Property, and
(y) appropriate adjustments shall be made to the conversion provisions set forth in Section 6 and the adjustment to conversion
price provisions set forth in Section 9 and the other provisions of this Certificate as determined reasonably and in good faith
by the Board of Directors to place the Holders (whether with respect to the Preferred Stock or any such replacement preferred stock as
applicable) in as nearly as equal of a position as possible with respect to such matters following such Reorganization Event as compared
to immediately prior to such Reorganization Event, or (ii) if the Corporation is not the surviving company in such Reorganization
Event or will be dissolved in connection with such Reorganization Event, each share of Preferred Stock outstanding immediately prior to
such Reorganization Event shall be converted or exchanged into a security of the Person surviving such Reorganization Event or such other
continuing parent entity in such Reorganization Event having rights, powers and preferences, and the qualifications, limitations and restrictions
thereof, as nearly equal as possible to those provided herein (with such adjustments as are appropriate to place the Holders in as nearly
as equal of a position as possible following such Reorganization Event as compared to immediately prior to such Reorganization Event).
(b) Form
of Consideration. In the event that shares of Preferred Stock become convertible into Exchange Property in connection with a Reorganization
Event and the holders of Common Stock have the opportunity to elect the form of consideration to be received in such Reorganization Event,
the Exchange Property shall be based on the types and amounts of consideration available for election by the holders of Common Stock and
the holders of Preferred Stock shall be entitled to the same election on as nearly equal as possible terms applicable to the Common Stock;
provided, however, that, to the extent the applicable transaction agreement provides for adjustments or limitations to such
elected types and amounts of consideration that are generally applicable to holders of Common Stock making such elections, the Exchange
Property will be subject to such adjustments and limitations.
17
(c) Successive
Reorganization Events. The provisions of this Section 7 shall similarly apply to successive Reorganization Events.
(d) Notice
of Reorganization Events. The Corporation (or any successor) shall, no later than 10 days following the execution of definitive agreements
in respect of any Reorganization Event, provide written notice thereof to the Holders and of the kind and amount of the cash, securities
or other property that constitutes the Exchange Property, and any available election with respect to the Exchange Property that may be
made. Failure to deliver such notice shall not affect the operation of this Section 7 except to the extent such failure prejudices
the Holders.
(e) Requirements
of Reorganization Events. The Corporation shall not, without consent of the Holders acting by Majority Vote, enter into any agreement
for, or consummate, any transaction or series of transactions constituting a Reorganization Event unless (i) such agreement provides for
or does not interfere with or prevent (as applicable) conversion of the Preferred Stock into the Exchange Property in a manner that is
consistent with and gives effect to this Section 7, (ii) to the extent that the Corporation is not the surviving company in such
Reorganization Event or will be dissolved in connection with such Reorganization Event, proper provision shall be made in the agreements
governing such Reorganization Event for the conversion of the Preferred Stock into a security of the Person surviving such Reorganization
Event or such other continuing entity in such Reorganization Event, (iii) if the primary Exchange Property in any Reorganization Event
consists of securities, such Exchange Property (and only such Exchange Property) shall be listed (or, as applicable, be convertible into
securities listed) on an Acceptable Exchange and (iv) the issuer(s) of the Preferred Stock or any replacement preferred stock contemplated
by Section 7(a) of this Certificate owns after such Reorganization Event, directly or indirectly, a substantial portion of the assets
of the Corporation immediately preceding such Reorganization Event (and, if applicable, immediately preceding the first of the series
of related transactions that included the Reorganization Event) (the “Pre-Reorg Assets”) and cash or other consideration
in lieu thereof with respect to the Pre-Reorg Assets not so owned thereof.
(f) Partial
Tender Offer. Notwithstanding anything to the contrary stated herein, to the extent the Reorganization Event is structured as a tender
offer that is for less than for all of the outstanding shares of Common Stock then outstanding, the Holders shall not be entitled to receive
cash as Exchange Property in respect of the Preferred Stock held thereby and instead such Preferred Stock will continue to remain outstanding
as if such Reorganization Event had not occurred, provided, that, if such tender offer constitutes a Change of Control and the Corporation
has elected to effect a Change of Control Redemption by delivering a COC Redemption Notice to the Holders in accordance with Section
10, nothing herein shall preclude the Holders from receiving cash in respect of their Preferred Stock as part of the Change of Control
Redemption; provided, further, that any Holder may elect to convert all or any portion of the shares of Preferred Stock held by such Holder
into Common Stock in accordance with the provisions of Section 6 at any time prior to the consummation of such Reorganization Event
and receive cash in such tender offer in respect of the shares of Common Stock then held by such Holder following such conversion.
(g) Change
of Control. For the sake of clarity, if a Reorganization Event constitutes a Change of Control and the Corporation has delivered a
COC Redemption Notice, then Section 10(b) shall take precedence over this Section 7 to the extent there is any inconsistency
between such sections.
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Section 8. [Reserved].
Section 9. Adjustments to Conversion
Price.
(a) Adjustments
to Conversion Price. Except as provided in Section 9(d), the Conversion Price shall be subject to the following adjustments:
(i) Stock
Dividends and Distributions. If the Corporation declares a dividend or makes a distribution on the Common Stock payable in shares
of Common Stock, then the Conversion Price in effect at the opening of business on the Ex-Date for such dividend or distribution shall
be adjusted to the price determined by multiplying the Conversion Price at the opening of business on such Ex-Date by the following fraction:
OS0
OS1
where,
OS0 = the number of shares of Common
Stock outstanding at the close of business on the Business Day immediately preceding the Ex-Date for such dividend or distribution.
OS1 = the sum of the number of shares
of Common Stock outstanding at the close of business on the Business Day immediately preceding the Ex-Date for such dividend or distribution
plus the total number of shares of Common Stock constituting such dividend or distribution.
If any dividend or distribution described in this
Section 9(a)(i) is declared but not so paid or made, the Conversion Price shall be readjusted, effective as of the date and time
the Board of Directors determines not to make such dividend or distribution, to such Conversion Price that would exist had such adjustment
not been made.
(ii) Subdivisions,
Splits and Combination of the Common Stock. If the Corporation subdivides, splits or combines the shares of Common Stock, then the
Conversion Price in effect immediately prior to the effective date of such share subdivision, split or combination shall be adjusted to
the price determined by multiplying the Conversion Price in effect immediately prior to the effective date of such share subdivision,
split or combination by the following fraction:
OS0
OS1
where,
OS0 = the number of shares of Common
Stock outstanding immediately prior to the effective date of such share subdivision, split or combination.
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OS1 = the number of shares of Common
Stock outstanding immediately after the opening of business on the effective date of such share subdivision, split or combination.
If the Conversion Price is adjusted in connection
with any subdivision, split or combination described in this Section 9(a)(ii) but the outstanding shares of Common Stock are, for
any reason, not subdivided, split or combined, the Conversion Price shall be readjusted, effective as of the date the Board of Directors
determines not to subdivide, split or combine the outstanding shares of Common Stock, to such Conversion Price that would exist had such
adjustment not been made.
(iii) Other
Distributions.
(A) If
the Corporation distributes to all holders of shares of Common Stock any Convertible Securities or Options or any other assets for which
there is no corresponding distribution in respect of the Preferred Stock pursuant to Section 4(a)(i) (other than pursuant to (x)
a “spin-off”, whereupon the Conversion Price will be equitably adjusted to allocate the economic value associated with the
Preferred Stock as between the Corporation and the entity that is “spun-off”, or (y) a rights plan which is subject to Section
9(a)(v) below), then the Conversion Price in effect immediately prior to the Ex-Date for such distribution shall be adjusted to the
price determined by multiplying the Conversion Price in effect immediately prior to the Ex-Date for such distribution by the following
fraction:
SP0 – FMV
SP0
where,
SP0 = the Market Price of a share of
Common Stock on the date immediately prior to the Ex-Date for such distribution.
FMV = the fair market value of the portion of
the distribution applicable to one share of Common Stock on the Ex-Date for such distribution, in the case of a non-cash distribution
or with respect to the non-cash portion of a distribution, if any, as determined (i) by the good faith determination of the Board of Directors
or (ii) if, within five Business Days following notice from the Corporation of the value determined by the Board of Directors pursuant
to clause (i), the Holders of a majority of the outstanding shares of Preferred Stock object in good faith to such determination, then
the fair market value will be determined by a nationally recognized independent investment banking firm that has for this purpose (x)
been selected by the Board of Directors, and (y) is reasonably acceptable to the Holders acting by Majority Vote; provided, that
such value, whether determined pursuant to the foregoing clause (i) or (ii), shall not for the purposes hereof in any event be equal to
or greater than the Market Price of a share of Common Stock on such date.
In the event that such distribution
described in this Section 9(a)(iii) is not so paid or made, the Conversion Price shall be readjusted, effective as of the date the Board
of Directors publicly announces its decision not to pay or make such dividend or distribution, to the Conversion Price that would then
be in effect if such dividend or distribution had not been declared.
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(iv) Certain
Repurchases of Common Stock. If the Corporation effects a Pro Rata Repurchase of Common Stock that involves the payment by the Corporation
of consideration per share of Common Stock that exceeds the Market Price of a share of Common Stock on the Effective Date of such Pro
Rata Repurchase; provided that if part or all of the consideration is not cash, the fair market value of the non-cash consideration
shall be determined by a nationally recognized independent investment banking firm that has for this purpose (x) been selected by the
Board of Directors, and (y) been consented to by the Holders by Majority Vote, then the Conversion Price in effect immediately prior to
the Effective Date of such Pro Rata Repurchase shall be adjusted (such adjustment to become effective immediately prior to the opening
of business on the day following the Effective Date of such Pro Rata Repurchase) by multiplying the Conversion Price in effect immediately
prior to the Effective Date of such Pro Rata Repurchase by the following fraction:
(OS0 x SP0) – AC
SP0 x OS1
Where,
SP0 = the Market Price of a share of
Common Stock on the Trading Day immediately preceding the first public announcement of the intent to effect such Pro Rata Repurchase.
OS0 = the number of shares of Common
Stock outstanding at the Effective Date of such Pro Rata Repurchase, including, if applicable, any shares validly tendered and not withdrawn
or exchanged shares.
OS1= the number of shares of Common
Stock outstanding at the Effective Date of such Pro Rata Repurchase, including, if applicable, any shares validly tendered or exchanged
and not withdrawn, minus the number of shares purchased in such Pro Rata Repurchase (which shares shall equal the Purchased Shares
(as defined below) if such Pro Rata Repurchase is effected pursuant to a tender offer or exchange offer).
AC = the aggregate cash and fair market value
of the other consideration payable in such Pro Rata Repurchase, and in the case of non-cash consideration, as determined by a nationally
recognized independent investment banking firm that has for this purpose (x) been selected by the Board of Directors, and (y) been consented
to by Holders by Majority Vote, based, in the case of a tender offer or exchange offer, on the number of shares actually accepted for
purchase (the “Purchased Shares”).
In the event that the Conversion Price is adjusted
in connection with any Pro Rata Repurchase described in this Section 9(a)(iv) and such Pro Rata Repurchase is not, for any reason,
consummated, the Conversion Price shall be readjusted, effective as of the date the Board of Directors determines such Pro Rata Repurchase,
to such Conversion Price that would exist had such adjustment not been made.
In the event that the Corporation, or one of its
Affiliates, is obligated to purchase shares of Common Stock pursuant to any such Pro Rata Repurchase, but the Corporation, or such Affiliate,
is permanently prevented by applicable Law from effecting any such purchases, or all such purchases are rescinded, then the Conversion
Price shall be readjusted to be such Conversion Price that would then be in effect if such Pro Rata Repurchase had not been made.
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(v) Rights
Plans. To the extent that the Corporation has a rights plan in effect with respect to the Common Stock on any Conversion Date, upon
conversion of any shares of the Preferred Stock into Common Stock, the Holders will receive, in addition to the shares of Common Stock,
the rights under the rights plan, unless, prior to such Conversion Date, the rights have separated from the shares of Common Stock, in
which case (and only in such case) the Conversion Price will be adjusted at the time of separation as if the Corporation had issued the
rights to all holders of the Common Stock in an issuance triggering an adjustment pursuant to Section 9(a)(iii), subject to readjustment
in the event of the expiration, termination or redemption of such rights.
(b) Other
Adjustments.
(i) The
Corporation may make decreases in the Conversion Price, in addition to any other decreases required by this Section 9, if the Board
of Directors deems it advisable to avoid or diminish any income tax to holders of the Common Stock resulting from any dividend or distribution
of shares of Common Stock (or issuance of Options for Common Stock) or from any event treated as such for income tax purposes.
(ii) If
the Corporation takes any action affecting the Common Stock, other than an action described in Section 9(a), which upon a determination
by the Board of Directors, in its good faith discretion (such determination intended to be a “fact” for purposes of Section
151(a) of the DGCL), would materially adversely affect the conversion rights of the Holders of shares of Preferred Stock, the Conversion
Price shall be adjusted, to the extent permitted by Law, in such manner, if any, and at such time, as the Board of Directors determines
in good faith to be equitable in the circumstances.
(c) Successive
Adjustments. Successive adjustments in the Conversion Price shall be made, without duplication, whenever any event specified in Section
9(a) or Section 9(b) shall occur.
(d) Rounding
of Calculations; Minimum Adjustments. All adjustments to the Conversion Price shall be calculated to the nearest one-tenth (1/10th)
of a cent. No adjustment in the Conversion Price shall be required if such adjustment would be less than $0.01; provided, that
any adjustments which by reason of this Section 9(d) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment; provided, further that on any Conversion Date adjustments to the Conversion Price will be
made with respect to any such adjustment carried forward and which has not been taken into account before such date.
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(e) Statement
Regarding Adjustments; Notices. Whenever the Conversion Price is to be adjusted in accordance with one or more of Section 9(a)
or Section 9(b), the Corporation shall: (i) compute the Conversion Price in accordance with Section 9(a) or Section
9(b), taking into account the one cent threshold set forth in Section 9(d); (ii) (x) in the event that the Corporation
shall give notice or make a public announcement to the holders of Common Stock of any action of the type described in Section 9(a)
(but only if the action of the type described in Section 9(a) would result in an adjustment to the Conversion Price or a change
in the type of securities or property to be delivered upon conversion of the Preferred Stock), the Corporation shall, at the time of such
notice or announcement, and in the case of any action which would require the fixing of a record date, at least ten (10) days prior to
such record date, give notice to each Holder by mail, first class postage prepaid, at the address appearing in the Register, which notice
shall specify the record date, if any, with respect to any such action, the approximate date on which such action is to take place and
the facts with respect to such action as shall be reasonably necessary to indicate the effect on the Conversion Price and the number,
kind or class of shares or other securities or property which shall be deliverable upon conversion or redemption of the Preferred Stock
or (y) in the event that the Corporation does not give notice or make a public announcement as set forth in subclause (x) of this
clause (ii), the Corporation shall, as soon as practicable following the occurrence of an event that requires an adjustment to the Conversion
Price pursuant to one or more of Section 9(a) or Section 9(b), taking into account the one cent threshold set forth in Section
9(d) (or if the Corporation is not aware of such occurrence, as soon as practicable after becoming so aware), provide, or cause to
be provided, a written notice to the Holders of the occurrence of such event, in the same manner and with the same detail as the notice
set forth in subclause (x) of this clause (ii); and (iii) whenever the Conversion Price shall be adjusted pursuant to one or more
of Section 9(a) or Section 9(b), the Corporation shall, as soon as practicable following the determination of the revised
Conversion Price, (x) file at the principal office of the Corporation, a statement showing in reasonable detail the facts requiring
such adjustment, the Conversion Price that shall be in effect after such adjustment and the method by which the adjustment to the Conversion
Price was determined and (y) cause a copy of such statement to be sent in the manner set forth in subclause (x) of clause (ii)
to each Holder.
(f) Certain
Adjustment Rules. If an adjustment in the Conversion Price made hereunder would reduce the Conversion Price to an amount below par
value of the Common Stock, then such adjustment in Conversion Price made hereunder shall reduce the Conversion Price to the par value
of the Common Stock. As a condition precedent to the taking of any action which would require an adjustment pursuant to this Section
9, the Corporation shall use its reasonable best efforts to take any and all actions which may be necessary, including obtaining regulatory,
NYSE (or such exchange or automated quotation system on which the Common Stock is then listed) or stockholder approvals or exemptions,
in order that the Corporation may thereafter validly and legally issue as fully paid and nonassessable all shares of Common Stock issuable
upon conversion of the Preferred Stock in compliance with the applicable listing standards of NYSE (or such exchange or automated quotation
system on which the Common Stock is then listed).
23
Section 10. Redemption.
(a) Optional
Redemption. Subject to and in accordance with the provisions of this Section 10 (including, for the avoidance of doubt, the
final further proviso to this Section 10(a)) the Corporation shall have the right, at its option, at any time following June 14,
2027, to redeem (i) all or (ii) any portion of the shares of Preferred Stock then outstanding at a redemption price per share in cash
(the “Optional Redemption Price”) equal to two times (2x) the sum of (A) the Accumulated Amount and (B)
the Interim Accrued Dividends of each such share of Preferred Stock as of the date of such redemption; provided, that any Interim
Accrued Dividends that have accrued since the most recent Preferred Dividend Payment Date shall instead be calculated at one times (1x)
(not 2X) the amount of such current period Interim Accrued Dividends; provided, further, that any redemption under this
Section 10 for less than all of the shares of Preferred Stock then outstanding must redeem sufficient shares of Preferred Stock
such that the redemption will be treated as a payment in exchange for stock pursuant to Section 302(b) of the Code for United States federal
income tax purposes (for the avoidance of doubt, taking into account any equity interests held in the Corporation by the Investor) and
must not result in the Investor’s Beneficial Ownership of the Common Stock (on an as-converted to Common Stock basis) falling below
three percent (3%) of the Common Stock then outstanding as of the Redemption Date (on an as-converted to Common Stock basis); provided,
further, that the Corporation shall not be entitled to exercise its option to redeem pursuant to this Section 10(a) unless
(x) as of the Optional Redemption Date all of the Common Stock Liquidity Conditions are satisfied and (y) the Lock-Up Period (as defined
in the Shareholders Agreement) has terminated (or deemed to have terminated in respect of a portion of the Preferred Stock in accordance
with the terms set forth in the Shareholders Agreement) or expired in accordance with the terms set forth in the Shareholders Agreement.
The Corporation may exercise its right to require redemption under this Section 10 by sending a written notice to each Holder of
Preferred Stock (the “Optional Redemption Notice”) specifying (x) the date on which the redemption shall occur (the
“Optional Redemption Date”), which shall be a Business Day that is no earlier than 10 days and no later than 60 days
from the date the Redemption Notice is sent and (y) the aggregate number of shares of Preferred Stock which are being redeemed pursuant
to such redemption and the aggregate and per-share purchase price therefor. If fewer than all of the shares of Preferred Stock then outstanding
are to be redeemed pursuant to this Section 10(a), then such redemption shall occur on a pro rata basis with respect to
all Holders of Preferred Stock based on the total number of shares of Preferred Stock then held by such Holder relative to the total number
of shares of Preferred Stock then outstanding.
(b) Redemption
in Connection with a Change of Control. In the event of a Change of Control, the Corporation (or its successor in the Change of Control,
or an Affiliate thereof) shall have the option, exercisable during the period beginning on the effective date of the Change of Control
(the “Change of Control Effective Date”) and ending on the date that is 20 Business Days after the Change of Control
Effective Date, to purchase all (but not less than all) of the shares of Preferred Stock then outstanding at a purchase price per share,
payable in cash (the “COC Redemption Price” and together with the Optional Redemption Price, each (as applicable) the
“Redemption Price”), equal to one hundred fifty percent (150%) of the sum of (A) the Accumulated Amount and
(B) the Interim Accrued Dividends of each such share of Preferred Stock as of the date of such purchase (a “Change of
Control Redemption”); provided, that any Interim Accrued Dividends that have accrued since the most recent Preferred
Dividend Payment Date shall instead be calculated at 100% (not 150%) of the amount of such current period Interim Accrued Dividends. In
order to exercise the Change of Control Redemption, the Corporation shall deliver written notice (a “COC Redemption Notice”
and together with an Optional Redemption Notice, a “Redemption Notice”) to the Holders specifying that the Change of
Control Redemption is being exercised, the number of shares of Preferred Stock to be acquired in connection therewith, the aggregate and
per share purchase price therefor and the date which such redemption shall occur (the “COC Redemption Date” and together
with the Optional Redemption Date, each (as applicable) a “Redemption Date”) on the Change of Control Effective Date;
provided, further, that, as a condition to the Corporation’s exercise of its redemption option pursuant to this Section
10(b), the Corporation must provide written notice of the Change of Control to each Holder within 10 days following the execution
of the definitive agreements with respect to such Change of Control.
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(c)
Effectiveness of Redemption. Redemption pursuant to Section 10(a) or Section 10(b) shall become effective on the
applicable Redemption Date and the aggregate Redemption Price for such redeemed shares shall be due and payable in cash to the record
Holder of the shares of Preferred Stock being redeemed on such date. From and after the applicable Redemption Date, dividends and distributions
will cease to accrue on such redeemed shares of Preferred Stock, such redeemed shares of Preferred Stock shall no longer be deemed outstanding
and all rights of the Holders with respect to such redeemed shares of Preferred Stock will terminate, except the right to receive the
aggregate Redemption Price for such redeemed shares of Preferred Stock held by each such Holder.
(d) Information.
During the period between the delivery of the Optional Redemption Notice and the Optional Redemption Date, if requested by any Holder,
the Corporation shall provide reasonable access to the books and records of the Corporation, and provide a reasonable opportunity for
such Holder to meet with the executive officers of the Corporation for the purpose of assisting such Holder in evaluating whether to convert
the Preferred Stock into Common Stock in lieu of the redemption of such Preferred Stock; provided that in no event shall the Corporation
be required to provide any information that would cause such information to no longer be subject to the attorney-client privilege (or
a similar privilege) or where disclosure is prohibited by Law, but if any such disclosure is so limited, the Corporation shall cooperate
with such Holder to determine a reasonable manner to allow for prompt disclosure of such information to such Holder.
(e) Contingencies.
Any Redemption Notice or Conversion Notice may be delivered subject to contingencies set forth therein (which may include, for the avoidance
of doubt, the actual consummation of a Change of Control) and may be revoked if any such contingencies are not satisfied or as otherwise
set forth therein.
(f) Partial
Redemption. If a portion, but less than all, of the shares of Preferred Stock held by any Holder are purchased in accordance with
this Section 10 on any particular Redemption Date, the Corporation shall promptly thereafter reflect in the Register the remaining
shares of Preferred Stock held by such Holder. Such shares of Preferred Stock shall remain subject to the terms of this Certificate, including
with respect to the Corporation’s right to redeem such shares (including in connection with a subsequent Change of Control). The
election of the Corporation not to redeem the Preferred Stock at any time or in connection with any Change of Control shall not limit
the Corporations right to exercise a future redemption in accordance with the terms of this Certificate.
(g) Conversion.
Notwithstanding anything to the contrary in this Section 10, each Holder of shares of Preferred Stock to be redeemed by the Corporation
may elect to convert all or any portion of the shares of Preferred Stock held by such Holder into Common Stock in accordance with the
provisions of Section 6 (taking into account any contingencies contemplated by Section 10(e)) at any time prior to the Redemption
Date, which election, for the avoidance of doubt, may be made subject to the same or similar contingencies to which any such redemption
by the Corporation is made subject. Without limiting the generality of the foregoing, in the event that any such conversion is being effected
in connection with, or as part of a Change of Control or any redemption by the Corporation in accordance with this Section 10 is
otherwise made conditional on another event or happening (or the absence of any event or happening), any Holder may condition such conversion
on the effectiveness of such Change of Control (or such earlier time as the consideration payable to holders of Common Stock in respect
of such Change of Control is determined) or such other event or happening (or the absence of such event or happening), in which case such
conversion shall be deemed effective as of immediately prior to any such redemption of such shares.
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Section 11. Voting Rights.
(a) General.
The Holders of shares of Preferred Stock shall be entitled to vote with the holders of the Common Stock on all matters submitted to a
vote of stockholders of the Corporation, except as otherwise provided herein or as required by applicable Law, voting together with the
holders of Common Stock as a single class. For such purposes, each Holder shall be entitled to a number of votes in respect of the shares
of Preferred Stock owned of record by it equal to the number of shares of Common Stock into which such shares of Preferred Stock could
be converted as of the record date for the determination of stockholders entitled to vote on such matters or, if no such record date is
established, as of the date such vote is taken or any written consent of stockholders is solicited. The Holders of shares of Preferred
Stock shall be entitled to notice of any stockholders’ meeting in accordance with the Certificate of Incorporation and the By-laws
as if they were holders of record of Common Stock for such meeting.
(b) Class
Voting Rights. So long as any shares of Preferred Stock are outstanding, in addition to any other vote required by applicable Law,
the Corporation may not take any of the following actions (including by means of merger, consolidation, division, reorganization, recapitalization
or otherwise) without the prior approval of the Holders by Majority Vote (it being understood that this Section 11(b) shall not limit
the ability of the Corporation to undertake a redemption or conversion of the Preferred Stock as provided for in this Certificate or to
consummate a Change of Control or Reorganization Event that complies with the terms of this Certificate (including, without limitation,
the provisions of this Section 11(b)):
(i) amend,
alter, repeal or otherwise modify any provision of the Certificate of Incorporation, this Certificate or the By-laws in a manner that
would alter or change the terms or the powers, preferences, rights or privileges of the Preferred Stock as to affect them adversely;
(ii) authorize,
create, increase the authorized amount of, or issue any class or series of Senior Securities or Parity Securities, including any debt
securities convertible by their terms into shares Senior Securities or Parity Securities;
(iii) redeem,
repurchase or pay dividends on Junior Securities except as permitted in accordance with Section 4(c) of this Certificate;
(iv) increase
or decrease the authorized number of shares of Preferred Stock (except for the cancellation and retirement of shares set forth in Section
14(c)) or issue additional shares of Preferred Stock;
26
(v) (1)
amend, restate, supplement, modify or replace the Debt Financing Documents to include limitations on the ability of the Corporation to
accrue Preferred Dividends as Compounded Dividends in accordance with Section 4(a) that are more restrictive in any material respect
than those set forth in the Debt Financing Documents in effect as of the Original Issuance Date or (2) enter into any agreements
or arrangements relating to indebtedness (a) containing provisions relating to the ability of the Corporation or its Subsidiaries
to accrue Preferred Dividends as Compounded Dividends in accordance with Section 4(a) that are more restrictive in any material
respect than those set forth in the Debt Financing Documents as of the Original Issuance Date (or subsequently amend, restate, supplement
or otherwise modify any such agreements to include limitations on the ability of the Corporation to accrue Preferred Dividends as Compounded
Dividends in accordance with Section 4(a) that are more restrictive in any material respect than those set forth in the Debt Financing
Documents as of the Original Issuance Date); or
(vi) adopt
any plan of Liquidation or file any voluntary petition for bankruptcy, receivership or any similar proceeding.
(c) The
consent or votes required in Section 11(b) shall be in addition to any approval of stockholders of the Corporation which may be
required by Law or pursuant to any provision of the Certificate of Incorporation or the By-laws. Each Holder of shares of Preferred Stock
will have one vote per share on any matter on which Holders of shares of Preferred Stock are entitled to vote separately as a class, whether
at a meeting or by written consent.
Section 12. Board Designation and Other
Rights.
(a) From
and after the Original Issuance Date, and for as long as the Preferred Stock and Common Stock that is owned by the CD&R Shareholder
Parties represents (i) at least ten percent (10%) of the outstanding shares of Common Stock, determined on an As-Converted Common
Stock basis, the CD&R Shareholder shall be entitled to designate two (2) persons, who shall be Partners, Managing Directors, Advisors
or Principals of the CD&R Shareholder, CD&R or any CD&R Affiliate and reasonably acceptable to the Corporation at the time
of such designation, to serve on the Board of Directors (such individuals who are so reasonably acceptable to the Corporation, the “CD&R
Designees” and each a “CD&R Designee”), it being understood and agreed that, without the prior written
consent of the Corporation, a CD&R Designee shall not be an individual that is (or will) be concurrently a member of the Board of
Directors and the board of directors of Resideo Technologies, Inc., and (ii) at least five percent (5%) (but less than the 10%
contemplated in the foregoing clause (i)) of the outstanding shares of Common Stock, determined on an As-Converted Common Stock basis,
the CD&R Shareholder shall be entitled to designate one (1) CD&R Designee; provided, that, for purposes of calculating the percentage
As-Converted Common Stock ownership for this Section 12, any Exempted Securities issued pursuant to clauses (1), (2) and (5) of
the definition thereof shall be excluded and deemed not outstanding. At such time that the CD&R Shareholder is no longer entitled
to designate one or both CD&R Designees pursuant to the previous sentence, the CD&R Shareholder shall promptly cause one or both
CD&R Designees, as applicable, to offer to resign from the Board of Directors. The CD&R Designees shall initially be Nathan Sleeper
and William Galvin, each of whom has been determined to be reasonably acceptable to the Corporation. A person that is a CD&R Designee
shall remain and be regarded as a CD&R Designee for purposes of this Certificate for the remainder of such person’s term on
the Board of Directors or, if earlier, death or resignation. The Corporation’s obligations to have any CD&R Designee appointed
to the Board of Directors or nominate any CD&R Designee for election as a director at any meeting of the Corporation’s stockholders
pursuant to this Section 12, as applicable, shall in each case be subject to such CD&R Designee’s satisfaction of all
requirements regarding service as a director of the Corporation under applicable Law, stock exchange rules regarding service as a director
of the Corporation, and the Corporation’s corporate governance or other guidelines and director onboarding and membership requirements,
in each case, that are generally applicable to all directors. The CD&R Shareholder Parties will cause each CD&R Designee to make
himself or herself reasonably available for interviews and to consent to such reference and background checks or other investigations
and provide such information as the Board of Directors may reasonably request to determine the CD&R Designee’s eligibility and
qualification to serve as a director of the Board of Directors and otherwise comply with the corporate governance or other guidelines
and director onboarding and membership requirements of the Corporation that are generally applicable to all directors thereof.
27
(b) From
and after the Original Issuance Date, subject to Section 12(a) of this Certificate, the Corporation shall take such actions as
are reasonably necessary to cause the CD&R Designees to be nominated as members of the Board of Directors and shall, subject to applicable
Law and the exercise of the fiduciary duties of the Board of Directors, include in any proxy statement prepared, used, delivered or publicly
filed by the Corporation to solicit the vote of its stockholders in connection with any meeting of stockholders of the Corporation the
recommendation of the Board of Directors that stockholders of the Corporation vote in favor of the CD&R Designees and solicit votes
in favor of the election of the CD&R Designees to the Board of Directors consistent with the Corporation’s efforts to solicit
votes in favor of the election of the Corporation’s other nominees to the Board of Directors.
(c) For
so long as a CD&R Designee is serving on the Board of Directors, (i) the Corporation shall not implement or maintain any trading policy,
equity ownership guidelines (including with respect to the use of Rule 10b5-1 plans and preclearance or notification to the Corporation
of any trades in the Corporation’s securities) or similar guideline or policy with respect to the trading of securities of the Corporation
that applies to any CD&R Shareholder Party (including a policy that limits, prohibits or restricts any CD&R Shareholder Party
from entering into any hedging or derivative arrangements), in each case other than with respect to any CD&R Person or CD&R Designee
solely in his or her individual capacity, except as provided herein, (ii) any share ownership requirement for any CD&R Designee serving
on the Board of Directors will be deemed satisfied by the securities owned by any CD&R Shareholder Party and under no circumstances
shall any of such policies, procedures, processes, codes, rules, standards and guidelines impose any restrictions on any CD&R Shareholder
Party’s transfers of securities pursuant to the Registration Rights Agreement or otherwise, subject to compliance with applicable
securities Laws, (iii) under no circumstances shall any policy, procedure, code, rule, standard or guideline applicable to the Board of
Directors be violated by any CD&R Designee receiving compensation from any CD&R Shareholder Party and (iv) no CD&R Designee
shall be excluded or required to recuse himself or herself from any meetings or materials of the Board of Directors as a result of or
in connection with his or her affiliation with the CD&R Group or the CD&R Group’s ownership of any Preferred Stock or Common
Stock except in connection with a transaction with, or dispute involving, the CD&R Shareholder or any other member of the CD&R
Group, and, in each case of the foregoing clauses (i), (ii), (iii) and (iv), it is agreed that any such policies in effect from time to
time that purport to impose terms inconsistent with this Section 12 shall not apply to the extent inconsistent with this Section
12 (but shall otherwise be applicable to the CD&R Designee).
28
(d) To
the fullest extent permitted by the DGCL and subject to any express agreement that may from time to time be in effect, including the confidentiality
provisions set forth in the Shareholders Agreement, to the extent in compliance with applicable Law, the Corporation agrees that any CD&R
Designee, any member of the CD&R Group and any CD&R Affiliate or any portfolio company thereof (collectively, “Covered
Persons”) may, and none of the foregoing shall have any duty not to, (i) invest in, carry on and conduct, whether directly,
or as a partner in any partnership, or as a joint venturer in any joint venture, or as an officer, director, stockholder, equityholder
or investor in any person, or as a participant in any syndicate, pool, trust or association, any business of any kind, nature or description,
whether or not such business is competitive with or in the same or similar lines of business as the Corporation or any of its Subsidiaries,
(ii) do business with any client, customer, vendor or lessor of any of the Corporation or its Affiliates, and/or (iii) make investments
in any kind of property in which the Corporation may make investments. To the fullest extent permitted by the DGCL, to the extent in compliance
with applicable Law, the Corporation renounces any interest or expectancy to participate in any business or investments of any Covered
Person as currently conducted or as may be conducted in the future, and waives any claim against a Covered Person. Except as set forth
below, the Corporation agrees that in the event that a Covered Person acquires knowledge of a potential transaction or matter which may
constitute a corporate opportunity for both (x) the Covered Person and (y) the Corporation or its Subsidiaries, the Covered Person shall
not have any duty to offer or communicate information regarding such corporate opportunity to the Corporation or its Subsidiaries. To
the fullest extent permitted by the DGCL, the Corporation hereby renounces any interest or expectancy in any potential transaction or
matter of which the Covered Person acquires knowledge and waives any claim against each Covered Person that such Covered Person is liable
to the Corporation or its stockholders for breach of any fiduciary duty solely by reason of the fact that such Covered Person (A) pursues
or acquires any corporate opportunity for its own account or the account of any Affiliate or other person, (B) directs, recommends, sells,
assigns or otherwise transfers such corporate opportunity to another person or (C) does not communicate information regarding such corporate
opportunity to the Corporation, in each case, except for any corporate opportunity which is expressly offered to a Covered Person in his
or her capacity as a member of the Board of Directors, it being understood that any such corporate opportunity shall belong to the Corporation.
(e) The
provisions of this Section 12 shall survive the repurchase, redemption, conversion and cancellation of the Preferred Stock; provided that
from and after the time that no shares of Preferred Stock are outstanding, this Section 12 may be amended, modified or waived with the
prior written consent of CD&R. Each of the CD&R Shareholder, the CD&R Shareholder Parties, the CD&R Designees and the
other Covered Persons are express third party beneficiaries of the applicable portions of this Section 12 referencing such Persons.
Section 13. Transfers
and Transfer Agent. The Corporation shall appoint a transfer agent of recognized standing with respect to the Preferred Stock
(which may be the same transfer agent with respect to the Common Stock) and may remove such transfer agent in accordance with the
agreement between the Corporation and such transfer agent; provided that the Corporation shall appoint a successor transfer
agent of recognized standing who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or
appointment, the Corporation shall send notice to the Holders. When a Holder requests to register the transfer of shares of
Preferred Stock, provided that such transfer is not in violation of the Transfer Restrictions, the Corporation or the
Corporation’s transfer agent, as applicable, shall register the transfer as requested if its reasonable requirements for such
transaction are met. Any transfer made not in compliance with the forgoing shall be disregarded and deemed void.
29
Section 14. Miscellaneous.
(a) Taxes.
The issuance or delivery of shares of Preferred Stock, shares of Common Stock or other securities issued on account of Preferred Stock
pursuant hereto, or certificates representing such shares or securities, shall be made without charge to the Holder for such shares or
certificates or for any tax in respect of the issuance or delivery of such certificates or the securities represented thereby, including
any share transfer, documentary, stamp or similar tax; provided, however, that the Corporation shall not be required to
pay any tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Preferred Stock, shares of
Common Stock or other securities in a name other than that in which the shares of Preferred Stock with respect to which such shares or
other securities were issued, delivered or registered, or in respect of any payment to any Person other than a payment to the applicable
Holder thereof, and the transferee or payee, as the case may be, shall pay or bear the cost of any such tax, and the Corporation shall
not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery
or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such
tax has been paid or is not payable. Without limiting Section 3.2(b) of the Shareholders Agreement, all payments and distributions (or
deemed distributions) on the shares of Preferred Stock (and any share of Common Stock issued upon the conversion of any share of Preferred
Stock) shall be subject to withholding and backup withholding of taxes to the extent required by applicable Law, subject to applicable
exemptions, and amounts withheld, if any, shall be treated as received by the Holders.
(b) Good
Faith. The Corporation shall not, by amendment of the Certificate of Incorporation or through reorganization, consolidation, merger,
dissolution, sale of assets, or otherwise, take any action the primary purpose of which is to avoid the observance or performance of any
of the terms of this Certificate.
(c) Status
of Shares. Shares of Preferred Stock which have been converted, redeemed, repurchased or otherwise cancelled shall be retired and,
following the filing of any certificate required by the DGCL, have the status of authorized and unissued shares of Preferred Stock, without
designation as to series until such shares are once more, subject to and in accordance with the provisions of Section 11, designated
as part of a particular series of Preferred Stock by the Board of Directors.
(d) Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have
been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail
with postage prepaid, addressed: (i) if to the Corporation, to its office at 275 Broadhollow Rd, Suite 400, Melville, NY 11747,
Attention: General Counsel (jeannine.lane@adiglobal.com), with a copy (which may be delivered by email but in all cases shall not constitute
notice) to Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, NY 10019 attn: Russell Leaf, Esq. and Jared Fertman, Esq. (rleaf@willkie.com;
jfertman@willkie.com), or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the Register or (iii)
to such other address as the Corporation or any such Holder, as the case may be, shall have designated by written notice similarly given.
30
(e) Waiver
and Modifications. Subject to Section 12(e), the powers (including voting powers), if any, of the Preferred Stock and the preferences
and relative, participating, optional, special or other rights, if any, and the qualifications, limitations or restrictions, if any, of
the Preferred Stock may be waived or modified as to all shares of Preferred Stock in any instance (without the necessity of calling, noticing
or holding a meeting of stockholders) by the Holders acting by Majority Vote.
(f) Severability.
If any right, preference or limitation of the Preferred Stock set forth in this Certificate (as amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule of Law or public policy, all other rights, preferences and limitations set
forth in this Certificate (as so amended) which can be given effect without the invalid, unlawful or unenforceable right, preference or
limitation shall, nevertheless, remain in full force and effect, and no right, preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation unless so expressed herein.
(g) Other
Rights. Except as expressly provided in any agreement between a Holder and the Corporation, the shares of Preferred Stock shall not
have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions
thereof, other than as set forth herein or in the Certificate of Incorporation or as provided by applicable Law.
(h) Headings.
The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.
(i) Facts
Ascertainable. When the terms of this Certificate refers to a specific agreement or other document to determine the meaning or operation
of a provision hereof, the Corporation shall maintain a copy of such agreement or document at the principal executive offices of the Corporation
and a copy thereof shall be provided free of charge to any Holder who makes a written demand therefore.
(j) Effectiveness.
This Certificate shall become effective upon the filing thereof with the Secretary of State of the State of Delaware.
[Remainder of this page intentionally left blank]
31
IN WITNESS WHEREOF, the Corporation has caused
this Certificate to be duly executed and acknowledged by its undersigned duly authorized officer this 3rd day of August, 2026.
ADI GLOBAL DISTRIBUTION INC.
By:
/s/ Jeannine Lane
Name:
Jeannine Lane
Title:
Executive Vice President,
General Counsel,
Corporate Secretary and
Chief Compliance Officer
32
EX-4.1 — FIRST SUPPLEMENTAL INDENTURE, DATED AS OF AUGUST 3, 2026, BY AND AMONG ADI GLOBAL DISTRIBUTION FUNDING LLC, ADI GLOBAL DISTRIBUTION INC., THE OTHER GUARANTORS NAMED THEREIN AND U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE
EX-4.1
Filename: ea030019001ex4-1.htm · Sequence: 6
Exhibit 4.1
FIRST SUPPLEMENTAL INDENTURE
First Supplemental Indenture (this “Supplemental
Indenture”), dated as of August 3, 2026, among ADI Global Distribution Funding LLC (the “Assumption Issuer”),
ADI Global Distribution Inc. (the “Parent Guarantor”), the Subsidiary Guarantors listed on the signature pages
hereto (together with the Parent Guarantor, the “Guarantors”) and U.S. Bank Trust Company, National Association,
as trustee (the “Trustee”).
W I T N E S S E T H
WHEREAS, ADI Escrow Issuer LLC, a Delaware limited
liability company (the “Escrow Issuer”), has heretofore executed and delivered to the Trustee that certain Indenture
(the “Indenture”), dated as of June 30, 2026, providing for the issuance of an unlimited aggregate principal
amount of 7.125% Senior Notes due 2034 (the “Notes”);
WHEREAS, the Indenture provides that on the Escrow
Release Date the Assumption Issuer and each of the Guarantors shall execute and deliver to the Trustee a supplemental indenture pursuant
to which (i) the Assumption Issuer shall assume all of the Escrow Issuer’s obligations under the Notes and the Indenture and (ii)
the Guarantors shall, jointly and severally, fully and unconditionally guarantee all of the Issuer’s obligations under the Notes
and the Indenture, on the terms and conditions set forth herein and under the Indenture (the “Guarantees”);
and
WHEREAS, pursuant to Section 9.01 of the Indenture,
the Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing
and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for
the equal and ratable benefit of the Holders as follows:
(1) Capitalized
Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
(2) Assumption
by Issuer. The Assumption Issuer acknowledges and agrees to (i) unconditionally assume all of the Escrow Issuer’s obligations
under the Notes and the Indenture on the terms and subject to the conditions set forth in the Indenture; (ii) be bound by all applicable
provisions of the Indenture as if made by, and with respect to the Assumption Issuer; and (iii) perform all obligations and duties required
of the Issuer pursuant to the Indenture. From and after the date hereof, all references in the Indenture to the “Issuer” shall
refer to the Assumption Issuer instead of the Escrow Issuer.
(3) Agreement
to Guarantee.
(i) Each Guarantor, other than ADI Global Distribution
Inc., hereby agrees, jointly and severally, with all existing Guarantors (if any), to unconditionally guarantee the Issuer’s Obligations
under the Notes and the Indenture on the terms and subject to the conditions set forth in Article 10 of the Indenture and to be bound
by all other applicable provisions of the Indenture and the Notes and to perform all of the obligations and agreements of a Guarantor
(which for this purpose excludes the obligations and agreements of the Parent Guarantor) under the Indenture. From and after the date
hereof, all references in the Indenture to the “Guarantors” shall include each of the undersigned Guarantors.
(ii) ADI Global Distribution Inc. hereby agrees,
jointly and severally, with all existing Guarantors (if any), to unconditionally guarantee the Issuer’s Obligations under the Notes
and the Indenture on the terms and subject to the conditions set forth in Article 10 of the Indenture and to be bound by all other applicable
provisions of the Indenture and the Notes and to perform all of the obligations and agreements of a Guarantor and the Parent Guarantor
under the Indenture. From and after the date hereof, all references in the Indenture to the “Guarantors” shall include ADI
Global Distribution Inc. and all references in the Indenture to the “Parent Guarantor” shall refer to ADI Global Distribution
Inc.
(4) Successors
and Assigns. This Supplemental Indenture and Article 10 of the Indenture shall be binding upon the Guarantors and their respective
successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee, the Agents and the Holders and, in
the event of any transfer or assignment of rights by any Holder, the Trustee or the Agents, the rights and privileges conferred upon that
party in this Supplemental Indenture, in the Indenture and in the Notes shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions of the Indenture.
(5) No
Waiver. Neither a failure nor a delay on the part of either the Trustee, the Agents or the Holders in exercising any right, power
or privilege under this Supplemental Indenture or Article 10 of the Indenture shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of
the Trustee, the Agents and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits
which either may have under this Supplemental Indenture and Article 10 of the Indenture at law, in equity, by statute or otherwise.
(6) Release.
Upon execution of this Supplemental Indenture by the Parent Guarantor, the Assumption Issuer and the other Guarantors, the Escrow Issuer
shall be unconditionally and irrevocably released and discharged from all obligations and liabilities under the Indenture and the Notes.
(7) Execution
and Delivery. The Assumption Issuer Agrees that the Notes shall remain in full force and effect notwithstanding the absence of any
endorsement of the Assumption Issuer on the Notes, and each Guarantor agrees that its Guarantee shall remain in full force and effect
notwithstanding the absence of the endorsement of any notation of such Guarantee.
(8) No
Recourse Against Others. No director, officer, employee, incorporator or stockholder of any Guarantor shall have any liability for
any obligations of the Issuer or the other Guarantors under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or
for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting Notes waives and
releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
(9) Governing
Law. THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(10) Counterparts.
The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
(11) Effect
of Headings. The section headings herein are for convenience only and shall not affect the construction hereof.
(12) The
Trustee and the Agents. The Trustee and the Agents shall not be responsible in any manner whatsoever for or in respect of the validity
or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely
by the Assumption Issuer and the Guarantors.
2
IN WITNESS WHEREOF, the parties hereto have caused
this Supplemental Indenture to be duly executed, all as of the date first above written.
ADI GLOBAL DISTRIBUTION FUNDING LLC, as Assumption Issuer
By:
/s/ Jeannine Lane
Name:
Jeannine Lane
Title:
Secretary
ADI GLOBAL DISTRIBUTION INC., as Parent Guarantor
By:
/s/ Jeannine Lane
Name:
Jeannine Lane
Title:
Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer
SUBSIDIARY GUARANTORS
ADI GLOBAL DISTRIBUTION LLC
SUNBRITE HOLDING CORPORATION
SUNBRITETV LLC
SNAP ONE HOLDINGS CORP.
SNAP ONE, LLC,
as Guarantors
By:
/s/ Jeannine Lane
Name:
Jeannine Lane
Title:
Secretary
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee
By:
/s/ Michael K. Herberger
Name:
Michael K. Herberger
Title:
Vice President
[Signature Page to Supplemental Indenture]
3
EX-10.1 — EMPLOYEE MATTERS AGREEMENT, DATED JULY 31, 2026, BY AND BETWEEN ADI GLOBAL DISTRIBUTION INC. AND RESIDEO TECHNOLOGIES, INC
EX-10.1
Filename: ea030019001ex10-1.htm · Sequence: 7
Exhibit 10.1
Execution Version
EMPLOYEE MATTERS AGREEMENT
by and between
RESIDEO TECHNOLOGIES, INC.
and
ADI GLOBAL DISTRIBUTION INC.
Dated as of July 31, 2026
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
1
Section 1.1
General
1
Section 1.2
References; Interpretation
9
ARTICLE II
GENERAL PRINCIPLES
9
Section 2.1
Nature of Liabilities
9
Section 2.2
Transfers of Employees and Independent Contractors Generally
9
Section 2.3
Assumption and Retention of Liabilities Generally
10
Section 2.4
Participation in Benefit Plans
12
Section 2.5
Service Recognition
12
Section 2.6
Collective Bargaining Agreements
13
Section 2.7
Information and Consultation
13
Section 2.8
WARN
13
Section 2.9
Individual Agreements
14
Section 2.10
Payroll Services
14
Section 2.11
No Change in Control
14
ARTICLE III
CERTAIN BENEFIT PLAN PROVISIONS
15
Section 3.1
Health and Welfare Benefit Plans
15
Section 3.2
401(k) Plans
16
Section 3.3
U.S. Defined Benefit Pension Plans
17
Section 3.4
Deferred Compensation Arrangements
17
Section 3.5
Non-U.S. Plans
18
Section 3.6
Chargeback of Certain Costs
19
ARTICLE IV
EQUITY INCENTIVE AWARDS
19
Section 4.1
Treatment of Resideo Stock Options
19
Section 4.2
Treatment of Unvested Resideo Time-Based Restricted Stock Units
19
Section 4.3
Treatment of Resideo Director Unvested Deferred RSU Awards
20
Section 4.4
Treatment of Unvested Resideo Performance Stock Units
20
Section 4.5
Treatment of Resideo Director DSU Awards
22
Section 4.6
ADI SpinCo Stock Plan
23
Section 4.7
General Terms
24
ARTICLE V
ADDITIONAL MATTERS
24
Section 5.1
Cash Incentive Programs
24
Section 5.2
Time-Off Benefits
25
Section 5.3
Workers’ Compensation Liabilities
25
Section 5.4
COBRA Compliance in the United States
25
i
Section 5.5
Retention Bonuses
26
Section 5.6
Code Section 409A
26
Section 5.7
Payroll Taxes and Reporting; CARES Act and ARP Act
26
Section 5.8
Regulatory Filings
27
Section 5.9
Disability
27
Section 5.10
Certain Requirements
28
Section 5.11
No Hire of Employees
28
ARTICLE VI
GENERAL AND ADMINISTRATIVE
29
Section 6.1
Employer Rights
29
Section 6.2
Effect on Employment
29
Section 6.3
Consent of Third Parties
29
Section 6.4
Access to Employees
29
Section 6.5
Beneficiary Designation/Release of Information/Right to Reimbursement
29
Section 6.6
No Third-Party Beneficiaries
30
Section 6.7
Employee Benefits Administration
30
Section 6.8
Sharing of Records; Cooperation
30
ARTICLE VII
MISCELLANEOUS
31
Section 7.1
Entire Agreement
31
Section 7.2
Counterparts
31
Section 7.3
Survival of Agreements
31
Section 7.4
Notices
31
Section 7.5
Amendment
32
Section 7.6
Assignment
32
Section 7.7
Successors and Assigns
32
Section 7.8
Termination
32
Section 7.9
Subsidiaries
32
Section 7.10
Title and Headings
33
Section 7.11
Governing Law
33
Section 7.12
Dispute Resolution
33
Section 7.13
Severability
33
Section 7.14
Interpretation
33
Section 7.15
No Duplication; No Double Recovery
33
Section 7.16
No Waiver
33
Section 7.17
No Admission of Liability
33
Section 7.18
Tax Treatment of Payments
33
ii
EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS AGREEMENT
(this “Agreement”), dated as of July 31, 2026, is entered into by and between Resideo Technologies, Inc., a Delaware
corporation (“Resideo”), and ADI Global Distribution Inc., a Delaware corporation and a wholly owned subsidiary of
Resideo (“ADI SpinCo”). “Party” or “Parties” means Resideo or ADI SpinCo, individually
or collectively, as the case may be. Capitalized terms used in this Agreement, but not otherwise defined in this Agreement or the Separation
Agreement, shall have the meaning set forth in Section 1.1.
W I T N E S S E
T H:
WHEREAS, Resideo, acting
through its direct and indirect Subsidiaries, currently conducts the Resideo Retained Business and the ADI Business;
WHEREAS, the Board
of Directors of Resideo (the “Resideo Board”) has determined that it is appropriate, desirable and in the best
interests of Resideo and its stockholders to separate Resideo into two separate, publicly traded companies, one for each of (a) the
Resideo Retained Business, which shall be owned and conducted, directly or indirectly, by Resideo and its Subsidiaries (other than ADI
SpinCo and its Subsidiaries), and (b) the ADI Business, which shall be owned and conducted, directly or indirectly, by ADI SpinCo
and its Subsidiaries, in the manner contemplated by the Separation and Distribution Agreement by and between the Parties, dated as of
July 31, 2026 (the “Separation Agreement”);
WHEREAS, the Separation
Agreement sets forth the terms and conditions applicable to the Distribution; and
WHEREAS, pursuant to
the Separation Agreement, Resideo and ADI SpinCo have agreed to enter into this Agreement for the purpose of allocating Assets, Liabilities
and responsibilities with respect to certain employee matters, and employee compensation and benefit plans and programs between them,
and to address certain other employment-related matters.
NOW, THEREFORE, in
consideration of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
AND INTERPRETATION
Section 1.1 General.
As used in this Agreement, the following terms shall have the following meanings:
“2024 PSUs”
shall have the meaning set forth in Section 4.4(a).
“2025 PSUs”
shall have the meaning set forth in Section 4.4(a).
1
“2025 ROIC PSUs”
shall have the meaning set forth in Section 4.4(c)(i).
“2025 rTSR PSUs”
shall have the meaning set forth in Section 4.4(c)(ii).
“2026 PSUs”
shall have the meaning set forth in Section 4.4(a).
“Accrued Incentive
Amount” shall have the meaning set forth in Section 5.1.
“Acquired Rights
Directive” shall have the meaning set forth in the definition “Transfer Regulations.”
“ADI SpinCo”
shall have the meaning set forth in the Preamble.
“ADI SpinCo 2026
Stock Plan” shall mean the ADI SpinCo 2026 Stock Incentive Plan, as may be amended or amended and restated from time to time.
“ADI SpinCo 401(k)
Plan” shall have the meaning set forth in Section 3.2(a).
“ADI SpinCo Benefit
Plan” shall mean any Benefit Plan sponsored, maintained or contributed to exclusively by any member of the ADI Group.
“ADI SpinCo Board”
shall mean the Board of Directors of ADI SpinCo.
“ADI SpinCo Cafeteria
Plan” shall have the meaning set forth in Section 3.1(c).
“ADI SpinCo Conversion
Ratio” shall mean the quotient obtained by dividing (a) the Post-Distribution ADI SpinCo Stock Value, by (b) the Resideo
Pre-Spin Stock Value.
“ADI SpinCo Director
DSU Award” shall mean an award of deferred stock units relating to shares of ADI SpinCo Common Stock as described in Section
4.5.
“ADI SpinCo Employee”
shall mean (a) each individual employed by a member of the ADI Group as of the Effective Time and (b) each Delayed Transfer ADI SpinCo
Employee, in each case regardless of whether any such employee is actively at work or is not actively at work as a result of disability
or illness, an approved leave of absence (including military leave with reemployment rights under federal Law and leave under the Family
and Medical Leave Act of 1993), vacation, personal day or similar short- or long-term absence.
“ADI SpinCo Independent
Contractor” shall mean, as of immediately prior to the Effective Time, each individual who is engaged as an independent contractor
or consultant by ADI SpinCo or any member of the ADI Group.
“ADI SpinCo Non-Employee
Director” shall mean a member of the ADI SpinCo Board (including any ADI SpinCo Transferred Non-Employee Director) who is not
an ADI SpinCo Employee.
“ADI SpinCo Post-Spin
Award” shall have the meaning set forth in Section 4.4(a).
2
“ADI SpinCo Time-Based
Restricted Stock Unit” shall have the meaning set forth in Section 4.2.
“ADI SpinCo Transferred
Non-Employee Director” shall mean each ADI SpinCo Non-Employee Director immediately after the Effective Time, who served on
the Resideo Board immediately prior to the Effective Time.
“ADI SpinCo Unvested
Deferred RSU Award” shall have the meaning set forth in Section 4.3.
“ADI SpinCo Welfare
Plan Effective Date” shall have the meaning set forth in Section 3.1(a).
“ADI SpinCo Welfare
Plans” shall mean any Welfare Plan maintained by ADI SpinCo or any member of the ADI Group.
“Agreement”
shall have the meaning set forth in the Preamble.
“ARP Act”
shall have the meaning set forth in Section 5.7(b).
“Automatic Transfer
Employees” shall mean any ADI SpinCo Employee, where local employment Laws, including the Transfer Regulations, provide for
an automatic transfer of such employees to a member of the ADI Group by operation of Law upon the transfer or demerger of a business and/or
activities (or part thereof) as a going concern and such transfer or demerger occurs as a result of the transactions contemplated by the
Separation Agreement.
“Benefit Plan”
shall mean, with respect to an entity, each compensation or employee benefit plan, program, policy, agreement or other arrangement, whether
or not “employee benefit plans” (within the meaning of Section 3(3) of ERISA, whether or not subject to ERISA), including
any benefit plan, program, policy, agreement or arrangement providing cash- or equity-based compensation or incentives, health, medical,
dental, vision, disability, accident or life insurance benefits or vacation, paid or unpaid leave, severance, retention, change in control,
termination, deferred compensation, individual employment or consulting, retirement, pension or savings benefits, supplemental income,
retiree benefit or other fringe benefit (whether or not taxable), or employee loans that are sponsored or maintained by such entity (or
to which such entity contributes or is required to contribute or in which it participates), and excluding workers’ compensation
plans, policies, programs and arrangements.
“CARES Act”
shall have the meaning set forth in Section 5.7(b).
“COBRA”
shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the regulations promulgated thereunder.
“Code”
shall mean the Internal Revenue Code of 1986, as amended.
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“Collective Bargaining
Agreement” shall mean each agreement with the collective bargaining representative, employee representative, trade union, labor
or management organization, group of employees, or works council or similar representative body of ADI SpinCo Employees, including any
national, industry or sector-specific collective agreement which is applicable to ADI SpinCo Employees, ADI SpinCo Independent Contractors,
Former ADI SpinCo Service Providers, or Other Service Providers in respect of the ADI Business or ADI Former Business, and all modifications
of, or amendments to, such agreement and any rules, procedures, awards or decisions of competent jurisdiction interpreting or applying
such agreement.
“Delayed Transfer
ADI SpinCo Employee” shall mean each individual employed by Resideo or a member of the Resideo Group as of the Effective Time
(a) whom Resideo determines in its sole discretion is either (i) exclusively or primarily engaged in the ADI Business, or (ii) necessary
for the ongoing operation of the ADI Business on and following the Effective Time, and (b) whose employment is determined by Resideo to
not be eligible to be transferred to a member of the ADI Group at or prior to the Effective Time as a result of (i) requirements
under applicable Law, (ii) participation in a disability plan or similar arrangement that is a Resideo Benefit Plan, or (iii) a
delay in setting up ADI Business operations in a particular jurisdiction sufficient to employ such individual.
“Delayed Transfer
Date” shall mean the date on which it is determined by Resideo that either (a) a Delayed Transfer ADI SpinCo Employee or
Delayed Transfer Resideo Employee is permitted to transfer from the Resideo Group to the ADI Group or from the ADI Group to the Resideo
Group, respectively, in accordance with applicable Law, or (b) the necessary business operations are set up in the relevant jurisdiction
to enable employment of the ADI SpinCo Employee or Resideo Employee by the ADI Group or Resideo Group, as applicable.
“Delayed Transfer
Resideo Employee” shall mean each individual employed by ADI SpinCo or a member of the ADI Group as of the Effective Time (a) whom
Resideo determines in its sole discretion is either (i) exclusively or primarily engaged in the Resideo Retained Business, or (ii) necessary
for the ongoing operation of the Resideo Retained Business on and following the Effective Time, and (b) whose employment is determined
by Resideo to not be eligible to be transferred from a member of the ADI Group to a member of the Resideo Group at or prior to the Effective
Time as a result of (i) requirements under applicable Law or (ii) a delay in setting up Resideo Retained Business operations
in a particular jurisdiction sufficient to employ such Resideo Employee.
“Distribution”
shall have the meaning set forth in the recitals hereto.
“Distribution Ratio”
shall mean the quotient of the total number of shares of ADI SpinCo Common Stock divided by the total number of shares of Resideo Common
Stock, in each case, outstanding as of the Effective Time.
“Earned 2024 PSUs”
shall have the meaning set forth in Section 4.4(b).
“Earned 2025 ROIC
PSUs” shall have the meaning set forth in Section 4.4(c)(i).
“Earned 2025 rTSR
PSUs” shall have the meaning set forth in Section 4.4(c)(ii).
“Employee Representative”
shall mean any works council, including national trade union, employee representative, trade union, labor or management organization,
group of employees or similar representative body.
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“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended.
“Former ADI SpinCo
Service Provider” shall mean:
(a) each
individual (i) whose employment or service with Resideo or any of its Subsidiaries or Affiliates terminated for any reason prior
to the Effective Time, and (ii) (A) who was employed or engaged by ADI SpinCo or a member of the ADI Group immediately prior
to such termination, or (B) whom Resideo determines was exclusively or primarily engaged in the ADI Business as of immediately prior
to such termination; or
(b) any
former employee, independent contractor or consultant of Resideo or any of its Subsidiaries or Affiliates who was exclusively or primarily
engaged in an ADI Former Business (i) at the time either (A) such business was sold, conveyed, assigned, transferred, spun-off,
split-off or otherwise disposed of or divested (in whole or in part) to a Person that is not a member of the ADI Group, or the Resideo
Group, or (B) the operations, activities or production of which were discontinued, abandoned, completed or otherwise terminated (in
whole or in part), or (ii) at any other time, but in such case only to the extent relating to his or her service with such ADI Former
Business.
“FSA” shall
have the meaning set forth in Section 3.1(c).
“Individual Agreement”
shall mean any Benefit Plan that is (a) an employment contract, (b) a retention, severance or change in control agreement, or
(c) any other agreement containing restrictive covenants (including confidentiality, noncompetition, non-solicitation or similar
provisions) between a member of the Resideo Group and an ADI SpinCo Employee or any Former ADI SpinCo Service Provider, as in effect immediately
prior to the Effective Time.
“IRS” shall
mean the United States Internal Revenue Service or any successor thereto, including, but not limited to, its agents, representatives,
and attorneys.
“Key Role”
shall have the meaning set forth in Section 5.11(a).
“Non-Assignable Individual
Agreement” shall have the meaning set forth in Section 2.9(a).
“Non-Automatic Transfer
Employees” shall mean any ADI SpinCo Employee who is not an Automatic Transfer Employee.
“Non-U.S. Plans”
shall have the meaning set forth in Section 3.5.
“NYSE”
shall mean the New York Stock Exchange.
“Other Service Provider”
shall mean each individual who (a) (i) is or was engaged as an independent contractor or consultant by Resideo or any of its Subsidiaries
or Affiliates, or (ii) is a current or former employee of Resideo or any of its Subsidiaries or Affiliates, and (b) is not a
Resideo Employee, an ADI SpinCo Employee, an ADI SpinCo Independent Contractor, or a Former ADI SpinCo Service Provider.
“Party”
and “Parties” shall have the meanings set forth in the Preamble.
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“Post-Distribution
ADI SpinCo Stock Value” shall mean the average of the volume weighted average per share price (as determined by Bloomberg Finance
L.P.) of ADI SpinCo Common Stock trading on the NYSE on each of the first two trading days following the Distribution Date.
“Post-Distribution
Incentives” shall have the meaning set forth in Section 5.1.
“Post-Distribution
Resideo Stock Value” shall mean the average of the volume weighted average per share price (as determined by Bloomberg Finance
L.P.) of Resideo Common Stock trading on the NYSE on each of the first two trading days following the Distribution Date.
“Resideo”
shall have the meaning set forth in the Preamble.
“Resideo 2018 Stock
Plan” shall mean the Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates, as may
be amended or amended and restated from time to time.
“Resideo 401(k) Plan”
shall mean the Resideo Technologies, Inc. 401(k) Plan, as may be amended or amended and restated from time to time.
“Resideo Adjustment
Ratio” shall mean the quotient obtained by dividing (a) the Post-Distribution Resideo Stock Value, by (b) the Resideo
Pre-Spin Stock Value.
“Resideo Benefit
Plan” shall mean any Benefit Plan sponsored, maintained or contributed to by any member of the Resideo Group.
“Resideo Board”
shall have the meaning set forth in the Recitals.
“Resideo CHCMC”
shall mean the Compensation and Human Capital Management Committee of the Resideo Board.
“Resideo Deferred
Compensation Plans” shall mean, collectively, (a) the Resideo Technologies Supplemental Savings Plan, including the Deferred
Incentive Compensation Program and the Supplemental Savings Program components thereunder, and (b) the Resideo Supplemental Executive
Retirement Plan, as each may be amended or amended and restated from time to time.
“Resideo Director
Deferred Compensation Plan” shall mean the Resideo Deferred Compensation Plan for Non-Employee Directors, as may be amended
or amended and restated from time to time.
“Resideo Director
DSU Award” shall mean, collectively, an award of (a) vested deferred stock units under the Resideo Director Stock Plan relating
to shares of Resideo Common Stock, granted in connection with an election made under the Resideo Director Deferred Compensation Plan to
defer all or a portion of the Non-Employee Director’s annual cash fee and (b) restricted stock units under the Resideo Director
Stock Plan relating to shares of Resideo Common Stock that, pursuant to an election made in accordance with the Resideo Director Stock
Plan, is subject to deferred settlement, and that has vested as of the Effective Time.
“Resideo Director
Stock Plan” shall mean the 2018 Stock Plan for Non-Employee Directors of Resideo Technologies, Inc., as may be amended or amended
and restated from time to time.
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“Resideo Director
Unvested Deferred RSU Award” shall mean an award of restricted stock units under the Resideo Director Stock Plan relating to
shares of Resideo Common Stock that is unvested as of immediately prior to the Effective Time and that, pursuant to an election made in
accordance with the Resideo Director Stock Plan, is subject to deferred settlement.
“Resideo Employee”
shall mean (a) each individual employed by Resideo or a member of the Resideo Group as of the Effective Time who is not a Delayed Transfer
ADI SpinCo Employee, and (b) each Delayed Transfer Resideo Employee, in each case regardless of whether any such employee is actively
at work or is not actively at work as a result of disability or illness, an approved leave of absence (including military leave with reemployment
rights under federal Law and leave under the Family and Medical Leave Act of 1993), vacation, personal day or similar short- or long-term
absence.
“Resideo Employee
DSU Award” shall mean restricted stock units under the Resideo 2018 Stock Plan relating to shares of Resideo Common Stock that,
pursuant to an election made in accordance with the Resideo 2018 Stock Plan, is subject to deferred settlement, and that has vested as
of the Effective Time.
“Resideo Equity Awards”
shall mean each outstanding Resideo Option, Resideo Director Unvested Deferred RSU Award, Resideo Director DSU Award, Resideo Employee
DSU Award, Resideo Time-Based Restricted Stock Unit and Resideo Performance Stock Unit.
“Resideo Equity Plans”
shall mean the Resideo 2018 Stock Plan, the Resideo Director Stock Plan, and any other stock option, stock incentive compensation plan
or arrangement, including equity award agreements, that is a Resideo Benefit Plan, as in effect as of the time relevant to the applicable
provision of this Agreement.
“Resideo Investment
Committee” shall mean the Resideo Technologies, Inc. Retirement Investment Committee.
“Resideo Non-Employee
Director” shall mean a member of the Resideo Board who is not a Resideo Employee.
“Resideo Option”
shall mean an option to purchase shares of Resideo Common Stock granted pursuant to the Resideo 2018 Stock Plan.
“Resideo Pension
Plan” shall mean the Resideo Technologies, Inc. Pension Plan, as may be amended or amended and restated from time to time.
“Resideo Performance
Stock Unit” shall mean an award granted by Resideo pursuant to a Resideo Equity Plan, that was denominated as a “Performance
Stock Unit” under the terms of such plan and the related award agreement.
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“Resideo Pre-Spin
Stock Value” shall mean the closing price per share of Resideo Common Stock trading on the NYSE on the final trading day immediately
prior to the Distribution Date.
“Resideo Time-Based
Restricted Stock Unit” shall mean an award granted by Resideo pursuant to a Resideo Equity Plan, as amended and restated, that
was denominated as a “Restricted Stock Unit” under the terms of such plan and the related award agreement and as of the Distribution
Date vests (a) solely based on the continued employment or service of the recipient, or (b) based on a combination of continued employment
or service of the recipient and the achievement of applicable performance targets over a one-year performance period.
“Resideo Welfare
Plans” shall mean any Welfare Plan maintained by Resideo or any member of the Resideo Group.
“ROIC”
shall have the meaning set forth in Section 4.4(c)(i).
“rTSR”
shall have the meaning set forth in Section 4.4(c)(i).
“Separation Agreement”
shall have the meaning set forth in the Recitals.
“Transfer Regulations”
shall mean (a) all Laws of any EU Member State implementing the EU Council Directive 2001/23/EC of 12 March 2001 on the approximation
of the Laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses
or parts of undertakings or businesses (the “Acquired Rights Directive”) and legislation and regulations of any EU
Member State implementing such Acquired Rights Directive, and (b) any similar Laws in any jurisdiction providing for an automatic transfer,
by operation of Law, of employment in the event of a transfer of business.
“Transferred Account
Balances” shall have the meaning set forth in Section 3.1(c).
“Welfare Plan”
shall mean, where applicable, a “welfare plan” (as defined in Section 3(1) of ERISA and in 29 C.F.R. §2510.3-1) whether
or not subject to ERISA or a “cafeteria plan” under Section 125 of the Code, and any benefits offered thereunder, and any
other plan offering health benefits (including medical, prescription drug, dental, vision and mental health and substance use disorder),
disability benefits, or life, accidental death and disability, pre-Tax premium conversion benefits, dependent care assistance programs,
employee assistance programs, contribution funding toward a health savings account, flexible spending accounts, tuition reimbursement
or adoption assistance programs or cashable credits.
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Section 1.2 References;
Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include
references to the plural and vice versa. Unless the context otherwise requires, the words “include,” “includes”
and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation.”
Unless the context otherwise requires, references in this Agreement to Articles, Sections, Annexes, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement. Unless the context otherwise requires,
the words “hereof,” “hereby” and “herein” and words of similar meaning when used in this Agreement
refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement. The word “or”
shall have the inclusive meaning represented by the phrase “and/or.” Any reference to any agreement, instrument or other document
means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by
the provisions thereof and by this Agreement. Any reference to any Law (including statutes and ordinances) means such law (including all
rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at
the time of determining compliance or applicability. The words “written request” or “in writing” when used in
this Agreement shall include email. Reference in this Agreement to any time shall be to New York City, New York time unless otherwise
expressly provided herein. Unless the context requires otherwise, references in this Agreement to “Resideo” shall also be
deemed to refer to the applicable member of the Resideo Group, references to “ADI SpinCo” shall also be deemed to refer to
the applicable member of the ADI Group and, in connection therewith, any references to actions or omissions to be taken, or refrained
from being taken, as the case may be, by Resideo or ADI SpinCo shall be deemed to require Resideo or ADI SpinCo, as the case may be, to
cause the applicable members of the Resideo Group or the ADI Group, respectively, to take, or refrain from taking, any such action. Unless
otherwise expressly provided herein, whenever a Party’s consent is required under this Agreement, such consent may be withheld,
delayed or conditioned by such Party in its sole and absolute discretion, and whenever any action hereunder is at a Party’s discretion,
such action shall be at such Party’s sole and absolute discretion. In the event of any inconsistency or conflict which may arise
in the application or interpretation of any of the definitions set forth in Section 1.1, for the purpose of determining what is
and is not included in such definitions, any item explicitly included on a Schedule referred to in any such definition shall take priority
over any provision of the text thereof.
ARTICLE II
GENERAL PRINCIPLES
Section 2.1 Nature of
Liabilities. All Liabilities assumed or retained by a member of the Resideo Group under this Agreement shall be Resideo Retained Liabilities
for purposes of the Separation Agreement. All Liabilities assumed or retained by a member of the ADI Group under this Agreement shall
be ADI Liabilities for purposes of the Separation Agreement. Without prejudice or limitation to any of the indemnification or liability
allocation provisions contained in this Agreement or the Separation Agreement, the Parties acknowledge and agree that, on the basis of
all facts and circumstances as of the date hereof and through the Effective Time, ADI SpinCo shall, and is expected to, satisfy any Liability
or other obligation (or portion thereof) it assumes or retains pursuant to this Agreement, whether or not Resideo has been legally relieved
of such Liability or other obligation.
Section 2.2 Transfers
of Employees and Independent Contractors Generally.
(a) Subject
to the requirements of applicable Law, through and until immediately before the Effective Time, Resideo shall use its reasonable best
efforts to (i) cause the employment of any ADI SpinCo Employee and the contract of services of any ADI SpinCo Independent Contractor to
be transferred to a member of the ADI Group no later than the Effective Time, and (ii) cause the employment of any Resideo Employee who
is employed by a member of the ADI Group and the contract of services between any independent contractor or consultant that does not qualify
as an ADI SpinCo Independent Contractor and a member of the ADI Group to be transferred to a member of the Resideo Group no later than
the Effective Time.
9
(b) Resideo
shall use its reasonable best efforts to cause each Automatic Transfer Employee to be employed by a member of the ADI Group no later than
the Effective Time in accordance with applicable Law, or as of the applicable Delayed Transfer Date, if applicable, and ADI SpinCo agrees
to take all actions reasonably necessary to cause the ADI SpinCo Employees to be so employed. If an Automatic Transfer Employee objects
to the transfer of employment to a member of the ADI Group as permitted under applicable Law and consequently does not become an employee
of the ADI Group and is terminated by Resideo as a result, then ADI SpinCo shall reimburse Resideo in accordance with Section 2.3(c)
for any severance or termination costs incurred by Resideo in connection with such termination of employment.
(c) ADI
SpinCo shall make a qualifying offer of employment to each Non-Automatic Transfer Employee who is not already employed by a member of
the ADI Group prior to the Effective Time to become employed by a member of the ADI Group effective as of no later than the Effective
Time, or as of the applicable Delayed Transfer Date, if applicable; provided that (i) if ADI SpinCo fails to make such a qualifying
offer of employment to a Non-Automatic Transfer Employee or (ii) such Non-Automatic Transfer Employee does not accept such qualifying
offer of employment, and in each case such Non-Automatic Transfer Employee does not become employed by ADI SpinCo and is terminated by
Resideo as a result, then ADI SpinCo shall reimburse Resideo in accordance with Section 2.3(c) for any severance or termination
costs incurred by Resideo in connection with such termination of employment.
(d) The
Resideo Group and ADI Group agree to execute, and to seek to have the applicable ADI SpinCo Employees execute, such documentation, if
any, as may be necessary to reflect the transfer of employment described in this Section 2.2.
Section 2.3 Assumption
and Retention of Liabilities Generally.
(a) Except
as otherwise set forth in this Agreement, in connection with the Internal Reorganization and the Contribution, or, if applicable, from
and after the Effective Time, Resideo shall, or shall cause one or more members of the Resideo Group to, accept, assume (or, as applicable,
retain) and perform, discharge, fulfill and satisfy (i) all Liabilities under all Resideo Benefit Plans, whenever incurred (except
as provided in Section 2.3(b)); (ii) all Liabilities with respect to the employment, service, termination of employment or
termination of service of all Resideo Employees, prospective employees of the Resideo Retained Business and all Other Service Providers
and their respective dependents and beneficiaries (and any alternate payees in respect thereof), whenever incurred; and (iii) all
other Liabilities or obligations expressly assigned to or assumed by a member of the Resideo Group under this Agreement.
(b) Except
as otherwise set forth in this Agreement, in connection with the Internal Reorganization and the Contribution, or, if applicable, from
and after the Effective Time, ADI SpinCo shall, or shall cause one or more members of the ADI Group to, accept, assume (or, as applicable,
retain) and perform, discharge, fulfill and satisfy (i) all Liabilities under all ADI SpinCo Benefit Plans, whenever incurred; (ii) all
Liabilities with respect to the employment, service, termination of employment or termination of service of all ADI SpinCo Employees,
prospective employees of the ADI Business, Former ADI SpinCo Service Providers and ADI SpinCo Independent Contractors and their respective
dependents and beneficiaries (and any alternate payees in respect thereof), whenever incurred; and (iii) all other Liabilities or
obligations expressly assigned to or assumed by a member of the ADI Group under this Agreement.
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(c) Subject
to the following sentence, the Parties shall promptly reimburse one another, upon reasonable request of the Party requesting reimbursement
and the presentation by such Party of such substantiating documentation as the other Party shall reasonably request, for the cost of any
obligations or Liabilities satisfied or assumed by the Party requesting reimbursement or its Affiliates that are, or that have been made
pursuant to this Agreement, the responsibility of the other Party or any of its Affiliates. Notwithstanding anything to the contrary herein,
any amount to be paid by ADI SpinCo in respect of an ADI Liability or other Liability or obligation of Resideo that is assumed by ADI
SpinCo, or otherwise treated as a Liability or obligation of Resideo that is assumed by ADI SpinCo within the meaning of Section 357(d)
of the Code, pursuant to this Agreement, in each case, as determined by Resideo in its sole discretion, shall be paid, at Resideo’s
option and in its sole discretion, in the manner set forth in Section 9.11(b) of the Separation Agreement.
(d) Notwithstanding
that a Delayed Transfer ADI SpinCo Employee or Delayed Transfer Resideo Employee shall not become employed by a member of the ADI Group
or Resideo Group, respectively, until the Delayed Transfer Date applicable to such employee, (i) ADI SpinCo or Resideo shall be responsible
for, and shall timely reimburse (for the avoidance of doubt, in accordance with Section 2.3(c)) the other for, all Liabilities
incurred by Resideo or ADI SpinCo, respectively, with regard to each such Delayed Transfer ADI SpinCo Employee or Delayed Transfer Resideo
Employee from the Effective Time to the Delayed Transfer Date applicable to such employee, and (ii) the Parties shall use their reasonable
efforts to effect the provisions of this Agreement with respect to the compensation and benefits of such Delayed Transfer ADI SpinCo Employees
and Delayed Transfer Resideo Employees following the Delayed Transfer Date applicable to such employee, it being understood that it may
not be possible to replicate the effect of such provisions under such circumstances. As the context requires, with respect to Delayed
Transfer ADI SpinCo Employees and Delayed Transfer Resideo Employees, references throughout this Agreement to the “Effective Time”
or the “Distribution Date” shall be deemed to refer to the applicable Delayed Transfer Date.
(e) Notwithstanding
any provision of this Agreement or the Separation Agreement to the contrary, ADI SpinCo shall, or shall cause one or more members of the
ADI Group to, accept, assume (or, as applicable, retain) and perform, discharge, fulfill and satisfy all Liabilities that have been accepted,
assumed or retained under this Agreement irrespective of whether accruals for such Liabilities have been transferred to ADI SpinCo or
a member of the ADI Group or included on a combined balance sheet of the ADI Business or whether any such accruals are sufficient to cover
such Liabilities.
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(f) Except
to the extent otherwise required by applicable Tax Law (as determined by Resideo in its sole discretion), each of Resideo and ADI SpinCo
shall, and shall cause the members of its respective Group to, treat for all U.S. federal (and applicable state and local) income Tax
purposes any Liabilities of Resideo that are Assumed or otherwise accepted or assumed by ADI SpinCo (whether such Liabilities are Assumed,
accepted or assumed by ADI SpinCo directly or treated as Assumed, accepted or assumed by ADI SpinCo as a result of a transfer by Resideo
to ADI SpinCo of equity interests in an entity treated as a “disregarded entity” for U.S. federal income Tax purposes) pursuant
to this Agreement in accordance with Section 5.4(a) of the Tax Matters Agreement. For purposes of this Section 2.3(f),
all references to Resideo and ADI SpinCo shall include a reference to any member of the Resideo Group and the ADI Group that is, for U.S.
federal income Tax purposes, disregarded as separate from Resideo and ADI SpinCo, respectively.
Section 2.4 Participation
in Benefit Plans. Except as provided in this Agreement or the Transition Services Agreement, effective no later than the Distribution
Date, (a) ADI SpinCo and each member of the ADI Group, to the extent applicable, shall cease to be a participating company in any
Resideo Benefit Plan, and (b) each ADI SpinCo Employee (and each of their respective dependents and beneficiaries) shall cease to
participate in, be covered by, accrue benefits under, be eligible to contribute to or have any rights under any Resideo Benefit Plan (except
to the extent of previously accrued obligations that remain a Liability of any member of the Resideo Group pursuant to this Agreement
or as otherwise provided under ERISA). Effective as of the Distribution Date, ADI SpinCo shall, or shall cause one of the members of the
ADI Group to, retain, pay, perform, fulfill and discharge all Liabilities arising out of or relating to all ADI SpinCo Benefit Plans.
Section 2.5 Service
Recognition.
(a) Except
as provided in Article IV of this Agreement or the Transition Services Agreement, from and after the Effective Time (or, if later,
from and after the Delayed Transfer Date), service of ADI SpinCo Employees and Former ADI SpinCo Service Providers with any member of
the ADI Group or any other employer, as applicable, other than any member of the Resideo Group following the Effective Time, shall not
be taken into account for any purpose under any Resideo Benefit Plan.
(b) From
and after the Effective Time, and in addition to any applicable obligations under the Transfer Regulations or other applicable Law, ADI
SpinCo shall, and shall cause each member of the ADI Group to, give each ADI SpinCo Employee full credit for purposes of eligibility,
vesting, and determination of level of benefits under any ADI SpinCo Benefit Plan for such ADI SpinCo Employee’s prior service with
any member of the Resideo Group or ADI Group or any predecessor thereto, to the same extent such service was recognized by the relevant
members of the Resideo Group or the applicable Resideo Benefit Plan prior to the later of the Effective Time (or if later, the Delayed
Transfer Date) and the date such employee ceases participating in the applicable Resideo Benefit Plan in accordance with the Transition
Services Agreement; provided that such service shall only be recognized to the extent such ADI SpinCo Employee becomes employed
by the ADI Group as of the Distribution Date or the Delayed Transfer Date, as applicable; provided, further, that such service
shall not be recognized to the extent that it would result in the duplication of benefits.
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(c) Except
to the extent prohibited by applicable Law, as soon as administratively practicable on or after the Distribution Date: (i) ADI SpinCo
shall waive or cause to be waived all limitations as to preexisting conditions or waiting periods with respect to participation and coverage
requirements applicable to each ADI SpinCo Employee (and each of their respective dependents and beneficiaries) under any ADI SpinCo Welfare
Plan in which ADI SpinCo Employees participate (or are eligible to participate) to the same extent that such conditions and waiting periods
were satisfied or waived under an analogous Resideo Welfare Plan, and (ii) ADI SpinCo shall provide or cause each ADI SpinCo Employee
(and each of their respective dependents and beneficiaries) to be provided with credit for any co-payments, deductibles or other out-of-pocket
amounts paid during the plan year in which the ADI SpinCo Employees (and each of their respective dependents and beneficiaries) become
eligible to participate in the ADI SpinCo Welfare Plans in satisfying any applicable co-payments, deductibles or other out-of-pocket requirements
under any such plans for such plan year.
Section 2.6 Collective
Bargaining Agreements.
(a) All
provisions contained in this Agreement providing for the treatment of compensation and benefits in connection with the Distribution shall
apply equally to any employee who is covered by a Collective Bargaining Agreement, except to the extent that any such Collective Bargaining
Agreement specifically provides for the compensation or benefits contemplated by such provision and, in each such case, such Collective
Bargaining Agreement shall apply rather than the terms of this Agreement. Nothing in this Agreement is intended to alter the provisions
of any Collective Bargaining Agreement or modify in any way the obligations of the Resideo Group or the ADI Group to any Employee Representative
or any other Person as described in such agreement.
(b) As
of the Effective Time, ADI SpinCo shall, and shall cause the members of the ADI Group as appropriate to, adopt and assume any Collective
Bargaining Agreements covering any of the ADI SpinCo Employees immediately prior to the Effective Time, subject to any agreed upon changes
required by the transition of such Collective Bargaining Agreements to ADI SpinCo or applicable Law, and recognize the Employee Representatives
that are party to such Collective Bargaining Agreements; provided, that any compensation or benefits that were, prior to the Distribution,
provided to ADI SpinCo Employees under any such Collective Bargaining Agreements through Resideo Benefit Plans shall, to the extent such
compensation and benefits are still required to be provided under such Collective Bargaining Agreements on and after the Distribution,
be provided as mutually agreed with such Employee Representative through the ADI SpinCo Benefit Plans as set forth in this Agreement.
Section 2.7 Information
and Consultation. The Parties shall comply with all requirements and obligations to inform, consult or otherwise notify any ADI SpinCo
or Resideo Employees or Employee Representatives in relation to the transactions contemplated by this Agreement and the Separation Agreement,
whether required pursuant to any Collective Bargaining Agreement, the Transfer Regulations or other applicable Law.
Section 2.8 WARN.
Notwithstanding anything set forth in this Agreement to the contrary, none of the transactions contemplated by or undertaken by this Agreement
is intended to nor shall any transactions contemplated by or undertaken by this Agreement constitute or give rise to an “employment
loss” or employment separation within the meaning of the federal Worker Adjustment and Retraining Notification (WARN) Act, or any
other federal, state, or local law or legal requirement addressing mass employment separations.
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Section 2.9 Individual
Agreements.
(a) Assignment
by Resideo. Resideo hereby assigns, or causes an applicable member of the Resideo Group to assign, to ADI SpinCo or an appropriate
member of the ADI Group, all Individual Agreements, with such assignment effective no later than the Effective Time; provided,
however, that, to the extent that assignment of any such Individual Agreement is not permitted by the terms of such agreement or
by applicable Law, effective as no later than the Effective Time, each member of the ADI Group shall be considered to be a successor to
each member of the Resideo Group for purposes of, and a third-party beneficiary with respect to, such Individual Agreement (“Non-Assignable
Individual Agreement”), such that each member of the ADI Group shall enjoy all the rights and benefits of the applicable member
of the Resideo Group under such agreement (including rights and benefits as a third-party beneficiary), and to the extent that no member
of the ADI Group is recognized as a successor or third-party beneficiary to an Individual Agreement for which any member of the ADI Group
seeks enforcement, then Resideo shall take such lawful and reasonable actions as reasonably requested by ADI to enforce or cooperate in
the enforcement of a Non-Assignable Individual Agreement at the sole cost and expense of ADI; provided, further, that in
no event shall Resideo be permitted to enforce any restrictive covenants contained in any Individual Agreement against an ADI SpinCo Employee
for action taken in such individual’s capacity as an ADI SpinCo Employee.
(b) Assumption
by ADI SpinCo. Effective no later than the Effective Time, ADI SpinCo hereby assumes and honors, or causes an appropriate member of
the ADI Group to assume and honor, each Individual Agreement, including any rights, benefits, Liabilities and obligations thereunder of
the applicable member of the Resideo Group. ADI SpinCo shall reimburse Resideo in accordance with Section 2.3(c) for any costs
and Liabilities borne by any member of the Resideo Group under any Non-Assignable Individual Agreement.
(c) Further
Actions. Solely to the extent required in order to cause the assignment and assumption of Individual Agreements as contemplated by
this Section 2.9 to be effective, Resideo and ADI SpinCo shall, or shall cause a member of the Resideo Group or the ADI Group,
as applicable, to take all actions reasonably necessary to effectuate such assignment and assumption.
Section 2.10 Payroll
Services. Except as may otherwise be provided in accordance with the Transition Services Agreement, prior to, on and after the Distribution
Date, the members of the ADI Group shall be solely responsible for providing payroll services to the ADI SpinCo Employees and Former ADI
SpinCo Service Providers.
Section 2.11 No Change
in Control. The Parties hereto agree that none of the transactions contemplated by the Separation Agreement constitute a “change
in control,” “change of control” or similar term, as applicable, within the meaning of any Resideo Benefit Plan or ADI
SpinCo Benefit Plan; provided, that, the transactions contemplated by the Separation Agreement shall constitute a “Divestiture”
as such term is defined in the Resideo Technologies, Inc. Severance Plan for Designated Officers and any comparable ADI SpinCo severance
plan. Accordingly, except as otherwise provided in this Agreement (including, without limitation, the proviso in the preceding sentence),
no provision of this Agreement shall be construed to create any right, or accelerate vesting or entitlement, to any compensation or benefit
whatsoever on the part of any ADI SpinCo Employee or Resideo Employee or other former, current or future employee of the Resideo Group
or ADI Group under any Benefit Plan of the Resideo Group or ADI Group.
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ARTICLE III
CERTAIN BENEFIT
PLAN PROVISIONS
Section 3.1 Health and
Welfare Benefit Plans.
(a) Effective
as of the Distribution Date or such later date as agreed to between Resideo and ADI SpinCo in accordance with the Transition Services
Agreement (such applicable date, the “ADI SpinCo Welfare Plan Effective Date”), (i) ADI SpinCo shall or shall
cause a member of the ADI Group to have in effect ADI SpinCo Welfare Plans providing health and welfare benefits for the benefit of each
ADI SpinCo Employee (and their dependents and beneficiaries) with terms that are substantially similar to those provided to the applicable
ADI SpinCo Employee (and their dependents and beneficiaries) immediately prior to the ADI SpinCo Welfare Plan Effective Date; and (ii) each
ADI SpinCo Employee (and their dependents and beneficiaries) shall cease active participation in the corresponding Resideo Welfare Plan.
For purposes of this Section 3.1, the term “ADI SpinCo Employees” shall be deemed to include any Former ADI SpinCo
Service Provider who was receiving welfare benefits in connection with the termination of his or her employment from a member of the Resideo
Group or the ADI Group as of the applicable ADI SpinCo Welfare Plan Effective Date. Notwithstanding the foregoing, to the extent that
Resideo determines that the aforementioned provision of welfare benefits by the ADI Group to a Former ADI SpinCo Service Provider is not
feasible, such Former ADI SpinCo Service Provider may continue active participation in the corresponding Resideo Welfare Plan after the
ADI SpinCo Welfare Plan Effective Date, and ADI SpinCo shall reimburse Resideo for any Liabilities associated with such Former ADI SpinCo
Service Provider after the ADI SpinCo Welfare Plan Effective Date.
(b) (i) Resideo
shall retain all Liabilities in accordance with the applicable Resideo Welfare Plan for all reimbursement claims (such as medical and
dental claims) and for all non-reimbursement claims (such as life insurance claims), in each case, incurred by ADI SpinCo Employees and
Former ADI SpinCo Service Providers (and each of their respective dependents and beneficiaries) under such Benefit Plans prior to the
applicable ADI SpinCo Welfare Plan Effective Date, and (ii) the members of the ADI Group shall retain all Liabilities in accordance
with the ADI SpinCo Welfare Plans for all reimbursement claims (such as medical and dental claims) and for all non-reimbursement claims
(such as life insurance claims), in each case, incurred by ADI SpinCo Employees and Former ADI SpinCo Service Providers (and each of their
respective dependents and beneficiaries) on or after the applicable ADI SpinCo Welfare Plan Effective Date; provided, that ADI
SpinCo shall reimburse Resideo in accordance with the Transition Services Agreement for Liabilities incurred under clause (i) between
the Distribution Date and the applicable ADI SpinCo Welfare Plan Effective Date. For purposes of this Section 3.1(b), a benefit
claim shall be deemed to be incurred as follows: (i) health, dental, vision, employee assistance program and prescription drug benefits
(including in respect of any hospital confinement), upon provision of such services, materials or supplies; and (ii) life, accidental
death and dismemberment and business travel accident insurance benefits, upon the death, cessation of employment or other event giving
rise to such benefits.
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(c) Effective
as of no later than the applicable ADI SpinCo Welfare Plan Effective Date, ADI SpinCo shall, or shall cause the members of the ADI Group
to, establish a cafeteria plan that shall provide premium payment and health and dependent care flexible spending account (“FSA”)
benefits to ADI SpinCo Employees on and after the ADI SpinCo Welfare Plan Effective Date (collectively, the “ADI SpinCo Cafeteria
Plan”). The Parties shall use commercially reasonable efforts to ensure that (i) the elections made by each ADI SpinCo Employee
with respect to Resideo Welfare Plans (including FSAs) under a Resideo cafeteria plan will, in the absence of an affirmative special mid-year
election (which, for clarity, the Distribution shall not constitute an event permitting a mid-year election change under the ADI SpinCo
Cafeteria Plan), transfer to the ADI SpinCo Cafeteria Plan with respect to corresponding ADI SpinCo Welfare Plans (including FSAs), and
(ii) any FSA balances of ADI SpinCo Employees (whether positive or negative) (the “Transferred Account Balances”)
under a Resideo cafeteria plan are transferred as soon as practicable after the applicable ADI SpinCo Welfare Plan Effective Date, from
the Resideo FSAs to the ADI SpinCo FSAs. The FSA components of the ADI SpinCo Cafeteria Plan shall assume responsibility as of the applicable
ADI SpinCo Welfare Plan Effective Date for all outstanding health or dependent care claims under the corresponding Resideo FSAs of each
ADI SpinCo Employee as of the first day of the year in which the applicable ADI SpinCo Welfare Plan Effective Date occurs and ADI SpinCo
shall assume and agree to perform, discharge, fulfill and satisfy the obligations of the corresponding Resideo FSAs from and after the
ADI SpinCo Welfare Plan Effective Date (including, without limitation, the obligation to provide reimbursement for eligible claims incurred
prior to the ADI SpinCo Welfare Plan Effective Date). Subject to Section 2.3(c), as soon as practicable after the applicable ADI
SpinCo Welfare Plan Effective Date, and in any event within thirty (30) days after the amount of the Transferred Account Balances
is determined or such later date as mutually agreed upon by the Parties, Resideo shall pay ADI SpinCo the net aggregate amount of the
Transferred Account Balances, if such amount is positive, and ADI SpinCo shall pay Resideo the net aggregate amount of the Transferred
Account Balances, if such amount is negative. Without limiting the generality of Section 6.7, Resideo and ADI SpinCo shall use
commercially reasonable efforts to cooperate in administering any Resideo FSAs and health savings accounts in connection with the Distribution
in accordance with the terms of the applicable Resideo Benefit Plan, including by exchanging any necessary participant records and engaging
recordkeepers, administrators, providers, insurers and other third parties.
Section 3.2 401(k) Plans.
(a) (i) Effective
as of the Distribution Date, ADI SpinCo shall cause a member of the ADI Group to have in effect one or more defined contribution savings
plans and related trusts that satisfy the requirements of Sections 401(a) and 401(k) of the Code in which each ADI SpinCo Employee who
participated in the Resideo 401(k) Plan immediately prior thereto shall be eligible to participate (the “ADI SpinCo 401(k) Plan”),
with terms that are substantially similar to those provided by the Resideo 401(k) Plan immediately prior to the Distribution Date, (ii) the
participation of each ADI SpinCo Employee who is a participant in the Resideo 401(k) Plan shall automatically cease effective immediately
prior to the Distribution Date (or if later, as of the individual’s Delayed Transfer Date), (iii) as soon as practicable after
the ADI SpinCo 401(k) Plan becomes effective, Resideo shall cause the accounts (including any outstanding participant loan balances) in
the Resideo 401(k) Plan attributable to ADI SpinCo Employees and all plan assets of the Resideo 401(k) Plan related thereto to be transferred
in cash, or in-kind (as determined by the Resideo Investment Committee) to the ADI SpinCo 401(k) Plan, and subject to such transfer, the
ADI SpinCo 401(k) Plan shall assume and be solely responsible for and shall perform, discharge, fulfill and satisfy all Liabilities for
or relating to ADI SpinCo Employees under the Resideo 401(k) Plan and (iv) effective as of the Distribution Date, the ADI Group shall
be responsible for all ongoing rights of or relating to ADI SpinCo Employees for future participation in the ADI SpinCo 401(k) Plan.
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(b) Without
limitation or duplication of Section 3.2(a)(i), each ADI SpinCo Employee who participates in the ADI SpinCo 401(k) Plan will be
eligible to receive a matching contribution for the 2026 plan year under the ADI SpinCo 401(k) Plan, subject to terms and conditions that
are similar to those applicable to matching contributions under the Resideo 401(k) Plan (including vesting schedule and condition to remain
employed through the last payday of the 2026 plan year). Subject to applicable Law, the ADI SpinCo 401(k) Plan shall provide that the
amount of each eligible ADI SpinCo Employee’s matching contribution under the ADI SpinCo 401(k) Plan for the 2026 plan year shall
be at least equal to the same matching contribution to which such ADI SpinCo Employee would be entitled under the Resideo 401(k) Plan
had such ADI SpinCo Employee remained employed with the Resideo Group through the last payday in 2026 (without regard to any requirement
to remain employed with the Resideo Group through such date), taking into account for each such ADI SpinCo Employee both (x) eligible
compensation paid and contributions made to the Resideo 401(k) Plan between January 1, 2026 and the Distribution Date, and (y) eligible
compensation paid and contributions made to the ADI SpinCo 401(k) Plan between the Distribution Date and December 31, 2026. Notwithstanding
any provision of this Agreement or the Separation Agreement to the contrary, the full cost attributable to the matching contributions
under the ADI SpinCo 401(k) Plan described in this Section 3.2(b) shall be for the account of ADI SpinCo, and Resideo shall have
no obligation to pay or reimburse ADI SpinCo for any portion of such cost.
(c) Other
than with respect to ADI SpinCo Employees as provided in Section 3.2(a), Resideo shall retain all accounts and all Assets
and Liabilities relating to the Resideo 401(k) Plan, including in respect of each Former ADI SpinCo Service Provider.
Section 3.3 U.S. Defined
Benefit Pension Plans. Resideo shall retain sponsorship of the Resideo Pension Plan and all Assets and Liabilities arising out of
or relating to the Resideo Pension Plan.
Section 3.4 Deferred
Compensation Arrangements.
(a) Resideo
shall retain all Liabilities under the Resideo Deferred Compensation Plans in respect of all benefits accrued thereunder for all participants
and their respective beneficiaries, and shall retain all of the Assets related thereto (including any Assets relating to corporate-owned
life insurance policies). Effective as of the Distribution Date, each ADI SpinCo Employee who is a participant in any of the Resideo Deferred
Compensation Plans shall cease to have any additional compensation contributed or deferred thereunder. From and after the Distribution
Date, ADI SpinCo shall or shall cause a member of the ADI Group to provide notice to Resideo within five (5) days following the date on
which any ADI SpinCo Employee with an accrued benefit under any of the Resideo Deferred Compensation Plans incurs a “separation
from service” (as such term is defined in Section 409A of the Code) from the ADI Group. Resideo shall have the sole responsibility
for the administration of the Resideo Deferred Compensation Plans and the payment of benefits thereunder to Resideo Employees, ADI SpinCo
Employees, Former ADI SpinCo Service Providers or Other Service Providers, and no member of the ADI Group shall have any Liability or
responsibility therefor (other than with respect to the obligation to provide notice in accordance with the preceding sentence).
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(b) Resideo
shall retain all Liabilities in respect of the Resideo Employee DSU Awards. Each Resideo Employee DSU Award that is outstanding immediately
prior to the Effective Time shall be adjusted in accordance with the resolutions adopted by the Resideo CHCMC in connection with the Distribution
and shall continue to be denominated in shares of Resideo Common Stock and be subject to the same terms and conditions (including settlement
terms) after the Effective Time as were applicable to such Resideo Employee DSU Award prior to the Effective Time. From and after the
Distribution Date, ADI SpinCo shall or shall cause a member of the ADI Group to provide notice to Resideo within five (5) days following
the date on which any ADI SpinCo Employee who holds a Resideo Employee DSU Award incurs a “separation from service” (as such
term is defined in Section 409A of the Code) from the ADI Group. From and after the Effective Time, Resideo shall have the sole responsibility
for the administration of the Resideo Employee DSU Awards and the payment of benefits thereunder with respect to, and no member of the
ADI Group shall have any Liability or responsibility therefor (other than with respect to the obligation to provide notice in accordance
with the preceding sentence).
(c) Except
as otherwise provided in Section 4.5, Resideo shall retain all Liabilities under the Resideo Director Deferred Compensation
Plan in respect of all benefits accrued thereunder for all participants and their respective beneficiaries, and shall retain all of the
Assets related thereto (including any Assets relating to corporate-owned life insurance policies). Effective as of the Distribution Date,
ADI SpinCo shall or shall cause a member of the ADI Group to have in effect a nonqualified deferred compensation plan for the benefit
of each ADI SpinCo Non-Employee Director with terms that are substantially similar to those provided in the Resideo Director Deferred
Compensation Plan. Each Resideo Director DSU Award subject to the Resideo Director Deferred Compensation Plan that is outstanding immediately
prior to the Effective Time shall be converted, as of the Effective Time, into a Resideo Director DSU Award and ADI SpinCo Director DSU
Award in accordance with and otherwise subject to the terms and conditions set forth in Section 4.5.
(d) For
the avoidance of doubt, the transactions contemplated by the Separation Agreement shall not in and of itself result in a separation of
service triggering the payment of benefits under any of the Resideo Deferred Compensation Plans, the Resideo Director Deferred Compensation
Plan (including the settlement of Resideo Director DSU Awards (or ADI SpinCo Director DSU Awards converted therefrom)) or the Resideo
Employee DSU Awards.
Section 3.5 Non-U.S.
Plans. Notwithstanding any provision of this Agreement to the contrary, other than as set forth in this Section 3.5, the treatment
of each Resideo Benefit Plan and ADI SpinCo Benefit Plan that is maintained primarily in respect of individuals who are located outside
of the United States (together, the “Non-U.S. Plans”) shall be subject to the terms and conditions set forth in the
applicable Conveyancing and Assumption Instrument; provided that if the treatment of any such Non-U.S. Plan is not specifically
covered by such Conveyancing and Assumption Instrument, then unless otherwise agreed upon by the Parties, (a) ADI SpinCo shall assume
and fully perform, pay, discharge, and satisfy all obligations of the Non-U.S. Plans relating to ADI SpinCo Employees, ADI SpinCo Independent
Contractors and Former ADI SpinCo Service Providers, whenever incurred, (b) Resideo shall assume and fully perform, pay, discharge, and
satisfy all obligations of the Non-U.S. Plans relating to Resideo Employees and Other Service Providers, whenever incurred, and (c) Resideo
shall determine in its sole discretion the extent to which any Assets held in respect of such Non-U.S. Plans shall be transferred to ADI
SpinCo.
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Section 3.6 Chargeback
of Certain Costs. Nothing contained in this Agreement shall limit Resideo’s ability to charge back any Liabilities that it incurs
in respect of any Resideo Benefit Plan to any of its operating companies in the ordinary course of business consistent with its past practices.
ARTICLE IV
EQUITY INCENTIVE
AWARDS
Section 4.1 Treatment
of Resideo Stock Options. Each Resideo Option that is outstanding immediately prior to the Effective Time, whether held by a current
or former Resideo Employee or Other Service Provider or a current ADI SpinCo Employee or Former ADI SpinCo Service Provider or Other Service
Provider, shall generally remain subject to the same terms and conditions applicable to such Resideo Option (including the term, exercisability
and vesting schedule, if any), immediately prior to the Effective Time; provided, however, that from and after the
Effective Time:
(a) the
number of shares of Resideo Common Stock subject to such Resideo Option shall be equal to the quotient, rounded down to the nearest whole
share, of (i) the number of shares of Resideo Common Stock subject to such Resideo Option immediately prior to the Effective Time divided
by (ii) the Resideo Adjustment Ratio; and
(b) the
per share exercise price of such Resideo Option shall be equal to the product, rounded up to the nearest cent, of (i) the per share exercise
price of such Resideo Option immediately prior to the Effective Time, times (ii) the Resideo Adjustment Ratio.
(c) Notwithstanding
anything to the contrary in this Section 4.1, the exercise price, the number of shares of Resideo Common Stock subject to
each Resideo Option following the Effective Time, and the terms and conditions of exercise of each such Resideo Option shall be determined
in a manner that is not inconsistent with the requirements of Section 409A of the Code and in all events subject to Section 4.7(a).
In addition, the Distribution shall not in and of itself result in a separation of service of any ADI SpinCo Employee, triggering the
commencement of the post-termination exercise period of a Resideo Option, which will instead commence upon a termination of employment
from the ADI Group.
Section 4.2 Treatment
of Unvested Resideo Time-Based Restricted Stock Units. Each Resideo Time-Based Restricted Stock Unit that is outstanding and unvested
immediately prior to the Effective Time and that is held by an ADI SpinCo Employee or an ADI SpinCo Transferred Non-Employee Director
shall be converted into an award of unvested restricted stock units of ADI SpinCo and shall, except as otherwise provided in this Section 4.2,
be subject to the same terms and conditions (including vesting schedule) after the Effective Time as were applicable to such Resideo Time-Based
Restricted Stock Unit prior to the Effective Time (each, an “ADI SpinCo Time-Based Restricted Stock Unit”). After
the Effective Time, the number of shares of ADI SpinCo Common Stock underlying each ADI SpinCo Time-Based Restricted Stock Unit shall
be equal to (i) the number of shares of Resideo Common Stock that were issuable upon the vesting of such Resideo Time-Based Restricted
Stock Units immediately prior to the Effective Time divided by (ii) the ADI SpinCo Conversion Ratio, with each discrete grant rounded
up to the nearest whole share, subject to Section 4.7(a). Notwithstanding anything to the contrary contained herein, following
the Effective Time, the ADI SpinCo Time-Based Restricted Stock Unit will remain subject to the same vesting conditions as in effect prior
to the Distribution, except that the relevant service for the purposes of fulfilling such vesting conditions will be service to the ADI
Group immediately following the Distribution.
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Section 4.3 Treatment
of Resideo Director Unvested Deferred RSU Awards. Each Resideo Director Unvested Deferred RSU Award that is outstanding immediately
prior to the Effective Time and that is held by an ADI SpinCo Transferred Non-Employee Director shall be converted into an award of deferred
unvested restricted stock units of ADI SpinCo and shall, except as otherwise provided in this Section 4.3, be subject to the
same terms and conditions (including vesting schedule, deferral schedule and permissible payment events) after the Effective Time as were
applicable to such Resideo Director Unvested Deferred RSU Award prior to the Effective Time (each, an “ADI SpinCo Unvested
Deferred RSU Award”). After the Effective Time, the number of shares of ADI SpinCo Common Stock underlying each ADI SpinCo Unvested
Deferred RSU Award shall be equal to (i) the number of shares of Resideo Common Stock that were issuable upon the vesting of such
Resideo Director Unvested Deferred RSU Award immediately prior to the Effective Time divided by (ii) the ADI SpinCo Conversion Ratio,
with each discrete grant rounded up to the nearest whole share, subject to Section 4.7(a). Notwithstanding anything to the contrary
contained herein, following the Effective Time, the ADI SpinCo Unvested Deferred RSU Awards will remain subject to the same vesting conditions
and payment timing rules as in effect prior to the Distribution, except that (x) the relevant service for the purposes of fulfilling such
vesting conditions will be service to the ADI Group immediately following the Distribution, and (y) the relevant service recipient for
the purposes of determining whether an ADI SpinCo Transferred Non-Employee Director with an ADI SpinCo Unvested Deferred RSU Award incurs
a “separation from service” (as such term is defined in Section 409A of the Code) shall be the ADI Group.
Section 4.4 Treatment
of Unvested Resideo Performance Stock Units.
(a) Each
Resideo Performance Stock Unit that is outstanding and unvested immediately prior to the Effective Time and that is held by an ADI SpinCo
Employee shall automatically be converted into an award of unvested time-based and/or performance-based restricted stock units of ADI
SpinCo (each, an “ADI SpinCo Post-Spin Award”) after the Effective Time in accordance with the terms and conditions
set forth in this Section 4.4. For purposes of this Section 4.4, any Resideo Performance Stock Units that are
outstanding and unvested immediately prior to the Effective Time and held by an ADI SpinCo Employee (i) that were granted in 2024 are
hereinafter referred to as the “2024 PSUs”; (ii) that were granted in 2025 are hereinafter referred to as the “2025
PSUs”; and (iii) that were granted in 2026 are hereinafter referred to as the “2026 PSUs.”
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(b) With
respect to each 2024 PSU, the number of Resideo Performance Stock Units deemed earned in accordance with this Section 4.4(b) shall
be determined based on actual performance against the applicable performance goals measured as of June 30, 2026, as determined by the
Resideo CHCMC (the “Earned 2024 PSUs”). Each Earned 2024 PSU will be converted into an ADI SpinCo Post-Spin Award
that will no longer be subject to any performance-based vesting conditions but will remain subject to the same time-vesting conditions
as in effect prior to the Distribution, except that the relevant service for the purposes of fulfilling such vesting conditions (if any)
will be service to the ADI Group immediately following the Distribution. Following the Effective Time, the number of shares of ADI SpinCo
Common Stock underlying each ADI SpinCo Post-Spin Award converted in accordance with this Section 4.4(b) shall be equal to
(i) the number of Earned 2024 PSUs divided by (ii) the ADI SpinCo Conversion Ratio, with each discrete grant rounded up to the nearest
whole share, subject to Section 4.7(a).
(c) With
respect to each 2025 PSU, the number of shares of ADI SpinCo Common Stock underlying each ADI SpinCo Post-Spin Award shall be determined
based on a split performance period, with performance measured separately for the period prior to the date specified in this Section
4.4(c) and the period thereafter, as follows:
i. For
the portion of the 2025 PSUs subject to a return on invested capital (“ROIC”) performance metric (the “2025
ROIC PSUs”), (x) fifty percent (50%) of the target number of units subject to the 2025 ROIC PSUs shall be measured based
on actual performance against the applicable ROIC performance goals for the period from the beginning of the applicable performance period
through December 31, 2025, as determined by the Resideo CHCMC (with the number of Resideo Performance Stock Units deemed earned under
this Section 4.4(c)(i)(x), determined based on such actual performance (the “Earned 2025 ROIC PSUs”)),
and thereafter subject to the time-based vesting conditions set forth in Section 4.4(c)(iii), and (y) the remaining fifty
percent (50%) of the target number of units subject to the 2025 ROIC PSUs shall remain unearned and instead subject to performance-based
vesting based on relative total shareholder return (“rTSR”) performance of ADI SpinCo Common Stock for a performance
period and pursuant to performance goals established by the Resideo CHCMC. Following the Effective Time, the number of shares of ADI SpinCo
Common Stock underlying each such ADI SpinCo Post-Spin Award converted from a 2025 ROIC PSU in accordance with this Section 4.4(c)(i)
shall be equal to (i) the sum of (A) the number of the Earned 2025 ROIC PSUs and (B) fifty percent (50%) of the target
number of units subject to the 2025 ROIC PSUs, divided by (ii) the ADI SpinCo Conversion Ratio, with each discrete grant rounded
up to the nearest whole share, subject to Section 4.7(a).
ii. For
the portion of the 2025 PSUs subject to an rTSR performance metric (the “2025 rTSR PSUs”), (x) fifty percent (50%)
of the target number of units subject to the 2025 rTSR PSUs shall be measured based on actual performance against the applicable rTSR
performance goals for the period from the beginning of the applicable performance period through June 30, 2026, as determined by the Resideo
CHCMC (with the number of Resideo Performance Stock Units deemed earned under this Section 4.4(c)(ii)(x) determined based
on such actual performance (the “Earned 2025 rTSR PSUs”), and thereafter subject to the time-based vesting conditions
set forth in Section 4.4(c)(iii), and (y) the remaining fifty percent (50%) of the target number of units subject to the 2025
rTSR PSUs shall remain unearned and subject to vesting based on rTSR performance of ADI SpinCo Common Stock for a performance period and
pursuant to performance goals established by the Resideo CHCMC. Following the Effective Time, the number of shares of ADI SpinCo Common
Stock underlying each such ADI SpinCo Post-Spin Award converted from a 2025 rTSR PSU in accordance with this Section 4.4(c)(ii)
shall be equal to (i) the sum of (A) the number of the Earned 2025 rTSR PSUs and (B) fifty percent (50%) of the target number of
units subject to the 2025 ROIC PSUs divided by (ii) the ADI SpinCo Conversion Ratio, with each discrete grant rounded up to the nearest
whole share, subject to Section 4.7(a).
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iii. Following
the Effective Time, each ADI SpinCo Post-Spin Award contemplated under this Section 4.4 (c) will, in addition to any performance
vesting condition noted above, as applicable, remain subject to the same time-vesting conditions as in effect prior to the Distribution,
except that the relevant service for the purposes of fulfilling such vesting conditions (if any) will be service to the ADI Group immediately
following the Distribution.
(d) With
respect to each 2026 PSU, the number of shares of ADI SpinCo Common Stock underlying each ADI SpinCo Post-Spin Award shall be equal to
(i) one hundred percent (100%) of the target number of units subject to such 2026 PSU, which will be subject to time- and performance-based
vesting criteria as determined by the Resideo CHCMC, divided by (ii) the ADI SpinCo Conversion Ratio, with each discrete grant rounded
up to the nearest whole share, subject to Section 4.7(a). Each ADI SpinCo Post-Spin Award contemplated under this Section 4.4 (d)
will be subject to the same time-vesting conditions as in effect prior to the Distribution, except that the relevant service for the purposes
of fulfilling the time-based vesting conditions will be service to the ADI Group immediately following the Distribution.
Section 4.5 Treatment
of Resideo Director DSU Awards.
(a) Each
Resideo Director DSU Award held by a member of the Resideo Board as of immediately prior to the Effective Time that is outstanding as
of immediately prior to the Effective Time shall be converted into both a Resideo Director DSU Award and an ADI SpinCo Director DSU Award,
in each case subject to the same terms and conditions applicable to such Resideo Director DSU Award immediately prior to the Effective
Time; provided, however, that from and after the Effective Time:
i. the
number of shares of Resideo Common Stock subject to the post-conversion Resideo Director DSU Award shall be equal to the same number of
shares of Resideo Common Stock subject to such Resideo Director DSU Award immediately prior to the Effective Time; and
ii. the
number of shares of ADI SpinCo Common Stock subject to the post-conversion ADI SpinCo Director DSU Award shall be equal to the product,
rounded up to the nearest whole share, of (A) the number of shares of Resideo Common Stock subject to such Resideo Director DSU Award
immediately prior to the Effective Time multiplied by (B) the Distribution Ratio.
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(b) Following
the Effective Time, the timing of settlement of the Resideo Director DSU Award shall be determined as follows:
i. Each
Resideo Director DSU Award and ADI SpinCo Director DSU Award held by a current or former Resideo Non-Employee Director who does not serve
on either the Resideo Board or the ADI SpinCo Board immediately following the Effective Time shall be settled upon or following the holder’s
separation from service with the Resideo Board, at such dates and times as were applicable immediately before the Effective Time.
ii. Each
Resideo Director DSU Award and ADI SpinCo Director DSU Award held by a Resideo Non-Employee Director who continues to serve on the Resideo
Board immediately following the Effective Time (regardless of whether such individual also serves on the ADI SpinCo Board) shall be settled
upon or following the holder’s separation from service with the Resideo Board, at such dates and times as were applicable immediately
before the Effective Time.
iii. Each
Resideo Director DSU Award and ADI SpinCo Director DSU Award held by an ADI SpinCo Transferred Non-Employee Director who does not serve
on the Resideo Board immediately following the Effective Time shall be settled upon or following the holder’s separation from service
from the ADI SpinCo Board, at such dates and times as were applicable immediately before the Effective Time.
(c) Resideo
Director DSU Awards, as adjusted pursuant to this Section 4.5 and regardless of by whom held, shall be settled by Resideo
pursuant to the terms of the applicable Resideo Equity Plan, and ADI SpinCo Director DSU Awards, regardless of by whom held, shall be
settled by ADI SpinCo pursuant to the terms of the ADI SpinCo 2026 Stock Plan. From and after the Distribution Date, ADI SpinCo shall
or shall cause a member of the ADI Group to provide notice to Resideo within five (5) days following the date on which any ADI SpinCo
Transferred Non-Employee Director with a Resideo Director DSU Award incurs a “separation from service” (as such term is defined
in Section 409A of the Code) from the ADI Group.
(d) For
the avoidance of doubt, the Distribution shall not in and of itself result in a separation of service triggering the settlement of any
Resideo Director DSU Award.
Section 4.6 ADI SpinCo
Stock Plan. Prior to the Effective Time, (a) ADI SpinCo shall have established the ADI SpinCo 2026 Stock Plan for the benefit of eligible
ADI SpinCo Employees, ADI SpinCo Non-Employee Directors and other service providers of ADI SpinCo, as well as Resideo Non-Employee Directors
solely in respect of the conversion of the ADI SpinCo Director DSU Awards in accordance with and otherwise subject to the terms and conditions
set forth in Section 4.5, which shall permit the grant and issuance of equity incentive awards denominated in ADI SpinCo Common
Stock as described in this Article IV, and (b) Resideo, as the sole stockholder of ADI SpinCo, shall approve the ADI SpinCo
2026 Stock Plan. After the Effective Time, ADI SpinCo may make such changes, modifications or amendments to the ADI SpinCo 2026 Stock
Plan, as may be required by applicable Law or as are necessary and appropriate to reflect the Distribution or to permit the implementation
of the provisions of this Article IV.
23
Section 4.7 General
Terms.
(a) All
of the adjustments described in this Article IV shall be effected in accordance with Sections 424 and 409A of the Code, in each
case to the extent applicable. Each equity incentive award held by an ADI SpinCo Employee that is outstanding as of immediately prior
to the Effective Time and granted pursuant to the Resideo 2018 Stock Plan shall be treated as described in this Article IV;
provided, however, that, prior to the Effective Time, the Resideo CHCMC may provide (i) for different treatment with
respect to some or all of the awards held by ADI SpinCo Employees located outside of the United States to the extent that the Resideo
CHCMC deems such treatment necessary or appropriate, including to avoid adverse Tax consequences to such ADI SpinCo Employees, and (ii) for
the adjustment of any performance conditions. Any such adjustments made by the Resideo CHCMC pursuant to the foregoing sentence shall
be deemed incorporated by reference herein as if fully set forth below and shall be binding on the Parties and their respective Affiliates.
(b) Resideo
Equity Awards, other than those awards that are canceled or converted pursuant to this Article IV, shall remain subject to all
terms and conditions of the applicable Resideo Equity Plans, including the adjustment provisions thereof, and shall be adjusted in accordance
with the resolutions adopted by the Resideo CHCMC in connection with the Distribution.
(c) The
Parties shall use their reasonable best efforts to maintain effective registration statements with the Securities and Exchange Commission
with respect to the awards described in this Article IV, to the extent that any such registration statement is required by applicable
Law.
(d) The
Parties hereby acknowledge that the provisions of this Article IV are intended to achieve certain Tax, legal and accounting objectives,
and, in the event that such objectives are not achieved, the Parties agree to negotiate in good faith regarding such other actions that
may be necessary or appropriate to achieve such objectives.
(e) The
provisions of this Article IV shall not apply unless the Distribution takes place.
ARTICLE V
ADDITIONAL
MATTERS
Section 5.1 Cash Incentive
Programs. Each Resideo cash incentive program applicable to ADI SpinCo Employees whose performance period is currently open will conclude
as of July 3, 2026, and fifty percent (50%) of the 2026 target cash incentive will be measured based on actual performance as
of such date and become payable by ADI SpinCo as set forth herein (the “Accrued Incentive Amount”). In addition,
following the Effective Date, each applicable ADI SpinCo Employee who participated in a Resideo cash incentive program as of immediately
prior to the Effective Date shall be eligible to receive a cash incentive bonus payment in respect of the remaining fifty percent (50%)
of the 2026 target cash incentive in accordance with the terms and conditions, including performance metrics, established by the Compensation
Committee of the ADI SpinCo Board for the period between the Effective Date and December 31, 2026 (the “Post-Distribution
Incentives”). Notwithstanding any provision of this Agreement or the Separation Agreement to the contrary, (a) ADI SpinCo
shall assume and perform, discharge, fulfill and satisfy all Liabilities and obligations in respect of the Accrued Incentive Amount and
Post-Distribution Incentives in respect of ADI SpinCo Employees, which shall be paid in accordance with the terms (i) of the applicable
Resideo cash incentive program in respect of the Accrued Incentive Amount, and (ii) established by the Compensation Committee of
the ADI SpinCo Board in respect of the Post-Distribution Incentives; and (b) Resideo shall not transfer assets in respect of the
Accrued Incentive Amount. In no event shall the aggregate incentive amounts paid to the applicable ADI SpinCo Employees in respect of
the 2026 performance period be less than the Accrued Incentive Amount.
24
Section 5.2 Time-Off
Benefits. Unless otherwise required in a Collective Bargaining Agreement, the Transfer Regulations or applicable Law, ADI SpinCo shall
(a) credit each ADI SpinCo Employee with the amount of accrued but unused vacation time, paid time off and other time-off benefits as
such ADI SpinCo Employee had with the Resideo Group as of immediately before the date on which the employment of the ADI SpinCo Employee
transfers to ADI SpinCo, and (b) permit each such ADI SpinCo Employee to use such accrued but unused vacation time, paid time off and
other time-off benefits in the same manner and upon the same terms and conditions as the ADI SpinCo Employee would have been so permitted
under the terms and conditions of the applicable Resideo policies in effect for the year in which such transfer of employment occurs,
up to and including full exhaustion of such transferred unused vacation time, paid time off and other time-off benefits (if such full
exhaustion would be permitted under the applicable Resideo policies in effect for that year in which the transfer of employment occurs).
Section 5.3 Workers’
Compensation Liabilities. Effective no later than the Effective Time, ADI SpinCo shall assume all Liabilities for ADI SpinCo Employees,
ADI SpinCo Independent Contractors and Former ADI SpinCo Service Providers related to any and all workers’ compensation injuries,
incidents, conditions, claims or coverage, whenever incurred (including claims incurred prior to the Effective Time, but not reported
until after the Effective Time), and ADI SpinCo shall be fully responsible for the administration, management and payment of all such
claims and the performance, discharge, fulfillment and satisfaction of all such Liabilities, taking into account Section 8.1 of the
Separation Agreement regarding insurance matters. Notwithstanding the foregoing, if ADI SpinCo is unable to assume any such Liability
or the administration, management or payment of any such claim solely because of the operation of applicable Law, Resideo shall retain
such Liabilities and ADI SpinCo shall reimburse and otherwise fully indemnify Resideo (for the avoidance of doubt, in accordance with
Section 2.3(c)) for all such Liabilities, including the costs of administering the plans, programs or arrangements under which
any such Liabilities have accrued or otherwise arisen (such that the Parties are in the same net economic position as they would have
been in had such Liabilities been assumed by the applicable member of the applicable Group pursuant to this Agreement).
Section 5.4 COBRA Compliance
in the United States. Effective as of the Distribution Date, ADI SpinCo shall assume and be responsible for administering compliance
with the healthcare continuation requirements of COBRA, in accordance with the provisions of the ADI SpinCo Welfare Plans, with respect
to ADI SpinCo Employees or Former ADI SpinCo Service Providers who incurred a COBRA-qualifying event under an ADI SpinCo Welfare Plan
at any time on or after the Distribution Date and/or any COBRA qualifying event in connection with the transactions described in the Separation
Agreement. ADI SpinCo shall also be responsible for administering compliance with the health care continuation requirements of COBRA,
and the corresponding provisions of the ADI SpinCo Welfare Plans with respect to ADI SpinCo Employees and their covered dependents who
incur a COBRA qualifying event or loss of coverage under the ADI SpinCo Welfare Plans at any time on or after the Distribution Date. ADI
SpinCo shall also assume and be responsible for administering compliance with the health care continuation requirements of COBRA with
respect to any former employees of Resideo or any of its subsidiaries who incurred a COBRA qualifying event under a Resideo Welfare Plan
prior to the Distribution Date and who, at the time of their termination of employment, were employed by Resideo LLC, with such responsibility
including administering any remaining COBRA continuation coverage obligations applicable to such individuals; provided, however,
that the foregoing shall not apply, and ADI SpinCo shall not assume or be responsible for any such obligations, with respect to any employee
whose termination of employment with Resideo LLC occurred prior to January 1, 2026 and who is not a Former ADI SpinCo Service
Provider.
25
Section 5.5 Retention
Bonuses. If requested in writing by Resideo, ADI SpinCo shall take all necessary actions (including withholding, paying and remitting
Taxes, including payroll Taxes) to facilitate the payment of any retention bonuses on behalf of a member of the Resideo Group to any ADI
SpinCo Employees that relate to the transactions contemplated by the Separation Agreement that become payable after the Distribution Date.
Section 5.6 Code Section
409A. Notwithstanding anything in this Agreement to the contrary, the Parties shall negotiate in good faith regarding the need for
any treatment different from that otherwise provided herein with respect to the payment of compensation to ensure that the treatment of
such compensation does not cause the imposition of a Tax under Section 409A of the Code. In no event, however, shall any Party be liable
to another in respect of any Taxes imposed under, or any other costs or Liabilities relating to, Section 409A of the Code.
Section 5.7 Payroll
Taxes and Reporting; CARES Act and ARP Act.
(a) The
Parties shall, to the extent practicable, (i) treat ADI SpinCo or a member of the ADI Group as a “successor employer”
and Resideo (or the appropriate member of the Resideo Group) as a “predecessor,” within the meaning of Sections 3121(a)(1)
and 3306(b)(1) of the Code, with respect to ADI SpinCo Employees for purposes of Taxes imposed under the United States Federal Unemployment
Tax Act or the United States Federal Insurance Contributions Act, and (ii) cooperate with each other to avoid, to the extent possible,
the filing of more than one IRS Form W-2 with respect to each ADI SpinCo Employee for the calendar year in which the Effective Time
occurs.
(b) Effective
as of the Effective Time (or, if later, the applicable Delayed Transfer Date), ADI SpinCo shall, or shall cause one or more members of
the ADI Group to, assume and perform, discharge, fulfill and satisfy all Liabilities in respect of the payment of any employment taxes
that have been delayed pursuant to Section 2302 of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”)
and Section 9651 of the American Rescue Plan Act of 2021 (“ARP Act”) with respect to any ADI SpinCo Employee or Former
ADI SpinCo Service Provider, and, if applicable, shall timely reimburse Resideo in accordance with Section 2.3(c) for any
such amounts that are required to be paid by Resideo in accordance with applicable Law. Resideo shall retain the benefit of any Tax credit
allowed pursuant to Section 2301 of the CARES Act and Section 9651 of the ARP Act with respect to any “qualified wages”
(as defined in the CARES Act and the ARP Act, respectively) paid to any ADI SpinCo Employee or Former ADI SpinCo Service Provider after
March 12, 2020 and prior to the Effective Time (or, if later, the applicable Delayed Transfer Date).
26
Section 5.8 Regulatory
Filings. Subject to applicable Law and the Tax Matters Agreement, Resideo shall retain responsibility for all employee-related regulatory
filings for reporting periods ending at or prior to the Effective Time, except for Equal Employment Opportunity Commission EEO-1 reports
and affirmative action program (AAP) reports and responses to Office of Federal Contract Compliance Programs (OFCCP) submissions, for
which Resideo shall provide data and information (to the extent permitted by applicable Laws) to ADI SpinCo, which shall be responsible
for making such filings in respect of ADI SpinCo Employees.
Section 5.9 Disability.
(a) To
the extent that any ADI SpinCo Employee is, as of the Distribution Date, receiving payments as part of any short-term disability program
that is part of a Resideo Welfare Plan, such ADI SpinCo Employee’s rights to continued short-term disability benefits (i) will end
under any Resideo Welfare Plan as of the Distribution Date; and (ii) all remaining rights will be recognized under an ADI SpinCo Welfare
Plan as of the Distribution Date, and the remainder (if any) of such ADI SpinCo Employee’s short-term disability benefits will be
paid by an ADI SpinCo Welfare Plan. In the event that any ADI SpinCo Employee described above shall have any dispute with the short-term
disability benefits they are receiving under an ADI SpinCo Welfare Plan, any and all appeal rights of such employees shall be realized
through the ADI SpinCo Welfare Plan (and any appeal rights such ADI SpinCo Employee may have under any Resideo Welfare Plan will be limited
to benefits received and time periods occurring prior to the Distribution Date).
(b) As
of the Distribution Date, (i) the Resideo Group shall retain all Liabilities for providing long-term disability benefits under a
Resideo Welfare Plan with respect to any Resideo Employee, and (ii) the ADI Group shall assume and be solely responsible for all Liabilities
for providing long-term disability benefits under an ADI SpinCo Welfare Plan with respect to (x) any ADI SpinCo Employee, and (y) any
Former ADI SpinCo Service Provider. For the avoidance of doubt, to the extent that any employee’s long-term disability Liabilities
are not expressly assigned to the ADI Group pursuant to clause (ii) of this Section 5.9(b), such Liabilities shall be retained
by the Resideo Group.
(c) For
this purpose, a disability claim shall be considered incurred on the date of the occurrence of the event or condition giving rise to disability.
For the avoidance of doubt, if, as of the Distribution Date, an individual employed by either the Resideo Group or the ADI Group is receiving
short-term disability benefits due to an event or condition that occurred prior to the Distribution Date, such individual shall remain
an employee of the Resideo Group or ADI Group, as applicable, and, to the extent that such individual subsequently becomes entitled to
long-term disability benefits, such long-term disability benefits shall be the responsibility of, and shall be provided under a Welfare
Plan maintained by, the applicable Resideo Group or the ADI Group to which such individual is employed or is intended to be employed after
any required transfers of employment following the Effective Time.
27
Section 5.10 Certain
Requirements. Notwithstanding anything in this Agreement to the contrary, if the Transfer Regulations, the terms of a Collective Bargaining
Agreement or applicable Law require that any assets or Liabilities be retained by the Resideo Group or transferred to or assumed by the
ADI Group in a manner that is different from that set forth in this Agreement, such retention, transfer or assumption shall be made in
accordance with the terms of such Collective Bargaining Agreement or applicable Law and shall not be made as otherwise set forth in this
Agreement.
Section 5.11 No Hire
of Employees.
(a) ADI
SpinCo agrees that, for a period of eighteen (18) months following the Distribution Date, it shall not, and shall cause each other
member of the ADI Group not to, without the prior written consent of Resideo, directly or indirectly, on its own behalf or in the service
or on behalf of others, hire or attempt to hire, whether as an employee, consultant, independent contractor or otherwise, any (i) employee
of the Resideo Group employed in an executive or senior management capacity (each of such roles, a “Key Role”) or (ii) former
employee of the Resideo Group employed in a Key Role who was on the payroll of the Resideo Group within six (6) months of the
date of such hiring or attempted hiring by ADI SpinCo or any other member of the ADI Group (other than in respect of an ADI SpinCo Employee);
provided that ADI SpinCo and each other member of the ADI Group may hire any employee or former employee of the Resideo Group,
including any employee or former employee of the Resideo Group employed in a Key Role, if such employee or former employee is hired more
than six (6) months after the Distribution Date in response to a general solicitation for employment by use of advertisements in
the media that are not specifically directed at employees of the Resideo Group.
(b) Resideo
agrees that, for a period of eighteen (18) months following the Distribution Date, it shall not, and shall cause each other member
of the Resideo Group not to, without the prior written consent of ADI SpinCo, directly or indirectly, on its own behalf or in the service
or on behalf of others, hire or attempt to hire, whether as an employee, consultant, independent contractor or otherwise, any (i) employee
of the ADI Group employed in a Key Role or (ii) former employee of the ADI Group employed in a Key Role who was on the payroll of
the ADI Group within six (6) months of the date of such hiring or attempted hiring by Resideo or any other member of the Resideo
Group; provided that Resideo and each other member of the Resideo Group may hire any employee or former employee of the ADI Group,
including any employee or former employee of the ADI Group employed in a Key Role, if such employee or former employee is hired more than
six (6) months after the Distribution Date in response to a general solicitation for employment by use of advertisements in the media
that are not specifically directed at employees of the ADI Group.
(c) If
a final and non-appealable judicial determination is made that any provision of this Section 5.11 constitutes an unreasonable
or otherwise unenforceable restriction with respect to any particular jurisdiction, the provisions of this Section 5.11 will
not be rendered void but will be deemed to be modified solely with respect to the applicable jurisdiction to the minimum extent necessary
to remain in force and effect for the greatest period and to the greatest extent that such court determines constitutes a reasonable restriction
under the circumstances.
28
ARTICLE VI
GENERAL AND
ADMINISTRATIVE
Section 6.1 Employer
Rights. Nothing in this Agreement shall be deemed to be an amendment to any Resideo Benefit Plan or ADI SpinCo Benefit Plan or to
prohibit any member of the Resideo Group or ADI Group, as the case may be, from amending, modifying or terminating any Resideo Benefit
Plan or ADI SpinCo Benefit Plan at any time within its sole discretion.
Section 6.2 Effect on
Employment. Nothing in this Agreement is intended to or shall confer upon any employee or former employee of Resideo, ADI SpinCo or
any of their respective Affiliates any right to continued employment or any recall or similar rights to any such individual on layoff
or any type of approved leave.
Section 6.3 Consent
of Third Parties. If any provision of this Agreement is dependent on the Consent of any third party and such Consent is withheld,
the Parties shall use their reasonable best efforts to implement the applicable provisions of this Agreement to the fullest extent practicable.
If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, the Parties hereto shall negotiate
in good faith to implement the provision (as applicable) in a mutually satisfactory manner.
Section 6.4 Access to
Employees. On and after the Effective Time, Resideo and ADI SpinCo shall, or shall cause each of their respective Affiliates to, make
available to each other those of their employees who may reasonably be needed in order to defend or prosecute any legal or administrative
action (other than a legal action between Resideo and ADI SpinCo) to which any employee or director of the Resideo Group or the ADI Group
or any Resideo Benefit Plan or ADI SpinCo Benefit Plan is a party and which relates to a Resideo Benefit Plan or ADI SpinCo Benefit Plan.
The Party to whom an employee is made available in accordance with this Section 6.4 shall pay or reimburse the other Party for
all reasonable expenses which may be incurred by such employee in connection therewith, including all reasonable travel, lodging, and
meal expenses, but excluding any amount for such employee’s time spent in connection herewith.
Section 6.5 Beneficiary
Designation/Release of Information/Right to Reimbursement. To the extent permitted by applicable Law and except as otherwise provided
for in this Agreement, all beneficiary designations, authorizations for the release of Information and rights to reimbursement made by
or relating to ADI SpinCo Employees under Resideo Benefit Plans shall be transferred to and be in full force and effect under the corresponding
ADI SpinCo Benefit Plans until such beneficiary designations, authorizations or rights are replaced or revoked by, or no longer apply,
to the relevant ADI SpinCo Employee.
29
Section 6.6 No Third-Party
Beneficiaries. This Agreement is solely for the benefit of the Parties, and, except to the extent otherwise expressly provided herein,
nothing in this Agreement, express or implied, is intended to confer any rights, benefits, remedies, obligations or Liabilities under
this Agreement upon any Person, including any ADI SpinCo Employee or other current or former employee, officer, director or contractor
of the Resideo Group or ADI Group, other than the Parties and their respective successors and assigns. Nothing in this Agreement is intended
to amend any employee benefit plan or affect the applicable plan sponsor’s right to amend or terminate any employee benefit plan
pursuant to the terms of such plan.
Section 6.7 Employee
Benefits Administration. At all times following the date hereof, the Parties will cooperate in good faith as necessary to facilitate
the administration of employee benefits and the resolution of related employee benefit claims with respect to ADI SpinCo Employees, Former
ADI SpinCo Service Providers and employees and Other Service Providers, as applicable, including with respect to the provision of employee-level
information necessary for the other Party to manage, administer, finance and file required reports with respect to such administration.
Section 6.8 Sharing
of Records; Cooperation.
(a) The
Parties shall use their respective commercially reasonable efforts to provide the other Party such employee-related records and information
as necessary or appropriate to carry out their respective obligations under applicable Law or any other Data Protection Requirement, this
Agreement, any other Ancillary Agreement or the Separation Agreement, and for the purposes of administering their respective employee
benefit plans and policies. To the extent not inconsistent with this Agreement and any applicable Data Protection Requirement, access
to such records on and after the Effective Time will be provided to members of the ADI Group or the Resideo Group, as applicable, in accordance
with the Separation Agreement. All information and records regarding employment, personnel and employee benefit matters contemplated hereunder
shall be accessed, retained, held, used, copied and transmitted on and after the Effective Time by any relevant Party in accordance with
all Data Protection Requirements relating to the collection, storage, retention, use, transmittal, disclosure and destruction of such
records.
(b) Each
Party shall use commercially reasonable efforts to cooperate to share, retain and maintain data and records that are necessary or appropriate
to further the purposes of this Section 6.8 and for each Party to administer its respective benefit plans to the extent consistent
with this Agreement and applicable Data Protection Requirements, and each Party agrees to cooperate as long as is reasonably necessary
to further the purposes of this Section 6.8.
(c) Except
as otherwise set forth in this Agreement, all records and data relating to employees shall, in each case, be subject to the confidentiality
provisions of the Separation Agreement and any other applicable agreement and applicable Law. The provisions of this Section 6.8
shall be in addition to, and not in derogation of, the provisions of the Separation Agreement governing Confidential Information, including
Article VI of the Separation Agreement.
30
ARTICLE VII
MISCELLANEOUS
Section 7.1 Entire Agreement.
Subject to Section 9.1 of the Separation Agreement, this Agreement and the Separation Agreement, including the Exhibits and Schedules
thereto, shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous
negotiations, commitments, course of dealings and writings with respect to such subject matter.
Section 7.2 Counterparts.
This Agreement may be executed in more than one counterpart, all of which shall be considered one and the same agreement and shall become
effective when one or more such counterparts have been signed by each of the Parties and delivered to each of the Parties.
Section 7.3 Survival
of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the Parties contained in this Agreement
shall survive the Effective Time and remain in full force and effect in accordance with their applicable terms.
Section 7.4 Notices.
All notices, requests, claims, demands and other communications under this Agreement shall be in English, shall be in writing and shall
be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service,
by email or by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service) to the respective
Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this
Section 7.4):
To Resideo:
Resideo Technologies,
Inc.
16100 N 71st St,
Suite 550
Scottsdale, AZ 85254
Attention: General Counsel
Email: legalnotices@resideo.com
joshua.foster@resideo.com
with a copy (which
shall not constitute notice) to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019-6099
Attention: Russell L. Leaf; Jared N. Fertman; Tej Prakash
Email: rleaf@willkie.com
jfertman@willkie.com
tprakash@willkie.com
31
To ADI SpinCo:
ADI Global Distribution
Inc.
275 Broadhollow
Rd, Suite 400
Melville, NY 11747
Attention: General Counsel
Email: jeannine.lane@adiglobal.com
with a copy (which shall not
constitute notice) to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019-6099
Attention: Russell L. Leaf; Jared N. Fertman; Tej Prakash
Email: rleaf@willkie.com
jfertman@willkie.com
tprakash@willkie.com
Section 7.5 Amendment.
No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement
or modification is in writing and signed by the authorized representatives of the Parties against whom it is sought to enforce such waiver,
amendment, supplement or modification.
Section 7.6 Assignment.
This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party hereto without the prior written consent
of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void.
Notwithstanding the foregoing, this Agreement shall be assignable to (a) with respect to Resideo, an Affiliate of Resideo, or (b) a bona
fide third party in connection with a merger, reorganization, consolidation or the sale of all or substantially all the assets of a Party
hereto, so long as the resulting, surviving or transferee entity assumes all the obligations of the relevant party hereto by operation
of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party to this Agreement; provided,
however, that, in the case of each of the preceding clauses (a) and (b), no assignment permitted by this Section 7.6 shall
release the assigning Party from liability for the full performance of its obligations under this Agreement.
Section 7.7 Successors
and Assigns. The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit
of and be enforceable by (and against) the Parties and their respective successors and permitted assigns.
Section 7.8 Termination.
This Agreement may be terminated at any time prior to the Effective Time by and in the sole discretion of Resideo without the approval
of ADI SpinCo or the stockholders of Resideo. In the event of such termination prior to the Effective Time, no Party (nor any of its directors,
officers or employees) shall have any liability of any kind to the other Party or any other Person by reason of this Agreement. After
the Effective Time, this Agreement may not be terminated except by an agreement in writing signed by Resideo and ADI SpinCo.
Section 7.9 Subsidiaries.
Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set
forth herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party at and after the
Effective Time, to the extent such Subsidiary remains a Subsidiary of the applicable Party.
32
Section 7.10 Title and
Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement. Unless otherwise indicated, all “Section” references in this
Agreement are to sections of this Agreement.
Section 7.11 Governing
Law. This Agreement and any dispute arising out of, in connection with or relating to this Agreement shall be governed by and construed
in accordance with the Laws of the State of Delaware, without giving effect to the conflicts of laws principles thereof.
Section 7.12 Dispute
Resolution. The provisions of Article VII of the Separation Agreement shall govern any dispute under or in connection with this
Agreement.
Section 7.13 Severability.
In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or
impaired thereby. The Parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
Section 7.14 Interpretation.
The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard
to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.
Section 7.15 No Duplication;
No Double Recovery. Nothing in this Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement,
obligation or recovery with respect to any matter arising out of the same facts and circumstances.
Section 7.16 No Waiver.
No failure to exercise and no delay in exercising, on the part of any Party, any right, remedy, power or privilege hereunder shall operate
as a waiver hereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or privilege.
Section 7.17 No Admission
of Liability. The allocation of Assets and Liabilities herein is solely for the purpose of allocating such Assets and Liabilities
between Resideo and ADI SpinCo and is not intended as an admission of liability or responsibility for any alleged Liabilities vis-à-vis
any third party, including with respect to the Liabilities of any non-wholly owned subsidiary of Resideo or ADI SpinCo.
Section 7.18 Tax Treatment
of Payments. Unless otherwise required by a Final Determination, for U.S. federal income Tax purposes and all other applicable Tax
purposes, any payment made pursuant to this Agreement shall be treated in accordance with Section 5.4 of the Tax Matters Agreement.
[Signature Page Follows]
33
IN WITNESS WHEREOF, the Parties
have caused this Agreement to be duly executed as of the day and year first above written.
RESIDEO TECHNOLOGIES, INC.
By:
/s/ Thomas Surran
Name:
Thomas Surran
Title:
President
ADI GLOBAL DISTRIBUTION INC.
By:
/s/ Robert Aarnes
Name:
Robert Aarnes
Title:
President and Chief Executive Officer
EX-10.2 — TAX MATTERS AGREEMENT, DATED JULY 31, 2026, BY AND BETWEEN ADI GLOBAL DISTRIBUTION INC. AND RESIDEO TECHNOLOGIES, INC
EX-10.2
Filename: ea030019001ex10-2.htm · Sequence: 8
Exhibit 10.2
Execution
Version
Tax Matters Agreement
by and between
RESIDEO TECHNOLOGIES,
INC.
and
ADI GLOBAL distribution
INC.
Dated as of July 31, 2026
Table of Contents
Page
ARTICLE I DEFINITIONS
2
1.1
General
2
ARTICLE II PAYMENTS AND TAX REFUNDS
11
2.1
Taxes Relating to Joint Returns
11
2.2
Taxes Relating to Separate Returns
11
2.3
Certain Indemnified Taxes; Integration; Satisfaction
12
2.4
Determination of Tax Attributable to the ADI Business
12
2.5
Allocation of Employment Taxes
12
2.6
Tax Refunds
12
2.7
Tax Benefits
13
2.8
Certain Carrybacks
13
2.9
Tax Adjustments
13
2.10
Prior Agreements
13
2.11
Resideo and ADI SpinCo Income Tax Deductions in Respect of Certain Equity Awards and Incentive Compensation
13
ARTICLE III PREPARATION AND FILING OF TAX RETURNS
14
3.1
Resideo’s Responsibility
14
3.2
ADI SpinCo’s Responsibility
14
3.3
Right to Review Tax Returns
14
3.4
Cooperation
15
3.5
Tax Reporting Practices
15
3.6
Reporting of Separation
15
3.7
Distribution Straddle Period Tax Allocation
16
3.8
Payment of Taxes
16
3.9
Amended Returns and Carrybacks
17
3.10
Tax Attributes
18
3.11
Section 245A Election
18
3.12
Information for Joint Returns and Resideo Separate Returns
18
ARTICLE IV TAX-FREE STATUS OF THE DISTRIBUTION
19
4.1
Representations and Warranties
19
4.2
Restrictions Relating to the Distribution
20
ARTICLE V INDEMNITY OBLIGATIONS
22
5.1
Indemnity Obligations
22
5.2
Indemnification Payments
24
5.3
Payment Mechanics
24
5.4
Treatment of Liabilities and Payments; Gross-Up
25
i
ARTICLE VI TAX CONTESTS
26
6.1
Notice
26
6.2
Separate Returns
26
6.3
Joint Returns
26
6.4
Mixed Contests
26
6.5
Distribution-Related Tax Contests
27
6.6
Obligation of Continued Notice
27
6.7
Settlement Rights
28
6.8
Costs and Expenses
28
ARTICLE VII COOPERATION
28
7.1
General
28
7.2
Timely Compliance
29
7.3
Consistent Treatment
29
7.4
Impact of Cooperation
29
ARTICLE VIII RETENTION OF RECORDS; ACCESS
30
8.1
Retention of Records
30
8.2
Access to Tax Records
30
ARTICLE IX DISPUTE RESOLUTION
30
9.1
Dispute Resolution
30
9.2
Injunctive Relief
31
ARTICLE X MISCELLANEOUS PROVISIONS
31
10.1
Disposition of ADI SpinCo Subsidiaries
31
10.2
Conflicting Agreements
31
10.3
Interest on Late Payments
31
10.4
Expenses
32
10.5
Successors
32
10.6
Subsidiaries
32
10.7
Assignability
32
10.8
No Fiduciary Relationship
32
10.9
Further Assurances
32
10.10
Survival
33
10.11
Notices
33
10.12
Distribution Date
34
10.13
No Waiver
34
10.14
Severability
34
10.15
Interpretation
34
10.16
Integration
34
10.17
Title and Headings
35
10.18
Counterparts
35
10.19
Governing Law
35
10.20
Amendments
35
10.21
No Duplication; No Double Recovery
35
10.22
Specific Performance
35
10.23
Authority
35
ii
Tax Matters Agreement
This
Tax Matters Agreement (this “Agreement”),
is entered into as of July 31, 2026 between Resideo Technologies, Inc., a Delaware corporation (“Resideo”), and ADI
Global Distribution Inc., a Delaware corporation (“ADI SpinCo” and, together with Resideo, the “Parties,”
and each, a “Party”). Capitalized terms used in this Agreement and not defined herein shall have the meanings ascribed
to such terms in the Separation and Distribution Agreement, dated as of the date hereof, between the Parties (as may be amended, modified
or restated from time to time, the “Separation Agreement”).
R e c i t a l s
Whereas,
the board of directors of Resideo has determined that it is appropriate, desirable and in the best interests of Resideo and its stockholders
to separate the ADI Business from Resideo’s other businesses, creating ADI SpinCo as a new subsidiary company to which Resideo will
transfer, directly or indirectly, the assets and liabilities of the ADI Business (the “Separation”) and, following
the Separation, to undertake the Distribution;
Whereas,
ADI SpinCo has been incorporated for these purposes and has not engaged in activities except those incidental to its formation and in
preparation for the Distribution;
Whereas,
Resideo will effect certain restructuring transactions described in the Separation Plan for the purpose of aggregating the ADI Business,
the ADI Assets and the ADI Liabilities in the ADI Group prior to the Distribution (collectively, the “Reorganization”);
Whereas,
in connection with the Reorganization and pursuant to the Separation Plan, Resideo will contribute, or cause to be contributed, to ADI
SpinCo or a Subsidiary thereof, the assets of, and entities conducting, the ADI Business (the “Contribution”) and,
in exchange therefor, ADI SpinCo shall, or shall cause a Subsidiary thereof to, as applicable, (i) issue to Resideo shares of ADI SpinCo
Common Stock and ADI SpinCo Preferred Stock (which issuances may be actual or constructive), (ii) assume (directly or indirectly)
certain Liabilities of Resideo and its Subsidiaries associated with the ADI Business, and (iii) pay Resideo an amount of cash equal
to the ADI Cash Payment (and any Cash Adjustment payable by ADI SpinCo to Resideo), each as more fully described and subject to the terms
and conditions set forth in the Separation Agreement;
Whereas,
Resideo (i) will distribute all of the outstanding ADI SpinCo Common Stock to the holders of Resideo Common Stock as a pro rata dividend
(the “Common Distribution”) and (ii) pursuant to the Exchange Agreement, cause the exchange of certain shares of Resideo
Preferred Stock held by CD&R and the other party thereto for shares of ADI SpinCo Preferred Stock (the “Preferred Exchange,”
and, taken together with the Common Distribution, the “Distribution”);
Whereas,
Resideo intends to effect the Distribution in a transaction that, taken together with the Contribution, is intended to qualify as tax-free
for U.S. federal income Tax purposes under Sections 368(a)(1)(D), 355 and 361(c) of the Code;
Whereas,
certain members of the Resideo Group, on the one hand, and certain members of the ADI Group, on the other hand, file certain Tax Returns
on a consolidated, combined, unitary or similar basis for certain federal, state, local and foreign Tax purposes; and
1
Whereas,
the Parties desire to (i) provide for the payment of Tax liabilities and entitlement to refunds thereof, allocate responsibility for,
and cooperation in, the filing of Tax Returns, and provide for certain other matters relating to Taxes and (ii) set forth certain covenants
and indemnities relating to the preservation of the tax-free status of the relevant Transactions.
Now,
therefore, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, and for 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 General.
As used in this Agreement, the following terms shall have the following meanings:
“Action”
shall have the meaning set forth in the Separation Agreement.
“ADI Active Trade
or Business” shall mean the active conduct (as defined in Section 355(b)(2) of the Code and the Treasury Regulations thereunder)
by ADI SpinCo and its “separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code) of the trade or business
(as defined in the Tax Opinion and as further described in the Tax Materials) as conducted immediately prior to the Distribution.
“ADI Assets”
shall have the meaning set forth in the Separation Agreement.
“ADI Business”
shall have the meaning set forth in the Separation Agreement.
“ADI Carryback”
shall mean any net operating loss, net capital loss, excess tax credit, or other similar Tax Item of any member of the ADI Group which
may or must be carried from one taxable period to another prior taxable period under the Code or other applicable Tax Law.
“ADI Cash Payment”
shall have the meaning set forth in the Separation Agreement.
“ADI Disqualifying
Action” shall mean (i) any action (or the failure to take any action) by any member of the ADI Group after the Distribution
(including entering into any agreement, understanding or arrangement or any negotiations with respect to any transaction or series of
transactions), (ii) any event (or series of events) after the Distribution involving the ADI SpinCo Capital Stock or any stock or assets
of any member of the ADI Group, (iii) any action, failure to act or transaction prohibited or required, as applicable, pursuant to Section
4.2(b) (regardless of whether the requirements of Section 4.2(e) are satisfied with respect to such action, failure to act
or transaction) or Section 4.2(c) (regardless of whether Resideo consents to any such action, failure to act or transaction), or
(iv) any breach by ADI SpinCo or any member of the ADI Group after the Distribution of any representation, warranty or covenant made by
it in this Agreement, the Separation Agreement or any Ancillary Agreement, that, in each case of the foregoing clauses (i) through (iv),
would adversely affect the Tax-Free Status of the Transactions or the Tax Treatment of the Transactions; provided, however,
that the term “ADI Disqualifying Action” shall not include any action required pursuant to any Ancillary Agreement (other
than this Agreement) or that is expressly contemplated by the Separation or the Distribution.
2
“ADI Group”
shall have the meaning set forth in the Separation Agreement.
“ADI Liabilities”
shall have the meaning set forth in the Separation Agreement.
“ADI Pre-Distribution
Period Taxes” shall mean any and all Taxes due with respect to all Pre-Distribution Periods imposed on the Resideo Group arising
out of, based upon, or attributable to the ADI Business, including, for the avoidance of doubt, any Taxes resulting from any Internal
Distributions.
“ADI Separate Return”
shall mean any Tax Return of or including any member of the ADI Group (including any consolidated, combined, unitary or similar return)
that does not include any member of the Resideo Group.
“ADI SpinCo”
shall have the meaning set forth in the preamble hereto.
“ADI SpinCo Capital
Stock” shall mean all classes or series of capital stock of ADI SpinCo, including (i) the ADI SpinCo Common Stock, (ii) the
ADI SpinCo Preferred Stock, (iii) all options, warrants and other rights to acquire such capital stock and (iv) all instruments properly
treated as stock in ADI SpinCo for U.S. federal income Tax purposes.
“ADI SpinCo Common
Stock” shall have the meaning set forth in the Separation Agreement.
“ADI SpinCo Preferred
Stock” shall have the meaning set forth in the Separation Agreement.
“Adjustment”
shall mean an adjustment of any item of income, gain, loss, deduction, credit or any other item affecting Taxes of a taxpayer pursuant
to a Final Determination.
“Affiliate”
shall mean, when used with respect to a specified Person and at a point in, or with respect to a period of, time, a Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person
at such point in or during such period of time. For the purposes of this definition, “control,” when used with respect to
any specified Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities or other interests, by Contract or otherwise. It is expressly
agreed that, (a) from and after the Effective Time, solely for purposes of this Agreement, (i) no member of the ADI Group shall
be deemed an Affiliate of any member of the Resideo Group and (ii) no member of the Resideo Group shall be deemed an Affiliate of
any member of the ADI Group, and (b) whether before or after the Effective Time, solely for purposes of this Agreement, neither CD&R
nor any of its Affiliates (other than Resideo, ADI SpinCo and their respective Subsidiaries, as applicable) will be deemed an Affiliate
of any member of the Resideo Group or the ADI Group, and vice versa.
“Agreement”
shall have the meaning set forth in the preamble hereto.
3
“Ancillary Agreement”
shall have the meaning set forth in the Separation Agreement.
“Business Day”
shall have the meaning set forth in the Separation Agreement.
“Capital Stock”
shall mean all classes or series of capital stock, including (i) common stock, (ii) preferred stock, (iii) all options, warrants and other
rights to acquire such capital stock and (iv) all instruments properly treated as stock for U.S. federal income Tax purposes.
“Cash Adjustment”
shall have the meaning set forth in the Separation Agreement.
“CD&R”
shall have the meaning set forth in the Separation Agreement.
“CD&R Agreements”
shall mean (i) that certain Shareholders Agreement entered into by and among ADI SpinCo, CD&R and the various other parties thereto
on August 3, 2026, and (ii) any other agreement entered into between ADI SpinCo and CD&R (or any of the Affiliates of CD&R) in
connection with the Separation, Reorganization or Distribution.
“CD&R Persons”
shall have the meaning set forth in Section 4.2(b)(v).
“Code”
shall mean the Internal Revenue Code of 1986, as amended.
“Common Distribution”
shall have the meaning set forth in the recitals hereto.
“Contract”
shall have the meaning set forth in the Separation Agreement.
“Contribution”
shall have the meaning set forth in the recitals hereto.
“Controlling Party”
shall mean, with respect to a Tax Contest, the Party entitled to control such Tax Contest pursuant to Sections 6.2, 6.3,
6.4 and 6.5 of this Agreement.
“Dispute Resolution
Firm” shall have the meaning set forth in Section 9.1.
“Distribution”
shall have the meaning set forth in the recitals hereto.
“Distribution Date”
shall have the meaning set forth in the Separation Agreement.
“Distribution Taxes”
shall mean any Taxes incurred as a result of the failure of any of the Transactions to qualify for the Tax-Free Status of the Transactions
or the Tax Treatment of the Transactions.
“Distribution-Related
Tax Contest” shall mean any Tax Contest in which the IRS, another Taxing Authority, or any other Person asserts a position that
could reasonably be expected to (i) adversely affect, jeopardize or prevent (x) the Tax-Free Status of the Transactions or (y) the Tax
Treatment of the Transactions or (ii) otherwise affect the amount of Taxes imposed with respect to any of the Transactions.
“Effective Time”
shall have the meaning set forth in the Separation Agreement.
4
“Employee Matters
Agreement” shall have the meaning set forth in the Separation Agreement.
“Employment Tax”
shall mean those Liabilities (as defined in the Separation Agreement) for Taxes which are allocable pursuant to the provisions of the
Employee Matters Agreement.
“Employment Tax Credit”
shall mean any Tax credit allocated to Resideo or a member of the Resideo Group pursuant to the provisions of the Employee Matters Agreement.
“Federal Tax”
shall mean any Tax imposed by the federal government of the United States (other than any Employment Taxes).
“Final Determination”
shall mean the final resolution of liability for any Tax for any taxable period, by or as a result of (i) IRS Form 870 or 870-AD (or any
successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the Laws of a state,
local, or foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination
to the extent that it reserves (whether by its terms or by operation of Law) the right of the taxpayer to file a claim for a Tax Benefit
or the right of the Taxing Authority to assert a further deficiency in respect of the relevant issue or adjustment or for such taxable
period (as the case may be), (ii) a final decision, judgment, decree or other order by any court of competent jurisdiction that can no
longer be appealed, (iii) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Section 7121 or 7122
of the Code, or a comparable agreement under the Laws of other jurisdictions, which resolves the entire Tax liability for any taxable
period, (iv) any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during
which such refund or credit may be recovered (including by way of offset) by the jurisdiction imposing the Tax, or (v) any other final
resolution, including by reason of the expiration of the applicable statute of limitations or the execution of a pre-filing agreement
with the IRS or other Taxing Authority.
“Foreign Tax”
shall mean any Tax imposed by any foreign country or any possession of the United States, or by any political subdivision of any foreign
country or United States possession.
“Group”
shall mean either the Resideo Group or the ADI Group, as the context requires.
“Indemnification
Threshold” shall have the meaning set forth in Section 5.1(d).
“Indemnifying Party”
shall have the meaning set forth in Section 5.2(a).
“Indemnitee”
shall have the meaning set forth in Section 5.2(a).
“Internal Distribution”
shall mean, with respect to the pre-Distribution reorganization of ADEMCO III Ltd, any distribution or exchange of stock of ADEMCO III
Ltd or any other Subsidiary of Resideo (determined prior to the Distribution), or other transaction having the same effect, in each case,
together with related transactions, that is intended to qualify as a reorganization described in Sections 368(a)(1)(D) and 355 of the
Code or a distribution described in Section 355(a) of the Code.
5
“IRS” shall
mean the United States Internal Revenue Service or any successor thereto, including, but not limited to, its agents, representatives,
and attorneys.
“IRS Ruling”
shall mean any U.S. federal income Tax ruling, and any supplements thereto, issued to Resideo by the IRS in connection with the Transactions.
“IRS Ruling Request”
shall mean the letter filed by Resideo with the IRS on April 1, 2026 (including all attachments, exhibits, and other materials submitted
with such letter) requesting a ruling regarding certain tax consequences of the Transactions and any amendment or supplement to such ruling
request letter.
“Joint Return”
shall mean any Tax Return that includes, by election or otherwise, one or more members of the Resideo Group together with one or more
members of the ADI Group.
“Law” shall
have the meaning set forth in the Separation Agreement.
“Non-Controlling
Party” shall mean, with respect to a Tax Contest, the Party that is not entitled to control such Tax Contest pursuant to Sections
6.2, 6.3, 6.4 and 6.5 of this Agreement.
“Parties”
shall have the meaning set forth in the preamble hereto.
“Past Practices”
shall have the meaning set forth in Section 3.5.
“Person”
shall have the meaning set forth in the Separation Agreement.
“Post-Distribution
Period” shall mean any taxable period (or portion thereof) beginning after the Distribution Date, including, for the avoidance
of doubt, the portion of any Straddle Period beginning after the Distribution Date.
“Pre-Distribution
Period” shall mean any taxable period (or portion thereof) ending on or before the Distribution Date, including, for the avoidance
of doubt, the portion of any Straddle Period ending at the end of the day on the Distribution Date.
“Preferred Exchange”
shall have the meaning set forth in the recitals hereto.
“Proposed Acquisition
Transaction” shall mean a transaction or series of transactions (or any agreement, understanding or arrangement, within the
meaning of Section 355(e) of the Code and Treasury Regulations Section 1.355-7, or any other regulations promulgated thereunder, to enter
into a transaction or series of transactions), whether such transaction is supported by ADI SpinCo management or shareholders, is a hostile
acquisition, or otherwise, as a result of which ADI SpinCo would merge or consolidate with any other Person or as a result of which one
or more Persons would (directly or indirectly) acquire, or have the right to acquire, from ADI SpinCo and/or one or more holders of ADI
SpinCo Capital Stock, respectively, any amount or number of shares of ADI SpinCo Capital Stock, that would, when combined with any other
direct or indirect changes in ownership of ADI SpinCo Capital Stock pertinent for purposes of Section 355(e) of the Code and/or the Treasury
Regulations promulgated thereunder, comprise forty percent (40%) or more of (i) the value of all outstanding shares of stock of ADI SpinCo
as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, in each
case determined after giving effect to the transaction or series of transactions, or (ii) the total combined voting power of all outstanding
shares of voting stock of ADI SpinCo as of the date of such transaction, or in the case of a series of transactions, the date of the last
transaction of such series, in each case determined after giving effect to the transaction or series of transactions. Notwithstanding
the foregoing, a Proposed Acquisition Transaction shall not include (x) the adoption by ADI SpinCo of a shareholder rights plan or (y)
issuances by ADI SpinCo that satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services)
or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulations Section 1.355-7(d). For purposes
of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power or
any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non-exchanging shareholders. This
definition and the application thereof are intended to monitor compliance with Section 355(e) of the Code and the Treasury Regulations
promulgated thereunder and shall be interpreted accordingly. Any clarification of, or change in, the statute or regulations promulgated
under Section 355(e) of the Code shall be incorporated in this definition and its interpretation. For the avoidance of doubt, any references
to ADI SpinCo in this definition and related provisions of this Agreement shall include a reference to any successor thereto.
6
“Reasonable Basis”
shall mean reasonable basis within the meaning of Section 6662(d)(2)(B)(ii)(II) of the Code and the Treasury Regulations promulgated thereunder
(or such other level of confidence required by the Code at that time to avoid the imposition of penalties).
“Refund”
shall mean any refund, reimbursement, offset, credit, or other similar benefit in respect of Taxes (including any overpayment of Taxes
that can be refunded or, alternatively, applied against other Taxes payable), including any interest paid on or with respect to such refund
of Taxes.
“Reorganization”
shall have the meaning set forth in the recitals.
“Resideo”
shall have the meaning set forth in the preamble hereto.
“Resideo Capital
Stock” shall mean all classes or series of capital stock of Resideo, including (i) the Resideo Common Stock, (ii) Resideo Preferred
Stock, (iii) all options, warrants and other rights to acquire such capital stock and (iv) all instruments properly treated as stock in
Resideo for U.S. federal income Tax purposes.
“Resideo Common Stock”
shall have the meaning set forth in the Separation Agreement.
“Resideo Group”
shall have the meaning set forth in the Separation Agreement.
“Resideo Preferred
Stock” shall have the meaning set forth in the Separation Agreement.
“Resideo Pre-Distribution
Period Taxes” shall mean any and all Taxes due with respect to all Pre-Distribution Periods imposed on the ADI Group arising
out of, based upon, or attributable to those businesses, other than the ADI Business, historically conducted by Resideo and its Subsidiaries
prior to the Effective Time.
“Resideo Retained
Assets” shall have the meaning set forth in the Separation Agreement.
“Resideo Retained
Business” shall have the meaning set forth in the Separation Agreement.
“Resideo Retained
Liabilities” shall have the meaning set forth in the Separation Agreement.
“Resideo Separate
Return” shall mean any Tax Return of or including any member of the Resideo Group (including any consolidated, combined, unitary
or similar return) that does not include any member of the ADI Group.
7
“Responsible Company”
shall mean, with respect to any Tax Return, the Party having responsibility for preparing and filing such Tax Return pursuant to this
Agreement.
“Restricted Period”
shall mean the period beginning (and including) the Distribution Date and ending on (and including) the first Business Day after the two-year
anniversary of the Distribution Date.
“Reviewing Company”
shall have the meaning set forth in Section 3.3.
“Section 4.2(d) Acquisition
Transaction” shall mean any transaction or series of transactions that is not a Proposed Acquisition Transaction but would be
a Proposed Acquisition Transaction if the percentage reflected in the definition of Proposed Acquisition Transaction were ten percent
(10%) instead of forty percent (40%).
“Separate Return”
shall mean a Resideo Separate Return or an ADI Separate Return, as the case may be.
“Separation”
shall have the meaning set forth in the recitals.
“Separation Agreement”
shall have the meaning set forth in the preamble hereto.
“Separation Plan”
shall have the meaning set forth in the Separation Agreement.
“Specific Indemnities”
shall have the meaning set forth in Section 2.3.
“State Tax”
shall mean any Tax imposed by any state of the United States or by any political subdivision of any such state or the District of Columbia,
or any city or municipality located therein.
“Straddle Period”
shall mean any taxable year or other taxable period that begins on or before the Distribution Date and ends after the Distribution Date.
“Subsidiary”
shall have the meaning set forth in the Separation Agreement.
“Tax” or
“Taxes” shall mean (i) all taxes, charges, fees, duties, levies, imposts, rates and other similar assessments and governmental
charges of any kind imposed by any federal, state, local or non-United States Taxing Authority, including, without limitation, income,
gross receipts, employment, estimated, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties,
property, sales, use, license, capital stock, transfer, franchise, registration, payroll, withholding, social security, unemployment,
disability, value added, alternative, add-on minimum and other taxes, whether disputed or not, and including any interest, penalties,
charges or additions attributable thereto, (ii) liability for the payment of any amount of the type described in clause (i) above arising
as a result of being (or having been) a member of any Tax group or being (or having been) included or required to be included in any Tax
Return related thereto, or as transferee or successor, and (iii) liability for the payment of any amount of the type described in clause
(i) or (ii) above as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any
other Person.
8
“Tax Advisor”
shall mean any Tax counsel or accounting firm of recognized national standing in the United States (or, in the case of any Tax Opinion
regarding the Tax treatment of any of the Transactions under the Laws of a foreign jurisdiction, in the relevant foreign jurisdiction).
“Tax Advisor Dispute”
shall have the meaning set forth in Section 9.1.
“Tax Attribute”
shall mean net operating losses, capital losses, research and experimentation credit carryovers, excess charitable contributions, investment
tax credit carryovers, earnings and profits, foreign tax credit carryovers, overall foreign losses, overall domestic losses, previously
taxed earnings and profits, separate limitation losses and any other similar losses, deductions, credits or other comparable items that
could reduce a Tax liability for a past or future taxable period; provided, however, that the term “Tax Attribute”
shall not include tax basis.
“Taxing Authority”
shall mean any governmental authority or any subdivision, agency, commission or entity thereof or any quasi-governmental or private body
having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the IRS).
“Tax Benefit”
shall mean a cash tax benefit actually realized due to any reduction in liability for Taxes (or increase in a Refund) as a result of any
loss, deduction, Refund, reimbursement, offset, credit, or other item reducing any Taxes otherwise payable.
“Tax Contest”
shall mean any pending or threatened audit, claim, dispute, suit, action, litigation, proposed assessment or other proceeding with respect
to Taxes or Tax Benefits (including any administrative or judicial review of any claim for Refund).
“Tax Item”
shall mean any item of income, gain, loss, deduction, or credit.
“Tax Law”
shall mean the law of any Taxing Authority or political subdivision thereof relating to any Tax.
“Tax Materials”
shall have the meaning set forth in Section 4.1(a).
“Tax Matter”
shall have the meaning set forth in Section 7.1(a).
“Tax Opinion”
shall mean any written opinion or memorandum of any Tax Advisor regarding certain tax consequences of certain transactions executed as
part of the Transactions.
9
“Tax Records”
shall mean any (i) Tax Returns, (ii) Tax Return work papers, (iii) documentation relating to any Tax Contests and (iv) any other books
of account or records (whether or not in written, electronic, or other tangible or intangible forms and whether or not stored on electronic
or any other medium) maintained or required to be maintained under the Code or other applicable Tax Laws or under any record retention
agreement with any Taxing Authority.
“Tax Representation
Letters” shall mean any representation letters of officers of Resideo and/or ADI SpinCo provided to any Tax Advisor in connection
with any Tax Opinion issued in connection with the Transactions.
“Tax Return”
shall mean any return, report, certificate, form or similar statement or document (including any related supporting information or schedule
attached thereto and any information return, amended tax return, claim for refund or declaration of estimated tax) supplied to or filed
with, or required to be supplied to or filed with, a Taxing Authority, including any amendment thereof or supplement thereto, or any bill
for or notice related to ad valorem or other similar Taxes received from a Taxing Authority, in each case, in connection with the determination,
assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.
“Tax Treatment of
the Transactions” shall mean the Tax treatment of the Transactions (for the avoidance of doubt, other than the Tax treatment
of the Transactions described in the definition of “Tax-Free Status of the Transactions”) set forth on Schedule 1.1.
“Tax-Free Status
of the Transactions” shall mean, with respect to the Contribution and the Distribution, taken together, and each Internal Distribution,
the qualification thereof as (i) in the case of the Contribution and the Distribution, taken together, a “reorganization”
described in Sections 368(a)(1)(D) and 355(a) of the Code and, in the case of each Internal Distribution, as a “reorganization”
described in Sections 368(a)(1)(D) and 355(a) of the Code or a distribution described in Section 355(a) of the Code, as applicable, and
(ii) as a transaction in which (x) cash or other property received is property with respect to which no gain is recognized pursuant to
Section 361(a) or (b) of the Code, (y) stock distributed (or deemed distributed) thereby is “qualified property” with respect
to which no gain is recognized pursuant to Section 361(c) or Section 355(c)(2) of the Code, as applicable (and neither Section 355(d)
nor Section 355(e) applies to treat such property as other than “qualified property” for such purposes) and (z) as a transaction
in which no income or gain is recognized by any member of the Resideo Group, any member of the ADI Group or the holders of Resideo Capital
Stock pursuant to Sections 355, 361 and/or 1032 of the Code, other than, in the case of Resideo, ADI SpinCo and the members of their respective
Groups (as relevant), income or gain recognized as a result of intercompany items or excess loss accounts taken into account pursuant
to the Treasury Regulations promulgated pursuant to Section 1502 of the Code.
“Tax-Related Losses”
shall mean, with respect to any Taxes (or any reduction in a Refund), (i) all accounting, legal and other professional fees, and court
costs incurred in connection with such Taxes (or reduction in a Refund), as well as any other out-of-pocket costs, expenses or other liabilities
incurred in connection with such Taxes (or reduction in a Refund); and (ii) all costs, expenses and damages associated with stockholder
litigation or controversies and any amount paid by Resideo (or any of its Affiliates) or ADI SpinCo (or any of its Affiliates) in respect
of the liability of shareholders, whether paid to shareholders or to the IRS or any other Taxing Authority, in each case of this clause
(ii), resulting from the failure of the Transactions to qualify for the Tax-Free Status of the Transactions or the Tax Treatment of the
Transactions.
10
“Transactions”
shall mean the Separation (including any transactions undertaken pursuant to the Separation Plan, the Reorganization and the Contribution),
the Distribution, the Internal Distributions, any transactions related to any of the foregoing and any transaction described on Schedule
1.1.
“Transition Services
Agreement” shall have the meaning set forth in the Separation Agreement.
“Treasury Regulations”
shall mean the regulations promulgated from time to time under the Code as in effect for the relevant tax period.
“Unqualified Tax
Opinion” shall mean a “will” opinion, without substantive qualifications, of a Tax Advisor, which Tax Advisor is
reasonably acceptable to Resideo, on which Resideo may rely to the effect that a transaction will not (i) affect the Tax-Free Status of
the Transactions or (ii) adversely affect any of the conclusions set forth in any Tax Opinion or IRS Ruling regarding the Tax-Free Status
of the Transactions. Any such tax opinion must assume that the Contribution and Distribution and each Internal Distribution would have
qualified for the Tax-Free Status of the Transactions if the transaction in question did not occur.
Article
II
Payments and Tax Refunds
2.1 Taxes
Relating to Joint Returns.
(a) Resideo
shall pay and be responsible for any and all Federal Taxes, State Taxes and Foreign Taxes due with respect to or required to be reported
on any Joint Return (including any increase in such Tax as a result of a Final Determination) for all Pre-Distribution Periods.
(b) ADI
SpinCo shall pay and be responsible for any and all Federal Taxes, State Taxes and Foreign Taxes due with respect to or required to be
reported on any Joint Return (including any increase in such Tax as a result of a Final Determination), which Taxes are attributable to
the ADI Business for all Post-Distribution Periods.
2.2 Taxes
Relating to Separate Returns.
(a) Resideo
shall pay and be responsible for any and all Federal Taxes, State Taxes and Foreign Taxes due with respect to or required to be reported
on any Resideo Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax periods.
(b) ADI
SpinCo shall pay and be responsible for any and all Federal Taxes, State Taxes and Foreign Taxes due with respect to or required to be
reported on any ADI Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax periods.
11
2.3 Certain
Indemnified Taxes; Integration; Satisfaction. For the avoidance of doubt, notwithstanding the provisions set forth in Sections
2.1 and 2.2, nothing in this Article II shall be interpreted as limiting in any way the Parties’ indemnification
obligations pursuant to Section 5.1(a)(ii) through (a)(iv) or Section 5.1(b)(ii) through (b)(v) (taking into
account Section 5.1(c) and Section 5.1(d)) (the “Specific Indemnities”), and, in the case of any conflict
between the allocation of liability for Taxes set forth in this Article II and the Specific Indemnities, the Specific Indemnities
shall govern (and the conflicting liability allocations set forth in this Article II shall not apply). Without prejudice or limitation
to any of the indemnification or liability allocation provisions contained in this Agreement, the Parties acknowledge and agree that,
on the basis of all facts and circumstances as of the date hereof and through the Effective Time, (i) ADI SpinCo shall, and is expected
to, satisfy any liability or other obligation (or portion thereof) it assumes pursuant to this Agreement, whether or not Resideo (or another
member of the Resideo Group) has been legally relieved of such liability, and (ii) Resideo shall, and is expected to, satisfy any liability
or other obligation (or portion thereof) it assumes pursuant to this Agreement, whether or not ADI SpinCo (or another member of the ADI
Group) has been legally relieved of such liability.
2.4 Determination
of Tax Attributable to the ADI Business. For purposes of this Agreement (except as expressly provided otherwise herein), the amount
of Federal Taxes, State Taxes and Foreign Taxes, or any items thereof, attributable to the ADI Business shall be determined by Resideo
in its reasonable discretion and, to the extent relevant, in a manner consistent with Past Practices.
2.5 Allocation
of Employment Taxes. Liability for Employment Taxes and the allocation of any Employment Tax Credit shall be determined pursuant to
the Employee Matters Agreement.
2.6 Tax
Refunds.
(a) Subject
to Section 2.5, Section 2.6(b), Section 2.7 and Section 2.8, Resideo shall be entitled to all Refunds related
to Taxes the liability for which is allocated to Resideo pursuant to this Agreement and ADI SpinCo shall be entitled to all Refunds related
to Taxes the liability for which is allocated to ADI SpinCo pursuant to this Agreement, in each case, after giving effect to any indemnification
obligations under Article V.
(b) ADI
SpinCo shall pay to Resideo any Refund received by ADI SpinCo or any member of the ADI Group that is allocable to Resideo pursuant to
Section 2.6(a), net of any costs and expenses incurred in connection with, and any Taxes imposed by any Taxing Authority on, related
to, or attributable to, the receipt, accrual or realization of such Refund (including any Taxes imposed by way of withholding or offset),
no later than five (5) Business Days after the receipt of such Refund. Resideo shall pay to ADI SpinCo any Refund received by Resideo
or any member of the Resideo Group that is allocable to ADI SpinCo pursuant to Section 2.6(a), net of any costs and expenses incurred
in connection with, and any Taxes imposed by any Taxing Authority on, related to, or attributable to, the receipt, accrual or realization
of such Refund (including any Taxes imposed by way of withholding or offset), no later than five (5) Business Days after the receipt of
such Refund. For purposes of this Section 2.6(b), any Refund that arises as a result of an offset, credit, or other similar benefit
in respect of Taxes other than a receipt of cash shall be deemed to be received on the earlier of (i) the date on which a Tax Return is
filed claiming such offset, credit, or other similar benefit or (ii) the date on which payment of the Tax which would have otherwise been
paid absent such offset, credit, or other similar benefit is due (determined without taking into account any applicable extensions).
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2.7 Tax
Benefits. Without prejudice to (or duplication of any amounts payable pursuant to) Section 2.8, if Resideo determines, in its
reasonable discretion, that: (i) one Party bears a Tax pursuant to this Agreement or under applicable Law and (ii) the other Party is
entitled to a Tax Benefit relating to such Tax, then the Party entitled to the Tax Benefit shall pay to the Party responsible for such
Tax the amount of the Tax Benefit, net of any costs and expenses incurred in connection with, and any Taxes imposed by any Taxing Authority
on, related to, or attributable to, the receipt or realization of such Tax Benefit (including any Taxes imposed by way of withholding
or offset), in each case, as determined by Resideo in its reasonable discretion; provided, however, that any obligation
under this Section 2.7 shall only arise (x) in the event Resideo is subject to an indemnity obligation described in Section
5.1(a)(iii) hereof or (y) in respect of an adjustment to Taxes resulting from a Tax Contest described in Article VI hereof.
2.8 Certain
Carrybacks. In the event that any member of the ADI Group is required by applicable Law to carry back an ADI Carryback to a Tax Return
described in Section 3.1 for a Pre-Distribution Period, then (i) no payment with respect to such a carryback shall be due to any
member of the ADI Group from any member of the Resideo Group and (ii) if any member of the ADI Group receives a Tax Benefit in connection
with such ADI Carryback, ADI SpinCo shall promptly pay to Resideo the full amount of such Tax Benefit, net of any costs and expenses incurred
in connection with, and any Taxes imposed by any Taxing Authority on, related to, or attributable to, the receipt or realization of such
Tax Benefit (including any Taxes imposed by way of withholding or offset), as determined by Resideo in its reasonable discretion.
2.9 Tax
Adjustments. If Resideo or ADI SpinCo (or one of their respective Affiliates) pays to the other Party any amount pursuant to Section
2.5, Section 2.6, Section 2.7 or Section 2.8, in respect of a Refund or Tax Benefit and all or a portion of such
Refund or Tax Benefit is subsequently disallowed or adjusted by a Taxing Authority or in a Tax Contest, such disallowance or adjustment
shall be allocated to the Resideo Group and the ADI Group in the same manner in which such Refund or Tax Benefit was allocated pursuant
to Section 2.5, Section 2.6, Section 2.7 or Section 2.8, as applicable, and an appropriate adjusting payment
shall be promptly made (including in respect of any interest paid or imposed by any Taxing Authority) to reflect such disallowance or
adjustment.
2.10 Prior
Agreements. Except as set forth in this Agreement and in consideration of the mutual indemnities and other obligations of this Agreement,
any and all prior Tax sharing or allocation agreements, arrangements or practices between any member of the Resideo Group and any member
of the ADI Group shall be terminated with respect to the ADI Group and the Resideo Group as of the Distribution Date. No member of either
the ADI Group or the Resideo Group shall have any continuing rights or obligations under any such agreement, arrangement or practice.
2.11 Resideo
and ADI SpinCo Income Tax Deductions in Respect of Certain Equity Awards and Incentive Compensation. To the extent permitted by applicable
Law, (i) in the case of an active or former employee, solely the member of the Group for which the relevant individual is employed or,
if such individual is not employed by a member of the Group, was most recently employed at the time of the vesting, exercise, disqualifying
disposition, payment or other relevant taxable event, as appropriate, in respect of the equity awards and other incentive compensation
described in Article IV or Article V of the Employee Matters Agreement shall be entitled to claim, in a Post-Distribution
Period, any income Tax deduction in respect of such equity awards and other incentive compensation on its Tax Return associated with such
event; and (ii) in the case of a non-employee director, any income Tax deduction in respect of such equity awards and other incentive
compensation shall be claimed by the Party for which the director serves as a director following the Distribution (provided that,
in the case of any non-employee director who is to be assigned to both Resideo and ADI SpinCo, each Party shall be entitled to the deductions
arising in respect of its own stock or equity awards).
13
Article
III
Preparation and Filing of Tax Returns
3.1 Resideo’s
Responsibility. Resideo shall prepare and file when due (taking into account any applicable extensions), or shall cause to be prepared
and filed, (a) all Joint Returns, (b) all Tax Returns pursuant to which there is a claim to group relief by one or more members of the
ADI Group in respect of losses generated by one or more members of the Resideo Group, and (c) all Resideo Separate Returns, including
any amendments to such Tax Returns. Notwithstanding any provision in this Agreement to the contrary, with respect to any Joint Return,
to the extent that any expenses related to a previously filed Joint Return for similar Taxes were customarily paid by a member of the
ADI Group, as determined by Resideo in its reasonable discretion, then any similar expenses shall be paid and borne by ADI SpinCo after
the Distribution, including, for the avoidance of doubt, any expenses related to the preparation of transfer pricing documentation.
3.2 ADI
SpinCo’s Responsibility. ADI SpinCo shall prepare and file when due (taking into account any applicable extensions), or shall
cause to be prepared and filed, all Tax Returns, including any amended Tax Returns, required to be filed by or with respect to members
of the ADI Group other than those Tax Returns that Resideo is required to prepare and file under Section 3.1. The Tax Returns required
to be prepared and filed by ADI SpinCo under this Section 3.2 shall include any ADI Separate Returns and any amended ADI Separate
Returns. For the avoidance of doubt, ADI SpinCo shall prepare any transfer pricing documentation required to be prepared with respect
to a Tax Return described in this Section 3.2.
3.3 Right
to Review Tax Returns. The Responsible Company for any material Tax Return shall make such Tax Return (or the relevant portions thereof)
available for review by the other Party (the “Reviewing Company”), if requested, to the extent that the requesting
Party (i) is or would reasonably be expected to be liable for Taxes reflected on such Tax Return, (ii) is or would reasonably be expected
to be liable for any additional Taxes owing as a result of adjustments to the amount of such Taxes reported on such Tax Return, or (iii)
has or would reasonably be expected to have a claim for Tax Benefits under this Agreement in respect of items reflected on such Tax Return.
The Responsible Company shall use reasonable efforts to make any such Tax Return (or the relevant portions thereof) available for review
as required under this paragraph sufficiently in advance of the due date for the filing of such Tax Return (taking into account extensions)
to provide the Reviewing Company with a meaningful opportunity to review and comment on such Tax Return (which, in the case of any Tax
Return with respect to income Taxes, shall be no later than thirty (30) days prior to the due date for such Tax Return (taking into account
extensions)). The Responsible Company shall consider in good faith any reasonable comments provided by the Reviewing Company reasonably
in advance of the due date for such Tax Return (taking into account extensions) (which, in the case of any Tax Return with respect to
income Taxes, shall be no later than fifteen (15) days following the Reviewing Company’s receipt of the draft of such return from
the Responsible Company). The Parties shall attempt in good faith to resolve any material disagreement arising out of the review of such
Tax Return and, failing such resolution, any material disagreement shall be resolved in accordance with the provisions of Article IX
as promptly as practicable.
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3.4 Cooperation.
The Parties shall provide, and shall cause their Affiliates to provide, assistance and cooperation to one another in accordance with Article
VII with respect to the preparation and filing of Tax Returns, including providing information required to be provided under Article
VIII. Notwithstanding anything to the contrary in this Agreement, Resideo shall not be required to disclose to ADI SpinCo any consolidated,
combined, unitary, or other similar Joint Return of which a member of the Resideo Group is the common parent or any information related
to such a Joint Return other than information relating solely to the ADI Group; provided that Resideo shall provide such additional
information that is reasonably required in order for ADI SpinCo to determine Taxes attributable to the ADI Business. If an amended Separate
Return for State Taxes for which ADI SpinCo is the Responsible Company is required to be filed as a result of an amendment made to a Joint
Return for Federal Tax pursuant to an audit adjustment, then the Parties shall cooperate to ensure that such amended Separate Return can
be prepared and filed in a manner that preserves confidential information including through the use of third-party preparers.
3.5 Tax
Reporting Practices. Except as provided in Section 3.6, with respect to any Tax Return for any taxable period that begins on
or before the second anniversary of the Distribution Date with respect to which ADI SpinCo is the Responsible Company, such Tax Return
shall be prepared in a manner (i) consistent with past practices, accounting methods, elections and conventions (“Past Practices”)
used with respect to the Tax Returns in question (unless there is no Reasonable Basis for the use of such Past Practices), and to the
extent any items are not covered by Past Practices (or in the event that there is no Reasonable Basis for the use of such Past Practices),
in accordance with reasonable Tax accounting practices selected by ADI SpinCo that are consistent with Resideo’s accounting practices
with respect to similar Tax Items and otherwise acceptable to Resideo, in Resideo’s reasonable discretion; and (ii) that, to the
extent consistent with clause (i), minimizes the overall amount of Taxes due and payable on such Tax Return for all of the Parties by
cooperating in making such elections or applications for group or other relief or allowances available in the taxing jurisdiction in which
such Tax Return is filed. Notwithstanding anything herein to the contrary (but subject to Section 3.6), ADI SpinCo shall not, and
shall not cause or permit its Affiliates to, (i) take any action or Tax position inconsistent with (x) the assumptions made (including
with respect to any Tax Item) in determining all estimated or advance payments of Taxes on or prior to the Distribution Date or (y) any
position taken on any Tax Return with respect to which Resideo is the Responsible Company with respect to similar Tax Items or (ii) without
Resideo’s prior written consent, make a change in any of its methods of accounting for Tax purposes until all applicable statutes
of limitations for all Pre-Distribution Periods have expired.
3.6 Reporting
of Separation. The Tax treatment of any step or portion of the Transactions and any Tax Item related thereto shall be reported on
each applicable Tax Return consistently with the Tax-Free Status of the Transactions and the Tax Treatment of the Transactions, taking
into account the jurisdiction in which such Tax Returns are filed; provided that, notwithstanding anything to the contrary herein,
if Resideo determines that there is no Reasonable Basis for such Tax treatment, then Resideo shall notify ADI SpinCo no later than twenty
(20) Business Days prior to filing the relevant Tax Return and the Parties shall attempt in good faith to agree on the manner in which
the relevant step or portion of the Transactions or related Tax Item shall be reported (with any disagreements resolved in accordance
with the provisions of Article IX as promptly as practicable); provided, further, that in the case of any step or
portion of the Transactions or any Tax Item related thereto that is not covered by the Tax-Free Status of the Transactions or the Tax
Treatment of the Transactions, such step or portion of the Transactions and any Tax Item related thereto shall be treated and reported
as determined by Resideo in its reasonable discretion. If Resideo determines, in its reasonable discretion, that a protective election
under Section 336(e) of the Code shall be made with respect to the Distribution, ADI SpinCo agrees to take any such action that is necessary
to effect such election, including any corresponding election with respect to any of its Subsidiaries, as determined by Resideo. If such
a protective election is made, this Agreement shall be amended in such a manner, if any, as is determined by Resideo in its reasonable
discretion (including by requiring that, in the event the Transactions fail to qualify for the Tax-Free Status of the Transactions or
the Tax Treatment of the Transactions, ADI SpinCo shall pay over to Resideo any Tax Benefits realized by ADI SpinCo or any member of the
ADI Group arising from the step-up in Tax basis resulting from such election).
15
3.7 Distribution
Straddle Period Tax Allocation.
(a) In
the case of any Straddle Period, Tax Items shall be apportioned between Pre-Distribution Periods and Post-Distribution Periods in accordance
with the principles of Treasury Regulations Section 1.1502-76(b) as interpreted and applied by Resideo in its sole discretion. With respect
to the Joint Return for the Tax period that includes the Distribution, Resideo may determine in its sole discretion whether to make a
ratable election under Treasury Regulations Section 1.1502-76(b)(2)(ii) with respect to ADI SpinCo or any other relevant member of the
ADI Group. ADI SpinCo shall, and shall cause each member of the ADI Group to, take all actions necessary to give effect to such election.
(b) In
determining the apportionment of Tax Items between Pre-Distribution Periods and Post-Distribution Periods, any Tax Items relating to the
Transactions shall be treated as extraordinary items described in Treasury Regulations Section 1.1502-76(b)(2)(ii)(C) and shall (to the
extent arising on or prior to the Distribution Date) be allocated to the Pre-Distribution Period, and any Taxes related to such items
shall be treated under Treasury Regulations Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall (to the extent
arising on or prior to the Distribution Date) be allocated to the Pre-Distribution Period.
3.8 Payment
of Taxes.
(a) With
respect to any Tax Return required to be filed pursuant to this Agreement, the Responsible Company shall remit or cause to be remitted
to the applicable Taxing Authority in a timely manner any Taxes due in respect of any such Tax Return. In the case of any adjustment pursuant
to a Final Determination with respect to any Tax Return, the Responsible Company with respect to such Tax Return shall pay to the applicable
Taxing Authority when due (taking into account any automatic or validly elected extensions, deferrals, or postponements) any additional
Tax due with respect to such Tax Return required to be paid as a result of such adjustment pursuant to a Final Determination.
(b) In
the case of any Tax Return for which the Party that is not the Responsible Company is obligated pursuant to this Agreement to pay all
or a portion of the Taxes reported as due on such Tax Return, the Responsible Company shall notify the other Party, in writing, of its
obligation to pay such Taxes and, in reasonably sufficient detail, its calculation of the amount due by such other Party and the Party
receiving such notice shall pay such amount to the Responsible Company upon the later of five (5) Business Days prior to the date on which
such payment is due and fifteen (15) Business Days after the receipt of such notice.
16
(c) With
respect to any estimated Taxes, the Party that is or will be the Responsible Company with respect to any Tax Return that will reflect
(or otherwise give credit for) such estimated Taxes shall remit or cause to be remitted to the applicable Taxing Authority in a timely
manner any estimated Taxes due. In the case of any estimated Taxes for which the Party that is not the Responsible Company is obligated
pursuant to this Agreement to pay all or a portion of the Taxes that will be reported as due on any Tax Return that will reflect (or otherwise
give credit for) such estimated Taxes, the Responsible Company shall notify the other Party, in writing, of its obligation to pay such
estimated Taxes and, in reasonably sufficient detail, its calculation of the amount due by such other Party, and the Party receiving such
notice shall pay such amount to the Responsible Company upon the later of five (5) Business Days prior to the date on which such payment
is due and fifteen (15) Business Days after the receipt of such notice.
(d) Notwithstanding
anything to the contrary herein (including, for the avoidance of doubt, Sections 3.8(a), 3.8(b) and 3.8(c)), any
amount to be paid by ADI SpinCo in respect of any liability or obligation of Resideo for Taxes that is assumed by ADI SpinCo, or otherwise
treated as a liability or obligation of Resideo that is assumed by ADI SpinCo within the meaning of Section 357(d) of the Code, pursuant
to this Agreement, in each case, as determined by Resideo in its sole discretion, shall be paid, at Resideo’s option and in its
sole discretion, in the manner set forth in Section 9.11(b) of the Separation Agreement.
3.9 Amended
Returns and Carrybacks.
(a) ADI
SpinCo shall not, and shall not permit any member of the ADI Group to, file or allow to be filed any request for an Adjustment for any
Pre-Distribution Period without the prior written consent of Resideo, such consent to be exercised in Resideo’s reasonable discretion.
(b) ADI
SpinCo shall, and shall cause each member of the ADI Group to, make any available elections to waive the right to carry back any ADI Carryback
arising in a Post-Distribution Period to a Pre-Distribution Period.
(c) ADI
SpinCo shall not, and shall cause each member of the ADI Group not to, without the prior written consent of Resideo, make any affirmative
election to carry back any ADI Carryback arising in a Post-Distribution Period to a Pre-Distribution Period, such consent to be exercised
in Resideo’s sole discretion.
(d) Receipt
of consent by ADI SpinCo or a member of the ADI Group from Resideo pursuant to the provisions of this Section 3.9 shall in no way
limit or modify ADI SpinCo’s indemnification obligations pursuant to this Agreement (including Article V).
17
3.10 Tax
Attributes. Resideo shall in its reasonable discretion advise ADI SpinCo in writing of the amount (if any) of any Tax Attributes,
which Resideo determines, in its good faith discretion, shall be allocated or apportioned to the ADI Group under applicable Law. ADI SpinCo
and all members of the ADI Group shall prepare all Tax Returns in accordance with such written notice. ADI SpinCo agrees that it shall
not dispute Resideo’s reasonable determination of Tax Attributes. For the avoidance of doubt, Resideo shall not be required in order
to comply with this Section 3.10 or otherwise to create or cause to be created any books and records or reports or other documents
based thereon (including, without limitation, “earnings & profits studies,” “basis studies” or similar determinations)
that it does not maintain or prepare in the ordinary course of business.
3.11 Section
245A Election. With respect to any member of the ADI Group that is a “controlled foreign corporation” within the meaning
of Section 957(a) of the Code immediately prior to the Distribution, Resideo may, in its sole discretion, determine that an election under
Treasury Regulations Section 1.245A-5(e)(3)(i) (or any successor provision of Tax Law that allows a closing of the books election) shall
be made to close such entity’s taxable year for Federal Tax purposes as of the Effective Time. If Resideo determines that such election
shall be made with respect to any such member of the ADI Group, ADI SpinCo shall, and shall cause its Affiliates to, cooperate with Resideo
and its Affiliates to make and give effect to such election.
3.12 Information
for Joint Returns and Resideo Separate Returns.
(a) ADI
SpinCo shall promptly, and in any event no later than thirty (30) days following the close of each fiscal quarter (or, with respect to
information requested less than ten (10) days prior to the close of the relevant fiscal quarter, as promptly as reasonably practicable),
provide Resideo with all information with respect to ADI SpinCo, the members of the ADI Group, and their respective assets and operations
as requested by Resideo in order to enable Resideo to timely prepare and file all Tax Returns for which Resideo is the Responsible Company
and to timely pay any and all Taxes (including estimated Taxes) payable with respect to such Tax Returns. Where applicable, such information
shall be provided in a manner consistent with Past Practices of Resideo and its Subsidiaries prior to the Distribution; and
(b) Resideo
shall promptly, and in any event no later than thirty (30) days following the close of each fiscal quarter (or, with respect to information
requested less than ten (10) days prior to the close of the relevant fiscal quarter, as promptly as reasonably practicable), provide ADI
SpinCo with all information with respect to Resideo, the members of the Resideo Group, and their respective assets and operations as requested
by ADI SpinCo in order to enable ADI SpinCo to timely prepare and file all Tax Returns for which ADI SpinCo is the Responsible Company
and to timely pay any and all Taxes (including estimated Taxes) payable with respect to such Tax Returns. Where applicable, such information
shall be provided in a manner consistent with Past Practices of ADI SpinCo and its Subsidiaries prior to the Distribution.
18
For the avoidance of doubt,
a Party’s failure to timely provide information required to be provided under this Section 3.12 shall be subject to the provisions
set forth in Section 7.2.
Article
IV
Tax-Free Status of the Distribution
4.1 Representations
and Warranties.
(a) Resideo,
on behalf of itself and all other members of the Resideo Group, hereby represents and warrants that (i) it has examined the IRS Ruling
Request, the IRS Ruling (if any), the Tax Opinion(s), the Tax Representation Letters and any other materials delivered or deliverable
in connection with the issuance of any IRS Ruling and the rendering of any Tax Opinion, in each case, as they exist as of the date hereof
(all documents and materials described in this clause (i), including, for the avoidance of doubt, the IRS Ruling Request, the IRS Ruling
(if any), the Tax Opinion and the Tax Representation Letters, collectively, the “Tax Materials”) and (ii) the facts
presented and statements and representations made therein, to the extent descriptive of or otherwise relating to Resideo or any member
of the Resideo Group or the Resideo Retained Business, were or will be, at the time presented or represented and from such time until
and including the Distribution Date, true, correct, and complete in all material respects. Resideo, on behalf of itself and all other
members of the Resideo Group, hereby confirms and agrees to comply with any and all covenants and agreements in the Tax Materials applicable
to Resideo or any member of the Resideo Group or the Resideo Retained Business.
(b) ADI
SpinCo, on behalf of itself and all other members of the ADI Group, hereby represents and warrants that (i) it has examined the Tax Materials
and (ii) the facts presented and statements and representations made therein, to the extent descriptive of or otherwise relating to ADI
SpinCo or any member of the ADI Group or the ADI Business, were or will be, at the time presented or represented and from such time until
and including the Distribution Date, true, correct, and complete in all material respects. ADI SpinCo, on behalf of itself and all other
members of the ADI Group, hereby confirms and agrees to comply with any and all covenants and agreements in the Tax Materials applicable
to ADI SpinCo or any member of the ADI Group or the ADI Business.
(c) ADI
SpinCo, on behalf of itself and all other members of the ADI Group, hereby represents and warrants that during the two-year period ending
on the date of any Internal Distribution or the Distribution Date, there was no “agreement, understanding, arrangement, substantial
negotiations or discussions” (as such terms are defined in Treasury Regulations Section 1.355-7(h)) by any one or more officers
or directors of ADI SpinCo or any member of the ADI Group or by any other person or persons with the implicit or explicit permission of
one or more of such officers or directors regarding an acquisition of all or a significant portion of the ADI SpinCo Capital Stock (or
any predecessor of ADI SpinCo) or the Capital Stock of ADEMCO III Ltd or any other member of the ADI Group which underwent an Internal
Distribution; provided that no representation or warranty is made regarding the absence of any “agreement, understanding,
arrangement, substantial negotiations” or “discussions” (as such terms are defined in Treasury Regulations Section 1.355-7(h))
by any one or more present or former officers or directors of any member of the Resideo Group (or by any other person or persons with
the implicit or explicit permission of one or more of such officers or directors) who are not officers or directors of any member of the
ADI Group.
19
(d) Each
of Resideo, on behalf of itself and all other members of the Resideo Group, and ADI SpinCo, on behalf of itself and all other members
of the ADI Group, represents and warrants that it knows of no fact (after due inquiry) that may cause the Tax treatment of the Transactions
to be other than the Tax-Free Status of the Transactions and the Tax Treatment of the Transactions.
(e) Each
of Resideo, on behalf of itself and all other members of the Resideo Group, and ADI SpinCo, on behalf of itself and all other members
of the ADI Group, represents and warrants that it has no plan or intent to take any action, or fail to take any action (or to cause or
permit any member of its Group to take or fail to take any action) which is inconsistent with any facts presented or statements or representations
made in the Tax Materials.
4.2 Restrictions
Relating to the Distribution.
(a) ADI
SpinCo, on behalf of itself and all other members of the ADI Group, hereby covenants and agrees that no member of the ADI Group will take,
fail to take, or permit to be taken: (i) any action where such action or failure to act would be inconsistent with or cause to be untrue
any statement, information, covenant or representation in the Tax Materials or would reasonably be expected to result in a failure to
preserve the Tax-Free Status of the Transactions or the Tax Treatment of the Transactions or (ii) any action which constitutes an ADI
Disqualifying Action.
(b) During
the Restricted Period, ADI SpinCo:
(i) shall
continue and shall cause each member of the ADI Group to continue the active conduct of the ADI Active Trade or Business for purposes
of Section 355(b)(2) of the Code, taking into account Section 355(b)(3) of the Code, as conducted immediately prior to the Distribution;
(ii) shall
not voluntarily dissolve or liquidate (wholly or partially) itself or, if such action could or could be expected to jeopardize or impede
the Tax-Free Status of the Transactions, any of its Affiliates (including, in each case, any action that is a liquidation for U.S. federal
income Tax purposes);
(iii) shall
not (1) enter into any Proposed Acquisition Transaction or, to the extent ADI SpinCo has the right to prohibit any Proposed Acquisition
Transaction, permit any Proposed Acquisition Transaction to occur, (2) redeem or otherwise repurchase (directly or through an Affiliate)
any ADI SpinCo Capital Stock except to the extent such repurchases are in connection with the net exercise of stock options issued to
a person for the performance of services, (3) amend its certificate of incorporation (or other organizational documents), or take any
other action, whether through a stockholder vote or otherwise, affecting the relative voting rights of ADI SpinCo Capital Stock (including
through the conversion of any capital stock into another class of capital stock, other than a conversion of the ADI SpinCo Preferred Stock
pursuant to its terms), (4) merge, amalgamate or consolidate with any other Person or (5) take any other action or actions (including
any action or transaction that would be reasonably likely to be inconsistent with any representation made in the Tax Materials) which
in the aggregate would, when combined with any other direct or indirect changes in ownership of ADI SpinCo Capital Stock pertinent for
purposes of Section 355(e) of the Code, have the effect of causing or permitting one or more Persons (whether or not acting in concert)
to acquire directly or indirectly stock representing a fifty percent (50%) or greater interest in ADI SpinCo or would reasonably be expected
to result in a failure to preserve the Tax-Free Status of the Transactions;
20
(iv) shall
not and shall not permit any member of the ADI Group, in a single transaction or a series of transactions, to sell, transfer, or otherwise
dispose of or agree to sell, transfer or otherwise dispose (including in any transaction treated for U.S. federal income Tax purposes
as a sale, transfer or disposition) of assets (including, any shares of capital stock of a Subsidiary) that, in the aggregate, constitute
more than twenty percent (20%) of the gross assets of ADI SpinCo or the consolidated gross assets of the ADI Group. The foregoing sentence
shall not apply to (1) sales, transfers, or dispositions of inventory in the ordinary course of business, (2) any cash paid to acquire
assets from an unrelated Person in an arm’s-length transaction, (3) any assets transferred to a Person that is disregarded as an
entity separate from the transferor for U.S. federal income Tax purposes or (4) any mandatory or optional repayment (or pre-payment) of
any indebtedness of ADI SpinCo or any member of the ADI Group. The percentages of gross assets or consolidated gross assets of ADI SpinCo
or the ADI Group, as the case may be, sold, transferred, or otherwise disposed of, shall be based on the fair market value of the gross
assets of ADI SpinCo and the members of the ADI Group as of the Distribution Date. For purposes of this Section 4.2(b)(iv), a merger
of ADI SpinCo or one of its Subsidiaries with and into any Person that is not a wholly owned Subsidiary of ADI SpinCo shall constitute
a disposition of all of the assets of ADI SpinCo or such Subsidiary; and
(v) shall
not permit any holder of ADI SpinCo Capital Stock other than CD&R, CD&R Channel Holdings II, L.P. (together with CD&R, the
“CD&R Persons”), or any Affiliates of the CD&R Persons, to become a “controlling shareholder” within
the meaning of Treasury Regulations Section 1.355-7.
(c) Without
the prior written consent of Resideo (such consent to be provided in Resideo’s sole discretion), ADI SpinCo shall not, and shall
not cause or permit any member of the ADI Group to, waive or amend any provisions, obligations or restrictions under the CD&R Agreements
in such a manner that would, as determined in Resideo’s sole discretion, jeopardize or impede the Tax-Free Status of the Transactions
or the Tax Treatment of the Transactions.
Any consent provided by Resideo
in connection with this Section 4.2(c) shall in no way limit or modify ADI SpinCo’s indemnification obligations pursuant
to Article V.
(d) If
ADI SpinCo proposes to enter into any Section 4.2(d) Acquisition Transaction or, to the extent ADI SpinCo has the right to prohibit any
Section 4.2(d) Acquisition Transaction, proposes to permit any Section 4.2(d) Acquisition Transaction to occur, in each case, during the
Restricted Period, ADI SpinCo shall provide Resideo, no later than ten (10) days prior to the signing of any written agreement with respect
to the Section 4.2(d) Acquisition Transaction, with a written description of such transaction (including the type and amount of ADI SpinCo
Capital Stock to be issued in such transaction) and a certificate of the Chief Financial Officer of ADI SpinCo to the effect that the
Section 4.2(d) Acquisition Transaction is not a Proposed Acquisition Transaction or any other transaction to which the requirements of
Section 4.2(b) apply.
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(e) Notwithstanding
the restrictions imposed by Section 4.2(a), (b) and (c), ADI SpinCo or a member of the ADI Group may take any of the actions
or transactions described therein (in the case of Section 4.2(a), other than any actions or transactions described therein relating
to the Tax Treatment of the Transactions) if ADI SpinCo either (i) obtains an Unqualified Tax Opinion in form and substance reasonably
satisfactory to Resideo or (ii) obtains the prior written consent of Resideo waiving the requirement that ADI SpinCo obtain an Unqualified
Tax Opinion, such waiver to be provided in Resideo’s sole discretion. Resideo’s evaluation of an Unqualified Tax Opinion may
consider, among other factors, the appropriateness of any underlying assumptions, representations, and covenants made in connection with
such opinion. ADI SpinCo shall bear all costs and expenses of securing any such Unqualified Tax Opinion and shall reimburse Resideo for
all reasonable out-of-pocket expenses that Resideo or any of its Affiliates may incur in good faith in seeking to obtain or evaluate any
such Unqualified Tax Opinion. Neither the delivery of an Unqualified Tax Opinion nor Resideo’s waiver of ADI SpinCo’s obligation
to deliver an Unqualified Tax Opinion shall in any way limit or modify ADI SpinCo’s indemnification obligations pursuant to Article
V.
(f) ADI
SpinCo agrees that Resideo shall have the sole and exclusive control over the process of obtaining any private letter ruling with respect
to the Transactions and any related transaction, and only Resideo shall be entitled to apply for any such private letter ruling (whether
prior to or following the Distribution). Resideo shall have the right to obtain a private letter ruling from the IRS (and/or any other
Taxing Authority) (and/or if applicable, any supplemental private letter ruling) at any time in its sole discretion. If Resideo determines
to obtain a private letter ruling or supplemental private letter ruling, ADI SpinCo shall (and shall cause its Affiliates to) cooperate
with Resideo and take any and all actions reasonably requested by Resideo in connection with obtaining such private letter ruling or supplemental
private letter ruling (including, without limitation, by making any representation or covenant or providing any materials or information
requested by the IRS or other applicable Taxing Authority; provided that ADI SpinCo shall not be required to make (or cause any
of its Affiliates to make) any representation or covenant that is inconsistent with historical facts or as to future matters or events
over which it has no control). After the Distribution, Resideo and ADI SpinCo shall each bear its own costs and expenses incurred in connection
with obtaining any such private letter ruling or supplemental private letter ruling.
Article
V
Indemnity Obligations
5.1 Indemnity
Obligations.
(a) Resideo
shall indemnify and hold harmless ADI SpinCo from and against, and will reimburse ADI SpinCo for, (i) any and all Taxes allocated to Resideo
pursuant to Article II, after giving effect to Section 5.1(b)(v), (ii) any and all Taxes and Tax-Related Losses arising
out of, based upon, or relating or attributable to any breach of or inaccuracy in, or failure to perform, as applicable, any representation,
covenant, or obligation of any member of the Resideo Group pursuant to this Agreement, (iii) any and all Distribution Taxes and Tax-Related
Losses to the extent such amounts are not attributable to ADI SpinCo or the ADI Group, as set forth in Section 5.1(b) and (iv)
any and all Resideo Pre-Distribution Period Taxes and all Tax-Related Losses arising out of, based upon, or attributable to Resideo Pre-Distribution
Period Taxes.
22
(b) Without
regard to whether an Unqualified Tax Opinion may have been provided, the existence of any private letter ruling or whether any action
is permitted or consented to hereunder, and notwithstanding anything else to the contrary contained herein, ADI SpinCo shall indemnify
and hold harmless Resideo from and against, and will reimburse Resideo for, (i) any and all Taxes allocated to ADI SpinCo pursuant to
Article II, after giving effect to Section 5.1(a)(iv), (ii) any and all Taxes and Tax-Related Losses arising out of, based
upon, or relating or attributable to any breach of or inaccuracy in, or failure to perform, as applicable, any representation, covenant,
or obligation of any member of the ADI Group pursuant to this Agreement, (iii) any and all Distribution Taxes and Tax-Related Losses attributable
to an ADI Disqualifying Action (regardless of whether the conditions set forth in Section 4.2(e) are satisfied and regardless of
any consent provided by Resideo), (iv) any and all Distribution Taxes and Tax-Related Losses arising out of, based upon, or relating or
attributable to (A) the acquisition (other than pursuant to the Contribution and the Distribution) of all or a portion of the ADI SpinCo
Capital Stock and/or ADI SpinCo’s or its Subsidiaries’ stock or assets by any means whatsoever by any Person, (B) any “agreement,
understanding, arrangement, substantial negotiations, or discussions” (as such terms are defined in Treasury Regulations Section
1.355-7(h)) by any one or more officers or directors of any member of the ADI Group or by any other person or persons with the implicit
or explicit permission of one or more such officers or directors regarding transactions or events that cause the Distribution to be treated
as part of a plan pursuant to which one or more Persons acquire, directly or indirectly, ADI SpinCo Capital Stock representing a fifty
percent (50%) or greater interest in ADI SpinCo, or (C) any action or failure to act by ADI SpinCo or any other member of the ADI Group
after the Distribution (including, without limitation, any amendment to ADI SpinCo’s certificate of incorporation (or other organizational
documents), whether through a stockholder vote or otherwise) affecting the voting rights of ADI SpinCo stock (including, without limitation,
but other than a conversion of the ADI SpinCo Preferred Stock pursuant to its terms, through the conversion of one class of ADI SpinCo
Capital Stock into another class of ADI SpinCo Capital Stock), and (v) any and all ADI Pre-Distribution Period Taxes and all Tax-Related
Losses arising out of, based upon, or attributable to ADI Pre-Distribution Period Taxes.
(c) To
the extent that any Tax or Tax-Related Loss is subject to indemnity pursuant to both Sections 5.1(a)(ii) through (iv) and
5.1(b)(ii) through (b)(v), responsibility for such Tax or Tax-Related Loss shall be shared by Resideo and ADI SpinCo according
to relative fault.
(d) Notwithstanding
anything else to the contrary contained in this Agreement, Resideo and ADI SpinCo, as applicable, shall not have any right to obtain indemnification
payments under this Agreement unless the aggregate amounts received by such Party as indemnification payments hereunder would exceed $5,000,000
in the aggregate (the “Indemnification Threshold”); provided, however, that if amounts indemnified under
this Agreement would exceed the Indemnification Threshold in the aggregate, the Party responsible for such amounts shall be responsible
for all such amounts from the first dollar thereof.
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5.2 Indemnification
Payments.
(a) Except
as otherwise provided in this Agreement, if either Party (the “Indemnitee”) is required to pay to a Taxing Authority
a Tax or to another Person a payment in respect of a Tax that the other Party (the “Indemnifying Party”) is liable
for under this Agreement, including as the result of a Final Determination, the Indemnitee shall notify the Indemnifying Party, in writing,
of its obligation to pay such Tax and, in reasonably sufficient detail, its calculation of the amount due by such Indemnifying Party to
the Indemnitee, including any Tax-Related Losses attributable thereto. The Indemnifying Party shall pay such amount, including any Tax-Related
Losses attributable thereto, to the Indemnitee no later than the later of (i) five (5) Business Days prior to the date on which such payment
is due to the applicable Taxing Authority or (ii) fifteen (15) Business Days after the receipt of notice from the other Party.
(b) If,
as a result of any change or redetermination, any amount previously allocated to and borne by one Party pursuant to the provisions of
Article II is thereafter allocated to the other Party, then, no later than five (5) Business Days after such change or redetermination,
such other Party shall pay to such Party the amount previously borne by such Party which is allocated to such other Party as a result
of such change or redetermination.
(c) Notwithstanding
anything to the contrary herein (including, for the avoidance of doubt, Sections 5.2(a) and 5.3), any amount to be paid
by ADI SpinCo in respect of a liability or obligation of Resideo that is assumed by ADI SpinCo, or otherwise treated as a liability or
obligation of Resideo that is assumed by ADI SpinCo within the meaning of Section 357(d) of the Code, pursuant to this Agreement, in each
case, as determined by Resideo in its sole discretion, shall be paid, at Resideo’s option and in its sole discretion, in the manner
set forth in Section 9.11(b) of the Separation Agreement.
5.3 Payment
Mechanics.
(a) All
payments under this Agreement required to be made by one Party to the other Party shall be made by Resideo directly to ADI SpinCo and
by ADI SpinCo directly to Resideo; provided, however, that if the Parties mutually agree with respect to any such indemnification
payment, any member of the Resideo Group, on the one hand, may make such indemnification payment to any member of the ADI Group, on the
other hand, and vice versa. All indemnification payments shall be treated in the manner described in Section 5.4 and, for the avoidance
of doubt, all payments shall be made in accordance with Section 5.2(c).
(b) In
the case of any payment of Taxes made by a Responsible Company or Indemnitee pursuant to this Agreement for which such Responsible Company
or Indemnitee, as the case may be, has received or will receive a payment from the other Party, such Responsible Company or Indemnitee
shall provide to the other Party a copy of any official government receipt received with respect to the payment of such Taxes to the applicable
Taxing Authority (or, if no such official governmental receipts are available, executed bank payment forms or other reasonable evidence
of payment).
24
5.4 Treatment
of Liabilities and Payments; Gross-Up.
(a) Except
to the extent otherwise required by applicable Tax Law (as determined by Resideo in its sole discretion), each of Resideo and ADI SpinCo
shall, and shall cause the members of its Group to, treat for all U.S. federal (and applicable state and local) income Tax purposes any
Liabilities of Resideo that are assumed or otherwise accepted by ADI SpinCo pursuant to this Agreement, the Separation Agreement or the
Employee Matters Agreement or, to the extent involving Liabilities attributable to Pre-Distribution Periods, otherwise in connection with
the Separation (whether such Liabilities are assumed or accepted by ADI SpinCo directly or treated as assumed or accepted by ADI SpinCo
as a result of a transfer by Resideo to ADI SpinCo of equity interests in an entity treated as a “disregarded entity” for
U.S. federal income Tax purposes) as assumed, within the meaning of Section 357(d) of the Code, by ADI SpinCo pursuant to the Contribution.
For purposes of this Section 5.4(a), all references to Resideo and ADI SpinCo shall include a reference to any member of the Resideo
Group or the ADI Group that is, for U.S. federal income Tax purposes, disregarded as separate from Resideo and ADI SpinCo, respectively.
(b) The
Parties agree that, in the absence of any change in applicable U.S. federal income Tax Law or except as otherwise required by other applicable
Tax Law, (i) any indemnity or other similar payment made among the Parties pursuant to this Agreement, the Separation Agreement or any
Ancillary Agreement (other than any payment of interest or penalties (whether pursuant to this Agreement, the Separation Agreement or
any Ancillary Agreement or to or by a Taxing Authority) or State Income Taxes by or to a Taxing Authority) shall be treated, for all income
Tax purposes, as (A) a payment with respect to an assumed or retained liability (with, if and as applicable, one Party acting as agent
for the other Party or its Subsidiaries), or, if the treatment described in clause (A) is not available under applicable Law (as determined
by Resideo in its sole discretion), (B) a non-taxable contribution by Resideo to ADI SpinCo or a distribution by ADI SpinCo to Resideo,
as applicable, and, in the case of this clause (B), such contribution or distribution shall be treated as having been made immediately
prior to the Distribution, and (ii) any payment of interest, penalties or State Taxes pursuant to this Agreement, the Separation Agreement
or any Ancillary Agreement or by or to a Taxing Authority shall be reported for Tax purposes by the Parties as taxable or deductible (to
the extent a deduction is available), as the case may be, to the Party entitled under this Agreement to retain such payment or required
under this Agreement to make such payment. Notwithstanding the foregoing, Resideo shall notify ADI SpinCo if it reasonably determines
that any payment made pursuant to this Agreement is to be treated, for any Tax purposes, as a payment made by one Party acting as an agent
of one of such Party’s Subsidiaries to the other Party acting as an agent of one of such other Party’s Subsidiaries, and the
Parties agree to treat any such payment accordingly.
(c) None
of Resideo or ADI SpinCo shall, and each shall cause its Affiliates not to, report or take any position (on a Tax Return or otherwise)
inconsistent with the treatment described in Section 5.4(a) or 5.4(b) (unless otherwise required by a Final Determination
or a good-faith resolution of a Tax Contest).
(d) If,
notwithstanding the manner in which payments described in Section 5.4(b) were reported, there is a Tax liability or an adjustment
to a Tax liability of a Party as a result of its receipt of a payment pursuant to this Agreement or the Separation Agreement, such payment
shall be appropriately adjusted so that the amount of such payment, reduced by the amount of all Taxes payable with respect to the receipt
thereof (but taking into account all correlative Tax Benefits resulting from the payment of such Taxes), shall equal the amount of the
payment which the Party receiving such payment would otherwise be entitled to receive.
25
Article
VI
Tax Contests
6.1 Notice.
Each Party shall notify the other Party in writing within ten (10) days after receipt by such Party or any member of its Group of a written
communication from any Taxing Authority with respect to a Tax Contest concerning any Taxes for which the other Party may be liable pursuant
to this Agreement, and thereafter shall promptly forward or make available to such Party copies of notices and communications relating
to such Tax Contest. The failure of one Party to notify the other of such communication in accordance with the immediately preceding sentence
shall not relieve the other Party of any liability or obligation to pay such Tax or make indemnification payments under this Agreement,
except to the extent that the failure to timely provide such notification actually and materially prejudices the ability of such other
Party to contest such Tax liability and increases the amount of such Tax liability.
6.2 Separate
Returns. Subject to Section 6.4, Section 6.5 and Section 6.7, in the case of any Tax Contest with respect to
any Separate Return, the Responsible Company with respect to such Separate Return shall have the sole responsibility and right to control
the prosecution of such Tax Contest, including the exclusive right to communicate with agents of the applicable Taxing Authority and to
control, resolve, settle, or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result
of such Tax Contest.
6.3 Joint
Returns. Subject to Section 6.4, Section 6.5 and Section 6.7, in the case of any Tax Contest with respect to
any Joint Return, Resideo shall have the sole responsibility and right to control the prosecution of such Tax Contest, including the exclusive
right to communicate with agents of the applicable Taxing Authority and to control, resolve, settle or agree to any deficiency, claim
or adjustment proposed, asserted, or assessed in connection with or as a result of such Tax Contest. Notwithstanding the foregoing, to
the extent a portion of any such Tax Contest with respect to a Joint Return with respect to Foreign Taxes relates to a matter which was
customarily controlled by a member of the ADI Group, as determined by Resideo in its reasonable discretion, then Resideo may elect that
ADI SpinCo shall be responsible for the conduct of such portion of such Tax Contest and any expenses related thereto, including expenses
relating to any supporting transfer pricing analysis.
6.4 Mixed
Contests. Subject to Section 6.5 and Section 6.7, in the event of any Tax Contest with respect to both an ADI Separate
Return, on the one hand, and a Resideo Separate Return or a Joint Return, on the other hand, the Parties shall use their reasonable efforts
to cause such Tax Contest to be severed into separate Tax Contests, each relating solely to ADI Separate Returns and Resideo Separate
Returns or Joint Returns, as applicable. If such Tax Contest is not so severable, then Resideo shall determine which Party shall be the
Controlling Party with respect to such Tax Contest, and such Controlling Party selected by Resideo shall, subject to Section 6.5
and Section 6.7, have the sole responsibility and right to control the prosecution of such Tax Contest, including the exclusive
right to communicate with agents of the applicable Taxing Authority and to control, resolve, settle, or agree to any deficiency, claim
or adjustment proposed, asserted or assessed in connection with or as a result of such Tax Contest.
26
6.5 Distribution-Related
Tax Contests.
(a) In
the event of any Distribution-Related Tax Contest as a result of which ADI SpinCo could reasonably be expected to become liable for any
Tax or Tax-Related Losses and which Resideo has the right to administer and control pursuant to Section 6.2 or Section 6.3,
(i) Resideo shall consult with ADI SpinCo reasonably in advance of taking any significant action in connection with such Tax Contest,
(ii) Resideo shall offer ADI SpinCo a reasonable opportunity to comment before submitting any written materials prepared or furnished
in connection with such Tax Contest, (iii) Resideo shall defend such Tax Contest diligently and in good faith as if it were the only party
in interest in connection with such Tax Contest, (iv) Resideo shall provide ADI SpinCo copies of any written materials relating to such
Tax Contest received from the relevant Taxing Authority and (v) if ADI SpinCo would have liability for a material amount of Taxes as a
result of the proposed settlement of any such Tax Contest, Resideo shall not settle such Tax Contest without the consent of ADI SpinCo
(not to be unreasonably withheld, conditioned or delayed).
(b) In
the event of any Distribution-Related Tax Contest with respect to any ADI Separate Return, (i) ADI SpinCo shall consult with Resideo reasonably
in advance of taking any significant action in connection with such Tax Contest, (ii) ADI SpinCo shall consult with Resideo and offer
Resideo a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such Tax
Contest, (iii) ADI SpinCo shall defend such Tax Contest diligently and in good faith as if it were the only party in interest in connection
with such Tax Contest, (iv) Resideo shall be entitled to participate in such Tax Contest and receive copies of any written materials relating
to such Tax Contest received from the relevant Taxing Authority, and (v) ADI SpinCo shall not settle, compromise or abandon any such Tax
Contest without obtaining the prior written consent of Resideo (not unreasonably withheld, conditioned or delayed); provided, however,
that in the case of any Distribution-Related Tax Contest with respect to an ADI Separate Return as a result of which Resideo could reasonably
be expected to become liable for or be required to pay any Taxes or Tax-Related Losses, whether pursuant to this Agreement or otherwise,
Resideo shall have the right to elect to assume control of such Tax Contest, in which case the provisions of Section 6.5(a) shall
apply.
6.6 Obligation
of Continued Notice. During the pendency of any Tax Contest or threatened Tax Contest, each of the Parties shall provide prompt notice
to the other Party of any written communication received by it or a member of its respective Group from a Taxing Authority regarding any
Tax Contest for which it is indemnified by the other Party hereunder or for which it may be required to indemnify the other Party hereunder.
Such notice shall attach copies of the pertinent portion of any written communication from a Taxing Authority and contain factual information
(to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and
other documents received from any Taxing Authority in respect of any such matters. Such notice shall be provided in a reasonably timely
fashion. The failure of one Party to notify the other of such communication in accordance with the preceding provisions of this Section
6.6 shall not relieve the other Party of any liability or obligation to pay such Tax or make indemnification payments under this Agreement,
except to the extent that the failure to timely provide such notification actually and materially prejudices the ability of such other
Party to contest such Tax liability, and increases the amount of such Tax liability.
27
6.7 Settlement
Rights. Unless waived by the Parties in writing, in connection with any potential adjustment in a Tax Contest as a result of which
adjustment the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment to the Controlling
Party under this Agreement: (i) the Controlling Party shall keep the Non-Controlling Party informed in a timely manner of all actions
taken or proposed to be taken by the Controlling Party with respect to such potential adjustment in such Tax Contest; (ii) the Controlling
Party shall timely provide the Non-Controlling Party with copies of any correspondence or filings submitted to any Taxing Authority or
judicial authority in connection with such potential adjustment in such Tax Contest; and (iii) the Controlling Party shall defend such
Tax Contest diligently and in good faith. The failure of the Controlling Party to take any action specified in the preceding sentence
with respect to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability and/or obligation which it may
have to the Controlling Party under this Agreement, and in no event shall such failure relieve the Non-Controlling Party from any other
liability or obligation which it may have to the Controlling Party except to the extent that such failure actually and materially prejudices
the ability of such other Party to contest the relevant Tax liability and increases the amount of such Tax liability.
6.8 Costs
and Expenses. Except for any costs and expenses incurred by a Non-Controlling Party in the exercise of any participation rights that
such Non-Controlling Party possesses with respect to a Tax Contest pursuant to this Article VI, all costs and expenses incurred
in connection with the defense of a Tax Contest shall be borne by the Controlling Party.
Article
VII
Cooperation
7.1 General.
(a) Each
Party shall fully cooperate, and shall cause all members of such Party’s Group to fully cooperate, with all reasonable requests
in writing from the other Party, or from an agent, representative or advisor to such Party, in connection with the preparation and filing
of any Tax Return, claims for Refunds, the conduct of any Tax Contest, and calculations of amounts required to be paid pursuant to this
Agreement, in each case, related or attributable to or arising in connection with Taxes of either Party or any member of either Party’s
Group covered by this Agreement and the establishment of any reserve required in connection with any financial reporting (a “Tax
Matter”). Such cooperation shall include the provision of any information reasonably necessary or helpful in connection with
a Tax Matter and shall include, without limitation:
(i) the
timely provision of any Tax Returns of either Party or any member of either Party’s Group, books, records (including information
regarding ownership and Tax basis of property), documentation and other information relating to such Tax Returns, including accompanying
schedules, related work papers, and documents relating to rulings or other determinations by Taxing Authorities;
28
(ii) the
execution of any document (including any power of attorney) in connection with any Tax Contest of either Party or any member of either
Party’s Group, or the filing of a Tax Return or a Refund claim of either Party or any member of either Party’s Group;
(iii) the
use of the Party’s reasonable best efforts to promptly obtain any documentation in connection with a Tax Matter; and
(iv) the
use of the Party’s reasonable best efforts to promptly obtain any Tax Returns (including accompanying schedules, related work papers,
and documents), documents, books, records or other information in connection with the filing of any Tax Returns of any of either Party
or any member of either Party’s Group.
Each Party shall make its
employees and facilities available, without charge, on a mutually convenient basis to facilitate such cooperation. In addition, each Party
shall timely comply with all of its obligations pursuant to this Agreement to provide cooperation and information with respect to Tax
Matters to the other Party, including, without limitation, the foregoing provision of this Section 7.1(a), and Section 3.12.
A Party providing cooperation under this Section 7.1(a) shall bear its own cost incurred in providing such cooperation; provided,
however, that, if a Party’s request to cooperate pursuant to this Section 7.1(a) causes the other Party to incur out-of-pocket
expenses paid to third parties outside the ordinary course of business, the requesting Party shall bear any reasonable out-of-pocket expense
of the responding Party and the requesting Party shall reimburse the responding Party of any such reasonable out-of-pocket expenses no
later than thirty (30) days following delivery of a notice from the responding Party.
7.2 Timely
Compliance. Each of ADI SpinCo and Resideo acknowledges that time is of the essence in relation to any request for information, assistance,
or cooperation made by Resideo or ADI SpinCo pursuant to Section 7.1(a), and any other obligations of ADI SpinCo or Resideo pursuant
to this Agreement to provide information, assistance or cooperation (including Section 3.12). Each of ADI SpinCo and Resideo acknowledges
that failure to conform to the deadlines set forth in this Agreement or reasonable deadlines otherwise set by ADI SpinCo or Resideo, in
each case, with respect to the provision of information, assistance and cooperation with respect to Tax Matters, could cause irreparable
harm. If either ADI SpinCo or Resideo fails to comply with any such deadlines, then, notwithstanding anything to the contrary set forth
in this Agreement, such non-complying Party shall be liable for, and shall indemnify and hold harmless the other Party for, any Taxes
and Tax-Related Losses to the extent arising solely out of such failure to comply.
7.3 Consistent
Treatment. Unless and until there has been a Final Determination to the contrary, except as expressly and specifically provided otherwise
in this Agreement, each Party agrees not to take any position on any Tax Return, in connection with any Tax Contest or otherwise that
is inconsistent with (a) the treatment of liabilities and payments as set forth in Section 5.4, (b) the Tax Materials, (c) the
Tax-Free Status of the Transactions or the Tax Treatment of the Transactions or (d) any other tax treatment set forth in this Agreement.
7.4 Impact
of Cooperation. For the avoidance of doubt, the existence of a Party’s obligation to cooperate with the other Party pursuant
to this Agreement with respect to the preparation of any Tax Return, the conduct of any Tax Contest or otherwise, or such Party’s
satisfaction of such cooperation obligation, shall under no circumstances be interpreted as imposing any additional obligations on such
Party that are not otherwise provided for in this Agreement, including, for the avoidance of doubt, any additional procedural obligations
with respect to Tax Return preparation and filing or the conduct of any Tax Contest, and any indemnification or other payment obligation
with respect to any Taxes for which such Party is not otherwise responsible hereunder. In addition, the existence of any such cooperation
obligations of one Party, or its compliance therewith, shall in no way limit or modify any obligations of the other Party pursuant to
this Agreement, including, without limitation, any of its indemnification obligations pursuant to Article V or any of its obligations
with respect to Tax Return filing and preparation or Tax Contest control.
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Article
VIII
Retention of Records; Access
8.1 Retention
of Records. For so long as the contents thereof may become material in the administration of any matter under applicable Tax Law,
but in any event until the later of (i) sixty (60) days after the expiration of any applicable statutes of limitation (including any waivers
or extensions thereof) and (ii) seven (7) years after the Distribution Date, the Parties shall retain all Tax Records in respect of Taxes
of any member of either the Resideo Group or the ADI Group for any Pre-Distribution Period or Post-Distribution Period or for any Tax
Contests relating to such Tax Returns. At any time after the Distribution Date when the Resideo Group proposes to destroy any Tax Records
(other than any Tax Records to the extent solely relating to Resideo, any member of the Resideo Group, their respective operations, the
Resideo Retained Assets and/or the Resideo Retained Liabilities), Resideo shall first notify ADI SpinCo in writing and the ADI Group shall
be entitled to receive such records or documents proposed to be destroyed. At any time after the Distribution Date when the ADI Group
proposes to destroy any Tax Records, ADI SpinCo shall first notify Resideo in writing and the Resideo Group shall be entitled to receive
such records or documents proposed to be destroyed. The Parties will notify each other in writing of any waivers or extensions of the
applicable statute of limitations that may affect the period for which the foregoing records or other documents must be retained.
8.2 Access
to Tax Records. The Parties and their respective Affiliates shall make available to each other for inspection and copying during normal
business hours upon reasonable notice all Tax Records in their possession pertaining to Pre-Distribution Periods to the extent reasonably
required by the other Party in connection with the preparation of financial accounting statements, audits, litigation, or the resolution
of items under this Agreement. The Party seeking access to the records of the other Party shall bear all costs and expenses associated
with such access, including any professional fees.
Article
IX
Dispute Resolution
9.1 Dispute
Resolution. The Parties mutually desire that friendly collaboration will continue between them. Accordingly, they will endeavor, and
they will cause their respective Group members to endeavor, to resolve in good faith and in an amicable manner all disagreements and misunderstandings
connected with their respective rights and obligations under this Agreement, including any amendments hereto. In furtherance thereof,
in the event of any dispute or disagreement between any member of the Resideo Group, on the one hand, and any member of the ADI Group,
on the other hand, as to the interpretation of any provision of this Agreement or the performance of obligations hereunder (a “Tax
Advisor Dispute”), the Tax departments of the Parties shall negotiate in good faith to resolve the dispute. If, within thirty
(30) days, such good-faith negotiations do not resolve such Tax Advisor Dispute, the Parties shall appoint a nationally recognized law
firm or independent public accounting firm (the “Dispute Resolution Firm”) to resolve such dispute. In this regard,
the Dispute Resolution Firm shall make determinations with respect to the disputed items based solely on representations made by Resideo,
ADI SpinCo and their respective representatives, and not by independent review, and shall function only as an expert and not as an arbitrator
and shall be required to make a determination in favor of one Party only. The Parties shall request that the Dispute Resolution Firm resolve
all disputes no later than thirty (30) days after the submission of such dispute to the Dispute Resolution Firm, but in no event later
than the due date for the payment of Taxes or the filing of the applicable Tax Return, if applicable, and agree that all decisions by
the Dispute Resolution Firm with respect thereto shall be final and conclusive and binding on the Parties. The Dispute Resolution Firm
shall resolve all disputes in a manner consistent with this Agreement and, to the extent not inconsistent with this Agreement, in a manner
consistent with the Past Practices of Resideo and its Subsidiaries, except as otherwise required by applicable Law. The Parties shall
require the Dispute Resolution Firm to render all determinations in writing and to set forth, in reasonable detail, the basis for such
determination. The fees and expenses of the Dispute Resolution Firm shall be borne equally by the Parties.
30
9.2 Injunctive
Relief. Nothing in this Article IX shall prevent either Party from seeking injunctive relief if any delay resulting from the
efforts to resolve any Tax Advisor Dispute in accordance with the provisions of Section 9.1 could result in serious and irreparable
injury to either Party or the members of its Group. Notwithstanding anything to the contrary in this Agreement, the Separation Agreement
or any Ancillary Agreement, Resideo and ADI SpinCo are the only members of their respective Groups entitled to commence a dispute resolution
procedure under this Agreement, and each of Resideo and ADI SpinCo will cause its respective Group members not to commence any dispute
resolution procedure other than through such Party as provided in this Article IX.
Article
X
Miscellaneous Provisions
10.1 Disposition
of ADI SpinCo Subsidiaries. In the event that ADI SpinCo disposes of the stock of a Subsidiary that is not a Party to this Agreement
(i) without receiving compensation equal to the fair market value of such Subsidiary, prior to the disposition, such Subsidiary shall
deliver to Resideo an executed agreement, in a form reasonably acceptable to Resideo, agreeing to be bound by this Agreement as if it
had been an original Party hereto or (ii) in an exchange intended to result in the receipt of compensation equal to the fair market value
of such Subsidiary, prior to the disposition, such Subsidiary shall deliver to Resideo an executed agreement, in a form reasonably acceptable
to Resideo, agreeing to be bound by Section 7.1 and Article X of this Agreement as if it had been an original Party hereto.
10.2 Conflicting
Agreements. In the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions
of the Separation Agreement, this Agreement shall control with respect to the subject matter thereof.
10.3 Interest
on Late Payments. With respect to any payment between the Parties pursuant to this Agreement not made by the due date set forth in
this Agreement for such payment, the outstanding amount will accrue interest at a rate per annum equal to the rate in effect for underpayments
under Section 6621 of the Code from such due date to and including the payment date.
31
10.4 Expenses.
Except as otherwise provided in this Agreement, each Party and its Affiliates shall bear their own expenses incurred in connection with
the preparation of Tax Returns, Tax Contests, and other matters related to Taxes under the provisions of this Agreement.
10.5 Successors.
The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable
by (and against) the Parties and their respective successors and permitted assigns.
10.6 Subsidiaries.
Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set
forth herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party at and after the
Effective Time, to the extent such Subsidiary remains a Subsidiary of the applicable Party (and provided that the terms of Section
10.1 have been complied with).
10.7 Assignability.
This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party hereto without the prior written consent
of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void.
Notwithstanding the foregoing, this Agreement shall be assignable to (i) with respect to Resideo, an Affiliate of Resideo, or (ii) a bona
fide third party in connection with a merger, reorganization, consolidation or the sale of all or substantially all the assets of a Party
hereto so long as the resulting, surviving or transferee entity assumes all the obligations of the relevant Party hereto by operation
of law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party to this Agreement; provided,
however, that in the case of each of the preceding clauses (i) and (ii), no assignment permitted by this Section 10.7 shall
release the assigning Party from liability for the full performance of its obligations under this Agreement.
10.8 No
Fiduciary Relationship. The duties and obligations of the Parties, and their respective successors and permitted assigns, contained
herein are the extent of the duties and obligations contemplated by this Agreement; nothing in this Agreement is intended to create a
fiduciary relationship between the Parties hereto, or any of their successors and permitted assigns, or create any relationship or obligations
other than those explicitly described.
10.9 Further
Assurances. Prior to, on, and after the Effective Time, each Party hereto shall cooperate with the other Party, at the expense of
the requesting Party, to execute and deliver, or use its reasonable best efforts to cause to be executed and delivered, all instruments,
including the execution and delivery to the other Party and its Affiliates and representatives of such powers of attorney or other authorizing
documentation as is reasonably necessary or appropriate in connection with Tax Contests (or portions thereof) under the control of such
other Party in accordance with Article VI, and to make all filings with any Governmental Entity, and to take all such other actions,
as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement, in
order to effectuate the provisions and purposes of this Agreement.
32
10.10 Survival.
Notwithstanding any other provision of this Agreement to the contrary, all representations, covenants and obligations contained in this
Agreement shall be unconditional and absolute and shall remain in effect without limitation as to time.
10.11 Notices.
All notices, requests, claims, demands and other communications under this Agreement shall be in English, shall be in writing and shall
be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service,
by email or by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service) to the respective
Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this
Section 10.11):
If to Resideo,
to:
Resideo Technologies, Inc.
16100 N 71st St., Suite 550
Scottsdale, AZ, 85254
Attention: General Counsel
Email: legalnotices@resideo.com
joshua.foster@resideo.com
with a copy to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019-6099
Attention: Russell L. Leaf; Jared N. Fertman; Tej Prakash
Email: rleaf@willkie.com
jfertman@willkie.com
tprakash@willkie.com
If to ADI SpinCo,
to:
ADI Global Distribution Inc.
275 Broadhollow Rd Suite 400
Melville, NY 11747
Attention: General Counsel
Email: jeannine.lane@adiglobal.com
33
with a copy (which shall not constitute
notice) to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019-6099
Attention: Russell L. Leaf; Jared N. Fertman; Tej Prakash
Email: rleaf@willkie.com
jfertman@willkie.com
tprakash@willkie.com
10.12 Distribution
Date. This Agreement shall become effective only upon the Distribution Date.
10.13 No
Waiver. No failure to exercise and no delay in exercising, on the part of any Party, any right, remedy, power or privilege hereunder
shall operate as a waiver hereof or thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder
or thereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
10.14 Severability.
In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or
impaired thereby. The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
10.15 Interpretation.
The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard
to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.
10.16 Integration.
This Agreement, together with each of the exhibits and schedules appended hereto, contains the entire agreement among the Parties with
respect to the subject matter hereof, supersedes all previous agreements, negotiations, discussions, writings, understandings, commitments
and conversations with respect to such subject matter, and there are no agreements or understandings among the Parties other than those
set forth herein and in the Separation Agreement and the other Ancillary Agreements. This Agreement, the Separation Agreement, and the
other Ancillary Agreements together govern the arrangements in connection with the Separation and the Distribution and would not have
been entered into independently. In the event of any inconsistency between this Agreement and the Separation Agreement, or any other agreements
relating to the transactions contemplated by the Separation Agreement, with respect to matters addressed herein, the provisions of this
Agreement shall control (it being understood that the terms pursuant to which any transition services related to Tax matters shall be
provided under the Transition Services Agreement shall be governed by the Transition Services Agreement).
34
10.17 Title
and Headings. Titles and headings to sections herein are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement. Unless otherwise indicated, all “Section” references in this
Agreement are to sections of this Agreement.
10.18 Counterparts.
This Agreement may be executed in more than one counterpart, all of which shall be considered one and the same agreement, and shall become
effective when one or more such counterparts have been signed by each of the Parties and delivered to each of the Parties.
10.19 Governing
Law. This Agreement and any dispute arising out of, in connection with or relating to this Agreement shall be governed by and construed
in accordance with the Laws of the State of Delaware, without giving effect to the conflicts of law principles thereof.
10.20 Amendments.
No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement
or modification is in writing and signed by the authorized representatives of the Parties against whom it is sought to enforce such waiver,
amendment, supplement or modification.
10.21 No
Duplication; No Double Recovery. Nothing in this Agreement is intended to confer to or impose upon any Party a duplicative right,
entitlement, obligation or recovery with respect to any matter arising out of the same facts and circumstances (including with respect
to the rights, entitlements, obligations and recoveries that may arise out of Article V).
10.22 Specific
Performance. Subject to the provisions of Article IX, in the event of any actual or threatened default in, or breach of, any
of the terms, conditions and provisions of this Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the
right to specific performance and injunctive or other equitable relief in respect of its or their rights under this Agreement, in addition
to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree
that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and
that any defense in any Action for specific performance for which a remedy at law would be adequate is waived. Any requirements for the
securing or posting of any bond with such remedy are waived by each of the Parties.
10.23 Authority.
Resideo represents on behalf of itself and each other member of the Resideo Group and ADI SpinCo represents on behalf of itself and
each other member of the ADI Group, as follows:
(a) each
such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to
execute, deliver and perform this Agreement; and
(b) this
Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with
the terms hereof.
[Remainder of this page
intentionally left blank]
35
In
witness whereof, the Parties hereto have duly executed this Agreement as of the day and year first above written.
Resideo TECHNOLOGIES, INC.
By:
/s/ Thomas Surran
Name:
Thomas Surran
Title:
President
ADI GLOBAL DISTRIBUTION INC.
By:
/s/ Robert Aarnes
Name:
Robert Aarnes
Title:
President and Chief Executive Officer
EX-10.3 — TRANSITION SERVICES AGREEMENT, DATED JULY 31, 2026, BY AND BETWEEN ADI GLOBAL DISTRIBUTION INC. AND RESIDEO TECHNOLOGIES, INC
EX-10.3
Filename: ea030019001ex10-3.htm · Sequence: 9
Exhibit 10.3
Execution Version
TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT
(this “Agreement”), dated as of July 31, 2026, is entered into by and between Resideo Technologies, Inc., a Delaware
corporation (“Resideo”), and ADI Global Distribution Inc., a Delaware corporation and a wholly owned subsidiary of
Resideo (“ADI SpinCo”). “Party” or “Parties” means Resideo or ADI SpinCo, individually
or collectively, as the case may be.
W I T N E S S E T H:
WHEREAS, the Board of Directors
of Resideo (the “Resideo Board”) has determined that it is appropriate, desirable and in the best interests of Resideo
and its stockholders to create a new publicly traded company that shall operate the ADI Business;
WHEREAS, in furtherance of
the foregoing, the Resideo Board has determined that it is appropriate, desirable and in the best interests of Resideo and its stockholders
to separate the ADI Business from the Resideo Retained Business (the “Separation”) and, following the Separation, make
a distribution, in accordance with the Distribution Ratio, to Record Date Holders, of all of the issued and outstanding shares of ADI
SpinCo Common Stock owned by Resideo (the “Distribution”);
WHEREAS, in order to effectuate
the Separation and the Distribution, the Parties have entered into that certain Separation and Distribution Agreement, dated as of the
date hereof (together with the schedules, exhibits and appendices thereto, the “Separation Agreement”);
WHEREAS, pursuant to the Separation
Agreement, in order to facilitate and provide for an orderly transition in connection with the Separation and the Distribution, certain
services are to continue to be provided by the Resideo Group to the ADI Group and by the ADI Group to the Resideo Group after the Distribution
Date upon the terms and conditions set forth in this Agreement; and
WHEREAS, the Parties acknowledge
that this Agreement, the Separation and Distribution Agreement, and the other Ancillary Agreements represent the integrated agreement
of Resideo and ADI SpinCo relating to the Separation and the Distribution, are being entered into together, and would not have been entered
into independently.
NOW, THEREFORE, in consideration
of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:
Article
I
DEFINITIONS
Section 1.01 Certain
Defined Terms.
The capitalized terms used
in this Agreement shall have the respective meanings set forth below; provided that all capitalized terms used but not defined
herein shall have the same meanings as in the Separation Agreement.
(a) The
following capitalized terms used in this Agreement shall have the meanings set forth below:
“ADI Provider”
means ADI SpinCo or a Provider that is a member of the ADI Group.
“ADI Service Coordinator”
shall have the meaning set forth in Section 7.03(a)(i).
“ADI Transition Manager”
shall have the meaning set forth in Section 7.03(b)(i).
“Excluded Service”
shall have the meaning set forth in Section 2.04(b).
“Force Majeure”
means, with respect to a Party, an event beyond the reasonable control of such Party (or any Person acting on its behalf), which event
(a) does not arise or result from the fault or negligence of such Party (or any Person acting on its behalf), and (b) by its nature would
not reasonably have been foreseen by such Party (or such Person), or, if it would reasonably have been foreseen, was unavoidable, including
acts of God, acts of civil or military authority, embargoes, epidemics, pandemics, war, riots, insurrections, fires, explosions, earthquakes,
floods, unusually severe weather conditions, unavailability of parts, or, in the case of computer systems, any significant and prolonged
failure in electrical or air conditioning equipment. Notwithstanding the foregoing, the receipt by a Party of an unsolicited takeover
offer or other acquisition proposal, even if unforeseen or unavoidable, and such Party’s response thereto shall not be deemed an
event of Force Majeure.
“Prime Rate”
means the rate last quoted as of the time of determination by The Wall Street Journal as the “Prime Rate” in the United States
or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in
Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate as of such time, or,
if such rate is no longer quoted therein, any similar rate quoted therein (as determined by Resideo) or any similar release by the Federal
Reserve Board (as determined by Resideo).
“Provider”
means the Party or its Affiliates providing a Service under this Agreement.
“Recipient”
means the Party to whom a Service is being provided under this Agreement.
“Required Consents”
shall have the meaning set forth in Section 7.02.
“Resideo Provider”
means Resideo or a Provider that is a member of the Resideo Group.
“Resideo Service
Coordinator” shall have the meaning set forth in Section 7.03(a)(ii).
“Resideo Transition
Manager” shall have the meaning set forth in Section 7.03(b)(ii).
“Separation Management
Committee” shall have the meaning set forth in Section 7.04.
“Virus(es)”
means any computer instructions (i) that have a material adverse effect on the operation, security or integrity of a computing telecommunications
or other digital operating or processing system or environment, including other programs, data, databases, computer libraries and computer
and communications equipment, by altering, destroying, disrupting or inhibiting such operation, security or integrity; (ii) that without
functional purpose, self-replicate without manual intervention; or (iii) that purport to perform a useful function but which actually
either perform a destructive or harmful function, or perform no useful function and utilize substantial computer, telecommunications or
memory resources.
2
Article
II
SERVICES AND DURATION
Section 2.01 Services.
Subject to the terms and conditions of this Agreement, Resideo shall provide (or cause to be provided) to the ADI Group all of the services
listed in Schedule 2.01-1 attached hereto (as such Schedule may be amended pursuant to Section 2.03, the “Resideo-Provided
Services”). Subject to the terms and conditions of this Agreement, ADI SpinCo shall provide (or cause to be provided) to the
Resideo Group all of the services listed in Schedule 2.01-2 attached hereto (as such Schedule may be amended pursuant to Section
2.03, the “ADI-Provided Services”, and collectively with the Resideo-Provided Services and any Additional Services,
the “Services”).
Section 2.02 Duration
of Services.
(a) Term.
Subject to Section 6.01 hereof, each of Resideo and ADI SpinCo shall provide or cause to be provided to the respective Recipients
each Service until the expiration of the period set forth next to such Service on the applicable Schedule hereto or, if no such period
is provided with respect to a particular Service on such Schedule, on the second (2nd) anniversary of the Distribution Date (the “Term”);
provided, however, that to the extent that a Resideo Provider’s ability to provide a Resideo-Provided Service is dependent
on the continuation of an ADI-Provided Service, Resideo’s obligation to provide, or cause to be provided, such Resideo-Provided
Service shall terminate automatically with the termination of such supporting ADI-Provided Service; provided, further, to
the extent that an ADI Provider’s ability to provide an ADI-Provided Service is dependent on the continuation of a Resideo-Provided
Service, ADI SpinCo’s obligation to provide, or cause to be provided, such ADI-Provided Service shall terminate automatically with
the termination of such supporting Resideo-Provided Service. Notwithstanding anything to the contrary set forth in this Agreement (including
Section 2.02(b)) or in Schedule 2.01-1 or Schedule 2.01-2, each as attached hereto, in no event shall the duration
of the Term, including any extension thereof, exceed the period ending twenty-four (24) months from the Distribution Date.
(b) Extensions.
Unless otherwise set forth in the applicable Schedule for the Services, each Party in its capacity as a Recipient shall be entitled to
request up to two (2) extensions of the Term for any Service for no longer than three (3) months each by providing the other Party with
no less than thirty (30) days’ written notice. Such other Party shall consider each such extension request in good faith and respond
to such notice within ten (10) days of its receipt of same. Such other Party may accept or deny each extension request in its sole discretion.
The extension of any Service shall include an extension of each other Service on which such extended Service is dependent.
3
Section 2.03 Additional
Services. If, within nine (9) months after the Distribution Date, Resideo or ADI SpinCo (or the Resideo Transition Manager or ADI
Transition Manager, as applicable) identifies a service that (a) the Resideo Group provided to the ADI Group during the one (1)-year period
prior to the Distribution Date that the ADI Group reasonably needs in order for the ADI Business to continue to operate in substantially
the same manner in which the ADI Business operated prior to the Distribution Date, and such service was not included in Schedule 2.01-1
(other than because the Parties agreed such services shall not be provided), or (b) the ADI Group provided to the Resideo Group prior
to the Distribution Date that the Resideo Group reasonably needs in order for the Resideo Group to continue to operate their businesses
other than the ADI Business in substantially the same manner in which such businesses operated prior to the Distribution Date, and such
service was not included in Schedule 2.01-2 (other than because the Parties agreed such services shall not be provided), and in
each case (i) such service is not an Excluded Service and (ii) the proposed Recipient of such service is unable to reasonably obtain such
service from a third party, then, in each case, ADI SpinCo and Resideo shall use commercially reasonable efforts to agree on terms, including
fees, pursuant to which such requested services shall be provided or caused to be provided (such additional services, the “Additional
Services”). Unless specifically agreed in writing to the contrary, the Parties shall amend the appropriate Schedule in writing
to include such Additional Services (including the termination date with respect to such Services, which, for clarity, shall be no later
than the end of the Term) and such Additional Services shall be deemed Services, hereunder, and accordingly, the Party requested to provide
such Additional Services shall provide such Additional Services, or cause such Additional Services to be provided, in accordance with
the terms and conditions of this Agreement.
Section 2.04 Exception
to Obligation to Provide Services; Excluded Services.
(a) Notwithstanding
anything in this Agreement to the contrary, including Resideo’s and ADI SpinCo’s obligations set forth in Section 2.01
hereof, the relevant Providers shall not be obligated to (and neither Resideo nor ADI SpinCo shall be obligated to cause any Provider
to) provide any Services if the provision of such Services would violate any Law or any Contract to which Resideo, ADI SpinCo, any of
Resideo’s or ADI SpinCo’s Affiliates or any of the Providers are subject; provided, however, that Resideo and
ADI SpinCo shall comply with Section 7.02 in obtaining any Required Consents.
(b) Notwithstanding
anything to the contrary set forth herein, the Services shall in no event include those services set forth on Schedule 2.04(b)
(the “Excluded Services”).
Section 2.05 Standard
of the Provision of Services. The provision of Services shall be provided in the manner and at a level substantially consistent with
that provided by the Providers immediately preceding the Distribution Date. All of the Resideo-Provided Services shall be for the sole
use and benefit of ADI Group, and all of the ADI-Provided Services shall be for the sole use and benefit of the Resideo Group.
Section 2.06 Change
in Services.
(a) Recipient
Changes. Each Party in its capacity as a Recipient may request a change to the Services it is receiving (a “Service Change”)
by delivering a written notice describing such change to the other Party. Such request shall be in sufficient detail to explain the nature
of the proposed change and the impact (if any) on the scope and delivery of the Services. Such other Party shall consider each such Service
Change request in good faith and respond to such notice within ten (10) Business Days of its receipt of same. If such other Party agrees
to implement such Service Change, the Parties shall negotiate an amendment to the applicable Service Schedule in good faith to add such
Service Change, and such Service Change shall become effective as of the effective date of such amendment. If such other Party rejects
such Service Change request or the Parties fail to agree on an amendment to the applicable Service Schedule to include such Service Change,
such Service Change shall not be effective. The Parties acknowledge that any Service Change may result in the other Party in its capacity
as a Provider being unable to continue the provision of another Service(s) (in whole or in part) that is dependent on the Service that
is subject to the Service Change.
4
(b) Provider
Changes. Each Party in its capacity as a Provider may from time to time reasonably supplement, modify, substitute or otherwise alter
the Services it is providing on no less than thirty (30) days’ notice to the other Party; provided that such supplementation, modification,
substitution or other alteration does not materially adversely affect the quality or availability of the applicable Services or increase
the cost of using such Services.
(c) Change
Costs. The costs of the applicable Provider relating to any Service Change shall be borne by (i) the applicable Recipient for requests
made by such Recipient or (ii) the applicable Provider for requests made by such Provider. Any Service Change shall be subject to, if
applicable, any Required Consents, which shall be sought in accordance with Section 7.02.
Section 2.07 Subcontractors.
A Provider may subcontract any of the Services or portion thereof to any other Person, including any Affiliate of the Provider; provided,
however, that such other Person shall be subject to service standards and confidentiality provisions at least equivalent to those
set forth herein, and such Provider shall in all cases remain primarily responsible for all of its obligations hereunder with respect
to the Services provided by such subcontractor.
Section 2.08 Data Protection.
The provision of the Services, to the extent that they involve the transfer of Personal Information from one Party to another or the processing
of Personal Information by one Party on behalf of the other, shall be governed by and subject to the terms of the Data Privacy Agreement.
Section 2.09 Migration.
Each Party in its capacity as a Recipient shall be responsible for the migration from each Service it receives under this Agreement to
the performance of such Service by such Party or by a third party at its sole cost and expense. As part of such migration, the other Party
agrees to use, and to cause its Affiliates to use, commercially reasonable efforts to cooperate with and assist such migrating Party in
connection with such migration (such cooperation and assistance, the “Migration Services”). The migrating Party shall
reimburse such other Party for any reasonable expenses incurred by such other Party in connection with providing Migration Services. The
Parties shall take into account the need to minimize both the cost of such migration and the disruption to the ongoing business activities
of each Party in connection with the activities contemplated under this Section 2.09.
5
Section 2.10 Electronic
Access.
(a) To
the extent that the performance or receipt of Services hereunder requires access to a Group’s intranet or other internal systems
by the other Group (the “Accessing Group”), the Party whose Group intranet or other internal systems is being accessed
shall provide or cause to be provided limited access to such systems, subject to policies, procedures and limitations to be determined
by such Party. From and after the Distribution Date, a Party shall cause its Accessing Group to comply with all security guidelines (including
physical security, network access, internet security, confidentiality and personal data security guidelines) of the other Party, copies
of which shall be made available to the Accessing Group upon reasonable request.
(b) While
Services are being provided hereunder, the Parties shall take commercially reasonable measures to ensure that no Virus or similar items
are coded or introduced into the Services. With respect to Services provided by third parties, compliance with the applicable agreement
with such third party shall be deemed sufficient commercially reasonable measures. If a Virus is found to have been introduced into such
Services, the Parties shall use commercially reasonable efforts to cooperate and to diligently work together and with each Provider providing
the Services to eliminate the effects of the Virus.
(c) The
Parties shall, and shall cause their respective Providers to, exercise reasonable care in providing, accessing and using the Services
to prevent access to the Services by unauthorized Persons.
Article
III
COSTS AND DISBURSEMENTS
Section 3.01 Costs and
Disbursements.
(a) Each
Party (or its designee) shall pay to the other Party providing, or causing to be provided, the applicable Service a monthly fee for providing
such Service as set forth therefor in the applicable Schedule hereto (each aggregate fee calculated in accordance with this provision
constituting a “Service Charge” and, collectively, the “Service Charges”); provided, however,
that a fee for a Service not provided or made available hereunder for a full month shall be prorated for the portion of such month provided
or made available. During the Term, the amount of a Service Charge for any Services shall not increase, except to the extent that there
is an increase after the Distribution Date in the costs actually incurred by the Provider in providing such Services, including as a result
of (i) an increase in the amount of such Services being provided to the Recipient (as compared to the amount of the Services underlying
the determination of a Service Charge), (ii) an increase in the rates or charges imposed by any third party provider that is providing
goods or services used by the Provider in providing the Services (as compared to the rates or charges underlying a Service Charge), (iii)
an increase in the payroll or benefits for any personnel used by the Provider in providing the Services, or (iv) any increase in costs
relating to any changes requested by the Recipient in the nature of the Services provided (including relating to newly installed products
or equipment or any upgrades to existing products or equipment).
6
(b) As
of or prior to the Distribution Date, the Parties shall mutually agree on a form of invoice to be issued for the aggregate of Service
Charges by each Party. Each of Resideo and ADI SpinCo (or any of their respective designees), as applicable, shall deliver invoices to
the other Party (or its designees) in accordance with the terms hereof, beginning on or prior to the tenth (10th) day following the first
(1st) fiscal month end following the Distribution Date and, thereafter, on or prior to the tenth (10th) day following
the fiscal month end for each succeeding month or week (in accordance with the terms hereof) for the duration of this Agreement (or with
such other frequency as is consistent with the basis on which the Service Charges are determined and, if applicable, charged to Affiliates
of each Party) in arrears for the Service Charges due under this Agreement. Each of Resideo or ADI SpinCo (or any of their respective
designees) shall pay, or cause to be paid, the amount of such invoice by wire transfer or check to the other Party (or its designees)
within thirty (30) days of the date of such invoice; provided that (i) if a Party disputes any invoiced amount in good faith by
written notice to the other Party within such thirty (30)-day period, such Party may withhold payment of the disputed amount, which dispute
the Parties shall use commercially reasonable efforts to expeditiously resolve in accordance with the dispute resolution procedures set
forth in this Agreement, (ii) any Contracts that prescribe other payment terms for any other individual Service shall continue to govern,
and (iii) to the extent consistent with past practice with respect to Services rendered outside the United States, payments may be required
in local currency. If Resideo or ADI SpinCo (or any of their respective designees), as applicable, fails to pay such amount by such date,
such Party shall be obligated to pay to the other Party providing, or causing to be provided, the Services, in addition to the amount
due, interest on such amount at a rate per annum equal to the Prime Rate, from time to time in effect, calculated for the actual number
of days elapsed, accrued from the date on which such payment was due up to the date of the actual receipt of payment.
Section 3.02 Taxes.
Except as expressly noted in the applicable Schedule hereto, the fees set forth on the applicable Schedule hereto with respect to each
Service do not include any sales, use, value added, excise, goods and services or similar taxes, charges, fees, levies or imposts (collectively,
and together with any interest, penalties or additions to tax imposed with respect thereto, “Service Taxes”). In addition
to the amounts required to be paid as set forth on the applicable Schedule hereto or otherwise pursuant to this Agreement, the applicable
Recipient (or its designee) (the “Applicable Payor”) shall pay and be responsible for and shall promptly reimburse
the applicable Provider (or its designee) (the “Applicable Payee”) for any Service Taxes imposed on or with respect
to such amounts (including by way of withholding or deductions) or the provision of Services to the Recipient hereunder, which reimbursement
shall be in addition to such amounts and any other amounts required to be paid pursuant to this Agreement. Any and all payments hereunder
shall be made free and clear of, and without deduction or withholding for or on account of, any Taxes; provided, that if the Applicable
Payor is required by applicable Law to deduct or withhold any Taxes from such payments, then (a) the Applicable Payor shall make such
deductions or withholdings as are required by applicable Law, (b) the Applicable Payor shall timely pay the full amount deducted or withheld
to the relevant Governmental Entity and (c) to the extent withholding or deduction is required to be made on account of Taxes, the amount
payable by the Applicable Payor to the Applicable Payee shall be increased as necessary so that after all required deductions and withholdings
have been made (including deductions or withholdings applicable to additional sums payable hereunder) the Applicable Payee shall receive
an amount equal to the sum it would have received had no such deductions or withholdings been made. At the Applicable Payee’s request,
the Applicable Payor shall provide the Applicable Payee with reasonably satisfactory documentation evidencing payment to the applicable
Governmental Entity of any amounts so withheld or deducted. Each of the Parties shall provide to the other, prior to the commencement
of any Services hereunder, a properly completed and duly executed copy of IRS Form W-9.
Section 3.03 Right of
Set-Off. Each of Resideo or ADI SpinCo, as applicable, shall pay the full amount of Service Charges and shall not set-off, counterclaim
or otherwise withhold any amount owed to the other Party under this Agreement, on account of any obligation owed by the other Party to
Resideo or ADI SpinCo, as applicable, under this Agreement, the Separation Agreement or any other Ancillary Agreement that has not been
finally adjudicated, settled or otherwise agreed upon by the Parties in writing; provided, however, that Resideo or ADI
SpinCo, as applicable, shall be permitted to assert a set-off right with respect to any obligation that has been so finally adjudicated,
settled or otherwise agreed upon by the Parties in writing against amounts owed by the other Party under this Agreement.
7
Section 3.04 Inspection
Rights. Each Party in its capacity as a Provider shall maintain records for all invoiced Services for a period of no less than two
(2) years after the invoice date for such Services. Upon the written request of the other Party, it shall make such records reasonably
available to such other Party for the sole purpose of permitting such other Party to confirm such invoiced amounts. Any disputes with
respect to such amounts shall be subject to the dispute resolution procedures set forth in this Agreement.
Article
IV
WARRANTIES AND COMPLIANCE; LIMITATION OF LIABILITY
Section 4.01 Disclaimer
of Warranties. Except as expressly set forth herein, the Parties acknowledge and agree that (a) the Services are provided as-is, (b)
the Recipients assume all risks and Liability arising from or relating to their use of and reliance upon the Services and (c) each Party
and their respective Providers make no representation or warranty with respect thereto. EXCEPT AS EXPRESSLY SET FORTH HEREIN, EACH PARTY
AND THEIR RESPECTIVE PROVIDERS HEREBY EXPRESSLY DISCLAIM ALL REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICES, WHETHER EXPRESS OR
IMPLIED, INCLUDING ANY REPRESENTATION OR WARRANTY IN REGARD TO QUALITY, PERFORMANCE, NONINFRINGEMENT, MISAPPROPRIATION, COMMERCIAL UTILITY,
OR MERCHANTABILITY OR FITNESS OF THE SERVICES FOR A PARTICULAR PURPOSE.
Section 4.02 Compliance
with Laws and Regulations. Each Party hereto shall be responsible for its own compliance with any and all Laws applicable to its performance
under this Agreement. FOR THE AVOIDANCE OF DOUBT AND NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, EACH PARTY EXPRESSLY DISCLAIMS ANY
EXPRESS OR IMPLIED OBLIGATION OR WARRANTY WITH RESPECT TO THE SERVICES THAT COULD BE CONSTRUED TO REQUIRE THE PROVIDER TO DELIVER SERVICES
HEREUNDER IN SUCH A MANNER TO ALLOW A RECIPIENT TO ITSELF COMPLY WITH ANY LAW APPLICABLE TO THE ACTIONS OR FUNCTIONS OF SUCH RECIPIENT
(OR ITS AFFILIATES).
Section 4.03 Limitations
of Liability.
(a) EXCEPT
IN CONNECTION WITH EACH PARTY’S RESPECTIVE OBLIGATIONS UNDER SECTIONS 5.01 OR 5.02 OR A PARTY’S GROSS NEGLIGENCE,
WILLFUL MISCONDUCT OR FRAUD, NEITHER PARTY SHALL HAVE ANY LIABILITY TO THE OTHER PARTY HERETO OR ANY THIRD PARTY FOR ANY INDIRECT, INCIDENTAL,
EXEMPLARY, MORAL, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF DATA, LOSS OF USE, CLAIMS OF THIRD PARTIES OR LOST PROFITS,
REVENUES OR OPPORTUNITIES OR LOST OR DELAYED GENERATION OR DIMINUTION IN VALUE OF ASSETS OR SECURITIES OR ANY LOSSES CALCULATED BASED
ON A MULTIPLE OF REVENUES, EARNINGS OR OTHER ECONOMIC OR FINANCIAL MEASURE BY THE OTHER PARTY OR ANY THIRD PARTY), ARISING IN ANY MANNER
OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ITS PERFORMANCE OR BREACH HEREOF, OR INCIDENT TO ANY RECIPIENT’S OR THIRD PARTY’S
USE OF (OR ANY INABILITY TO USE) THE SERVICES OR ANY OTHER INFORMATION OR MATERIALS PROVIDED TO THE RECIPIENTS HEREUNDER, WHETHER IN CONTRACT,
TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, AND WHETHER OR NOT THE PARTY HAS BEEN ADVISED OF OR OTHERWISE MIGHT HAVE
ANTICIPATED THE POSSIBILITY OF SUCH LOSSES.
8
(b) Except
in connection with each Party’s respective obligations under Sections 5.01 or 5.02 or a Party’s gross negligence,
willful misconduct or fraud, in no event will either Party’s maximum aggregate liability to the other Party or any of its Affiliates
or Representatives for any and all claims arising out of or in connection with this Agreement, its termination, or expiration, whether
in contract, tort or otherwise, be greater than an amount equal to the aggregate Service Charges received by the Parties in the preceding
three (3) months as of the time of calculation, (or (i) if, as of the time of calculation, this Agreement has been in effect for less
than three (3) months, the period from the Distribution Date until the time of calculation, or (ii) if, as of the time of calculation,
this Agreement has been terminated pursuant to Section 6.01, the three (3) months prior to such termination).
Article
V
INDEMNIFICATION
Section 5.01 Indemnification
by Recipient. Each Party as Recipient shall indemnify, defend, save and hold harmless the Providers and any of their personnel, successors
and assigns (collectively, the “Provider Indemnified Parties”), from and against any and all losses, damages, liabilities,
claims, costs and expenses (collectively, “Losses”) to the extent resulting from or arising out of any Third Party
Claim to the extent resulting from or arising out of the subject matter of this Agreement or any operations or activities of the Recipient
affected by the Services provided to it, including the use of (or inability to use) the Services, except to the extent resulting from
or arising out of the Provider’s gross negligence or intentional misconduct in the provision of Services by the Provider hereunder.
Section 5.02 Indemnification
by Provider. Each Party as Provider shall indemnify, defend, save and hold harmless the Recipients and any of their personnel, successors
and assigns (collectively, the “Recipient Indemnified Parties” and, together with the Provider Indemnified Parties,
the “Indemnified Parties”), from and against any and all Losses to the extent resulting from or arising out of any
Third Party Claim to the extent resulting from or arising out of the Provider’s gross negligence or intentional misconduct in the
provision of Services by the Provider hereunder.
Section 5.03 Indemnification
Procedures. The Indemnified Party shall provide the Party providing indemnification (the “Indemnifying Party”)
with reasonably prompt notice concerning the existence of the indemnifiable event, grant authority to the Indemnifying Party to defend
or settle any related action or claim, and provide, at the Indemnifying Party’s expense, such information, cooperation and assistance
to the Indemnifying Party as may be reasonably necessary for the Indemnifying Party to defend or settle the claim or action; provided
that failure to comply with the foregoing shall not constitute a waiver of the right to indemnification and shall affect the Indemnifying
Party’s indemnification obligations only to the extent that it is materially prejudiced by such failure or delay. Notwithstanding
anything to the contrary set forth herein, (a) the Indemnifying Party shall not settle any such action or claim without the Indemnified
Party’s consent (not to be unreasonably withheld, conditioned or delayed), unless the settlement (i) is limited to the payment of
monetary damages, (ii) includes a full release of liability with respect to the Indemnified Party, and (iii) does not include an admission
of fault on the part of the Indemnified Party, and (b) the Indemnified Party (i) may participate, at its own expense, in any defense and
settlement directly or through counsel of its choice and (ii) will not enter into any settlement agreement on terms that would impact
the Indemnifying Party’s rights or obligations, without the prior written consent of the Indemnifying Party.
9
Article
VI
TERMINATION
Section 6.01 Termination.
(a) Notwithstanding
Section 2.02, this Agreement may be terminated earlier by Resideo: (i) if ADI SpinCo, any ADI Provider or any of the ADI Group
are in material breach of the terms of this Agreement and such breach is not cured within thirty (30) days of a written notice from Resideo
or the Resideo Transition Manager of such breach; (ii) immediately upon written notice from Resideo or the Resideo Transition Manager,
with respect to any Resideo-Provided Service, if the continued performance of such Resideo-Provided Service would be a violation of any
Law or any Contract in effect prior to the Distribution Date; or (iii) upon any failure of ADI SpinCo to pay any outstanding Service Charge
due to Resideo, except to the extent any part of an outstanding Service Charge is not paid due to a good faith dispute of such Service
Charge by ADI SpinCo.
(b) Notwithstanding
Section 2.02, this Agreement may be terminated earlier by ADI SpinCo: (i) if Resideo or any Resideo Provider or any of the Resideo
Group is in material breach of the terms of this Agreement and such breach is not cured within thirty (30) days of a written notice from
ADI SpinCo or the ADI Transition Manager of such breach; (ii) immediately upon written notice from ADI SpinCo or the ADI Transition Manager,
with respect to any ADI-Provided Service, if the continued performance of such ADI-Provided Service would be a violation of any Law or
any Contract in effect prior to the Distribution Date; or (iii) upon the failure of Resideo to pay any outstanding Service Charge due
to ADI SpinCo, except to the extent any part of an outstanding Service Charge is not paid due to a good faith dispute of such Service
Charge by Resideo.
(c) Without
prejudice to any rights with respect to a Force Majeure: (i) a Recipient may from time to time terminate this Agreement with respect to
any Service, in whole but not in part: (A) for any reason or no reason upon providing at least thirty (30) days’ prior written notice
to the Transition Manager of the Provider of such termination (unless a longer notice period is specified in the Schedules attached hereto
or in a third party Contract to provide Services); (B) if the Provider of such Service has failed to perform any of its material obligations
under this Agreement with respect to such Service, and such failure shall continue to exist thirty (30) days after receipt by the Provider’s
Transition Manager of written notice of such failure from the Recipient’s Transition Manager; or (C) immediately upon mutual written
agreement of the Parties; and (ii) a Provider may terminate this Agreement with respect to one or more Services, in whole but not in part,
at any time upon prior written notice to the Recipient’s Transition Manager if the Recipient has failed to perform any of its material
obligations under this Agreement relating to such Services, and such failure continues uncured for a period of thirty (30) days after
receipt by the Recipient’s Transition Manager of a written notice of such failure from the Provider’s Transition Manager.
The relevant Schedule shall be updated to reflect any terminated Service. In the event that the effective date of the termination of any
Service is a day other than at the end of a month, the Service Charge associated with such Service shall be prorated appropriately.
(d) A
Recipient may from time to time request a reduction in part of the scope or amount of any Service. If requested to do so by the Recipient’s
Transition Manager, the other Party, through its Transition Manager agrees to discuss in good faith appropriate reductions to the relevant
Service Charges in light of all relevant factors including the costs and benefits to the Provider of any such reductions. The relevant
Schedule shall be updated to reflect any reduced Service agreed to in writing by the Parties. In the event that any Service is so reduced
other than at the end of a month, the Service Charge associated with such Service for the month in which such Service is reduced shall
be prorated appropriately.
(e) To
the extent that a Recipient is not in compliance with Section 7.01(b) and such noncompliance remains unremedied for a period of
ten (10) days, the Provider may terminate the provision of any Services provided under such third party Contract.
10
Section 6.02 Effect
of Termination.
(a) Upon
termination of any Service pursuant to this Agreement, the Provider of the terminated Service or its Affiliate shall have no further obligation
to provide the terminated Service, and Resideo or ADI SpinCo, as applicable, shall have no obligation to pay any Service Charges relating
to any such Service; provided that Resideo or ADI SpinCo, as applicable, shall remain obligated to the other Party for the Service
Charges owed and payable in respect of Services provided prior to the effective date of termination. In connection with termination of
any Service, the provisions of this Agreement not relating solely to such terminated Service shall survive any such termination.
(b) In
connection with a termination of this Agreement, Article IV, Article V, this Section 6.02, Article VIII, and
Liability for all due and unpaid Service Charges shall continue to survive indefinitely.
Section 6.03 Force Majeure.
(a) No
Party (or any Person acting on its behalf) shall have any Liability or responsibility for failure to fulfill any obligation (other than
a payment obligation) under this Agreement so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated,
hindered or delayed as a consequence of circumstances of Force Majeure; provided that (i) such Party (or such Person) shall have
exercised commercially reasonable efforts to minimize the effect of Force Majeure on its obligations; and (ii) the nature, quality and
standard of care that the Provider shall provide in delivering a Service after a Force Majeure shall be substantially the same as the
nature, quality and standard of care that the Provider provided prior to the Force Majeure. In the event of an occurrence of a Force Majeure,
the Party whose performance is affected thereby shall give notice of suspension as soon as reasonably practicable to the other Party,
stating the date and extent of such suspension and the cause thereof, and such Party shall resume the performance of such obligations
as soon as reasonably practicable after the removal of the cause, and if the Provider is the Party so prevented then the Recipient shall
not be obligated to pay the Service Charge for a Service to the extent and for so long as such Service is not made available to the Recipient
hereunder as a result of such Force Majeure.
(b) During
the period of a Force Majeure, the Recipient shall be entitled to seek an alternative service provider at its own cost with respect to
such Services, and Resideo or ADI SpinCo, as applicable, shall be entitled to permanently terminate such Services (and shall be relieved
of the obligation to pay Service Charges for the provision of such Services throughout the duration of such Force Majeure or, in the event
of such permanent termination, thereafter) if a Force Majeure shall continue to exist for more than fifteen (15) consecutive days.
Article
VII
MANAGEMENT AND CONTROL
Section 7.01 Cooperation.
(a) During
the Term, each Party shall, and shall cause its Affiliate Recipients to, use its commercially reasonable efforts to cooperate with the
relevant Provider and its Affiliates with respect to such Provider providing the Services and responding to such Provider’s reasonable
requests for information related to the functionality or operation of the Services. Neither Party nor any of its Affiliates shall knowingly
take any action which would substantially interfere with or substantially increase the cost of the other Party providing (or causing to
be provided) any of the Services. After the Distribution Date, each Party and its Affiliates shall use its commercially reasonable efforts
to enable the other Party or its Affiliates to provide the Services as soon as possible after the Distribution Date. Without limiting
the foregoing, each Party shall provide the relevant Provider with reasonable access (during reasonable business hours) to (i) records
related to the provision of the Services; and (ii) the relevant Party’s personnel and facilities for the purpose of training and
consultation with respect to the Services.
11
(b) To
the extent the Parties or a member of their respective Group has entered into any third party Contracts in connection with any of the
Services, the Recipients shall comply with the terms of such Contract to the extent the Recipients or their ADI Transition Manager or
Resideo Transition Manager, as applicable, have been informed of such terms.
Section 7.02 Required
Consents. Each Party shall use commercially reasonable efforts to obtain any and all third party Consents necessary or advisable to
allow the relevant Provider to provide the Services (the “Required Consents”); provided, however, that
the costs of such Required Consents shall be paid by the Recipient of such Services. Each Party shall provide written evidence of receipt
of Required Consents to the other Party upon such other Party’s request.
Section 7.03 Services
Management.
(a) Service
Coordinators. Each Party shall appoint at least one individual to act as the primary point of operational contact for the day-to-day
administration and operation of this Agreement, as follows:
(i) ADI
SpinCo shall appoint at least one (1) individual as the primary point of day-to-day operational contact pursuant to this Section 7.03(a)(i)
(each, an “ADI Service Coordinator”) who shall have day-to-day operational responsibility for coordinating, on behalf
of ADI SpinCo, all activities undertaken by ADI SpinCo and its Providers, Affiliates and Representatives hereunder, including the performance
of ADI SpinCo’s obligations hereunder, the coordinating of the day-to-day provision of the ADI-Provided Services and the receipt
of the Resideo-Provided Services, in each case, with Resideo, acting as a day-to-day contact with the Resideo Service Coordinator(s) and
making available to Resideo the data, facilities, resources and other support services from ADI SpinCo required for Resideo Providers
to be able to provide the Resideo-Provided Services in accordance with the requirements of this Agreement. ADI SpinCo may change the ADI
Service Coordinator(s) from time to time upon written notice to Resideo. ADI SpinCo shall use commercially reasonable efforts to provide
at least thirty (30) days’ prior written notice of any such change.
(ii) Resideo
shall appoint at least one (1) individual as the primary point of day-to-day operational contact pursuant to this Section 7.03(a)(ii)
(each, a “Resideo Service Coordinator” and each of the ADI Service Coordinator(s) and the Resideo Service Coordinator(s),
a “Service Coordinator”) who shall have day-to-day operational responsibility for coordinating, on behalf of Resideo,
all activities undertaken by Resideo and its Providers, Affiliates and Representatives hereunder, including the performance of Resideo’s
obligations hereunder, the coordinating of the day-to-day provision of the Resideo-Provided Services and the receipt of the ADI-Provided
Services, in each case, with ADI SpinCo, acting as a day-to-day contact with the ADI Service Coordinator(s) and making available to ADI
SpinCo the data, facilities, resources and other support services from Resideo required for ADI Providers to be able to provide the ADI-Provided
Services in accordance with the requirements of this Agreement. Resideo may change the Resideo Service Coordinator(s) from time to time
upon written notice to ADI SpinCo. Resideo shall use commercially reasonable efforts to provide at least thirty (30) days’ prior
written notice of any such change.
12
(iii) The
Resideo Service Coordinator(s) and the ADI Service Coordinator(s) shall meet either via telephone or video conference or as otherwise
agreed between the Resideo Service Coordinator(s) and the ADI Service Coordinator(s) at least weekly to review Resideo’s and ADI
SpinCo’s provision of the Services as required under this Agreement.
(iv) The
initial Resideo Service Coordinator(s) and the initial ADI Service Coordinator(s) are set forth on Schedule 7.03(a) hereto. In
the event that there are not an equal number of Service Coordinators appointed by each Party and any decision of the Service Coordinators
is subject to a vote or a similar method of determination, the Service Coordinators appointed by each Party shall be entitled to one (1)
vote or determining input irrespective of how many Service Coordinators have been appointed by such Party.
(b) Transition
Managers. Each Party shall appoint at least one (1) individual to act as the primary point of managerial contact for the administration
and operation of this Agreement, as follows:
(i) ADI
SpinCo shall appoint at least one (1) individual as the primary point of managerial contact pursuant to this Section 7.03(b)(i)
(each, a “ADI Transition Manager”) who shall have overall responsibility for managing, on behalf of ADI SpinCo, all
activities undertaken by ADI SpinCo and its Providers, Affiliates and Representatives hereunder, including the performance of ADI SpinCo’s
obligations hereunder, receiving and approving requests from the ADI Service Coordinator(s) (including additional services, terminations
and reductions in scope), attending to escalated disputes from the Service Coordinators with the Resideo Transition Manager(s) and liaising
with the Separation Management Committee. ADI SpinCo may change the ADI Transition Manager(s) from time to time upon written notice to
Resideo. ADI SpinCo shall use commercially reasonable efforts to provide at least thirty (30) days’ prior written notice to Resideo
of any such change.
(ii) Resideo
shall appoint at least one (1) individual as the primary point of managerial contact pursuant to this Section 7.03(b)(ii) (each,
a “Resideo Transition Manager” and each of the ADI Transition Manager(s) and the Resideo Transition Manager(s), a “Transition
Manager”) who shall have overall responsibility for managing, on behalf of Resideo, all activities undertaken by Resideo and
its Providers, Affiliates and Representatives hereunder, including the performance of Resideo’s obligations hereunder, receiving
and approving requests from the Resideo Service Coordinator(s) (including additional services, terminations and reductions in scope),
attending to escalated disputes from the Service Coordinators with the ADI Transition Manager(s) and liaising with the Separation Management
Committee. Resideo may change the Resideo Transition Manager(s) from time to time upon written notice to ADI SpinCo. Resideo shall use
commercially reasonable efforts to provide at least thirty (30) days’ prior written notice of any such change.
(iii) The
Resideo Transition Manager(s) and ADI Transition Manager(s) shall meet either via telephone or video conference or as otherwise agreed
between Resideo Transition Manager(s) and ADI Transition Manager(s) at least monthly to review Resideo’s and ADI SpinCo’s
provision of the Services as required under this Agreement.
13
(iv) The
initial Resideo Transition Manager(s) and the initial ADI Transition Manager(s) are set forth on Schedule 7.03(b) hereto. In the
event that there are not an equal number of Transition Managers appointed by each Party and any decision of the Transition Managers is
subject to a vote or a similar method of determination, the Transition Managers appointed by each Party shall be entitled to one (1) vote
or determining input irrespective of how many Transition Managers have been appointed by such Party.
Section 7.04 Separation
Management Committee.
(a) Size
and Composition. Resideo shall appoint no less than three (3) members of its management staff, and ADI SpinCo shall appoint no less
than three (3) members of its management staff to serve on a separation management committee (the “Separation Management Committee”).
Either Party may change its Separation Management Committee members from time to time upon written notice to the other Party; provided,
however, that the then-current Resideo Transition Manager(s) and ADI Transition Manager(s) shall at all times remain as members
of the Separation Management Committee. In addition, the Parties may mutually agree to increase or decrease the size, purpose or composition
of the Separation Management Committee in an effort for the Providers to better provide, and for the Recipients to better utilize, the
Services; provided that in the event that there are not an equal number of Separation Management Committee members appointed by
each Party and any decision of the Separation Management Committee is subject to a vote or a similar method of determination, the Separation
Management Committee members appointed by each Party shall be entitled to one (1) vote or determining input irrespective of how many Separation
Management Committee members have been appointed by such Party. The Separation Management Committee shall disband automatically upon termination
of this Agreement in accordance with its terms.
(b) Responsibilities.
The Separation Management Committee’s responsibilities include:
(i) generally
overseeing the performance of each Party’s obligations under this Agreement; and
(ii) making,
and providing continuity for making, decisions for the Recipients with respect to the establishment, prioritization and use of the Services.
(c) Meetings.
The Separation Management Committee shall meet once a month or with such other frequency as mutually agreed by the Parties. Each Separation
Management Committee meeting shall be via telephone or video conference or as otherwise agreed by the members of the Separation Management
Committee.
(d) The
initial Resideo Separation Management Committee members and the initial ADI SpinCo Separation Management Committee members are set forth
on Schedule 7.04 hereto.
14
Section 7.05 Personnel.
(a) The
Provider of any Service shall make available to the Recipient of such Service such personnel as may be reasonably necessary to provide
such Service, in accordance with such Provider’s standard business practices. The Provider shall have the right, in its reasonable
discretion, to (i) designate which personnel it will assign to perform such Service, and (ii) remove and replace such personnel at any
time.
(b) The
Provider of any Service shall be solely responsible for all salary, employment and other benefits of and Liabilities relating to the employment
of persons employed by such Provider. In performing their respective duties hereunder, all such employees and representatives of any Provider
shall be under the direction, control and supervision of such Provider, and such Provider shall have the sole right to exercise all authority
with respect to the employment (including termination of employment), assignment and compensation of such employees and representatives.
Section 7.06 No Agency.
Nothing in this Agreement shall be deemed in any way or for any purpose to constitute any Party or its Affiliates acting as an agent of
another unaffiliated Person in the conduct of such other Person’s business. A Provider of any Service hereunder shall act as an
independent contractor and not as the agent of the Recipient or its Affiliates in performing such Service.
Article
VIII
MISCELLANEOUS
Section 8.01 Treatment
of Confidential Information.
(a) The
provisions of Section 6.5 of the Separation Agreement shall govern the treatment of Confidential Information hereunder.
(b) Each
Party shall comply with all applicable state, federal and foreign privacy and data protection Laws that are or that may in the future
be applicable to the provision of Services hereunder.
Section 8.02 Entire
Agreement; Construction. This Agreement, including the Exhibits and Schedules hereto, shall constitute the entire agreement between
the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments, course of dealings and
writings with respect to such subject matter. In the event of any conflict or inconsistency between this Agreement and any Schedule hereto,
the Schedule shall prevail.
Section 8.03 Notices.
All notices, requests, claims, demands and other communications under this Agreement shall be in English, shall be in writing and shall
be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service,
by email or by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service) to the respective
Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this
Section 8.03):
To Resideo:
Resideo Technologies, Inc.
16100 N. 71st St., Suite 550
Scottsdale, AZ 85254
Attention: General Counsel
Email: legalnotices@resideo.com
joshua.foster@resideo.com
15
with a copy (which shall not constitute
notice) to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Attention: Russell L. Leaf
Jared Fertman
Tej Prakash
Email: rleaf@willkie.com
jfertman@willkie.com
tprakash@willkie.com
To ADI SpinCo:
ADI Global Distribution Inc.
275 Broadhollow Rd., Suite 400
Melville, NY 11747
Attention: General Counsel
Email: jeannine.lane@adiglobal.com
with a copy (which shall not
constitute notice) to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Attention: Russell L. Leaf
Jared Fertman
Tej Prakash
Email: rleaf@willkie.com
jfertman@willkie.com
tprakash@willkie.com
Section 8.04 Amendments.
No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement
or modification is in writing and signed by the authorized representatives of the Parties against whom it is sought to enforce such waiver,
amendment, supplement or modification.
16
Section 8.05 No Waiver.
No failure to exercise and no delay in exercising, on the part of any Party, any right, remedy, power or privilege hereunder shall operate
as a waiver hereof or thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or thereunder
preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
Section 8.06 Assignment.
This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party hereto without the prior written consent
of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void.
Notwithstanding the foregoing, this Agreement shall be assignable to (i) an Affiliate of a Party, or (ii) a bona fide third party in connection
with a merger, reorganization, consolidation or the sale of all or substantially all the assets of a Party hereto so long as the resulting,
surviving or transferee entity assumes all the obligations of the relevant Party hereto by operation of law or pursuant to an agreement
in form and substance reasonably satisfactory to the other Party; provided, however, that in the case of each of the preceding
clauses (i) and (ii), no assignment permitted by this Section 8.06 shall release the assigning Party from Liability for the full
performance of its obligations under this Agreement.
Section 8.07 Successors
and Assigns. The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit
of and be enforceable by (and against) the Parties and their respective successors and permitted assigns.
Section 8.08 Payment
Terms. Unless otherwise consented to by the Party receiving any payment under this Agreement specifying otherwise, all payments to
be made by either Resideo or ADI SpinCo under this Agreement shall be made in US Dollars. Except as expressly provided herein, any amount
which is not expressed in US Dollars shall be converted into US Dollars by using the exchange rate published on Bloomberg at 5:00 pm Eastern
time (ET) on the day before the relevant date or in The Wall Street Journal on such date if not so published on Bloomberg.
Section 8.09 Subsidiaries.
Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set
forth herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party at and after the
Distribution Date, to the extent such Subsidiary remains a Subsidiary of the applicable Party.
Section 8.10 Third Party
Beneficiaries. Except as set forth in Section 5.01 or Section 5.02, this Agreement is solely for the benefit of the
Parties and should not be deemed to confer upon third parties any remedy, claim, Liability, reimbursement, claim of Action or other right
in excess of those existing without reference to this Agreement.
Section 8.11 Exhibits
and Schedules. The Exhibits and Schedules shall be construed with and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.
Section 8.12 Governing
Law. This Agreement and any dispute arising out of, in connection with or relating to this Agreement shall be governed by and construed
in accordance with the Laws of the State of Delaware, without giving effect to the conflicts of laws principles thereof.
17
Section 8.13 Dispute
Resolution. The Parties agree that any disputes arising with respect to this Agreement, including the interpretation, enforcement,
termination or invalidity hereof (each, a “Dispute”) shall first be addressed by each Party’s Service Coordinator.
If the Service Coordinators are unable to resolve such Dispute within thirty (30) days of the referral of such Dispute to them (or such
longer period as the Parties may agree), such Dispute shall be referred to the Transition Managers for resolution. If the Transition Managers
are unable to resolve such Dispute within three (3) Business Days of the referral of such Dispute to them (or such longer period as the
Parties may agree), such Dispute shall be referred to the Separation Management Committee for resolution. If the Separation Management
Committee is unable to resolve such Dispute within five (5) Business Days of such referral (or such longer period as the Parties may agree),
the provisions of Article VII of the Separation Agreement shall govern. Each Party agrees to continue to fulfill its obligations under
this Agreement during the pendency of any Dispute.
Section 8.14 Termination.
This Agreement may be terminated at any time prior to the Effective Time by and in the sole discretion of Resideo without the approval
of ADI SpinCo or the stockholders of Resideo. In the event of such termination prior to the Effective Time, no Party (nor any of its directors,
officers or employees) shall have any liability of any kind to the other Party or any other Person by reason of this Agreement. Following
the Effective Time, this Agreement may be terminated pursuant to Article VI.
Section 8.15 Severability.
In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or
impaired thereby. The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
Section 8.16 Interpretation.
(a) The
Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard
to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.
(b) Titles
and headings to Articles and Sections herein are inserted for the convenience of reference only and are not intended to be a part of or
to affect the meaning or interpretation of this Agreement.
(c) When
a reference is made in this Agreement to an Article, Section or Exhibit such reference shall be to an Article or Section of, or Exhibit
to, this Agreement unless otherwise indicated. Wherever the words “include,” “includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” References to “dollar”
or “$” contained herein are to United States Dollars (unless otherwise specified). 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.
Section 8.17 Counterparts.
This Agreement may be executed in more than one counterpart, all of which shall be considered one and the same agreement and shall become
effective when one or more such counterparts have been signed by each of the Parties and delivered to each of the Parties.
[Signature page follows]
18
IN WITNESS WHEREOF, the Parties
have caused this Agreement to be executed on the date first written above by their respective duly authorized officers.
RESIDEO TECHNOLOGIES, INC.
By:
/s/ Thomas Surran
Name:
Thomas Surran
Title:
President
ADI GLOBAL DISTRIBUTION INC.
By:
/s/ Robert Aarnes
Name:
Robert Aarnes
Title:
President and Chief Executive Officer
EX-10.4 — INTELLECTUAL PROPERTY MATTERS AGREEMENT, DATED JULY 31, 2026, BY AND BETWEEN ADI GLOBAL DISTRIBUTION INC. AND RESIDEO TECHNOLOGIES, INC
EX-10.4
Filename: ea030019001ex10-4.htm · Sequence: 10
Exhibit 10.4
Execution Version
INTELLECTUAL PROPERTY MATTERS AGREEMENT
This Intellectual Property
Matters Agreement (this “Agreement”) is entered into as of July 31, 2026 (the “Effective Date”),
by and between Resideo Technologies, Inc., a Delaware corporation (“Resideo”), and ADI Global Distribution Inc., a
Delaware corporation and a wholly owned subsidiary of Resideo (“ADI SpinCo”). “Party” or “Parties”
means Resideo or ADI SpinCo, individually or collectively, as the case may be.
WHEREAS, Resideo, acting through
its direct and indirect Subsidiaries, currently conducts the Resideo Retained Business and the ADI Business;
WHEREAS, the Board of Directors
of Resideo (the “Resideo Board”) has determined that it is appropriate, desirable and in the best interests of Resideo
and its stockholders to create a new publicly traded company that shall operate the ADI Business;
WHEREAS, in furtherance of
the foregoing, the Resideo Board has determined that it is appropriate, desirable and in the best interests of Resideo and its stockholders
to separate the ADI Business from the Resideo Retained Business (the “Separation”) and, following the Separation, make
a distribution, in accordance with the Distribution Ratio, to Record Date Holders, of all of the issued and outstanding shares of ADI
SpinCo Common Stock owned by Resideo (the “Distribution”);
WHEREAS, in order to effectuate
the Separation and the Distribution, the Parties have entered into that certain Separation and Distribution Agreement, dated as of the
date hereof (together with the schedules, exhibits and appendices thereto, the “Separation Agreement”);
WHEREAS, pursuant to the Separation
Agreement, and in connection with the Separation and the Distribution, certain rights in and to certain intellectual property are to be
provided by the Resideo Group to the ADI Group and by the ADI Group to the Resideo Group after the Distribution Date upon the terms and
conditions set forth in this Agreement; and
WHEREAS, the Parties acknowledge
that this Agreement, the Separation and Distribution Agreement, and the other Ancillary Agreements represent the integrated agreement
of Resideo and ADI SpinCo relating to the Separation and the Distribution, are being entered into together, and would not have been entered
into independently.
NOW THEREFORE, in consideration
of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
Article
I
DEFINITIONS
Section 1.1
Unless otherwise defined herein, all capitalized terms used herein shall have the same meanings as in the Separation Agreement.
Section 1.2 “ADI
Field of Use” means any products of the ADI Business existing as of the Effective Date and natural evolutions thereof. For
the avoidance of doubt, (a) an enhancement, modification or other change to any such product shall not be deemed a natural evolution
thereof if such enhanced, modified or otherwise changed product embodies or is covered by a Valid Claim of a Patent that was not
licensed to ADI SpinCo pursuant to this Agreement with respect to such product prior to the addition or implementation of such
enhancement, modification or other change in or to such product, and (b) products of the ADI Business shall not include any product
that (i) was not substantially designed or developed by and manufactured by or for a member of the ADI Group or (ii) is a third
party product acquired or purchased by a member of the ADI Group for distribution or resale to customers or other third parties,
including any such product acquired or purchased from a member of the Resideo Group.
Section 1.3
“ADI Licensed Copyrights” means the Copyrights that are (a) owned or Licensable by the ADI Group as of the Distribution
Date and (b) used in the Resideo Retained Business as of the Distribution Date.
Section 1.4
“ADI Licensed IP” means the ADI Licensed Copyrights, ADI Licensed Know-How and ADI Licensed Patents, excluding
any rights in or to any Trademarks.
Section 1.5
“ADI Licensed Know-How” means the Know-How that is (a) owned or Licensable by the ADI Group as of the Distribution
Date and (b) used in the Resideo Retained Business as of the Distribution Date.
Section 1.6
“ADI Licensed Patents” means (a) the Patents that are (i) owned or Licensable by the ADI Group as of the Distribution
Date and (ii) used in the Resideo Retained Business as of the Distribution Date, and (b) all Valid Claims of other Patents that are owned
by the ADI Group that claim priority to the Patents described in the foregoing clause (a), but (c) expressly excluding the ADI Licensed
Video Patents.
Section 1.7
“ADI Licensed Video Patents” means (a) the Patents set forth on Schedule A hereto and (b) all Valid Claims
of other Patents that are owned by the ADI Group and claim priority to the Patents set forth on Schedule A hereto.
Section 1.8
“Copyrights” means copyrights and any similar Intellectual Property in any copyrightable subject matter, excluding
Know-How.
Section 1.9
“Field of Use” means (a) with respect to ADI SpinCo, the ADI Field of Use and (b) with respect to Resideo, the
Resideo Field of Use.
Section 1.10
“Licensable” means, with respect to any Intellectual Property, the right to grant sublicenses to a Person within
the scope of the licenses set forth in Section 2.1 or Section 2.2, as applicable, without (a) the requirement to obtain consent from,
give notice to, or take any other action with respect to any third party or (b) incurring fees, royalties, Liabilities or other costs
in connection with such sublicense.
Section 1.11
“Licensed Copyrights” means (a) the Copyrights included in the ADI Licensed IP, as licensed to Resideo hereunder,
and (b) the Copyrights included in the Resideo Licensed IP, as licensed to ADI SpinCo hereunder.
- 2 -
Section 1.12 “Licensed
IP” means (a) the ADI Licensed IP, as licensed to Resideo hereunder, and (b) the Resideo Licensed IP, as licensed to ADI
SpinCo hereunder.
Section 1.13
“Licensed Know-How” means (a) the Know-How included in the ADI Licensed IP, as licensed to Resideo hereunder,
and (b) the Know-How included in the Resideo Licensed IP, as licensed to ADI SpinCo hereunder.
Section 1.14
“Licensee” means (a) Resideo, with respect to the ADI Licensed IP, and (b) ADI SpinCo, with respect to the Resideo
Licensed IP.
Section 1.15
“Licensor” means (a) ADI SpinCo, with respect to the ADI Licensed IP, and (b) Resideo, with respect to the Resideo
Licensed IP.
Section 1.16
“Licensor IP” means (a) with respect to ADI SpinCo, the ADI Licensed IP, and (b) with respect to Resideo, the
Resideo Licensed IP.
Section 1.17
“Licensed Video Patents” means (a) with respect to ADI SpinCo, the ADI Licensed Video Patents, and (b) with
respect to Resideo, the Resideo Licensed Video Patents.
Section 1.18
“Resideo Field of Use” means the current and future businesses of the Resideo Group.
Section 1.19
“Resideo Licensed Copyrights” means the Copyrights that are (a) owned or Licensable by the Resideo Group as
of the Distribution Date and (b) used in the ADI Business as of the Distribution Date.
Section 1.20
“Resideo Licensed IP” means the Resideo Licensed Copyrights, Resideo Licensed Know-How and Resideo Licensed
Patents, excluding any rights in or to any Trademarks.
Section 1.21
“Resideo Licensed Know-How” means the Know-How that is (a) owned or Licensable by the Resideo Group as of the
Distribution Date and (b) used in the ADI Business as of the Distribution Date.
Section 1.22
“Resideo Licensed Patents” means (a) the Patents that are (i) owned or Licensable by the Resideo Group as of
the Distribution Date and (ii) used in the ADI Business as of the Distribution Date, and (b) all Valid Claims of other Patents that are
owned by the Resideo Group that claim priority to the Patents described in the foregoing clause (a), but (c) expressly excluding the Resideo
Licensed Video Patents.
Section 1.23
“Resideo Licensed Video Patents” means (a) the Patents set forth on Schedule B hereto and (b) all Valid
Claims of other Patents that are owned by the Resideo Group and claim priority to the Patents set forth on Schedule B hereto.
Section 1.24
“Valid Claim” means a claim of an issued and unexpired Patent that (a) has not been revoked or held unenforceable
or invalid by a decision of a court or other Governmental Entity of competent jurisdiction from which no appeal can be taken or has been
taken within the time allowed for appeal and (b) has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable
through reissue or disclaimer or otherwise in such country.
Section 1.25 “Video
Field of Use” means the use of video in SMB, light commercial or residential applications solely in security or monitoring
applications.
- 3 -
Article
II
GRANTS OF RIGHTS
Section 2.1
License to Resideo.
(a)
Subject to the terms and conditions of this Agreement, ADI SpinCo hereby grants, and shall cause the other members of the ADI Group
to grant, to Resideo (i) a non-exclusive, worldwide, non-transferable, perpetual, irrevocable, non-terminable, fully paid-up, royalty-free
license to the ADI Licensed Copyrights and the ADI Licensed Know-How, in each case, in the Resideo Field of Use, with the right to sublicense
in the Resideo Field of Use by Resideo and the other members of the Resideo Group but not for the independent use of or by third parties,
(ii) a non-exclusive, worldwide, non-transferable, perpetual, irrevocable, non-terminable, fully paid-up, royalty-free license to the
ADI Licensed Video Patents in the Video Field of Use, with the right to sublicense in the Video Field of Use by Resideo and the other
members of the Resideo Group but not for the independent use of or by third parties, and (iii) in the event that the express terms of
Section 2.1(b) are fully satisfied, a springing non-exclusive, worldwide, non-transferable, perpetual, irrevocable, non-terminable, fully
paid-up, royalty-free license to the ADI Licensed Patents, in the Resideo Field of Use, with the right to sublicense in the Resideo Field
of Use by Resideo and the other members of the Resideo Group but not for the independent use of or by third parties ((i), (ii) and (iii)
collectively, the “Resideo License”). Subject to the terms and conditions of this Agreement, the Resideo License shall
include (x) the right to exercise any and all rights in and to the ADI Licensed Copyrights and the ADI Licensed Know-How, in each case,
in the Resideo Field of Use, including the right to use, copy, perform, display, render, develop, modify and make derivative works of
the ADI Licensed Copyrights and the ADI Licensed Know-How within the Resideo Field of Use, (y) the right to exercise any and all rights
in and to the ADI Licensed Video Patents in the Video Field of Use, including the right to make, have made, use, sell, offer for sale,
export and import products or services under the ADI Licensed Video Patents in the Video Field of Use, and (z) in the event that the express
terms of Section 2.1(b) are fully satisfied, the right to exercise any and all rights in and to the ADI Licensed Patents in the Resideo
Field of Use, including the right to make, have made, use, sell, offer for sale, export and import any products, services or technologies
under the ADI Licensed Patents in the Resideo Field of Use. For the avoidance of doubt, no rights or licenses are granted to ADI Licensed
Patents unless and until the express requirements set forth in Section 2.1(b) are fully satisfied.
(b)
If, after the Distribution Date, ADI SpinCo or any other member of the ADI Group asserts any Patent against Resideo, any other
member of the Resideo Group, or any of their respective bona fide customers, partners or suppliers that are subject to a written agreement
(including, for the avoidance of doubt, any purchase order or similar document) with Resideo or any other member of the Resideo Group
on the date of such assertion, and such Patent constitutes an ADI Licensed Patent, such Patent shall automatically be included in the
license granted in Section 2.1(a), effective as of the Distribution Date, and ADI SpinCo shall reimburse Resideo and the other members
of the Resideo Group for any reasonable and documented out of pocket costs borne by Resideo or the other members of the Resideo Group
in connection with any such assertion of such ADI Licensed Patent by ADI SpinCo or any
other member of the ADI Group against Resideo or any other member of the Resideo Group.
- 4 -
Section 2.2
License to ADI SpinCo.
(a)
Subject to the terms and conditions of this Agreement, Resideo hereby grants, and shall cause the other members of the Resideo
Group to grant, to ADI SpinCo (i) a non-exclusive, worldwide, non-transferable, perpetual, irrevocable, non-terminable, fully paid-up,
royalty-free license to the Resideo Licensed Copyrights and Resideo Licensed Know-How, in each case, in the ADI Field of Use, with the
right to sublicense in the ADI Field of Use by ADI SpinCo and the other members of the ADI Group but not for the independent use of or
by third parties, (ii) a non-exclusive, worldwide, non-transferable, perpetual, irrevocable, non-terminable, fully paid-up, royalty-free
license to the Resideo Licensed Video Patents in the Video Field of Use, with the right to sublicense in the Video Field of Use by ADI
SpinCo and the other members of the ADI Group but not for the independent use of or by third parties, and (iii) in the event that the
express terms of Section 2.2(b) are fully satisfied, a springing non-exclusive, worldwide, non-transferable, perpetual, irrevocable, non-terminable,
fully paid-up, royalty-free license to the Resideo Licensed Patents, in the ADI Field of Use, with the right to sublicense in the ADI
Field of Use by ADI SpinCo and the other members of the ADI Group but not for the independent use of or by third parties ((i), (ii) and
(iii) collectively, the “ADI License”). Subject to the terms and conditions of this Agreement, the ADI License shall
include (x) the right to exercise any and all rights in and to the Resideo Licensed Copyrights and the Resideo Licensed Know-How, in each
case, in the ADI Field of Use, including the right to use, copy, perform, display, render, develop, modify and make derivative works of
the Resideo Licensed Copyrights and the Resideo Licensed Know-How within the ADI Field of Use, (y) the right to exercise any and all rights
in and to the Resideo Licensed Video Patents in the Video Field of Use, including the right to make, have made, use, sell, offer for sale,
export and import products or services under the Resideo Licensed Video Patents in the Video Field of Use, and (z) in the event that the
express terms of Section 2.2(b) are fully satisfied, the right to exercise any and all rights in and to the Resideo Licensed Patents in
the ADI Field of Use, including the right to make, have made, use, sell, offer for sale, export and import products or services under
the Resideo Licensed Patents in the ADI Field of Use. For the avoidance of doubt, no rights or licenses are granted to Resideo Licensed
Patents unless and until the requirements set forth in Section 2.2(b) are fully satisfied.
(b)
If, after the Distribution Date, Resideo or any other member of the Resideo Group asserts any Patent against ADI SpinCo, any other
member of the ADI Group, or any of their respective bona fide customers, partners or suppliers that are subject to a written agreement
(including, for the avoidance of doubt, any purchase order or similar document) with ADI SpinCo or any other member of the ADI Group on
the date of such assertion, and such Patent constitutes an Resideo Licensed Patent, such Patent shall automatically be included in the
license granted in Section 2.2(a), effective as of the Distribution Date, and Resideo shall reimburse ADI SpinCo and the other members
of the ADI Group for any reasonable and documented out of pocket costs borne by ADI SpinCo or any other member of the ADI Group in connection
with any such assertion of such Resideo Licensed Patent by Resideo or any
of its Affiliates against ADI SpinCo or any other member of the ADI Group.
- 5 -
Section 2.3
Limitations. Notwithstanding anything to the contrary herein, the licenses granted hereunder are subject to any rights of
or obligations owed to any third party under any Contracts existing as of the Distribution Date between Licensor or any other member of
its Group and any such third party.
Section 2.4
No Other Rights. Nothing herein shall be construed as either Party granting the other Party, by implication, estoppel or
otherwise, any ownership, license or other right in, to or under any Intellectual Property of such Party, except for those rights and
licenses expressly granted to a Party in this Agreement. Neither Party shall have any obligation to license or deliver to the other Party,
by reason of this Agreement or otherwise, any improvements, modifications, updates, upgrades, enhancements, tangible embodiments or derivative
works or additions to the Licensed IP, including any related technical information or materials of any kind, made by or on behalf of such
Party or any other member of its Group after the Distribution Date. All other rights to each Party’s Intellectual Property are reserved
to such Party.
Article
III
OWNERSHIP
Section 3.1
As between the Parties, Licensee acknowledges and agrees that (a) Licensor owns the Licensor IP, (b) none of Licensee, other members
of its Group or its sublicensees, will acquire any rights in, to or under the Licensor IP, except for the licenses and sublicenses granted
pursuant to Sections 2.1 or 2.2, as applicable, and (c) Licensee shall not, and shall cause the other members of its Group and its sublicensees
to not, represent that they have an ownership interest in any of the Licensor IP.
Section 3.2
As between the Parties, each Party shall own all enhancements, improvements, derivative works or other modifications made by or
on behalf of such Party with respect to the Licensed IP; provided that, with respect to Licensee, such enhancements, improvements, derivative
works or other modifications shall not include, and shall be subject to the provisions of this Agreement as they concern, the Licensed
IP to which such enhancements, improvements, derivative works or other modifications are made.
Article
IV
PROSECUTION, MAINTENANCE AND
ENFORCEMENT
Section 4.1
Responsibility. Licensor shall be solely responsible for filing, prosecuting, and maintaining all Patents within the Licensor
IP, in Licensor’s sole discretion. Licensor shall be responsible for any costs associated with filing, prosecuting and maintaining
such Patents.
Section 4.2
Defense and Enforcement. Licensor shall have the sole right, but not the obligation, to elect to bring an Action or enter
into settlement agreements regarding the Licensor IP, at Licensor’s sole discretion, cost and expense.
Section 4.3 No Additional Obligations. This Agreement
shall not obligate either Party to disclose or deliver to the other Party, or maintain, register, prosecute, pay for, enforce or otherwise
manage any Intellectual Property, except as may be expressly set forth herein.
- 6 -
Article
V
Confidentiality
Section 5.1
Each Licensee, on behalf of itself and the members of its respective Group, understands and agrees, that the Licensor IP includes
certain confidential, non-public information of the Licensor, including, to the extent included in the Licensor IP, any software source
code (all such confidential, non-public information, “Confidential Information”). Each Licensee agrees: (a) to take
reasonable precautions to protect the Licensor’s Confidential Information, with the same degree of care and in a manner consistent
with the maintenance of such Licensee’s own Confidential Information of a similar nature or value (but in no event less than reasonable
care); and (b) not to disclose to any third party any such Confidential Information, except as reasonably necessary to exercise the rights
and licenses granted to it under this Agreement.
Section 5.2
Each Licensor agrees that the provisions set forth in Section 5.1 do not apply with respect to any Confidential Information that
the Licensee can document (i) is or becomes generally available to the public except as a result of a breach of this Article V or any
other applicable obligation of confidentiality by the Licensee; (ii) was rightfully disclosed to it by a third party; or (iii) was independently
developed without the use of or reference to any Confidential Information of the Licensor.
Section 5.3
Nothing in this Agreement shall prevent the Licensee from disclosing the Licensor’s Confidential Information to the extent
the Licensee is required by applicable Law to do so; provided, however, that prior to any such disclosure, the applicable Licensee shall
(a) assert the confidential nature of the Confidential Information to the agency, (b) to the extent permitted by applicable Law, promptly
notify the Licensor in writing of the agency’s order or request to disclose, and (c) cooperate fully with the Licensor, at the Licensor’s
cost and expense, in protecting against any such disclosure or obtaining a protective order narrowing the scope of the compelled disclosure
and protecting its confidentiality.
Section 5.4
No Licensee shall, with respect to any software included in the Licensor IP, (a) use, distribute or modify such software with,
(b) link any such software to, or (c) include in or integrate with, or combine any such software with (in each case of (a) – (c),
in whole or in part), any Open Source Software in any manner that could pursuant to the terms of the applicable Open Source Software license,
(i) require disclosure of the source code to such licensed software or the release of any portion of such licensed software as Open Source
Software (other than any pre-existing Open Source Software itself), in source code form, for the purpose of making derivative works, or
at no or minimal charge; (ii) require the grant of any rights or immunities in, to or under any Licensor IP, or (iii) require the disclosure,
distribution, licensing or other provision of any source code for such software to any third party. For the purpose of this Section 5.4,
“Open Source Software” means any software that is distributed (x) as “free software” (as defined by the
Free Software Foundation), (y) as “open source software” or pursuant to any license identified as an “open source license”
by the Open Source Initiative (www.opensource.org/licenses), other license that substantially conforms to the Open Source Definition (opensource.org/osd)
or any similar license or distribution model, or (z) under a license
that requires source code or derivative works based on such software to be made publicly available under the same license.
- 7 -
Article
VI
disclaimerS;
Limitation of Liability
Section 6.1
Disclaimer of Warranties. Except as expressly set forth herein, the Parties acknowledge and agree that (a) the Licensor
IP is provided as-is, (b) the Licensee assumes all risks and Liabilities arising from or relating to its use of and reliance upon the
Licensor IP and (c) each Party makes no representation or warranty with respect thereto. EACH PARTY HEREBY EXPRESSLY DISCLAIMS ALL REPRESENTATIONS
AND WARRANTIES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY AND ALL CONDITIONS OR WARRANTIES OF ANY KIND OR NATURE REGARDING
THE LICENSOR IP, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY REPRESENTATION OR WARRANTY IN REGARD TO QUALITY, PERFORMANCE, TITLE,
NONINFRINGEMENT, MISAPPROPRIATION, VALIDITY, ENFORCEABILITY, COMMERCIAL UTILITY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Section 6.2
Compliance with Laws and Regulations. Each Party shall be responsible for its own compliance with any and all Laws applicable
to its performance under this Agreement. FOR THE AVOIDANCE OF DOUBT AND NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, EACH PARTY EXPRESSLY
DISCLAIMS ANY EXPRESS OR IMPLIED OBLIGATION OR WARRANTY WITH RESPECT TO THE LICENSOR IP THAT COULD BE CONSTRUED TO REQUIRE LICENSOR TO
PROVIDE LICENSOR IP HEREUNDER IN SUCH A MANNER TO ALLOW LICENSEE TO ITSELF COMPLY WITH ANY LAW APPLICABLE TO THE ACTIONS OR FUNCTIONS
OF SUCH LICENSEE (OR ITS AFFILIATES).
Section 6.3
TO THE EXTENT NOT PROHIBITED BY LAW, IN NO EVENT SHALL EITHER PARTY OR ITS AFFILIATES BE LIABLE FOR PERSONAL INJURY, OR ANY DIRECT,
INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES WHATSOEVER, INCLUDING DAMAGES FOR LOSS OF PROFITS OR ANY OTHER COMMERCIAL
DAMAGES OR LOSSES, ARISING OUT OF OR RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT.
Article
VII
MISCELLANEOUS PROVISIONS
Section 7.1
Term. The term of this Agreement shall commence as of the Distribution Date and shall continue in perpetuity until there
no longer exists any valid or enforceable Licensed IP. Following the Effective Time, this Agreement may not be terminated unless agreed
to in writing by the Parties. This Agreement may be terminated at any time prior to the Effective Time by and in the sole discretion of
Resideo without the approval of ADI SpinCo or the stockholders of Resideo. In the event of such termination prior to the Effective Time,
no Party (nor any of its directors, officers or employees) shall have any liability of any kind to the other Party or any other Person
by reason of this Agreement.
- 8 -
Section 7.2 No
Challenges. Each Licensee acknowledges that, as between the Parties, the Licensor is the owner of the Licensor IP, and that
ownership of the Licensor IP shall remain with the Licensor. No Licensee or any of its Affiliates shall, directly or indirectly,
contest, dispute or challenge the validity or enforceability or the Licensor’s sole ownership of the Licensor IP or, other
than as required by any Governmental Entity, assist any third party in any such contest, dispute, or challenge.
Section 7.3
Interpretation.
(a)
The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be
drafted.
(b)
When a reference is made in this Agreement to an Article, Section or Exhibit such reference shall be to an Article or Section of,
or Exhibit to, this Agreement unless otherwise indicated. Wherever the words “include,” “includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” References to “dollar”
or “$” contained herein are to United States Dollars (unless otherwise specified). 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.
(c)
Titles and headings to Articles and Sections herein are inserted for the convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement. Unless otherwise indicated, all “Section” references
in this Agreement are to sections of this Agreement.
Section 7.4
Entire Agreement; Construction. This Agreement shall constitute the entire agreement between the Parties with respect to
the subject matter hereof and shall supersede all previous negotiations, commitments, course of dealings and writings with respect to
such subject matter.
Section 7.5
Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless
such waiver, amendment, supplement or modification is in writing and signed by the authorized representatives of the Party against whom
it is sought to enforce such waiver, amendment, supplement or modification.
Section 7.6
No Waiver. No failure to exercise and no delay in exercising, on the part of any Party, any right, remedy, power or privilege
hereunder shall operate as a waiver hereof or thereof; nor shall any single or partial exercise of any right, remedy, power or privilege
hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
Section 7.7
Governing Law. This Agreement and any dispute arising out of, in connection with or relating to this Agreement shall be
governed by and construed in accordance with the Laws of the State of Delaware, without giving effect to the conflicts of laws principles
thereof.
- 9 -
Section 7.8 Notices.
All notices, requests, claims, demands and other communications under this Agreement shall be in English, shall be in writing and
shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight
courier service, by email or by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service)
to the respective Party at the following addresses (or at such other address for a Party as shall be specified in a notice given in
accordance with this Section 7.8):
To Resideo:
Resideo Technologies, Inc.
16100 N. 71st Street, Suite 550
Scottsdale, Arizona 85254
Attention: General Counsel
Email: legalnotices@resideo.com
joshua.foster@resideo.com
with a copy (which shall not constitute
notice) to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
Attention: Russell L. Leaf
Jared Fertman
Tej Prakash
Email: rleaf@willkie.com
jfertman@willkie.com
tprakash@willkie.com
To ADI SpinCo:
ADI Global Distribution Inc.
275 Broadhollow Rd Suite 400
Melville, NY 11747
Attention: General Counsel
Email: jeannine.lane@adiglobal.com
with a copy (which shall not constitute notice)
to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
Attention: Russell L. Leaf
Jared Fertman
Tej Prakash
Email: rleaf@willkie.com
jfertman@willkie.com
tprakash@willkie.com
- 10 -
Section 7.9 Assignment.
Except as otherwise provided in this Agreement, neither Party shall assign this Agreement or any rights or obligations hereunder without
the prior written consent of the other Party and any such attempted assignment without such prior written consent shall be void and of
no force and effect. This Agreement shall inure to the benefit of and shall be binding upon the successors and permitted assigns of each
Party. Notwithstanding the foregoing or anything else to the contrary in this Agreement or the Separation Agreement, (a) either Party
may assign this Agreement (i) to any of its Affiliates, (ii) in connection with the sale of all or substantially all of the assets of
such Party or any of its Affiliates related to the subject matter of this Agreement or the acquisition of a Party or any of its Affiliates
by another Person, whether by merger, sale of membership interests or capital stock or otherwise, or (iii) for collateral security purposes
to any lenders, potential lenders and other customary secured parties providing financing, hedging or cash management arrangements to
a Party or any of its Affiliates, in each case, without the prior written consent of the other Party, and (b) in the event that a Licensee
sells, transfers, assigns, or otherwise divests all or substantially all of a business unit or product line in which the Licensor’s
Licensed Copyrights, Licensed Know-How or Licensed Video Patents are utilized (a “Divested Product Line”), whether
by asset sale, stock sale, merger, or similar transaction (a “Divestiture”), the license granted herein to such Licensee
with respect to such Licensed Copyrights, Licensed Know-How or Licensed Video Patents shall automatically transfer to and vest in the
acquiring entity solely with respect to such Divested Product Line, without the need for any further consent or action by the applicable
Licensor. Any license transferred to an acquiring entity pursuant to clause (b) above shall be limited solely to the scope of
the license granted to Licensee, including the Field of Use, with respect to the Divested Product Line and shall remain subject to all
terms and conditions of this Agreement. For the avoidance of doubt, upon the effectiveness of any license transfer in connection with
a Divestiture pursuant to clause (b) above, the transferring Licensee shall have no further rights or licenses in or to the Licensed
Copyrights, Licensed Know-How or Licensed Video Patents with respect to the Divested Product Line. The provisions of this Agreement and
the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and
their respective successors and permitted assigns.
Section 7.10
Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal
or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal
or unenforceable provisions.
Section 7.11 Dispute Resolution.
The provisions of Article VII of the Separation Agreement shall govern any Dispute under or in connection with this Agreement.
Section 7.12 Bankruptcy.
The rights and licenses granted in this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of
the United States Bankruptcy Code, a license of rights to “intellectual property” (as defined under Section 101 of the United
States Bankruptcy Code), and each Party shall retain and may fully exercise all of its respective rights and elections under the United
States Bankruptcy Code (or any similar foreign applicable Law) with respect thereto.
- 11 -
Section 7.13
Subsidiaries. Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party
at and after the Effective Time, to the extent such Subsidiary remains a Subsidiary of the applicable Party.
Section 7.14
Specific Performance. The Parties acknowledge and agree that a breach or threatened breach of this Agreement may give rise
to irreparable harm to the non-breaching Party, for which monetary damages may not be an adequate remedy, and that in the event of a breach
or a threatened breach by a Party of this Agreement, the non-breaching Party shall, in addition to any and all other rights and remedies
that may be available regarding such breach, be entitled to equitable relief, including a temporary restraining order, injunction, specific
performance and any other relief that may be available from a court of competent jurisdiction, without any requirement to post bond or
provide any other security in connection therewith.
Section 7.15
Counterparts. This Agreement may be executed in more than one counterpart, all of which shall be considered one and the
same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to
each of the Parties.
[Signature Page Follows]
- 12 -
IN WITNESS WHEREOF, the Parties have caused this
Agreement to be duly executed as of the day and year first above written.
RESIDEO TECHNOLOGIES, INC.
By:
/s/ Thomas Surran
Name:
Thomas Surran
Title:
President
ADI GLOBAL DISTRIBUTION INC.
By:
/s/ Robert Aarnes
Name:
Robert Aarnes
Title:
President and Chief Executive Officer
- 13 -
EX-10.5 — REGISTRATION RIGHTS AGREEMENT, DATED AUGUST 3, 2026, BY AND AMONG ADI GLOBAL DISTRIBUTION INC., CD&R CHANNEL HOLDINGS, L.P. AND CD&R CHANNEL HOLDINGS II, L.P
EX-10.5
Filename: ea030019001ex10-5.htm · Sequence: 11
Exhibit 10.5
Execution Version
REGISTRATION RIGHTS AGREEMENT
of
ADI GLOBAL DISTRIBUTION INC.
dated as of August 3, 2026
TABLE OF CONTENTS
Page
1.
Definitions
1
2.
Registration Rights.
5
(a)
Shelf Registration
5
(b)
Shelf Takedowns
5
(c)
Cooperation with Shelf Takedowns
6
(d)
Automatic Shelf Registration Statements
6
(e)
Demand Rights
6
(f)
Effectiveness of Demand Registration
7
(g)
Continued Effectiveness
7
(h)
Priority on Demand Registration or Shelf Takedown
7
(i)
Postponements in Requested Registrations
8
(j)
Registration Expenses
9
(k)
Selection of Underwriters
9
(l)
Inclusion of After-Acquired Registrable Securities
9
3.
Piggyback Restrictions.
10
(a)
Right to Piggyback
10
(b)
Underwritten Registration
10
(c)
Piggyback Registration Expenses
11
(d)
Priority on Primary Registrations
11
(e)
Priority on Secondary Registrations
11
4.
Registration Procedures
12
5.
Indemnification
17
(a)
Indemnification by the Company
17
(b)
Indemnification by CD&R Stockholder of Registrable Securities
17
(c)
Conduct of Indemnification Proceedings
18
(d)
Contribution
18
(e)
Non-Exclusivity
19
6.
Registration Expenses.
19
7.
Rule 144.
20
8.
Miscellaneous.
20
(a)
Termination
20
(b)
Holdback Agreement
20
(c)
Amendments and Waivers
21
(d)
Successors, Assigns and Transferees
21
(e)
Notices
22
(f)
Further Assurances
22
(g)
No Inconsistent Agreements
23
(h)
Entire Agreement; No Third Party Beneficiaries
23
(i)
Governing Law; Jurisdiction and Forum; Waiver of Jury Trial
23
(j)
Severability
23
(k)
Enforcement
24
(l)
Titles and Subtitles
24
(m)
No Recourse
24
(n)
Limitations on Subsequent Registration Rights
24
(o)
Counterparts; Facsimile Signatures
24
Exhibit A
—
Form of Certificate of Designations, Preferences and Rights of Series A Cumulative Convertible Participating Preferred Stock
- i -
This REGISTRATION RIGHTS AGREEMENT
(this “Agreement”) is entered into as of August 3, 2026, by and among ADI Global Distribution Inc., a Delaware corporation
(the “Company”), CD&R Channel Holdings, L.P., a Cayman Islands exempted limited partnership (“CD&R
Investor I”), CD&R Channel Holdings II, L.P. (“CD&R Investor II” and together with CD&R Investor
I, each, a “CD&R Investor” and together, the “CD&R Investors”) and any Person who becomes
a party hereto pursuant to Section 8(d) (each such party and each CD&R Investor,
a “CD&R Stockholder” and collectively, the “CD&R Stockholders”). Capitalized terms used
herein shall have the meaning assigned to such terms in the text of this Agreement or in Section 1.
WHEREAS, on or prior to the
date hereof, the Company has adopted and filed with the Secretary of State of the State of Delaware the Certificate of Designations, Preferences
and Rights of Series A Cumulative Convertible Participating Preferred Stock in the form attached hereto as Exhibit A (the “Certificate
of Designations”) in order to create a series of preferred stock, par value $0.001 per share, designated as Series A Cumulative
Convertible Participating Preferred Stock (the “Preferred Stock”);
WHEREAS, pursuant to the Exchange
Agreement, dated as of the date hereof, by and among the Company, CD&R Investor I and the other party named therein (as such agreement
may be amended from time to time, the “Exchange Agreement”), CD&R Investor I exchanged certain of the shares of
Series A Cumulative Convertible Participating Preferred Stock of Resideo Technologies, Inc., par value $0.001 per share, held by it for
149,550 shares of Preferred Stock;
WHEREAS, pursuant to the Certificate
of Designations, the Preferred Stock may be converted into a certain number of shares of Common Stock, on the terms and subject to certain
conditions specified in the Certificate of Designations;
WHEREAS, CD&R Investor
II is receiving shares of Common Stock of the Company in connection with the spin-off of the Company from Resideo Technologies, Inc. and
WHEREAS, the Company desires
to provide to the CD&R Stockholders rights to registration under the Securities Act of Registrable Securities, on the terms and subject
to the conditions set forth herein.
NOW, THEREFORE, in consideration
of the foregoing recitals and of the mutual promises hereinafter set forth, the parties hereto agree as follows:
AGREEMENT
1.
Definitions. As used in this Agreement, the following capitalized terms shall have the following respective meanings:
“Affiliate”
means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with, such
person.
“Agreement”
has the meaning given to such term in the Preamble.
“Automatic Shelf
Registration Statement” has the meaning given to such term in Section 2(d).
1
“Block Sale”
means the sale of shares of Common Stock to one or several purchasers in a registered transaction by means of a bought deal, a block trade
or a direct sale.
“Business Day”
means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in New York
City.
“CD&R Investor”
has the meaning given to such term in the Preamble.
“CD&R Investor
I” has the meaning given to such term in the Preamble.
“CD&R Investor
II” has the meaning given to such term in the Preamble.
“CD&R Stockholders”
has the meaning given to such term in the Preamble.
“Certificate of Designations”
has the meaning given to such term in the Recitals.
“Closing”
means the closing of the transactions contemplated by the Exchange Agreement.
“Closing Date”
means the date on which the Closing occurs.
“Common Stock”
means the common stock, par value $0.001 per share, of the Company, including any shares of capital stock into which the Common Stock
may be converted (as a result of recapitalization, share exchange or similar event) or are issued including with respect to any stock
split or stock dividend, or a successor security.
“Company”
has the meaning given to such term in the Preamble.
“control”
(including the terms “controlling,” “controlled by” and “under common control with”),
with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct
or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor,
by contract or otherwise.
“Covered Person”
has the meaning given to such term in Section 5(a).
“Demand Registration”
has the meaning given to such term in Section 2(e).
“Demand Request”
has the meaning defined in Section 2(e).
“Effective Period”
has the meaning given to such term in Section 2(g).
“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and any successor statute thereto and the rules and regulations of the SEC promulgated
thereunder.
“Exchange Agreement”
has the meaning given to such term in the Recitals.
“FINRA”
means the Financial Industry Regulatory Authority.
“Free Writing Prospectus”
has the meaning given to such term in Section 4(a).
2
“Holdback Period”
means, with respect to any Underwritten Offering, 90 days after (or such shorter period as may be agreed to by the managing underwriter(s)
for such offering) and during the 10 days before, the effective date of the related Registration Statement or, in the case of an underwritten
takedown from a Shelf Registration Statement, 90 days after (or such shorter period as may be agreed to by the managing underwriter(s)
for such offering) the date of the Prospectus supplement filed with the SEC in connection with such takedown and during such prior period
(not to exceed 10 days) as the Company has given reasonable written notice to the CD&R Stockholders holding Registrable Securities.
“including”
means “including without limitation.”
“Indemnified Party”
has the meaning given to such term in Section 5(c).
“Indemnifying Party”
has the meaning given to such term in Section 5(c).
“Losses”
has the meaning given to such term in Section 5(a).
“Marketed Underwritten
Offering” means (i) an Underwritten Offering pursuant to a Demand Registration or (ii) a Marketed Underwritten Shelf Offering.
“Marketed Underwritten
Shelf Offering” has the meaning given to such term in Section 2(b).
“Other Stockholders”
shall mean Persons who by virtue of agreements with the Company (other than this Agreement) are entitled to include their securities in
any registration of the offer or sale of securities pursuant to the Securities Act. Any references herein to “Registrable Securities”
in respect of Other Stockholders shall refer to the corresponding defined term for “registrable securities” in their respective
registration rights agreement(s) with the Company.
“Permitted Rights
Transferee” means, for the purposes of this Agreement, any Person to whom a CD&R Stockholder transfers shares of Preferred
Stock or Common Stock in accordance with Section 3.3 of the Shareholders Agreement.
“Person”
means any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization, government
or any department or agency thereof or any other entity.
“Piggyback Registration”
has the meaning given to such term in Section 3(a).
“Piggybacking Holder”
has the meaning given to such term in Section 2(h)(iii).
“Preferred Stock”
has the meaning given to such term in the Recitals.
“Prospectus”
means the prospectus included in any Registration Statement (including a prospectus that discloses information previously omitted from
a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A or Rule 430B, as the case may be, promulgated
under the Securities Act), as amended or supplemented by any prospectus supplement, relating to Registrable Securities, and all other
amendments and supplements to the Prospectus, including post-effective amendments,
and all material incorporated by reference or deemed to be incorporated by reference in such prospectus.
3
“Registration Expenses”
has the meaning given to such term in Section 6.
“Registrable Securities”
means, as of any date of determination, (a)(i) any shares of Common Stock held by a CD&R Stockholder and (ii)
any shares of Common Stock issuable upon conversion of shares of Preferred Stock (including shares of Preferred Stock issued as dividends
thereon as permitted under the terms of the Certificate of Designations) held by a CD&R Stockholder and (b) any equity securities
or other equity interests issued or issuable, directly or indirectly, with respect to the shares of Common Stock described in clause (a)
above by way of conversion or exchange thereof or stock dividends, stock splits or in connection with a combination of shares, reclassification,
recapitalization, merger, consolidation or other reorganization. As to any particular Registrable Securities, once issued, such securities
shall cease to be Registrable Securities when (i) they are disposed of pursuant to an effective Registration Statement under the
Securities Act, (ii) they are sold to the public pursuant to Rule 144 or Rule 145 (or other exemption from registration under the
Securities Act) or (iii) they shall have ceased to be outstanding.
“Registration Statement”
means any registration statement of the Company filed with the SEC under the Securities Act which covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including any Prospectus, Free Writing Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
“Rule 144”
means Rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
“Rule 145”
means Rule 145 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
“Rule 405”
means Rule 405 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
“SEC” means
the U.S. Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act.
“Securities Act”
means the Securities Act of 1933, as amended, and any successor statute thereto and the rules and regulations of the SEC promulgated thereunder.
“Selling Expenses”
means all underwriting and brokerage discounts, selling commissions, transfer taxes, if any; provided that, for the avoidance of doubt,
Selling Expenses shall not include any fees and disbursements of any counsel retained by any underwriter in connection with any such sales.
“Shelf Registration
Statement” has the meaning given to such term in Section 2(a).
“Shelf Takedown”
has the meaning given to such term in Section 2(b).
4
“Subsidiary”
means (i) any corporation of which a majority of the securities entitled to vote generally in the election of directors thereof,
at the time as of which any determination is being made, are owned by another entity, either directly or indirectly and (ii) any
joint venture, general or limited partnership, limited liability company or other legal entity in which an entity is the record or beneficial
owner, directly or indirectly, of a majority of the voting interests or the general partner.
“Take-Private Transaction”
has the meaning given to such term in Section 4(k).
“Underwritten Offering”
means an offering registered under the Securities Act in which securities of the Company are sold to one or more underwriters for reoffering
to the public.
“WKSI”
has the meaning given to such term in Section 2(d).
2.
Registration Rights.
(a)
Shelf Registration. Upon the earlier to occur of (i) within sixty (60) days of receipt of written request by the CD&R
Stockholders or (ii) within forty (40) days following August 1, 2027, the Company shall file with the SEC and thereafter use its reasonable
best efforts to cause to be declared effective a registration statement on Form S-1 or, at the Company’s option, such other form
of registration statement, including a registration statement on Form S-3 or any comparable or successor form or forms or any similar
short-form registration statement, as is then available to effect a “shelf” registration statement providing for the registration
of, and the sale by the CD&R Stockholders on a continuous or delayed basis of, all of the Registrable Securities, pursuant to Rule
415 or otherwise (any such registration statement, a “Shelf Registration Statement”); provided that to the extent
that Section 2(a)(ii) applies, if eligible to do so, the Company shall file such registration statement on Form S-3 or any comparable
or successor form or forms or any similar short-form registration statement.
(b)
Shelf Takedowns. Subject to the provisions of Section 2(c) hereof, the
CD&R Stockholders shall be entitled, at any time and from time to time when a Shelf Registration Statement is effective, to sell such
Registrable Securities held by them as are then registered pursuant to a Shelf Registration Statement (each, a “Shelf Takedown”).
Subject to the following sentence, the number of Shelf Takedowns that the CD&R Stockholders may effect pursuant to this Section
2(b) shall not be limited. The number of Underwritten Offerings that may be effected hereunder
shall be limited to a total of six (6) Underwritten Offerings and the Company shall not be required to facilitate an Underwritten Offering
where the plan of distribution contemplates a customary “road show” (including an “electronic road show”) or other
substantial marketing effort by the Company and the underwriters (any such Underwritten Offering, a “Marketed Underwritten Shelf
Offering”) unless the aggregate gross proceeds from such offering are reasonably expected to be at least the lesser of (x) seventy-five
million dollars ($75,000,000) and (y) the aggregate gross proceeds from such offering assuming all of the remaining number of Registrable
Securities held by the CD&R Stockholders are sold. Any such Shelf Takedown may be made in the United States by and pursuant to any
method or combination of methods legally available to the CD&R Stockholders (including an underwritten offering, a direct sale to
purchasers, a sale to or through brokers, dealers or agents, a sale over the internet, Block Sales, derivative transactions with third
parties, sales in connection with short sales and other hedging transactions). The Company shall comply with the applicable provisions of the Securities
Act with respect to the disposition of all Registrable Securities covered by the Shelf Registration Statement in accordance with the intended
methods of disposition by the CD&R Stockholders participating in such Shelf Takedown.
5
(c)
Cooperation with Shelf Takedowns. Upon receipt of prior written notice by the CD&R Stockholders that they intend to
effect a Shelf Takedown, subject to Section 2(i), the Company shall use its reasonable
best efforts to cooperate in such Shelf Takedown, whether or not such Shelf Takedown constitutes an Underwritten Offering, by amending
or supplementing the Registration Statement or Prospectus related to such Shelf Registration Statement as may be reasonably requested
by the CD&R Stockholders for so long as any CD&R Stockholders hold Registrable Securities; provided that the Company shall
not be obligated to cooperate in an Underwritten Offering to be effected by means of a Block Sale if notice of such Underwritten Offering
has not been delivered to the Company at least three (3) Business Days prior to the intended launch of such Block Sale.
(d)
Automatic Shelf Registration Statements. If on or after August 1, 2027, the Company is a well-known seasoned issuer (as defined
in Rule 405) (a “WKSI”) at a time when it is obligated to file a Shelf Registration Statement pursuant to this Agreement,
the Company shall file an automatic shelf registration statement (as defined in Rule 405) on Form S-3 (an “Automatic Shelf Registration
Statement”) in accordance with the requirements of the Securities Act and the rules and regulations of the SEC thereunder, that
covers the Registrable Securities. The Company shall pay the registration fee for all Registrable Securities to be registered pursuant
to an Automatic Shelf Registration Statement at the time of filing of the Automatic Shelf Registration Statement and shall not elect to
pay any portion of the registration fee on a deferred basis. The Company shall use its reasonable best efforts to remain a WKSI (and not
to become an ineligible issuer (as defined in Rule 405)) during the period during which any Automatic Shelf Registration Statement is
effective. If at any time following the filing of an Automatic Shelf Registration Statement when the Company is required to re-evaluate
its WKSI status the Company determines that it is not a WKSI, the Company shall use its reasonable best efforts to post-effectively amend
the Automatic Shelf Registration Statement to a Shelf Registration Statement that is not automatically effective or file a new Shelf Registration
Statement or, if the Company is not eligible at such time to file a Shelf Registration Statement on Form S-3, a Registration Statement
on Form S-1; have such Registration Statement declared effective by the SEC; and keep such Registration Statement effective during the
period during which such Shelf Registration Statement or Registration Statement on Form S-1 is required to be kept effective in accordance
with Section 2(g) hereof.
(e)
Demand Rights. In the event the Company is not eligible to register Registrable Securities on Form S-3 or has failed to
perform its obligations under Section 2(a) or Section 2(f), the CD&R Stockholders
shall have the right to require the Company to file a registration statement under the Securities Act in respect of all or a portion of
Registrable Securities owned by the CD&R Stockholders, which may, for the avoidance of doubt, include an Underwritten Offering (so
long as such request covers at least $25,000,000 worth of the then current value of shares of Common Stock (including, for purposes of
such determination, any shares of Common Stock issuable upon conversion of shares of Preferred Stock (including shares of Preferred Stock
issued as dividends thereon as permitted under the terms of the Certificate of Designations))), by delivering to the Company a written
notice stating that such right is being exercised, specifying the number of Registrable Securities owned by the CD&R Stockholders
to be included in such registration, and describing
the intended method of distribution thereof (each, a “Demand Request” and any registration effected pursuant thereto,
a “Demand Registration”). Notwithstanding the foregoing, the Company shall not be required to file any Registration
Statement pursuant to a Demand Request within 90 days after the effective date of a previous Demand Registration or any previous Registration
Statement in which the holders of Registrable Securities were given piggyback rights pursuant to Section 3
in which there was no reduction in the number of Registrable Securities to be included, and in each case, in which the sale of the Registrable
Securities included therein was consummated. The Company shall comply with the applicable provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by the Demand Registration in accordance with the intended methods of disposition
by the CD&R Stockholders.
6
(f)
Effectiveness of Demand Registration. As promptly as practicable, but in no event later than 20 Business Days after the
Company receives a Demand Request pursuant to Section 2(e) hereof, the Company shall
file with the SEC and thereafter use its reasonable best efforts to cause to be declared effective promptly a registration statement on
the appropriate form (it being agreed that, subject to Section 2(d) hereof, such Registration
Statement shall be an Automatic Shelf Registration Statement, if then available to the Company) providing for the registration of such
number of Registrable Securities the CD&R Stockholders shall have requested be registered for distribution in accordance with such
intended method of distribution. The Company shall comply in all material respects with the applicable provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by any such registration statement in accordance with the intended
method or methods of disposition by the CD&R Stockholders.
(g)
Continued Effectiveness. The Company shall use its reasonable best efforts to keep (A) any Shelf Registration Statement
filed pursuant to this Agreement continuously effective and usable for the resale of the Registrable Securities covered by this Agreement
until the date on which all of the Registrable Securities have been sold pursuant to such Shelf Registration Statement and (B)
any Registration Statement filed pursuant to a Demand Request effective for a period of at least 360 days after the effectiveness thereof
or such shorter period during which all Registrable Securities included therein shall have actually been sold (such period, the “Effective
Period”); provided, however, that in the event the Company suspends, postpones or delays the filing of a Registration
Statement required to be filed pursuant to this Agreement, the Effective Period shall be extended by the duration of each such applicable
suspension, postponement or delay.
(h)
Priority on Demand Registration or Shelf Takedown. If any of the Registrable Securities registered pursuant to a Demand
Request or a Shelf Takedown are to be sold in a Marketed Underwritten Offering, and the managing underwriter(s) advise the CD&R Stockholders
that in its good faith opinion the total number or dollar amount of Registrable Securities proposed to be sold in such Marketed Underwritten
Offering (including securities proposed to be included by other holders of securities entitled to include securities in such Registration
Statement pursuant to incidental or piggyback registration rights), is such as to adversely affect the success of such offering, then
there shall be included in such Marketed Underwritten Offering the number or dollar amount of Registrable Securities that in the good
faith opinion of such managing underwriter(s) can be sold without adversely affecting such offering, and such number of Registrable Securities shall
be allocated as follows, unless the underwriters require a different allocation:
(i)
first, to the CD&R Stockholders requesting such registration pro rata on the basis of the percentage of Registrable
Securities owned by each such CD&R Stockholder relative to the number of Registrable Securities owned by all CD&R Stockholders,
until with respect to each such CD&R Stockholder, all Registrable Securities requested for registration by such CD&R Stockholder
have been included in such registration;
7
(ii)
second, the securities for which inclusion in such Registration Statement was requested by the Company; and
(iii)
third, Common Stock requested by other holders of Common Stock (each, a “Piggybacking Holder”) to be included
in such Marketed Underwritten Offering, on a pro rata basis or in such other manner as such Piggybacking Holders shall agree.
Notwithstanding the foregoing, no securities other
than Registrable Securities held by the CD&R Stockholders shall be eligible for inclusion in the total number or dollar amount of
Registrable Securities proposed to be sold in any Block Sale effected pursuant to Section 2(b)
or Section 2(c) of this Agreement.
(i)
Postponements in Requested Registrations. If the filing, initial effectiveness or continued use of a Registration Statement,
including a Shelf Registration Statement, filed hereunder, including any proposed Underwritten Offering thereunder, (i) would require
the Company, under applicable securities laws or other laws, to make a public disclosure of material non-public information, which disclosure
in the good faith judgment of the Company (after consultation with external legal counsel) (a) would be required to be made in
any Registration Statement so that such Registration Statement would not be materially misleading, and (b) would not be required
to be made at such time but for the filing, effectiveness or continued use of such Registration Statement or (ii) would reasonably
be expected to adversely affect in any material respect the Company or its business or the Company’s ability to effect a bona fide
material proposed acquisition, disposition, financing, reorganization, recapitalization or similar transaction, then the Company may,
upon giving prompt written notice of such action to the CD&R Stockholders participating in such registration, delay the filing or
initial effectiveness of, or suspend use of, such Registration Statement; provided that the Company shall not be permitted to do
so (x) more than once in any 6-month period or (y) for any single period of time in excess of 90 days, or for periods exceeding,
in the aggregate, 120 days during any 12-month period. In the event that the Company exercises its rights under the preceding sentence,
such CD&R Stockholders agree to suspend, promptly upon receipt of the notice referred to above, the use of any Prospectus relating
to such registration in connection with any sale or offer to sell Registrable Securities. If the Company so postpones the filing of a
Prospectus or the effectiveness of a Registration Statement, the demanding CD&R Stockholder shall be entitled to withdraw such request.
The Company shall promptly give the CD&R Stockholders requesting registration thereof pursuant to this Section 2
written notice of any postponement made in accordance with the preceding sentence.
8
(j)
Registration Expenses. The Company shall pay, and shall be responsible for, all Registration Expenses in connection with any registrations
and offerings pursuant to this Section 2, including any underwritten offering, direct sales to purchasers, sales to or
through brokers, dealers or agents, derivative transactions with third parties, sales in connection with short sales and other hedging
transactions, that are effectuated pursuant to this Section 2; provided, however, that the CD&R Stockholders
shall pay all Selling Expenses, if any, with respect to Registrable Securities sold by them.
(k)
Selection of Underwriters. The lead underwriters of any Underwritten Offering effected pursuant to a Demand Registration
or a Shelf Takedown shall be selected by the CD&R Stockholders, subject to the consent, not to be unreasonably withheld, of the Company.
If the CD&R Stockholders intend that the Registrable Securities requested to be covered by a Demand Registration shall be distributed
by means of an Underwritten Offering, the CD&R Stockholders shall so advise the Company in writing. The right of any CD&R Stockholder
to participate in an Underwritten Offering pursuant to this Section 2 will be conditioned
upon such CD&R Stockholder’s participation in such underwriting and the inclusion of such CD&R Stockholder’s Registrable
Securities in the underwriting and each such CD&R Stockholder will (together with the Company and any Piggybacking Holder distributing
its securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter(s) selected for
such underwriting (including pursuant to the terms of any over-allotment or “green shoe” option requested by the managing
underwriter(s)), provided that (A) no CD&R Stockholder shall be required to sell more than the number of Registrable
Securities that such CD&R Stockholder has requested the Company to include in any registration and (B) if any CD&R Stockholder
disapproves of the terms of the underwriting, such CD&R Stockholder may elect to withdraw therefrom by written notice to the Company,
the managing underwriter(s) and, in connection with an Underwritten Offering pursuant to this Section 2,
the other CD&R Stockholders, provided, further, that no such Person (other than the Company) shall be required to make
any representations or warranties other than (x) those related to the title and ownership of, and power and authority to transfer, Registrable
Securities and (y) those related to the accuracy and completeness of statements made in a Registration Statement, Prospectus or other
document in reliance upon, and in conformity with, written information prepared and furnished to the Company or the managing underwriter(s)
by such Person pertaining exclusively to such CD&R Stockholder. Notwithstanding the foregoing, no CD&R Stockholder shall be required
to agree to any indemnification obligations on the part of such CD&R Stockholder that are greater than its obligations pursuant to
Section 5.
(l)
Inclusion of After-Acquired Registrable Securities. If, at any time after the filing of a Registration Statement (including,
without limitation, an Automatic Shelf Registration Statement) pursuant to this Section 2, any CD&R Stockholder acquires or
otherwise becomes the holder of additional Registrable Securities that are not then covered by such Registration Statement, the Company
shall, as promptly as reasonably practicable (and in any event within thirty (30) calendar days following written notice from such CD&R
Stockholder identifying such additional Registrable Securities), file with the SEC a post-effective amendment, a new registration statement,
or a prospectus supplement (to the extent permitted under Rule 430B under the Securities Act or otherwise), as applicable, to include
such additional Registrable Securities in such Registration Statement or in a new registration statement so that all Registrable Securities
held by the CD&R Stockholders are registered for resale on a continuous or delayed basis pursuant to Rule 415. The Company shall use its reasonable
best efforts to cause any such post-effective amendment or new registration statement to become effective as promptly as practicable after
filing and to keep such Registration Statement, as so amended or supplemented, continuously effective and usable for the resale of all
Registrable Securities covered thereby in accordance with Section 2(g). For the avoidance of doubt, the obligations of the Company
under this Section 2(l) are in addition to, and not in limitation of, the Company’s obligations under Section 4 of
this Agreement.
9
3.
Piggyback Restrictions.
(a)
Right to Piggyback. Whenever the Company proposes to register any of its equity securities for its own account, including,
but not limited to, pursuant to a Shelf Takedown or an Underwritten Offering (other than (w) pursuant to a registration statement Form
S-4 (or similar form that relates to a transaction subject to Rule 145) or in which the Company is offering to exchange its own securities
for other securities, (x) a registration pursuant to this Agreement, (y) a registration relating solely to employee benefit
plans or any dividend or distribution reinvestment or similar plan, or relating to a registration relating solely to the sale of debt
or convertible debt instruments or (z) a “universal” shelf registration statement on Form S-3 (provided, that for the avoidance
of doubt, the foregoing clause (z) shall apply only to the filing of a “universal” shelf registration statement, but not to
any Shelf Takedown or other sales of equity securities thereunder) and the registration form to be filed may be used for the registration
or qualification for distribution of Registrable Securities, the Company will give written notice at least fifteen (15) days before the
anticipated filing date to the CD&R Stockholders of its intention to effect such a registration (which notice shall be held in confidence
by the CD&R Stockholders until such registration is publicly disclosed) and will include in such registration all Registrable Securities
held by the CD&R Stockholders with respect to which the Company has received from the CD&R Stockholder a written request for inclusion
therein within ten (10) days after the date of the Company’s notice (a “Piggyback Registration”). If the CD&R
Stockholder has made such a written request, it may withdraw its or any Registrable Securities from such Piggyback Registration by giving
written notice to the Company and the managing underwriter(s), if any, on or before the fifth (5th) day prior to the planned effective
date of such Piggyback Registration. The Company may terminate or withdraw any registration under this Section 3
prior to the effectiveness of such registration, whether or not the CD&R Stockholder has elected to include Registrable Securities
in such registration, and, except for the obligation to pay Registration Expenses pursuant to Section 3(c),
the Company will have no liability to the CD&R Stockholder in connection with such termination or withdrawal.
(b)
Underwritten Registration. If the registration referred to in Section 3(a)
is proposed to be an Underwritten Offering, the Company will so advise the CD&R Stockholders as a part of the written notice given
pursuant to Section 3(a). In such event, the right of any CD&R Stockholder to registration
pursuant to this Section 3 will be conditioned upon such CD&R Stockholder’s
participation in such underwriting and the inclusion of such CD&R Stockholder’s Registrable Securities in the underwriting,
and any CD&R Stockholder that holds Registrable Securities that are to be sold in such offering will (together with the Company and
any other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such offering by the Company. If the CD&R Stockholder disapproves of the terms of the
underwriting, the CD&R Stockholder may elect to withdraw therefrom by
written notice to the Company and the managing underwriter(s).
10
(c)
Piggyback Registration Expenses. The Company will pay all Registration Expenses in connection with any Piggyback Registration,
whether or not any registration or prospectus becomes effective or final; provided, however, that the CD&R Stockholders
shall pay all Selling Expenses, if any, with respect to Registrable Securities sold by them.
(d)
Priority on Primary Registrations. If a Piggyback Registration relates to a primary Underwritten Offering on behalf of the
Company, and the managing underwriter(s) advise the Company in writing that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold without adversely affecting the marketability of such offering, the
Company will include in such registration or prospectus only such number of securities that in the opinion of such underwriters can be
sold without adversely affecting the marketability of the offering, which securities will be so included in the following order of priority:
(i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included
in such registration by the CD&R Stockholders (and, if applicable, Other Stockholders) on a pro rata basis relative to the
total number of Registrable Securities requested to be included therein by such holders, until all Registrable Securities requested for
registration by such holders have been included in such registration and (iii) third, Common Stock requested by any other persons to be
included in the Piggyback Registration, on a pro rata basis relative to the total number of registrable securities requested to
be included in the Piggyback Registration by such other requesting persons, or in such other manner as such other requesting persons shall
agree.
(e)
Priority on Secondary Registrations. If a Piggyback Registration relates to a secondary Underwritten Offering on behalf
of any Other Stockholders, and the managing underwriter(s) advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be sold without adversely affecting the marketability of the
offering, the Company will include in such registration only such number of securities that in the opinion of such underwriters can be
sold without adversely affecting the marketability of the offering, which securities shall include Registrable Securities requested to
be included therein by the Other Stockholders making demand for such offering, together with any Registrable Securities requested to have
been included in such registration by the CD&R Stockholders on a pro rata basis relative to the number of total shares of Registrable
Securities requested to be included therein by the CD&R Stockholders.
11
4.
Registration Procedures. If and whenever the Company is required to use its reasonable best efforts to effect the registration
of any Registrable Securities under the Securities Act as provided in Section 2, the
Company shall effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods
of disposition thereof, and pursuant thereto the Company shall cooperate in the sale of such Registrable Securities and shall, as expeditiously
as possible:
(a) prepare and file, in
each case as promptly as practicable, with the SEC a Registration Statement or Registration Statements on such form as shall be
available for the sale of the Registrable Securities by the CD&R Stockholders thereof or by the Company in accordance with the
intended method or methods of distribution thereof, make all required filings with FINRA, and, if such Registration Statement is not
automatically effective upon filing, use its reasonable best efforts to cause such Registration Statement to be declared effective
as soon as practicable and to remain effective as provided herein; provided, however, that before filing a
Registration Statement or Prospectus or any amendments or supplements thereto (including free writing prospectuses under Rule 433
(each a “Free Writing Prospectus”)), the Company shall furnish or otherwise make available to the CD&R
Stockholders, their counsel and the managing underwriter(s), if any, copies of all such documents proposed to be filed (including
exhibits thereto), which documents will be subject to the reasonable review and comment of such counsel, and such other documents
reasonably requested by such counsel, including any comment letter from the SEC, and, if requested by such counsel, provide such
counsel reasonable opportunity to participate in the preparation of such Registration Statement and each Prospectus included therein
and such other opportunities to conduct a reasonable investigation within the meaning of the Securities Act, including reasonable
access to the Company’s books and records, officers, accountants and other advisors. The Company shall not file any such
Registration Statement or Prospectus, or any amendments or supplements thereto (including Free Writing Prospectuses) with respect to
a Demand Registration to which CD&R Stockholders or the managing underwriter(s), if any, shall reasonably object, in writing, on
a timely basis, unless, in the opinion of the Company, such filing is necessary to comply with applicable law;
(b)
prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection
therewith and such Free Writing Prospectuses and Exchange Act reports as may be necessary to (i) keep such Registration Statement continuously
effective during the period provided herein, (ii) comply in all material respects with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement and (iii) include in such Registration Statement any additional
Registrable Securities acquired by the CD&R Stockholders after the initial filing of such Registration Statement, in each case as
contemplated by Section 2(l); and cause the related Prospectus to be supplemented by any Prospectus supplement as may be necessary
to comply with the provisions of the Securities Act with respect to the disposition of the securities covered by such Registration Statement,
and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act in each case,
until such time as all of such securities have been disposed of in accordance with the intended method or methods of disposition by the
seller or sellers thereof set forth in such Registration Statement;
(c)
notify each selling CD&R Stockholder of Registrable Securities, its counsel and the managing underwriter(s) of any Underwritten
Offering:
(i)
when a Registration Statement, pre-effective amendment to any Registration Statement, Prospectus or any Prospectus supplement or
post-effective amendment or any Free Writing Prospectus has been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective,
(ii)
of any request by the SEC or any other federal or state governmental authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information,
12
(iii)
of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or the initiation or
threatening of any proceedings for that purpose,
(iv)
if at any time the Company has reason to believe that the representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated by Section 4(l) below cease to
be true and correct,
(v)
of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification
of such Registrable Securities for sale in any jurisdiction, or the initiation of any proceeding for such purpose, and
(vi)
of the happening of any event that makes any statement made in such Registration Statement or related Prospectus, Free Writing
Prospectus, amendment or supplement thereto, or any document incorporated or deemed to be incorporated therein by reference, as then in
effect, untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus or documents
so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein, not misleading, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading (which notice shall notify the selling CD&R
Stockholders only of the occurrence of such an event and shall provide no additional information regarding such event to the extent such
information would constitute material non-public information);
(d)
use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement,
or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction at the earliest date reasonably practical;
(e)
if requested by the CD&R Stockholders, or, in the case of an Underwritten Offering, the managing underwriter(s) of such Underwritten
Offering, promptly include in a Prospectus supplement or post-effective amendment such information as the CD&R Stockholders or such
managing underwriter(s), as the case may be, may reasonably request in order to facilitate the disposition of the Registrable Securities
in accordance with the intended method or methods of distribution of such securities set forth in the Registration Statement and make
all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received
such request; provided, however, that the Company shall not be required to take any actions under this Section 4(e)
that are not, in the opinion of counsel for the Company, in compliance with applicable law;
(f)
deliver to each selling CD&R Stockholder of Registrable Securities, its counsel, and the underwriters, if any, without charge,
as many copies of the Prospectus or Prospectuses (including each form of Prospectus) and each amendment or supplement thereto (including
any Free Writing Prospectus) as such Persons may reasonably request from time to time in order to facilitate the disposition of the
Registrable Securities in accordance with the intended method or methods of disposition thereof; and the Company, subject to the last
paragraph of this Section 4, hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling CD&R Stockholders of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by such Prospectus and any such amendment or supplement thereto;
13
(g)
use its reasonable best efforts to register or qualify or cooperate with the selling CD&R Stockholders of Registrable Securities,
the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration
or qualification) of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions within
the United States as any seller or underwriter reasonably requests in writing and to keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration Statement is required to be kept effective and to take any other action
that may be necessary or advisable to enable such CD&R Stockholders of Registrable Securities to consummate the disposition of such
Registrable Securities in such jurisdiction in accordance with the intended method or methods of disposition thereof; provided,
however, that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 4(g), (ii) subject
itself to taxation in any jurisdiction wherein it is not so subject or (iii) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject;
(h)
cooperate with the selling CD&R Stockholders of Registrable Securities and the managing underwriter(s), if any, to facilitate
the timely preparation and delivery of certificates (not bearing any legends) representing Registrable Securities to be sold after receiving
written representations from each CD&R Stockholder of such Registrable Securities that the Registrable Securities represented by the
certificates so delivered by such CD&R Stockholder will be transferred in accordance with the Registration Statement, and enable such
Registrable Securities to be in such denominations and registered in such names as the managing underwriter(s), if any, or CD&R Stockholders
may request at least two Business Days prior to any sale of Registrable Securities in a firm commitment public offering, but in any other
such sale, within 10 Business Days prior to having to issue the securities;
(i)
upon the occurrence of any event contemplated by Section 4(c)(vi)
above, prepare a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities being sold thereunder, such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(j)
provide and cause to be maintained a transfer agent and registrar for all such Registrable Securities from and after the effective
date of such Registration Statement;
(k)
use its reasonable best efforts to cause all shares of Registrable Securities covered by any Registration Statement to be listed
on each primary national securities exchange (if any) on which shares of the particular class
of Registrable Securities are at that time listed; provided that, for the avoidance of doubt, neither this Section 4(k) nor any
other provision of this Agreement shall prohibit the Company from effecting a merger, sale or other “take-private” transaction
(each, a “Take-Private Transaction”) in which all or substantially all of the shares of Common Stock outstanding immediately
prior to such transaction (other than “rollover” shares) are converted into or exchanged for the right to receive consideration
consisting of cash or other property and, following such transaction, the Common Stock is no longer listed on a national securities exchange
nor registered under the Securities Act and/or the Exchange Act;
14
(l)
in the case of any Underwritten Offering in which any CD&R Stockholder participates, enter into an underwriting agreement containing
such provisions as are acceptable to the Company, acting reasonably (including provisions for indemnification, lockups, opinions of counsel
and comfort letters), and take all such other customary and reasonable actions as the managing underwriters of such offering may request
in order to facilitate the disposition of such Registrable Securities, including adding information requested by the managing underwriters
to the Prospectus, and making such representations and warranties to the holders of such Registrable Securities and the underwriters,
if any, with respect to the business of the Company and its material subsidiaries, and the Registration Statement, Prospectus and documents,
if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily
made by issuers to underwriters in underwritten offerings, and, if true, confirm the same if and when requested;
(m)
in the case of any Underwritten Offering in which any CD&R Stockholder participates, (A) make reasonably available, for inspection
by the managing underwriters of such Underwritten Offering and one law firm and accounting firm acting for such managing underwriters,
pertinent corporate documents and financial and other records of the Company and its subsidiaries and controlled Affiliates, (B) cause
the Company’s officers and employees to supply information reasonably requested by such managing underwriters or law firm or accounting
firm in connection with such offering, (C) make the Company’s independent auditor available for any such managing underwriters’
due diligence and have them provide customary comfort letters to such underwriters in connection therewith and to each CD&R Stockholder
selling Registrable Securities in such offering (unless such accountants shall be prohibited from so addressing such letters by applicable
standards of the accounting profession) and (D) cause the Company’s outside counsel to furnish customary legal opinions and updates
thereof (which legal opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriter(s)) to such
underwriters and to each CD&R Stockholder selling Registrable Securities in such offering in connection therewith (subject to delivery
to outside counsel of each such CD&R Stockholder’s representation that it is knowledgeable with respect to the due diligence
review process that an underwriter would perform in connection with an offering of securities registered pursuant to the Securities Act),
covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested
by such counsel and underwriters; provided, however, that any such records and other information provided under clauses
(A) and (B) above that is not generally publicly available shall be subject to such confidential treatment as is customary for underwriters’
due diligence reviews;
(n)
in the case of any Underwritten Offering in which any CD&R Stockholder participates, cause its management to use their reasonable
best efforts to support the marketing of the Registrable Securities covered by the Registration
Statement (including participation in such number of “road shows” as the underwriter(s) reasonably request, and in any management
diligence meetings or teleconferences as the underwriter(s) or their counsel reasonably request), in each case consistent, to the extent
commercially reasonable, with the historical practices of the Company for an underwritten offering by the Company having an aggregate
offering size comparable to such Underwritten Offering;
15
(o)
cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required to be made with the FINRA; and
(p)
otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to
its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning
with the first day of the Company’s first full calendar quarter after the effective date of any Registration Statement, which earnings
statement will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
The Company may require each
CD&R Stockholder of Registrable Securities as to which any registration is being effected to furnish to the Company in writing such
information required in connection with such registration regarding such seller and the distribution of such Registrable Securities as
the Company may, from time to time, reasonably request and the Company may exclude from such registration the Registrable Securities of
any CD&R Stockholder who unreasonably fails to furnish such information within a reasonable time after receiving such request.
The Company agrees not to
file or make any amendment to any Registration Statement with respect to any Registrable Securities, or any amendment of or supplement
to the Prospectus or any Free Writing Prospectus used in connection therewith, that refers to any CD&R Stockholder covered thereby
by name, or otherwise identifies such CD&R Stockholder as the holder of any securities of the Company, without first furnishing or
otherwise making available to such CD&R Stockholder a copy of any such amendment or supplement no less than five Business Days prior
to the filing of such amendment or supplement (unless and to the extent such amendment or supplement is required by law to be filed earlier)
and including all comments reasonably and timely requested by such CD&R Stockholder thereon.
If the Company files any Shelf
Registration Statement for the benefit of the holders of any of its securities other than the CD&R Stockholders, the Company agrees
that it shall use its reasonable best efforts to include in such registration statement such disclosures as may be required by Rule 430B
under the Securities Act (referring to the unnamed selling security holders in a generic manner by identifying the initial offering of
the securities to the CD&R Stockholders) in order to ensure that the CD&R Stockholders may be added to such Shelf Registration
Statement at a later time through the filing of a Prospectus supplement rather than a post-effective amendment.
Each CD&R Stockholder
holding Registrable Securities agrees if such CD&R Stockholder has Registrable Securities covered by such Registration Statement that,
upon receipt of any notice from the Company of the happening of any event
of the kind described in Sections 4(c)(ii), 4(c)(iii),
4(c)(iv), 4(c)(v)
and 4(c)(vi) hereof, such CD&R Stockholder will promptly discontinue disposition
of such Registrable Securities covered by such Registration Statement or Prospectus until such CD&R Stockholder’s receipt of
the copies of the supplemented or amended Prospectus contemplated by Section 4(c)(i)
hereof, or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus; provided,
however, that the time periods under Section 2 with respect to the length of
time that the effectiveness of a Registration Statement must be maintained shall automatically be extended by the amount of time the CD&R
Stockholder is required to discontinue disposition of such securities.
16
5.
Indemnification.
(a)
Indemnification by the Company. The Company shall, without limitation as to time, indemnify and hold harmless, to the fullest
extent permitted by law, each CD&R Stockholder of Registrable Securities whose Registrable Securities are covered by a Registration
Statement or Prospectus, the officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees
of each of them, each Person who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
each such CD&R Stockholder and the officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents
and employees of each such controlling person, each underwriter, if any, and each Person who controls (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) such underwriter (each such person being referred to herein as a “Covered
Person”), from and against any and all losses, claims, damages, liabilities, costs (including costs of preparation and reasonable
attorneys’ fees and any legal or other fees or expenses incurred by such party in connection with any investigation or proceeding),
expenses, judgments, fines, penalties, charges and amounts paid in settlement (collectively, “Losses”), as incurred,
arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Prospectus, Registration Statement
or Free Writing Prospectus or any amendment thereof or supplement thereto or any document incorporated by reference therein or based
on any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act, the Exchange Act, any state securities law, or any rule
or regulation thereunder applicable to the Company and relating to any action or inaction in connection with the related offering of
Registrable Securities, and will reimburse each such Covered Person for any legal and any other expenses reasonably incurred in connection
with investigating and defending or settling any such Loss, provided that the Company will not be liable in any such case to the
extent that any such Loss arises out of or is based on any untrue statement or omission by such Covered Person relating to such Covered
Person or its Affiliates (other than the Company or any of its Subsidiaries), but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such Registration Statement, Prospectus, Free Writing Prospectus
or any amendment thereof or supplement thereto, or any document incorporated by reference therein, in each case in reliance upon and
in conformity with written information furnished to the Company by such Covered Person with respect to such Covered Person for use therein.
It is agreed that the indemnity agreement contained in this Section 5(a) shall not apply to amounts paid in settlement
of any such Loss or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably
withheld).
(b)
Indemnification by CD&R Stockholder of Registrable Securities. As a condition to including any Registrable Securities
in any Registration Statement filed in accordance with Section 4 hereof, the Company
shall have received an undertaking reasonably satisfactory to it from the prospective seller of such Registrable Securities to indemnify,
to the fullest extent permitted by law, severally and not jointly with any other CD&R Stockholders holding Registrable Securities,
the Company, its directors and officers and each Person who controls (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act) the Company and all other prospective sellers, from and against all Losses arising out of or based on any untrue
or alleged untrue statement of a material fact contained in any such Registration Statement, Prospectus or Free Writing Prospectus or
any amendment thereof or supplement thereto, or any document incorporated by reference therein, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse
the Company, such directors, controlling persons and prospective sellers for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such Loss, in each case to the extent, but only to the extent, that such untrue statement or omission
is made in such Registration Statement, Prospectus or Free Writing Prospectus or any amendment thereof or supplement thereto, or any document
incorporated by reference therein, in each case in reliance upon and in conformity with written information furnished to the Company by
such CD&R Stockholder with respect to such CD&R Stockholder for inclusion in such Registration Statement, Prospectus or Free Writing
Prospectus or any amendment thereof or supplement thereto, or any document incorporated by reference therein; provided, however,
that the obligations of such CD&R Stockholder hereunder shall not apply to amounts paid in settlement of any such Losses (or actions
in respect thereof) if such settlement is effected without the consent of such CD&R Stockholder (which consent shall not be unreasonably
withheld); and provided, further, that the liability of such CD&R Stockholder of Registrable Securities shall be limited
to the net proceeds received by such selling CD&R Stockholder from the sale of Registrable Securities covered by such Registration
Statement.
17
(c) Conduct of Indemnification
Proceedings. If any Person shall be entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified
Party shall give prompt notice to the party from which such indemnity is sought (the “Indemnifying Party”) of any
claim or of the commencement of any proceeding with respect to which such Indemnified Party seeks indemnification or contribution pursuant
hereto; provided, however, that the delay or failure to so notify the Indemnifying Party shall not relieve the Indemnifying
Party from any obligation or liability except to the extent that the Indemnifying Party has been materially prejudiced by such delay
or failure. The Indemnifying Party shall have the right, exercisable by giving written notice to an Indemnified Party promptly after
the receipt of written notice from such Indemnified Party of such claim or proceeding, to, unless in the Indemnified Party’s reasonable
judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, assume, at the
Indemnifying Party’s expense, the defense of any such claim or proceeding, with counsel reasonably satisfactory to such Indemnified
Party; provided, however, that an Indemnified Party shall have the right to employ separate counsel in any such claim or
proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless: (i) the Indemnifying Party agrees to pay such fees and expenses; or (ii) the Indemnifying Party fails promptly
to assume, or in the event of a conflict of interest cannot assume, the defense of such claim or proceeding or fails to employ counsel
reasonably satisfactory to such Indemnified Party; in which case the Indemnified Party shall have the right to employ counsel and to
assume the defense of such claim or proceeding at the Indemnifying Party’s expense; provided, further, however,
that the Indemnifying Party shall not, in connection with any one such claim or proceeding or separate but substantially similar or related
claims or proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees
and expenses of more than one firm of attorneys (together with appropriate local counsel) at any time for all of the Indemnified Parties,
or for fees and expenses that are not reasonable. Whether or not such defense is assumed by the Indemnifying Party, such Indemnifying
Party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld).
The Indemnifying Party shall not consent to entry of any judgment or enter into any settlement that (x) does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release, in form and substance reasonably
satisfactory to the Indemnified Party, from all liability in respect of such claim or litigation for which such Indemnified Party would
be entitled to indemnification hereunder or (y) involves the imposition of equitable remedies or the imposition of any obligations
on the Indemnified Party or adversely affects such Indemnified Party other than as a result of financial obligations for which such Indemnified
Party would be entitled to indemnification hereunder.
(d)
Contribution. If the indemnification provided for in this Section 5 is
unavailable to an Indemnified Party in respect of any Losses (other than in accordance with its terms), then each applicable Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and such
Indemnified Party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as
any other relevant equitable considerations. The relative fault of such Indemnifying Party, on the one hand, and Indemnified Party, on
the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a material fact, has been made (or omitted) by, or relates
to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent any such action, statement or omission.
The parties hereto agree that
it would not be just and equitable if contribution pursuant to this Section 5(d) were
determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d),
an Indemnifying Party that is a selling CD&R Stockholder holding Registrable Securities shall not be required to contribute any amount
in excess of the amount that such Indemnifying Party has otherwise been, or would otherwise be, required to pay pursuant to Section
5(b) by reason of such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.
Notwithstanding the foregoing,
to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall control.
18
(e)
Non-Exclusivity. The obligations of the parties under this Section 5
shall be in addition to any liability which any party may otherwise have to any other party.
6.
Registration Expenses. All fees and expenses incurred in the performance of or compliance with this Agreement by the Company
including (i) all registration and filing fees (including fees and expenses (A) with respect to filings required to be made
with the SEC, all applicable securities exchanges and/or FINRA and (B) of compliance with securities or blue sky laws, including
any fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities pursuant
to Section 4(g)), (ii) printing expenses (including expenses of printing certificates
for Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses if the printing
of Prospectuses is requested by the managing underwriter(s), if any, of an Underwritten Offering, or by the CD&R Stockholders, (iii)
messenger, telephone and delivery expenses of the Company, (iv) fees and disbursements of counsel for the Company, (v) expenses
of the Company incurred in connection with any road show, (vi) fees and disbursements of all independent registered public accounting
firms referred to in Section 4(m) hereof (including the expenses of any “cold
comfort” letters required by this Agreement) and any other persons, including special experts retained by the Company, shall be
borne by the Company whether or not any Registration Statement is filed or becomes effective and (vii) fees and disbursements of
any counsel retained by any CD&R Stockholder holding Registrable Securities in an aggregate amount not to exceed $100,000 per Marketed
Underwritten Shelf Offering or Demand Registration, or $100,000 in the case of the Shelf Registration Statement required to be filed pursuant
to Section 2(a) (all such expenses, “Registration Expenses”). In addition,
the Company shall pay its internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered
on any securities exchange on which similar securities issued by the Company are then listed and rating agency fees and the fees and expenses
of any Person, including special experts, retained by the Company.
The Company shall not be required
to pay (i) any underwriter’s fees (including discounts, commissions or fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals) relating to the distribution of the Registrable Securities (other than with respect to Registrable
Securities sold by the Company) or (ii) expenses (other than the Company’s internal expenses) in connection with any offering
pursuant to a Demand Request or Shelf Takedown begun pursuant to Section 2, the request
of which has been subsequently withdrawn by the demanding CD&R Stockholder unless (x) the withdrawal is based upon (A)
any fact, circumstance, event, change, effect or occurrence that individually or in the aggregate with all other facts or circumstances,
events, changes, effects or occurrences has a material adverse effect on the Company or (B) material adverse information concerning
the Company that the Company had not publicly disclosed at least forty-eight (48) hours prior to such registration request or that the
Company had not otherwise notified, in writing, the demanding CD&R Stockholder of at the time of such request or (y) the CD&R
Stockholder issuing such Demand Request or requesting such Shelf Takedown, as applicable, has not withdrawn three Demand Requests relating
to Underwritten Offerings of a type not covered by the foregoing clauses (ii)(x)(A) or (ii)(x)(B).
19
7.
Rule 144. The Company covenants that it will file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports (except
as a result of a Take-Private Transaction), it will, upon the request of any of the CD&R Stockholders, make publicly available such
information so long as necessary to permit sales of Registrable Securities pursuant to Rule 144), and it will take such further action
as any CD&R Stockholder of Registrable Securities (or, if the Company is not required to file reports as provided above (except as
a result of a Take-Private Transaction), any of the CD&R Stockholders) may reasonably request, all to the extent required from time
to time to enable such CD&R Stockholder to sell shares of Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144. Upon the request of any CD&R Stockholder of Registrable Securities, the Company
will deliver to such CD&R Stockholder a written statement as to whether it has complied with such requirements and will, within the
limitations of the exemption provided by Rule 144 (as such rule may be amended from time to time) or any similar rule enacted by the SEC,
instruct the transfer agent to remove the restrictive legend affixed to any Common Stock to enable such shares to be sold in compliance
with Rule 144 (as such rule may be amended from time to time) or any similar rule enacted by the SEC.
8.
Miscellaneous.
(a)
Termination. The provisions of this Agreement (other than Section 5)
shall terminate upon the earliest to occur of (i) its termination by the written agreement of all parties hereto or their respective
successors in interest, (ii) the date on which the CD&R Stockholders cease to own any Registrable Securities or shares of Preferred
Stock and (iii) the dissolution, liquidation or winding up of the Company. Nothing herein shall relieve any party from any liability
for the breach of any of the agreements set forth in this Agreement.
(b)
Holdback Agreement. In consideration for the Company agreeing to its obligations under this Agreement, each CD&R Stockholder
agrees in connection with any Marketed Underwritten Shelf Offering or Marketed Underwritten Offering of the Company’s Common Stock
(whether or not such CD&R Stockholder is participating in such transaction) upon the request of the Company and the underwriter(s)
managing such Underwritten Offering, not to effect (other than pursuant to such registration) any public sale or distribution of Common
Stock, including, but not limited to, any sale pursuant to Rule 144, or make any short sale of, loan, grant any option for the purchase
of, or otherwise dispose of, or enter into any swap or other arrangement that transfers to another Person any of the economic consequences
of ownership of, any Common Stock, any other equity securities of the Company or any securities convertible into or exchangeable or exercisable
for any equity securities of the Company without the prior written consent of the Company or such underwriters, as the case may be, during
the Holdback Period.
If any registration pursuant
to Section 2 of this Agreement shall be in connection with any Marketed Underwritten
Shelf Offering or other Marketed Underwritten Offering where the plan of distribution contemplates a customary “road show”
(including an “electronic road show”) or other substantial marketing effort by the Company and the underwriters, the Company
will not effect any public sale or distribution of any common equity (or securities convertible into or exchangeable or exercisable for
common equity) (other than a registration statement (i) on Form S-4, Form S-8 or any successor forms promulgated for similar purposes
or (ii) filed in connection with an exchange offer or any employee benefit
or dividend reinvestment plan) for its own account, during the Holdback Period.
20
(c)
Amendments and Waivers. This Agreement may be amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if any such amendment, action or omission to act, has received the written
consent of the Company and each of the CD&R Stockholders. The failure of any party to enforce any of the provisions of this Agreement
shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and
every provision of this Agreement in accordance with its terms. Any CD&R Stockholder may waive (in writing) the benefit of any provision
of this Agreement with respect to itself for any purpose. Any such waiver shall constitute a waiver only with respect to the specific
matter described in such writing and shall in no way impair the rights of the CD&R Stockholder granting such waiver in any other respect
or at any other time.
(d)
Successors, Assigns and Transferees. This Agreement may not be assigned without the prior written consent of the Company.
Notwithstanding the foregoing, (i) any CD&R Stockholder may assign any of its rights, interests and obligations hereunder to (a) any
Affiliate of any CD&R Stockholder and (b) any Permitted Rights Transferee who acquires at least 25% of the Registrable Securities
held by the CD&R Stockholders as of the date hereof, and (ii) in the event of and as a condition to any such assignment, such assignee
shall agree in writing to be bound by the provisions of this Agreement, including the rights, interests and obligations so assigned. The
CD&R Stockholders acknowledge that no limited partner of an investment fund managed by Clayton, Dubilier & Rice, LLC or any portfolio
company thereof (excluding the Company and its subsidiaries) will be deemed to be a CD&R Stockholder for purposes of this Agreement.
Notwithstanding the foregoing, any notice (or Demand Request, as applicable) of a CD&R Stockholder to register Registrable Securities
pursuant to a registration statement under the Securities Act pursuant to, and in accordance with, Section 2(b),
Section 2(e), Section 2(l) or Section 3(a)
shall be deemed to include, and the Company shall register (subject to the limitations and conditions otherwise applicable to the CD&R
Stockholder), any portion of such Registrable Securities that are transferred to a Permitted Rights Transferee prior to the execution
of an underwriting agreement in connection with an Underwritten Offering and the effectiveness of the registration statement, in each
other case, provided that the notice (or Demand Request, as applicable) described in Section 2(b),
Section 2(e), Section 2(l) or Section 3(a),
as applicable, includes the identity of such Permitted Rights Transferee, the relationship (if any) of such Permitted Rights Transferee
with the Company, their beneficial ownership of Common Stock, the Registrable Securities held by such Permitted Rights Transferee to be
included in such registration and the intended method of distribution thereof, and any other information reasonably requested by the Company
and/or the managing underwriter(s) for inclusion in the applicable Registration Statement, Prospectus, Free Writing Prospectus or any
amendment thereof or supplement thereto.
21
(e)
Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile
transmission) and shall be given:
If to the Company, to:
ADI Global Distribution Inc.
275 Broadhollow Rd Suite 400
Melville, NY 11747
E-mail: jeannine.lane@adiglobal.com
Attention: General Counsel
with a copy (which shall not
constitute notice) to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Attention: Russell Leaf; Jared Fertman; Tej Prakash
Fax: (212) 728-8111
Email: Rleaf@Willkie.com; JFertman@willkie.com;
TPrakash@Willkie.com
if to a CD&R Stockholder,
to:
c/o Clayton, Dubilier & Rice, LLC
375 Park Avenue, 18th Floor
New York, NY 10152
Attention: Andrew Campelli
Michael Pratt
Email:
ACampelli@cdr-inc.com
mpratt@cdr-inc.com
with a copy (which shall not
constitute notice) to:
Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Attention: Richard J. Campbell, P.C.
Kyle P. Elder, P.C.
Email: richard.campbell@kirkland.com
kyle.elder@kirkland.com
or such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the other parties hereto.
All such notices, requests
and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a
Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the
next succeeding Business Day in the place of receipt.
(f)
Further Assurances. At any time or from time to time after the date hereof, the parties agree to cooperate with each other,
and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action
as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby
and to otherwise carry out the intent of the parties hereunder.
22
(g)
No Inconsistent Agreements. The Company shall not hereafter enter into any agreement with respect to its securities which
is inconsistent with or violates the rights granted to the holders of Registrable Securities in this Agreement.
(h)
Entire Agreement; No Third Party Beneficiaries. This Agreement (i) constitutes the entire agreement among the
parties with respect to the subject matter of this Agreement and supersede any prior discussions, correspondence, negotiation, proposed
term sheet, agreement, understanding or agreement and there are no agreements, understandings, representations or warranties between the
parties other than those set forth or referred to in this Agreement and (ii) except as provided in Section 5
with respect to an Indemnified Party, is not intended to confer in or on behalf of any Person not a party to this Agreement (and their
successors and assigns) any rights, benefits, causes of action or remedies with respect to the subject matter or any provision hereof.
(i)
Governing Law; Jurisdiction and Forum; Waiver of Jury Trial.
(i)
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts
executed and to be performed wholly within such State and without reference to the choice-of-law principles that would result in the application
of the laws of a different jurisdiction.
(ii)
Each party to this Agreement irrevocably submits to the jurisdiction of the United States District Court for the Southern District
of New York or any court of the State of New York located in such district any suit, action or other proceeding arising out of or relating
to this Agreement, and hereby irrevocably agrees that all claims in respect of such suit, action or proceeding may be heard and determined
in such court. Each party to this Agreement hereby irrevocably waives, to the fullest extent that it may effectively do so, the defense
of an inconvenient forum to the maintenance of such suit, action or other proceeding. The parties further agree, to the extent permitted
by law, that final and unappealable judgment against any of them in any suit, action or other 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, a certified copy of which shall
be conclusive evidence of the fact and amount of such judgment.
(iii)
EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(j)
Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such a determination,
the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner
in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
23
(k)
Enforcement. Each party hereto acknowledges that money damages would not be an adequate remedy in the event that any of
the covenants or agreements in this Agreement are not performed in accordance with its terms, and it is therefore agreed that in addition
to and without limiting any other remedy or right it may have, the non-breaching party will have the right to an injunction, temporary
restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically
the terms and provisions hereof. In any action or proceeding brought to enforce any provision of this Agreement, the successful party
shall be entitled to recover reasonable attorneys’ fees in addition to its costs and expenses and other available remedies.
(l)
Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only
and will not affect the meaning or interpretation of this Agreement.
(m)
No Recourse. Notwithstanding anything that may be expressed or implied in this Agreement, the Company and each CD&R
Stockholder covenant, agree and acknowledge that no recourse under this Agreement or any documents or instruments delivered in connection
with this Agreement shall be had against any current or future director, officer, employee, shareholder, general or limited partner or
member of any CD&R Stockholder or of any Affiliate thereof (in each case other than an assignee pursuant to Section 8(d)
that is a Permitted Rights Transferee), whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue
of any statute, regulation or other applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall
attach to, be imposed on or otherwise be incurred by any current or future director, officer, employee, shareholder, general or limited
partner or member of any CD&R Stockholder or of any Affiliate or assignee thereof, as such for any obligation of any CD&R Stockholder
under this Agreement or any documents or instruments delivered in connection with this Agreement for any claim based on, in respect of
or by reason of such obligations or their creation.
(n)
Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without
the prior written consent of the CD&R Stockholders, enter into any agreement with any holder or prospective holder of any securities
of the Company that would give such holder or prospective holder the right to include any securities in any Demand Registration, Shelf
Takedown, Underwritten Offering or Piggyback Registration or other registration rights, in each case on terms which are more senior to,
conflict with or are otherwise more favorable to such holder or prospective holder (including, for the avoidance of doubt, any such registration
rights that adversely impact or dilute the priority rights of the CD&R Stockholders under Section 2(h)
with respect to a Demand Request or a Shelf Takedown initiated by the CD&R Stockholders that is a Marketed Underwritten Offering)
than the registration rights granted to the CD&R Stockholders hereunder and, if any such terms are pari passu to such rights granted
hereunder, the Company shall consult with the CD&R Stockholders prior to entering into any such agreement.
(o)
Counterparts; Facsimile Signatures. This Agreement may be executed in any number of counterparts (including via facsimile
and electronic transmission), each of which shall be an original, but all of which together shall constitute one instrument. This Agreement
may be executed by facsimile signature(s).
[Remainder of page left intentionally blank]
24
IN WITNESS WHEREOF, each of
the undersigned has executed this Agreement or caused this Agreement to be duly executed on its behalf as of the date first written above.
Company
ADI GLOBAL DISTRIBUTION INC.
By: /s/ Jeannine Lane
Name: Jeannine Lane
Title: Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer
CD&R Investor I
CD&R CHANNEL HOLDINGS, L.P.
By: CD&R Investment Associates XII, Ltd.
Its: General Partner
By: /s/
Rima Simson
Name: Rima Simson
Title: Vice President, Treasurer and
Secretary
CD&R Investor II
CD&R CHANNEL HOLDINGS II, L.P.
By: CD&R Investment Associates XII, Ltd.
Its: General Partner
By: /s/
Rima Simson
Name: Rima Simson
Title: Vice President, Treasurer and
Secretary
EX-10.6 — SHAREHOLDERS AGREEMENT, DATED AUGUST 3, 2026, BY AND AMONG ADI GLOBAL DISTRIBUTION INC., CD&R CHANNEL HOLDINGS, L.P., CD&R CHANNEL HOLDINGS II, L.P., WILLIAM GALVIN AND, SOLELY FOR PURPOSES OF SECTION 3.6, CLAYTON, DUBILIER & RICE FUND XII, L.P
EX-10.6
Filename: ea030019001ex10-6.htm · Sequence: 12
Exhibit 10.6
Execution Version
SHAREHOLDERS AGREEMENT
dated as of August 3, 2026
by and among
ADI Global Distribution Inc.,
CD&R Channel Holdings, L.P.,
CD&R Channel Holdings II, L.P.,
Clayton, Dubilier & Rice Fund XII,
L.P.,
(solely for purposes of Section 3.6),
and
the other parties referenced herein
Table of Contents
Page
ARTICLE I REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2
Section 1.1.
Organization and Authority
2
Section 1.2.
Authorization
2
Section 1.3.
Status of Securities
3
Section 1.4.
Brokers and Finders
4
Section 1.5.
Registration Rights
4
Section 1.6.
DGCL 203
4
Section 1.7.
NYSE Listing Requirements
4
Section 1.8.
No Additional Representations
5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF the shareholders
5
Section 2.1.
Organization and Authority
5
Section 2.2.
Authorization
5
Section 2.3.
Purchase for Investment
6
Section 2.4.
Brokers and Finders
7
Section 2.5.
U.S. Persons
7
Section 2.6.
Acknowledgment of No Other Representations or Warranties
7
ARTICLE III Covenants
8
Section 3.1.
Confidentiality
8
Section 3.2.
Tax Matters
9
Section 3.3.
Transfer Restrictions
10
Section 3.4.
Board Representation
12
Section 3.5.
Preemptive Rights
12
Section 3.6.
Standstill
15
Section 3.7.
Legend
18
Section 3.8.
Section 16 Matters
19
Section 3.9.
D&O Indemnification / Insurance Priority Matters
20
Section 3.10.
NYSE Listing
20
Section 3.11.
Anti-Takeover Provisions
20
ARTICLE IV Miscellaneous
21
Section 4.1.
Amendment; Waiver
21
Section 4.2.
Counterparts; Electronic Transmission
21
Section 4.3.
Governing Law
21
Section 4.4.
WAIVER OF JURY TRIAL
21
Section 4.5.
Notices
22
Section 4.6.
Entire Agreement
23
Section 4.7.
Assignment
23
Section 4.8.
Interpretation; Other Definitions
23
Section 4.9.
Captions
31
Section 4.10.
Severability
31
Section 4.11.
No Third Party Beneficiaries
31
Section 4.12.
Public Announcements
32
Section 4.13.
Specific Performance
32
Section 4.14.
Jurisdiction
32
Section 4.15.
Survival
33
Section 4.16.
Other Shareholder Matters
33
Section 4.17.
Spin-Off Matters
33
Section 4.18.
Non-Recourse
34
Section 4.19.
Further Assurances
34
i
THIS SHAREHOLDERS AGREEMENT,
dated as of August 3, 2026 (this “Agreement”), is by and among (a) ADI Global Distribution Inc., a Delaware corporation
(the “Company”), (b) CD&R Channel Holdings, L.P., a Cayman Islands exempted limited partnership (the “CD&R
Shareholder”), (c) CD&R Channel Holdings II, L.P., a Cayman Islands exempted limited partnership (“CD&R II”),
(d) William Galvin (the “Other Shareholder” and, together with the CD&R Shareholder, the “Shareholders”),
and (e) solely for purposes of Section 3.6 hereof, Clayton, Dubilier & Rice Fund XII, L.P., a Cayman Islands exempted
limited partnership (the “CD&R Fund”). Capitalized terms used in this Agreement and not otherwise defined herein
shall have the meaning set forth in Section 4.8 hereof.
RECITALS:
WHEREAS, on the date hereof,
the Company is spinning off from Resideo Technologies, Inc., a Delaware corporation (“Resideo”), pursuant to the terms
of that certain Separation and Distribution Agreement, dated as of July 31, 2026, by and between the Company and Resideo (as may be amended,
restated or modified from time to time, the “Separation Agreement” and such transaction, the “Spin-Off”);
WHEREAS, as partial consideration
for the transfer and contribution by Resideo of the assets and liabilities related to the ADI business to the Company and its Subsidiaries
as contemplated by the Separation Agreement, the Company issued 150,000 shares (the “Exchanged Shares”) of its preferred
stock, par value $0.001 per share, designated as “Series A Cumulative Convertible Participating Preferred Stock” (the “Preferred
Stock”), having the terms set forth in the Certificate of Designations, Preferences and Rights of Series A Cumulative Convertible
Participating Preferred Stock in the form attached hereto as Exhibit A (the “Certificate of Designations”),
to Resideo;
WHEREAS, substantially concurrently
with the consummation of the transactions contemplated by the Separation Agreement, pursuant to the terms of that certain Exchange Agreement,
dated as of July 31, 2026, by and among Resideo and each Shareholder (as may be amended, restated or modified from time to time, the “Exchange
Agreement”), Resideo transferred the Exchanged Shares (representing all of the shares of Preferred Stock held by it) to the
Shareholders in exchange for the number of shares of Series A Cumulative Convertible Participating Preferred Stock of Resideo, par value
$0.001 per share, held by the Shareholders as set forth in the Exchange Agreement;
WHEREAS, the Preferred Stock
will be convertible into shares of Common Stock of the Company on the terms set forth in the Certificate of Designations and this Agreement;
WHEREAS, in connection with
the transactions contemplated by the Separation Agreement, CD&R II is hereby agreeing to become a party to, and be bound by the applicable
terms of, this Agreement in its own capacity as a party to this Agreement and as a “CD&R Shareholder Party” hereunder;
and
WHEREAS, as a condition to
the consummation of the transactions contemplated by the Exchange Agreement, the parties hereto are entering into this Agreement.
1
NOW, THEREFORE, in consideration
of the premises, and of the representations, warranties, covenants and agreements set forth herein, the parties agree as follows:
ARTICLE
I
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and
warrants to each Shareholder and CD&R II, as of the date hereof (except to the extent made only as of a specified date, in which case
as of such date), that:
Section 1.1. Organization
and Authority. The Company is a corporation duly organized and validly existing under the laws of the State of Delaware, has all
requisite corporate power and authority to own its properties and conduct its business as presently conducted, is duly qualified to do
business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires
it to be so qualified (in the case of good standing, to the extent such jurisdiction recognizes such concept), except where such failure
to be so qualified, individually or in the aggregate, would not be reasonably expected to have a material adverse effect on the Company
and its Subsidiaries, taken as a whole. True and accurate copies of the amended and restated certificate of incorporation of the Company
(the “Certificate of Incorporation”) and the amended and restated bylaws of the Company (the “Bylaws”),
each as in effect as of the date of this Agreement and immediately after giving effect to the consummation of the transactions contemplated
by the Separation Agreement, have been made available to each Shareholder and CD&R II prior to the date hereof.
Section 1.2. Authorization.
(a) The
Company has the corporate power and authority to enter into this Agreement and the other Transaction Documents and to carry out its obligations
hereunder and thereunder. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company
and the consummation of the transactions contemplated hereby and thereby have been duly authorized by the board of directors of the Company
(the “Company Board”). This Agreement and the other Transaction Documents have been duly and validly executed and delivered
by the Company and, assuming due authorization, execution and delivery by the applicable parties hereto and thereto (other than the Company),
each of this Agreement and the other Transaction Documents constitute a valid and binding obligation of the Company enforceable against
the Company in accordance with their respective terms (except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general
equity principles). No other corporate proceedings are necessary for the execution and delivery by the Company of this Agreement or the
other Transaction Documents, and no other corporate proceedings or approval of the Company’s stockholders are necessary for the
performance by the Company of its obligations hereunder or thereunder or the consummation by it of the transactions contemplated hereby
or thereby (including, for the avoidance of doubt the conversion of Exchanged Shares in accordance with the Certificate of Designations).
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(b) Neither
the execution, delivery and performance by the Company of this Agreement or the other Transaction Documents, nor the consummation of the
transactions contemplated hereby or thereby, nor compliance by the Company with any of the provisions hereof or thereof, will (i)
violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result
in a right of termination or acceleration of, or result in the creation of any Lien upon any of the material properties or assets of any
Company Group Member under any of the terms, conditions or provisions of (x) the Certificate of Incorporation, the Certificate
of Designations, the Bylaws or the certificate of incorporation, charter, articles of association, bylaws or other governing instrument
of any Subsidiary of the Company or (y) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which any Company Group Member is a party or by which it may be bound, or to which any Company Group Member
or any of the properties or assets of any Company Group Member may be subject (including any of the Existing Debt Agreements), or (ii)
violate any law, statute, ordinance, rule, regulation, permit, franchise or any judgment, ruling, order, writ, injunction or decree applicable
to any Company Group Member or any of its respective properties or assets, except in the case of clauses (i)(y) and (ii),
for such violations, conflicts and breaches as would not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the Company and its Subsidiaries, taken as a whole.
(c) No
notice to, registration, declaration or filing with, exemption or review by, or authorization, order, consent or approval of any Governmental
Entity, nor expiration or termination of any statutory waiting period, in each case that has not been made or received or that has not
expired, as applicable, prior to the date hereof is necessary for the consummation by the Company of the transactions contemplated by
this Agreement or the other Transaction Documents, except where the failure to obtain such approval or to provide or obtain such notice,
registration, declaration, filing, exemption, review, authorization, order, consent or obtain the expiration of such waiting period would
not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its Subsidiaries, taken
as a whole.
(d) The
Common Stock is registered pursuant to Section 12(b) of the Exchange Act and listed on the NYSE, and the Company has taken no action
designed to, or which to the knowledge of the Company is reasonably likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act or delisting the Common Stock from the NYSE, nor has the Company received as of the date of this Agreement
any notification that the SEC or the NYSE is contemplating terminating such registration or listing or otherwise.
Section 1.3. Status
of Securities.
(a) (i)
The Exchanged Shares and (ii) the shares of Common Stock issuable upon conversion of the Exchanged Shares (including shares of Preferred
Stock issued as dividends thereon as provided in the Certificate of Designations) have been duly authorized by all necessary corporate
action. The Exchanged Shares have been validly issued, fully paid and nonassessable, will not be subject to preemptive rights of any other
stockholder of the Company, and will effectively vest in each respective Shareholder good title to the Exchanged Shares, free and clear
of all Liens (other than restrictions arising under applicable securities Laws and the restrictions set forth in this Agreement, including
Section 3.6 hereof, and the Certificate of Designations).
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(b) Upon
any conversion of any Exchanged Shares (including shares of Preferred Stock issued as dividends thereon as provided in the Certificate
of Designations), the shares of Common Stock upon such conversion will be validly issued, fully paid and non-assessable, and will not
be subject to preemptive rights of any other stockholder of the Company, and will effectively vest in such Shareholder good title to all
such securities, free and clear of all Liens (other than restrictions arising under applicable securities Laws and the restrictions set
forth in this Agreement, including Section 3.6 hereof). The respective rights, preferences, privileges and restrictions of the
Common Stock and the Preferred Stock are as stated in the Certificate of Incorporation and the Certificate of Designations and the Bylaws.
The shares of Common Stock and shares of Preferred Stock to be issued upon any conversion of the Exchanged Shares (including shares of
Preferred Stock issued as dividends thereon as provided in the Certificate of Designations) and have been duly reserved for such issuance.
Section 1.4. Brokers
and Finders. No Company Group Member and none of their respective officers, directors, employees or agents has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder’s fees, and no broker
or finder has acted directly or indirectly for the Company in connection with this Agreement or the transactions contemplated hereby.
For the avoidance of doubt, this is not a representation with respect to any such fees incurred by Resideo in connection with the transactions
contemplated by the Separation Agreement.
Section 1.5. Registration
Rights. Except as provided in the Registration Rights Agreement, the Company has not granted or agreed to grant, and is not under
any obligation to provide, any rights to register under the Securities Act any of its presently outstanding equity securities or any
of its equity securities that may be issued subsequently.
Section 1.6. DGCL
203. Other than Section 203 of the DGCL, no “business combination,” “fair price,” “moratorium,”
“control share acquisition” or other similar anti-takeover statute or regulation under the laws of the State of Delaware
or other applicable Laws is applicable to the Company, the transfer of the Exchanged Shares to CD&R Shareholder or any of the transactions
contemplated by the Transaction Documents. The Company Board has approved the acquisition by the CD&R Shareholder Parties (individually
and collectively) of all Exchanged Shares, all Common Stock received by the CD&R Shareholder Parties in the Spin-Off or upon conversion
of Exchanged Shares and all Common Stock and other capital stock acquired without violation of this Agreement for all purposes of Section
203 of the DGCL such that Section 203 of the DGCL will not apply to any transaction between any or all of the CD&R Shareholder Parties,
on the one hand, and the Company or any of its Subsidiaries, on the other hand.
Section 1.7. NYSE
Listing Requirements. Resideo has approved the transactions contemplated by the Transaction Documents, the Exchange Agreement, including
with respect to the Exchanged Shares, the Common Stock issuable upon conversion of the Exchanged Shares and Common Stock issued in connection
with the consummation of the Spin-Off, the acquisition by the CD&R Shareholder Parties of additional Preferred Stock, Common Stock
or any New Securities, for all purposes of the applicable listing and corporate governance requirements of NYSE.
4
Section 1.8. No Additional
Representations. Except for the representations and warranties made by the Company in this ARTICLE I, neither the Company
nor any other person makes any express or implied representation or warranty with respect to any Company Group Member or their respective
businesses, operations, assets, liabilities, employees, employee benefit plans, conditions or prospects, and the Company hereby disclaims
any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither the Company nor any other
Person makes or has made any representation or warranty to any Shareholder or its representatives, with respect to (i) any financial
projection, forecast, estimate, budget or prospect information relating to any Company Group Member or their respective business, or
(ii) except for the representations and warranties made by the Company in this ARTICLE I, any oral or written information presented
to any Shareholder or its representatives in the course of their due diligence investigation of the Company, the negotiation of this
Agreement or in the course of the transactions contemplated hereby.
ARTICLE
II
REPRESENTATIONS AND WARRANTIES OF the shareholders
Each Shareholder and CD&R
II, severally as to itself or himself only and not jointly, hereby represent and warrant to the Company, as of the date hereof (except
to the extent made only as of a specified date, in which case as of such date), that:
Section 2.1. Organization
and Authority. Such Shareholder and CD&R II (to the extent not a natural Person) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, is duly qualified to do business and is in good standing in all jurisdictions
where its ownership or leasing of property or the conduct of its business requires it to be so qualified and where failure to be so qualified
would reasonably be expected to materially and adversely affect such Shareholder’s or CD&R II’s ability to perform its
obligations under this Agreement or the other Transaction Documents to which it is a party or consummate the transactions contemplated
hereby or thereby on a timely basis, and such Shareholder and CD&R II has the requisite power and authority and governmental authorizations
to own its properties and assets and to carry on its business as it is now being conducted.
Section 2.2. Authorization.
(a) Such
Shareholder and CD&R II has the requisite power and authority to enter into this Agreement and the other Transaction Documents to
which it is a party and to carry out its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement
and the other Transaction Documents to which such Shareholder or CD&R II is a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite action on the part of such Shareholder and CD&R II, as applicable, and
to the extent such Shareholder or CD&R II is not a natural Person, no further approval or authorization by any of its stockholders,
partners, members or other equity owners, as the case may be, is required. This Agreement and each other Transaction Document to which
such Shareholder or CD&R II is party has been duly and validly executed and delivered by such Shareholder and CD&R II, as applicable,
and assuming due authorization, execution and delivery by the Company, is a valid and binding obligation of such Shareholder and CD&R
II, as applicable, enforceable against such Shareholder and CD&R II in accordance with its respective terms (except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability
relating to or affecting creditors’ rights or by general equity principles).
5
(b) None
of the execution, delivery and performance by such Shareholder or CD&R II of this Agreement, the consummation of the transactions
contemplated hereby, or compliance by such Shareholder or CD&R II with any of the provisions hereof, will (i) violate, conflict
with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination
or acceleration of, or result in the creation of any Lien upon any of the properties or assets of such Shareholder or CD&R II, as
applicable, under any of the terms, conditions or provisions of (x) its governing instruments (if such Shareholder or CD&R
II is not a natural Person) or (y) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument
or obligation to which such Shareholder or CD&R II is a party or by which it may be bound, or to which such Shareholder or CD&R
II or any of the properties or assets of such Shareholder or CD&R II may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in the next paragraph, violate any Law, statute, ordinance, rule or regulation, permit, concession,
grant, franchise or any judgment, ruling, order, writ, injunction or decree applicable to such Shareholder, CD&R II or any of their
respective properties or assets except in the case of clauses (i)(y) and (ii) for such violations, conflicts and breaches as would not
reasonably be expected to materially and adversely affect such Shareholder’s or CD&R II’s, as applicable, ability to perform
its respective obligations under this Agreement or the other Transaction Documents to which it is a party or consummate the transactions
contemplated hereby or thereby on a timely basis.
(c) Other
than federal securities law or securities or blue sky laws of the various states, no notice to, registration, declaration or filing with,
exemption or review by, or authorization, order, consent or approval of any Governmental Entity, nor expiration or termination of any
statutory waiting period, in each case that has not been made or received or that has not expired, as applicable, prior to the date hereof
is necessary for the consummation by such Shareholder or CD&R II of the transactions contemplated by this Agreement or the other Transaction
Documents.
Section 2.3. Purchase
for Investment. Such Shareholder acknowledges that the Exchanged Shares have not been registered under the Securities Act or under
any state or other applicable securities laws. Such Shareholder (i) acknowledges that it is acquiring the Exchanged Shares and
the Common Stock issuable upon conversion of the Preferred Stock pursuant to an exemption from registration under the Securities Act
solely for investment with no present intention to distribute any of the Exchanged Shares to any Person in violation of applicable securities
laws, (ii) will not sell or otherwise dispose of any of the Exchanged Shares or the Common Stock issuable upon conversion of the
Exchanged Shares, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other
applicable securities laws (and the provisions of Section 3.3 hereof), (iii) has such knowledge and experience in financial and
business matters and in investments of this type that it is capable of evaluating the merits and risks of its investment in the Exchanged
Shares and of making an informed investment decision, (iv) is an “accredited investor” (as that term is defined by
Rule 501 of the Securities Act), (v) in the case of the CD&R Shareholder, is a “qualified institutional buyer”
(as that term is defined in Rule 144A of the Securities Act), (vi) is acquiring the Exchanged Shares for its own account and not
with a view to, or for sale in connection with, any distribution thereof in violation of federal or state securities Laws, and (vii)
(A) has been furnished with or has had full access to all the information that it considers necessary or appropriate to make an
informed investment decision with respect to the Exchanged Shares and the Common Stock issuable upon conversion of the Exchanged Shares,
(B) has had an opportunity to discuss with management of the Company the intended business and financial affairs of the Company
and to obtain information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to it or to which it had access and (C) can bear the economic risk of (x)
an investment in the Exchanged Shares and the Common Stock issuable upon conversion of the Exchanged Shares indefinitely and (y)
a total loss in respect of such investment. Such Shareholder has such knowledge and experience in business and financial matters so as
to enable it to understand and evaluate the risks of and form an investment decision with respect to its investment in the Exchanged
Shares and the Common Stock issuable upon conversion of the Exchanged Shares and to protect its own interest in connection with such
investment.
6
Section 2.4. Brokers
and Finders. Neither such Shareholder, CD&R II nor their respective Affiliates or any of their respective officers, directors,
employees or agents has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions
or finder’s fees, and no broker or finder has acted directly or indirectly for such Shareholder or CD&R II, in connection with
this Agreement or the transactions contemplated hereby.
Section 2.5. U.S.
Persons. No Shareholder nor CD&R II is a “foreign person” as such term is defined in 31 CFR 800.224.
Section 2.6. Acknowledgment
of No Other Representations or Warranties. Such Shareholder, CD&R II and their respective Affiliates acknowledge that they conducted
their own independent investigation and analysis of the business, operations, assets, liabilities, results of operations, condition (financial
or otherwise) and prospects of the Company and other Company Group Members. Such Shareholder, CD&R II and their respective Affiliates
acknowledge and agree that, except for the representations and warranties contained in ARTICLE I, neither the Company nor any
of its Subsidiaries, nor any other Person, makes any express or implied representation or warranty with respect to any Company Group
Member or their respective businesses, operations, assets, liabilities, employees, employee benefit plans, conditions or prospects, and
the Company hereby disclaims any such other representations or warranties and such Shareholder and CD&R II acknowledges that neither
it nor any Affiliate thereof have relied on any information or material other than the express representations and warranties set forth
in ARTICLE I. In particular, without limiting the foregoing disclaimer, neither the Company nor any of its Subsidiaries, nor any
other Person, makes or has made any representation or warranty to any Shareholder or CD&R II, or any of their respective Affiliates
or representatives, with respect to (i) any financial projection, forecast, estimate, budget or prospect information relating
to any Company Group Member or their respective business, or (ii) except for the representations and warranties made by the Company
in ARTICLE I, any oral or written information presented to such Shareholder, CD&R II or any of their respective Affiliates
or representatives in the course of their due diligence investigation of the Company, the negotiation of this Agreement or in the course
of the transactions contemplated hereby. To the fullest extent permitted by applicable Law, except with respect to the representations
and warranties contained in ARTICLE I, neither the Company nor any of its Affiliates shall have any liability (except in the case
of actual fraud) to any Shareholder, CD&R II or their respective Affiliates or representatives on any basis (including in contract
or tort, under federal or state securities Laws or otherwise) based upon any other representation or warranty, either express or implied,
included in any information or statements (or any omissions therefrom) provided or made available by the Company or its Affiliates to
such Shareholder, CD&R II or their respective Affiliates or representatives in the course of their due diligence investigation of
the Company, the negotiation of this Agreement or in the course of the transactions contemplated by this Agreement.
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ARTICLE
III
Covenants
Section 3.1. Confidentiality.
Each party to this Agreement will hold, and will cause its respective Affiliates and their respective directors, managers, officers,
employees, agents, auditors, consultants and advisors to hold, in strict confidence, unless disclosure to a Governmental Entity is necessary
in connection with any necessary regulatory approval, examination or inspection or unless disclosure is required by judicial or administrative
process or by other requirement of Law or the applicable requirements of any Governmental Entity or relevant stock exchange (in which
case, other than in connection with a disclosure in connection with a routine audit or examination by, or document request from, a regulatory
or self-regulatory authority, bank examiner or auditor, the party disclosing such information shall provide the other party with prior
written notice of such permitted disclosure to the extent lawful), and shall not use (other than for purposes of monitoring its investment
in the Company or enforcing its rights under this Agreement and the other Transaction Documents to which it is a party), all non-public
records, books, contracts, instruments, computer data and other data and information concerning the other parties hereto or their respective
Subsidiaries furnished to it by or on behalf of such other party or its representatives pursuant to this Agreement or otherwise in connection
with the investment in the Company contemplated by or referenced in this Agreement (except to the extent that such information can be
reasonably demonstrated to have been or be (a) previously known by such party from other sources, provided that such source was
not known by such party to be bound by a contractual, legal or fiduciary obligation of confidentiality to the other party, (b)
in the public domain through no violation of this Section 3.1 by such party or (c) later lawfully acquired from other
sources by the party to which it was furnished), and no party hereto shall, and shall cause their respective Affiliates and their respective
directors, managers, officers, employees, agents, auditors, consultants and advisors not to, release or disclose such information to
any other Person, except its directors, managers, officers, employees, agents, auditors, consultants and advisors to the extent the disclosure
thereto is reasonable in connection with the transactions contemplated hereby or for purposes of monitoring its investment in the Company
or enforcing its rights under this Agreement and the other Transaction Documents to which it is a party. Each party shall be responsible
for any breach of this Section 3.1 by any Affiliate thereof or any of their respective directors, managers, officers, employees,
agents, auditors, consultants and advisors. For purposes of this Section 3.1, any information regarding the Company, its
Subsidiaries or their respective assets, liabilities, businesses or operations that was furnished or otherwise made available to any
Shareholder or any Affiliate thereof or any of their respective directors, managers, officers, employees, agents, auditors, consultants
and advisors by or on behalf of Resideo or any Subsidiary thereof prior to the date hereof shall be deemed to be information that was
made available to such Shareholder or Affiliate thereof or applicable director, manager, officer, employee, agent, auditor, consultant
or advisor thereof by or on behalf of the Company and is therefore subject to the terms of this Section 3.1.
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Section 3.2. Tax
Matters.
(a) Each
Shareholder and the Company agree that it is their intention that, for U.S. federal (and applicable state and local) income Tax purposes
(such tax treatment, the “Intended Tax Treatment”), (i) the Exchanged Shares are equity (and not debt), (ii) not to
treat the Exchanged Shares (based on their terms as set forth in the Certificate of Designations) as “preferred stock” within
the meaning of Section 305 of the Code, and Treasury Regulations Section 1.305-5 for U.S. federal income tax and withholding
tax purposes, and (iii) the Holders shall not be required to include in income as a dividend any amounts in respect of the Exchanged Shares
unless and until dividends are declared and paid in cash thereon in accordance with the terms of the Certificate of Designations. The
Company will, and will cause any paying agent or other agent of the Company to, report consistently with, and take no positions or actions
inconsistent with (including on any IRS Form 1099 or any other information return) the Intended Tax Treatment (including by way of withholding)
unless otherwise required by (A) a change in Law that is binding on the Company or (B) a final determination of a taxing authority that
is binding on the Company.
(b) The
Company and its paying agent shall be entitled to withhold Taxes on all payments on the Exchanged Shares and the Common Stock issuable
upon conversion thereof to the extent required by applicable Law. The Company shall use reasonable best efforts to (i) notify a Holder
at least ten (10) business days prior to any withholding on payments to such Holder, and (ii) give such Holder a reasonable opportunity
to provide any form or certificate to reduce or eliminate such withholding.
(c) At
the CD&R Shareholder’s request in connection with any sale, redemption, or other exchange of Exchanged Shares or Common Stock
held by the CD&R Shareholder or CD&R II, the Company shall use reasonable efforts to determine within fifteen (15) days of receipt
of request from the CD&R Shareholder whether it is a United States real property holding corporation within the meaning of Section 897(c)(2)
of the Code (a “USRPHC”) and shall promptly notify the CD&R Shareholder or CD&R II, as applicable, in writing
of its determination of its status as a USRPHC and shall provide to the CD&R Shareholder or CD&R II, as applicable, a statement
in accordance with Treasury Regulations Section 1.897-2(h)(1) where it determines the interest being sold is not a United States
real property interest within the meaning of Section 897 of the Code, or otherwise inform the CD&R Shareholder or CD&R II,
as applicable, in writing that it cannot make such certification under applicable law.
(d) For
so long as any Exchanged Shares or any shares of Common Stock issuable upon conversion of the Exchanged Shares are outstanding, the Company
is and will remain classified as a corporation for U.S. federal income tax purposes.
(e) Each
Shareholder and the Company agree that it is their intention that, for U.S. federal (and applicable state and local) Tax purposes, the
Exchange is treated as a distribution of stock pursuant to a transaction described in Sections 368(a)(1)(D) and 355(a) of the Code (the
“Exchange Tax Treatment”) that is tax-free to each Shareholder, Resideo, and
the Company, except for cash that Shareholders may receive (if any) in lieu of fractional shares. Each Shareholder and the Company
shall (and shall cause their respective Affiliates to) file all tax returns and otherwise report consistently with, the Exchange Tax Treatment,
except as otherwise required by a change in applicable Law after the date of this Agreement or pursuant to a final determination within
the meaning of Section 1313(a) of the Code (or any corresponding provision of state or local Law). The Company shall, to the extent permitted
by applicable Law (and not otherwise directed not to do so by a Governmental Entity), (i) keep the CD&R Shareholder reasonably informed
regarding any material audit, investigation, or other proceeding by a Governmental Entity with respect to the Exchange Tax Treatment (each,
a “Tax Proceeding”), and (ii) reasonably consult with and consider in good faith any reasonable comments of the CD&R
Shareholder regarding the conduct of any Tax Proceeding. For the avoidance of doubt, any information or documentation made available under
this Agreement, including pursuant to this Section 3.2(e), shall be subject to the confidentiality provisions set forth in Section
3.1.
9
Section 3.3. Transfer
Restrictions.
(a) Each
Shareholder and CD&R II hereby agrees that, except as set forth in the remaining provisions of this Section 3.3, from the consummation
of the Spin-Off (if and only if the Spin-Off occurs) until August 3, 2028 (the “Lock-Up Period”) the Other Shareholder
and CD&R Shareholder Parties shall not, directly or indirectly, in any single transaction or series of related transactions: (a) sell,
offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose
of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within
the meaning of Section 16 of the Exchange Act, with respect to (A) any of the Exchanged Shares (or any shares of Preferred Stock issued
as dividends on the Exchanged Shares) or any shares of Common Stock received upon conversion thereof, (B) any shares of Common Stock owned
by the Other Shareholder or CD&R Shareholder Parties as of immediately following the consummation of the Spin-Off, or (C) any shares
of capital stock received in exchange for or as a distribution on or with respect to such Exchanged Shares or shares of Preferred Stock
or Common Stock (such shares referred to in clauses (A)-(C), but excluding any shares of capital stock of Resideo, collectively, the “Lock-Up
Shares”), (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences
of ownership of, or voting rights in respect of, any of the Lock-Up Shares, for cash or otherwise, or (c) publicly announce any intention
to effect any transaction specified in clause (a) or (b) (collectively, the transfers or other actions referred to in clauses (a), (b)
and (c) above, a “Transfer”); provided that any request or demand to file, or the filing of, a registration statement
or a prospectus supplement or any amendments thereto in accordance with the Registration Rights Agreement shall not violate the restrictions
set forth in clauses (a), (b) and (c) of this sentence. Each of the Other Shareholder, CD&R Shareholder and CD&R II hereby authorizes
the Company during the Lock-Up Period to cause its transfer agent for the Lock-Up Shares to decline to transfer, and to note stop transfer
restrictions on the stock register and other records relating to, Lock-Up Shares for which the Other Shareholder, CD&R Shareholder,
CD&R II (or any other CD&R Shareholder Party) is the record or beneficial holder with respect to any Transfer of Lock-Up Shares
during the Lock-Up Period that is prohibited in accordance with this Section 3.3. Each of the Other Shareholder, CD&R Shareholder
and CD&R II hereby agrees that (other than in the case of a Transfer pursuant to clauses (i), (ii), (iii) or (iv) of the following
sentence or, in the case of a Transfer pursuant to clauses (v) or (vi) of the following sentence, if such Transfer is to one or more CD&R
Shareholder Parties) the Other Shareholder and the CD&R Shareholder Parties shall not Transfer the Exchanged Shares (or any shares
of Preferred Stock issued as dividends on the Exchanged Shares) unless such shares are converted into Common Stock in connection with
such Transfer; provided, that the Other Shareholder or CD&R Shareholder Parties, as applicable, shall be permitted to Transfer the
Exchanged Shares (and any shares of Preferred Stock issued as dividends on the Exchanged Shares) without converting such shares into Common
Stock if the Common Stock ceases to be listed or quoted on the NYSE or another U.S. national securities exchange or automated inter-dealer
quotation system. Notwithstanding the foregoing provisions of this Section 3.3(a) (but without limiting the limitations on Transferring
Preferred Stock pursuant to the foregoing sentence), any CD&R Shareholder Party may Transfer the Lock-Up Shares (i) to another
CD&R Shareholder Party, but only if (x) such other CD&R Shareholder Party agrees in writing for the benefit of the Company (in
form and substance reasonably satisfactory to the Company) to be bound by the terms of this Agreement and if the transferee and the transferor
agree for the express benefit of the Company that the transferee shall Transfer the Lock-Up Shares so Transferred back to the transferor
at or before such time as the transferee ceases to be a CD&R Shareholder Party, and (y) either (1) such transferee is an entity that
is treated for U.S. federal income tax purposes as disregarded as separate from the transferring CD&R Shareholder Party (or the transferring
CD&R Shareholder Party is an entity that is treated for U.S. federal income tax purposes as disregarded as separate from the transferee
or disregarded as separate from the same entity as the transferee) or (2) the Transfer does not result in the recognition of more than
an insubstantial amount of gain or loss for U.S. federal income tax purposes with respect to the Transferred Lock-Up Shares, which gain
or loss shall in no event exceed 5% of the fair market value of the Lock-Up Shares subject to the Transfer; (ii) to the Company
(including by way of surrender, exchange or repurchase) or any Subsidiary of the Company; (iii) pursuant to a merger, tender offer
or exchange offer or other business combination, acquisition of assets or similar transaction or any change of control transaction involving
the Company or any Subsidiary thereof, in each case of this clause (iii), approved by the Company Board or any liquidation, dissolution
or winding up of the Company; (iv) pursuant to a pledge in respect of a Permitted Loan (A) that qualifies as an Existing Permitted
Loan, (B) where either (1) a CD&R Affiliate provides a guaranty from a creditworthy entity to the maker(s) of the Permitted Loan in
respect of all obligations under such Permitted Loan or (2) the CD&R Shareholder provides a written representation to the Company
and Resideo prior to the making of such Permitted Loan to the effect that it reasonably believes, as of the date of the incurrence of
such Permitted Loan, that such Permitted Loan is unlikely to be repaid through a Transfer of Lock-Up Shares to the applicable lender(s)
thereof, in each case, where such Permitted Loan otherwise satisfies the requirements of Section 3.3(d), including that such Permitted
Loan is not a Margin Loan, or (C) that is incurred after the date hereof in connection with an acquisition of shares of capital stock
from the Company in a primary issuance and otherwise satisfies the requirements of Section 3.3(d), including such Permitted Loan is not
a Margin Loan and, in any such case of clause of this clause (iv), shall include (I) a Transfer to the lender of a Permitted Loan in connection
with a foreclosure of such pledge, and (II) any pledge entered into in connection with a refinancing of a Permitted Loan described in
such clause (so long as such refinancing loan complies with the terms of such clause) and a Transfer to the lender thereof in connection
with a foreclosure of such a pledge, in each case, in accordance with terms of this Agreement; (v) subject to compliance with Section
3.3(b) and the third sentence of this Section 3.3(a), to any Person so long as the applicable CD&R Shareholder Party effecting
the Transfer pursuant to this clause (v) concurrently Transfers a proportionate amount of the Resideo Common Stock owned by such CD&R
Shareholder Party (if Common Stock is being Transferred by such CD&R Shareholder Party) or Resideo Preferred Stock (if Preferred Stock
is being Transferred by such CD&R Shareholder Party) (e.g., if a CD&R Shareholder Party proposes to Transfer 5% of the shares
of Common Stock held by such CD&R Shareholder Party, it must concurrently transfer 5% of the shares of Resideo Common Stock held by
such CD&R Shareholder Party); and/or (vi) for any Transfer (including to another CD&R Shareholder Party if clause (y) of
clause (i) of this sentence is not otherwise satisfied) being entered into or consummated after October 3, 2027, if a CD&R Shareholder
Party causes an Unqualified Tax Opinion to be provided to the Company and Resideo prior to such Transfer, it being understood that no
Transfers shall be permitted pursuant to this clause (vi) prior to October 3, 2027. The term “concurrently” in clause (v)
requires that the dispositions occur within thirty (30) calendar days of each other as part of the same integrated plan. The Company shall,
at the sole cost and expense of the CD&R Shareholder Parties, reasonably cooperate with the CD&R Shareholder Parties, and shall
provide any information reasonably necessary in connection with obtaining any such Unqualified Tax Opinion. Notwithstanding anything to
the contrary stated herein or in the Certificate of Designations, without limiting the rights of any CD&R Shareholder Party to Transfer
the Lock-Up Shares prior to expiration or termination of the Lock-Up Period in accordance with this paragraph and notwithstanding any
such Transfer, for all purposes hereof and the Certificate of Designations, the Lock-Up Period shall not be deemed to have terminated
or expired until August 3, 2028 unless consented to in writing by the Company, the CD&R Shareholder and CD&R II; provided that
if any CD&R Shareholder Party effects a Transfer of a portion of the Exchanged Shares held by it pursuant to clause (vi) hereof prior
to the expiration of the Lock-Up Period, then solely for purposes of Section 6(a) and Section 10(a) of the Certificate of Designations,
the Lock-Up Period in respect of a proportional number of shares of Preferred Stock shall be deemed to have terminated such that the Company
may effect an optional conversion pursuant to Section 6(a) or optional redemption pursuant to Section 10(a) of the Certificates of Designations
in respect of such proportional amount of shares of Preferred Stock, subject in each case, to the satisfaction of any conditions or terms
set forth therein in order to effect any such conversion or redemption (e.g., if a CD&R Shareholder Party proposes to Transfer 1,000
shares of Common Stock issued upon conversion of the Preferred Stock held by it pursuant to clause (vi), the Lock-Up Period with respect
to a number of shares of Preferred Stock held by the CD&R Shareholder Parties equaling 1,000 shares of Common Stock on an as-converted
basis (or, if less, all of the remaining Preferred Stock) will be deemed to have terminated solely for the purposes of Section 6(a) and
Section 10(a) of the Certificate of Designations). To the extent that any CD&R Shareholder Party wishes to Transfer any of the Lock-Up
Shares prior to expiration of the Lock-Up Period in reliance on the foregoing clauses (i) or (v), the applicable CD&R Shareholder
Party shall use reasonable efforts to provide written notice to the Company and Resideo in reasonable detail at least five (5) business
days prior to the contemplated Transfer necessary to permit the Company and Resideo to evaluate the consequences of the applicable Transfer
under Section 355 of the Code (and the CD&R Shareholder Party shall thereafter provide such additional information with respect thereto
as the Company and Resideo may reasonably request); provided that, for the avoidance of doubt, in no event shall this sentence provide
any consent right to the Company or Resideo or limit the rights of any CD&R Shareholder Party to Transfer the Lock-Up Shares in accordance
with this Section 3.3(a) and the CD&R Shareholder Party may, without breach of this Agreement, proceed with such Transfer without
delay, provided such Transfer is in compliance with Section 3.3.
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(b) Without
limiting the terms set forth in Section 3.3(a), neither the Other Shareholder nor any CD&R Shareholder Party shall at
any time (including after the end of the Lock-Up Period), directly or indirectly, without the prior written consent of the majority of
the Company Board excluding the CD&R Designees, in any single transaction or series of related transactions, Transfer any of the Lock-Up
Shares or any other shares of capital stock of the Company now owned or hereafter acquired by the Other Shareholder or any CD&R Shareholder
Party, as applicable:
(1) other
than in accordance with all applicable Laws and the other terms and conditions of this Agreement; or
(2) to
any Person that is a Prohibited Transferee, other than any Transfer on the open market in reliance upon Rule 144 of the Securities Act
or pursuant to a valid registration statement (including a registration statement filed pursuant to the Registration Rights Agreement).
Neither the Other Shareholder
nor any CD&R Shareholder Party shall be deemed to have breached their obligations under Section 3.3(b)(2) as it relates to
Prohibited Transferees with respect to the Transfer of Exchanged Shares or any other shares of capital stock of the Company to any Person
(including through a Block Sale (as defined in the Registration Rights Agreement)) so long as such CD&R Shareholder Party acts in
good faith, based on generally available public information and the advice of its legal and financial advisors and after reasonable inquiry,
determines that neither such Person nor its Affiliates is a Prohibited Transferee. The reporting by a Person of its ownership of the securities
of an issuer on Schedule 13G shall be deemed to establish conclusively that such person is not an Activist Investor with respect
to such issuer for purposes of the definition of “Activist Investor”, except to the extent such person subsequently (but prior
to such Transfer) files a Schedule 13D with respect to such issuer; provided that any such determination for any Person with respect
to one issuer shall not preclude such Person from otherwise being an Activist Investor.
(c) Any
attempted Transfer in violation of this Section 3.3 shall be null and void ab initio.
(d) Subject
to the terms set forth in this Section 3.3(d), after the expiration of the Lock-Up Period (or prior to such expiration, in respect
of any Permitted Loan that satisfies the requirements set forth in clause (iv) of Section 3.3(a)) the CD&R Shareholder Parties
shall be permitted to pledge the Lock-Up Shares in respect of one or more bona fide loans made to the CD&R Shareholder Parties by
a Person who is not (and whose Affiliates are not) Prohibited Transferees (each, a “Permitted Loan”); provided, that,
(i) at least five (5) business days prior to the execution of definitive documentation in respect of any such Permitted Loan and the consummation
thereof, the CD&R Shareholder Parties shall provide (or have provided in the case of the Existing Permitted Loan) written notice to
the Company of the identity of the lender or lenders thereunder and shall provide such other information about the lenders or the loan
reasonably requested by the Company to comply with, or monitor compliance with, this Agreement, and (ii) any such Permitted Loan (including
the Existing Permitted Loan) shall not be a Margin Loan. Notwithstanding the foregoing or anything to the contrary herein, any Permitted
Loan entered into by such CD&R Shareholder Party shall only be with (or provided by) one or more commercial banks or financial institutions
that are not Prohibited Transferees (such financial institutions or banks excluding any Prohibited Transferee, collectively referred to
herein as “lenders”), and no Prohibited Transferee shall be permitted to have any direct or indirect interest in any
such Permitted Loan (whether by participation or otherwise) and the definitive documentation in respect of any such Permitted Loan shall
provide that any transfer, assignment or participation to any Prohibited Transferee will be void. Nothing contained in this Agreement
shall prohibit or otherwise restrict the ability of any lender (or its securities affiliate) or collateral agent to foreclose upon and
sell, dispose of or otherwise transfer any Lock-Up Shares pledged to secure the obligations of the borrower following an event of default
under a Permitted Loan, provided that no such sale, disposition or other transfer may be made to a Prohibited Transferee. Notwithstanding
the foregoing or anything to the contrary herein, in the event that any lender or other creditor with respect to a Permitted Loan (including
any agent or trustee on their behalf) or any Affiliate of the foregoing exercises any rights or remedies in respect of the Lock-Up Shares
or any other collateral for any Permitted Loan or Transfers or causes the Transfer of any Lock-Up Shares, no lender, creditor, agent,
trustee or transferee or Affiliate of any of the foregoing (including any subsequent transferee of any of the foregoing but excluding,
for the avoidance of doubt, the CD&R Shareholder Parties) shall be entitled to any rights under this Agreement, including under ARTICLE
III (except under this Section 3.3(d)) or any of the board designation rights set forth in the Certificate of Designations
(it being understood that such lender shall continue to have the economic rights associated with the ownership of the Preferred Stock
as set forth in the Certificate of Designations (including the right to dividends and priority returns in the event of a liquidation)).
In connection with any foreclosure of the Lock-Up Shares, the applicable lender, creditor, agent, trustee or transferee shall execute
and deliver to the Company a written agreement pursuant to which it agrees to be bound by this Agreement on terms reasonably acceptable
to the Company. Subject to the terms set forth in this and the immediately succeeding sentence, on or after the date hereof, if requested
by a CD&R Shareholder Party, at the sole cost and expense of the CD&R Shareholder Parties, the Company will use reasonable best
efforts to provide such cooperation and assistance as may be reasonably requested in connection with such CD&R Shareholder Party obtaining
any Permitted Loan, provided that any cooperation and assistance as the CD&R Shareholder may reasonably request will not unreasonably
disrupt the operation of the Company’s business, which cooperation may include entering into such customary agreements (including
an issuer agreement) in forms reasonably acceptable to the Company, and using commercially reasonable efforts to cause any transfer agent
to take such actions and enter into such agreements, as are reasonably requested by a CD&R Shareholder Party. In connection with any
cooperation or assistance contemplated pursuant to the foregoing sentence, neither the Company nor any of its Subsidiaries shall (A) be
required to pay any fees, expenses or other amounts in connection with obtaining any Permitted Loan, (B) be required to enter into, or
cause any other person to enter into, any agreement or instrument unless it is on terms reasonably acceptable to the Company or (C) have
any liability or obligation under any Permitted Loan or any related document or any other agreement or document in connection with any
Permitted Loan (except for this Agreement and any agreement entered into by the Company or any such Subsidiary in accordance with this
Section 3.3). In addition, nothing herein will require the Company or its Subsidiaries to provide (or be deemed to require the
Company to prepare) any pro forma financial statements, projections or other prospective or non-public information in connection with
any Permitted Loan.
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(e) Notwithstanding
anything in this Agreement or elsewhere to the contrary, no sale by any CD&R Shareholder Party (other than any CD&R Designee)
of the Preferred Stock or any shares of Common Stock issuable or issued upon conversion of any of the Preferred Stock or purchase by any
CD&R Shareholder Party of any Common Stock of the Company (either directly or indirectly through another Person) shall be subject
to any policies, procedures or limitations (other than any applicable federal securities laws and any other applicable laws) otherwise
applicable to the CD&R Designees with respect to trading in the Company’s securities and the Company acknowledges and agrees
that such policies, procedures or limitations applicable to the CD&R Designees shall not be violated by any such transfer or purchase,
other than any applicable federal securities laws and any other applicable laws.
(f) The
Company shall, at each Shareholder’s and CD&R II’s sole cost and expense, provide such reasonable cooperation as reasonably
requested by such Shareholder and CD&R II and their respective Affiliates in connection with any transfer not prohibited by this Section
3.3.
Section 3.4. Board
Representation. The Company and CD&R Shareholder acknowledge and agree that the provisions of Section 12 of the Certificate
of Designations shall survive the repurchase, redemption, conversion and cancellation of the Preferred Stock and any termination or cancellation
of the Certificate of Designations, and each of the Company and the CD&R Shareholder shall continue to comply with such provisions
as if fully set forth at length herein following any such repurchase, redemption, conversion, cancellation or termination.
Section 3.5. Preemptive
Rights.
(a) From
the date hereof until such time as the CD&R Shareholder Parties cease to Beneficially Own at least twenty five percent (25%) of the
Exchanged Shares received by the CD&R Shareholder pursuant to the Exchange Agreement (adjusted for subdivisions, stock-splits, combinations,
recapitalizations or similar events; and provided that any shares of Common Stock issued upon conversion of shares of Preferred Stock
shall be treated as that number of shares of Preferred Stock from which such shares of Common Stock were converted), if the Company makes
any public or non-public offering of any Equity Securities or any securities to one or more Persons (other than a CD&R Shareholder
Party) that are convertible or exchangeable into (or exercisable for) Equity Securities, including, for the purposes of this Section 3.5,
warrants, options or other such rights to purchase such Equity Securities (any such security, a “New Security”) (other
than (1) pursuant to any employee or director benefit plan or the granting or exercise of employee stock options or RSUs or PRSUs or other
equity incentives pursuant to the Company Equity Plans (or any successor or additional equity incentive plans of the Company for the benefit
of employees, directors or other service providers of the Company) or employment or consulting or other service provider arrangements
with the Company or any of its Subsidiaries, (2) issuances made as consideration for any acquisition (by sale, merger in which the Company
is the surviving corporation, or otherwise) by the Company or any Subsidiary thereof of equity in, or assets of, another Person, business
unit, division or business, (3) issuances of any securities issued as a result of a stock split, stock dividend, reclassification or reorganization
or similar event, (4) issuances of Equity Securities issued upon conversion or exchange of, or as a dividend on, shares of Preferred Stock
or other Equity Securities then outstanding and that were issued in compliance with the terms of this Agreement, and (5) Equity Securities
issued to (i) lenders in connection with bona fide debt financings, or (ii) to joint venture or strategic partners in exchange for contribution
of assets (other than cash, cash equivalents or marketable securities) or services (in each case, other than a relationship focused on
the raising of equity capital) approved by the Board of Directors) (such securities contemplated for issuance pursuant to clauses (1)
through (5) of this proviso, “Exempted Securities”), the CD&R Shareholder and each CD&R Shareholder Party to
whom the CD&R Shareholder later transfers any shares of Preferred Stock acquired by the CD&R Shareholder upon the consummation
of the transactions contemplated by the Exchange Agreement (or any shares of Common Stock issued upon conversion of such shares of Preferred
Stock) shall be afforded the opportunity to acquire from the Company such CD&R Shareholder Party’s Preemptive Rights Portion
of such New Securities for the same price as that offered to the other purchasers of such Equity Securities or other securities (except,
in the case of any Equity Securities otherwise subject to a public offering, the purchase price shall be the gross price of such Equity
Securities and shall not be net of any underwriters’ discount, commission or similar fee); provided, that the CD&R Shareholder
Parties shall not be entitled to acquire the portion of any New Securities pursuant to this Section 3.5 to the extent the
portion of the issuance of such New Securities to the CD&R Shareholder Parties would require approval of the stockholders of the Company
pursuant to the rules and listing standards of the NYSE (or another Acceptable Exchange, as applicable), in which case the Company may,
with respect to the portion of such New Securities so subject to approval of stockholders of the Company, consummate the proposed issuance
of New Securities to other Persons without compliance with this Section 3.5(a) but subject to compliance by the Company with
Section 3.5(f) below.
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(b) Subject
to the foregoing proviso in Section 3.5(a), the amount of New Securities that each CD&R Shareholder Party shall be entitled
to purchase in the aggregate shall be determined by multiplying (1) the total number of such offered shares of New Securities by (2) a
fraction, the numerator of which is the number of shares of As-Converted Common Stock held by such CD&R Shareholder Party, as of the
date of the Preemptive Rights Notice (or as of a date as close as reasonably practicable to such date), and the denominator of which is
the number of shares of As-Converted Common Stock outstanding as of the date of the Preemptive Rights Notice (or as of a date as close
as reasonably practicable to such date) (the “Preemptive Rights Portion”).
(c) If
the Company proposes to offer New Securities that are subject to the preemptive rights of the CD&R Shareholder as set forth in this
Section 3.5, it shall give the CD&R Shareholder Parties written notice (the “Preemptive Rights Notice”) of its
intention, describing the anticipated price (or range of anticipated prices), anticipated amount of New Securities and other anticipated
material terms and timing upon which the Company proposes to offer the same (including, in the case of a registered public offering and
to the extent possible, a copy of the prospectus included in the registration statement filed with respect to such offering) at least
five (5) business days prior to such issuance (or, in the case of a registered public offering, at least five (5) business days prior
to the commencement of such registered public offering) (provided that, to the extent the terms of such offering cannot reasonably be
provided five (5) business days prior to such issuance, notice of such terms may be given as promptly as reasonably practicable but in
any event prior to such issuance) and the Company shall provide reasonable detail to the CD&R Shareholder if it determines that the
proviso to Section 3.5(a) limits in whole or in part the number of New Securities that the CD&R Shareholder Parties may acquire.
The Company may provide such notice to the CD&R Shareholder on a confidential basis prior to public disclosure of such offering. The
CD&R Shareholder may notify the Company in writing at any time on or prior to the earlier of (i) three (3) business days following
the delivery of the Preemptive Rights Notice, and (ii) the second (2nd) business day immediately preceding the date of such
issuance (or, if notice of all such terms has not been given earlier than the second (2nd) business day immediately preceding
the date of such issuance, at any time prior to such issuance) whether any of the CD&R Shareholder Parties will exercise such preemptive
rights and as to the amount of New Securities the CD&R Shareholder Parties desire to purchase, up to the maximum amount calculated
pursuant to Section 3.5(a). Such notice to the Company shall constitute a binding commitment by the CD&R Shareholder Parties
to purchase the amount of New Securities so specified at the price and other terms set forth in the Company’s notice to it. Subject
to the Company’s timely delivery of the Preemptive Rights Notice, the failure of the CD&R Shareholder Parties (or any of them)
to respond by the time a response is required pursuant to this Section 3.5(c) shall be deemed to be a waiver of the CD&R Shareholder
Parties’ purchase rights under this Section 3.5 only with respect to the offering described in the applicable Preemptive
Rights Notice.
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(d) Each
CD&R Shareholder Party shall purchase the New Securities that it has elected to purchase under this Section 3.5 concurrently
with the related issuance of such New Securities by the Company (subject to the receipt of any required approvals from any Governmental
Entity to consummate such purchase by such CD&R Shareholder Party); provided, that if such related issuance is prior to the
fifteenth (15th) business day following the date on which such CD&R Shareholder Party has notified the Company that it has elected
to purchase New Securities pursuant to this Section 3.5, then each CD&R Shareholder Party shall purchase such New Securities
within fifteen (15) business days following the date of the related issuance. If the proposed issuance by the Company of securities which
gave rise to the exercise by the CD&R Shareholder Parties of its preemptive rights pursuant to this Section 3.5 shall be terminated
or abandoned by the Company without the issuance of any securities, then the purchase rights of the CD&R Shareholder Parties pursuant
to this Section 3.5 shall also terminate as to such proposed issuance by the Company (but not any subsequent or future issuance),
and any funds in respect thereof paid to the Company by the CD&R Shareholder Parties in respect thereof shall be refunded in full.
(e) In
the case of the offering of securities for consideration in whole or in part other than cash, including securities acquired in exchange
therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value
thereof as reasonably determined by the Company Board; provided, however, that such fair value as determined by the Company
Board shall not exceed the aggregate market price of the securities being offered as of the date the Company Board authorizes the offering
of such securities.
(f) In
the event that the CD&R Shareholder Parties are not entitled to acquire any New Securities pursuant to this Section 3.5 because
such issuance would require the Company to obtain stockholder approval in respect of the issuance of such New Securities to the CD&R
Shareholder Parties pursuant to the rules and listing standards of NYSE (or another Acceptable Exchange, as applicable), the Company,
including in the case of clause (i) of this Section 3.5(f) acting through the Company Board, shall, upon the CD&R Shareholder’s
reasonable request delivered to the Company in writing within five (5) business days following its receipt of the written notice of such
issuance to the CD&R Shareholder pursuant to Section 3.5(c), at the CD&R Shareholder’s election, (i) waive the restrictions
set forth in Section 3.6 solely to the extent necessary to permit any CD&R Shareholder Party to acquire, prior to the date
that is six months following such issuance, such number of New Securities that were not issued by application of the proviso to Section
3.5(a); (ii) consider and discuss in good faith modifications proposed by the CD&R Shareholder Parties to the terms and conditions
of such portion of the New Securities which would otherwise be issued to the CD&R Shareholder Parties such that the Company would
not be required to obtain stockholder approval in respect of the issuance of such New Securities as so modified; and/or (iii) solely to
the extent that stockholder approval is required in connection with the issuance of Equity Securities (including New Securities) to Persons
other than the CD&R Shareholder Parties, use reasonable best efforts to seek stockholder approval in respect of the issuance of any
New Securities to the CD&R Shareholder Parties.
14
(g) The
election by any CD&R Shareholder Party to not exercise its subscription rights under this Section 3.5 in any one instance shall
not affect its right as to any subsequent proposed issuance.
(h) The
Company and the CD&R Shareholder Parties shall cooperate in good faith to facilitate the exercise of the CD&R Shareholder Parties’
rights pursuant to this Section 3.5, including using reasonable best efforts to secure any required approvals or consents (other
than the approval of the stockholders of the Company unless otherwise expressly specified in Section 3.5(f)).
Section 3.6. Standstill.
Each of CD&R Fund, the CD&R Shareholder Parties and the Other Shareholder agree that during the Standstill Period, without the
prior written approval of the Company Board, such CD&R Fund, the CD&R Shareholder Parties and the Other Shareholder shall not,
directly or indirectly, and shall cause their respective Affiliates not to (either individually, or in concert with any other Person,
or as a “group” (as such term is used in Section 13(d)(3) of the Exchange Act)):
(1) acquire,
offer or seek to acquire, agree to acquire or make a proposal to acquire (except in nonpublic communications that would not reasonably
be expected to require the Company, the CD&R Shareholder Parties, the Other Shareholder, any of their respective Affiliates or any
other Person to make any public announcement or other disclosure with respect thereto, including pursuant to Section 13 of the Exchange
Act), by purchase or otherwise, of record or through Beneficial Ownership, directly or indirectly, any Equity Securities, loans or debt
securities of the Company or any of its Subsidiaries or direct or indirect rights to acquire any Equity Securities, loans or debt securities
of the Company or any of its Subsidiaries, any securities or rights convertible into or exchangeable for any such Equity Securities, loans
or debt securities or any options or other derivative securities or contracts or instruments in any way related to the price of Equity
Securities, loans or debt securities of the Company or any of its Subsidiaries or substantially all of the assets or property of the Company
and its Subsidiaries (but in any case excluding any issuance by the Company or any Subsidiary thereof of any of the foregoing (A) to any
CD&R Designee as compensation for their membership on the Company Board (including, for the avoidance of doubt, any such compensation
which a CD&R Designee has assigned to any CD&R Shareholder Party) or (B) as a result of a dividend payment on, or the conversion
of, the Preferred Stock pursuant to the provisions of the Certificate of Designations); provided, that notwithstanding the foregoing or
any other limitation imposed by this Agreement, any CD&R Fund, CD&R Shareholder Parties and their respective Affiliates shall
be permitted to acquire shares of Common Stock in the open market or otherwise so long as, after giving effect to the acquisition thereof,
the CD&R Fund, CD&R Shareholder Parties and their respective Affiliates (excluding, for the avoidance of doubt, the Other Shareholder),
in the aggregate, would not Beneficially Own or have economic exposure to greater than 19.9% of the then outstanding Common Stock assuming
the conversion into Common Stock of all shares of Preferred Stock held by the CD&R Fund, the CD&R Shareholder Parties and their
respective Affiliates; provided further that, for the avoidance of doubt, the foregoing limitation shall in no manner limit the Company’s
obligation to pay dividends or any other premiums (including redemption premiums) on the Preferred Stock in accordance with the provisions
set forth in the Certificate of Designation (and, for purposes of the foregoing calculation, the CD&R Fund, CD&R Shareholder Parties
and their respective Affiliates’ Beneficial Ownership and economic exposure shall not be impacted by any such premiums or dividends
or any compensation assigned from the CD&R Designees described in the foregoing clause (A) to the extent in excess of 19.9%);
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(2) other
than solely to effectuate the nomination and election of the CD&R Designees pursuant to Section 12 of the Certificate of Designations,
make or in any way participate or engage in any “solicitation” of “proxies” or consents (whether or not relating
to the election or removal of directors), as such terms are used in the rules of the SEC, to vote, or knowingly seek to advise or influence
any Person with respect to voting of, any voting securities of the Company or any of its Subsidiaries, or call or seek to call a meeting
of the Company’s stockholders (or action by written consent in lieu thereof) or initiate or make any stockholder proposal for action
by the Company’s stockholders, other than with respect to the designation of any CD&R Designees pursuant to this Agreement or
the solicitation of “proxies” or consents with respect to the election of Persons nominated to be directors by the Company
Board, seek election to or to place a representative on the Company Board or seek the removal of any director from the Company Board;
(3) make
any announcement with respect to, or offer, propose or indicate an interest in (in each case with or without conditions) (except in nonpublic
communications that would not reasonably be expected to require the Company, the CD&R Shareholder Parties, the Other Shareholder,
any of their respective Affiliates or any other Person to make any public announcement or other disclosure with respect thereto, including
pursuant to Section 13 of the Exchange Act), any merger, consolidation, business combination, tender or exchange offer, recapitalization,
reorganization or purchase of all or substantially all of the assets of the Company or its Subsidiaries, or any other extraordinary transaction
involving the Company or any Subsidiary of the Company or any of their respective securities or assets, or enter into any negotiations,
arrangements, understandings or agreements (whether written or oral) with any other Person (other than advisors of the CD&R Fund,
the CD&R Shareholder Parties and their respective Affiliates, in such advisors’ capacity as such) regarding any of the foregoing;
(4) effect
or seek to effect (including by entering into negotiations, agreements or understandings with any third person), offer or propose (except
in nonpublic communications that would not reasonably be expected to require the Company, the CD&R Shareholder Parties, the Other
Shareholder, any of their respective Affiliates or any other Person to make any public announcement or other disclosure with respect thereto,
including pursuant to Section 13 of the Exchange Act) to effect, or cause or participate in, or in any way assist or facilitate (including
through the provision of financing) any other Person to effect or seek, offer or propose to effect or participate in a merger, consolidation,
division, acquisition or exchange of any Equity Securities of the Company or any Subsidiary thereof or any material portion of the assets
thereof, change of control transaction, recapitalization, restructuring, liquidation or similar transaction involving the Company or any
of its Subsidiaries;
16
(5) otherwise
act, alone or in concert with others, to seek to control or influence, in any manner, management or the Company Board, the Company or
any of its Subsidiaries;
(6) make
any public proposal or public statement of inquiry or publicly disclose any intention, plan or arrangement inconsistent with any of the
foregoing;
(7) other
than in respect of purchases of Common Stock not prohibited by clause (1), take any action that would reasonably be expected to require
the Company to make a public announcement regarding the possibility of a transaction or any of the events described in this Section
3.6;
(8) enter
into any negotiations, arrangements or understandings with any third party (including security holders of the Company, but excluding,
for the avoidance of doubt, any CD&R Shareholder Parties) with respect to any of the foregoing, including forming, joining or in any
way participating in a “group” (as such term is used in Section 13(d)(3) of the Exchange Act) with any third party with
respect to any securities of the Company or its Subsidiaries or otherwise in connection with any of the foregoing;
(9) request
the Company or any of its representatives, directly or indirectly, to amend or waive any provision of this Section 3.6, provided
that this clause shall not prohibit the CD&R Shareholder Parties from making a confidential request to the Company seeking an amendment
or waiver of the provisions of this Section 3.6, which the Company may accept or reject in its sole discretion, so long as any
such request is made in a manner that does not require public disclosure thereof by any Person;
(10) contest
the validity of this Section 3.6 or make, initiate, take or participate in any demand or action (legal or otherwise) to alter or
terminate any provision of this Section 3.6;
(11) deposit
any Equity Securities owned thereby (whether Beneficial Ownership or record ownership) in any voting trust or subject any such Equity
Securities to any arrangement or agreement (other than customary brokerage accounts, margin accounts, prime brokerage accounts and the
like) with respect to the voting of any such Equity Securities, other than any such voting trust, arrangement or agreement solely among
CD&R Fund, the CD&R Shareholder Parties and their respective Affiliates and granting proxies in solicitations approved by the
Company Board;
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(12) engage
in any short sale or any purchase, sale, or grant of any option, warrant, convertible security, share appreciation right, or other similar
right (including any put or call option or “swap” transaction) with respect to any security (other than any index fund, exchange
traded fund, benchmark fund or broad basket of securities) that derives any significant part of its value from a decline in the market
price or value of any of the securities or loans of the Company or its Subsidiaries; or
(13) advise,
assist, knowingly encourage or direct any Person to do, or to advise, assist, encourage or direct any other person to do, any of the foregoing;
provided, however,
that nothing in this Section 3.6 will limit (1) the CD&R Shareholder Parties’ ability to submit on a confidential basis
any communication or proposal to the Company Board that would not reasonably be expected to require the Company, the CD&R Shareholder
Parties, any of their respective Affiliates or any other Person to make any public announcement or other disclosure with respect thereto,
including pursuant to Section 13 of the Exchange Act, (2) the CD&R Shareholder Parties’ ability to vote (subject to the
terms of this Agreement and other Transaction Documents) or Transfer (subject to Section 3.3 and the other Transaction Documents)
their shares of Preferred Stock or Common Stock, or otherwise exercise rights under their shares of Preferred Stock pursuant to the Certificate
of Designations, (3) the preemptive rights of any CD&R Shareholder Party pursuant to Section 3.5, or (4) the ability of any
CD&R Designee to act in his or her capacity as a member of the Company Board, including, but not limited to, his or her ability to
vote or otherwise exercise his or her fiduciary duties.
Section 3.7. Legend.
(a) Each
Shareholder and CD&R II agree that any certificates or other instruments representing the Preferred Stock or Common Stock subject
to this Agreement will bear a legend substantially to the following effect:
THE SECURITIES REPRESENTED
BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.
THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND OTHER RESTRICTIONS SET FORTH IN A SHAREHOLDERS AGREEMENT, DATED AS OF AUGUST 3, 2026,
COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE ISSUER.
(b) Upon
request of any Shareholder or CD&R II, upon receipt by the Company of an opinion of counsel reasonably satisfactory to the Company
to the effect that such legend is no longer required under the Securities Act and applicable state laws, the Company shall promptly cause
the first paragraph of the legend to be removed from any certificate for any Preferred Stock or Common Stock to be Transferred in accordance
with the terms of this Agreement and the second paragraph of the legend shall be removed upon the expiration of such transfer and other
restrictions set forth in this Agreement (and, for the avoidance of doubt, immediately prior to any termination of this Agreement). Each
Shareholder acknowledges that the Preferred Stock and Common Stock issuable upon conversion of the Preferred Stock or, if applicable,
issued pursuant to this Agreement have not been registered under the Securities Act or under any state securities laws and agrees that
it will not sell or otherwise dispose of any of the Preferred Stock or Common Stock issuable upon conversion of the Preferred Stock or,
if applicable, issued pursuant to this Agreement, except in compliance with the registration requirements or exemption provisions of the
Securities Act and any other applicable securities laws.
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Section 3.8. Section 16
Matters. If the Company becomes a party to a consolidation, merger or other similar transaction, pays dividends in kind on the Preferred
Stock or if the Company proposes to take or omit to take any other action under Section 3.5 (including granting to the CD&R
Shareholder or any CD&R Shareholder Party the right to participate in any issuance of New Securities) or if there is any other event
or circumstance that may result in the CD&R Group and/or any CD&R Person being deemed to have made a disposition or acquisition
of equity securities of the Company or derivatives thereof for purposes of Section 16 of the Exchange Act to or from the Company
(including the purchase by the CD&R Shareholder of any New Securities under Section 3.5), and if any CD&R Person is serving
on the Company Board at such time or has served on the Company Board during the preceding six months, then upon request of the CD&R
Shareholder or any CD&R Shareholder Party and so long as the taking of any actions contemplated hereby are in compliance with applicable
Law (including the fiduciary duties of the Company Board or applicable committee thereof), including Rule 16b-3 under the Exchange Act,
the Company shall use its reasonable best efforts to cause (i) the Company Board or a committee of the Company Board composed solely
of two or more “non-employee directors” as defined in Rule 16b-3 of the Exchange Act to pre-approve such acquisition or disposition
of equity securities of the Company or derivatives thereof (which transaction, for the avoidance of doubt, must be in compliance with
the terms of this Agreement) for the express (and only) purpose of exempting the CD&R Group’s or any CD&R Person’s
interests (in each case, to the extent such persons may be deemed to be a director or “directors by deputization”) in such
transaction from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 thereunder to the extent applicable and (ii) if the transaction
involves (A) a merger or consolidation to which the Company is a party and the Common Stock is, in whole or in part, converted into or
exchanged for equity securities of a different issuer, (B) a potential acquisition or deemed acquisition, or disposition or deemed disposition,
by the CD&R Group or any CD&R Person of equity securities of such other issuer or derivatives thereof and (C) an Affiliate or
other designee of the CD&R Shareholder or its Affiliates will serve on the board of directors (or its equivalent) of such other issuer,
then the Company shall use reasonable best efforts to cause such other issuer to pre-approve any such acquisitions of equity securities
or derivatives thereof for the express purpose of exempting the interests of the CD&R Group’s and any CD&R Person’s
(in each case, to the extent such persons may be deemed to be a director or “directors by deputization” of such other issuer)
in such transactions from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 thereunder to the extent applicable.
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Section 3.9. D&O
Indemnification / Insurance Priority Matters. Each CD&R Designee who serves as a member of the Company Board (including a CD&R
Director) (collectively, the “Section 3.9 Persons”) shall be eligible to enter into an indemnification agreement
consistent with then-current form entered into by other directors of the Company. The Company acknowledges and agrees that any Section 3.9
Person who is a partner, member, employee, advisor or consultant of any member of the CD&R Group may have certain rights to indemnification,
advancement of expenses and/or insurance provided by the applicable member of the CD&R Group (collectively, the “CD&R
Indemnitors”). The Company acknowledges and agrees that the Company shall be the indemnitor of first resort with respect to
any indemnification, advancement of expenses and/or insurance provided in the Certificate of Incorporation, Bylaws and/or indemnification
agreement to any Section 3.9 Person, in his or her capacity as a director of the Company or any of its Subsidiaries, as applicable
(such that the Company’s obligations to such indemnitees in their capacities as directors are primary and any obligation of the
CD&R Indemnitors to advance expenses or to provide indemnification or insurance for the same expenses or liabilities incurred by
such indemnitees are secondary). Such indemnitees shall, in their capacities as directors, be entitled to all the rights to indemnification,
advancement of expenses and entitled to insurance to the extent provided under (a) the Certificate of Incorporation and/or Bylaws of
the Company as in effect from time to time and/or (b) such other agreement, if any, between the Company and such indemnitees, without
regard to any rights such indemnitees may have against the CD&R Indemnitors. No advancement or payment by the CD&R Indemnitors
on behalf of such indemnitees with respect to any claim for which such indemnitees have sought indemnification, advancement of expenses
or insurance from the Company in their capacities as directors shall affect the foregoing and the CD&R Indemnitors shall have a right
of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such indemnitees
against the Company.
Section 3.10. NYSE
Listing. At any time that any Preferred Stock is outstanding, the Company (x) shall from time to time take all lawful action
within its control to cause the authorized capital stock of the Company to include a sufficient number of authorized but unissued shares
of Common Stock to satisfy the conversion requirements of all shares of the Preferred Stock then outstanding and (y) shall not effect
any voluntary deregistration under the Exchange Act or any voluntary delisting of the Common Stock from NYSE except as part of a Change
of Control (as defined in the Certificate of Designations) or if approved in writing by the CD&R Shareholder and CD&R II.
Section 3.11. Anti-Takeover
Provisions. From and after the date hereof, the Company shall use reasonable best efforts to, and shall cause each of its Subsidiaries
to (a) use reasonable best efforts to take all reasonable action necessary within their control (other than waiving any of the Company’s
rights under this Agreement) so that no “fair price,” “moratorium,” “control share acquisition” or
other form of antitakeover statute or regulation or any anti-takeover or similar provision in the Certificate of Incorporation, bylaws
or similar organizational documents of the Company or any Subsidiary thereof is applicable to the CD&R Shareholder Parties Beneficially
Owning the Preferred Stock, the Common Stock to be issued upon conversion of the Preferred Stock, acquiring additional Preferred Stock
and Common Stock or any New Securities, and (b) not adopt or repeal, as the case may be, any shareholder rights plan, “poison pill”
or similar measure that is applicable to any of the foregoing or which would prevent any of the CD&R Shareholder Parties from exercising
any of the rights contemplated hereby or by the Certificate of Designations or from acquiring Preferred Stock, Common Stock or New Securities
without violation of this Agreement. Without limiting the generality of the foregoing and without limiting or waiving the approval already
obtained from the Company Board in connection with the execution and delivery of this Agreement, from time to time, upon the request
of any of the CD&R Shareholder Parties, the Company shall take such further actions as reasonably requested by any of the CD&R
Shareholder Parties such that the Company Board approves in advance any transaction permitted pursuant to the terms of this Agreement
that would result in one or more of the CD&R Shareholder Parties becoming an “interested stockholder” within the meaning
Section 203 of the DGCL.
20
ARTICLE
IV
Miscellaneous
Section 4.1. Amendment;
Waiver. This Agreement may be amended, modified and supplemented in any and all respects only by an instrument in writing signed
by the CD&R Shareholder, CD&R II and the Company. Any agreement on the part of a party to any extension or waiver with respect
to this Agreement shall be valid only if set forth in an instrument in writing signed by such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.
Section 4.2. Counterparts;
Electronic Transmission. This Agreement may be executed in one or more counterparts (including by .pdf,.tif,.gif, .jpg or similar
attachment to email (any such delivery, an “Electronic Delivery”)), all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other
parties. Delivery of an executed counterpart of a signature page of this Agreement by Electronic Delivery shall be deemed to be an original
and effective as delivery of a manually executed counterpart of this Agreement. No party may raise the use of an Electronic Delivery
to deliver a signature, or the fact that any signature or agreement or instrument was transmitted or communicated through the use of
an Electronic Delivery, as a defense to the formation of a contract, and each party forever waives any such defense, except to the extent
such defense relates to lack of authenticity.
Section 4.3. Governing
Law. This Agreement, and all claims, controversies or causes of action arising in connection herewith (whether sounding in tort,
statute or contract), shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws thereof.
Section 4.4. WAIVER
OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT (INCLUDING THE PERFORMANCE THEREOF) OR ANY OF THE OTHER
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF ANY PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT MAKES THIS WAIVER VOLUNTARILY AND THAT THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS Section 4.4.
21
Section 4.5. Notices.
All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be delivered by hand,
or sent by email, or sent by reputable overnight courier service and shall be deemed to have been duly delivered and received hereunder
when given when so delivered by hand, or, if mailed, one business day after mailing by reputable overnight courier service or, if emailed,
on the date of dispatch by the sender thereof (to the extent that no “bounce back” or similar message indicating nondelivery
is promptly received with respect thereto), in each case, to the intended recipient as set forth below (or to such other recipient as
designated in a written notice to the other parties hereto in accordance with this Section 4.5):
(a) If to the CD&R Shareholder and CD&R II:
c/o Clayton, Dubilier & Rice, LLC
375 Park Avenue, 18th Floor
New York, NY 10152
Attention:
Andrew Campelli
Michael Pratt
Email:
ACampelli@cdr-inc.com
mpratt@cdr-inc.com
with a copy to (which copy alone shall
not constitute notice):
Kirkland & Ellis LLP
333 W Wolf Point Plaza
Chicago, IL 60654
Attention:
Richard J. Campbell, P.C.
Kyle P. Elder, P.C.
Email:
richard.campbell@kirkland.com
kyle.elder@kirkland.com
(b) If to the Other Shareholder
1125 Acorn Trail
Lake Forest, IL 60045
Attention: William Galvin
Email: billgalvin84@gmail.com
(c) If to the Company:
ADI Global Distribution Inc.
275 Broadhollow Rd Suite 400
Melville, NY 11747
Attention: General Counsel
E-mail: jeannine.lane@adiglobal.com
with a copy to (which copy alone shall
not constitute notice):
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
E-mail: rleaf@willkie.com
jfertman@willkie.com
tprakash@willkie.com
Attention: Russell L. Leaf
Jared N. Fertman
Tej Prakash
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Section 4.6. Entire
Agreement. This Agreement and the other Transaction Documents, together with any Exhibit hereto constitutes the entire agreement,
and supersede all prior agreements and understandings, both written and oral, among the parties and their Affiliates, or any of them,
with respect to the subject matter hereof and thereof. For the avoidance of doubt, that certain Investment Agreement, by and between
Resideo, the CD&R Shareholder, CD&R II and the other parties thereto, dated as of April 14, 2024, as amended by that certain
Amendment No. 1 to the Investment Agreement entered into as of June 14, 2024, and that certain Amendment No. 2 to the Investment Agreement
entered into as of the date hereof (as may be further amended, supplemented or modified from time to time in accordance with its terms),
and the Transaction Documents (as defined and referenced therein) shall continue to remain in full force and effect in accordance with
their respective terms.
Section 4.7. Assignment.
Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written consent of each of the Company, the CD&R Shareholder
and CD&R II; provided, however, that the CD&R Shareholder and CD&R II may assign their rights, interests and obligations
under this Agreement, in whole or in part, to one or more of their respective Affiliates in accordance with a Transfer of Exchanged Shares
or Common Stock issued upon the conversion thereof pursuant to Section 3.3. In the event of an assignment contemplated by this
Section 4.7, such assignee shall agree in writing to be bound by the provisions of this Agreement, including the rights, interests
and obligations so assigned; provided, that no such assignment will relieve the CD&R Shareholder and CD&R II of their respective
obligations hereunder prior to the Transfer. Any purported assignment without such consent shall be void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and
assigns.
Section 4.8. Interpretation;
Other Definitions. Wherever required by the context of this Agreement, the singular shall include the plural and vice versa, and
the masculine gender shall include the feminine and neuter genders and vice versa, and, unless specified otherwise, references to any
agreement, document or instrument shall be deemed to refer to such agreement, document or instrument as amended, supplemented or modified
from time to time. All article, section, paragraph or clause references not attributed to a particular document shall be references to
such parts of this Agreement, and all exhibit, annex and schedule references not attributed to a particular document shall be references
to such exhibits, annexes and schedules to this Agreement. In addition, the following terms are ascribed the following meanings:
(1) the term “business day” means any day that is not a Saturday, a Sunday or any other
day on which commercial banks are generally required or authorized by Law to be closed in New York City, New York;
23
(2) the terms “herein,” “hereof” and “hereunder”
and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision;
(3) the words “including,” “includes,” “included”
and “include” are deemed to be followed by the words “without limitation”;
(4) the phrase “to the extent” means the degree to which a matter extends (rather than
“if”);
(5) the word “or” is not exclusive; and
(6) the term “person” has the meaning given to it in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act.
(7) “Acceptable Exchange” shall have the meaning set forth in the Certificate of Designations.
(8) “accredited investor” shall have the meaning set forth in Section 2.3.
(9) “Activist Investor” means, as of any date, any Person that has, directly or indirectly
through its Affiliates, whether individually or as a member of a publicly disclosed “group” (as such term is used in Section 13(d)(3)
of the Exchange Act), within the three-year period immediately preceding such date (i) publicly made, engaged in or been a participant
(as defined in Instruction 3 to Item 4 of Schedule 14A under the Exchange Act) in any “solicitation” of “proxies”
(as such terms are defined in Regulation 14A as promulgated by the SEC), including in connection with a proposed change in control or
other extraordinary or fundamental transaction involving any such company or any of its Subsidiaries, or a public proposal for the election
or replacement of any directors of any such company, unless in each case and for the avoidance of doubt, in support of a proposal approved
by the board of directors of such publicly traded company prior the investor taking such public action, (ii) publicly called, or publicly
sought to call, a meeting of stockholders of any publicly traded company or publicly initiated any stockholder proposal or meeting agenda
item for action by stockholders of any such publicly traded company (including through action by written consent), in each case not approved
by the board of directors (or equivalent) of such company prior to first public disclosure thereof, (iii) commenced a “tender offer”
(as such term is used in Regulation 14D under the Exchange Act) to acquire equity securities of any publicly traded company that was not
approved (at or before the time of commencement) by the board of directors (or equivalent) of such company, or (iv) publicly disclosed
any intention, plan, arrangement or other Contract to do any of the foregoing.
24
(10) “Affiliate” means, with respect to any Person, any Person directly or indirectly controlling,
controlled by or under common control with, such other person; provided, that for purposes of this Agreement (i) portfolio
companies in which any Person or any of its Affiliates has an investment shall not be deemed an Affiliate of such Person (other than for
purposes of Section 2.4, Section 2.6, Section 3.1), (ii) no Company Group Member, and none of the Company’s
other controlled Affiliates, will be deemed to be Affiliates of any Shareholder, or vice versa, (iii) each Subsidiary of
the Company will be deemed an Affiliate of the Company and of each other Subsidiary of the Company, (iv) neither Resideo nor any of its
Subsidiaries will be deemed to be Affiliates of any Company Group Member, or vice versa; and (v) no CD&R Shareholder will be
deemed an Affiliate of Resideo and its Subsidiaries, or vice versa. For purposes of this definition, “control”
(including, with correlative meanings, the terms “controlled by” and “under common control with”)
when used with respect to any Person, means the possession, directly or indirectly, of the power to cause the direction of management
or policies of such person, whether through the ownership of voting securities, by contract or otherwise.
(11) “Agreement” shall have the meaning set forth in the Preamble.
(12) “As-Converted Common Stock” means at the time of determination (i) the issued and outstanding
Common Stock, (ii) shares of Common Stock issuable upon conversion of all issued and outstanding shares of Preferred Stock (including
shares of Preferred Stock issued as dividends thereon pursuant to the Certificate of Designations), and (iii) shares of Common Stock issuable
upon the conversion, exchange or settlement of any other issued and outstanding securities or rights of or issued by the Company but only
to the extent at the time of determination the holder thereof has the right to so convert, exchange or settle such securities or rights.
(13) “Beneficial Ownership” or “Beneficially Own” shall have the meaning
given such term in Rule 13d-3 under the Exchange Act and a Person’s Beneficial Ownership of securities shall be calculated in accordance
with the provisions of such Rule; provided, however, that for purposes of determining any Person’s Beneficial Ownership,
such person shall be deemed to be the Beneficial Owner of any Equity Securities which may be acquired by such person, whether within sixty
(60) days or thereafter, upon the conversion, exchange, redemption or exercise of any warrants, options, rights or other securities issued
by the Company or any Subsidiary thereof or that primarily relate to Equity Securities of the Company.
(14) “Bylaws” shall have the meaning set forth in Section 1.1.
(15) “CD&R” shall mean Clayton, Dubilier & Rice, LLC or a successor thereto.
(16) “CD&R Affiliate” shall mean any of CD&R, any private equity fund managed or
advised by CD&R or any general partner thereof, or any of their respective Affiliates.
(17) “CD&R Designee” has the meaning set forth in the Certificate of Designations.
(18) “CD&R Director” shall mean each CD&R Designee and any other person that is
a managing director, officer, advisor or employee of CD&R or other CD&R management entity or general partner, in each case, that
is serving on the Company Board.
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(19) “CD&R Fund” shall have the meaning set forth in the Preamble.
(20) “CD&R Group” shall mean the CD&R Shareholder together with its Affiliates,
including CD&R Affiliates.
(21) “CD&R Indemnitors” shall have the meaning set forth in Section 3.9.
(22) “CD&R Person” shall mean any CD&R Director.
(23) “CD&R Shareholder” shall have the meaning set forth in the Preamble.
(24) “CD&R Shareholder Parties” means the CD&R Shareholder and any CD&R Affiliate,
including, for the avoidance of doubt, CD&R II.
(25) “Certificate of Designations” shall have the meaning set forth in the Recitals, as
such Certificate of Designations may be amended, modified or restated from time to time.
(26) “Certificate of Incorporation” shall have the meaning set forth in Section 1.1.
(27) “Chosen Courts” shall have the meaning set forth in Section 4.14.
(28) “Code” means the United States Internal Revenue Code of 1986, as amended.
(29) “Common Stock” means the shares of common stock, par value $0.001 per share, of the
Company.
(30) “Company” shall have the meaning set forth in the Preamble.
(31) “Company Board” shall have the meaning set forth in Section 1.2(a).
(32) “Company Equity Plans” means the (i) 2026 Stock Incentive Plan of the Company (together
with any sub-plan thereto), (ii) ADI Employee Stock Purchase Plan, and (iii) ADI UK Sharebuilder Plan, each, as amended from time to time
in the ordinary course of business, and the forms of award agreements thereunder.
(33) “Company Group” means the Company and its Subsidiaries from time to time.
(34) “Company Group Member” means any corporation, partnership, joint venture, limited liability
company, unincorporated association, trust or other entity within the Company Group.
(35) “Contract” means any written or oral agreement, arrangement, commitment or other instrument
or obligation.
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(36) “DGCL” means the General Corporation Law of the State of Delaware, as amended.
(37) “Electronic Delivery” shall have the meaning set forth in Section 4.2.
(38) “Equity Securities” means the equity securities of the Company, including the Common
Stock, Preferred Stock and any other securities, options, warrants, rights or instruments that are convertible into or exercisable or
exchangeable for shares of Common Stock or that derive their value principally from the appreciation or depreciation in the value of the
Common Stock.
(39) “Exchange” shall have the meaning set forth in the Exchange Agreement.
(40) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(41) “Exchange Agreement” shall have the meaning set forth in the Recitals.
(42) “Exchanged Shares” shall have the meaning set forth in the Recitals.
(43) “Exchange Tax Treatment” has the meaning set forth in Section 3.2(e).
(44) “Existing Debt Agreements” means the Debt Financing Documents as defined in the Certificate
of Designations.
(45) “Existing Permitted Loan” means a loan made to
the CD&R Shareholder Parties that is outstanding as of March 1, 2026 that satisfies the requirements of Section 3.3(d) of this Agreement
as it was in effect as of March 1, 2026, including that such loan is not a Margin Loan.
(46) “Form 10” means the registration statement on Form 10, dated as of July1, 2026, filed
by the Company with the SEC on July 1, 2026.
(47) “Governmental Entity” means any transnational, multinational, domestic or foreign federal,
state, provincial or local governmental, regulatory or administrative authority, instrumentality, department, court, arbitrator, agency,
commission or official, including any political subdivision thereof, any state-owned or state-controlled enterprise, or any non-governmental
self-regulatory agency, commission or authority.
(48) “Holder” shall have the meaning set forth in the Certificate of Designations.
(49) “Intended Tax treatment” shall have the meaning set forth in Section 3.2(a).
(50) “IRS” means the Internal Revenue Service of the United States of America.
(51) “Law” or “Laws” mean any statute, law, ordinance, treaty, rule,
code, regulation or other binding directive issued, promulgated or enforced by any Governmental Entity.
27
(52) “lenders” shall have the meaning set forth in Section 3.3(d).
(53) “Lien” means any mortgage, deed of trust, pledge, option, power of sale, retention
of title, right of pre-emption, right of first refusal, hypothecation, security interest, encumbrance, claim, lien or charge of any kind,
or an agreement, arrangement or obligation to create any of the foregoing.
(54) “Margin Loan” means any loan where the borrowing ability under the loan, rates, acceleration
terms or other rights or terms are tied to the trading price of stock and the primary credit support for such loan is such stock and the
proceeds therefrom.
(55) “New Security” shall have the meaning set forth in Section 3.5(a).
(56) “Non-Recourse Party” shall have the meaning set forth in Section 4.18.
(57) “NYSE” means the New York Stock Exchange (or its successor).
(58) “Other Shareholder” shall have the meaning set forth in the Preamble.
(59) “Permitted Loan” shall have the meaning set forth in Section 3.3(d).
(60) “Person” means an individual, a corporation, a general or limited partnership, a limited
liability company, an association, a trust, other legal entity or organization or Governmental Entity.
(61) “Preemptive Rights Notice” shall have the meaning set forth in Section 3.5(c).
(62) “Preemptive Rights Portion” shall have the meaning set forth in Section 3.5(a).
(63) “Preferred Stock” shall have the meaning set forth in the Recitals.
(64) “Proceeding” shall have the meaning set forth in Section 4.14.
(65) “Prohibited Party” means, at any time, (a) any Person (other than the Company and its
Subsidiaries) that, directly or indirectly (including through its Affiliates), is primarily engaged (i) in the distribution of (A) low-voltage
security and life safety products, audio visual, data com, wire and cable, and smart home solutions, or (B) comfort, energy management,
water valve or life safety or security products, services or solutions, or (ii) in the design,
manufacture or development of home control solutions or related software, in each case for the foregoing
clauses (i) and (ii) for commercial and residential markets, provided, that, for purposes of this definition, a Person will be
deemed to be primarily engaged in the relevant business if (x) either it derives more than ten percent (10%) of its consolidated revenue
or earnings before interest, taxes, depreciation and amortization (“EBITDA”) from such business in the most recently
completed fiscal year thereof immediately prior to the relevant date of determination, or (y) the consolidated revenue or EBITDA derived
from such business is ten percent (10%) or more of the consolidated revenue or EBITDA of the Company (excluding consolidated revenue or
EBITDA of the Company in respect of the Resideo Retained Business (as defined in the Separation Agreement) as determined in good faith
by the Company), in each case for the mostly recently completed fiscal year of such Person (or business) or the Company, as applicable;
provided that, for purposes of determining primary engagement pursuant to this clause (a), the businesses and engagements of any Person
shall be considered together with all businesses and engagements of such Person’s direct or indirect Subsidiaries and parent entities
and (b) any controlled Affiliate of any such Person in the preceding clause (a).
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(66) “Prohibited Transferee” means (a) any Prohibited Party, (b) any Person or “group”
(as such term is used in Section 13(d)(3) of the Exchange Act) who, individually or together with their Affiliates, either before
or after giving effect to the Transfer, Beneficially Owns (or would Beneficially Own) five percent (5%) or more of any class or series
(or the voting power of any class or series) of equity securities of the Company or (c) any Activist Investor; provided, that a “Prohibited
Transferee” shall not include any Prohibited Party, Activist Investor or other Person or group engaged in a merger, tender offer
or exchange offer or other business combination, acquisition of assets or similar transaction involving, or other acquisition of control
of, the Company or any of its Subsidiaries that, in each case, is approved by the Company Board.
(67) “Qualified Tax Advisor” means any nationally recognized Law or accounting firm in the
United States that is reasonably acceptable to the Company.
(68) “Registration Rights Agreement” means that certain Registration Rights Agreement, dated
as of the date hereof, by and between the Company and the CD&R Shareholder in the form attached hereto as Exhibit B.
(69) “Remain-Co” shall have the meaning set forth in Section 4.17.
(70) “Remain-Co Preferred Stock” shall have the meaning set forth in Section 4.17.
(71) “Resideo” shall have the meaning set forth in the Recitals.
(72) “Resideo Common Stock” means the shares of common stock, par value $0.001 per share,
of Resideo.
(73) “Resideo Preferred Stock” means the shares of preferred stock, par value $0.001 per
share, of Resideo, designated as Series A Cumulative Convertible Participating Preferred Stock.
(74) “SEC” means the U.S. Securities and Exchange Commission.
(75) “Section 3.9 Persons” shall have the meaning set forth in Section 3.9.
(76) “Securities Act” means the Securities Act of 1933, as amended.
(77) “Separation Agreement” shall have the meaning set forth in the Recitals.
29
(78) “Shareholders” shall have the meaning set forth in the Preamble.
(79) “Spin-Co” shall have the meaning set forth in Section 4.17.
(80) “Spin-Co Preferred Stock” shall have the meaning set forth in Section 4.17.
(81) “Spin-Off” shall have the meaning set forth in the Recitals.
(82) “Standstill Period” means the longer of (x) the period beginning on the date hereof
and ending on June 14, 2027, and (y) the period beginning on the date hereof and ending on the date that is twelve (12) months after the
date on which a CD&R Designee is no longer serving on the Company Board (whether due to resignation or otherwise) and the CD&R
Shareholder Parties no longer have the right pursuant to the Certificate of Designations to designate any CD&R Designee to serve on
the Company Board; provided that the Standstill Period shall immediately terminate and expire (and the restrictions of Section 3.6
shall cease to apply and shall be of no further force and effect) upon the Company entering into, other than in the case of a spin-off
transaction, a definitive written agreement to consummate any merger, tender offer or exchange offer or other business combination, acquisition
of assets or similar transaction that is approved by the Company Board and which results in (i) stockholders of the Company immediately
prior to such transaction ceasing to own, directly or indirectly, at least 50.1% voting securities of the Company (or any successor or
parent entity thereto) immediately following such transaction, (ii) a majority of the assets of the Company being sold to a Person (other
than wholly-owned Subsidiaries of the Company) or (iii) the commencement of a tender offer or exchange offer for at least 50.1% voting
securities of the Company (or any successor or parent entity thereto) and the Company Board does not recommend rejection of such exchange
or tender within 10 business days of the announcement of such tender offer or exchange offer.
(83) “Subsidiary” means, with respect to any Person, any corporation, partnership, joint
venture, limited liability company or other entity (i) of which such Person or a subsidiary of such Person is a general partner or (ii)
of which a majority of the voting securities or other voting interests, or a majority of the securities or other interests of which having
by their terms ordinary voting power to elect a majority of the board of directors or persons performing similar functions with respect
to such entity, that is directly or indirectly owned by such person and/or one or more subsidiaries thereof.
(84) “Taxes” means any federal, state, local, provincial or non-U.S. taxes, charges, fees,
levies or other assessments, including income, capital gains, alternative minimum, accumulated earnings, personal holding company, franchise,
capital stock, profits, windfall profits, gross receipts, production, goods and services, sales, use, value added, transfer, registration,
stamp, premium, excise, customs duties, severance, environmental (including taxes under section 59A of the Code), real property, personal
property, ad valorem, escheat, occupancy, license, occupation, employment, payroll, social security, disability, unemployment, workers’
compensation, withholding, estimated or other similar tax, duty, fee, assessment or other governmental charge or deficiencies thereof
(including all interest, penalties and additions to tax thereon, related liabilities and additions thereto).
30
(85) “Tax-Free Status of the Transactions” has the meaning set forth in the Tax Matters
Agreement.
(86) “Tax Matters Agreement” has the meaning set forth in the Separation Agreement.
(87) “Tax Proceeding” has the meaning set forth in Section 3.2(e).
(88) “Transaction Documents” means this Agreement, the Certificate of Designations and the
Registration Rights Agreement.
(89) “Unqualified Tax Opinion” means, with respect to a Transfer, an unqualified “will”
opinion of a Qualified Tax Advisor, in form and substance satisfactory to the Company and Resideo in their sole discretion, addressed
to the Company and Resideo and on which the Company and Resideo may rely to the effect that such Transfer, when taken together with any
prior Transfers or related transactions, if any, will not affect the Tax-Free Status of the Transactions. Any such tax opinion must assume
that the Spin-Off would have qualified for the Tax-Free Status of the Transactions if the Transfer in question did not occur.
(90) “USRPHC” shall have the meaning set forth in Section 3.2(c).
Section 4.9. Captions.
The headings contained in this Agreement and in the table of contents to this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
Section 4.10. Severability.
If any term or other provision of this Agreement is found by a court of competent jurisdiction to be invalid, illegal or incapable of
being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner
adverse to any 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 modify this Agreement so as to effect the original intent of the parties as closely as possible
in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.
Section 4.11. No
Third Party Beneficiaries. Except as expressly provided herein, nothing contained in this Agreement, expressed or implied, is intended
to confer upon any Person other than the parties hereto (and their permitted assigns), any benefit, right or remedies; provided
that, the CD&R Shareholder Parties are express third party beneficiaries of ARTICLE III, Resideo is an express third party
beneficiary of Section 3.3 and each other provision requiring Resideo’s approval, consent or receipt of notice, the CD&R Group
are express third party beneficiaries of Section 3.8 and the CD&R Indemnitors are express third party beneficiaries of
Section 3.9.
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Section 4.12. Public
Announcements. Subject to each party’s disclosure obligations imposed by Law or regulation or the rules of any stock exchange
upon which its securities are listed, each of the Company, the CD&R Shareholder and CD&R II will cooperate with each other in
the development and distribution of all news releases and other public information disclosures with respect to this Agreement and any
of the transactions contemplated by this Agreement, and, except to the extent prohibited by Law, neither the Company, nor the CD&R
Shareholder or CD&R II will, or permit their Affiliates to, make any such news release or public disclosure without first consulting
with the other, and, in each case, also receiving the other’s consent (which consent shall not be unreasonably withheld or delayed)
and each such party shall coordinate with other the party whose consent is required with respect to any such news release or public disclosure,
provided that the foregoing consultation and consent requirements shall not apply with respect to any disclosures made by the Company,
the CD&R Shareholder or CD&R II that are consistent with the disclosures set forth in the Form 10. For the avoidance of doubt,
the Other Shareholder shall not be permitted to make any public disclosure with respect to this Agreement or any of the transactions
contemplated by this Agreement without the prior written consent of the Company, other than pursuant to any required securities filings.
Section 4.13. Specific
Performance. The parties acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or were otherwise breached, and that monetary damages, even if available,
would not be an adequate remedy therefor. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions,
or any other appropriate form of equitable relief, to prevent breaches of this Agreement and to enforce specifically the performance
of the terms and provisions of this Agreement in any court referred to in Section
4.14, without the necessity of proving actual damages or the inadequacy of monetary damages as a remedy (and each party hereby waives
any requirement for the securing or posting of any bond in connection with such remedy), this being (in each case) in addition to any
other remedy to which they are entitled at law or in equity. Each of the parties acknowledges and agrees that the right of specific enforcement
is an integral part of the transactions contemplated hereby and without such right, none of the parties would have entered into this
Agreement. Each of the parties further agrees not to assert that a remedy of monetary damages would provide an adequate remedy for any
such breach.
Section 4.14. Jurisdiction.
Each of the parties hereto hereby irrevocably submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware
(or, only if such court declines to accept jurisdiction over a particular matter, then in the United States District Court for the District
of Delaware or, if jurisdiction is not then available in the United States District Court for the District of Delaware (but only in such
event), then in any Delaware state court sitting in New Castle County) and any appellate court from any of such courts (the “Chosen
Courts”) for the purpose of any claim, suit, action, litigation, arbitration, whether judicial or administrative (each, a “Proceeding”)
arising out of or relating to this Agreement, and each of the parties hereby irrevocably agrees that all claims with respect to such
Proceeding may be heard and determined exclusively in such court. Each of the parties hereto (i) consents to submit itself to the personal
jurisdiction of the Chosen Courts in the event any Proceeding arises out of this Agreement, (ii) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) irrevocably consents to the service
of process in any Proceeding arising out of or relating to this Agreement, on behalf of itself or its property, in accordance with Section
4.5 (provided, that nothing in this Section 4.14 shall affect the right of any party to serve legal process in any
other manner permitted by Law) and (iv) agrees that it will not bring any Proceeding relating to this Agreement in any court other than
the Chosen Courts. The parties hereto agree that a final trial court judgment in any such Proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided by Law. The foregoing shall not restrict any party’s
right to seek any post-judgment relief regarding, or any appeal from, such final trial court judgment, or to bring suit for the recognition
or enforcement of any judgment obtained in any Chosen Court.
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Section 4.15. Survival.
The representations and warranties of the parties contained in this Agreement shall survive for twelve (12) months following the date
hereof. All covenants or other agreements of the parties contained in this Agreement that are required to be performed after the date
hereof shall survive until fully performed or fulfilled, unless and to the extent that non-compliance with such covenants or agreements
is waived in writing by the party entitled to such performance.
Section 4.16. Other
Shareholder Matters. The Other Shareholder hereby agrees to waive the rights applicable to a “Holder” set forth in Section 10(d)
of the Certificate of Designations. In addition, and notwithstanding anything to the contrary stated herein, the Other Shareholder hereby
agrees that to the extent this Agreement provides for any right, vote or consent to be exercised by the Shareholders or any Shareholder
and not specifically the CD&R Shareholder, such right, vote or consent shall solely be exercised by the CD&R Shareholder on behalf
of all Shareholders, it being understood that the Other Shareholder does not have any independent right, vote or consent right hereunder.
Each representation, warranty, covenant and agreement of any Shareholder or CD&R II is made as to such Shareholder or CD&R II
only and, in no event, shall any Shareholder or CD&R II be responsible or have any liability for any breach by any other such Person.
Section 4.17. Spin-Off
Matters. Following the date hereof, if the Company pursues a spin-off transaction, the Company shall, and shall cause its Affiliates
to, consult and cooperate in good faith with the CD&R Shareholder with respect to any such spinoff transaction and the structuring
thereof (including the allocation of assets and liabilities to the company being distributed (the “Spin-Co”) and the
Company after giving effect to the distribution of Spin-Co (the “Remain-Co”), and any financing being provided to
Spin-Co and Remain-Co in connection with such spin-off transaction), the documentation related thereto and the matters set forth in this
Section 4.17, and shall, in connection with any such spin-off transaction that it consummates, (x) allocate the total Accumulated
Amount (as defined in the Certificate of Designations) of the Preferred Stock as of immediately prior to the spin-off transaction to
the “Accumulated Amount” of the preferred stock issued by Spin-Co (the “Spin-Co Preferred Stock”) and
the “Accumulated Amount” of remaining preferred stock of Remain-Co (the “Remain-Co Preferred Stock”),
in each case as of immediately after such spin-off transaction, with such allocation based on the relative equity values (as determined
by the Company Board in good faith) for Spin-Co and Remain-Co as of immediately after such spin-off transaction, (y) provide that the
Spin-Co Preferred Stock and the Remain-Co Preferred Stock will each have the same pro forma, as-converted, ownership (determined on a
percentage basis) immediately after such spinoff transaction as the as-converted ownership of Common Stock represented by the Preferred
Stock (determined on a percentage basis) immediately prior to such spin-off transaction, and (z) provide that the Spin-Co Preferred Stock
issued in such spin-off transaction plus the Remain-Co Preferred Stock that remains outstanding after such spin-off transaction will
have an aggregate economic value immediately after such spin-off transaction no less than the economic value of the Preferred Stock immediately
prior to such spin-off transaction (excluding, for the avoidance of doubt, any value creation deemed to arise from such spin-off transaction
itself). Except as necessary to effectuate the foregoing provisions of this Section 4.17, the documentation related to the Spin-Co
Preferred Stock and the Preferred Stock, and the holders’ rights thereto, shall (except as otherwise agreed by the parties thereto)
be substantially consistent with the provisions of the Certificate of Designations, this Agreement and the Registration Rights Agreement,
in each case as in effect immediately prior to such spin-off transaction.
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Section 4.18. Non-Recourse.
This Agreement may only be enforced against, and any claims or causes of action that may be based upon, arise out of or relate to this
Agreement, or the negotiation, execution or performance of this Agreement may only be made against the entities that are expressly identified
as parties hereto (and, in the case of the CD&R Fund, only with respect to its obligations under Section 3.6), including entities
that become parties hereto after the date hereof, and no former, current or future equityholders, controlling persons, directors, officers,
employees, agents or Affiliates of any party hereto or any former, current or future equityholder, controlling person, director, officer,
employee, general or limited partner, member, manager, advisor, agent or Affiliate of any of the foregoing (each, a “Non-Recourse
Party”) shall have any liability for any obligations or liabilities of the parties to this Agreement or for any claim (whether
in tort, contract or otherwise) based on, in respect of, or by reason of, the transactions contemplated by this Agreement, the other
Transaction Documents or in respect of any representations made or alleged to be made in connection herewith or therewith. Without limiting
the rights of any party against any other party hereto, in no event shall any party or any of its Affiliates seek to enforce this Agreement
against, make any claims for breach of this Agreement against, or seek to recover monetary damages from, any Non-Recourse Party.
Section 4.19. Further
Assurances. From time to time, as and when reasonably requested, the parties hereto will execute and deliver, or cause to be executed
and delivered, all such documents and instruments as may be reasonably necessary to consummate the transactions contemplated by this
Agreement.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, this Agreement
has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first herein above written.
ADI GLOBAL DISTRIBUTION INC.
By: /s/ Jeannine Lane
Name: Jeannine Lane
Title: Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer
IN WITNESS WHEREOF, this Agreement
has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first herein above written.
CD&R CHANNEL HOLDINGS, L.P.
By:
CD&R Investment Associates XII, Ltd.
Its:
General Partner
By:
/s/ Rima Simson
Name:
Rima Simson
Title:
Vice President, Treasurer and Secretary
CD&R CHANNEL HOLDINGS II, L.P.
By:
CD&R Investment Associates XII, Ltd.
Its:
General Partner
By:
/s/ Rima Simson
Name:
Rima Simson
Title:
Vice President, Treasurer and Secretary
CLAYTON, DUBILIER & RICE FUND XII, L.P. (solely for purposes of Section 3.6)
By:
CD&R Associates XII, L.P.,
its general partner
By:
CD&R Investment Associates
XII, Ltd.
its general partner
By:
/s/ Rima Simson
Name:
Rima Simson
Title:
Vice President, Treasurer and Secretary
IN WITNESS WHEREOF, this Agreement
has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first herein above written.
/s/ William Galvin
William Galvin (including on behalf of William A. Galvin Declaration of Trust, U/A dtd 8/13/2010 as amended)
EX-99.1 — INFORMATION STATEMENT OF ADI GLOBAL DISTRIBUTION INC., DATED JULY 20, 2026
EX-99.1
Filename: ea030019001ex99-1.htm · Sequence: 13
Exhibit 99.1
July 20,
2026
Dear Resideo Technologies, Inc. (“Resideo”)
Stockholder:
On July 30, 2025, we
announced our intention to separate our company into two independent, publicly traded companies. Completion of the separation will create
(i) a leading building products manufacturer focused on residential controls and sensing solutions that maximize comfort, help to
ensure safety and deliver cost savings and value to homeowners and businesses and (ii) a global specialty distributor, named ADI
Global Distribution Inc. (“ADI”), which focuses on professionally installed low-voltage products, including security and audio-visual
solutions, serving commercial and residential markets through an omnichannel go-to-market platform. Following the separation, each company
is expected to benefit from enhanced strategic and management focus with improved operational agility, tailored capital structure and
capital allocation strategies in line with each company’s growth strategy, improved investor alignment with each company’s
value proposition, and the ability for investors to separately value each company based on its strategic, operational and financial characteristics.
ADI will be
comprised of Resideo’s existing ADI Global Distribution business and certain other assets and liabilities that Resideo is
expected to contribute to ADI prior to the separation. As a standalone entity, ADI is expected to (i) pursue growth strategies
designed to extend its position as a leading industry player, deepen differentiation from competitors and improve our financial
profile, and (ii) maintain a balanced capital allocation policy focused on organic growth investments, disciplined deleveraging
over time as well as targeted acquisitions.
As a standalone business,
Resideo will continue to seek to expand its leading positions across attractive product categories serving critical home systems. Resideo
is focused on creating differentiated products and will look to utilize its channel strength and trusted brands to deliver value to homeowners
and professionals. Resideo’s strategy is supported by long-term secular tailwinds and the opportunities to expand geographically
and into adjacent categories to drive revenue growth, while maintaining strong margins and cash flow generation.
The separation will provide
current Resideo common stockholders with ownership interests in both Resideo and ADI. The separation will be in the form of a pro rata
distribution of 100% of the outstanding shares of ADI common stock to current Resideo common stockholders. Each Resideo common stockholder
will receive one share of ADI common stock for every two shares of Resideo common stock held on July 20, 2026 (the “record
date” for the distribution).
You do not need to take
any action to receive the shares of ADI common stock to which you are entitled as a Resideo common stockholder. You also do not need to
pay any consideration or surrender or exchange the shares of Resideo common stock for such shares of ADI common stock to which you are
entitled. ADI has applied to list its common stock on the New York Stock Exchange under the symbol “ADIG.” Following
the distribution, Resideo will continue to trade on the New York Stock Exchange under the symbol “REZI.”
The distribution is intended
to be tax-free to current Resideo common stockholders for U.S. federal income tax purposes, except for cash received in lieu
of fractional shares. You should consult your own tax advisor as to the particular consequences of the distribution to you, including
the applicability and effect of any U.S. federal, state and local and non-U.S. tax laws.
I encourage you to read
the information statement, which is being provided to all Resideo common stockholders who held shares of Resideo common stock on the record
date. The information statement describes the separation and the distribution in detail and contains important business and financial
information about ADI.
We believe the separation
is a significant and exciting step in our company’s history, and we remain committed to working on your behalf to continue to build long-term stockholder
value.
Sincerely,
Jay Geldmacher
President, Chief Executive Officer and
Director
Resideo Technologies, Inc.
July 20,
2026
Dear Future ADI Global Distribution Inc. (“ADI”)
Stockholder:
We are excited to welcome
you as a future stockholder of ADI. We are proud of our heritage and are committed to harnessing our experienced management team, talented
employees, outstanding brand and strong industry position to continue our record of strong performance.
ADI is a global specialty distributor of professionally installed low-voltage
products serving commercial and residential markets through an omnichannel go-to-market platform. Within North America, ADI is a market-leading
distributor in the professionally installed security, fire/life safety and audio-visual product categories. ADI generated revenues of
$4.8 billion during the year ended December 31, 2025 with over 100,000 customers via our omnichannel go-to-market platform leveraging
e-commerce and an integrated network of over 200 locations spanning 17 countries as of April 4, 2026. ADI generated revenues of $1.2 billion
during the three months ended April 4, 2026.
As a standalone company, we expect to (i) pursue growth strategies
designed to extend our position as a leading industry player, deepen differentiation from competitors and improve our financial profile,
and (ii) maintain a balanced capital allocation policy focused on organic growth investments, disciplined deleveraging over time
as well as targeted acquisitions.
Our outstanding team
has a strong Resideo legacy and seeks to make continuous improvement part of everything we do.
I personally invite you
to learn more about ADI and our strategic initiatives by reading the accompanying information statement. We have applied to list our
common stock on the New York Stock Exchange under the symbol “ADIG.” With our strong foundation derived from Resideo, ADI
is set up well for what we believe will be our best days to come.
Sincerely,
Robert Aarnes
President and Chief Executive Officer
ADI Global Distribution Inc.
INFORMATION STATEMENT
ADI Global Distribution Inc.
Common Stock
(par value $0.001 per share)
This information statement
is being furnished in connection with the distribution on a pro rata basis by Resideo Technologies, Inc. (“Resideo”) to its
common stockholders of 100% of the outstanding shares of common stock of ADI Global Distribution Inc. (the “Spin-Off”), a
wholly-owned subsidiary of Resideo, that will hold, directly or indirectly, the assets and liabilities associated with Resideo’s
ADI Global Distribution business (“ADI” or the “Company”).
For every two shares of Resideo
common stock held of record by you as of the close of business on July 20, 2026, the record date for the distribution, you will receive
one share of ADI common stock. You will receive cash in lieu of any fractional shares of ADI common stock that you would have received
after application of the above ratio. Resideo will distribute its shares of our common stock in book-entry form, which means that we will
not issue physical stock certificates.
The distribution agent
will not distribute any fractional shares of our common stock. The distribution is intended to qualify as tax-free to Resideo common stockholders
for U.S. federal income tax purposes, except for any cash received in lieu of fractional shares.
Approval from Resideo
common stockholders is not required for the distribution. Therefore, you are not being asked for a proxy, and you are requested not
to send Resideo a proxy, in connection with the distribution. You do not need to pay any consideration, exchange or surrender your
existing shares of Resideo common stock or take any other action to receive your shares of ADI common stock.
Holders of Resideo preferred stock will not be entitled by virtue of
their Resideo preferred stock to receive shares of our common stock in the Spin-Off and instead will exchange a portion of the Resideo
preferred stock they currently hold for shares of ADI preferred stock. In connection with the Spin-Off, we expect certain terms of the
Resideo preferred stock to be amended to be consistent with the terms of the ADI preferred stock described herein. Specifically, we expect
the lock-up period applicable to the Resideo preferred stock to be extended to match the Lock-Up Period applicable to the ADI preferred
stock, and that Resideo’s right, in certain circumstances, to convert or redeem the Resideo preferred stock will not be exercisable
until after the expiration (or deemed expiration) of the Lock-Up Period in accordance with the
Shareholders Agreement and ADI Certificate of Designations. As a result, following the Spin-Off, shares of ADI preferred stock and Resideo preferred
stock are expected to have substantially similar rights, preferences and privileges and qualifications, limitations and restrictions.
The amount of Resideo preferred stock exchanged for ADI preferred stock and the conversion prices of the Resideo preferred stock and ADI
preferred stock will be based on the relative equity values of Resideo and ADI as have been determined by the Board of Resideo, in consultation
with the holders of Resideo preferred stock. See “Description of Capital Stock—Preferred Stock” and “Certain Relationships
and Related Person Transactions—Exchange Agreement, Shareholders Agreement and ADI Preferred Stock Exchange” for more information
on the ADI preferred stock.
No trading market for
our common stock currently exists. We expect, however, that a limited trading market for our common stock, commonly known as a “when-issued”
trading market, will develop as early as three trading days prior to the distribution date, and we expect “regular-way” trading
of our common stock will begin on the first trading day after the distribution date. ADI has applied to have its common stock authorized
for listing on the New York Stock Exchange (the “NYSE”) under the symbol “ADIG.” Following the distribution, Resideo
will continue to trade on the NYSE under the symbol “REZI.”
In reviewing this information
statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 13.
Neither the U.S. Securities
and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information
statement is truthful or complete. Any representation to the contrary is a criminal offense.
This information statement
does not constitute an offer to sell or the solicitation of an offer to buy any securities. The date of this information statement is
July 20, 2026.
A Notice of Internet Availability
of Information Statement Materials containing instructions describing how to access this information statement was first mailed to Resideo
common stockholders on or about July 20, 2026. This information statement will be mailed to Resideo’s common stockholders who previously
elected to receive a paper copy of Resideo’s materials.
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION
v
INFORMATION STATEMENT SUMMARY
1
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
11
RISK FACTORS
13
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
43
DIVIDEND POLICY
44
CAPITALIZATION
45
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
46
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
51
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
56
BUSINESS
79
MANAGEMENT
87
EXECUTIVE COMPENSATION
96
DIRECTOR COMPENSATION
124
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
125
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
135
THE SEPARATION AND DISTRIBUTION
137
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
143
DESCRIPTION OF MATERIAL INDEBTEDNESS
147
DESCRIPTION OF CAPITAL STOCK
150
WHERE YOU CAN FIND MORE INFORMATION
154
INDEX TO THE COMBINED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F-2
i
Presentation of Information
Unless otherwise indicated
or the context otherwise requires, references in this information statement to:
(i)
“ADI Funding” refers to ADI Global Distribution Funding
LLC, a Delaware limited liability company and a wholly-owned subsidiary of ADI;
(ii) the “ADI Global Distribution business” refers
to the assets and liabilities of Resideo’s ADI Global Distribution segment as defined in the separation agreement;
(iii)
“ADI preferred stock” refers to the Series A Cumulative Convertible Participating Preferred Stock of ADI;
(iv)
“ADI preferred stock exchange” refers to the exchange by the Preferred Stockholders of a portion of their shares of Resideo preferred stock for shares of ADI preferred stock;
(v)
“ADI Certificate of Designations” refers to the Certificate of Designations,
Preferences and Rights of Series A Cumulative Convertible Participating Preferred Stock of ADI, a form of which is filed as an exhibit
to the registration statement of which this information statement forms a part, and which will become part of our certificate of incorporation
as part of the Spin-Off;
(vi)
“AI technologies” means, within the context of our business, both proprietary and third-party generative and predictive artificial intelligence (“AI”) and machine learning technologies that are used (i) in our products and services to enhance functionality and improve user experience, (ii) on our websites and other IT platforms to enhance customer experience, (iii) internally in product and software development and (iv) by our internal teams to increase efficiency, effectiveness and provide data insights across our enterprise operations;
(vii)
the “Board” or “our Board” refers to the board of directors of the Company;
(viii)
the “bylaws” refers to our amended and restated bylaws of ADI that will become effective
as part of the Spin-Off, the form of which is filed as an exhibit to this information statement;
(ix)
“CD&R” refers to Clayton, Dubilier & Rice LLC;
(x)
the “CD&R Group” refers to CD&R, any private equity fund managed or advised by CD&R or any general partner thereof, or any of their respective affiliates;
(xi)
“CD&R Holdings” refers to CD&R Channel Holdings, L.P., an entity affiliated with CD&R;
(xii)
the “certificate of incorporation” refers to our amended and
restated certificate of incorporation of ADI that will become effective as part of the Spin-Off, the form of which is filed as an exhibit
to this information statement;
(xiii)
the “Company,” “ADI,” “we,” “us,” and “our” refer to ADI Global Distribution Inc., a Delaware corporation, and its consolidated subsidiaries after giving effect to the Spin-Off;
(xiv)
the “Exchange” refers to the New York Stock Exchange;
(xv)
the “Financing” refers to the debt financing in connection with the Spin-Off, as further described under the section entitled “Description of Material Indebtedness”;
(xvi)
the “Indemnification Agreement” refers to the Indemnification
and Reimbursement Agreement dated October 14, 2018, that was entered into by and between Honeywell International Inc. (“Honeywell”)
and New HAPI Inc. (as predecessor to Resideo Intermediate Holding Inc.) in connection with
the separation of Resideo from Honeywell in 2018. The Indemnification Agreement was terminated on
August 13, 2025, as described under the section entitled “Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Capital Resources and Liquidity—Indemnification Agreement”;
(xvii)
the “Lock-Up Period” refers to the period from the consummation of the Spin-Off to the second anniversary thereof;
(xviii)
the “Preferred Stockholders” refer to CD&R
Holdings, and any transferee thereof, including an entity controlled by one of our director nominees. See “Security Ownership
of Certain Beneficial Owners and Management”;
(xix)
the “Reorganization Transactions” refer to a series of internal reorganization transactions that Resideo has undertaken or will undertake prior to, or at, the Spin-Off, pursuant to which, among other transactions, ADI will hold, through its subsidiaries, the ADI Global Distribution business;
(xx)
“Resideo” refers to Resideo Technologies, Inc., a Delaware corporation, and its consolidated subsidiaries;
ii
(xxi)
the “Resideo Board” refers to the board of directors of Resideo;
(xxii)
“Resideo Certificate of Designations” refers to the Certificate of Designations, Preferences and Rights of Resideo preferred stock, dated June 14, 2024;
(xxiii)
“Resideo preferred stock” refers to the Series A Cumulative Convertible Participating Preferred Stock of Resideo;
(xxiv)
the “Spin-Off” refers to the transaction in which Resideo will distribute to its common stockholders 100% of the shares of our common stock; and
(xxv)
“stockholders” refers to stockholders of Resideo or stockholders of ADI, depending on the context.
Certain percentages and other
figures provided and used in this information statement may not add up to 100.0% due to the rounding of individual components.
On July 30, 2025, Resideo
announced its intention to separate its ADI Global Distribution business from the remainder of its businesses. On July 1, 2026, the Resideo
Board approved the distribution of 100% of our issued and outstanding shares of common stock on the basis of one share of our common stock
for every two shares of Resideo common stock held as of the close of business on July 20, 2026, the record date for the distribution.
As of July 20, 2026, Resideo
had 500,000 outstanding shares of Resideo preferred stock. Holders of Resideo preferred stock will not be entitled by virtue of their
Resideo preferred stock to receive shares of our common stock in the Spin-Off and will instead, substantially concurrently with the Spin-Off,
exchange a portion of the Resideo preferred stock they currently hold for shares of ADI preferred stock. In connection with the Spin-Off,
we expect certain terms of the Resideo preferred stock to be amended to be consistent with the terms of the ADI preferred stock described
herein. Specifically, we expect the lock-up period applicable to the Resideo preferred stock to be extended to match the Lock-Up Period
applicable to the ADI preferred stock, and that Resideo’s right, in certain circumstances, to convert or redeem the Resideo preferred
stock will not be exercisable until after the expiration (or deemed expiration) of the Lock-Up Period in accordance with the Shareholders
Agreement and ADI Certificate of Designations. As a result, following the Spin-Off, shares of ADI preferred stock and Resideo preferred
stock are expected to have substantially similar rights, preferences and privileges and qualifications, limitations and restrictions.
The amount of Resideo preferred stock exchanged for ADI preferred stock and the conversion prices of the Resideo preferred stock and ADI
preferred stock will be based on the relative equity values of Resideo and ADI as have been determined by the Resideo Board, in consultation
with the holders of Resideo preferred stock. As a result, immediately following the Spin-Off, 350,000 shares of Resideo preferred stock
will remain issued and outstanding, 150,000 shares of Resideo preferred stock will be cancelled and 150,000 shares of ADI preferred stock
will be issued and outstanding. All accrued and unpaid dividends on Resideo preferred stock will be paid in cash immediately prior to
the ADI preferred stock exchange and the aggregate liquidation preference of the preferred stock of Resideo and ADI immediately after
the Spin-Off will equal the total liquidation preference (defined as the Accumulated Amount in the Resideo Certificate of Designations)
of the Resideo preferred stock immediately prior to the Spin-Off. The shares of Resideo preferred stock that remain outstanding will continue
to have the same rights, preferences and privileges and qualifications, limitations and restrictions set forth in Resideo’s public
filings with the SEC except as otherwise specified in this information statement. See “Description of Capital Stock—Preferred
Stock” and “Certain Relationships and Related Person Transactions—Exchange Agreement, Shareholders Agreement and ADI
Preferred Stock Exchange” for more information on ADI preferred stock.
Immediately following the
Spin-Off, the CD&R Group will beneficially own shares of our common stock and ADI preferred stock, which, taken together on an as-converted
basis, represent approximately 19.69% of our total voting power. As a result, the CD&R Group may have the indirect ability to influence
our policies and operations, including through its ability to designate up to two directors to our board of directors, and its interests
as a preferred equity holder may diverge from, or even conflict with, the interests of the other holders of our common stock. See “Risk
Factors—The CD&R Group will hold a significant equity interest in our business and may exercise influence over us, including
through its ability to designate up to two directors to our Board, and its interests as a preferred equity holder may diverge from, or
even conflict with, the interests of the other holders of our common stock.”
Basis of Presentation
We have historically operated
as a part of Resideo and have no operating history as a standalone company. As a result, separate audited combined financial statements
and unaudited interim condensed combined financial statements have not historically been prepared. Our historical audited combined financial
statements and unaudited interim condensed combined financial statements included elsewhere in this information statement were prepared
on a “carve-out” basis in connection with the expected Spin-Off and have been derived from Resideo’s historical accounting
records. The audited combined financial statements and unaudited interim condensed combined financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of America (“GAAP”) and Resideo’s historical
accounting policies. These audited combined financial statements and unaudited interim condensed combined financial statements do not
purport to reflect what the financial position, results of operations, comprehensive income or cash flows would have been had the Company
operated as a separate, standalone entity during the periods presented. Refer to Note 1. Description of the Business and Basis of Presentation
to the audited combined financial statements and to the unaudited interim condensed combined financial statements included elsewhere in
this information statement for additional information.
Our historical audited combined
statements of operations and unaudited interim condensed combined statements of operations include expense allocations for certain corporate
expenses provided by Resideo on a centralized basis, including, but not limited to corporate executives, finance, legal, audit, mergers
and acquisitions, human resources, information technology, insurance, employee benefits, and other expenses that are either specifically
identifiable or clearly applicable to us. These expenses have been allocated to us on the basis of direct usage when identifiable, with
the remainder allocated on a pro rata basis using an applicable measure of operating income, headcount or other allocation methodologies
that are considered to be a reasonable reflection of the utilization of services provided or the benefit received by us during the periods
presented.
iii
Certain related-party transactions
between the Company and Resideo have been included in our historical audited combined financial statements and unaudited interim condensed
combined financial statements included elsewhere in this information statement. Additionally, we are jointly and severally liable for
Resideo’s debt and were jointly and severally liable for Resideo’s obligations under the Indemnification Agreement prior to
the termination thereof on August 13, 2025. See “Certain Relationships and Related Person Transactions” as well as Note
9. Long-Term Debt, Note 10. Indemnification Agreement and Note 16. Related Party Transactions to the audited combined financial
statements and Note 8. Long-Term Debt, Note 9. Indemnification Agreement and Note 15. Related Party Transactions to the
unaudited interim condensed combined financial statements included elsewhere in this information statement for additional information.
Non-GAAP Financial Data
All financial information
presented in this information statement is derived from the audited combined financial statements and unaudited interim condensed combined
financial statements of the Company included elsewhere in this information statement. All financial information presented in this information
statement has been prepared in U.S. Dollars in accordance with GAAP, except for the presentation of the following non-GAAP financial measures:
Adjusted net income, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted free cash flow.
We present Adjusted net income,
Adjusted EBITDA, Adjusted EBITDA margin and Adjusted free cash flow in this information statement because we believe such measures provide
investors with additional supplemental information to measure our performance. Please refer to “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for an explanation on why we use these
non-GAAP financial measures, their definitions and their limitations. Because of their limitations, these non-GAAP financial measures
are not intended as alternatives to U.S. GAAP measures as indicators of our operating performance and should not be considered as measures
of cash available to us to invest in the growth of our business or that will be available to us to meet our obligations. We compensate
for these limitations by using these non-GAAP financial measures along with other comparative tools, together with GAAP measures, to assist
in the evaluation of operating performance.
For more information on the
use of Adjusted net income, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted free cash flow and reconciliations to the nearest GAAP
measures, see “Summary Historical and Unaudited Pro Forma Combined Financial Data” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”
Market, Industry and Other Data
Unless otherwise indicated, information contained in this information
statement concerning our industry and the markets in which we operate, including our general expectations, market position and market
opportunity, is based on information from third-party sources and management estimates. Our management estimates are derived from publicly
available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable.
Our management estimates have not been verified by any independent source. Information that is based on estimates, forecasts, projections,
market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially
from events and circumstances that are assumed in this information statement. In addition, assumptions and estimates of our and our industry’s
future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described
in “Risk Factors.” These and other factors could cause future performance to differ materially from our assumptions and estimates.
Forecasts and other forward-looking information with respect to industry, business, market and other data are subject to the same qualifications
and additional uncertainties regarding the other forward-looking statements in this information statement. See “Cautionary Statement
Concerning Forward-Looking Statements” for more information.
This information statement
also includes references to our “Net Promoter Score” or “NPS”, which we use to measure our customers’ brand
loyalty and satisfaction, and can range from -100 to +100. Responses were collected in 2025 as part of quarterly, non-overlapping customer
surveys conducted by management of over 3,300 customers. Responses were collected from 0, Not Likely, to 10, Very Likely. Customers who
responded 6 or lower are considered detractors, those who responded 7 to 8 passives and those who responded 9 or 10 promoters. Our NPS
was calculated by using the standard methodology of subtracting the percentage of customers who were detractors from the percentage of
customers who were promoters. Customers who declined to answer are excluded from the calculation. While NPS benchmarking can vary significantly
by industry, we believe this method is substantially consistent with how businesses across our industry typically calculate their NPS.
Trademarks and Trade Names
The name and mark, ADI, and
other trademarks, trade names and service marks of the Company appearing in this information statement are our property or, as applicable,
licensed to us, or, as applicable, are the property of Resideo. The name and mark, Resideo, and other trademarks, trade names and service
marks of Resideo appearing in this information statement are the property of, or have been licensed to, Resideo. This information statement
also contains additional trade names, trademarks and service marks belonging to other companies. We do not intend our use or display of
other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship
with, or endorsement or sponsorship of us by, these other parties.
iv
QUESTIONS
AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION
What is the Spin-Off?
The Spin-Off is the method by which ADI will separate from Resideo. In the Spin-Off, Resideo will distribute to Resideo common stockholders all the outstanding shares of our common stock. Following the Spin-Off, ADI will be an independent, publicly traded company, and Resideo will not retain any ownership interest in ADI.
What is ADI and why is Resideo separating ADI’s businesses and distributing ADI’s stock?
ADI, which is currently a wholly-owned subsidiary of Resideo, was incorporated
in Delaware on December 10, 2025 and will hold, directly or indirectly upon the completion of the Spin-Off, the assets and liabilities
associated with Resideo’s ADI Global Distribution business as described in the separation agreement. The separation of ADI from
Resideo and the distribution of ADI common stock are intended to create two separate, publicly traded companies that will be able to focus
on each of their respective business strategies. The separation is expected to, among other things, allow each of Resideo and ADI to have
an independent corporate strategy and distinct profit drivers, allowing each company to effectively allocate its respective resources
and manage its capital in line with its strategic priorities. Resideo and ADI believe that the separation will result in enhanced long-term
performance of each business for the reasons discussed in the sections entitled “The Separation and Distribution—Background”
and “The Separation and Distribution—Reasons for the Separation.”
Why am I receiving this document?
Resideo is delivering this document to you because you are a holder
of record of shares of Resideo common stock. If you are a holder of Resideo common stock as of the close of business on July 20, 2026,
the record date of the distribution, you will be entitled to receive one share of ADI common stock for every two shares of Resideo common
stock that you held at the close of business on such date. This document will help you understand how the separation and distribution
will affect your post-separation ownership of Resideo and us.
How will the separation of ADI from Resideo work?
As part of the separation, and prior to the distribution, Resideo and
its subsidiaries expect to complete the Reorganization Transactions to transfer to ADI the ADI Global Distribution business that ADI will
own following the separation. To accomplish the separation of ADI into a separate, publicly-traded company, Resideo will distribute 100%
of the outstanding shares of our common stock to Resideo common stockholders on a pro rata basis in a distribution intended to be tax-free
for U.S. federal income tax purposes, except for cash received in lieu of fractional shares.
What is the record date for the distribution?
The record date for the distribution will be July 20, 2026.
When will the distribution occur?
It is expected that 100% of our common stock will be distributed by Resideo
at 5:00 p.m. Eastern Time, on August 3, 2026, to holders of record of Resideo common stock at the close of business on July 20, 2026,
the record date for the distribution, with such distribution deemed effective as of 12:01 a.m. Eastern Time on August 3, 2026.
What do stockholders need to do to participate in the distribution?
Common stockholders of Resideo as of the record date will not be required to take any action or pay any consideration to receive our common stock in the distribution, but you are urged to read this entire information statement carefully. Stockholder approval is not required, so if you do not want to receive our common stock in the distribution, you should sell your Resideo common stock prior to the record date for the distribution. As no vote of Resideo common stockholders is required for the distribution, you are not being asked for a proxy, and you are requested not to send Resideo a proxy in connection with the distribution. You do not need to pay any consideration, exchange or surrender your existing shares of Resideo common stock. The distribution will not affect the number of outstanding Resideo shares of common stock or any rights of Resideo common stockholders, although it will affect the market value of each outstanding share of Resideo common stock.
v
How will shares of ADI common stock be issued?
You will receive shares of ADI common stock through the same or substantially similar channels that you currently use to hold or trade shares of Resideo common stock, whether through a brokerage account, 401(k) plan or other channel. Receipt of shares of ADI common stock will be documented for you in substantially the same manner that you typically receive stockholder updates, such as monthly broker statements and 401(k) statements. If you own shares of Resideo common stock as of the close of business on the record date, Resideo, with the assistance of Broadridge Corporate Issuer Solutions, LLC (“Broadridge”), the settlement and distribution agent, will electronically distribute shares of ADI common stock to you or to your brokerage firm on your behalf by way of direct registration in book-entry form. Broadridge will mail you a book-entry account statement that reflects your shares of our common stock, or your bank or brokerage firm will credit your account for the shares.
How many shares of ADI common stock will I receive in the distribution?
Resideo will distribute to you one share of ADI common stock for every two
shares of Resideo common stock held by you as of the record date for the distribution. Based on approximately 151,502,362 shares of Resideo
common stock outstanding as of June 15, 2026, ADI expects that a total of approximately 75,751,181 shares of ADI common stock will be
distributed to Resideo’s common stockholders. For additional information on the distribution, see the section entitled “The
Separation and Distribution.”
Will ADI issue fractional shares of its common stock in the distribution?
No. We will not issue fractional shares of our common stock in the distribution. The receipt of cash in lieu of fractional shares is described in the section entitled “Material U.S. Federal Income Tax Consequences.”
What will happen to the Resideo preferred stock as a result of the Spin-Off?
Holders of Resideo preferred stock will not
be entitled by virtue of their Resideo preferred stock to receive shares of our common stock in the Spin-Off and instead will exchange
a portion of the Resideo preferred stock they currently hold for shares of ADI preferred stock. In connection with the Spin-Off, we expect
certain terms of the Resideo preferred stock to be amended to be consistent with the terms of the ADI preferred stock described herein.
Specifically, we expect the lock-up period applicable to the Resideo preferred stock to be extended to match the Lock-Up Period applicable
to the ADI preferred stock, and that Resideo’s right, in certain circumstances, to convert or redeem the Resideo preferred stock
will not be exercisable until after the expiration (or deemed expiration) of the Lock-Up Period in accordance with the Shareholders Agreement
and ADI Certificate of Designations. As a result, following the Spin-Off, shares of ADI preferred stock and Resideo preferred stock are
expected to have substantially similar rights, preferences and privileges and qualifications, limitations and restrictions. The amount
of Resideo preferred stock exchanged for ADI preferred stock and the conversion prices of the Resideo preferred stock and ADI preferred
stock will be based on the relative equity values of Resideo and ADI as have been determined by the Resideo Board, in consultation with
the holders of Resideo preferred stock. As a result, immediately following the Spin-Off, 350,000 shares of Resideo preferred stock
will remain issued and outstanding, 150,000 shares of Resideo preferred stock will be cancelled and 150,000 shares of ADI preferred stock
will be issued and outstanding. All accrued and unpaid dividends on Resideo preferred stock will be paid in cash immediately prior to
the ADI preferred stock exchange and the aggregate liquidation preference of the preferred stock of Resideo and ADI immediately after
the Spin-Off will equal the total liquidation preference (defined as the Accumulated Amount in the Resideo Certificate of Designations)
of the Resideo preferred stock immediately prior to the Spin-Off. See “Description of Capital Stock—Preferred Stock”
and “Certain Relationships and Related Person Transactions—Exchange Agreement, Shareholders Agreement and ADI Preferred Stock
Exchange” for more information on ADI preferred stock.
Immediately following the Spin-Off, the CD&R Group will beneficially
own shares of our common stock and ADI preferred stock, which, taken together on an as-converted basis, represent approximately 19.69%
of our total voting power. As a result, the CD&R Group may have the indirect ability
to influence our policies and operations, including through its ability to designate up to two directors to our board of directors, and
its interests as a preferred equity holder may diverge from, or even conflict with, the interests of the other holders of our common stock.
See “Risk Factors—The CD&R Group will hold a significant equity interest in our business and may exercise influence
over us, including through its ability to designate up to two directors to our Board, and its interests as a preferred equity holder may
diverge from, or even conflict with, the interests of the other holders of our common stock.”
vi
What are the conditions to the distribution?
The Resideo Board must give its final approval of the distribution and certain conditions must be satisfied (or waived by the Resideo Board), including:
●
the Resideo Board shall have approved the Spin-Off and not withdrawn such approval, and shall have declared the dividend of our common stock to Resideo common stockholders;
●
the transfer of assets and liabilities to us in accordance with the separation agreement will have been completed, other than any assets and liabilities intended to transfer after the distribution pursuant to the separation agreement;
●
the receipt by Resideo and continuing validity of a private letter ruling from the Internal Revenue Service (the “IRS”) and/or an opinion of its outside tax advisors, in each case, satisfactory to the Resideo Board, regarding the qualification of the distribution, together with certain related transactions, as a “reorganization” within the meaning of Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the “Code”), and which ruling and/or opinion, as applicable, shall not have been withdrawn, rescinded or modified in any material respect;
●
the U.S. Securities and Exchange Commission (the “SEC”) will have declared effective the registration statement on Form 10 of which this information statement forms a part, no stop order suspending the effectiveness of the registration statement will be in effect, no proceedings for such purpose will be pending before or threatened by the SEC and this information statement will have been made available to Resideo common stockholders;
●
all registrations, consents and filings required under the securities or blue sky laws of states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the separation will have been received or made;
●
the agreements relating to the separation will have been duly executed and delivered by the parties;
●
no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, the distribution or any of the related transactions will be in effect;
●
the shares of our common stock to be distributed will have been accepted for listing on the NYSE, subject to official notice of distribution;
●
the transactions contemplated by the Exchange Agreement will have been consummated;
● an independent appraisal firm shall have delivered a solvency
opinion relating to Resideo and ADI;
●
the Financing described under the section entitled “Description of Material Indebtedness” will have been completed; and
●
no other event or development will have occurred or exist that, in the judgment of Resideo’s board of directors, in its sole and absolute discretion, makes it inadvisable to effect the separation, the distribution or the other related transactions.
Resideo and ADI cannot assure you that any or all of these conditions will be met. For a complete discussion of all of the conditions to the distribution, see the section entitled “The Separation and Distribution—Conditions to the Distribution.”
vii
What is the expected date of completion of the separation and distribution?
It is expected that the shares of ADI common stock will be distributed
by Resideo at 5:00 p.m. Eastern Time, on August 3, 2026, to the holders of record of shares of Resideo common stock at the close of business
on July 20, 2026, the record date for the distribution, with such distribution deemed effective as of 12:01 a.m. Eastern Time on August
3, 2026. No assurance can be provided as to the timing of the separation or that all conditions to the distribution will be met.
Can Resideo decide to cancel the distribution of ADI common stock even if all the conditions have been met?
Yes. Until the distribution has occurred, Resideo has the right to terminate, modify or abandon the distribution, even if all of the conditions set forth in the section “The Separation and Distribution—Conditions to the Distribution” are satisfied.
What if I want to sell my Resideo common stock or my ADI common stock?
You should consult with your financial advisor, such as your stockbroker, bank or tax advisor.
What is “regular-way” and “ex-distribution” trading of Resideo stock?
We anticipate that, as early as three trading days prior to the distribution date and continuing up to and including the distribution date, there will be two markets in Resideo common stock: a “regular-way” market and an “ex-distribution” market. Shares of Resideo common stock that trade on the regular-way market will trade with an entitlement to receive shares of our common stock in the Spin-Off. Shares that trade on the ex-distribution market will trade without an entitlement to receive shares of our common stock in the Spin-Off. Therefore, if you sell shares of Resideo common stock in the regular-way market up to and including the distribution date, you will be selling your right to receive shares of our common stock in the Spin-Off. However, if you own shares of Resideo common stock at the close of business on the record date and sell shares of Resideo common stock on the ex-distribution market up to and including the distribution date, you will still receive the shares of our common stock that you would otherwise be entitled to receive in the Spin-Off. See “The Separation and Distribution—Trading Between the Record Date and the Distribution Date.”
Where will I be able to trade shares of ADI common stock?
No trading market for our common stock currently exists. We expect,
however, that our common stock will begin trading on a “when-issued” basis
as early as three trading days prior to the distribution date and will continue up to and including the distribution date.
“When-issued” trading in the context of a spin-off refers to a sale or purchase made conditionally on or
before the distribution date because the securities of the spun-off entity have not yet been distributed.
“When-issued” trades generally settle within two trading days after the distribution date. On the first trading day
following the distribution date, any “when-issued” trading of our common stock will end
and “regular-way” trading will begin. See “The Separation and
Distribution—Trading Between the Record Date and the Distribution Date.” We cannot predict the trading prices for
our common stock before, on or after the distribution date. ADI has applied to have its common stock authorized for listing on
the NYSE under the symbol “ADIG.”
What will happen to the listing of Resideo common stock?
Resideo common stock will continue to trade on the NYSE after the distribution
under the symbol “REZI.”
Will the number of shares of Resideo common stock that I own change as a result of the distribution?
No. The number of shares of Resideo common stock that you own will not change as a result of the distribution.
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Will the distribution affect the market price of my Resideo shares?
Yes. As a result of the distribution, Resideo expects the trading price
of shares of Resideo common stock immediately following the distribution to be lower than the “regular-way” trading price
of such shares immediately prior to the distribution because the trading price will no longer reflect the value of the ADI Global Distribution
business held by us. There can be no assurance that the aggregate market value of the Resideo common stock and our common stock following
the separation will be higher or lower than the market value of Resideo common stock if the separation did not occur. This means, for
example, that the combined trading prices of one share of Resideo common stock and one-half of a share of our common stock after the distribution
may be equal to, greater than or less than the trading price of one share of Resideo common stock before the distribution.
What are the material U.S. federal income tax consequences of the separation and the distribution?
It is a condition to the distribution that Resideo
receive a private letter ruling from the IRS and/or an opinion of its outside tax advisors, in each case, satisfactory to the Resideo
Board, regarding the qualification of the distribution, together with certain related transactions, as a “reorganization”
within the meaning of Sections 368(a)(1)(D) and 355 of the Code, and which ruling and/or opinion, as applicable, shall not have been withdrawn,
rescinded or modified in any material respect.
If the distribution, together with certain related
transactions, so qualifies, it is expected that Resideo common stockholders generally will not recognize any gain or loss for U.S. federal
income tax purposes upon receipt of ADI common stock pursuant to the distribution, except with respect to any cash received in lieu of
fractional shares.
You should consult your tax advisor as to the
particular tax consequences of the separation and distribution to you, including the applicability and effect of any U.S. federal, state
and local and non-U.S. tax laws. For more information regarding the material U.S. federal income tax consequences of the distribution,
see the section entitled “Material U.S. Federal Income Tax Consequences.”
What will ADI’s relationship be with Resideo following the separation?
We expect to enter into a separation and other agreements with Resideo to effect the separation and provide a framework for our relationship with Resideo after the separation. These agreements will govern the separation between us and Resideo of the assets, employees, services, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) of Resideo and its subsidiaries attributable to periods prior to, at and after our separation from Resideo and will govern certain relationships between us and Resideo after the separation. For additional information regarding the separation agreement and other transaction agreements, see the sections entitled “Risk Factors—Risks Relating to the Spin-Off and Our Relationship with Resideo,” “Certain Relationships and Related Person Transactions” and “The Separation and Distribution.”
Who will manage ADI after the separation?
ADI’s management team will be led by Robert Aarnes, who will be ADI’s President and Chief Executive Officer. For more information regarding ADI’s management, see the section entitled “Management.”
Are there risks associated with owning ADI common stock?
Yes. Ownership of our common stock is subject to both general and specific risks, including those relating to our businesses, the industries in which we operate, the separation, our ongoing contractual relationships with Resideo after the separation and our status as a separate, publicly traded company. These risks are described in the “Risk Factors” section of this information statement beginning on page 13.
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Does ADI plan to pay dividends?
ADI has not yet determined whether it expects to pay a regular dividend
on its common stock after the separation and distribution. The timing, declaration, amount and payment of any dividends on the common
stock of ADI following the separation and distribution will be within the discretion of ADI’s board of directors (our “Board”
or the “Board”) and will depend upon many factors. See the section entitled “Dividend Policy.”
Will ADI incur any indebtedness prior to or at the time of the distribution?
Yes. In connection with the Spin-Off, we
expect to incur indebtedness in an aggregate principal amount of approximately $1,000 million, which is expected to consist of a
term credit facility and a series of debt securities (the “Financing”). The expected terms of such indebtedness are
summarized in the section entitled “Description of Material Indebtedness” and the forms of the credit agreement and
indenture we expect to be in place at closing of the Spin-Off are filed as exhibits to the registration statement of which this
information statement forms a part. We intend to make a one-time cash dividend of approximately $900 million of the net proceeds of
the Financing as partial consideration for the contribution of assets and liabilities to us by Resideo. We will also use the net
proceeds to pay related fees and expenses, with any remainder to be retained for general corporate purposes. We expect that the
credit agreement governing the term credit facility described above will also contain a revolving credit facility with commitments
for borrowings of up to $500 million, which we expect will be undrawn upon completion of the Spin-Off. We expect that Resideo will
use these cash proceeds to repay a portion of its outstanding indebtedness and related fees and expenses and, to the extent any
proceeds remain after giving effect to such payments, for general corporate purposes.
See the sections entitled “Description of
Material Indebtedness” and “Risk Factors—Risks Relating to Our Business.”
Who will be the distribution agent, transfer agent, registrar and information agent for the ADI common stock?
The distribution agent, transfer agent and registrar
for our common stock will be Broadridge. For questions relating to the transfer or mechanics of the distribution, you should contact:
Broadridge Corporate Issuer Solutions, LLC
P.O. Box 1342
Brentwood, NY 11717
United States
If your shares are held by a bank, broker or other nominee, you may
call the information agent for the distribution, Broadridge, toll-free at (844) 972-0573.
Where can I find more information about Resideo and ADI?
Before the distribution, if you have any questions
relating to Resideo’s business performance, you should contact:
Resideo Technologies, Inc.
16100 N. 71st Street, Suite
550
Scottsdale, Arizona 85254
Attention: Investor Relations
After the distribution, ADI stockholders who have
any questions relating to our business performance should contact us at:
ADI Global Distribution Inc.
275 Broadhollow Rd Suite 400
Melville, New York 11747
Attention: Investor Relations
We maintain a website at www.adiglobal.com.
Our website, and the information contained therein, or connected thereto, is not incorporated by reference into this information statement.
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INFORMATION STATEMENT SUMMARY
This summary highlights
information included elsewhere in this information statement and does not contain all of the information that may be important to you.
You should read this entire information statement carefully, including the sections entitled “Risk Factors,” “Cautionary
Statement Concerning Forward-Looking Statements,” “Summary Historical and Unaudited Pro Forma Combined Financial Data,”
“Unaudited Pro Forma Combined Financial Statements” and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” our audited combined financial statements and the notes thereto (the “audited combined financial
statements”) and our unaudited interim condensed combined financial statements and the notes thereto (the “unaudited interim
condensed combined financial statements”).
Our Company
ADI is a global specialty distributor of professionally installed low-voltage
products serving commercial and residential markets through an omnichannel go-to-market platform. Within North America, ADI is the market-leading
distributor in the professionally installed security, fire/life safety and audio-visual (“AV”) product categories. We offer
over 500,000 products from more than 1,000 suppliers across key specialty low-voltage categories with strong proximity to our customers
with a large network of store locations. Our omnichannel platform is underpinned by a digital experience designed to deepen customer engagement
and broaden our reach. We combine an extensive third-party product portfolio and deep supplier relationships with a growing suite of exclusive
brands and software-based services. These exclusive brands and services are designed to help our customers build stronger businesses,
differentiate our offerings and improve the end user experience. We are headquartered in Melville, New York, with a workforce of over
4,100 associates located in 20 countries. In 2025 and 2024, ADI generated revenues of $4.8 billion and $4.2 billion, net loss of
$261 million and $18 million and Adjusted EBITDA of $318 million and $286 million, respectively. In the three months ended April
4, 2026 and March 29, 2025, ADI generated revenues of $1.2 billion and $1.1 billion, net loss of $1 million and $15 million and Adjusted
EBITDA of $56 million and $65 million, respectively.
ADI sells primarily to professional
installers, dealers and integrators. Our global customer base of over 100,000 professionals spans independent contractors, regional and
national systems integrators and low-voltage specialists (security, fire/life safety, AV and data communications). Our customers serve
a number of end users, including small and medium businesses, large enterprises and institutions (e.g., in education, retail, hospitality
and industrial sectors) and residential homes. We estimate that 67% of our product sales are installed in commercial end markets with
the remaining 33% in residential locations. Demand for our products is driven, among other things, by building activity, retrofit/upgrade
cycles, building regulations and standards (e.g., fire/life safety codes) and growing adoption of connected technologies in commercial
facilities and homes.
We serve our customers through
an omnichannel go-to-market platform – leveraging e-commerce and an integrated network of over 200 locations and more than 20 distribution
centers spanning 17 countries (including third-party logistics) as well as robust digital storefronts, including our website and mobile
app, each of which is designed to meet the needs of professional installers. We believe our global footprint gives us distinct scale and
network advantages relative to our low-voltage distribution competitors. Customers benefit from convenient omnichannel access to our robust
and expanding product catalog, exclusive and differentiated ADI brands and expert design and technical support to meet complex system
requirements. We are continuously expanding our product selection and investing in strengthening our customer experience by adding functionality
and features that can boost installer efficiency and profitability.
While ADI operates as a single
operating and reportable segment, which reflects our integrated platform and consolidated resource allocation, we are well-diversified
across product categories, end markets and regions.
1
Breakdown of FY2025 Revenue by Product Category and Region
By Product Type
By Region
Our History
ADI
traces its roots to the Alarm Device Manufacturing Company (“ADEMCO”), founded in 1929 by Maurice Coleman in New York. ADEMCO
became a leading maker of intrusion and life safety devices through the mid-20th century. In 1963, ADEMCO was acquired by the
Pittsburgh Railway Company, which renamed itself Pittway in 1967 as it diversified around security and related businesses. In 1988 Pittway
formed ADEMCO Distribution Inc. to better distribute its growing security portfolio, an operation that later evolved into ADI.
In February 2000, Honeywell
International acquired Pittway bringing ADI under the Automation & Control segment. The business operated for almost two decades within
Honeywell before becoming a part of Resideo upon its spin-off in October 2018. Since then, ADI has grown organically, while also executing
a focused M&A strategy to broaden adjacencies, add services and expand regional coverage. Between 2020 and 2023, ADI executed six
acquisitions, deepening category expertise and expanding customer reach into the professional AV, residential AV and data communications
categories.
In June 2024, Resideo acquired
the Snap One business (“Snap One”) for approximately $1.4 billion and combined ADI’s scale and leadership in professionally-installed
low voltage products distribution with Snap One’s strong position and offerings in residential AV, including the innovative Control4
smart home automation platform used in more than 500,000 homes and businesses and the OvrC cloud-based remote management platform empowering
more than 60,000 professional installers with cloud-based configuration, project deployment and remote support capabilities. Together,
ADI and Snap One provide integrators an increased selection of both third-party products and exclusive brand offerings.
Industry Overview
ADI has a global reach in low-voltage specialty distribution across
four interrelated product categories: (i) security, (ii) audio-visual (residential AV and professional AV), (iii) fire/life safety and
(iv) data communications, with an increasingly convergent landscape with professionals installing across multiple categories. ADI’s
largest geography by revenue is North America where management estimates these four product categories represented a large and growing
total addressable industry (“TAI”) of approximately $65 billion in 2025, with security and fire/life safety representing approximately
15%, residential AV representing approximately 10%, professional AV representing approximately 50% and data communications representing
approximately 25%. Drivers of demand by product category include:
●
Security (represents greater than 50% of total revenue for fiscal year 2025): Demand is driven by growing sophistication of physical and cyber security threats and increased concerns around crime and asset protection, each of which continues to drive adoption and increased security spend across commercial and residential markets. This growth is further augmented by faster tech-led refresh cycles—AI/cloud upgrades in video surveillance, cloud/mobile credentials expanding access control and modernization of intruder alarms. With a well-known brand in North America despite broadline distributors continuing to gain traction with large commercial projects through bundled offerings, management believes ADI is the leading specialty distributor in security, being strongest in the small and midsize business (“SMB”) commercial and residential segments, while select distribution competitors maintain a stronger presence in enterprise grade installations.
2
●
Audio-visual (represents greater than 25% of total revenue for fiscal year 2025) consists of two sub-categories based on the residential and commercial end markets:
o
Residential AV: Demand is driven by increasing adoption of products like control, lighting and digital infrastructure, as smart home automation becomes more common. Housing demand continues to outpace supply domestically and more homes are expected to adopt smart home solutions to include a rising number of devices installed per home. While management believes that our category leadership remains strong with our expansive network of local stores that provide quick access to inventory and the availability of exclusive brand products, ADI competes in this fragmented category with multi-regional specialists which have solid local relationships as well as e-commerce companies. Given its size and scale, management believes ADI is the leading specialty distributor in North America in residential AV; however, it remains exposed to other types of competition, including from DIY solutions and customers shifting to direct purchasing from manufacturers or other e-commerce platforms outside our industry.
o
Professional AV: Demand is driven by video displays, collaboration technologies, momentum in healthcare (telemedicine, hospital experiences) and demand for immersive experiences in live events, higher education and enterprise. Given that our customer acquisition strategy in the professional AV space is still maturing and there remain challenges such as inventory gaps for large commercial projects, management believes ADI is an emerging player in professional AV, with attractive growth opportunities in SMB commercial applications.
●
Fire/life safety (represents greater than 10% of total revenue for
fiscal year 2025): Demand is code and ordinance driven, which creates a durable baseline demand. Fire/life safety also benefits
from a strong bundle pull with adjacent security categories (e.g., access control, video) in both commercial and residential businesses,
reinforcing our cross-selling opportunities in this industry. These dynamics make fire/life safety a resilient and robust driver
for the ADI business. With a line card representing all of the marquee fire brands in the distribution channel, management believes
ADI is the leading specialty distributor in North America in fire/life safety.
●
Data Communications (represents less than 5% of total revenue for fiscal year 2025): Demand is driven by more digital connectivity, data center expansion,
increasing AI workloads and increased high-security and low-latency operations. Management believes that relative to the security space,
ADI is an emerging player in this category, with a more limited assortment and investment and a smaller but growing customer set.
Competitive Strengths
Our competitive strengths
stem from our global footprint and distinct scale, inventory availability and reliability, omnichannel go-to-market platform, deep customer
and supplier relationships and exclusive brands. With attractive margins, cash flow generation and a differentiated growth profile, we
believe we will continue to be well positioned to organically grow our business and pursue selective M&A opportunities, aligned to
our go-forward strategic growth initiatives.
●
Preeminent Global Distributor of Security, Fire/Life Safety, AV and Other Low Voltage Products: We are a global leader in professionally installed low-voltage products, including security and residential AV. We believe we offer the industry’s most robust assortment of low-voltage brands—over 500,000 products from over 1,000 suppliers, curated through disciplined category management to meet key customer needs. In 2025, we achieved an NPS of 54, which management believes reflects strong customer satisfaction relative to industry benchmarks. Our position is reinforced by long-standing relationships with top suppliers and premier integrators, high product availability and superior technical sales support.
●
Global Footprint and Reach: ADI has over 200 locations and more than 20 regional distribution centers spanning 17 countries that serve a customer base of over 100,000 professionals. Our extensive global footprint, combined with our strategic supplier relationships and focus on customer service, enables ADI to scale effectively to serve both local and enterprise customers with a range of product and service solutions. Additionally, we believe our global scale affords us meaningful procurement efficiencies.
●
Leading Digital Platform Offering Distinctive Omnichannel Experience: Our digital platform (website and mobile app) provides a seamless purchasing experience for professional buyers, integrating third-party and proprietary AI technologies in dynamic, account-specific pricing, real-time inventory visibility across both stores and distribution centers, delivery date estimation based on item, location and past delivery performance and third-party product search and product recommendations informed by shopping context and user behavior. We also leverage third-party, AI-enabled system design and proposal software to automate key steps in the AV project lifecycle, including bill of materials builders, quote-to-order conversion, real-time order tracking and self-service account management. Omnichannel fulfillment options – such as one-hour store pickup, after-hours lockers and same-day shipping – further enhance the customer experience across store and digital channels. We believe the strength of our digital platform is a key driver of our global reach, supporting a digital customer base of approximately 55,000 customers as of December 31, 2025. In 2023, we generated approximately $700 million or 20% of consolidated revenue from our digital platform, which has grown to approximately $1,086 million or 26% of consolidated revenue in 2024 and approximately $1,415 million or 30% of consolidated revenue in 2025.
3
●
Differentiated Portfolio of Exclusive Brands: We
have more than a dozen proprietary and exclusive brands with products and solutions we develop in collaboration with third parties,
which may be joint development manufacturers, contract manufacturers and in some instances, original equipment manufacturers under
ADI trademarks and brands and sell exclusively through our omnichannel distribution platform. These exclusive brands and services
are anchored by our connected platforms Control4 and OvrC and designed to enhance project performance and installer economics. Control4
delivers comprehensive automation by integrating lighting, audio, video, security and climate control into a single, intuitive system
while supporting thousands of third-party devices and enabling personalized automation for users. OvrC, our cloud-based remote management
platform, allows dealers to monitor, configure and troubleshoot Control4 networks and connected devices remotely, reducing service
costs and downtime. These products and services drive higher margins, stickier customer relationships and attachment opportunities
(software licenses, services and accessories), and differentiate ADI in the marketplace. For the year ended December 31, 2025, exclusive
brand products continued to be a highly margin accretive offering delivering more than 3 times the gross margin of third-party product
sales. In 2023, we generated approximately $134 million or 4% of consolidated revenues from exclusive brands, which has grown to
approximately $524 million or 12% of revenue in 2024 and approximately $842 million or 18% of revenue in 2025. In the three months
ended April 4, 2026 and March 29, 2025, approximately 17% and 17% of our net revenue, respectively, were from sales of our exclusive
branded products. This marked increase in exclusive brand revenue was primarily driven by the acquisition of Snap One in June 2024.
Our exclusive brand products and services are currently concentrated in the residential market, and while such products and services
are present in all four of our product categories, a significant percentage is sold in the audio-visual and data communications categories.
●
Robust
Financial Position With Attractive Adjusted EBITDA Margin, Cash Flow Generation and Strong
Growth Profile: We generated consolidated revenues of $4.8 billion in 2025, 4.4% of which
was derived from products supplied by Resideo. Our consolidated revenues in 2025 represent
14% growth as reported, with $446 million of such growth attributable to the Snap One acquisition,
and an approximately 5% compound annual growth rate from 2020 (on an organic basis excluding
the impact of the Snap One acquisition and other acquisition activity), with a net loss margin
of (5.5)% and an Adjusted EBITDA margin of 6.6%. Our fiscal policy and balanced capital allocation
approach is designed to support disciplined deleveraging while preserving the capacity to
reinvest in our business. We expect to continue to leverage our extensive global footprint,
comprehensive product offering, differentiated portfolio of exclusive brands, leading digital
platform and omnichannel experience and strong supplier and customer relationships to drive
growth above our underlying markets and deliver attractive margins. We continue to invest
in technology solutions to bolster the customer experience, increase operating expense productivity,
enhance our data-driven operating model and expand profitability. We believe we are well
positioned to remain a category leader while expanding into attractive growth verticals.
●
Proven Leadership Team with Operational Momentum and a Culture That Wins: We have a strong management team with extensive experience, both within the industry and across our company. The leadership team has a track record of delivering consistent revenue growth, margin enhancement and strong cash flow. Further, the organization has executed and integrated accretive inorganic growth opportunities and delivered complex digital transformations to further scale the business. Our culture centers on being the indispensable partner for a smarter, safer future. This is accomplished by ensuring we show up, follow through, make it easy to work with us and help each other do our best work so our customers can do theirs. We believe that this combination of leadership depth and values-driven execution will continue to underpin our success and create long-term value for our stakeholders.
Growth Strategies
Our growth strategies are
designed to extend our category leadership, deepen differentiation from our competitors and improve our financial profile:
●
Extending Market Leadership Through Best-in-Class Omnichannel Customer Experience: We are unifying our physical and digital “store” with a single, AI-enabled omnichannel customer experience. On the digital front, we are consolidating various transactional platforms, modernizing product data and investing in third-party and proprietary AI technologies to, among other functions, enhance search and product recommendations, automate quote-to-order and other workflows and estimate inventory and delivery dates so that the digital experience can be a true differentiator and shape the customer buying journey. In parallel, we are modernizing our store formats and broadening our in-store merchandising, while our distribution network is being streamlined to enhance service levels and efficiency and create a consistent, high-quality experience across channels, while delivering meaningful cost savings.
●
Deepening Our Exclusive Brand Offerings: We are deepening our exclusive brands portfolio by optimizing our offering around a competitive portfolio of brands, categories and products, with a differentiated positioning in the residential AV product category and increasing relevance to commercial applications. Our product development priorities focus on improved end user interfaces, integrated product quality for faster testing and quicker releases to strengthen differentiation, and disciplined cost engineering to create more value with our investments. We believe these actions will deliver a more robust cadence of differentiated new product introductions while deepening cross-sell and loyalty.
4
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Scaling in Key Growth Categories – Professional AV and Data Communications: We aim to scale our presence in professional AV and data communications to become a leading category player, leveraging our existing omnichannel platform, overlapping customer base and channel conversion trends to accelerate growth share gains. In professional AV, we are investing in field sales and sales engineering talent to penetrate key accounts and attract premium brands, while also expanding our exclusive brands portfolio to create differentiated project bundles. In data communications, we are increasing our industry relevance through broader product offerings and sales coverage, inventory expansion, targeted marketing investments and deeper category expertise. We believe these initiatives will reinforce our one-stop shop value proposition and deepen our relevance with both existing and new customers.
●
Expanding Service Offerings to Deepen Engagement Across the Value Chain: We aim to build a data-driven services marketplace for professionals, end users and suppliers. For professionals and end users, we are scaling more than twenty differentiated services to increase customer value, including software offerings focused on increased remote monitoring capability, system and network design offerings, device programming and technical support. These offerings are designed to create recurring revenue streams for integrators and ADI, reduce truck rolls and/or improve the end user experience. For suppliers, we are commercializing services that improve planning and sell-through (e.g., data-as-a-service portal that provides visibility into inventory and sales performance). Collectively, these offerings aim to create value for professionals, end users and suppliers—and, in doing so, deepen our partnerships and increase our stickiness across the value chain.
●
Accelerating Growth Through Targeted Acquisitions: We have a history of successful strategic acquisitions to accelerate growth through category expansion. We intend to continue to selectively pursue acquisitions that will broaden our product portfolio, expand our geographic footprint and enhance our position in strategic growth categories. We believe our industry knowledge and track record in integration and execution position us well to continue to pursue disciplined and accretive strategic acquisitions.
The Separation and Distribution
The Separation and Distribution
On July 30, 2025, Resideo
announced its intention to separate its ADI Global Distribution business from the remainder of its businesses. On July 1, 2026, the Resideo
Board approved the distribution of 100% of the issued and outstanding shares of common stock of ADI, a newly-formed company that will
hold the ADI Global Distribution business.
ADI is currently a wholly-owned
subsidiary of Resideo, and in connection with the distribution, we expect that Resideo will complete the Reorganization Transactions,
as a result of which ADI will become the parent company of the Resideo operations comprising, and the entities that will conduct, the
ADI Global Distribution business. The Resideo Board has approved the distribution of 100% of our issued and outstanding shares of common
stock on the basis of one share of our common stock for every two shares of Resideo common stock held as of the close of business on July
20, 2026, the record date for the distribution.
Distributed Securities
Resideo will distribute one
share of ADI common stock for every two shares of Resideo common stock held as of the record date for the distribution. Based on approximately
151,502,362 shares of Resideo common stock outstanding as of June 15, 2026, ADI expects that a total of approximately 75,751,181 shares
of ADI common stock will be distributed to Resideo’s common stockholders. We will not issue fractional shares of our common stock
in the distribution. The receipt of cash in lieu of fractional shares is described in the section entitled “Material U.S. Federal
Income Tax Consequences.”
5
Treatment of Resideo Preferred Stock
Holders of Resideo preferred
stock will not be entitled by virtue of their Resideo preferred stock to receive shares of our common stock in the Spin-Off and instead
will exchange a portion of the Resideo preferred stock they currently hold for shares of ADI preferred stock. In connection with the Spin-Off,
we expect certain terms of the Resideo preferred stock to be amended to be consistent with the terms of the ADI preferred stock described
herein. Specifically, we expect the lock-up period applicable to the Resideo preferred stock to be extended to match the Lock-Up Period
applicable to the ADI preferred stock, and that Resideo’s right, in certain circumstances, to convert or redeem the Resideo preferred
stock will not be exercisable until after the expiration (or deemed expiration) of the Lock-Up Period in accordance with the Shareholders
Agreement and ADI Certificate of Designations. As a result, following the Spin-Off, shares of ADI preferred stock and Resideo preferred
stock are expected to have substantially similar rights, preferences and privileges and qualifications, limitations and restrictions.
The amount of Resideo preferred stock exchanged for ADI preferred stock and the conversion prices of the Resideo preferred stock and ADI
preferred stock will be based on the relative equity values of Resideo and ADI as have been determined by the Resideo Board, in consultation
with the holders of Resideo preferred stock. As a result, immediately following the Spin-Off, 350,000 shares of Resideo preferred
stock will remain issued and outstanding, 150,000 shares of Resideo preferred stock will be cancelled and 150,000 shares of ADI preferred
stock will be issued and outstanding. All accrued and unpaid dividends on Resideo preferred stock will be paid in cash immediately prior
to the ADI preferred stock exchange and the aggregate liquidation preference of the preferred stock of Resideo and ADI immediately after
the Spin-Off will equal the total liquidation preference (defined as the Accumulated Amount in the Resideo Certificate of Designations)
of the Resideo preferred stock immediately prior to the Spin-Off.
The ADI preferred stock will
be convertible perpetual participating preferred stock of the Company, with an initial conversion price equal to $16.152, and will accrue
dividends at a rate of 7.00% per annum, payable in cash or in-kind (by adding the dividend to the Accumulated Amount (as defined
in the ADI Certificate of Designations) of such shares). The ADI preferred stock will vote on an as-converted basis together with our
common stock. The ADI preferred stock may be converted into our common stock at the Preferred Stockholders’
option at any time. Following the expiration (or deemed expiration) of the Lock-Up Period in accordance with the Shareholders Agreement
and ADI Certificate of Designations, we will also be able to convert all (but not less than all) of the outstanding shares of ADI preferred
stock if at any time our common stock trading price exceeds 200% of the then-effective
conversion price for at least 20 out of 30 trailing trading days. Following the expiration (or deemed expiration) of the Lock-Up Period
in accordance with the Shareholders Agreement and ADI Certificate of Designations, we will have the option to redeem the ADI preferred
stock for an aggregate redemption price equal to two times the sum of the Accumulated Amount (as defined in the ADI Certificate of Designations)
plus any interim accrued and unpaid dividends (calculated at 1X instead of 2X) on such share of ADI preferred stock in effect at the time
of redemption. In the event of a change of control, we will have the option to purchase all (but not less than all) of the outstanding
shares of ADI preferred stock at a price per share equal to 150% of the sum of the Accumulated Amount plus any interim accrued and unpaid
dividends (calculated at 100% instead of 150%) on such share of ADI preferred stock in effect at the time of such purchase. See
“Description of Capital Stock—Preferred Stock” and “Certain Relationships and Related Person Transactions—Exchange
Agreement, Shareholders Agreement and ADI Preferred Stock Exchange” for more information on ADI preferred stock.
Immediately following the
Spin-Off, the CD&R Group will beneficially own shares of our common stock and ADI preferred
stock, which, taken together on an as-converted basis, represent approximately 19.69% of our total voting power. As
a result, the CD&R Group may have the indirect ability to influence our policies and operations, including through its ability to
designate up to two directors to our board of directors, and its interests as a preferred equity holder may diverge from, or even conflict
with, the interests of the other holders of our common stock. See “Risk Factors—The CD&R Group will hold a significant
equity interest in our business and may exercise influence over us, including through its ability to designate up to two directors to
our Board, and its interests as a preferred equity holder may diverge from, or even conflict with, the interests of the other holders
of our common stock.”
Incurrence of Indebtedness
In connection with the
Spin-Off, we expect to incur indebtedness in an aggregate principal amount of approximately $1,000 million, which is expected to consist
of a term credit facility and a series of debt securities. The expected terms of such indebtedness are summarized in the section entitled
“Description of Material Indebtedness” and the forms of the credit agreement and indenture we expect to be in place at closing
of the Spin-Off are filed as exhibits to the registration statement of which this information statement forms a part. We intend to make a one-time cash dividend of approximately $900 million of the net proceeds of the Financing as partial consideration
for the contribution of assets and liabilities to us by Resideo. We will also use
the net proceeds to pay related fees and expenses, with any remainder to be retained for general corporate purposes. We expect that the
credit agreement governing the term credit facility described above will also contain a revolving credit facility with commitments for
borrowings of up to $500 million, which we expect will be undrawn upon completion of the Spin-Off. We expect that Resideo will use these
cash proceeds to repay a portion of its outstanding indebtedness and related fees and expenses and, to the extent any proceeds remain
after giving effect to such payments, for general corporate purposes. See “Description of Material Indebtedness,” “Capitalization,”
“Unaudited Pro Forma Combined Financial Statements,” and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Capital Resources and Liquidity.” The separation agreement will contain cash adjustment provisions
pursuant to which, following completion of the cash payment described above and the Spin-Off, either we or Resideo will make a separate
cash payment to the other if our aggregate cash balance at the time of the Spin-Off is determined to be greater or less than the reference
cash balance of $150 million. See “The Separation Agreement—Cash Adjustments.” Following application of the provisions
described above and assuming the Spin-Off and Financing had been completed on April 4, 2026, we estimate that we would have made a one-time
cash dividend to Resideo of $900 million and a one-time separate cash payment to Resideo of approximately $67 million and retained $150
million of cash and cash equivalents on our balance sheet. See “Unaudited Pro Forma Combined Financial Statements.” The actual
amount of the separate cash payment to Resideo (or the amount of the separate cash payment that Resideo may be required to make to us)
is subject to change based on our actual cash and cash equivalents at the time of the Spin-Off.
6
ADI’s Post-Separation Relationship
with Resideo
Prior to the completion of
the distribution, we are a wholly-owned subsidiary of Resideo, and all of our outstanding shares of common stock are owned by Resideo.
Following the separation and distribution, we and Resideo will operate separately, each as a public company.
Prior to the completion of the distribution, we will enter into a separation
and distribution agreement with Resideo, which is referred to in this information statement as the “separation agreement.”
We will also enter into various other agreements to effect the separation and provide a framework for our relationship with Resideo after
the separation, including a commercial product purchase agreement, a transition services agreement, an employee matters agreement, a tax
matters agreement and an intellectual property matters agreement. These agreements will provide for the allocation between us and Resideo
of the assets, employees, services, liabilities and obligations (including investments, property and employee benefits and tax-related
assets and liabilities) of Resideo and its subsidiaries attributable to periods prior to, at and after the separation and will govern
certain relationships between us and Resideo after the separation. In exchange for the transfer of the assets and liabilities of Resideo’s
ADI Global Distribution business to us, we will, among other things, distribute to Resideo common stockholders one share of ADI common
stock for every two shares of Resideo common stock held by such Resideo common stockholders as of the record date for the distribution.
For additional information regarding the separation agreement and such other agreements, please refer to the sections entitled “Risk
Factors—Risks Relating to the Spin-Off and Our Relationship with Resideo,” “Certain Relationships and Related Person
Transactions” and “The Separation and Distribution.”
Reasons for the Separation
The Resideo Board believes
that separating the ADI Global Distribution business from the remainder of Resideo is in the best interests of Resideo and its stockholders
for certain reasons, including:
●
Improved Investor Alignment. The separation is intended to allow investors to separately value each company based on its distinctive investment identity. Our business differs from Resideo’s other businesses in important respects. These differences include each respective business’s core competencies, business model, strategic focus and capital and R&D expenditure needs. Post-separation, investors will be able to evaluate the merits, performance and prospects of each company on a standalone basis, which we believe will lead to a better appreciation of these characteristics, a more efficient valuation of each respective business and, in turn, more efficient access to the capital markets.
●
Enhanced Strategic and Management Focus, with Improved Operational Agility. The separation is intended to allow each company to more effectively pursue its distinct operating priorities and strategies with greater focus and flexibility. Dedicated boards and management teams will concentrate on each of the companies’ own unique opportunities for long-term growth and profitability, while maintaining a commitment to our culture of continuous improvement.
●
Tailored Capital Structures and Capital Allocation Strategies. The separation is intended to allow each business to establish its own optimal capital structure and manage its capital allocation strategy with greater agility and focus. Each company will concentrate financial resources solely on its own operations without having to compete with each other for investment capital. This will enable more efficient, company-specific capital allocation based on profitability, cash flow and growth opportunities, driving innovation and improving growth and returns.
●
Independent Equity Structures and Greater Access to Unique Strategic Opportunities. The separation is intended to create independent equity structures for Resideo and ADI that are aligned with each company’s respective industry and provide each with an enhanced ability to capitalize on unique growth opportunities. In addition, each company will be able to directly access the capital markets and will have more flexibility to pursue growth through selective M&A opportunities that are more closely aligned with each company’s core strategy.
7
●
Enhanced Talent Management, Recruitment and Retention and Alignment of Management Incentives and Performance. The separation is intended to permit each company to more effectively attract, retain and motivate talent, and to offer stock-based compensation that is more closely aligned to its business model and growth strategy.
The Resideo Board
also considered certain potentially negative factors in evaluating the separation, including:
●
Loss of Joint Purchasing Power and Increased Costs. As a current part of Resideo, the ADI Global Distribution business
benefits from Resideo’s size and purchasing power in procuring certain goods, services and technologies. After the separation, as
a separate, independent entity, ADI may be unable to obtain these goods, services and technologies at prices or on terms as favorable
as those Resideo obtained prior to the separation. We may also incur costs for certain functions previously performed by Resideo, such
as accounting, tax, legal, human resources and other general administrative functions, that are higher than the amounts reflected in our
historical audited combined financial statements or unaudited interim condensed combined financial statements, which could cause our profitability
to decrease.
●
Disruptions to the Business as a Result of the Separation. The actions required to separate our and Resideo’s respective businesses could disrupt our and Resideo’s operations prior to and/or after the separation.
●
Increased Significance of Certain Costs and Liabilities. Certain costs and liabilities that were otherwise less significant to Resideo as a whole will be more significant for us and Resideo after the separation as standalone companies.
●
One-time Costs of the Separation. We (and prior to the separation, Resideo) will incur costs in connection with the transition to being a standalone public company that may include accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring or reassigning our personnel and costs to separate information systems.
●
Risk of Failure to Realize Anticipated Benefits of the Separation. We may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others: (i) the separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our businesses; and (ii) following the separation, we may be more susceptible to market fluctuations, and other events may be more disadvantageous for us than if we were still part of Resideo, because our businesses will be less diversified than Resideo’s businesses prior to the separation.
●
Limitations on Strategic Transactions. Under the terms of the tax matters agreement that we will enter into with Resideo, for a period of two (2) years following the date of the distribution, we will be restricted from taking certain actions that could cause the distribution or certain related transactions (including certain transactions undertaken as part of the Reorganization Transactions) to fail to qualify as tax-free for U.S. federal income tax purposes or other applicable law. These restrictions may limit our ability to pursue certain strategic transactions or engage in other transactions that might increase the value of our businesses.
The Resideo Board concluded
that the potential benefits of the separation outweighed these factors. For more information, please refer to the sections entitled “The
Separation and Distribution—Reasons for the Separation” and “Risk Factors.”
Risks Associated with Our Business and the Separation
An investment in our common
stock is subject to a number of risks, including risks relating to the separation, the successful implementation of our strategy and the
ability to grow our business. The following list of risk factors is not exhaustive. Please read the information in the section entitled
“Risk Factors” for a more thorough description of these and other risks.
8
●
We operate in highly competitive markets that are continually evolving, and we may not be able to attract new customers or retain existing customers.
●
Weakness in the economy, market trends and other conditions affecting the profitability and financial stability of our customers, our supply chain and our logistics network could negatively impact our sales growth, costs and results of operations.
●
Enhanced tariff, import/export restrictions, or other trade barriers along with recent judicial developments may have an adverse impact on global economic conditions.
●
Challenges in forecasting demand and managing working capital and inventory may negatively affect our cash flow, margins and overall financial performance.
●
If the distribution, together with certain related transactions, does
not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, or if certain internal restructuring transactions
do not qualify as transactions that are generally tax-free for applicable tax purposes, we, as well as Resideo and Resideo’s common
stockholders, could incur significant U.S. federal income tax liabilities and, in certain circumstances, we could be required to indemnify
Resideo for material amounts of taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.
●
We may be affected by significant restrictions following the distribution, including on our ability to engage in certain desirable capital-raising, strategic or other corporate transactions, pursuant to the agreements we will enter into with Resideo, including the tax matters agreement.
●
Resideo may compete with us.
●
We may not achieve some or all of the expected benefits of the Spin-Off, and the Spin-Off may adversely affect our businesses.
●
Our inability to resolve favorably any disputes that arise between us and Resideo with respect to our past and ongoing relationships may adversely affect our operating results.
●
Resideo’s plan to separate into two independent, publicly traded companies is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time and expense, which could disrupt or adversely affect our business.
●
As of the date of this information statement, we expect to have outstanding
indebtedness at the closing of the Spin-Off of approximately $1,000 million and the ability to incur an additional $500 million of indebtedness
under the revolving facility we expect to be in place upon consummation of the Spin-Off, and in the future we may incur additional indebtedness.
This indebtedness could adversely affect our businesses and our ability to meet our obligations and pay dividends.
●
We cannot be certain that an active trading market for our common stock will develop or be sustained after the Spin-Off, and following the Spin-Off, the stock price of our common stock may fluctuate significantly.
●
A significant number of shares of our common stock are or will be eligible for future sale and expected to be freely tradable without restriction, which may cause the market price of our common stock to decline.
●
The ADI preferred stock we expect to issue in connection with the Spin-Off will have rights, preferences and privileges that are not held by, and are preferential to, the rights of our common stock and will reduce the relative voting power of the holders of our common stock.
●
The CD&R Group will hold a significant equity interest in our business and may exercise influence over us, including through its ability to designate up to two directors to our Board, and its interests as a preferred equity holder may diverge from, or even conflict with, the interests of the other holders of our common stock.
9
●
Certain provisions in our certificate of incorporation and bylaws, and of Delaware law, may prevent or delay an acquisition of our company, which could decrease the trading price of our common stock.
●
The combined post-Spin-Off value of one share of Resideo common
stock and one-half of a share of ADI common stock may not equal or exceed the pre-distribution value of one share of Resideo common
stock.
Corporate Information
We were incorporated in
Delaware on December 10, 2025 for the purpose of holding Resideo’s ADI Global Distribution business in connection with the
separation and the distribution. Prior to the separation, which is expected to occur immediately prior to completion of the
distribution, we have had no operations. The address of our principal executive offices is 275 Broadhollow Rd Suite 400, Melville,
New York 11747. Our telephone number is (631) 692-1000.
We maintain an Internet website
at www.adiglobal.com. Our website, and the information contained therein or connected thereto, is not incorporated by reference
into this information statement.
Reason for Furnishing This Information Statement
This information statement
is being furnished solely to provide information to stockholders of Resideo who will receive shares of our common stock in the distribution.
It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of our securities. The information contained
in this information statement is believed by us to be accurate as of the date set forth on its cover. Changes may occur after that date
and neither Resideo nor we will update the information except as required by federal securities laws or in the normal course of their
and our respective disclosure obligations and practices.
10
SUMMARY
HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited
summary financial data was derived from our audited annual combined financial statements and interim condensed combined financial
statements, which are included elsewhere in this information statement, and from our unaudited pro forma combined financial
statements included in the “Unaudited Pro Forma Combined Financial Statements” section of this information statement.
Our underlying financial records were derived from the financial records of Resideo for the periods reflected herein. Our historical
and pro forma results are presented for informational purposes only, should not be considered indicative of our results of
operations, financial position and cash flows for future periods or what they would have been had we been a separate, publicly
traded company during the periods presented.
The following tables present certain summary historical combined financial
information as of the periods indicated. The selected historical combined financial information as of, and for the years ended, December
31, 2025, 2024 and 2023 are derived from our historical audited combined financial statements included elsewhere in this information statement.
The selected historical combined financial information as of April 4, 2026, and each of the three-month periods ended April 4, 2026 and
March 29, 2025, are derived from our historical unaudited interim condensed combined financial statements included elsewhere in this information
statement. The unaudited interim condensed combined financial statements have been prepared on the same basis as the audited annual combined
financial statements and, in the opinion of our management, include all adjustments, consisting of only ordinary recurring adjustments,
necessary for a fair statement of the information set forth in this information statement.
The following tables also
present certain summary pro forma combined financial information as of April 4, 2026 and for the three months ended April 4, 2026 and
the year ended December 31, 2025. The summary unaudited pro forma combined financial data presented has been prepared to reflect the separation,
which is described in “Unaudited Pro Forma Combined Financial Statements.” The unaudited pro forma combined statements of
operations data presented reflect the financial results as if the separation occurred on January 1, 2025, which was the first day of fiscal
year 2025 and the unaudited pro forma combined balance sheet presented has been prepared as if the separation occurred on April 4, 2026.
The assumptions used and pro forma adjustments derived from such assumptions are preliminary and based on currently available information
and certain assumptions that our management believes are reasonable.
This summary historical and unaudited pro forma combined financial
data should be reviewed in combination with “Unaudited Pro Forma Combined Financial Statements,” “Capitalization,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited combined financial
statements, the unaudited interim condensed combined financial statements and accompanying notes included in this information statement.
For factors that could cause actual results to differ materially from those presented in the summary historical and pro forma combined
financial data, see “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” included elsewhere
in this information statement.
Pro Forma(1)
Historical
As of
As of
As of
April 4,
April 4,
December 31,
($ in millions)
2026
2026
2025
2024
Summary Balance Sheet Data:
Cash and cash equivalents
$ 150
$ 135
$ 124
$ 137
Total assets
$ 4,171
$ 4,156
$ 4,152
$ 4,095
Due from related parties – non-current
$ -
$ -
$ 13
$ 186
Long-term debt
$ 976
$ 981
$ 1,185
$ 475
Total equity
$ 2,098
$ 2,044
$ 1,684
$ 2,088
Total liabilities and equity
$ 4,171
$ 4,156
$ 4,152
$ 4,095
(1) Pro forma for the Spin-Off and
related transactions described in the section of this information statement entitled “The Separation and Distribution.” See
“Unaudited Pro Forma Combined Financial Statements.”
11
Pro Forma(1)
Historical
Three Months Ended
April 4,
Year Ended
December 31,
Three Months Ended
April 4,
Three Months Ended
March 29,
Year Ended
December 31,
($ in millions)
2026
2025
2026
2025
2025
2024
2023
Summary Statements of Operations:
Net revenue
$ 1,206
$ 4,784
$ 1,206
$ 1,121
$ 4,784
$ 4,197
$ 3,570
Cost of goods sold
950
3,719
950
879
3,719
3,346
2,902
Gross Profit
256
1,065
256
242
1,065
851
668
Operating expenses
Selling, general and administrative expenses
199
755
199
181
752
598
454
Intangible asset amortization
24
95
24
23
95
55
13
Transaction related expenses
8
16
8
1
16
45
-
Restructuring, impairment and extinguishment costs
-
8
-
4
9
22
13
Research and development expenses
12
39
12
8
39
17
-
Total operating expenses
243
913
243
217
911
737
480
Income from operations
13
152
13
25
154
114
188
Indemnification Agreement expense
-
-
-
33
364
79
67
Other (income) expense, net
-
(2 )
-
-
(2 )
4
(5 )
Interest expense
18
71
17
8
50
39
32
Interest income
(1 )
(3 )
(2 )
(2 )
(8 )
(15 )
(18 )
(Loss) income before taxes
(4 )
86
(2 )
(14 )
(250 )
7
112
(Benefit from) provision for
income taxes
(1 )
30
(1 )
1
11
25
50
Net (loss) income
$ (3 )
$ 56
$ (1 )
$ (15 )
$ (261 )
$ (18 )
$ 62
Net (loss) income margin(2)
(0.2 )%
1.2 %
(0.1 )%
(1.3 )%
(5.5 )%
(0.4 )%
1.7 %
(1) Pro forma for the Spin-Off. See
“Unaudited Pro Forma Combined Financial Statements.”
(2) Calculated as a percentage of
revenue.
Historical
Three Months Ended
April 4,
Three Months Ended
March 29,
Year Ended
December 31,
($ in millions)
2026
2025
2025
2024
2023
Other Financial Data (unaudited)(1):
Adjusted EBITDA(1)
$ 56
$ 65
$ 318
$ 286
$ 238
Adjusted net income(1)
$ 28
$ 42
$ 181
$ 181
$ 156
Adjusted EBITDA margin(1)(2)
4.6 %
5.8 %
6.6 %
6.8 %
6.7 %
Adjusted free cash flow(1)
$ (146 )
$ (99 )
$ 19
$ 60
$ 76
(1) For definitions and further information
about how we calculate our non-GAAP financial measures, including a reconciliation of Adjusted EBITDA; Adjusted net income; Adjusted
EBITDA Margin; and Adjusted free cash flow to the most comparable GAAP measures, please see “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.” Non-GAAP financial measures are included
in this information statement because they are used by management and our board of directors to assess our financial performance. Our
non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance
with GAAP.
(2) Calculated as a percentage of
revenue.
12
RISK
FACTORS
You should carefully consider
the risks and uncertainties described below, together with the information included elsewhere in this information statement. The risks
and uncertainties described below are those that we have identified as material but are not the only risks and uncertainties facing us.
These disclosures reflect our beliefs and opinions as to factors that could materially and adversely affect us and our securities in the
future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation
as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. Our business is also subject
to general risks and uncertainties that affect many other companies, such as market conditions, economic conditions, geopolitical events,
changes in laws, regulations or accounting rules, fluctuations in interest rates, terrorism, wars or conflicts, major health concerns,
natural disasters or other disruptions of expected business conditions. Additional risks and uncertainties not currently known to us or
that we currently believe are immaterial also may impair our business, including our results of operations, liquidity and financial condition.
Risks Relating to Our Business
We operate in highly competitive markets
that are continually evolving, and we may not be able to attract new customers or retain existing customers.
We operate in a highly competitive,
continually evolving environment, and we compete directly with global, national, regional and local providers of our products, services
and solutions, including distributors, manufacturers, service and software providers, retailers and online commerce providers. The most
significant competitive factors we face are: the reputation of our Company, the demand for the third-party and exclusive branded products
we sell; service and price; product availability; speed and accuracy of delivery; customer and technical support; customer relationships,
product performance; reliability and warranty; meeting evolving customer expectations for e-commerce; ease of installation; and sales
and marketing programs. In addition to current competitive factors, there have been, and in the future there may be, new market entrants
with nontraditional businesses, new business, distribution and customer service models or disruptive technologies and products. We may
face competitive pressures from changing consumer preference for simple do-it-yourself solutions rather than adopting professionally installed
solutions. In addition, retail outlets, including online commerce, may increase their participation in wholesale distribution markets.
To remain competitive, we will need to invest continually in our distribution networks, products and services development, e-commerce
technology and experience and marketing. We may not have sufficient resources to continue to make such investments and we may be unable
to maintain our competitive position. Our ability to effectively compete and attract new customers and retain existing customers will
depend on, among other items, the perceived value and quality of our products, consumer demand for distributed low voltage products, the
elasticity of our price increases, our ability to offer new and relevant products, our ability to invest adequately in e-commerce related
technologies and deliver e-commerce experiences that meet our customer’s evolving expectations and the effectiveness of our marketing
efforts. We may also lose loyal customers to our competitors if we are unable to meet consumer demand in a timely manner. In all such
situations, our ability to attract and retain customers could be adversely affected, which could adversely affect our business, financial
condition, results of operations and cash flows.
Our offerings are primarily
distributed and delivered through our omnichannel platform to a network of professional contractors, installers, and integrators, as well
as select online merchants. If retail outlets, including online commerce platforms, increase their presence in wholesale distribution
markets, or if customers increasingly purchase our products through these channels rather than through us, our business may be unable
to effectively compete, which could adversely affect our business, financial condition, results of operations and cash flows.
Weakness in the economy, market trends and
other conditions affecting the profitability and financial stability of our customers, our supply chain and our logistics network could
negatively impact our sales growth, costs and results of operations.
Economic, political and
industry trends affect our business environment. In particular, our business is affected by the performance and activity of the
global new construction and the repair and remodel construction industries. Similarly, the slowing of the housing market may result
in reduced demand for the products we distribute. These and other industries and markets we serve have demand that is sensitive to
the production activity, capital spending and demand for products and services of our customers. The ongoing uncertainty and
volatility in the global macroeconomic environment have affected, and could continue to affect, our visibility toward future
performance. While supply chain, trade dynamics and logistics continued to normalize over 2025, uncertainties remain in 2026 and we
have seen continued softness this year to-date, including the potential for changes in inflation and interest rates, tariffs,
increased labor costs, availability of labor, and reduced consumer spending due to softening labor markets, elevated mortgage rates,
unfavorable foreign currency impacts, global conflicts and shifts in energy policies. Many of our customers operate in markets that
are subject to fluctuations resulting from market uncertainty, trade and tariff policies, costs of goods sold, supply shortages or
reduced availability of raw materials, components and finished goods; capacity constraints or delays at suppliers, third-party
contract manufacturers, component vendors and other suppliers, ports and logistics hubs, currency exchange rates, interest rate
fluctuations, government spending and government shutdowns, economic downturns, recessions, foreign competition, offshoring of
production, oil and natural gas prices, information system outages or cyber incidents, geopolitical developments, labor shortages,
work stoppages, natural or human induced disasters, extreme weather, disruptions to transportation infrastructure and networks,
outbreaks of pandemic disease, inflation, deflation and a variety of other factors beyond our control. Any of these factors could
cause customers to idle, delay purchases, reduce production levels or experience reductions in the demand for their own products or
services. Similarly, certain of these factors have in the past, and could in the future, impact our supply chain and logistics
network and could cause shipment delays, backlogs, longer lead times and higher transportation, import and export costs.
13
Any of these events could
also reduce the volume of products and services these customers purchase from us or impair the ability of our customers to make full and
timely payments and could cause increased pressure on our pricing and terms of sale. Accordingly, a significant or prolonged slowdown
in economic activity in the U.S. or any other major world economy, or a segment of any such economy, could negatively impact our sales
and results of operations.
Any of these factors could
similarly impact our supply chain and logistics network and could cause shipment delays, backlogs, longer lead times and higher transportation,
import and export costs. See “Risks Relating to Our Business—Disruptions to our supply chain, logistics network, and fulfillment
centers, and reliance on third-party contract manufacturers could impair our ability to meet demand and increase our costs.”
Any of these events could
also reduce the volume of products and services these customers purchase from us or impair the ability of our customers to make full and
timely payments and could cause increased pressure on our pricing and terms of sale. Accordingly, a significant or prolonged slowdown
in economic activity in the U.S. or any other major world economy, or a segment of any such economy, could negatively impact our sales
and results of operations.
Enhanced tariff, import/export restrictions,
or other trade barriers along with recent judicial developments may have an adverse impact on global economic conditions.
We
are subject to certain laws and regulations affecting our international operations which, among other things, provide certain preferential
duties and tariffs for qualifying imports subject to compliance with the applicable rules of origin and other requirements. There
have been, and continue to be, uncertainties with respect to the global economy and trade relations between the U.S. and other countries
globally. Implementation of more restrictive trade policies, barriers, or market access policies, or the renegotiation of existing U.S.
trade agreements or trade agreements of other countries where we sell or procure large quantities of products and services or procure
supplies and other materials incorporated into our products could negatively impact our business, results of operations, cash flows and
financial condition. Various modifications to global tariffs, sanctions, and other trade measures have introduced uncertainty in global
markets that could adversely affect the business of our customers and suppliers, which could in turn negatively impact our net revenue,
cash flows, and results of operations.
In
2025 and 2026, the Trump administration implemented or announced tariffs and other trade actions against certain products and countries
where we manufacture, source or sell goods including China, Vietnam, the European Union, Mexico, Canada, Malaysia and Taiwan. In February
2026, the U.S. Supreme Court issued its opinion that the tariffs imposed by the U.S. government under the International Emergency Economic
Powers Act (“IEEPA”) were unauthorized, but other tariff types continue to be in effect including newly enacted tariffs under
Section 122 of the 1974 Trade Act. Certain of these tariffs and duties increased the costs of some of our imported products and services,
resulted in higher freight and logistics expenses and supplier surcharges, and impacted our pricing, sourcing, and inventory strategies. In
response to tariffs, we have taken mitigating measures including negotiating decreases with our suppliers, and passing along incurred
costs to customers. Although, in the aggregate, the impact to date has not been material to our business, results of operations, or financial
condition, if tariffs or duties are expanded or increased, or interpreted by a court or governmental agency to apply to more of our
products, this could disrupt our supply chain and lead times, significantly and materially increase product costs, compress margins and
adversely affect our business, operating results and financial condition. In addition, the U.S. government has adopted, and may continue
to adopt, enforcement postures regarding import classifications, country of origin standards and access to exclusions, which could result
in increased tariffs or duties on our products.
In
addition, the U.S. federal government and certain states, as well as other foreign governments including the United Kingdom and European
Union, have imposed certain restrictions on the licensing, use, and import and export of certain surveillance, networking, telecommunications
and other equipment manufactured by certain of our suppliers based in China for our business, which may require us to find additional
sources of end user products and result in higher costs. We have in the past had inquiries and claims from the U.S. federal government
and a U.S. state Attorney General regarding sales of certain Chinese made products in the U.S., which inquiries and litigation could impact
our business reputation.
The
continuing adoption or expansion of trade restrictions, the occurrence of a trade war or other governmental action related to tariffs
or trade agreements or policies has the potential to adversely impact demand for our products, including as a result of higher consumer
prices due to such trade restrictions, and may adversely impact our costs, our customers, our suppliers and the U.S. economy, which in
turn could have a material adverse effect on our business, operating results and financial condition.
14
Challenges in forecasting demand and managing
working capital and inventory may negatively affect our cash flow, margins and overall financial performance.
Accurate forecasting and disciplined
management of inventory, receivables and payables are essential to our performance. Variability in customer demand, channel mix and macroeconomic
conditions—together with uncertainty in the volume, timing and type of orders we receive across channels—can make forecasting
difficult, and prior growth rates or trends may not be predictive of future results. If our assumptions prove inaccurate or we fail to
adjust promptly, we may incur excess, obsolete or insufficient inventory, experience stock-outs or make suboptimal purchasing and production
decisions, leading to lower revenue, decreased gross margins, higher carrying and storage costs, increased customer acquisition and retention
costs and reduced cash conversion. Additionally, fluctuations in foreign exchange rates and interest rates, supplier price inflation,
changes in vendor payment terms and credit risk or collection delays on receivables can affect inventory costs, the value and timing of
receivables, and the cost of debt, which may impair working capital efficiency, liquidity, and our ability to fund operations and growth
initiatives. Any of these factors could adversely affect our business, financial condition, results of operations and prospects.
Disruptions to our supply chain, logistics
network, and fulfillment centers, and reliance on third-party contract manufacturers could impair our ability to meet demand and increase
our costs.
Our operations are exposed
to supply chain and logistics risks, including shortages or reduced availability of raw materials, product components and finished goods;
capacity constraints or delays at suppliers, third-party contract manufacturers, component vendors and other suppliers, ports and logistics
hubs or our inability to obtain necessary raw materials and product components, production equipment, or replacement parts; labor disputes,
strikes, lockouts or shortages; pandemics or other public health events; natural disasters and extreme weather; disruptions to transportation
infrastructure and networks; geopolitical events such as war, civil unrest or terrorism; information system outages or cyber incidents
at our or our third-party partners’ facilities or systems; and price inflation in materials, freight and other inputs. These events
can lead to shipment delays, backlogs, longer lead times, and higher transportation, import and export costs. Alternative sources or routes
may not be available on favorable terms, and our third-party contract manufacturers, component vendors, other suppliers, and shipping
and logistics partners may experience delays, capacity constraints, financial distress or insolvency, labor disruptions, or information
system outages that impede their performance and our ability to serve customers. Resulting product shortages or delivery delays could
cause us to be unable to obtain particular products or sufficient quantities of such products, miss customer delivery schedules, lose
sales and market share, incur penalties or expedited freight costs, suffer a competitive disadvantage, and harm our reputation, which
in turn could adversely affect our business, operating results and financial condition.
In addition, we rely upon
a network of warehouses, stores, and other fulfillment centers to effectively fulfill our orders. If we do not optimize, operate, and
manage the expansion capacity of our warehouse fulfillment centers successfully and efficiently, this could result in a disruption to
our ability to deliver our products, excess or insufficient fulfillment capacity, an increase in costs or impairment charges or harm our
business in other ways. In addition, if we do not have sufficient fulfillment capacity or experience a problem fulfilling orders in a
timely manner, our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship
with our customers, and our business, results of operations, cash flows, and financial condition.
15
With respect to our
exclusive branded products, we rely on a limited number of third-party contract manufacturers to manufacture most of our products
and components, and in many cases, one of these manufacturers is our only source for a particular product or product family. Our
reliance on contract manufacturers to produce many of our products reduces our control over the assembly process, exposing us to
risks, including reduced control over quality assurance, production costs and product supply. Quality control problems, such as the
use of materials and delivery of products that do not meet our quality control standards and specifications or comply with
applicable laws or regulations, could harm our brand and business or cause end user dissatisfaction. Quality control problems could
also result in regulatory action, such as restrictions on importation, products of inferior quality or product stock outages or
shortages, harming our sales and creating inventory write-downs for unusable products. In addition, any failure in the proper
functioning of embedded firmware and software and the uninterrupted integration with third-party products on which our exclusive
brand products and services rely on may harm our brand, operations and business. These risks are heightened because a significant
portion of our net revenue comes from exclusive branded products. In the fiscal years ended December 31, 2025 and 2024,
approximately 18% and 12% of our net revenue, respectively, were from sales of our exclusive branded products. In the three months
ended April 4, 2026 and March 29, 2025, approximately 17% and 17% of our net revenue, respectively, were from sales of our exclusive
branded products.
Currency exchange rate fluctuations and
financial counterparty risks may adversely affect our results.
We are exposed to risks associated with the effects of changes in currency
exchange rates as changes in the relative fair values of currencies occur from time to time and may, in some instances, have a material
impact on our operations. Approximately 18% and 19% of our 2025 and 2024 net revenue, respectively, and approximately 20% and 18% of our
net revenue for the three months ended April 4, 2026 and March 29, 2025, respectively, was derived outside the U.S., and we expect sales
to non-U.S. customers to continue to represent a similar portion of our consolidated net revenue. A significant amount of our expected
payment obligations, including pursuant to the tax matters agreement, and our anticipated debt obligations will be denominated in U.S.
dollars, which exposes us to foreign exchange risk. We also translate assets, liabilities, revenue, and expenses denominated in non-U.S.
dollar currencies into U.S. dollars for our audited combined financial statements and unaudited interim condensed combined financial statements
based on applicable exchange rates. Consequently, fluctuations in the value of the U.S. dollar compared to other currencies may have a
significant impact on the value of these items in our audited combined financial statements or unaudited interim condensed combined financial
statements, even if their value has not changed in their original currency. We do not currently hedge against our currency exposure, though
in the future we may choose to.
Loss of key suppliers could decrease sales,
profit margins and earnings.
Products supplied by our ten largest third-party product suppliers
in 2025 and 2024 accounted for approximately 47% and 49% of our revenue by dollar volume for the respective period. We are party to distribution
agreements with these suppliers, with an average term of 3 years as of December 31, 2025. Our standard distribution agreement is not terminable
for convenience, requires our suppliers to provide at least 60 days’ written notice of any price increase and provides for volume
rebates and prompt payment discounts. In connection with our supplier agreements, we enter into purchase obligations with certain suppliers
on occasion. As of April 4, 2026, we had purchase obligations of $124 million, all of which is payable within 12 months. A significant
change in the terms or conditions of sale from a significant supplier has in the past affected and could in the future negatively affect
our operating margins, revenues, and/or the level of capital required to fund our operations. The loss of, or a substantial decrease in
the availability of, products from any of our key suppliers, a supplier’s change in sales strategy to reduce its reliance on distribution
channels, the loss of key preferred supplier agreements or disruptions in a key supplier’s operations could have a material adverse
effect on our business. Although we believe our relationships with our key suppliers are strong, they could change their strategies as
a result of a change in control, expansion of their direct sales force, changes in the marketplace or other factors beyond our control,
including a key supplier becoming financially distressed or experiencing operational or business disruptions, which could materially affect
our supply chain, increase our costs or disrupt our ability to deliver products to our customers in a timely and cost-effective manner.
We are subject to the economic, political,
regulatory, foreign exchange and other risks of international operations.
Our revenue derived outside of the U.S. represented approximately 18%
and 19% of our net revenue for the years ended December 31, 2025 and 2024, respectively, and approximately 20% and 18% of our net revenue
for the three months ended April 4, 2026 and March 29, 2025, respectively. A significant amount of our exclusive branded products are
sourced from third-party contract manufacturers located in Asia. In addition, some of our research and development, IT support, software
and e-commerce development, customer support and operations and other engineering occurs outside the United States. Our international
geographic footprint subjects us to many risks including but not limited to: exchange control regulations; wage and price controls; antitrust/competition
regulations; environmental regulations; employment regulations; foreign investment laws; monetary and fiscal policies and protectionist
measures that may prohibit acquisitions or joint ventures, establish local content requirements or impact trade volumes; import, export
and other trade restrictions (such as embargoes); tariffs; violations by our employees of anti-corruption laws (despite our efforts to
mitigate these risks); changes in regulations regarding transactions with state-owned enterprises; nationalization of private enterprises;
natural and manmade disasters, hazards and losses; backlash from foreign labor organizations related to our restructuring actions; violence;
civil and labor unrest; acts of terrorism; global conflicts; product-related regulatory requirements including certifications, standards
and building codes; regulations relating to personal and non-personal data, privacy, artificial intelligence and cybersecurity regulations;
and our ability to hire and maintain qualified staff and maintain the safety of our employees in these regions. See “Risks Relating
to Legal and Regulatory Matters—Failure to comply with the broad range of standards, laws and regulations in the jurisdictions in
which we operate may result in exposure to substantial disruptions, costs and liabilities.”
16
Furthermore, certain non-U.S.
entities and assets that are part of our Spin-Off from Resideo may not be transferred prior to the Spin-Off because the entities or assets,
as applicable, are subject to foreign government or third-party approvals that we may not receive prior to the Spin-Off. Such approvals
may include, but are not limited to, approvals to merge or demerge, to form new legal entities (including obtaining required registrations
and/or licenses or permits), and to transfer assets and/or liabilities. It is currently anticipated that all material transfers will occur
without delays beyond the closing of the distribution, but we cannot offer any assurance that such transfers will ultimately occur or
not be delayed for an extended period of time. To the extent such transfers do not occur prior to the distribution, under the separation
agreement, the economic benefits and burdens of owning such assets and/or entities will, to the extent reasonably possible and permitted
by applicable law, be provided to the Company.
Current global conflicts and
potential conflicts have created substantial uncertainty in the global economy, including sanctions and penalties imposed on certain countries
from several governments. We are unable to predict the impact that these actions will have on the global economy or on our financial condition,
results of operations and cash flows as of the date of these financial statements.
Our success depends on our ability to maintain
the value and reputation of our brand. Failure to achieve and maintain a high level of product and service quality could damage our reputation
with customers and negatively impact our results.
We have developed strong and
trusted brands that have contributed to the success of our business and we believe our continued success depends on our ability to maintain
and grow the value of our brands. Maintaining, promoting and positioning our brands and reputation will depend on, among other factors,
the success of our product offerings, product safety, quality assurance, marketing and merchandising efforts, our continued focus on delivering
innovative and compelling low voltage products to our customers, e-commerce technology and experience, the proper functioning and versioning
of embedded firmware, software, as well as the uninterrupted integration with third-party products and our ability to provide a consistent,
high-quality consumer experience.
An important element of our
overall strategy is the success and growth of our exclusive brands across various categories and products, with a focus on improved end
user interfaces and digital platform enhancements. If we are unable to execute on this growth strategy, our margins and results of operations
could be adversely affected. We rely on third-party manufacturers to supply exclusive branded products for our business and a significant
percentage of these exclusive branded products are sourced from manufacturers located in Asia. Any potential or perceived quality issues,
product defects, recalls, counterfeiting, safety incidents, or failures to meet evolving regulatory or customer requirements could damage
our brand, increase warranty and service costs, or result in product liability claims. Furthermore, customers may prefer third-party branded
alternatives or resist transitions to our exclusive branded products, and competitive responses may require increased promotional activity,
pricing concessions, or investment in channel incentives, each of which could reduce expected profitability. Our growth strategy also
depends on continued investment in, and adoption of, our end user interfaces and digital platforms. These initiatives include e-commerce
capabilities, digital tools, data analytics, and omnichannel integration designed to improve customer engagement, accelerate product discovery,
and enhance attach rates and mix.
17
Product and service quality
issues could result in a negative impact on customer confidence in our company, our products and our brand image. We rely on qualified
installers and integrators to sell and install many of our products and services for end users and if our solutions are not properly installed,
they may fail to operate as intended which could adversely impact our reputation and consumer confidence in our products and services
and otherwise expose us to financial liability and adversely affect our business, results of operations and financial condition. If the
products we distribute do not meet applicable legal and safety standards or our customers’ expectations regarding safety or quality,
or if the products we distribute are improperly designed, manufactured, packaged or labeled, or are otherwise alleged to cause harm or
injury, they may be subject to recall and we may experience increased warranty costs or lost sales and increased costs and exposure to
legal, financial and reputational risks including litigation and government enforcement action, as well as product liability claims. Any
negative publicity, regardless of its accuracy, could have an adverse effect on our business. Brand value is based on perceptions of subjective
qualities, and any incident that erodes the loyalty of our customers, suppliers or manufacturers, including changes to our products or
packaging, failure of embedded firmware, software, or the uninterrupted integration with third-party products, adverse publicity or a
governmental investigation, litigation or regulatory enforcement action, could significantly reduce the value of our brand and adversely
affect our business, financial condition, results of operations and prospects.
We may from time to time pursue acquisitions.
Our business may be adversely affected if we cannot consummate acquisitions on satisfactory terms, or if we cannot effectively integrate
acquired companies or assets.
We may from time to time in
the future pursue and consummate acquisitions of companies or assets. Our ability to consummate any future acquisitions will be partially
dependent upon the availability of suitable acquisition candidates at favorable prices and upon advantageous terms and conditions. We
may not be able to find suitable acquisition candidates to purchase or may be unable to acquire on economically acceptable terms or to
receive necessary regulatory approvals or support.
The consummation of any particular
acquisition may depend, in part, on our ability to raise the capital necessary to fund such acquisition which may not be available to
us at all or on economically advantageous terms. In addition, if we consummate an acquisition, our capitalization and results of operations
may change significantly. Future acquisitions could result in gross and/or operating income dilution, the incurring of additional debt
or equity issuances and contingent liabilities and an increase in interest and amortization expenses or periodic impairment expenses related
to goodwill and other intangible assets and significant charges relating to integration costs.
We may not be successful in
effectively identifying all risks of an acquired business, integrating the acquired business or technology into our existing business
or realizing the benefits expected at acquisition. Our due diligence may fail to identify all of the liabilities or challenges of an acquired
business, product, software, service or technology, including issues related to intellectual property, product quality or product or software
architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee, customer or supplier issues.
We may not be able to achieve expected operational synergies or savings, or any growth targets identified in acquisition diligence. The
successful integration of future acquisitions may also require substantial attention from our senior management and the management of
the acquired business, which could decrease the time that they have to manage our existing portfolio, attract customers and develop new
products and services or attend to other acquisition opportunities.
18
Risks Relating to Information Technology, Intellectual
Property and Data Security and Privacy
We rely on a dependable IT infrastructure
and network operations that have adequate cybersecurity functionality.
The efficient operation of
our business requires substantial investment in technology infrastructure systems, including enterprise resource planning systems, information
systems, supply chain management systems, digital commerce systems, other third-party bolt-on systems critical to support operations and
connected solutions platforms and network operations and systems. The failure to acquire, implement, maintain, and upgrade these systems
has previously, and may in the future, impact our ability to respond effectively to changing customer expectations, manage our business,
scale our solutions effectively, disrupt our ability to fulfill customer orders, or impact our customer service levels, which has in the
past, and may in the future, put us at a competitive disadvantage and negatively impact our business, results of operations, financial
condition and cash flows. We have experienced delays in certain aspects of the implementation of certain ADI enterprise systems; while
we have resolved concerns to date related to the system implementation, we may not be able to successfully implement or consolidate all
systems without delays related to resource constraints or additional challenges with the critical implementation process. While we have
in the past experienced interruptions of service in our enterprise systems, none of these have been material to date. In addition, in
connection with our acquisition of the Snap One business, we are in the process of consolidating and integrating our ADI and Snap One
enterprise applications and e-commerce platforms. In connection with certain upgrades to our technology infrastructure systems or acquisitions,
we have encountered, and may continue to encounter in the future, concerns and challenges in the implementation and consolidations of
IT infrastructure systems, digital experience and e-commerce platforms, including delays related to resource constraints and complexities
in the critical implementation process, which have temporarily impacted, and may in the future temporarily impact, our customer service
levels and overall performance of our IT infrastructure. Repeated or prolonged interruptions of service, due to cyber threats or problems
with our systems or third-party technologies, such as that experienced globally by virtue of the Jira data exfiltration in June 2025,
could have a significant negative impact on our reputation and our ability to sell products and services. Our business, results of operations,
financial condition and cash flows may be adversely affected if our information systems fail, become unavailable for prolonged periods
of time, are corrupted or do not allow us to transmit accurate information. Failure to properly or adequately address these issues, including
the failure to fund backups, upgrades and improvements to our systems, could impact our ability to perform necessary business operations,
which could adversely affect our reputation, competitive position, business, results of operations, financial condition and cash flows.
Our ability to keep our business operating is highly dependent on the proper and efficient operation of our and third-party data centers,
networks and data backup systems.
Our IT and engineering systems
contain sensitive information, including personal data, trade secrets and other proprietary information. In addition, our connected products
potentially expose our business and customers to cybersecurity threats. As a result, we have experienced and may in the future be subject
to systems interruption, data corruption, data loss and service and product failures, not only resulting from the failures of our products
or services but also from the failures of third-party service providers, natural disasters, power shortages or terrorist attacks, and
cyber or other security threats. There is no assurance that the comprehensive security measures we have put in place to protect our IT
and engineering systems, services and products against unauthorized access and disclosure of personal data or confidential or trade secret
information will be effective in every case.
We have experienced, and expect
to continue to experience, cybersecurity threats and incidents, none of which, to our knowledge, have been material to date. The potential
consequences to any of our connected solutions platforms, data centers or network operations and systems resulting from a material cyber
or other security incident such as a successful ransomware attack or malicious publication of confidential information, trade secrets
or personal data include financial loss, reputational and brand impact, negative media coverage, loss of stockholder value, loss of customers,
litigation with third parties, including class-action litigation, regulatory investigations, audits or other enforcement actions, theft
of intellectual property, fines, regulatory reporting for data breaches and increased cyber and other security protection and remediation
costs due to the increasing sophistication and proliferation of threats, which in turn could adversely affect our competitiveness, business,
financial condition, results of operations and cash flows. In addition, damages, fines and claims arising from such incidents may not
be covered by, or may exceed the amount of, any insurance available or may not be insurable.
19
Our future results and growth are partly
dependent upon our ability to develop, maintain and protect our intellectual property.
As of April 4, 2026, we owned approximately 102 worldwide active patents
and 37 pending patent applications. We rely on a combination of trademarks, trade names, trade secrets, patents, copyrights and other
proprietary rights, as well as contractual arrangements, including licenses, to establish, maintain and protect our intellectual property
rights. Many of our exclusive branded products attribute significant value to their brand names. See “Risks Relating to Our Business—We
operate in highly competitive markets that are continually evolving, and we may not be able to attract new customers or retain existing
customers.” These rights may not prevent competitors from developing similar products or limit challenges to our intellectual property
rights. Failure to protect our intellectual property rights or defend against infringement claims could adversely affect our business,
financial condition and results of operations.
Our industry experiences significant
intellectual property litigation, and we have in the past and could in the future become involved in costly and lengthy litigation involving
patents or other intellectual property rights which could adversely affect our business. We have received allegations of patent infringement
from third parties, including both operating companies and non-practicing entity patent holders, as well as communications from customers
requesting indemnification for allegations brought by third parties. These allegations have resulted in patent litigation relating to
certain of our products and may continue to result in new litigation. These proceedings have in the past and could in the future result
in financial liability, harm our ability to compete and divert our management’s time and attention. Furthermore, our ability to
enforce our intellectual property rights in emerging markets may be limited by legal or practical considerations that have not historically
affected our business in markets with more established intellectual property protection systems. We are also monitoring the risk of inadvertent
intellectual property rights infringement introduced by evolving technologies such as generative AI. Often, we receive offers to license
patents for our use. We believe that we will be able to access any necessary rights through licensing, cross-licensing or other mutually
beneficial arrangements, although to the extent we are required but unable to enter into such arrangements on acceptable economic terms,
it could adversely impact us, requiring us to take specific actions including ceasing using, selling or manufacturing certain products,
services or processes or incurring significant costs and time delays to develop alternative technologies or re-design products.
Our intellectual property
rights may not be sufficient to permit us to take advantage of some business opportunities. As a result, we may be required to change
our plans or acquire necessary intellectual property rights, which could be costly. Our operations depend in part upon third-party technologies,
software and intellectual property. Failure to renew contracts with existing providers or licensors of technology, software, intellectual
property or connectivity solutions, or to contract with other providers or licensors on commercially acceptable terms or at all, as well
as any failure by such third-party provider to provide such technology solutions, may adversely impact our business, financial condition,
results of operations and cash flows.
20
We have in the past relied, and may in
the future rely, on AI technologies internally for business purposes and in our products and services. The regulatory framework for AI
technologies is rapidly evolving as many federal, state, and foreign government bodies and agencies have introduced or are currently
considering additional laws and regulations; to the extent any such laws or regulations apply to our business, or existing laws and regulations
are interpreted in ways that would affect the use of AI technologies in our business, we may need to implement additional standards or
practices to remain compliant and the operation of our business could be adversely affected.
We have in the past relied,
and may in the future rely, on AI technologies internally for business purposes and in the products and services we develop. These technologies
are complex and rapidly evolving and building them may require significant investment in infrastructure and personnel with no assurance
that we will realize the desired or anticipated benefits. In addition, certain of our products and services may rely on AI technologies,
which are complex, subject to increasing litigation and regulatory scrutiny, and may have errors or inadequacies that are not easily detectable.
The regulatory framework for AI technologies and automated decision-making is changing rapidly. There are significant risks involved in
utilizing AI technologies, machine learning, data analytics and similar tools that collect, aggregate and analyze data or inputs in connection
with our business and no assurance can be provided that the usage of such AI technologies will enhance our business or assist our business
in being more efficient or profitable. It is possible that new laws and regulations will be adopted in the United States and in non-United
States jurisdictions, or that existing laws and regulations may be interpreted in ways that would affect the operation of our products
and services and the way in which we use AI technologies. We may not be able to adequately anticipate or respond to these evolving laws
and regulations, and, to the extent we expand our business to more jurisdictions, we may need to adjust our offerings in certain jurisdictions
if applicable legal frameworks are inconsistent across jurisdictions. The cost to comply with such laws or regulations could be significant
and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.
The use of third-party and
proprietary AI technologies in search, software development and system design, among other functions, in our business may expose us to
risks as the intellectual property ownership, license rights, and other legal rights, including copyright, may not been fully interpreted
by U.S. or foreign courts or been fully addressed by legislation. For example, it may be challenging to ascertain whether the authors
of the original software had sufficient rights to support our usage of the tools, data and models underlying such software. In addition
to intellectual property risks, the use of this software may exacerbate other risks, including cybersecurity and privacy risks and other
rights issues. This could adversely affect our reputation and expose us to legal liability as well as contractual or regulatory risk.
Additionally, our reliance on AI technologies could pose ethical concerns and lead to a lack of human oversight and control, which could
have negative implications for our customers’ experience and our reputation.
Within our operations, employees
leverage AI, including generative AI technologies, to accelerate the creation of new features and reduce overall development time. While
these technologies can enhance efficiency, they also present potential intellectual property and privacy risks. Confidential information
or trade secrets may inadvertently be disclosed through generative AI interactions, and there is a risk that third-party intellectual
property could be inadvertently embedded in AI-generated results. There is also a risk of incorrect, biased or unethical outputs, which
can harm our reputation and competitive position and result in regulatory scrutiny or legal liability.
Our products also utilize
AI technologies to offer richer insights and more relevant notifications to our customers. For example, our video solutions use AI technologies
to identify people, animals, packages and other objects. We believe it is necessary to support these capabilities to remain competitive
in the smart home marketplace. Customers may reject AI-powered solutions over fears that their personal data, video footage or usage patterns
could be misused or inadequately protected. Our competitors or other third parties may incorporate AI into their products more quickly
or successfully than us, which could impair our ability to compete effectively and adversely affect our results and operations. Additionally,
there is no guarantee that AI-based features will succeed commercially or even prove technically feasible in all scenarios. AI technologies
may generate false alerts or fail to detect real events, undermining customer trust and potentially damaging our reputation.
As the use of AI becomes more
prevalent, we anticipate that it will continue to present new or unanticipated ethical, reputational, technical, operational, legal, competitive,
and regulatory issues, among others. We expect that our gradual incorporation of AI in our business may require additional resources,
including the incurrence of additional costs, to develop and maintain our products and services to minimize potentially harmful or unintended
consequences, to comply with applicable and emerging laws and regulations, to maintain or extend our competitive position, and to address
any ethical, reputational, technical, operational, legal, competitive, or regulatory issues that may arise as a result of any of the foregoing.
Further, a number of aspects of intellectual property protection in the field of AI are currently under development and there is uncertainty
and ongoing litigation in different jurisdictions as to the degree and extent of protection warranted for AI and relevant system input
and outputs.
21
Risks Relating to Legal and Regulatory Matters
Failure to comply with the broad range of
standards, laws and regulations in the jurisdictions in which we operate may result in exposure to substantial disruptions, costs and
liabilities.
Applicable laws and regulations
impose complex, stringent and costly compliance activities, including but not limited to environmental, health and safety protection standards
and permitting, labeling, and other requirements regarding, among other things, electronic and wireless communications, air emissions,
wastewater discharges, the use, handling and disposal of hazardous or toxic materials, remediation of environmental contamination, product
regulatory regulations and standards such as electronic emissions, radio and other communications regulations, and product safety, communications
regulations, producer responsibility and sustainability laws including those mandating disclosure requirements for e-waste, packaging,
emissions and batteries, anti-money-laundering and anti-corruption, taxation, trade, import and export, antitrust and competition law
concerns, data security, data transfers, data protection and data privacy, consumer protection and regulations regarding labor, employment
and benefits matters. We may also be affected by future standards, laws or regulations, including those imposed in response to cybersecurity,
artificial intelligence, energy, decarbonization, climate change, product functionality, geopolitical, corporate social responsibility,
data privacy, accuracy of third-party product data information, new types of online advertising, telecommunications regulations, product
safety and liability risks or similar concerns. We expect that the growth of our business may depend on our development of new technologies
in response to such regulations and laws. These standards, laws or regulations may further impact our costs of operation, the sourcing
of raw materials and the manufacture, design, redesign and distribution of our products and place restrictions and other requirements
on the products and services we can sell. The net revenue and margins of our business are directly impacted by government regulations,
including safety, performance, and product certification regulations, particularly those driven by customer demands, as well as changes
in trade agreements, tariffs and environmental and energy efficiency standards. We have in the past been, and may in the future be, subject
to various claims, including legal and regulatory claims arising in the normal course of business. Such claims may include without limitation
employment and benefits, product recall, personal injury, network security, consumer law, breaches of or other non-compliance with cybersecurity,
artificial intelligence, data transfers, data protection, data privacy or advertising and marketing regulations, or property damage claims
resulting from the use of our products, services or solutions, as well as exposure to hazardous materials, contract disputes or intellectual
property disputes. The actual costs of resolving legal claims may be substantially higher or lower than the level of insurance coverage
we hold and/or the amounts accrued for such claims or may be excluded from coverage. In the event of unexpected future developments, it
is possible that the ultimate resolutions of such matters could be unfavorable.
Various laws and regulations
as well as contracts we have entered into with third parties apply to the collection, processing, transfer, disposal, disclosure, and
security of personal data and other types of regulated data, including obligations concerning clear, accurate, and transparent data use
practices and advertising that is not misleading.
We cannot predict with certainty the outcome
of litigation matters, government proceedings or other contingencies and uncertainties.
In the ordinary course of
business, we may make certain commitments, including representations, warranties and indemnities relating to current and past operations
and issue guarantees of third-party obligations. We have in the past and may in the future be subject to various lawsuits, investigations
or disputes arising out of the conduct of our business, including matters relating to public disclosure and reporting, commercial transactions,
government contracts, competition and consumer law claims, product liability, marketing, prior acquisitions and divestitures, compliance
with laws, labor and employment, employee benefit plans, intellectual property and the environment, health and safety. We have incurred,
and may continue to incur, significant costs in connection with some or all of these matters.
While we maintain or may otherwise
have access to insurance for certain risks, certain risks may be excluded and the amount of our insurance coverage may not be adequate
to cover the total amount of all insured claims, legal fees, costs and liabilities and we may have to satisfy high insurance retentions.
The incurrence of significant liabilities for which there is no or insufficient insurance coverage (or where there is available insurance
but high retention levels) could adversely affect our liquidity and financial condition, results of operations and cash flows.
22
Risks Relating to the Spin-Off and Our Relationship
with Resideo
We have no history of operating as a separate,
publicly traded company, and our historical and pro forma financial information is not necessarily representative of the results that
we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.
The historical information
about us in this information statement refers to our businesses as operated by and integrated with Resideo, and our historical and pro
forma financial information included in this information statement is derived from the combined financial results and accounting records
of Resideo. The unaudited pro forma combined financial results included in this information statement are presented for informational
purposes only and are not necessarily indicative of what our actual financial condition or results of operations would have been had the
Spin-Off been completed on the dates indicated. The assumptions used in preparing the pro forma financial information may not prove to
be accurate and other factors may affect our financial condition or results of operations. Accordingly, the historical and pro forma financial
information included in this information statement does not necessarily reflect the financial condition, results of operations or cash
flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in
the future primarily as a result of the factors described below:
●
prior to the Spin-Off, our businesses have been operated by Resideo as part of its broader corporate organization, rather than as a separate, publicly traded company. Resideo or one of its affiliates performed various corporate functions for us such as legal, treasury, accounting, auditing, human resources, investor relations, corporate affairs and finance. Our historical and pro forma financial results reflect allocations of corporate expenses from Resideo for such functions and are likely to be less than the expenses we would have incurred had we operated as a separate publicly-traded company. Following the Spin-Off, our costs related to such functions previously performed by Resideo may therefore increase;
●
currently, our businesses are integrated with the other businesses of Resideo. Historically, we have shared economies of scope and scale in costs, employees, vendor relationships and customer relationships. Although we will enter into transition services agreements with Resideo, these arrangements may not fully capture the benefits that we have enjoyed as a result of being integrated with Resideo and may result in us paying higher charges than in the past for these services. This could have an adverse effect on our results of operations and financial condition following the completion of the Spin-Off;
●
generally, our working capital requirements and capital for our general corporate purposes, including acquisitions and capital expenditures, have historically been satisfied as part of the corporate-wide cash management policies of Resideo. Following the completion of the Spin-Off, we may be more susceptible to market fluctuations or other adverse events than would have been as part of Resideo and, as a result, our results of operations and cash flows may be more volatile, and we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements, which may or may not be available and, if available, may reflect a higher cost of capital;
●
as a current part of Resideo, we enjoy certain benefits from Resideo’s operating diversity, reputation, size, purchasing power, ability to borrow and available capital for investments, and we will lose these benefits after the Spin-Off. As an independent entity, we may be unable to purchase goods, services and technologies, obtain insurance and health care benefits, computer software licenses or other services or licenses or access capital markets on terms as favorable to us as those we obtained as part of Resideo prior to the Spin-Off, and our results of operations may be adversely affected. In addition, our historical combined financial data do not include an allocation of interest expense comparable to the interest expense we will incur as a result of the Reorganization Transactions and the Spin-Off, including interest expense in connection with our incurrence of indebtedness;
23
●
as an independent public company, we will separately become subject to, among other things, the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Act and the regulations of the NYSE and will be required to prepare our standalone financial results according to the rules and regulations required by the SEC. These reporting and other obligations will place significant demands on our management and administrative and operational resources. Moreover, to comply with these requirements, we anticipate that we will need to migrate our systems, including information technology systems, implement additional financial and management controls, reporting systems and procedures and hire additional accounting and finance staff. We expect to incur additional annual expenses related to these steps, and those expenses may be significant. If we are unable to implement our financial and management controls, reporting systems, information technology and procedures in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies under the Exchange Act could be impaired; and
●
some of our customers, prospective customers, suppliers or other companies with whom we conduct business may conclude that our financial stability as a separate, publicly traded company is insufficient to satisfy their requirements for doing or continuing to do business with them, or may require us to provide additional credit support, such as letters of credit or other financial guarantees. Any failure of parties to be satisfied with our financial stability could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Other significant changes
may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from Resideo.
For additional information about the past financial performance of our businesses and the basis of presentation of the historical audited
combined financial statements and unaudited interim condensed combined financial statements and the unaudited pro forma combined financial
results of our businesses, please refer to the sections entitled “Unaudited Pro Forma Combined Financial Statements,” “Summary
Historical and Unaudited Pro Forma Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and the audited combined financial statements, the unaudited interim condensed combined financial statements
and accompanying notes included elsewhere in this information statement.
Following the Spin-Off, we could incur substantial
additional costs and experience temporary business interruptions.
We have historically operated
as part of Resideo, and Resideo has provided us with various corporate functions. Following the Spin-Off, Resideo will not provide us
with assistance other than those described under “Certain Relationships and Related Person Transactions.” These services do
not include every service that we have received from Resideo in the past, and Resideo is only obligated to provide the transition services
for limited periods following completion of the Spin-Off. Following the Spin-Off and the cessation of any transition services agreements,
we will need to provide internally or obtain from unaffiliated third parties the services we will no longer receive from Resideo. We may
be unable to replace these services in a timely manner or on terms and conditions as favorable as those we receive from Resideo, and we
may incur substantially higher costs than currently anticipated as a result of the transition.
24
In connection with the separation into two
public companies, each of Resideo and ADI will indemnify each other for certain liabilities. If we are required to pay under these indemnities
to Resideo, our financial results could be negatively impacted. In addition, there can be no assurance that the Resideo indemnities will
be sufficient to insure us against the full amount of liabilities for which Resideo will be allocated responsibility, or that Resideo’s
ability to satisfy its indemnification obligation will not be impaired in the future.
Pursuant to the separation
agreement and certain other agreements with Resideo, each party will agree to indemnify the other for certain liabilities, whether incurred
prior to or after the Spin-Off, in each case for uncapped amounts, as discussed further in “Certain Relationships and Related Person
Transactions.” Indemnities that we may be required to provide Resideo are not subject to any cap, may be significant and could negatively
impact our business. Any amounts we are required to pay pursuant to these indemnification obligations and other liabilities could require
us to divert cash that would otherwise have been used in furtherance of our operating business.
Further, third parties could
also seek to hold us responsible for any of the liabilities that Resideo has agreed to retain, and there can be no assurance that the
indemnity from Resideo will be sufficient to protect us against the full amount of such liabilities, or that Resideo will be able to fully
satisfy its indemnification obligations.
In addition, Resideo’s
insurance will not necessarily be available to us for liabilities associated with occurrences of indemnified liabilities prior to the
Spin-Off, and in any event Resideo’s insurers may deny coverage to us for liabilities associated with certain occurrences of indemnified
liabilities prior to the Spin-Off. Moreover, even if we ultimately succeed in recovering from Resideo or such insurance providers any
amounts for which we are held liable, we may be temporarily required to bear these losses. Each of these risks could negatively affect
our businesses, financial position, results of operations and cash flows.
If the distribution, together with certain
related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, or if certain
internal restructuring transactions do not qualify as transactions that are generally tax-free for applicable tax purposes, we, as well
as Resideo and Resideo’s common stockholders, could incur significant U.S. federal income tax liabilities and, in certain circumstances,
we could be required to indemnify Resideo for material amounts of taxes and other related amounts pursuant to indemnification obligations
under the tax matters agreement.
The distribution, together
with certain related transactions, is intended to qualify as a tax-free “reorganization” under Sections 368(a)(1)(D) and 355
of the Code, and certain internal restructuring transactions are intended to qualify as tax-free for applicable tax purposes. It is a
condition to the distribution that Resideo receive a private letter ruling from the IRS and/or an opinion of its outside tax advisors
satisfactory to the Resideo board of directors and that such private letter ruling and/or opinion not be withdrawn, rescinded or materially
modified; these are separate conditions that the Resideo board may waive in its sole discretion. The IRS private letter ruling and/or
opinion will rely on facts, assumptions, representations, statements and undertakings by Resideo and us regarding, among other things,
historical and future conduct; if any are inaccurate, incomplete, not satisfied or violated, Resideo may not be able to rely on the IRS
private letter ruling and/or the opinion. Notwithstanding any IRS private letter ruling and/or opinion, an IRS audit could determine that
the distribution or related transactions are taxable if any of the facts, assumptions, representations, statements or undertakings upon
which the ruling or the opinion were based are not correct or have been violated, or if the IRS disagrees with any of the conclusions
in the opinion, or for other reasons, including due to changes in facts or post-distribution actions (such as changes in stock ownership),
and a court could sustain such a challenge. If the distribution or any related or internal restructuring transaction is taxable, Resideo
and/or its stockholders, and we, could incur significant U.S. federal income tax liabilities; in addition, Resideo, we and our respective
subsidiaries may incur material tax costs, including non-U.S. taxes, in connection with the reorganization transactions. For a discussion
of the tax consequences of the distribution, together with certain related transactions, please refer to the section entitled “Material
U.S. Federal Income Tax Consequences.”
25
Under the tax matters agreement,
we generally must indemnify Resideo for taxes and related amounts resulting from (a) any inaccuracy or breach of our representations,
covenants or undertakings in spin-off related agreements or in documents relating to the IRS ruling or tax opinion, (b) an acquisition
of any portion of our equity securities or assets, whether by merger or otherwise and whether or not we participate in or facilitate the
transaction, or (c) any other action or failure to act by us. For example, if we or our stockholders engage in transactions that result
in a 50% or greater change (by vote or value) in ownership of our stock during the four-year period beginning two years before the spin-off,
the spin-off would generally be taxable to Resideo under Section 355(e) (though not to Resideo common stockholders) unless established
not to be part of a plan or series of related transactions. In that event, Resideo would recognize gain equal to the excess of the fair
market value of our common stock distributed over Resideo’s tax basis in such stock, and we would generally be required to indemnify
Resideo for the tax on such gain and related expenses. Any such liabilities and indemnification obligations could be material and could
adversely affect our business, financial condition, cash flows and results of operations.
We may be affected by significant restrictions
following the distribution, including on our ability to engage in certain desirable capital-raising, strategic or other corporate transactions,
pursuant to the agreements we will enter into with Resideo, including the tax matters agreement.
Under current U.S. federal
income tax law, a spin-off that otherwise qualifies for tax-free treatment can be rendered taxable to the parent corporation and its
stockholders as a result of certain post-spin-off transactions, including certain acquisitions of shares or assets of the spun-off corporation.
For example, a spin-off may result in taxable gain to the parent corporation under Section 355(e) of the Code if it were later deemed
to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, shares
representing a 50 percent or greater interest (by vote or value) in the spun-off corporation. To preserve the tax-free treatment for
U.S. federal income tax purposes of the distribution and certain related transactions, and in addition to our indemnity obligations described
above, under the tax matters agreement that we will enter into with Resideo, we will be restricted from taking any action that prevents
the distribution, together with certain related transactions, from being tax-free for U.S. federal income tax purposes. Under the tax
matters agreement, for the two-year period following the distribution, we will be subject to specific restrictions on our ability to
enter into certain acquisition, merger, liquidation, sale and stock redemption transactions with respect to our stock. Moreover, we will
be subject to restrictions on discontinuing the active conduct of our trade or business, the issuance or sale of stock or other securities
(including securities convertible into our stock but excluding certain compensatory arrangements) and sales of assets outside the ordinary
course of business. Further, the tax matters agreement will impose similar restrictions on us and our subsidiaries that are intended
to prevent certain transactions undertaken as part of the Reorganization Transactions from failing to qualify for their intended tax
treatment. These restrictions may limit our ability to pursue certain strategic transactions or other transactions that we may believe
to be in the best interests of our stockholders or that might increase the value of our business and may reduce our strategic and operating
flexibility. In addition, under the tax matters agreement, we may be required to indemnify Resideo against any such tax liabilities as
a result of the acquisition of our stock or assets, even if we do not participate in or otherwise facilitate the acquisition. For more
information, please refer to the section entitled “Certain Relationships and Related Person Transactions—Agreements with
Resideo” and “Certain Relationships and Related Person Transactions— Tax Matters Agreement.”
26
After the distribution, certain of our executive
officers and directors may have actual or potential conflicts of interest because of their equity interest in Resideo.
Because of their current or
former positions with Resideo, certain of our executive officers and directors may own equity interests in Resideo. Continuing ownership
of shares of Resideo common stock and/or equity awards, as applicable, could create, or appear to create, potential conflicts of interest
if we and Resideo face decisions that could have implications for both Resideo and us, after the Spin-Off. For example, potential conflicts
of interest could arise in connection with the resolution of any dispute between Resideo and us regarding the terms of the agreements
governing the distribution and the relationship with Resideo thereafter. These agreements include the separation agreement, transition
services agreement, employee matters agreement, tax matters agreement, intellectual property matters agreement and any commercial agreements
between the parties or their affiliates. Potential conflicts of interest may also arise out of any commercial arrangements that we may
enter into with Resideo in the future. Our certificate of incorporation will provide that, subject to any contractual provision to the
contrary, Resideo and its directors and officers will have no obligation to refrain from engaging in the same or similar business activities
or lines of business as we do or doing business with any of our clients or customers. This could further exacerbate any conflicts of interest
as neither Resideo nor any officer or director of Resideo will be liable to us or to our stockholders for breach of any fiduciary duty
by reason of any of these activities.
As we will not have a non-competition agreement
with Resideo, Resideo may compete directly with us, which may adversely affect our businesses.
We will not have a non-competition
agreement with Resideo and Resideo will not be restricted from competing with us. If Resideo in the future decides to engage in the type
of business we conduct, it may have a competitive advantage over us, which may cause our business, financial condition and results of
operations to be materially adversely affected.
We may not achieve some or all of the expected
benefits of the Spin-Off, and the Spin-Off may adversely affect our businesses.
We may not be able to achieve
the full strategic and financial benefits expected to result from the Spin-Off, or such benefits may be delayed or not occur at all. The
Spin-Off is expected to provide the following benefits, among others:
●
Improved Investor Alignment. The separation is intended to allow investors to separately value each company based on its distinctive investment identity. Our business differs from Resideo’s other businesses in important respects. These differences include each respective business’ core competencies, business model, strategic focus and capital and R&D expenditure needs. Post-separation, investors will be able to evaluate the merits, performance and prospects of each company on a standalone basis, which we believe will lead to a better appreciation of these characteristics, a more efficient valuation of each respective business and, in turn, more efficient access to the capital markets.
●
Enhanced Strategic and Management Focus, with Improved Operational Agility. The separation is intended to allow each company to more effectively pursue its distinct operating priorities and strategies with greater focus and flexibility. Dedicated boards and management teams will concentrate on each of the companies’ own unique opportunities for long-term growth and profitability, while maintaining a commitment to our culture of continuous improvement.
27
●
Tailored Capital Structures and Capital Allocation Strategies. The separation is intended to allow each business to establish its own optimal capital structure and manage its capital allocation strategy with greater agility and focus. Each company will concentrate financial resources solely on its own operations without having to compete with each other for investment capital. This will enable more efficient, company-specific capital allocation based on profitability, cash flow and growth opportunities, driving innovation and improving growth and returns.
●
Independent Equity Structures and Greater Access to Unique Strategic Opportunities. The separation is intended to create independent equity structures for Resideo and ADI that are aligned with each company’s respective industry and provide each with an enhanced ability to capitalize on unique growth opportunities. In addition, each company will be able to directly access the capital markets and will have more flexibility to pursue growth through selective M&A opportunities that are more closely aligned with each company’s core strategy.
●
Enhanced Talent Management, Recruitment and Retention and Alignment of Management Incentives and Performance. The separation is intended to permit each company to more effectively attract, retain and motivate talent, and to offer stock-based compensation that is more closely aligned to its business model and growth strategy.
We may not achieve these and
other anticipated benefits for a variety of reasons, including, among others:
●
Loss of Joint Purchasing Power and Increased Costs. As a current
part of Resideo, the ADI Global Distribution business benefits from Resideo’s size and purchasing power in procuring certain
goods, services and technologies. After the separation, as a separate, independent entity, ADI may be unable to obtain these goods,
services and technologies at prices or on terms as favorable as those Resideo obtained prior to the separation. We may also incur
costs for certain functions previously performed by Resideo, such as accounting, tax, legal, human resources and other general administrative
functions, that are higher than the amounts reflected in our historical audited combined financial statements or unaudited interim
condensed combined financial statements, which could cause our profitability to decrease.
●
Disruptions to the Business as a Result of the Separation. The actions required to separate our and Resideo’s respective businesses could disrupt our and Resideo’s operations after the separation.
●
Increased Significance of Certain Costs and Liabilities. Certain costs and liabilities that were otherwise less significant to Resideo as a whole will be more significant for us and Resideo after the separation as standalone companies.
●
One-time Costs of the Separation. We (and prior to the separation, Resideo) will incur costs in connection with the transition to being a standalone public company that may include accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring or reassigning our personnel and costs to separate information systems.
28
●
Risk of Failure to Realize Anticipated Benefits of the Separation. We may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others, that: (i) the separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our businesses; and (ii) following the separation, we may be more susceptible to market fluctuations, and other events may be more disadvantageous for us than if we were still part of Resideo, because our businesses will be less diversified than Resideo’s businesses prior to the separation.
●
Limitations on Strategic Transactions. Under the terms of the tax matters agreement that we will enter into with Resideo, for a period of two (2) years following the date of the distribution, we will be restricted from taking certain actions that could cause the distribution or certain related transactions (including certain transactions undertaken as part of the Reorganization Transactions) to fail to qualify as tax-free for U.S. federal income tax purposes or other applicable law. These restrictions may limit our ability to pursue certain strategic transactions or engage in other transactions that might increase the value of our businesses.
If we fail to achieve some
or all of the benefits expected to result from the Spin-Off, or if such benefits are delayed, our businesses, operating results and financial
condition could be adversely affected.
In connection with the Spin-Off, we will
enter into a series of transaction agreements which will allocate assets and liabilities, establish indemnification obligations and govern
the provision of critical services between us and Resideo.
We will depend on a series
of transaction agreements with Resideo following the Spin-Off, including the separation agreement, transition services agreement, employee
matters agreement, tax matters agreement, intellectual property matters agreement, a commercial product purchase agreement and related
reorganization documents. Our business could be adversely affected if we or Resideo do not perform these agreements as expected, if required
consents are not obtained, or when such agreements expire.
While we believe these agreements
reflect reasonable commercial terms, because they will be negotiated while we are a wholly-owned subsidiary of Resideo and before we have
an independent board of directors and management team, the terms of such agreements may not reflect those that would have been obtained
in negotiations with an unaffiliated third party, and we might have achieved more favorable terms in other circumstances. Prior to the
distribution and separation, the Resideo board of directors will have the sole and absolute discretion to determine and change the terms
of the Spin-Off, including the establishment of the record date for the distribution and the distribution date. These changes could be
unfavorable to us. In addition, the Resideo board of directors, in its sole and absolute discretion, may decide not to proceed with the
distribution at any time prior to the distribution date.
We will rely on Resideo to
perform and pay amounts due under these agreements, including its indemnification obligations. If Resideo fails or is unwilling to perform,
we could experience operational disruptions, incur unanticipated costs or losses, or be required to seek alternative arrangements on less
favorable terms. For example, under the transition services agreement, we will rely on Resideo for certain corporate and shared services
for a limited period. Even if Resideo does perform under the terms of the transition services agreement, these services may not fully
meet our needs, our ability to change or reprice them will be limited, and, upon expiration, we may be unable to replace them on comparable
terms, which could increase our costs or impair service quality. We will also be obligated to provide certain services to Resideo during
the transition period, which could divert management attention and resources from our operations.
29
The transfer to us of contracts,
permits and other assets contemplated by the separation agreement may require third-party or governmental consents or provide counterparties
with rights that delay, condition or prevent transfer of such assets to us. In some cases, we and Resideo are joint beneficiaries of existing
contracts and will need counterparties’ consent to split or assign relevant portions of the contracts. Counterparties may seek to
terminate or renegotiate such arrangements on adverse terms or require credit support. If required consents are not obtained on a timely
basis, we may not receive the intended benefits of the contracts and permits allocated to us under the separation agreement, and we may
need to secure alternative arrangements that could be more costly or of lower quality, which could negatively affect our business, financial
condition, results of operations and cash flows.
As these agreements expire,
we will need to establish our own systems and services or third-party replacements. Implementing and transitioning to new systems and
functions, including information technology, finance, tax, treasury, internal audit, investor relations and other corporate capabilities,
is complex, time-consuming and costly. We may not complete these implementations or data transitions on schedule or at expected cost,
and any failure or downtime in our systems or in the services Resideo provides during the transition could impair our ability to operate
effectively, including paying suppliers and employees, executing transactions and timely performing administrative and financial processes,
which could adversely affect our profitability. For more information on our transaction agreements with Resideo, please refer to the section
entitled “Certain Relationships and Related Person Transactions.”
Our inability to resolve favorably any disputes
that arise between us and Resideo with respect to our past and ongoing relationships may adversely affect our operating results.
Disputes may arise between
Resideo and us in a number of areas relating to our ongoing relationships, including:
●
labor, tax, employee benefit, indemnification and other matters arising from our Spin-Off from Resideo;
●
employee retention and recruiting;
●
business combinations involving us; and
●
the nature, quality and pricing of services that we and Resideo have agreed to provide each other.
We may not be able to resolve
potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with an unaffiliated party.
30
Resideo’s plan to separate into two
independent, publicly traded companies is subject to various risks and uncertainties and may not be completed in accordance with the expected
plans or anticipated timeline, or at all, and will involve significant time and expense, which could disrupt or adversely affect our business.
Resideo’s separation
into two independent, publicly traded companies is complex in nature, and unanticipated developments or changes, including changes in
the law, the macroeconomic environment, competitive conditions of Resideo’s markets, regulatory approvals or clearances, the uncertainty
of the financial markets and challenges in executing the Spin-Off, could delay or prevent the completion of the proposed Spin-Off, or
cause the Spin-Off to occur on terms or conditions that are different or less favorable than expected. Additionally, the Resideo board
of directors, in its sole and absolute discretion, may decide not to proceed with the distribution at any time prior to the distribution
date.
The process of completing
the proposed Spin-Off has been and is expected to continue to be time- consuming and involves significant costs and expenses. The Spin-Off
costs may be significantly higher than what we currently anticipate and may not yield a discernible benefit if the Spin-Off is not completed
or is not well executed, or if the expected benefits of the Spin-Off are not realized. Executing the proposed Spin-Off will also require
significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our
business. Other challenges associated with effectively executing the Spin-Off include attracting, retaining and motivating employees during
the pendency of the Spin-Off and following its completion; addressing disruptions to our supply chain, manufacturing, sales and distribution
and other operations resulting from separating Resideo into two independent companies; and separating Resideo’s information
systems.
As of the date of this information statement,
we expect to have outstanding indebtedness at the closing of the Spin-Off of approximately $1,000 million and the ability to incur an
additional $500 million of indebtedness under the revolving facility we expect to be in place upon consummation of the Spin-Off, and in
the future we may incur additional indebtedness. This indebtedness could adversely affect our businesses and our ability to meet our obligations
and pay dividends.
As of the date of this information
statement, we expect to have outstanding indebtedness at the closing of the Spin-Off of approximately $1,000 million, and have the ability
to incur an additional $500 million of indebtedness under the revolving facility we expect to be in place upon consummation of the Spin-Off.
See the section entitled “Description of Material Indebtedness.” This debt could have important adverse consequences to us
and our investors, including:
●
requiring a substantial portion of our cash flow from operations to make interest payments;
●
making it more difficult to satisfy other obligations;
●
increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing;
●
increasing our vulnerability to general adverse economic and industry conditions;
●
reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our businesses;
●
limiting our ability to pay dividends;
●
placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt;
●
limiting our flexibility in planning for, or reacting to, changes in our businesses and industries; and
●
limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase shares of our common stock.
31
Our cash flow from operations
may not be sufficient to service our outstanding debt or to repay the outstanding debt as it becomes due, and we may not be able to borrow
money, sell assets or otherwise raise funds on acceptable terms, or at all, to service or refinance our debt.
We may require additional
capital in the future to finance our growth and development, upgrade and improve our distribution networks and further our marketing and
sales activities, satisfy regulatory and environmental compliance obligations and national approvals requirements, fund acquisitions,
pay ADI preferred stock dividends to the extent we choose to settle these dividends in cash and meet general working capital needs. If
we incur additional debt, the risks described above could increase. In addition, incurrence of additional indebtedness may result in our
failure to maintain credit ratings from independent rating agencies, would adversely affect our cost of capital and could adversely affect
our liquidity and access to the capital markets. If our access to capital were to become constrained significantly, or if costs of capital
increased significantly, due to lowered credit ratings, increased interest rates, prevailing business conditions, financial leverage,
the volatility of the capital markets, decreased investor interest or other factors, our business, financial condition, results of operations
and cash flows could be adversely affected and our ability to fund future development and acquisition activities could be impacted. In
addition, our actual cash requirements in the future may be greater than expected. Our cash flow from operations may not be sufficient
to service our outstanding debt or to repay the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets
or otherwise raise funds on acceptable terms, or at all, to service or refinance our debt. See “Capitalization,” “Unaudited
Pro Forma Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Capital Resources and Liquidity” and “Description of Material Indebtedness.”
The agreements governing our indebtedness
will contain restrictions that may limit our flexibility in operating our business.
In connection with the
Spin-Off, we expect to incur indebtedness in an aggregate principal amount of approximately $1,000 million, which we expect to be governed
by a credit agreement and an indenture. The expected terms of such indebtedness are summarized in the section entitled “Description
of Material Indebtedness” and the forms of the credit agreement and indenture we expect to be in place at closing of the Spin-Off
are filed as exhibits to the registration statement of which this information statement forms a part. We expect the terms of such credit
agreement and indenture to contain covenants that limit our ability to engage in specified types of transactions. These covenants are
expected to include restrictions on actions such as:
●
incurring additional indebtedness or issuing shares of preferred stock;
●
paying dividends on, or repurchasing, our capital stock;
●
making investments or acquisitions;
●
selling or transferring certain assets;
●
creating liens;
●
consolidating, merging, selling or otherwise disposing of all or substantially all of our assets; and
●
entering into certain transactions with our affiliates.
32
In addition, under the
Revolving Facility (as defined below), we expect to be required to maintain a consolidated total net leverage ratio that does not exceed
4.75:1.00, calculated on a quarterly basis beginning with the first fiscal quarter ending after the Spin-Off, as determined on the last
day of the most recent fiscal quarter end, with step-downs to 4.50:1.00, 4.25:1.00, 4.00:1.00 and 3.50:1.00 at the third, fifth, seventh
and ninth, respectively, fiscal quarters ending after the Spin-Off. From and after the ninth fiscal quarter ending after the Spin-Off
the maximum consolidated total net leverage ratio may be increased, at our option, to 4.00:1.00 for the four consecutive fiscal quarters
ending after the consummation of an acquisition that involves aggregate consideration of at least $250 million, subject to certain conditions
and limitations contained in the credit agreement governing the Revolving Facility. We also expect to be required under the Revolving
Facility to maintain a consolidated interest coverage ratio of not less than 2.50:1.00, calculated on a quarterly basis beginning with
the first fiscal quarter ending after the Spin-Off, as determined on the last day of the most recent fiscal quarter end.
As a result of these restrictions,
we may be limited in how we conduct our business and pursue our strategy, unable to raise additional debt financing to operate during
general economic or business downturns or unable to compete effectively or to take advantage of new business opportunities. If market
changes, economic downturns or other negative events occur, our ability to comply with these covenants may be impaired. A breach of any
of these covenants could result in an event of default under the terms of our indebtedness, giving lenders or holders the right to accelerate
the repayment of such debt, which could adversely affect our business, financial condition, results of operations and cash flows. To the
extent we have granted collateral to secure the obligations under such indebtedness, the lenders or holders thereof could foreclose on
such collateral. For additional information regarding the debt financing, please refer to the section entitled “Description of Material
Indebtedness.”
Risks Relating to Our Common Stock and the Securities
Market
We cannot be certain that an active trading
market for our common stock will develop or be sustained after the Spin-Off, and following the Spin-Off, the stock price of our common
stock may fluctuate significantly.
Prior to the completion
of the Spin-Off, there has been no public market for our common stock. We anticipate that on or prior to the record date for the distribution,
trading of shares of our common stock will begin on a “when-issued” basis and will continue through the distribution date.
However, we cannot guarantee that an active trading market will develop or be sustained for our common stock after the Spin-Off, nor
can we predict the prices at which shares of our common stock may trade after the Spin-Off. If an active trading market does not develop,
you may have difficulty selling your shares of our common stock at an attractive price, or at all. In addition, we cannot predict the
prices at which shares of our common stock may trade after the Spin-Off or whether the combined market value of one-half of a share of
our common stock and one share of Resideo common stock will be less than, equal to or greater than the market value of one share of Resideo
common stock prior to the distribution.
Until the market has fully
evaluated Resideo’s businesses without ADI, the price at which each share of Resideo common stock trades may fluctuate more significantly
than might otherwise be typical, even with other market conditions, including general volatility, held constant. Similarly, until the
market has fully evaluated our business as a standalone entity, the prices at which shares of our common stock trade may fluctuate more
significantly than might otherwise be typical, even with other market conditions, including general volatility, held constant. The increased
volatility of our stock price following the distribution may have a material adverse effect on our business, financial condition and results
of operations.
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The market price of our common
stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:
●
our quarterly or annual earnings, or those of other companies in our industry;
●
any downgrade, withdrawal, or other adverse action to our ratings by rating agencies;
●
the failure of securities analysts to cover our common stock after the Spin-Off;
●
actual or anticipated fluctuations in our operating results;
●
success or failure of our business strategies;
●
our level of indebtedness, our ability to make payments on or service our indebtedness and our ability to obtain financing as needed;
●
changes in earnings estimated by securities analysts or our ability to meet those estimates;
●
the operating and stock price performance of other comparable companies;
●
announcements by us or our competitors of significant acquisitions or dispositions;
●
changes to the regulatory and legal environment in which we operate;
●
changes in accounting standards, policies, guidance, interpretations or principles;
●
results from any material litigation or government investigation;
●
actual or anticipated fluctuations in commodities prices;
●
overall market fluctuations and domestic and worldwide economic conditions; and
●
other factors described in these “Risk Factors” and elsewhere in this information statement.
Stock markets in general have
experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations
may adversely affect the trading price of our common stock.
34
There may be substantial and rapid changes
in our stockholder base, which may cause our stock price to fluctuate significantly.
Many investors holding shares
of Resideo common stock may hold that stock because of a decision to invest in a company with Resideo’s profile. Following the Spin-Off,
the shares of ADI common stock held by those investors will represent an investment in a company with a different profile. This may not
be aligned with a holder’s investment strategy and may cause the holder to sell the shares rapidly. As a result, the price of ADI
common stock may decline or experience volatility as ADI’s stockholder base changes.
A significant number of shares of our common
stock are or will be eligible for future sale and expected to be freely tradable without restriction, which may cause the market price
of our common stock to decline.
Upon completion of the
separation and distribution, ADI will have an aggregate of approximately 75,751,181 shares of common stock outstanding. Other than shares
held by our affiliates, we expect that virtually all of those shares will be freely tradable without restriction or registration under
the Securities Act. We are unable to predict whether large amounts of ADI common stock will be sold in the open market following the
Spin-Off. We are also unable to predict whether a sufficient number of buyers of ADI common stock with demand for shares of ADI common
stock will exist to purchase such shares of ADI common stock at attractive prices. It is possible that Resideo common stockholders will
sell the shares of ADI common stock they receive in the distribution for various reasons. For example, such stockholders may not believe
that ADI’s business profile or its level of market capitalization as an independent company fits their investment objectives. The
sale of significant amounts of ADI common stock or the perception in the market that this will occur may lower the market price of ADI
common stock.
If we are unable to implement and maintain
effective internal control over financial reporting or disclosure controls and procedures in the future, investors may lose confidence
in the accuracy and completeness of our financial reports and other market disclosures and the market price of our common stock may be
negatively affected.
Our financial results previously
were included within the combined results of Resideo, and we believe that our reporting and control systems were appropriate for those
of subsidiaries of a public company.
However, we were not directly
subject to the reporting and other requirements of the Exchange Act. As a result of the distribution, we will be directly subject to reporting
and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act, which will require
annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered
public accounting firm addressing these assessments. In addition, our independent registered public accounting firm will be required to
express an opinion as to the effectiveness of our internal control over financial reporting. At such time, our independent registered
public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control
over financial reporting is documented, designed or operating. In addition, under the Sarbanes Oxley Act, we will also be required to
maintain effective disclosure controls and procedures, where previously such controls and procedures were included within Resideo. These
reporting and other obligations will place significant demands on our management and administrative and operational resources, including
accounting resources. We may not have sufficient time following the Spin-Off to meet these obligations by the applicable deadlines.
35
The process of designing,
implementing and testing the internal control over financial reporting and disclosure controls and procedures required to comply with
these obligations is time consuming, costly and complicated. If we identify material weaknesses in our internal control over financial
reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or to assert that
our internal control over financial reporting or disclosure controls and procedures are effective or if our independent registered public
accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may
lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively
affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory
authorities, which could limit ADI’s ability to access the global capital markets and could have a material adverse effect on our
business, financial condition, results of operations, cash flows or the market price of ADI securities.
Moreover, even if we were
to conclude, and our auditors were to concur, that following the Spin-Off our internal control over financial reporting provided reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with GAAP, because of its inherent limitations, internal control over financial reporting might not prevent or detect fraud or misstatements.
This, in turn, could have an adverse impact on trading prices for shares of our common stock, and could adversely affect our ability to
access the capital markets.
We cannot guarantee the payment of dividends
on our common stock, or the timing or amount of any such dividends.
We have not yet determined
whether or the extent to which we will pay any dividends on our common stock. The payment of any dividends in the future, and the timing
and amount thereof, to our stockholders will fall within the discretion of our Board. The Board’s decisions regarding the payment
of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive
covenants in our then existing debt agreements, industry practice, legal requirements and other factors that the Board deems relevant.
For more information, please refer to the section entitled “Dividend Policy.” Our ability to pay dividends will depend on
our ongoing ability to generate cash from operations and on our access to the capital markets. We cannot guarantee that we will pay a
dividend in the future or continue to pay any dividends if we commence paying dividends.
Your percentage ownership in us may be diluted
in the future.
In the future, your percentage
ownership in us may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including equity
awards that we will be granting to our directors, officers and employees in connection with the Spin-Off. See the section entitled “Executive
Compensation—Compensation Discussion and Analysis—Treatment of Outstanding Equity Awards Resulting from the Distribution.”
As of the date of this information statement, the exact number of shares of our common stock that will be subject to such equity awards
is not determinable, and, therefore, it is not possible to determine the extent to which your percentage ownership in us could be diluted
as a result of the grant of such equity awards. In addition, it is anticipated that our Compensation Committee will grant additional equity
awards to our employees and directors after the distribution, from time to time, under our equity compensation plans. These additional
awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock.
36
In addition, our certificate of incorporation will authorize us to
issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designation, powers, preferences
and relative, participating, optional and other special rights, including preferences over our common stock respecting dividends and distributions,
as the Board generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce
the value of our common stock. For example, we could grant the holders of preferred stock the right to elect some number of our directors
in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption
rights or liquidation preferences that we could assign to holders of preferred stock could affect the residual value of our common stock.
Please refer to the section entitled “Description of Capital Stock” and to “Risks Relating to Our Common Stock and the
Securities Market—The ADI preferred stock we expect to issue in connection with the Spin-Off will have rights, preferences
and privileges that are not held by, and are preferential to, the rights of our common stock and will reduce the relative voting power
of the holders of our common stock.”
The ADI preferred stock we expect to issue
in connection with the Spin-Off will have rights, preferences and privileges that are not held by, and are preferential to, the rights
of our common stock and will reduce the relative voting power of the holders of our common stock.
In connection with the Spin-Off, Resideo will enter into an exchange
agreement (the “Exchange Agreement”) with the Preferred Stockholders providing for the exchange by the Preferred Stockholders
of shares of Resideo preferred stock held by them for shares of ADI preferred stock. See “Certain Relationships and Related
Person Transactions—Exchange Agreement, Shareholders Agreement and ADI Preferred Stock Exchange” and “Description of
Capital Stock.” We have approved the ADI preferred stock exchange and CD&R Holdings as an “interested stockholder”
for purposes of Section 203 of the DGCL such that, without limiting the standstill to which CD&R Holdings is subject, Section 203
of the DGCL will not be applicable to any business combination with CD&R Holdings.
The ADI preferred stock will
rank senior to the shares of our common stock with respect to dividend rights and with respect to rights on liquidation, winding-up and
dissolution. Holders of shares of ADI preferred stock will be entitled to cumulative dividends which are payable quarterly in arrears,
will accrue on a daily basis from the issuance date of such shares and are payable at the Company’s option either (i) in cash
or (ii) in-kind (by adding the dividend to the Accumulated Amount (as defined in the ADI Certificate of Designations) of such shares),
at a rate of 7.00% per annum, subject to adjustment as described elsewhere in this information statement and as set forth in the ADI Certificate
of Designations a form of which has been attached as an exhibit to this information statement. Holders of ADI preferred stock are also
entitled to receive certain dividends declared or paid on the Company common stock on an as-converted basis. No dividends will
be payable to holders of shares of Company common stock unless the full dividends are paid at the same time to the holders of the ADI
preferred stock. See “Certain Relationships and Related Person Transactions—Exchange Agreement, Shareholders Agreement and
ADI Preferred Stock Exchange.”
37
Certain of the preferential
rights belonging to the ADI preferred stock could result in divergent interests between the holders of the ADI preferred stock and our
common stockholders. In addition, our obligations to pay regular dividends to the holders of the ADI preferred stock (which we may elect
to pay in cash or in-kind) or the exercise of any of our optional redemption rights with respect to the outstanding ADI preferred stock
could, if paid in cash, impact our liquidity and reduce the amount of cash available for working capital, capital expenditures, growth
opportunities, acquisitions and other general corporate purposes.
The CD&R Group will hold a significant
equity interest in our business and may exercise influence over us, including through its ability to designate up to two directors to
our Board, and its interests as a preferred equity holder may diverge from, or even conflict with, the interests of the other holders
of our common stock.
The CD&R Group will
beneficially own shares of our common stock and ADI preferred stock, which, taken together on an as-converted basis, will represent approximately
19.69% of our total voting power upon completion of the Spin-Off. As a result, the CD&R Group may have the indirect ability to influence
our rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings, the inability
of our stockholders to act by written consent and the right of the Board to issue preferred stock without stockholder approval. In addition,
under the ADI Certificate of Designations, the CD&R Group is entitled to appoint up to two directors to the Board, subject to specified
minimum ownership requirements, and may have the ability to influence our policies and operations. Both Nathan Sleeper and William Galvin are
currently expected to serve as directors upon completion of the Spin-Off. With such representation on our Board, the CD&R Group has
influence over the appointment of management and any action requiring the vote of our board of directors, including significant corporate
action such as mergers and sales of substantially all of our assets. Additionally, for so long as the Preferred Stockholders own ADI
preferred stock, certain matters will require the approval of the Preferred Stockholders, including: (1) amendments to our certificate
of incorporation, the certificate of designations for the ADI preferred stock or our bylaws that would alter or change the terms or the
powers, preferences, rights or privileges of the ADI preferred stock as to affect them adversely; (2) authorizing, creating, increasing
the authorized amount of or issuing any class or series of equity securities that rank senior to or on par with the ADI preferred stock;
(3) increasing or decreasing the authorized number of shares of ADI preferred stock; (4) amending certain debt financing documents to
include limitations on our ability to accrue dividends on the preferred stock that are more restrictive in any material respect than
those set forth in our existing debt financing documents; or (5) adopting any plan of liquidation or filing any voluntary petition for
bankruptcy, receivership or any similar proceeding. The CD&R Group is in the business of making or advising on investments in companies,
including businesses that may directly or indirectly compete with certain portions of our business. In addition, the CD&R Group may
have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their
overall equity investment and have a negative impact on holders of our common stock as a whole. See “Certain Relationships and
Related Person Transactions—Exchange Agreement, Shareholders Agreement and ADI Preferred Stock Exchange.”
38
Certain provisions in our certificate of
incorporation and bylaws, and of Delaware law, may prevent or delay an acquisition of our company, which could decrease the trading price
of our common stock.
Our certificate of incorporation
and bylaws will contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover
bids and to encourage prospective acquirers to negotiate with the Board rather than to attempt an unsolicited takeover not approved by
the Board. These provisions include, among others:
●
special meetings of stockholders may be called by (i) the Chairman of our Board, (ii) a majority of our Board or (iii) a stockholder, or a group of stockholders, owning a twenty-five percent (25%) or more “net long position,” as defined in the bylaws, of our outstanding stock for at least 30 days, provided that such stockholder(s) satisfy the requirements set forth in the bylaws;
●
the inability of our stockholders to act by written consent;
●
the inability of our stockholders to aggregate or cumulate votes for a director nominee;
●
rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;
●
the right of the Board to issue preferred stock without stockholder approval;
●
the ability of our directors to fill vacancies (including those resulting
from an enlargement of the Board) on the Board;
●
the requirement that the affirmative vote of stockholders holding at least a majority of our voting stock then outstanding is required to amend our bylaws and certain provisions in our certificate of incorporation;
●
until the election of directors at our annual stockholder meeting in 2032, our stockholders may remove directors only for cause; and
●
until our annual stockholder meeting in 2032, our Board will be divided into three classes, with each class consisting, as nearly as may be possible, of one-third of the total number of directors, which could have the effect of making the replacement of incumbent directors more time consuming and difficult.
In addition, because we have
not chosen to be exempt from Section 203 of the DGCL, this provision could delay or prevent a change of control that our stockholders
may favor. Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires,
more than 15% of the outstanding voting stock of a Delaware corporation (an “interested stockholder”) shall not engage in
any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year
period following the date on which the person became an interested stockholder, unless (i) prior to such time, the board of directors
of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of such corporation at the time the transaction commenced (excluding for purposes of
determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) the voting stock owned
by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender
or vote stock held by the plan); or (iii) on or subsequent to such time the business combination is approved by the board of directors
of such corporation and authorized at a meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting
stock of such corporation not owned by the interested stockholder.
39
We believe these provisions
will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with the
Board and by providing the Board with more time to assess any acquisition proposal. These provisions are not intended to make our company
immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could
delay or prevent an acquisition that the Board determines is not in the best interests of our company and our stockholders. These provisions
may also prevent or discourage attempts to remove and replace incumbent directors.
Our certificate of incorporation will provide
for an exclusive forum in the Court of Chancery of the State of Delaware for certain disputes between us and our stockholders, and that
the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of
action under the Securities Act.
Our certificate of incorporation
will provide that: (i) unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware
(or, if the Court of Chancery does not have, or declines to accept, jurisdiction, the federal court for the District of Delaware) will
be the sole and exclusive forum for any current or former stockholder (including a current or former beneficial owner) to bring: (A) any
derivative action or proceeding brought on our behalf, (B) any action, suit or proceeding asserting a claim that is based upon a violation
of a duty owed by any of our current or former directors, officers or stockholders to us or our stockholders, (C) any action, suit or
proceeding asserting a claim against us, or any of our current or former directors, officers or stockholders arising pursuant to any provision
of the DGCL (or any successor provision thereto), our certificate of incorporation or bylaws (as either may be amended from time to time),
(D) any action, suit or proceeding asserting a claim related to or involving us that is governed by the internal affairs doctrine or (E)
any action, suit or proceeding asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL;
(ii) unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the
sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act; (iii) any person
or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock will be deemed to have notice of and
consented to these provisions; and (iv) failure to enforce the foregoing provisions would cause us irreparable harm, and we will be entitled
to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.
The choice of forum provisions
may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our
current or former directors, officers, other employees, agents or stockholders, which may discourage such claims against us or any of
our current or former directors, officers, other employees, agents or stockholders and result in increased costs for investors to bring
such a claim. We believe these provisions may benefit us by providing increased consistency in the application of the DGCL and federal
securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration
of cases on a more expedited schedule relative to other forums, and protection against the burdens of multi-forum litigation. While the
Delaware courts have found similar choice of forum provisions to be facially valid, a stockholder may nevertheless seek to bring a claim
in a venue other than those designated in such provisions, and there can be no assurance that such provisions will be enforced by a court
in those other jurisdictions. If a court were to find the choice of forum provisions contained in our amended and restated certificate
of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action
in other jurisdictions, which could adversely affect our business, results of operations, financial condition and prospects.
40
The combined post-Spin-Off value of
one share of Resideo common stock and one-half of a share of ADI common stock may not equal or exceed the pre-distribution value of one
share of Resideo common stock.
As a result of the Spin-Off, we expect the trading price of shares
of Resideo common stock immediately following the Spin-Off to be different from the “regular-way” trading price of Resideo
common stock immediately prior to the Spin-Off because the trading price will no longer reflect the value of ADI. There can be no assurance
that the aggregate market value of one share of Resideo common stock and one-half of a share of ADI common stock following the Spin-Off
will be higher than, lower than or the same as the market value of a share of Resideo common stock if the Spin-Off did not occur.
General Risk Factors
We depend on the recruitment and retention
of qualified personnel, and our failure to attract and retain such personnel could adversely affect our business, financial condition,
results of operations and cash flows.
Our future performance is
highly dependent upon the continued services of our employees and management who have significant industry expertise, including our IT,
software, e-commerce operations, supplier management relations, engineering and design personnel and trained sales force. Our performance
is also dependent on the development of additional personnel and the hiring of new qualified personnel for our operations. Competition
for qualified personnel in our markets is intense; many locations in which we operate have seen competition for talent and increases in
wages, and we may not be successful in attracting or retaining qualified personnel. While none of our U.S. employees are currently covered
by a collective bargaining agreement, any attempt by our employees to organize a labor union could also result in increased legal and
other associated costs. The loss of key employees, our inability to attract new qualified employees or adequately train employees or the
delay in hiring key personnel could negatively affect our business, financial condition, results of operations and cash flows. Additionally,
as part of Resideo, we have been able to leverage Resideo’s historical reputation, performance and brand identity to recruit and
retain key personnel to run and operate our business. As an independent, publicly traded company, we will need to develop new strategies,
and it may be more difficult for us to recruit or retain such key personnel.
Our effective tax rate will be affected
by factors including changes in tax rules, and in the interpretation and application of those rules, in the countries in which we operate.
Our future results of operations
could be adversely affected by changes in the effective tax rate as a result of changes to the various statutory tax rates and rules to
which we are subject and other factors outside our control. Our tax expense includes estimates of tax reserves and reflects other estimates
and assumptions, including assessments of our future earnings which could impact the valuation of our deferred tax assets. Changes in
tax laws or regulations may adversely impact our provision for income taxes. In December 2022, the European Union (EU) approved a directive
requiring member states to incorporate a 15% global minimum tax into their respective domestic laws effective for fiscal years beginning
on or after December 31, 2023. In addition, several non-EU countries have proposed and/or adopted legislation consistent with the global
minimum tax framework, such as Switzerland. Important details of these minimum tax developments are still to be determined and, in some
cases, enactment and timing remain uncertain. Based on current legislation and available guidance, we do not anticipate the Pillar Two
global minimum tax to have a material impact on our financial condition, results of operations, cash flows or effective tax rate in this
fiscal year. The Company continues to assess the overall impact of potential changes as developments occur, consistent with our practice
of monitoring all tax law changes.
41
If our critical accounting estimates are
based on assumptions that change or prove to be incorrect, our results of operations could fall below the expectations of our investors
and securities analysts, resulting in a decline in the trading price of our common stock.
The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our audited
combined financial statements and unaudited interim condensed combined financial statements appearing elsewhere in this information statement.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances,
as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical
Accounting Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities
and equity, and the amount of revenue and expenses. Significant estimates and judgments involve: revenue recognition, including revenue-related
reserves; legal contingencies; valuation of our common stock and equity awards; income taxes; and sales and indirect tax reserves. Our
results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions,
which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline
in the market price of our common stock.
Our ability to raise capital in the future
may be limited and our failure to raise capital may limit our ability to invest in strategic priorities and grow our business.
In the future, we could be
required to raise capital through public or private financing or other arrangements. Such financing may not be available on acceptable
terms, or at all, and our failure to raise capital when needed could harm our business. We may sell common stock, convertible securities
and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any
such securities in subsequent transactions, investors in our common stock may be materially diluted. New investors in such subsequent
transactions could gain rights, preferences and privileges senior to those of holders of our common stock. Debt financing, if available,
may involve restrictive covenants and could reduce our operational flexibility or ability to achieve or maintain profitability. Additionally,
our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions
to, and volatility in, the credit and financial markets in the United States and worldwide, resulting from increased volatility in the
trading markets, or otherwise. If we cannot raise funds on acceptable terms, we may be forced to raise funds on undesirable terms,
our business may contract or we may be unable to grow our business or respond to competitive pressures, any of which could have an adverse
effect on our business, financial condition, results of operations and prospects.
If our goodwill, other intangible assets
and long-lived assets become impaired, we may be required to record a significant charge to earnings.
We test, at least annually,
the carrying value of goodwill for impairment, as discussed in Note 7. Goodwill and Other Intangible Assets, net to the audited
combined financial statements and Note 5. Goodwill and Other Intangible Assets, net to the unaudited interim condensed combined
financial statements included elsewhere in this information statement. We review other intangible assets and long-lived assets for impairment
whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable. The estimates and assumptions
about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results.
If the assumptions used in our analysis are not realized or if there was an adverse change in facts and circumstances, it is possible
that an impairment expense may need to be recorded in the future. If the fair value of our reporting units falls below their carrying
amounts because of reduced operating performance, market declines, changes in the discount rate or other conditions, expenses for impairment
may be necessary. Any such expenses may have a material negative impact on our results of operations. While we were a part of Resideo,
for the years ended December 31, 2025, 2024 and 2023, and the three months ended April 4, 2026 and March 29, 2025, there were no material
impairment expenses taken.
42
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
Certain statements included
in this information statement, in other documents we file with or furnish to the SEC, in our press releases, webcasts, conference calls,
materials delivered to stockholders and other communications, are “forward-looking statements” within the meaning of the U.S.
federal securities laws. All statements other than historical factual information are forward-looking statements, including, without limitation,
statements regarding: the separation; expected future financial and operating performance of, and future opportunities for, the Company
following the separation; anticipated benefits of the separation; the tax treatment of the separation; leadership of the Company following
the separation; tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position
or other financial measures; management’s plans and strategies for future operations, including statements relating to anticipated
operating performance, cost reductions, restructuring activities, new product and service developments, competitive strengths or market
position, acquisitions, divestitures, strategic opportunities, securities offerings, stock repurchases, dividends and executive compensation;
the effects of the separation or the distribution, if consummated, on our business; growth, declines and other trends in markets
we sell into, including the expected impact of trade and tariff policies; new or modified laws, regulations and accounting pronouncements;
impact of climate-related events or transition activities; outstanding claims, legal proceedings, tax audits and assessments and
other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; impact of changes to tax laws;
general economic and capital markets conditions, including expected impact of inflation or interest rate changes; impact of geopolitical
events and other hostilities; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any
other statements that address events or developments that we intend or believe will or may occur in the future. Terminology such as “believe,”
“anticipate,” “will,” “should,” “could,” “intend,” “plan,” “expect,”
“estimate,” “project,” “target,” “may,” “possible,” “potential,”
“forecast” and “positioned” and similar references to future periods are intended to identify forward-looking
statements, although not all forward-looking statements are accompanied by such words. Forward-looking statements are based on assumptions
and assessments made by our management in light of their experience and perceptions of historical trends, current conditions, expected
future developments and other factors they believe to be appropriate. These forward-looking statements are subject to a number of risks
and uncertainties, including but not limited to the risks and uncertainties set forth under “Risk Factors.”
Forward-looking statements
are not guarantees of future performance and actual results may differ materially from the results, developments and business decisions
contemplated by our forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements.
Forward-looking statements speak only as of the date of the information statement, document, press release, webcast, call, materials or
other communication in which they are made (or such earlier date as may be specified in such statement). Except to the extent required
by applicable law, neither Resideo nor we assume any obligation to update or revise any forward-looking statement, whether as a result
of new information, future events and developments or otherwise.
43
DIVIDEND POLICY
We have not yet determined
the extent to which we will pay any dividends on our common stock. However, we expect that we will be required to make preferred dividend
payments under the expected terms of our ADI preferred stock in cash or in-kind. The payment of any dividends on our common stock in the
future, and the timing and amount thereof, is within the discretion of the Board. The Board’s decisions regarding the payment of
dividends on our common stock will depend on many factors, such as our financial condition, earnings, capital requirements, debt service
obligations, restrictive covenants in our then existing debt agreements, industry practice, legal requirements and other factors that
our Board deems relevant. Our ability to pay dividends on our common stock will depend on our ongoing ability to generate cash from operations
and on our access to the capital markets. We cannot guarantee that we will pay a dividend on our common stock in the future or continue
to pay any dividends on our common stock if we commence paying dividends on our common stock.
44
CAPITALIZATION
The following table sets forth
our cash and equivalents and capitalization as of April 4, 2026:
●
on a historical basis; and
●
on a pro forma basis to give effect to the Pro Forma Transactions, as defined in the “Unaudited Pro Forma Combined Financial Statements.”
The following table sets forth
our cash and cash equivalents and capitalization as of April 4, 2026, on a historical basis and a pro forma basis, to give effect to the
Spin-Off and the transactions related to the Spin-Off as further described under “Unaudited Pro Forma Combined Financial Statements,”
as if they occurred on April 4, 2026. The cash and cash equivalents and capitalization information in the following table may not necessarily
reflect what our cash and cash equivalents and capitalization would have been had we been operating as a standalone company as of April
4, 2026. In addition, the information below is not indicative of our future cash and cash equivalents and capitalization.
This table should be read
in conjunction with “Unaudited Pro Forma Combined Financial Statements,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and our unaudited interim condensed combined financial statements and notes thereto
included elsewhere in this information statement.
As of April 4, 2026
Historical
Pro Forma
($ amounts in millions)
Cash and cash equivalents(1)
$ 135
$ 150
Debt:
Long-term debt (including current portion)(2)
987
982
Total debt
987
982
Equity:
Common Stock - $0.001 par value
-
-
Series A Cumulative Convertible Participating Preferred Stock - $0.001 par value
-
150
Additional paid-in capital
-
1,993
Net Parent investment(3)
2,089
-
Accumulated other comprehensive loss, net
(45 )
(45 )
Total equity
2,044
2,098
Total capitalization
$ 3,031
$ 3,080
(1) Concurrent with the date of separation, we expect to have $150 million
in cash and cash equivalents as reflected on our Pro Forma Combined Balance Sheet.
(2)
In
connection with the Spin-Off, we expect to incur indebtedness in an aggregate principal amount
of approximately $1,000 million with debt issuance costs of $18 million, which is expected
to consist of a term credit facility and a series of debt securities. The expected terms
of such indebtedness are summarized in the section entitled “Description of Material
Indebtedness” and the forms of the credit agreement and indenture we expect to be in
place at closing of the Spin-Off are filed as exhibits to the registration statement of which
this information statement forms a part. We intend to make a one-time cash dividend of approximately
$900 million of the net proceeds of the Financing as partial consideration for the contribution
of assets and liabilities to us by Resideo. We will also use the net proceeds to pay related
fees and expenses, with any remainder to be retained for general corporate purposes. We expect
that the credit agreement governing the term credit facility described above will also contain
a revolving credit facility with commitments for borrowings of up to $500 million, which
we expect will be undrawn upon completion of the Spin-Off. We expect that Resideo will use
these cash proceeds to repay a portion of its outstanding indebtedness and related fees and
expenses and, to the extent any proceeds remain after giving effect to such payments, for
general corporate purposes. See “Description of Material Indebtedness,” “Unaudited
Pro Forma Combined Financial Statements,” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations—Capital Resources and
Liquidity.”
(3)
Reflects the Net parent investment impact as a result of the anticipated post-separation and post-distribution capital structure.
45
UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
The following unaudited pro
forma combined financial statements (the “unaudited pro forma combined financial statements”) consist of unaudited pro forma
combined statements of operations for the three months ended April 4, 2026 and the year ended December 31, 2025 and an unaudited pro forma
combined balance sheet as of April 4, 2026.
These unaudited pro forma
combined financial statements were derived from the Company’s historical audited combined financial statements and unaudited interim
condensed combined financial statements included elsewhere in this information statement. The pro forma adjustments give effect to the
Spin-Off and related transactions described in the section of this information statement entitled “The Separation and Distribution.”
The unaudited pro forma combined statements of operations for the three months ended April 4, 2026 and the year ended December 31, 2025
give effect to the Spin-Off and related transactions as if they had occurred on January 1, 2025, the first day of fiscal 2025. The unaudited
pro forma combined balance sheet gives effect to the Spin-Off and related transactions as if they had occurred on April 4, 2026, our latest
statement of financial position date. References to the “Company” or “ADI” in this section and in the following
unaudited pro forma combined financial statements and our audited combined financial statements and unaudited interim condensed combined
financial statements included in this information statement shall mean Resideo’s ADI Global Distribution business and references
to “Resideo” shall mean Resideo Technologies, Inc.
The unaudited pro forma combined
financial statements have been prepared to reflect transaction accounting and autonomous entity adjustments to present the financial condition
and results of operations as if we were a separate standalone entity. In addition, the unaudited pro forma combined financial statements
include a presentation of management adjustments that management believes are necessary to enhance an understanding of the pro forma effects
of the transaction. The unaudited pro forma combined financial statements give effect to the following transactions, which we refer to
as the “Pro Forma Transactions”:
●
the impact of the consummation of the Spin-Off and the transactions
contemplated by the separation agreement, the tax matters agreement, the transition services agreement, the commercial product purchase
agreement, the employee matters agreement, the intellectual property matters agreement, shareholder related agreements and other commercial
agreements between ADI and Resideo and the provisions contained therein;
●
the anticipated post-separation capital structure of
ADI, including (i) the issuance of approximately 75,362,906 shares of our common stock, based on the number of shares of Resideo common stock outstanding as of April 4, 2026, to holders of Resideo
common stock, (ii) the issuance of shares of ADI preferred stock to Resideo and the exchange of ADI preferred stock for shares of
Resideo preferred stock pursuant to the Exchange Agreement and (iii) the Financing;
●
differences between our audited historical combined balance sheet prepared on a carve-out basis and assets and liabilities expected to be contributed by Resideo to us pursuant to the separation agreement;
46
●
the incremental income and costs, including transaction expenses, that ADI expects to incur as an autonomous entity and that are specifically related to the Spin-Off; and
●
other adjustments described in the notes to the unaudited pro forma combined financial statements.
The unaudited pro forma combined
financial statements were prepared in accordance with Article 11 of Regulation S-X.
The unaudited pro forma combined
financial statements are subject to the assumptions and adjustments described in the accompanying notes.
In connection with the separation,
we expect to enter into a separation agreement, tax matters agreement, transition services agreement, commercial product purchase agreement,
employee matters agreement and other transaction and shareholder related agreements with Resideo, pursuant to which Resideo and we will
provide to each other certain specified services on a temporary basis, including various information technology, financial and administrative
services. The charges for the transition services are based on arm’s length terms. Any incremental costs expected to be incurred
from the transition services agreement are reflected as an autonomous entity adjustment.
Our historical audited combined financial statements and unaudited
interim condensed combined financial statements, which were the basis for the unaudited pro forma combined financial statements, were
prepared on a carve-out basis and were derived from Resideo’s historical accounting records as we did not operate as a separate,
independent company for the periods presented. Accordingly, such financial information reflects an allocation of certain corporate costs,
such as corporate executives, finance, legal, audit, mergers and acquisitions, human resources, information technology, insurance, employee
benefits, and other expenses that are either specifically identifiable or clearly applicable to ADI Global Distribution. We believe that
the methods used to allocate expenses are reasonable; however, the allocations may not be indicative of actual expenses that would have
been incurred had we operated as an independent, publicly traded company for the periods presented. See Note 16. Related Party Transactions
to the audited combined financial statements and Note 15. Related Party Transactions to the unaudited interim condensed combined
financial statements included elsewhere in this information statement for further information on the allocation of corporate costs.
The unaudited pro forma combined financial statements are based upon available
information and assumptions, including those described in the accompanying notes, that we believe are reasonable and supportable given
the information and estimates available at this time. However, these adjustments are subject to change as the terms of the Pro Forma Transactions
are finalized. The unaudited pro forma combined financial statements have been presented for informational purposes only. The pro forma
information is not necessarily indicative of our results of operations or financial condition had the Spin-Off and the related transactions
been completed on the dates assumed and should not be relied upon as a representation of our future performance or financial position
as a separate public company.
The following unaudited pro forma combined financial statements should
be read in conjunction with our historical audited combined financial statements and unaudited interim condensed combined financial statements
and accompanying notes included elsewhere in this information statement and the sections of this information statement entitled “Capitalization,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Certain Relationships
and Related Person Transactions,” and “The Separation and Distribution.” For factors that could cause actual results
to differ materially from those presented in the unaudited pro forma combined financial statements, see “Cautionary Statement Concerning
Forward-Looking Statements” and “Risk Factors” included elsewhere in this information statement.
47
ADI Global Distribution
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
($ and shares in millions, except per share amounts)
As of April 4, 2026
Historical
Transaction
Accounting
Adjustments
Notes
Autonomous
Entity
Adjustments
Notes
Pro
Forma
ASSETS
Current assets:
Cash and cash equivalents
$ 135
15
(a)
-
$ 150
Accounts receivable, net
703
-
-
703
Inventories, net
1,036
-
-
1,036
Other current assets
146
-
-
146
Total current assets
2,020
15
-
2,035
Property, plant and equipment, net
107
-
-
107
Goodwill
1,065
-
-
1,065
Intangible assets, net
725
-
-
725
Operating lease right-of-use assets
226
-
-
226
Other assets
13
-
-
13
Total assets
$ 4,156
15
-
$ 4,171
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$ 610
-
-
$ 610
Accrued liabilities
148
(3 )
(b), (g)
-
145
Current portion of operating lease liabilities
37
-
-
37
Due to related parties - current
59
(59 )
(d)
-
-
Total current liabilities
854
(62 )
-
792
Long-term debt
981
(5 )
(b)
-
976
Non-current portion of operating lease liabilities
200
-
-
200
Deferred tax liabilities
60
29
(j)
-
89
Other liabilities
17
(1 )
(d)
-
16
Total liabilities
2,112
(39 )
-
2,073
Equity
Common stock: $0.001 par value
-
-
(f)
-
-
Series A Cumulative Convertible Participating Preferred Stock: $0.001 par value
-
150
(g)
-
150
Additional paid-in capital
-
1,993
(i)
-
1,993
Net parent investment
2,089
(2,089 )
(h)
-
-
Accumulated other comprehensive loss, net
(45 )
-
-
(45 )
Total equity
2,044
54
-
2,098
Total liabilities and equity
$ 4,156
15
-
$ 4,171
See the accompanying notes to the unaudited pro
forma combined financial statements.
48
ADI Global Distribution
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
($ and shares in millions, except per share
amounts)
Three Months Ended April 4, 2026
Historical
Transaction
Accounting
Adjustments
Notes
Autonomous
Entity
Adjustments
Notes
Pro
Forma
Notes
Net revenue
$ 1,206
-
-
$ 1,206
Cost of goods sold
950
-
-
950
Gross profit
256
-
-
256
Operating expenses:
Selling, general and administrative expenses
199
-
-
199
Research and development expenses
12
-
-
12
Intangible asset amortization
24
-
-
24
Transaction related expenses
8
-
-
8
Restructuring expenses
-
-
-
-
Total operating expenses
243
-
-
243
Income from operations
13
-
-
13
Indemnification Agreement expense
-
-
-
-
Interest expense
17
1
(c), (d)
-
18
Interest income
(2 )
1
(c), (d)
-
(1 )
(Loss) income before taxes
(2 )
(2 )
-
(4 )
(Benefit from) provision for income taxes
(1 )
-
-
(1 )
Net (loss) income
(1 )
(2 )
-
(3 )
Less: preferred stock dividends
-
(3 )
(m)
-
(3 )
Net (loss) income available to common stockholders
$ (1 )
(5 )
-
$ (6 )
Net income (loss) per common share
Basic
$ (0.08 )
(l)
Diluted
$ (0.08 )
(l)
Weighted average common shares outstanding
Basic
75
(l)
Diluted
75
(l)
See the accompanying notes to the unaudited pro
forma combined financial statements.
49
ADI Global Distribution
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
($ and shares in millions, except per share
amounts)
Year Ended December 31, 2025
Historical
Transaction
Accounting
Adjustments
Notes
Autonomous
Entity
Adjustments
Notes
Pro
Forma
Notes
Net revenue
$ 4,784
-
-
$ 4,784
Cost of goods sold
3,719
-
-
3,719
Gross profit
1,065
-
-
1,065
Operating expenses:
Selling, general and administrative expenses
752
-
3
(n)
755
Intangible asset amortization
95
-
-
95
Transaction related expenses
16
-
-
16
Restructuring, impairment and extinguishment costs
9
(1 )
(c)
-
8
Research and development expenses
39
-
-
39
Total operating expenses
911
(1 )
3
913
Income from operations
154
1
(3 )
152
Indemnification Agreement expense
364
(364 )
(e)
-
-
Other (income) expense, net
(2 )
-
-
(2 )
Interest expense
50
21
(c), (d)
-
71
Interest income
(8 )
5
(c), (d)
-
(3 )
(Loss) income before taxes
(250 )
339
(3 )
86
Provision for income taxes
11
20
(k)
(1 )
(o)
30
Net (loss) income
(261 )
319
(2 )
56
Less: preferred stock dividends
-
(11 )
(m)
-
(11 )
Less: undistributed income allocated to preferred stockholders
-
(5 )
(m)
-
(5 )
Net (loss) income available to common stockholders
$ (261 )
303
(2 )
40
Net income (loss) per common share
Basic
$ 0.53
(l)
Diluted
$ 0.53
(l)
Weighted average common shares outstanding
Basic
75
(l)
Diluted
75
(l)
See the accompanying notes to the unaudited pro
forma combined financial statements.
50
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
For further information regarding the historical combined financial
statements, please refer to the unaudited interim condensed combined financial statements and the audited combined financial statements
included elsewhere in this information statement. The unaudited pro forma combined balance sheet as of April 4, 2026 and unaudited pro
forma combined statements of operations for the three months ended April 4, 2026 and the year ended December 31, 2025, include adjustments
related to the following ($ in millions):
Transaction Accounting Adjustments:
(a)
Reflects a pro forma adjustment to cash and cash
equivalents for approximately $1,000 million of borrowings expected to be incurred in connection with the separation pursuant
to the Financing, net of anticipated debt issuance costs and deferred financing fees of $18 million for a net amount of $982 million.
We also expect to make a one-time cash dividend of $900 million of the net proceeds of the Financing to Resideo as partial consideration
for assets transferred to us in connection with the separation and a one-time cash adjustment of $67 million pursuant to the
separation agreement. The actual one-time cash adjustment is subject to change based on final cash at the spin date. After giving
effect to the separation and the Financing, we will retain cash and cash equivalents of $150 million.
The table below
summarizes adjustments to Cash and cash equivalents:
(in millions)
As of
April 4,
2026
Cash received from Financing, net
$ 982
Less: cash dividend of net proceeds from Financing to Resideo
(900 )
Less: cash adjustment distribution to Resideo pursuant to separation agreement
(67 )
Total pro forma adjustment to cash and cash equivalents
$ 15
(b)
Reflects adjustments for indebtedness
which is expected to be comprised of a secured term loan facility in an aggregate principal amount of $600 million and senior unsecured
notes in an aggregate principal amount of $400 million for a total of $1,000 million. The expected terms of such indebtedness are
summarized in the section entitled “Description of Material Indebtedness” and the forms of the credit agreement and indenture
we expect to be in place at closing of the Spin-Off are filed as exhibits to the registration statement of which this information
statement forms a part. The adjustments also assume that we will enter into a secured revolving credit facility in an aggregate committed
amount of $500 million and with a maturity of no more than five years. However, the facility is not expected to be utilized at the
completion of the Spin-Off.
This adjustment reflects the removal of the
allocated long-term debt of $981 million, allocated short-term debt of $6 million and allocated accrued interest of $6 million which
was attributed to the Company historically due to the Company being jointly and severally liable for these obligations and is not expected
to continue following the Spin-Off.
The table below summarizes the pro forma adjustment to long-term debt:
(in millions)
As of
April 4,
2026
Cash received from Financing, net
$ 982
Less: allocated long-term debt
(981 )
Less: current portion of net proceeds from Financing
(6 )
Total pro forma adjustment to long-term debt
$ (5 )
The table below summarizes the pro forma adjustment to accrued liabilities:
(in millions)
As of
April 4,
2026
Current portion of net proceeds from financing
$ 6
Less: allocated short-term debt
(6 )
Less: allocated accrued interest
(6 )
Total pro forma adjustment to accrued liabilities
$ (6 )
51
(c)
Adjustment reflects estimated interest expense for
the three months ended April 4, 2026 and the year ended December 31, 2025 related to the change in capital structure described in notes
(a) and (b) above:
(in millions)
For the
Three Months
Ended
April 4,
2026
For the Year Ended
December 31, 2025
Interest expense attributable to Financing
$ 18
$ 71
Less: allocated third-party interest expense
(16 )
(44 )
Total pro forma adjustment to interest expense attributable to Financing
$ 2
$ 27
Interest expense was calculated
utilizing an estimated weighted average interest rate of approximately 6.78% per annum. A 1/8 percent variance in the assumed interest
rate on the floating rate indebtedness would change interest expense by $1 million and $0 million for the year ended December 31,
2025 and the three months ended April 4, 2026, respectively.
In addition, this adjustment reflects the removal of allocated interest
income related to cash flow hedges of $2 million and the removal of allocated losses on extinguishment of debt presented in Restructuring,
impairment and extinguishment costs of $1 million for the year ended December 31, 2025 which was attributed to the Company historically
due to the Company being jointly and severally liable for these obligations, which is not expected to continue following the Spin-Off.
The allocated interest income related to the cash flow hedges was not material and there was no extinguishment of debt for the three months
ended April 4, 2026.
(d)
Reflects settlement of related-party balances not expected to remain post-Spin-Off.
The remaining $59 million in Due to related parties – current and the $1 million in other liabilities are expected to be settled
in cash prior to the closing of the Spin-Off. In addition, this adjustment reflects the removal of interest expense associated with these
arrangements of $1 million and $6 million for the three months ended April 4, 2026 and the year ended December 31, 2025, respectively.
This adjustment also reflects the removal of interest income of $1 million and $3 million associated with these arrangements during the
three months ended April 4, 2026 and the year ended December 31, 2025, respectively.
(e)
Represents the removal of $364 million, recorded in Indemnification
Agreement expense related to allocations of Resideo’s obligations under the Indemnification Agreement, which were attributed to
the Company for the year ended December 31, 2025, historically due to joint-and-several liability but will not be assumed on a go-forward
basis. On August 13, 2025, Resideo made a one-time cash payment to settle its obligations, and the Indemnification Agreement was terminated
which enabled the ability to execute the separation. Resideo is no longer required to make any further payments under the Indemnification
Agreement and the associated affirmative and negative covenants no longer apply. See “Management’s Discussion and Analysis
of Financial Condition and Results of Operations—Capital Resources and Liquidity—Indemnification Agreement.” As the
Indemnification Agreement was terminated in the fiscal year ended December 31, 2025, there was no Indemnification Agreement expense recorded
for the three months ended April 4, 2026.
52
(f)
Reflects the issuance of 75,362,906 shares of our common stock
with a par value of $0.001 per share pursuant to the separation agreement. We have assumed the number of outstanding shares of our common
stock based on the number of shares of Resideo’s common stock outstanding as of April 4, 2026 and an assumed distribution ratio
of one share of our common stock for every two shares of Resideo common stock. The actual number of shares issued will not be known until
the record date for the distribution.
(g)
Reflects the issuance of 150,000 shares of ADI preferred stock
with a par value of $0.001 per share and a carrying value of $150 million. Holders of Resideo preferred stock will exchange a portion
of Resideo preferred stock for ADI preferred stock in connection with the Spin-Off. As of April 4, 2026, the accrued dividends of the
ADI preferred stock are $3 million and reflected in accrued liabilities.
(h)
Adjustment reflects the reclassification of Parent’s net investment in ADI to Additional paid-in capital.
(i)
The Additional paid-in capital adjustments are summarized below:
(in millions)
As of
April 4,
2026
Net parent investment reclassification (h)
$ 2,089
Net impact of cash distribution to Resideo (a)
15
Net assets transferred to ADI (b) (d) (g) (j)
39
ADI common stock issuance (f)
-
ADI preferred stock issuance (g)
(150 )
Total pro forma adjustment to Additional paid-in capital
$ 1,993
(j)
Reflects
an adjustment for deferred tax liabilities of $29 million related to certain tax attributes included within the historical unaudited
interim condensed combined financial statements that may not be transferred to ADI.
53
(k)
Reflects the tax effect of transaction
pro forma adjustments using the applicable statutory income tax rates within the respective tax jurisdictions
for the year ended December 31, 2025. The tax effect of transaction pro forma adjustments are not
material for the three months ended April 4, 2026. The pro forma taxes have not been adjusted to
reflect any change in our effective tax rate subsequent to the distribution. The applicable tax rates
could be impacted depending on many factors subsequent to the transaction and may be materially different
from the pro forma results.
(l)
Pro forma basic and diluted earnings per share and pro forma weighted-average
basic and diluted shares outstanding for the three months ended April 4, 2026 and the year ended December 31, 2025 reflects 75,362,906
of ADI common stock which are expected to be outstanding upon completion of the Spin-Off based on the number of shares of Resideo common
stock outstanding as of April 4, 2026. The actual number of shares of our common stock outstanding immediately following the distribution
will depend on the actual number of shares of Resideo common stock outstanding on the record date. The actual dilutive effect following
the completion of the Spin-Off will depend on various factors such as the impact of Resideo and ADI equity-based compensation arrangements.
(m)
The unaudited pro forma condensed financial information assumes the
issuance of 150,000 shares of ADI preferred stock in connection with the Spin-Off as discussed in note (g) above. Accrued and
unpaid dividends on the preferred stock are assumed to accrue at an annual rate of 7.00% and are reflected as a reduction to pro forma
net income attributable to ADI common stockholders for purposes of computing pro forma basic earnings per share of ADI common stock. The
dilutive effect of the ADI preferred stock is calculated using the if-converted method.
Autonomous Entity
Adjustments:
(n)
Reflects the impact of the transition services agreement,
which results in incremental corporate and administrative costs not included in the historical audited combined financial statements.
This adjustment is comprised of a $3 million increase to Selling, general and administrative expense in the unaudited pro forma combined
statements of operations for the year ended December 31, 2025. Incremental corporate and administrative costs in connection with the
transition services agreement are not material for the three months ended April 4, 2026. Actual charges that will be incurred pursuant
to these executed contracts with third-party vendors could be different from these estimates.
(o)
Reflects the income tax impact of the autonomous
entity pro forma adjustments for the year ended December 31, 2025. This adjustment was calculated by applying the applicable statutory
income tax rates to the pre-tax pro forma adjustments. The tax impact for the three months ended April 4, 2026 is not material. The
applicable tax rates could be impacted (either higher or lower) depending on certain factors subsequent to the separation including
the legal entity structure implemented and may be materially different from the pro forma results.
Management Adjustments:
The Company has elected to present management adjustments to the pro
forma financial information and included all adjustments necessary for a fair statement of such information. As a separate public company,
ADI expects to incur incremental costs within certain corporate functions including finance, IT, legal, human resources and other general
and administrative related functions. The Company received the benefit of economies of scale as a single operating and reportable segment
within Resideo; however, in establishing these functions independently, the expenses are expected to be higher than the prior corporate
allocation from Resideo reflected within our historical audited combined financial statements and unaudited interim condensed combined
financial statements.
54
As a separate public company,
ADI expects to incur certain costs in addition to those reflected in the autonomous entity adjustments and described above, including
employee related costs, information technology system costs, corporate governance costs, including board of director compensation and
expenses, audit and other professional services fees, annual report and proxy statement costs, SEC filing fees, transfer agent fees, consulting
and legal fees and stock exchange listing fees. The Company expects to begin recognizing recurring costs at the date of the Spin-Off and
one-time costs are expected to be incurred over a period of 12 to 24 months post-separation.
The Company estimated that it would incur approximately $51 million of
incremental expense (including $28 million of total one-time expenses and $23 million of recurring costs) for the year ended December
31, 2025 as if the Spin-Off had occurred on January 1, 2025. These incremental expenses are in addition to the $7 million of allocated
spin-related transaction expenses within the combined statement of operations. The Company also estimated that it would incur approximately
$8 million of incremental expense (including $3 million of total one-time expenses and $5 million of recurring costs) for the three months
ended April 4, 2026. These incremental expenses are in addition to the $8 million of allocated spin-related expenses within the combined
statement of operations.
We estimated these additional
dis-synergies of recurring and one-time expenses by assessing the resources and associated recurring costs each function (e.g., finance,
information technology, human resources, etc.) will require to stand up and operate as part of a separate publicly traded company. We
expect to address any required resources incremental to the services provided by Resideo under the transition services agreement as described
in note (n) through additional hiring or incremental vendor and other third-party services spend.
The additional expenses have
been estimated based on assumptions that our management believes are reasonable. However, actual additional costs that will be incurred
could differ from these estimates and would depend on several factors, including the economic environment, results of contractual negotiations
with third party vendors, ability to execute on proposed separation plans and strategic decisions made in areas such as selling and marketing,
research and development, information technology and infrastructures. In addition, adverse effects and limitations including those discussed
in the section entitled “Risk Factors” to this document may impact actual costs incurred. We may also decide to increase or
reduce resources or invest more heavily in certain areas in the future, which may result in further differences between management’s
estimates and actual costs incurred in the future.
These management adjustments
include forward-looking information that is subject to the safe harbor protections of the Exchange Act. Please see “Cautionary Statement Concerning
Forward-Looking Statements.” The tax effect has been determined by applying the respective statutory tax rates to the aforementioned
adjustments in jurisdictions where valuation allowances were not required.
The
table below sets forth the management adjustments for the three months ended April 4, 2026:
($ in millions except per share amounts)
Net
loss
Basic
loss
per share
Diluted
loss
per share
Unaudited pro forma combined net earnings(1)
$ (6 )
Management adjustments
(8 )
Tax effect
2
Unaudited pro forma combined net earnings after management adjustments
$ (12 )
$ (0.16 )
$ (0.16 )
Weighted average number of shares of common stock outstanding
Basic
75
Diluted
75
(1)
As shown in the unaudited pro forma combined statement of operations available to common stockholders.
The table below sets forth the management adjustments for the year
ended December 31, 2025:
($ in millions except per share amounts)
Net
income
Basic
earnings
per share
Diluted
earnings
per share
Unaudited pro forma combined net earnings(1)
$ 40
Management adjustments
(51 )
Tax effect
13
Unaudited pro forma combined net earnings after management adjustments
$ 2
$ 0.03
$ 0.03
Weighted average number of shares of common stock outstanding
Basic
75
Diluted
75
(1)
As shown in the unaudited pro forma combined statement of operations available
to common stockholders.
55
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion
and analysis of our financial condition and results of operations is intended to help readers understand the results of our operations
and financial condition for the three months ended April 4, 2026 and March 29, 2025 and the three years ended December 31, 2025, December
31, 2024 and December 31, 2023. It should be read in conjunction with our audited combined financial statements, our unaudited interim
condensed combined financial statements, related notes and other financial information included elsewhere in this information statement.
ADI has historically operated
as a part of Resideo; consequently, standalone financial statements have not historically been prepared. The accompanying audited combined
financial statements and unaudited interim condensed combined financial statements have been derived from Resideo’s historical accounting
records, including the historical cost basis of assets and liabilities comprising ADI, as well as the historical revenues, direct costs
and allocations of indirect costs attributable to the operations of ADI, using the historical accounting policies applied by Resideo.
These audited combined financial statements and unaudited interim condensed combined financial statements do not purport to reflect what
the financial position, results of operations, comprehensive income or cash flows would have been had ADI operated as a separate, standalone
entity during the periods presented. As a result, the discussion of our historical results is not necessarily indicative of the results
that may be expected in the future.
In addition to historical
combined financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs
that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking
statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this information
statement, particularly in “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements.”
Overview and Business Trends
ADI is a global specialty
distributor of professionally installed low-voltage products serving commercial and residential markets through an omnichannel go-to-market
platform. Within North America, ADI is the market-leading distributor in the professionally installed security, fire/life safety and audio-visual
product categories. We offer over 500,000 products from more than 1,000 suppliers across key specialty low-voltage categories with strong
proximity to our customers with a large network of store locations. ADI sells primarily to professional installers, dealers and integrators.
Our global customer base of over 100,000 professionals spans independent contractors, regional and national systems integrators and low-voltage
specialists installing security, fire/life safety, AV and data communications products.
Our omnichannel go-to-market
platform is underpinned by a digital experience designed to deepen customer engagement and broaden our reach. We combine an extensive
third-party product portfolio and deep supplier relationships with a growing suite of exclusive brands and software-based services. These
exclusive brands and services are designed to help our customers build stronger businesses, differentiate our offerings and improve the
end user experience.
ADI Global Distribution is
our sole operating and reportable segment based upon the information used by our chief operating decision maker (“CODM”) in
evaluating the performance of our business and allocating resources and capital.
Outlook
For the remainder of 2026, we anticipate executing our business operations
against a highly dynamic global macroeconomic environment. We are monitoring the litigation and recent ruling from the Court of International
Trade (“CIT”) on the Section 122 tariffs for potential change in status. These policies impact third-party supplier products
and can impact the pricing and purchase costs of the products we distribute. We will continue to take actions to address the cost impact
of tariffs that affect our business; however, rising prices and other macroeconomics factors may lead to lower purchase levels by our
customers. We are monitoring these dynamics closely and will adjust our business operations as appropriate. Also, we anticipate stable
remodeling and upgrade demand across commercial and residential markets. We anticipate slow growth in the U.S. residential housing market
and a moderation of growth in the commercial construction market. In the second quarter of 2025, our margins benefited from raising prices
due to tariffs while much of our inventory was acquired in advance of tariffs; we expect economic conditions in the second quarter of
2026 to be consistent with the first quarter but without this benefit experienced in the second quarter of 2025.
56
Key Factors Affecting Our Performance
We believe our performance
and future success depends on a number of factors that present significant opportunities for us but also pose risks and challenges, including
those discussed below and in the section entitled “Risk Factors.”
Continued Investment in Non-Residential
and Commercial Building
Continued investment in non-residential
buildings—whether new construction, repair, or remodel—drives demand for security, connectivity and workplace technology solutions.
These products have become essential in modern workplaces and small businesses, and our future growth depends in part on our ability to
continue to leverage the investment in non-residential buildings and expand our capabilities in a cost-effective way.
Continued Investment in Residential Building
In our primary North American
market, residential construction activity has softened due to inflationary pressures and higher interest rates. New homes incorporate
more connected technologies for smarter living, fueling the demand for professionally installed home technology solutions. To the extent
new construction accelerates, we expect there to be an increased demand for products in our portfolio and an opportunity for our business.
Disruptions in the housing market can affect our business if builders encounter difficulties that lead to a decrease in the number of
homes they can build and sell or if demand for homes decreases altogether.
Increased Sales of Existing Homes and Renovation
Projections
Home sales and repair and
remodel projects often serve as catalysts for technology upgrades and installations. While current activity remains below recent historical
levels, any rebound in these areas represents a significant opportunity for renewed demand. Any such future opportunity depends on our
ability to capitalize on any such growth through disciplined investment in our product portfolio and our omnichannel go-to-market platform.
Increasingly Rapid Technology Replacement
Cycles
The rapid adoption of cloud-based
solutions and ongoing software innovation are shortening product upgrade cycles. This shorter product lifetime has led to a growing trend
of replacing and renovating technology across multiple categories. Our ability to continually invest in digital innovation and to benefit
from these shorter product cycles through disciplined capital management could impact our future growth.
Increasing Competition
The regions and industries
we serve are highly competitive. We face significant competition from a wide range of companies, including large, diversified companies
with broad geographic footprints, as well as smaller, more specialized companies. Our business strength is predicated on our continued
delivery of innovative products and services through a single omnichannel go-to-market platform. In order to compete in this environment,
we allocate resources to drive innovation in our portfolio through new product launches and extend our global presence so that we can
meet expected demand.
57
Continuing Impacts of Macroeconomic Conditions
Our financial performance is influenced
by macroeconomic factors underlying end market performance in the new construction and the repair and remodel construction industries,
new home sales, existing home sales, employment rates, interest rates and bank lending standards, rising prices and inflation,
impact of tariffs, and supply chain dynamics that can be influenced by geopolitics. The ongoing uncertainty and volatility in the global
macroeconomic environment have affected, and could continue to affect, our visibility toward future performance. While supply chain, trade
dynamics and logistics continued to normalize over 2025, uncertainties remain in 2026 including the potential for changes in inflation
and interest rates, tariffs, increased labor costs, availability of labor, and reduced consumer spending due to softening labor markets,
elevated mortgage rates, unfavorable foreign currency impacts, global conflicts, higher fuel and freight costs and shifts in energy policies.
We typically source around a quarter
of our products from Mexico which are currently exempt from tariffs under the USMCA or specific commodity exceptions. Tariff impacts related
to imported products that are not subject to the USMCA or another exception may be affected by the new tariff surcharge of at least 10%.
Other inflationary pressures include higher fuel and freight costs arising from geopolitical instability, which we have largely absorbed
so far. We will continue to take actions intended to address the cost impact of any tariffs or geopolitical conflict that affect our business.
In light of the volatility of the global macroeconomic landscape, we
employ a variety of strategies aimed at addressing uncertainties like tariffs, inflation, supply chain, labor costs and reduced consumer
spend. For example, when macroeconomic conditions result in customer demand shifting away from a certain product category, we reallocate
our internal resources and goods purchased towards product categories with consistent or growing demand. Further, our diverse portfolio
of product offerings helps guard against volatility as we can thoughtfully deploy our sales and marketing efforts to align with shifting
consumer demand profiles and macroeconomic trends. We also regularly assess our supply chain practices, logistics networks and cost profiles
of our products to reduce inefficiencies and maintain agility in the face of volatility and other macroeconomic factors.
Separation and Distribution
On July 30, 2025, Resideo
announced its intention to separate its ADI Global Distribution business from the remainder of its businesses. On July 1, 2026, the Resideo
Board approved the distribution of 100% of our issued and outstanding shares of common stock on the basis of one share of our common stock
for every two shares of Resideo common stock held as of the close of business on July 20, 2026, the record date for the distribution.
Resideo intends to execute
the separation through a tax-free pro rata distribution to Resideo common stockholders of shares of common stock of ADI. As part of the
separation, Resideo and its subsidiaries expect to conduct an internal reorganization to transfer ADI and its associated assets and liabilities
to ADI. Following the distribution, Resideo common stockholders will own 100% of the outstanding shares of our common stock, and ADI will
be a separate public company from Resideo.
58
For a further discussion of
the conditions pursuant to the separation agreement and the risks and uncertainties associated with the separation and distribution, refer
to the following sections of the information statement, “The Separation and Distribution” and “Risk Factors.”
Relationship with Resideo
Prior to the completion of
the distribution, we are a wholly-owned subsidiary of Resideo, and all of our outstanding shares of common stock are owned by Resideo.
Following the separation and distribution, we and Resideo will operate separately, each as a public company. Historically, we have relied
on Resideo to manage certain of our operations and provide certain services, the costs of which have historically been either allocated
or directly billed to us. Historical costs for such services may not necessarily reflect the actual expenses we would have incurred, or
will incur, as an independent company.
In connection with the Spin-Off, we intend to enter into the separation
agreement and certain other agreements with Resideo, including a transition services agreement, an employee matters agreement, a tax matters
agreement, an intellectual property matters agreement, a commercial product purchase agreement, shareholder related agreements and other
commercial agreements. See “Certain Relationships and Related Person Transactions—Agreements with Resideo.” We generally
expect to be able to utilize Resideo’s services for a transitional period following the Spin-Off before we replace these services
over time with services supplied either internally or by third parties, as Resideo is only obligated to provide the transition services
for limited periods following completion of the Spin-Off.
The expenses for the services we will receive from Resideo initially
and then internally or by third parties may vary from the historical costs directly billed and allocated to us for the same services.
Addressing the needs that arise from becoming a standalone company will require significant resources, including time and attention from
our senior management and others throughout ADI. We will continue to monitor potential separation dis-synergies and we anticipate incurring
certain one-time and ongoing costs associated with creating our own capabilities, as further discussed below. As discussed below, we are
jointly and severally liable for certain third-party debt instruments and other obligations to which Resideo is a party. Accordingly,
a portion of these obligations and the related expenses have been allocated to the Company for the periods presented to the extent the
Resideo balances remained outstanding. These outstanding debt obligations are not expected to transfer to ADI in connection with the Spin-Off.
As a result, our actual long-term liability balances upon completion of the Spin-Off are expected to differ from the amounts reflected
in the historical audited combined financial statements and unaudited interim condensed combined financial statements. All amounts reflected
in our audited combined financial statements and unaudited interim condensed combined financial statements reflect estimated allocations.
Refer to Note 9. Long-Term Debt to the audited combined financial statements and Note 8. Long-Term Debt to the unaudited
interim condensed combined financial statements and Note 10. Indemnification Agreement to the audited combined financial statements
and Note 9. Indemnification Agreement to the unaudited interim condensed combined financial statements. Refer to the sections entitled
“Unaudited Pro Forma Combined Financial Statements” and “Description of Material Indebtedness” for a description
of the indebtedness we expect to be in place upon consummation of the Spin-Off.
59
Future Standalone Company Expenses
As a result of the Spin-Off, we will become subject to the requirements
of the federal and state securities laws and stock exchange requirements. We will have to establish additional procedures and practices
as a standalone public company. As a result, subsequent to the separation, we will incur additional one-time and non-recurring expenses
consisting primarily of employee-related costs, costs to establish certain standalone functions and information technology systems and
other transaction-related costs. Additionally, we will incur incremental costs that arise from becoming a standalone public company, including
costs related to external reporting, internal audit, treasury, investor relations, board of directors and officers, and stock administration,
as well as costs from expanding the services of existing functions, such as information technology, finance, supply chain, human resources,
legal, tax, facilities, branding, security, government relations, community outreach and insurance. In line with our long-term cost strategy,
we will continue to look for operational cost improvement opportunities as a standalone company by utilizing our lean culture and innovative
technologies to drive lower costs and increased productivity levels across our business and corporate functions.
Refer to “Unaudited
Pro Forma Combined Financial Statements” for additional details.
Results of Operations for the Three Months Ended April 4, 2026
and March 29, 2025
This
section discusses the three months ended April 4, 2026, and March 29, 2025 and year-over-year comparisons of these periods.
The following table
represents results of operations on a combined basis for the periods indicated:
Three Months Ended
(in millions, except percentages)
April 4,
2026
March 29,
2025
$ change
% change
Net revenue
1,206
1,121
85
7.6 %
Cost of goods sold
950
879
71
8.1 %
Gross profit
256
242
14
5.8 %
Gross profit margin
21.2 %
21.6 %
(40 ) bps
Operating expenses:
Selling, general and administrative expenses
199
181
18
9.9 %
Research and development expenses
12
8
4
50.0 %
Intangible asset amortization
24
23
1
4.3 %
Transaction related expenses
8
1
7
700.0 %
Restructuring expenses
-
4
(4 )
(100.0 )%
Total operating expenses
243
217
26
12.0 %
Income from operations
13
25
(12 )
(48.0 )%
Indemnification Agreement expense
-
33
(33 )
(100.0 )%
Interest expense
17
8
9
112.5 %
Interest income
(2 )
(2 )
-
0.0 %
Net loss before taxes
(2 )
(14 )
12
(85.7 )%
(Benefit from) provision for income taxes
(1 )
1
(2 )
(200.0 )%
Net loss
(1 )
(15 )
14
(93.3 )%
Net Revenue
Net revenue for the three
months ended April 4, 2026 was $1,206 million, an increase of $85 million, or 7.6%, as compared to the same period in 2025. The increase
was primarily driven by $43 million from favorable price and mix shift, higher sales volumes of $32 million driven by incremental days in the reporting period and average daily
sales growth of 1%, and favorable foreign currency
exchange rates of $15 million.
60
Gross Profit
Gross
profit for the three months ended April 4, 2026 was $256 million, an increase of $14 million, or 5.8%, as compared to 2025, and gross
margin was 21.2% for the three months ended April 4, 2026, down 40 basis points (“bps”) from the prior three month ended
period. The decrease in gross margin was primarily driven by higher duty and freight costs of $5 million.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses for the three months ended April 4, 2026 were $199 million, an increase of $18 million, or 9.9%, as
compared to the same period in 2025. The increase was driven mainly by $15 million due to the incremental days in the year-over-year reporting
period, inflationary impacts and investment in the business, and $3 million of unfavorable foreign currency exchange rates.
Research and Development Expenses
Research
and development expenses for the three months ended April 4, 2026 were $12 million, an increase of $4 million compared to 2025. The increase
was primarily due to incremental costs incurred to develop and introduce new products into the market.
Intangible Asset Amortization
Intangible
asset amortization for the three months ended April 4, 2026 was $24 million, an increase of $1 million as compared to the same period
in 2025.
Transaction Related Expenses
Transaction
related expenses for the three months ended April 4, 2026 were $8 million, an increase of $7 million as compared to the same period in
2025. The increase is primarily due to $8 million of expenses incurred in connection with the ADI Spin-Off including third-party advisory,
consulting, legal and other incremental separation-related costs, offset by a $1 million decrease in expenses related to integration costs
incurred in in the three months ended March 29, 2025 for the Snap One acquisition.
Restructuring Expenses
Restructuring
expenses for the three months ended April 4, 2026 were immaterial and decreased $4 million as compared to the same period in 2025, primarily
due to fewer restructuring actions.
Indemnification Agreement Expense
We
incurred no Indemnification Agreement expense for the three months ended April 4, 2026, a decrease of $33 million compared to the same
period in 2025. The decrease was driven by Resideo’s termination of the Indemnification Agreement with Honeywell in 2025. Refer
to Note 9. Indemnification Agreement to the unaudited interim condensed combined financial statements included elsewhere in this
information statement for additional information.
Interest Expense
Interest expense for the three months ended April 4, 2026 was $17 million,
an increase of $9 million, or 112.5% compared to 2025. The change was due to an increase in the total long-term debt by Resideo through
additional borrowings related to the termination of the Indemnification Agreement and the resulting increase in the allocated debt and
associated interest expense to the Company. Refer to Note 8. Long-Term Debt to the unaudited interim condensed combined financial
statements included elsewhere in this information statement for additional information.
Interest Income
Interest
income for the three months ended April 4, 2026 was $2 million, consistent with the same period in 2025.
61
(Benefit From) Provision for Income Taxes
The
income tax benefit for the three months ended April 4, 2026 was $1 million compared to the income tax expense of $1 million in the same
period in 2025. The changes in income tax expense were primarily driven by a decrease in loss before taxes for the quarter, decrease to
non-deductible expenses related to Indemnification Agreement expense, and a change in discrete stock compensation benefit.
The
effective tax rate increased to 47% for the three months ended April 4, 2026 compared to (3)% for the same period in 2025. The changes
in the effective tax rate were primarily driven by a decrease in loss before taxes, a decrease to non-deductible expenses related to Indemnification
Agreement expense and a change in discrete stock compensation benefit.
Results of Operations for the Years Ended December 31, 2025, 2024, and
2023
This section discusses the years ended December 31, 2025, December 31,
2024 and December 31, 2023 and year-over-year comparisons of these periods.
The following table represents
results of operations on a combined basis for the periods indicated:
Years Ended December 31,
(in millions, except percentages)
2025
2024
$ change
% change
Net revenue
$ 4,784
$ 4,197
$ 587
14.0 %
Cost of goods sold
3,719
3,346
373
11.1 %
Gross profit
1,065
851
214
25.1 %
Gross profit margin
22.3 %
20.3 %
200 bps
Operating expenses:
Selling, general and administrative expenses
752
598
154
25.8 %
Intangible asset amortization
95
55
40
72.7 %
Transaction related expenses
16
45
(29 )
(64.4 )%
Restructuring, impairment and extinguishment costs
9
22
(13 )
(59.1 )%
Research and development expenses
39
17
22
129.4 %
Total operating expenses
911
737
174
23.6 %
Income from operations
154
114
40
35.1 %
Indemnification Agreement expense
364
79
285
360.8 %
Other (income) expense, net
(2 )
4
(6 )
(150.0 )%
Interest expense
50
39
11
28.2 %
Interest income
(8 )
(15 )
7
(46.7 )%
(Loss) income before taxes
(250 )
7
(257 )
(3671.4 )%
Provision for income taxes
11
25
(14 )
(56.0 )%
Net loss
$ (261 )
$ (18 )
$ (243 )
1350.0 %
62
Years Ended December 31,
(in millions, except percentages)
2024
2023
$ change
% change
Net revenue
$ 4,197
$ 3,570
$ 628
17.6 %
Cost of goods sold
3,346
2,902
445
15.3 %
Gross profit
851
668
183
27.4 %
Gross profit margin
20.3 %
18.7 %
160 bps
Operating expenses:
Selling, general and administrative expenses
598
454
144
31.7 %
Intangible asset amortization
55
13
42
323.1 %
Transaction related expenses
45
-
45
N/A
Restructuring, impairment and extinguishment costs
22
13
9
69.2 %
Research and development expenses
17
-
17
N/A
Total operating expenses
737
480
257
53.5 %
Income from operations
114
188
(74 )
(39.4 )%
Indemnification Agreement expense
79
67
12
17.9 %
Other (income) expense, net
4
(5 )
9
180.0 %
Interest expense
39
32
7
21.9 %
Interest income
(15 )
(18 )
3
(16.7 )%
Income before taxes
7
112
(105 )
(93.8 )%
Provision for income taxes
25
50
(25 )
(50.0 )%
Net (loss) income
$ (18 )
$ 62
$ (80 )
(129.0 )%
Net Revenue
2025 compared to 2024
Net revenue for the year ended
December 31, 2025 was $4,784 million, an increase of $587 million, or 14.0%, as compared to the same period in 2024, primarily due to
$446 million of revenue from the acquisition of Snap One, $66 million from higher sales volumes, $64 million from favorable price and
mix shift, and $18 million from favorable currency exchange rates.
2024 compared to 2023
Net revenue for the year ended
December 31, 2024 was $4,197 million, an increase of $628 million, or 17.6%, as compared to the same period in 2023, primarily due to
$553 million of revenue from the acquisition of Snap One, $98 million from higher volumes and favorable foreign currency fluctuations
of $4 million. The increase was partially offset by an unfavorable price impact of $31 million.
Gross Profit
2025 compared to 2024
Gross profit for the year ended December 31, 2025 was $1,065 million, an
increase of $214 million, or 25.1%, as compared to 2024, and gross margin was 22.3% for the year ended December 31, 2025, up 200 bps from
the prior year. The increase in gross margin was primarily driven by favorable impacts from the acquisition of Snap One of 150 bps and
favorable pricing and mix impacts of 100 bps, partly offset by increased freight and duties of 20 bps, and volume impact of 10 bps.
2024 compared to 2023
Gross profit for the year ended December 31, 2024 was $851 million, an
increase of $183 million, or 27.4%, as compared to 2023, and gross margin was 20.3% for the year ended December 31, 2024, up 160 bps from
the prior year. The increase in gross margin was primarily driven by favorable impacts from the acquisition of Snap One of 230 bps, partly
offset by net impacts from competitive pricing pressure and unfavorable business mix of 60 bps, and freight and duties of 10 bps.
63
Selling, General and Administrative Expenses
2025 compared to 2024
Selling, general and administrative
expenses for the year ended December 31, 2025 were $752 million, an increase of $154 million, or 25.8%, as compared to the same period
in 2024. The increase was driven mainly by $109 million of incremental operating expenses from the Snap One acquisition, $41 million of
inflationary impacts and investment in the business, and $4 million of unfavorable foreign currency exchange rates.
2024 compared to 2023
Selling, general and administrative
expenses for the year ended December 31, 2024 were $598 million, an increase of $144 million, or 31.7%, as compared to the same period
in 2023. The increase was driven mainly by $141 million of incremental operating expenses from the Snap One acquisition, and $20 million
of inflationary impacts and investment in the business. This increase was partially offset by lower employee expenses of $13 million from
prior restructuring efforts due to operating expense reduction initiatives.
Intangible Asset Amortization
2025 compared to 2024
Intangible asset amortization
for the year ended December 31, 2025 was $95 million, an increase of $40 million as compared to the same period in 2024. The increase
was primarily due to additional amortization expense of $36 million associated with the new intangibles acquired in the Snap One acquisition,
and $4 million higher amortization primarily related to an increase in capitalized software development.
2024 compared to 2023
Intangible asset amortization
for the year ended December 31, 2024 was $55 million, an increase of $42 million as compared to the same period in 2023. The increase
was primarily due to additional amortization expense of $41 million associated with the new intangibles recorded in purchase accounting
as a result of the Snap One acquisition.
Transaction Related Expenses
2025 compared to 2024
Transaction related expenses
for the year ended December 31, 2025 were $16 million, a decrease of $29 million as compared to the same period in 2024. The decrease
in costs is primarily due to a $36 million decrease in expenses related to integration costs for the Snap One acquisition, offset by $7
million of expenses incurred in connection with the ADI Spin-Off including third-party advisory, consulting, legal and other incremental
separation-related costs.
2024 compared to 2023
Transaction related expenses
for the year ended December 31, 2024 were $45 million, an increase of $45 million as compared to the same period in 2023. These costs
were attributable to third-party diligence, legal and other third-party advisor fees and integration related costs that were incurred
in connection with the Snap One acquisition.
Restructuring, Impairment and Extinguishment
Costs
2025 compared to 2024
Restructuring, impairment
and extinguishment costs for the year ended December 31, 2025 were $9 million, a decrease of $13 million, or 59.1% compared to 2024, primarily
due to fewer restructuring actions.
2024 compared to 2023
Restructuring, impairment
and extinguishment costs for the year ended December 31, 2024 were $22 million, an increase of $9 million, or 69.2%, as compared to the
same period in 2023. The increase primarily reflects higher restructuring expenses of $14 million related to initiatives undertaken in
connection with the Snap One acquisition, and $1 million of allocated debt extinguishment costs associated with Resideo’s multiple
credit agreement amendments during the year. This increase was partially offset by a $6 million decrease in impairment expenses recorded
in 2023.
64
Research and Development Expenses
2025 compared to 2024
Research and development expenses
for the year ended December 31, 2025 were $39 million, an increase of $22 million compared to 2024. The $22 million increase was primarily
due to the full-year inclusion of the acquisition of Snap One, including both employee compensation and third-party professional service
costs.
2024 compared to 2023
Research and development expenses
for the year ended December 31, 2024 were $17 million, up from $0 for the same period in 2023. The expenses resulted from new research
and development activities obtained as part of the Snap One acquisition, including both employee compensation and third-party professional
service costs.
Indemnification Agreement Expense
2025 compared to 2024
Indemnification agreement expense for the year ended December 31, 2025
was $364 million, an increase of $285 million, or 360.8%, as compared to the same period in 2024. The increase was driven by an additional
expense incurred in connection with the termination of the Indemnification Agreement with Honeywell. Refer to Note 10. Indemnification
Agreement to the audited combined financial statements included elsewhere in this information statement for additional information.
2024 compared to 2023
Indemnification agreement expense for the year ended December 31, 2024
was $79 million, an increase of $12 million, or 17.9%, as compared to the same period in 2023. The increase was due to an increase in
the amount allocated to the audited combined financial statements as a result of an increase in amounts estimated to be payable by Resideo
under the Indemnification Agreement.
Other (Income) Expense, Net
2025 compared to 2024
Other (income) expense, net
for the year ended December 31, 2025 was $2 million of income, an increase of $6 million, as compared to $4 million of expense for the
same period in 2024. The change was driven primarily by a $6 million change in the impact of foreign exchange rate fluctuations during
the year ended December 31, 2025.
2024 compared to 2023
Other expenses, net for the
year ended December 31, 2024 were $4 million of expense, an increase of $9 million, as compared to $5 million of income for the same period
in 2023. The change was driven primarily by the impact of foreign exchange rate fluctuations in the year ended December 31, 2024.
Interest Expense
2025 compared to 2024
Interest expense for the year
ended December 31, 2025 was $50 million, an increase of $11 million, or 28.2% compared to 2024. The change was due to an increase in the
total long-term debt by Resideo through additional borrowings related to the termination of the Indemnification Agreement and the resulting
increase in the allocated debt and associated interest expense to the Company. Refer to Note 9. Long-Term Debt to the audited combined
financial statements included elsewhere in this information statement for additional information.
65
2024 compared to 2023
Interest expense for the year
ended December 31, 2024 was $39 million, an increase of $7 million, or 21.9%, as compared to the same period in 2023. The change was due
to an increase in the total long-term debt at Resideo through additional borrowings and the resulting increase in the allocated debt and
associated interest expense to the Company. Refer to Note 9. Long-Term Debt to the audited combined financial statements included
elsewhere in this information statement for additional information.
Interest Income
2025 compared to 2024
Interest income for the year
ended December 31, 2025 was $8 million, a decrease of $7 million, or 46.7%, as compared to the same period in 2024. The change was primarily
due to a decrease of $4 million of allocated interest income related to interest rate swaps and $3 million lower interest on related party
assets.
2024 compared to 2023
Interest income for the year
ended December 31, 2024 was $15 million, a decrease of $3 million, or 16.7%, as compared to the same period in 2023. The change was primarily
due to lower interest income on related party assets.
Provision for Income Taxes
2025 compared to 2024
Provision for income taxes for the year ended December 31, 2025 was $11
million, a decrease of $14 million, or 56.0%, as compared to the same period in 2024. The $14 million decrease in tax expense was primarily
driven by $25 million of tax benefit associated with interest expense resulting from the Indemnification Agreement termination, partially
offset by a $7 million dollar increase in tax expense from the increase in income before taxes and before the non-deductible costs incurred
to terminate the Indemnification Agreement.
The effective tax rate for
the year ended December 31, 2025 was (4.2)% as compared to 327.7% in the same period in 2024. The decrease was primarily driven by non-deductible
costs incurred to terminate the Indemnification Agreement and the associated interest expense deduction. Excluding these costs, the effective
tax rate for 2025 is approximately 29%.
2024 compared to 2023
Provision for income taxes for the year ended December 31, 2024 was $25
million, a decrease of $25 million, or 50.0%, as compared to the same period in 2023. The decrease in income tax expense was primarily
due to a decrease in income before taxes.
The effective tax rate for
the year ended December 31, 2024 was 327.7% as compared to 43.8% in the same period in 2023. The increase was primarily driven
by non-deductible indemnification costs, which materially distorted the effective tax rate. Excluding these costs, the effective tax rate
for 2024 is approximately 31%.
66
Non-GAAP Financial Measures
In addition to the key operational metrics above and our financial results
as reported under GAAP, we evaluate our operating performance using certain financial measures, including Adjusted net income, Adjusted
EBITDA, Adjusted EBITDA margin and Adjusted free cash flow, that are not defined by, or prepared in accordance with, GAAP. We refer to
these measures as “non-GAAP” financial measures. These non-GAAP financial measures are supplemental measures of our performance
that we believe help investors to better understand our financial condition and operating results and to analyze business trends by providing
measures which management uses to evaluate operating performance. We use these non-GAAP financial measures, in addition to the corresponding
GAAP financial measures, as important supplemental measures of our operating performance that exclude non-cash and other disclosed items
that we believe are not indicative of our underlying business, core operating results and the overall health of our company. We believe
the use of such non-GAAP financial measures assists investors in understanding the ongoing operating performance of the Company by presenting
the financial results between periods on a more comparable basis. These non-GAAP measures should be considered only as supplements to,
and should not be considered in isolation or used as a substitute for, financial information prepared in accordance with GAAP. We further
believe that providing this information assists our investors in understanding our operating performance and the methodology used by management
to evaluate and measure such performance. In conjunction with our GAAP results, we use these non-GAAP measures to assess business performance,
particularly when comparing performance to past periods. As such, we believe these measures are useful for investors because they facilitate
a comparison of financial results from period to period.
Management recognizes that
these non-GAAP financial measures have limitations, including that they may be calculated differently by other companies or may be used
under different circumstances or for different purposes, thereby affecting their comparability from company to company. In order to compensate
for these and the other limitations discussed below, management does not consider these measures in isolation from or as alternatives
to the comparable financial measures determined in accordance with GAAP. Readers should review the reconciliations below and should
not rely on any single financial measure to evaluate our business. The reasons we use these non-GAAP financial measures and the reconciliations
to their most directly comparable GAAP financial measures follow.
We believe that Adjusted net income, Adjusted EBITDA and Adjusted EBITDA
margin, which are adjusted to exclude the effects of unique and/or non-cash items that are not closely associated with ongoing operations,
provide management and investors with meaningful measures of our performance that increase the period-to-period comparability by highlighting
the results from ongoing operations and the underlying profitability factors. We define Adjusted EBITDA margin as Adjusted EBITDA as a
percentage of revenue. We believe Adjusted net income, Adjusted EBITDA and Adjusted EBITDA margin provide management and investors with
a more complete understanding of underlying operating results and trends of established, ongoing operations without the effect of charges
that do not relate to the core operations of our business, such as the impact of transaction costs, the Indemnification Agreement and
foreign currency impacts, as these activities can obscure underlying trends. We believe that Adjusted free cash flow is a useful measure
of liquidity and an additional basis for assessing our ability to generate cash.
67
We believe these measures
provide additional insight into how our businesses are performing by excluding certain disclosed items that we believe are not representative
of our underlying business and operating performance. However, Adjusted net income, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted
free cash flow should not be construed as inferring that our future results will be unaffected by the items for which the measures adjust.
The following table provides a reconciliation of net (loss) income,
the most closely comparable GAAP financial measure, to Adjusted net income:
Adjusted Net Income
Three Months Ended
April 4,
2026
March 29,
2025
Net loss
$ (1 )
$ (15 )
Intangible asset amortization
24
23
Indemnification Agreement expense (1)
-
33
Stock-based compensation expense (2)
6
6
Restructuring expenses (3)
-
4
Transaction related expenses (4)
8
1
Tax effect of applicable non-GAAP adjustments (5)
(9 )
(10 )
Adjusted net income
$ 28
$ 42
(1)
Consists of charges associated with the Indemnification Agreement that
were allocated to the unaudited interim condensed combined financial statements. Refer to Note 9. Indemnification Agreement within
the unaudited interim condensed combined financial statements for additional information.
(2) Represents non-cash compensation expenses recognized for stock-based compensation arrangements.
(3)
Consists of non-recurring charges associated with restructuring initiatives, primarily related to the Snap One Acquisition in 2024. Refer to Note 11. Restructuring within the unaudited interim condensed combined financial statements for additional information.
68
(4) For the three months ended April 4, 2026, represents $8 million of allocated transaction costs related
to the Spin-Off. For the three months ended March 29, 2025, represents $1 million of Snap One integration costs.
(5) Represents the estimated tax effect of non-GAAP adjustments by applying
a flat statutory tax rate of 25%. A one-time tax impact on the Indemnification Agreement of approximately 8% is included for the
three months ended March 29, 2025.
Years Ended December 31,
2025
2024
2023
Net (loss) income
$ (261 )
$ (18 )
$ 62
Intangible asset amortization
95
55
13
Indemnification Agreement expense (1)
364
79
67
Stock-based compensation expense (2)
24
23
15
Restructuring, impairment and extinguishment costs (3)
9
22
13
Transaction related expenses (4)
16
45
-
Purchase accounting fair value adjustments (5)
-
9
-
Other (6)
(2 )
6
(5 )
Tax effect of applicable non-GAAP adjustments (7)
(64 )
(40 )
(9 )
Adjusted net income
$ 181
$ 181
$ 156
(1) Consists of charges associated with the Indemnification Agreement that
were allocated to the audited combined financial statements. Refer to Note 10. Indemnification Agreement within the audited combined
financial statements for additional information.
(2) Represents non-cash compensation
expenses recognized for stock-based compensation arrangements.
(3) Consists of non-recurring charges associated with restructuring initiatives,
primarily related to the Snap One Acquisition in 2024, as well as non-cash asset impairment charges and the allocation of debt extinguishment
costs associated with third-party debt instruments. Refer to Note 5. Restructuring within the audited combined financial statements
for additional information.
(4)
In 2025, represents $9 million Snap One integration costs and $7 million transaction costs related to the Spin-Off. Expenses incurred in 2024 relate to the Snap One Acquisition.
(5) Represents the impact to Cost
of goods sold of acquisition-related inventory step-up adjustments recognized in connection with the Snap One Acquisition in 2024.
(6) Represents
(a) amounts included in Other (income) expense, net on the combined statement of operations and (b) litigation settlements incurred during
2024.
(7)
Represents the estimated tax effect of non-GAAP adjustments by applying a flat statutory tax rate of 25%. A one-time tax impact on the Indemnification Agreement of approximately 8% is included for 2025.
69
The following table provides
a reconciliation of net (loss) income and net (loss) income margin, the most closely comparable GAAP financial measures, to Adjusted EBITDA
and Adjusted EBITDA margin:
Adjusted EBITDA and Adjusted EBITDA margin
Three Months Ended,
April 4,
2026
March 29,
2025
Net revenue
$ 1,206
$ 1,121
Net loss
$ (1 )
$ (15 )
Net loss margin
(0.1 )%
(1.3 )%
(Benefit from) provision for income taxes
(1 )
1
Loss before taxes
(2 )
(14 )
Depreciation and amortization
29
29
Interest expense
17
8
Interest income
(2 )
(2 )
Indemnification Agreement expense (1)
-
33
Stock-based compensation expense (2)
6
6
Restructuring expenses (3)
-
4
Transaction related expenses (4)
8
1
Adjusted EBITDA
$ 56
$ 65
Adjusted EBITDA margin
4.6 %
5.8 %
(1) Consists of charges associated with the Indemnification Agreement that
were allocated to the unaudited interim condensed combined financial statements. Refer to Note 9. Indemnification Agreement within
the unaudited interim condensed combined financial statements for additional information.
(2) Represents non-cash compensation expenses recognized for stock-based compensation
arrangements.
(3) Consists of non-recurring charges associated with restructuring initiatives,
primarily related to the Snap One Acquisition in 2024, as well as non-cash asset impairment charges and the allocation of debt extinguishment
costs associated with third-party debt instruments. Refer to Note 11. Restructuring within the unaudited interim condensed combined
financial statements for additional information.
(4) For the three months ended April 4, 2026, represents $8 million of transaction
costs related to the Spin-Off. For the three months ended March 29, 2025, represents $1 million of Snap One integration costs.
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Years Ended December 31,
2025
2024
2023
Net revenue
$ 4,784
$ 4,197
$ 3,570
Net (loss) income
$ (261 )
$ (18 )
$ 62
Net (loss) income margin
(5.5 )%
(0.4 )%
1.7 %
Provision for income taxes
11
25
50
Income before taxes
(250 )
7
112
Depreciation and amortization
115
71
22
Interest expense
50
39
32
Interest income
(8 )
(15 )
(18 )
Indemnification Agreement expense (1)
364
79
67
Stock-based compensation expense (2)
24
23
15
Restructuring, impairment and extinguishment costs (3)
9
22
13
Transaction related expenses (4)
16
45
-
Purchase accounting fair value adjustments (5)
-
9
-
Other (6)
(2 )
6
(5 )
Adjusted EBITDA
$ 318
$ 286
$ 238
Adjusted EBITDA margin
6.6 %
6.8 %
6.7 %
(1) Consists of charges associated with the Indemnification Agreement that
were allocated to the audited combined financial statements. Refer to Note 10. Indemnification Agreement within the audited combined
financial statements for additional information.
(2) Represents non-cash compensation
expenses recognized for stock-based compensation arrangements.
(3) Consists of non-recurring charges associated with restructuring initiatives,
primarily related to the Snap One Acquisition in 2024, as well as non-cash asset impairment charges and the allocation of debt extinguishment
costs associated with third-party debt instruments. Refer to Note 5. Restructuring within the audited combined financial statements
for additional information.
(4) Represents expenses incurred in
2025 for integration costs related to the Snap One Acquisition of $9 million and allocated transaction costs primarily related to third
party vendors incurred due to the Spin-Off of $7 million. Expenses incurred in 2024 relate to the Snap One Acquisition.
(5) Represents the impact to Cost
of goods sold of acquisition-related inventory step-up adjustments recognized in connection with the Snap One Acquisition in 2024.
(6) Represents
(a) amounts included in Other (income) expense, net reported on the combined statement of operations and (b) litigation settlements incurred
during 2024.
71
The following table provides a reconciliation of net cash flows provided
by operating activities, the most closely comparable GAAP financial measure, to Adjusted free cash flow, for the three months ended April
4, 2026 and March 29, 2025:
Adjusted Free Cash Flow
Three Months Ended,
April 4,
2026
March 29,
2025
Net cash flows used in operating activities
$ (133 )
$ (88 )
Less: capital expenditures
(13 )
(11 )
Add: allocated portion of the one-time payment made to Honeywell to terminate the Indemnification Agreement
-
-
Adjusted free cash flow
$ (146 )
$ (99 )
The following table provides
a reconciliation of net cash flows provided by operating activities, the most closely comparable GAAP financial measure, to Adjusted
free cash flow, for the years ended December 31, 2025, December 31, 2024 and December 31, 2023:
Years Ended December 31,
2025
2024
2023
Net cash flows (used in) provided by operating activities
$ (522 )
$ 85
$ 103
Less: capital expenditures
(54 )
(25 )
(27 )
Add: allocated portion of the one-time payment made to Honeywell to terminate the Indemnification Agreement
595
-
-
-
Adjusted free cash flow
$ 19
$ 60
$ 76
Capital Resources and Liquidity
As of April 4, 2026, total cash and cash equivalents were $135 million.
The cash reflected on our combined balance sheets represents cash accounts legally owned by our subsidiaries and comprises both (a) bank
accounts held by local jurisdictions that do not participate in centralized cash pooling arrangements, as well as (b) bank accounts that
participate in centralized cash pooling arrangements and are owned by our subsidiaries.
Historically, Resideo has
provided cash management and other treasury services to us, the effect of which is presented as Due to related parties – current,
Due from related parties – non-current and Net parent investment in the audited combined financial statements and unaudited interim
condensed combined financial statements included elsewhere in this information statement. Upon completion of the Spin-Off, we
will cease participation in Resideo’s cash pooling process, effectively settle any outstanding related party loan arrangements and
our cash and cash equivalents will be held and used solely for our own operations. As a result, our capital structure, long-term commitments
and sources of liquidity are expected to change meaningfully from our historical practices. For additional detail regarding changes to
our capital structure, see the sections entitled “Unaudited Pro Forma Combined Financial Statements” and “Description
of Material Indebtedness” within this information statement.
Our future capital
requirements will depend on many factors, including the rate of sales growth, market acceptance of our products, the timing and
extent of research and development projects, potential acquisitions of companies or technologies, and the expansion of our sales and
marketing activities. We may enter into acquisitions or strategic arrangements in the future, which also could require us to seek
additional equity or debt financing. In connection with the Spin-Off, we plan to enter into new financing arrangements described in
the section entitled “Description of Material Indebtedness.” In connection with the Spin-Off, we will also be issuing
shares of ADI preferred stock which will include an obligation to pay regular dividends (in cash or in-kind) to the holders of the
ADI preferred stock and will include a conversion feature as described in the section entitled “Description of Capital
Stock—Preferred Stock.” Fulfilling our obligations to pay dividends or the exercise of any optional redemption rights
with respect to the outstanding ADI preferred stock could, if paid in cash, impact our liquidity and reduce the amount of cash
available for working capital, capital expenditures, growth opportunities, acquisitions, and other general corporate purposes. We
believe our existing cash at the Spin-Off, cash flows generated from operations and access to capital markets will provide
adequate resources to meet the needs of our current and planned operations.
72
To the extent our current
liquidity is insufficient to fund future activities, we may need to raise additional funds, such as refinancing or securing new secured
or unsecured debt, common or preferred equity, disposing of certain assets to fund our operations, and/or other public or private sources
of capital. If we raise additional funds by issuing equity securities, the ownership of our existing stockholders will be diluted. The
incurrence of additional debt financing would result in debt service obligations, and any future instruments governing such debt could
provide for operating and financial covenants that could restrict our operations. We cannot assure you that we could obtain refinancing
or additional financing on favorable terms or at all. See “Risk Factors—General Risk Factors—Our ability to raise capital
in the future may be limited and our failure to raise capital may limit our ability to invest in strategic priorities and grow our business.”
With respect to long-term
debt of Resideo and the Indemnification Agreement liability, the Company has not historically made cash payments to third parties as such
payments are made by Resideo and there is no expectation or requirement for the Company to be obligated to make payments of this nature
in the future as the Indemnification Agreement (including the guarantee provided by ADI) has been terminated on August 13, 2025 and, in
the case of the long-term debt of Resideo, ADI is not expected to continue to be an obligor or guarantor with respect to these obligations
upon the closing of the Spin-Off.
Credit Agreement
A subsidiary of Resideo (the
“Borrower”) is the borrower under multiple third-party debt instruments for which we are jointly and severally liable as
a guarantor, along with other U.S. subsidiaries of the Borrower. For such arrangements, the Borrower’s long-term third-party debt
has been allocated to the Company for each reporting period. The related interest expense, including the effects of the Borrower’s
interest rate swaps and interest rate cap, and amortization of deferred financing costs have been allocated to the Company for the periods
presented in this information statement. An allocated portion of the Borrower’s unrealized gains or losses on the swaps and interest
rate cap were also included within the accumulated other comprehensive loss for all periods presented. The portion of the Borrower’s
debt and debt-related items allocated to us is based on what we would reasonably expect to pay on behalf of our co-obligors.
As of April 4, 2026, the
Borrower had $3,226 million of long-term debt, including $2,326 million outstanding under our Credit Agreement, $300 million 4.000% Senior
Notes due 2029, and $600 million 6.500% Senior Notes due 2032. The Borrower has $18 million in outstanding debt due in the next twelve
months, and $43 million of unamortized deferred financing costs. The Senior Notes due 2029 and Senior Notes due 2032 are senior unsecured
obligations of Resideo guaranteed by Resideo’s existing and future domestic subsidiaries and rank equally with all of Resideo’s
senior unsecured debt.
The Borrower
has entered into certain interest rate swap agreements to effectively convert a portion of the variable-rate debt to fixed-rate debt.
In June 2026, the Credit
Agreement was amended to extend the maturity of the revolving credit facility thereunder to June 2031 and to permit the Spin-Off.
As of April 4,
2026, the Borrower was in compliance with all covenants related to the Credit Agreement, Senior Notes due 2029 and Senior Notes due 2032.
Refer to Note 9. Long-Term
Debt to the audited combined financial statements and Note 8. Long-Term Debt to the unaudited interim condensed combined financial
statements for a description of the Borrower’s debt obligations and the timing of future principal and interest payments.
Indemnification Agreement
Resideo separated from Honeywell
in 2018, becoming an independently traded public company as a result of a pro rata distribution of Resideo’s common stock to the
stockholders of Honeywell (“Resideo Spin-Off”). In connection with the Resideo Spin-Off, Resideo entered into the Indemnification
Agreement for which we were jointly and severally liable along with other subsidiaries of Resideo until the termination thereof on August
13, 2025. Accordingly, a portion of Resideo’s historical obligations under the agreement, and the resulting termination discussed
below, has been allocated to us for the periods presented. The related expenses have also been allocated to us for the periods presented.
The portion of Resideo’s obligation and related items allocated to us is based on what we would have reasonably expected to pay
on behalf of our co-obligors.
73
Pursuant to the Indemnification
Agreement, Resideo had an obligation to make cash payments to Honeywell in amounts equal to 90% of Honeywell’s payments, which included
amounts billed, with respect to certain environmental claims, remediation and, to the extent arising after the Resideo spin-off, hazardous
exposure or toxic tort claims, in each case, including consequential damages (the “liabilities”) in respect to specified Honeywell
properties contaminated through historical business operations prior to the Resideo spin-off (“Honeywell Sites”), including
the legal and other costs of defending and resolving such liabilities, less 90% of Honeywell’s net insurance receipts relating to
such liabilities, and less 90% of the net proceeds received by Honeywell in connection with (i) affirmative claims relating to such liabilities,
(ii) contributions by other parties relating to such liabilities and (iii) certain property sales. The amount payable in respect of such
liabilities arising in any given year was subject to a cap of $140 million. Indemnification Agreement expenses are presented within Indemnification
Agreement expense in the audited combined financial statements and unaudited interim condensed combined financial statements included
elsewhere in this information statement. As of April 4, 2026, no allocated portion of the liabilities related to the Indemnification Agreement
is presented within the combined balance sheet as the agreement was terminated.
Refer to Note 10.
Indemnification Agreement within the audited combined financial statements and Note 9. Indemnification Agreement to the
unaudited interim condensed combined financial statements included elsewhere in this information statement for additional information.
Cash Flow Summary for the Three Months Ended April 4,
2026 and March 29, 2025
Our cash flows from operating,
investing, and financing activities for the three months ended April 4, 2026 and March 29, 2025, as reflected in the unaudited interim
condensed combined financial statements are summarized as follows:
Three Months Ended
April 4,
2026
March 29,
2025
$ change
Cash provided by (used for):
Operating activities
$ (133 )
$ (88 )
$ (45 )
Investing activities
1
(11 )
12
Financing activities
145
73
72
Effect of exchange rate changes on cash
(2 )
2
(4 )
Net increase (decrease) in cash, cash equivalents and restricted cash
$ 11
$ (24 )
$ 35
Operating Activities
Net cash used for operating activities
for the three months ended April 4, 2026 was $133 million, an increase of $45 million, compared to $88 million of cash used for operations
in the same period of 2025. The $45 million increase in the use of cash was primarily driven by an increase of $59 million cash outflows
associated with working capital partially offset by a decrease in the net loss of $14 million. The $59 million increase in cash outflows
associated with working capital is primarily driven by cash outflows associated with a $23 million decrease in accounts payable due to
timing of supplier payments, a $20 million decrease in obligations under the Indemnification Agreement which was terminated in 2025 and
a $10 million increase in receivables due to the timing of cash collection from customers.
Investing Activities
Net cash provided by investing
activities for the three months ended April 4, 2026 was $1 million, an increase of $12 million compared to the $11 million net cash used
in investing activities in the for the same period in 2025. The $12 million increase is primarily driven by an increase of $14 million
in proceeds from related-party loan arrangements, partially offset by an increase in cash outflows of $2 million in capital expenditures.
74
Financing Activities
Net cash provided by financing
activities for the three months ended April 4, 2026 was $145 million, an increase of $72 million compared to $73 million use of cash for
financing activities in the same period in 2025. The $72 million increase is primarily due to transfers from Resideo in connection to
general financing activities of $82 million, partially offset by an increase of $10 million of cash outflow related to net financings
associated with cash pooling arrangements.
Cash Flow Summary for the Years Ended December 31, 2025, 2024 and
2023
Our cash flows from operating,
investing, and financing activities for the years ended December 31, 2025, 2024 and 2023, as reflected in the audited combined financial
statements are summarized as follows:
Years Ended December 31,
2025
2024
2023
$ change (2025 v. 2024)
$ change (2024 v. 2023)
Cash provided by (used for):
Operating activities
$ (522 )
$ 85
$ 103
$ (607 )
$ (18 )
Investing activities
(68 )
(118 )
(15 )
50
(103 )
Financing activities
570
57
(42 )
513
99
Effect of exchange rate changes on cash
7
(6 )
4
13
(10 )
Net (decrease) increase in cash, cash equivalents and
restricted cash
$ (13 )
$ 18
$ 50
$ (31 )
$ (32 )
Operating Activities
Net cash used for operating
activities for the year ended December 31, 2025 was $522 million, a decrease of $607 million compared to the $85 million cash provided
by operating activities in the prior year. This change was primarily driven by an increase in cash outflows associated with allocated
payments related to the Indemnification Agreement, including the termination payment in the year ended December 31, 2025. The cash outflow
associated with the Indemnification Agreement in the year ended December 31, 2025 was $634 million which represented an increase in cash
used of $581 million relative to the prior year. The remaining change of $26 million was driven by cash used for other working capital
accounts, partially offset by income, excluding the impacts of the Indemnification Agreement, and non-cash add-backs.
Net cash provided by operating
activities for the year ended December 31, 2024 was $85 million, a decrease of $18 million compared to the prior year. The decrease was
primarily attributable to reductions of $9 million in operating lease liabilities and $12 million in deferred income tax liabilities,
partially offset by a decrease in cash used for working capital accounts of $2 million.
Investing Activities
Net cash used for investing
activities for the year ended December 31, 2025 was $68 million, an increase of $50 million, compared to the prior year, primarily driven
by a decrease of $201 million in loans made to related parties, partially offset by a decrease of $122 million in proceeds from related-party
loan arrangements and an increase of $29 million in capital expenditures related primarily to the implementation of a new enterprise resource
planning system.
Net cash used for investing
activities for the year ended December 31, 2024 was $118 million, an increase of $103 million, compared to the prior year, primarily driven
by a decrease of $157 million in proceeds from related-party loan arrangements, which was offset by a decrease of $53 million in net loans
made to related parties.
75
Financing Activities
Net cash provided by financing
activities for the year ended December 31, 2025 was $570 million, an increase of $513 million compared to the prior year, primarily due
to an increase in transfers from Resideo in connection with general financing activities of $453 million and $60 million of cash inflow
related to net financings associated with cash pooling arrangements.
Net cash provided by financing
activities for the year ended December 31, 2024 was $57 million, an increase of $99 million compared to the prior year, primarily due
to an increase in transfers from Resideo in connection with general financing activities of $195 million, which was partially offset by
an increase of $96 million in cash outflows related to net financings associated with cash pooling arrangements.
Contractual Obligations and Probable Liability Payments
In addition to our long-term
debt discussed above, our material cash requirements include the following contractual obligations.
Operating Leases
We have operating lease arrangements
for the majority of our stores, distribution centers, offices, engineering sites, automobiles, and certain equipment. As of April 4, 2026,
we had operating lease payment obligations of $237 million, with $37 million payable within 12 months.
Purchase Obligations
On occasion, we enter into
purchase obligations with certain vendors. As of April 4, 2026, we had purchase obligations of $124 million, all of which is payable within
12 months.
As of April 4, 2026, we have additional operating leases that have
not yet commenced. The total undiscounted future lease payments for these leases was $56 million.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financial arrangements that
have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition,
net revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Estimates
Our audited combined financial
statements and unaudited interim condensed combined financial statements are prepared in accordance with GAAP and pursuant to the regulations
of the SEC and are based in part on the application of significant accounting policies, many of which require us to make estimates and
assumptions. Application of the critical accounting estimates discussed below requires management’s significant judgments and involve
a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition
and results of operations. We review our estimates and assumptions on an ongoing basis and reflect changes as appropriate when additional
information becomes available. We base our estimates and assumptions on pertinent factors we believe are applicable and reasonable
under the circumstances, such as forecasts of future performance, which serve as the foundation for determining how to recognize and measure
assets and liabilities not readily apparent from other sources. We consider the below critical areas in the application of our accounting
policies and estimates that involve a significant level of estimation uncertainty, complex judgment, subjectivity, and have had or are
reasonably likely to have a material impact on our financial condition or results of operations and are critical to the understanding
of our audited combined financial statements and unaudited interim condensed combined financial statements. Actual results could differ
materially from our estimates and assumptions. Refer to Note 2. Summary of Significant Accounting Policies to the audited combined
financial statements and the unaudited interim condensed combined financial statements included elsewhere in this information statement
for a description of our major accounting policies.
Corporate Expense Allocations
The audited combined financial
statements and the unaudited interim condensed combined financial statements include expense allocations for certain corporate, infrastructure,
and shared services expenses provided by Resideo on a centralized basis, including, but not limited to, corporate executives, finance,
legal, audit, mergers and acquisitions, human resources, information technology, insurance, employee benefits, costs associated with the
Spin-Off and other expenses that are either specifically identifiable or clearly applicable to the Company. These expenses have been allocated
to us on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis using an applicable measure of
operating income, headcount, or other allocation methodologies that are considered to be a reasonable reflection of the utilization of
services provided or the benefit received by ADI during the periods presented. We consider that such allocations have been made on a reasonable
basis; however, these allocations may not be indicative of the actual expense that would have been incurred had we operated as an independent,
standalone public entity, nor are they indicative of our future expenses. Refer to Note 16. Related Party Transactions to the audited
combined financial statements and Note 15. Related Party Transactions to the unaudited interim condensed combined financial statements
included elsewhere in this information statement.
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Goodwill
We review the carrying values of goodwill and identifiable intangibles
whenever events or changes in circumstances indicate that such carrying values may not be recoverable and annually, on the first day of
the fourth quarter. If the carrying value of a reporting unit exceeds its fair value, we record a goodwill impairment loss as the amount
by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that
reporting unit. Refer to Note 7. Goodwill and Other Intangible Assets, net to the audited combined financial statements and Note
5. Goodwill and Other Intangible Assets, net to the unaudited interim condensed combined financial statements included elsewhere in
this information statement.
Warranties and Guarantees
Expected warranty costs for products sold are recognized based on an
estimate of the amount that eventually will be required to settle such obligations. These accruals are based on factors such as past experience,
length of the warranty, and various other considerations. Costs of product recalls, which may include the cost of the product being replaced
as well as the customer’s cost of the recall, including labor to remove and replace the recalled part, are accrued as part of the
warranty accrual at the time an obligation becomes probable and can be reasonably estimated. We periodically adjust these provisions to
reflect actual experience and other facts and circumstances that impact the status of existing claims. Refer to Note 12. Commitments
and Contingencies to the audited combined financial statements and Note 14. Commitments and Contingencies to the unaudited
interim condensed combined financial statements included elsewhere in this information statement for additional information.
Revenue
Revenue is measured as the
amount of consideration expected to be received in exchange for our products. Allowances for cash discounts, volume rebates, and other
customer incentive programs, as well as gross customer returns, among others, are recorded as a reduction of sales at the time of sale
based upon the estimated future outcome. Cash discounts, volume rebates and other customer incentive programs are based upon certain percentages
agreed upon with various customers, which are typically earned by the customer over an annual period.
Revenue is adjusted for variable consideration, which includes customer
volume rebates and prompt payment discounts. We measure variable consideration by estimating expected outcomes using analysis and inputs
based upon anticipated performance, historical data, and current and forecasted information. Customer returns are recorded as a reduction
to sales on an actual basis throughout the year and also include an estimate at the end of each reporting period for future customer returns
related to sales recorded prior to the end of the period. We generally estimate customer returns based upon the time lag that historically
occurs between the sale date and the return date, while also factoring in any new business conditions that might impact the historical
analysis such as new product introduction. Measurement of variable consideration is reviewed by management periodically and revenue is
adjusted accordingly. We do not have significant financing components. Refer to Note 4. Revenue Recognition to the audited combined
financial statements and Note 3. Revenue Recognition to the unaudited interim condensed combined financial statements included
elsewhere in this information statement.
Third-Party Debt
We are jointly and severally
liable for third-party debt of Resideo and, as a result, a portion of Resideo’s debt obligations and related expenses were allocated
to the Company based on the amount we would reasonably expect to pay on behalf of the co-obligors. This allocation involved judgment
and estimates regarding the timing and amount of future payments. The recognized liability reflected our estimate of amounts that were
probable and reasonably estimable. Refer to Note 9. Long-Term Debt to the audited combined financial statements and Note 8.
Long-Term Debt to the unaudited interim condensed combined financial statements included elsewhere in this information statement.
Indemnification Agreement
The allocated obligations
under the Indemnification Agreement required significant management judgment and estimates. As we were jointly and severally liable for
the Indemnification Agreement prior to its termination on August 13, 2025, a portion of Resideo’s obligations and related expenses
were allocated to the Company based on the amount we would reasonably expect to pay on behalf of the co-obligors. This allocation involved
judgment and estimates regarding the timing and amount of future payments.
On July 30, 2025, Resideo entered into the Termination Agreement with
Honeywell to terminate the Indemnification Agreement. Subject to the terms and conditions of the Termination Agreement, Resideo made a
pre-tax, one-time cash payment of $1,590 million to Honeywell in August 2025 using proceeds from the incremental term loans and a portion
of cash on hand. Resideo is no longer required to make any further payments to Honeywell under the Indemnification Agreement and the associated
affirmative and negative covenants no longer apply. Refer to Note 10. Indemnification Agreement to the audited combined financial
statements and Note 9. Indemnification Agreement to the unaudited interim condensed combined financial statements included elsewhere
in this information statement.
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Income Taxes
Significant judgment is required in evaluating tax positions. We established
additional reserves for income taxes when, despite the belief that tax positions are fully supportable, there remain certain positions
that do not meet the minimum recognition threshold. The approach for evaluating certain and uncertain tax positions is defined by the
authoritative guidance which determines when a tax position is more likely than not to be sustained upon examination by the applicable
taxing authority. In the normal course of business, we, along with our subsidiaries, are examined by various federal, state, and foreign
tax authorities. We regularly assess the potential outcomes of these examinations and any future examinations for the current or prior
years in determining the adequacy of our provision for income taxes. We continually assess the likelihood and amount of potential adjustments
and adjust the income tax provision, the current tax liability, and deferred taxes in the period in which the facts that give rise to
a change in estimate become known. Refer to Note 14. Income Taxes to the audited combined financial statements and Note 13.
Income Taxes to the unaudited interim condensed combined financial statements included elsewhere in this information statement.
Other Matters
Litigation and Indemnification Agreement
Refer to Note 10. Indemnification Agreement to the audited combined
financial statements and Note 9. Indemnification Agreement to the unaudited interim condensed combined financial statements and
Note 12. Commitments and Contingencies to the audited combined financial statements and Note 14. Commitments and Contingencies
to the unaudited interim condensed combined financial statements included elsewhere in this information statement for further discussion.
Recent Accounting Pronouncements
Refer to Note 2. Summary of Significant Accounting Policies
to the audited combined financial statements and the unaudited interim condensed combined financial statements included elsewhere in this
information statement for further discussion.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk
from foreign currency exchange rates, commodity prices and interest rates, which could affect operating results, financial position, and
cash flows. We manage our exposure to these market risks through our regular operating and financing activities.
Interest Rate Risk
While we are not the primary obligor on the underlying debt facilities,
we are jointly and severally liable for such arrangements and therefore record an allocated portion of the related obligations in our
audited combined financial statements and unaudited interim condensed combined financial statements. Accordingly, we are exposed to interest
rate risk on the portion of variable-rate debt allocated to us. Our exposure is affected by the overall terms of the debt structure and
is sensitive to changes in the general level of interest rates.
As of April 4, 2026, an increase
in interest rates by 100bps would have had an immaterial impact on our annual interest expense. From time to time, we may use interest
rate hedging instruments to manage our exposure to interest rate risk; however, we had no such arrangements outstanding as of April 4,
2026.
Foreign Currency Exchange Rate Risk
We are exposed to market risks
from changes in currency exchange rates. While we primarily transact with customers and suppliers in the U.S. dollar, we also transact
in foreign currencies, including the British Pound, Canadian Dollar, Euro, Mexican Peso, Indian Rupee and Czech Koruna. These exposures
may impact total assets, liabilities, future earnings and/or operating cash flows. Our exposure to market risk for changes in foreign
currency exchange rates emerges from transactions arising from international trade, foreign currency denominated monetary assets and liabilities
and international financing activities between subsidiaries. We rely primarily on natural offsets to address our exposures and may supplement
this approach from time to time by entering into hedging contracts. As of April 4, 2026, we have no outstanding foreign currency hedging
arrangements.
Commodity Price Risk
While we are exposed to commodity
price risk, we attempt to pass through significant changes in component and raw material costs to our customers based on the contractual
terms of our arrangements. In limited situations, we may not be fully compensated for such changes in costs.
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BUSINESS
Our Company
ADI is a global specialty
distributor of professionally installed low-voltage products serving commercial and residential markets through an omnichannel go-to-market
platform. Within North America, ADI is the market-leading distributor in the professionally installed security, fire/life safety and AV
product categories. We offer over 500,000 products from more than 1,000 suppliers across key specialty low-voltage categories with strong
proximity to our customers with a large network of store locations. Our omnichannel platform is underpinned by a digital experience designed
to deepen customer engagement and broaden our reach. We combine an extensive third-party product portfolio and deep supplier relationships
with a growing suite of exclusive brands and software-based services. These exclusive brands and services are designed to help our customers
build stronger businesses, differentiate our offerings and improve the end user experience. We are headquartered in Melville, New York,
with a workforce of over 4,100 associates located in 20 countries. In 2025 and 2024, ADI generated revenues of $4.8 billion and $4.2 billion,
net loss of $261 million and $18 million and Adjusted EBITDA of $318 million and $286 million, respectively. In the three months ended
April 4, 2026 and March 29, 2025, ADI generated revenues of $1.2 billion and $1.1 billion, net loss of $1 million and $15 million and
Adjusted EBITDA of $56 million and $65 million, respectively.
ADI sells primarily to professional
installers, dealers and integrators. Our global customer base of over 100,000 professionals spans independent contractors, regional and
national systems integrators and low-voltage specialists (security, fire/life safety, AV and data communications). Our customers serve
a number of end users, including small and medium businesses, large enterprises and institutions (e.g., in education, retail, hospitality
and industrial sectors) and residential homes. We estimate that 67% of our product sales are installed in commercial end markets with
the remaining 33% in residential locations. Demand for our products is driven, among other things, by building activity, retrofit/upgrade
cycles, building regulations and standards (e.g., fire/life safety codes) and growing adoption of connected technologies in commercial
facilities and homes.
We serve our customers through
an omnichannel go-to-market platform – leveraging e-commerce and an integrated network of over 200 locations and more than 20 distribution
centers spanning 17 countries (including third-party logistics) as well as robust digital storefronts, including our website and mobile
app, each of which is designed to meet the needs of professional installers. We believe our global footprint gives us distinct scale and
network advantages relative to our low-voltage distribution competitors. Customers benefit from convenient omnichannel access to our robust
and expanding product catalog, exclusive and differentiated ADI brands and expert design and technical support to meet complex system
requirements. We are continuously expanding our product selection and investing in strengthening our customer experience by adding functionality
and features that can boost installer efficiency and profitability.
While ADI operates as a single
operating and reportable segment, which reflects our integrated platform and consolidated resource allocation, we are well-diversified
across product categories, end markets and regions.
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Breakdown of FY2025 Revenue by Product Category and Region
By Product
Type
By Region
Our History
ADI traces its roots to the
Alarm Device Manufacturing Company (“ADEMCO”), founded in 1929 by Maurice Coleman in New York. ADEMCO became a leading maker
of intrusion and life safety devices through the mid-20th century. In 1963, ADEMCO was acquired by the Pittsburgh Railway Company,
which renamed itself Pittway in 1967 as it diversified around security and related businesses. In 1988 Pittway formed ADEMCO Distribution
Inc. to better distribute its growing security portfolio, an operation that later evolved into ADI.
In February 2000, Honeywell
International acquired Pittway bringing ADI under the Automation & Control segment. The business operated for almost two decades within
Honeywell before becoming a part of Resideo upon its spin-off in October 2018. Since then, ADI has grown organically, while also executing
a focused M&A strategy to broaden adjacencies, add services and expand regional coverage. Between 2020 and 2023, ADI executed six
acquisitions, deepening category expertise and expanding customer reach into the professional AV, residential AV and data communications
categories.
In June 2024, Resideo acquired
Snap One for approximately $1.4 billion and combined ADI’s scale and leadership in professionally-installed low voltage products
distribution with Snap One’s strong position and offerings in residential AV, including the innovative Control4 smart home automation
platform used in more than 500,000 homes and businesses and the OvrC cloud-based remote management platform empowering more than 60,000
professional installers with cloud-based configuration, project deployment and remote support capabilities. Together, ADI and Snap One
provide integrators an increased selection of both third-party products and exclusive brand offerings.
Industry Overview
ADI has a global reach in
low-voltage specialty distribution across four interrelated product categories: (i) security, (ii) audio-visual (residential AV and professional
AV), (iii) fire/life safety and (iv) data communications, with an increasingly convergent landscape with professionals installing across
multiple categories. ADI’s largest geography by revenue is North America where management estimates these four product categories
represented a large and growing TAI of approximately $65 billion in 2025, with security and fire/life safety representing approximately
15%, residential AV representing approximately 10%, professional AV representing approximately 50% and data communications representing
approximately 25%. Drivers of demand by product category include:
●
Security (represents greater than 50% of total revenue for fiscal year 2025): Demand is driven by growing sophistication of physical and cyber security threats and increased concerns around crime and asset protection, each of which continues to drive adoption and increased security spend across commercial and residential markets. This growth is further augmented by faster tech-led refresh cycles—AI/cloud upgrades in video surveillance, cloud/mobile credentials expanding access control and modernization of intruder alarms. With a well-known brand in North America despite broadline distributors continuing to gain traction with large commercial projects through bundled offerings, management believes ADI is the leading specialty distributor in security, being strongest in the SMB commercial and residential segments, while select distribution competitors maintain a stronger presence in enterprise grade installations.
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●
Audio-visual (represents greater than 25% of total revenue for fiscal year 2025) consists of two sub-categories based on the residential and commercial end markets:
o
Residential AV: Demand is driven by increasing adoption of products like control, lighting and digital infrastructure, as smart home automation becomes more common. Housing demand continues to outpace supply domestically and more homes are expected to adopt smart home solutions to include a rising number of devices installed per home. While management believes that our category leadership remains strong with our expansive network of local stores that provide quick access to inventory and the availability of exclusive brand products, ADI competes in this fragmented category with multi-regional specialists which have solid local relationships as well as e-commerce companies. Given its size and scale, management believes ADI is the leading specialty distributor in North America in residential AV; however, it remains exposed to other types of competition, including from DIY solutions, and customers shifting to direct purchasing from manufacturers or other e-commerce platforms outside our industry.
o
Professional AV: Demand is driven by video displays, collaboration technologies, momentum in healthcare (telemedicine, hospital experiences) and demand for immersive experiences in live events, higher education and enterprise. Given that our customer acquisition strategy in the professional AV space is still maturing and there remain challenges such as inventory gaps for large commercial projects, management believes ADI is an emerging player in professional AV, with attractive growth opportunities in SMB commercial applications.
●
Fire/life safety (represents greater than 10% of total revenue for fiscal year 2025): Demand is code and ordinance driven, which creates a durable baseline demand. Fire/life safety also benefits from a strong bundle pull with adjacent security categories (e.g., access control, video) in both commercial and residential businesses, reinforcing our cross-selling opportunities in this industry. These dynamics make fire/life safety a resilient and robust driver for the ADI business. With a line card representing all of the marquee fire brands in the distribution channel, management believes ADI is the leading specialty distributor in North America in fire/life safety.
●
Data Communications (represents less than 5% of total revenue for fiscal year 2025): Demand is driven by more digital connectivity, data center expansion, increasing AI workloads and increased high-security and low-latency operations. Management believes that relative to the security space, ADI is an emerging player in this category, with a more limited assortment and investment and a smaller but growing customer set.
Competitive Strengths
Our competitive strengths
stem from our global footprint and distinct scale, inventory availability and reliability, omnichannel go-to-market platform, deep customer
and supplier relationships and exclusive brands. With attractive margins, cash flow generation and a differentiated growth profile, we
believe we will continue to be well positioned to organically grow our business and pursue selective M&A opportunities, aligned to
our go-forward strategic growth initiatives.
●
Preeminent Global Distributor of Security, Fire/Life Safety, AV and Other Low Voltage Products: We are a global leader in professionally installed low-voltage products, including security and residential AV. We believe we offer the industry’s most robust assortment of low-voltage brands—over 500,000 products from over 1,000 suppliers, curated through disciplined category management to meet key customer needs. In 2025, we achieved an NPS of 54, which management believes reflects strong customer satisfaction relative to industry benchmarks. Our position is reinforced by long-standing relationships with top suppliers and premier integrators, high product availability and superior technical sales support.
●
Global Footprint and Reach: ADI has over 200 locations and more than 20 regional distribution centers spanning 17 countries that serve a customer base of over 100,000 professionals. Our extensive global footprint, combined with our strategic supplier relationships and focus on customer service, enables ADI to scale effectively to serve both local and enterprise customers with a range of product and service solutions. Additionally, we believe our global scale affords us meaningful procurement efficiencies.
●
Leading Digital Platform Offering Distinctive Omnichannel Experience: Our digital platform (website and mobile app) provides a seamless purchasing experience for professional buyers, integrating third-party and proprietary AI technologies in dynamic, account-specific pricing, real-time inventory visibility across both stores and distribution centers, delivery date estimation based on item, location and past delivery performance and third-party product search and product recommendations informed by shopping context and user behavior. We also leverage third-party, AI-enabled system design and proposal software to automate key steps in the AV project lifecycle, including bill of materials builders, quote-to-order conversion, real-time order tracking and self-service account management. Omnichannel fulfillment options – such as one-hour store pickup, after-hours lockers and same-day shipping – further enhance the customer experience across store and digital channels. We believe the strength of our digital platform is a key driver of our global reach, supporting a digital customer base of approximately 55,000 customers, as of December 31, 2025. In 2023, we generated approximately $700 million or 20% of consolidated revenue from our digital platform, which has grown to approximately $1,086 million or 26% of consolidated revenue in 2024 and approximately $1,415 million or 30% of consolidated revenue in 2025.
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●
Differentiated Portfolio of Exclusive Brands: We have more than a dozen proprietary and exclusive brands with products and solutions we develop in collaboration with third parties, which may be joint development manufacturers, contract manufacturers and in some instances, original equipment manufacturers under ADI trademarks and brands and sell exclusively through our omnichannel distribution platform. These exclusive brands and services are anchored by our connected platforms Control4 and OvrC and designed to enhance project performance and installer economics. Control4 delivers comprehensive automation by integrating lighting, audio, video, security and climate control into a single, intuitive system while supporting thousands of third-party devices and enabling personalized automation for users. OvrC, our cloud-based remote management platform, allows dealers to monitor, configure and troubleshoot Control4 networks and connected devices remotely, reducing service costs and downtime. These products and services drive higher margins, stickier customer relationships and attachment opportunities (software licenses, services and accessories), and differentiate ADI in the marketplace. For the year ended December 31, 2025, exclusive brand products continued to be a highly margin accretive offering delivering more than 3 times the gross margin of third-party product sales. In 2023, we generated approximately $134 million or 4% of consolidated revenues from exclusive brands, which has grown to approximately $524 million or 12% of revenue in 2024 and approximately $842 million or 18% of revenue in 2025. In the three months ended April 4, 2026 and March 29, 2025, approximately 17% and 17% of our net revenue, respectively, were from sales of our exclusive branded products. This marked increase in exclusive brand revenue was primarily driven by the acquisition of Snap One in June 2024. Our exclusive brand products and services are currently concentrated in the residential market, and while such products and services are present in all four of our product categories, a significant percentage is sold in the audio-visual and data communications categories.
●
Robust Financial Position With Attractive Adjusted EBITDA Margin, Cash Flow Generation and Strong Growth Profile: We generated consolidated revenues of $4.8 billion in 2025, 4.4% of which was derived from products supplied by Resideo. Our consolidated revenues in 2025 represent 14% growth as reported, with $446 million of such growth attributable to the Snap One acquisition, and an approximately 5% compound annual growth rate from 2020 (on an organic basis excluding the impact of the Snap One acquisition and other acquisition activity), with a net loss margin of (5.5)% and an Adjusted EBITDA margin of 6.6%. Our fiscal policy and balanced capital allocation approach is designed to support disciplined deleveraging while preserving the capacity to reinvest in our business. We expect to continue to leverage our extensive global footprint, comprehensive product offering, differentiated portfolio of exclusive brands, leading digital platform and omnichannel experience and strong supplier and customer relationships to drive growth above our underlying markets and deliver attractive margins. We continue to invest in technology solutions to bolster the customer experience, increase operating expense productivity, enhance our data-driven operating model and expand profitability. We believe we are well positioned to remain a category leader while expanding into attractive growth verticals.
●
Proven Leadership Team with Operational Momentum and a Culture That Wins: We have a strong management team with extensive experience, both within the industry and across our company. The leadership team has a track record of delivering consistent revenue growth, margin enhancement and strong cash flow. Further, the organization has executed and integrated accretive inorganic growth opportunities and delivered complex digital transformations to further scale the business. Our culture centers on being the indispensable partner for a smarter, safer future. This is accomplished by ensuring we show up, follow through, make it easy to work with us and help each other do our best work so our customers can do theirs. We believe that this combination of leadership depth and values-driven execution will continue to underpin our success and create long-term value for our stakeholders.
Growth Strategies
Our growth strategies are
designed to extend our category leadership, deepen differentiation from our competitors and improve our financial profile:
●
Extending Market Leadership Through Best-in-Class Omnichannel Customer Experience: We are unifying our physical and digital “store” with a single, AI-enabled omnichannel customer experience. On the digital front, we are consolidating various transactional platforms, modernizing product data and investing in third-party and proprietary AI technologies to, among other functions, enhance search and product recommendations, automate quote-to-order and other workflows and estimate inventory and delivery dates so that the digital experience can be a true differentiator and shape the customer buying journey. In parallel, we are modernizing our store formats and broadening our in-store merchandising, while our distribution network is being streamlined to enhance service levels and efficiency and create a consistent, high-quality experience across channels, while delivering meaningful cost savings.
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●
Deepening Our Exclusive Brand Offerings: We are deepening our exclusive brands portfolio by optimizing our offering around a competitive portfolio of brands, categories and products, with a differentiated positioning in the residential AV product category and increasing relevance to commercial applications. Our product development priorities focus on improved end user interfaces, integrated product quality for faster testing and quicker releases to strengthen differentiation, and disciplined cost engineering to create more value with our investments. We believe these actions will deliver a more robust cadence of differentiated new product introductions while deepening cross-sell and loyalty.
●
Scaling in Key Growth Categories – Professional AV and Data Communications: We aim to scale our presence in professional AV and data communications to become a leading category player, leveraging our existing omnichannel platform, overlapping customer base and channel conversion trends to accelerate growth share gains. In professional AV, we are investing in field sales and sales engineering talent to penetrate key accounts and attract premium brands, while also expanding our exclusive brands portfolio to create differentiated project bundles. In data communications, we are increasing our industry relevance through broader product offerings and sales coverage, inventory expansion, targeted marketing investments and deeper category expertise. We believe these initiatives will reinforce our one-stop shop value proposition and deepen our relevance with both existing and new customers.
●
Expanding Service Offerings to Deepen Engagement Across the Value Chain: We aim to build a data-driven services marketplace for professionals, end users and suppliers. For professionals and end users, we are scaling more than twenty differentiated services to increase customer value, including software offerings focused on increased remote monitoring capability, system and network design offerings, device programming and technical support. These offerings are designed to create recurring revenue streams for integrators and ADI, reduce truck rolls and/or improve the end user experience. For suppliers, we are commercializing services that improve planning and sell-through (e.g., data-as-a-service portal that provides visibility into inventory and sales performance). Collectively, these offerings aim to create value for professionals, end users and suppliers—and, in doing so, deepen our partnerships and increase our stickiness across the value chain.
●
Accelerating Growth Through Targeted Acquisitions: We have a history of successful strategic acquisitions to accelerate growth through category expansion. We intend to continue to selectively pursue acquisitions that will broaden our product portfolio, expand our geographic footprint and enhance our position in strategic growth categories. We believe our industry knowledge and track record in integration and execution position us well to continue to pursue disciplined and accretive strategic acquisitions.
Materials and Manufacturing
We purchase third-party
products from more than 1,000 suppliers, which are located and manufacture in markets including the United States, Mexico, Canada, Asia,
and the European Union. The main product categories we source from third parties are security, fire/life safety, networking, audio-visual
and data communications. In 2025, our ten largest suppliers accounted for approximately 47% of our revenue by dollar volume for the period,
and no single supplier accounted for more than 10% of our revenue for the same period, except for one supplier that generated approximately
13.3% of our total revenue in 2025. We are party to our standard written distribution agreements with more than 800 suppliers, with an
average term of 3 years. Our standard distribution agreements are not terminable for convenience, require our suppliers to provide at
least 60 days’ written notice of any price increase and provide for volume rebates and prompt payment discounts. None of our material
distribution agreements are on an exclusive basis. See “Risk Factors—Risks Relating to Our Business—Loss of key suppliers
could decrease sales, profit margins and earnings.”
We rely on third-party manufacturers
to supply third-party products, and we rely on a limited number of contract manufacturers to produce many of our exclusive branded products.
Our exclusive brand manufacturing and supply agreements generally provide for a multi-year minimum supply period and are not terminable
for convenience. In some cases, our suppliers may be the sole suppliers of a product or product components. Reliance upon third-parties
for product supply and production reduces our control over the assembly process, exposing us to risks, including reduced control over
quality assurance, production costs and product supply. Raw material price fluctuations, the ability of key suppliers to meet quality
and delivery requirements, and catastrophic events can increase the cost and affect the supply of our products and services and impact
our ability to meet commitments to customers. See “Risk Factors—Risks Relating to Our Business—Disruptions to our supply
chain, logistics network, and fulfillment centers, and reliance on third-party contract manufacturers could impair our ability to meet
demand and increase our costs.” Additionally, a significant percentage of our exclusive branded products and components are sourced
from Asia. Such a regional focus introduces political, economic, social, regulatory and legal uncertainties that may harm our relationships
with them. See “Risk Factors—Risks Relating to Our Business—We are subject to the economic, political, regulatory, foreign
exchange and other risks of international operations.”
Intellectual Property
We have major product and
software design and development centers in Lehi, Utah, Charlotte, North Carolina and Belgrade, Serbia.
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Our deep domain expertise, proprietary technology and brands are protected
by a combination of patents, trademarks, copyrights, trade secrets, non-disclosure agreements, contractual provisions and physical and
technological safeguards. As of April 4, 2026, we owned approximately 102 worldwide active patents and 37 pending patent applications
to protect our research and development investments in new products and services. We have and will continue to protect our products and
technology, including by, among other alternatives, asserting our intellectual property rights against third-party infringers. Refer to
Note 12. Commitments and Contingencies to the audited combined financial statements and Note 14. Commitments and Contingencies
to the unaudited interim condensed combined financial statements. Our intellectual property program includes structured processes for
patents and trademarks to safeguard innovation and brand assets. For patents, we regularly review new products under development, conduct
patent mining sessions to identify protectable features and provide training to help employees recognize patentable ideas. A dedicated
patent committee meets monthly to evaluate submissions, and we review granted patents with product and engineering managers to confirm
their ongoing business value before incurring maintenance costs. For trademarks, we review new products to determine the need for protecting
additional trademark rights and conduct regular audits of pending and registered marks to ensure active use and appropriate geographic
coverage. These practices help maintain a strong and relevant IP portfolio aligned with our strategic objectives. For a more detailed
description of the various intellectual property rights and relationships that affect our business, refer to “Risk Factors—Risks
Relating to Information Technology, Intellectual Property and Data Security and Privacy.”
Competition
We compete with global, national,
regional and local providers for our distribution of products, as well as direct sales, big box and online sellers with non-traditional
business and customer service models. Additionally, we compete with many manufacturers and service providers who have disruptive technologies
and products, including large technology companies competing in the connected home space as well as smaller market entrants that offer
control capabilities among their products, applications and services and have ongoing development efforts to address the broader connected
home market.
Factors influencing our competitive
position in the industry include the reputation of our Company, exclusive brands and the third-party brands we sell; price; sales and
marketing programs; e-commerce customer experience; product availability; ease of installation; speed and accuracy of delivery; customer
and technical support; and product performance.
Seasonal Nature of Business
The effects of climate change,
such as extreme weather conditions and events and water scarcity, may exacerbate fluctuations in typical weather patterns, creating financial
risks to our business. In addition, the dynamic global and macro-economic conditions and regulatory changes may further disrupt these
seasonal patterns. We also historically experience some slight variability in our results of operations and capital requirements from
quarter to quarter due to the seasonal nature of our end users’ businesses with a minor increase in revenues due to more active
homebuilding, school spending and general construction activities during the second and third quarters. As a result, our revenue may fluctuate
on a quarterly basis, and we may have higher capital requirements during these quarters in order to maintain our inventory levels.
Human Capital
As of April 4, 2026, we
employed approximately 4,119 employees in 20 countries, of which about 2,681 employees were located in the U.S. and 320 in Mexico. In
2025, none of our U.S. employees were covered by a collective bargaining agreement and approximately 20% of our non-U.S. employees were
covered by national collective labor agreements. We believe relations with our workforce are good.
Talent Acquisition, Management and Development:
We have a robust recruiting
model to attract all levels of talent across the regions where we operate, and diversity is one of our core components. Our model includes
(1) attract, develop, and retain a diverse workforce, (2) foster a winning culture, and (3) be identified as a company of choice by our
customers and the communities we serve. We continue to assess the needs of the business and identify diverse organizations to partner
with that promote a pipeline of diverse talent.
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In
2025, our average time to accepted offer for open roles was 27 days, and we hired approximately 792 employees, of which approximately
140 were warehouse workers. Internally, strategic talent reviews and succession planning occur on an annual basis, globally and across
all business areas. In addition, we provide regular trainings to our people managers. Our annual Employee Voice Survey allows each function
in our company to better understand engagement across the organization. In 2025, we made enhancements to provide action group owners
a deeper understanding of the scores in their groups across various categories.
We
conduct three performance review discussions throughout the year and refer to them as the “Pulse.” In 2025, we introduced
performance ratings as part of the final “Pulse” conversation. The purpose of the rating is to drive accountability, strengthen
our succession planning process and establish “pay-for-performance” standards.
Culture:
ADI culture is centered on
a customer first mentality, ensuring we are an indispensable partner to efficiently support customers’ needs. Our seamless omnichannel
experience and disciplined category management drive customer satisfaction, reflected in our strong NPS of 54 in 2025. This is accomplished
by fostering a collaborative and results oriented ADI culture, so our employees help each other do our best work so we can best help our
customers. We believe that this combination of leadership depth and values-driven execution will continue to underpin our success and
create long-term value for our shareholders.
Our
culture is reflected through four core values:
● Start
With The Customer by understanding the customers’ needs and have pride in delivering exceptional experience.
● Act
As One Team by working toward common goals and engaging from a place of humility and respect.
● Pioneer
The Future by embracing change and fostering innovation to fuel growth.
● Make
A Difference by making a long-lasting, positive impact on each other, our customers, our communities and our planet.
Our
leadership actively works to instill a culture of accountability referred to as: See It, Own It, Solve It, Do It.
● See
It: Acknowledge the problem.
● Own
it: Take responsibility for it.
● Solve
It: Determine what I can do.
● Do
it: Take action.
Total
Rewards:
Our
primary reward strategy is ensuring “pay-for-performance” on an annual basis, as well as over the long term, which drives
a mindset of accountability and productivity. Our compensation guiding principles are to structure compensation that is simple, aligned
and balanced. We structure and administer our rewards programs in a manner consistent with good governance practices. We believe that
the interests of employees must be aligned with our stockholders. We provide comprehensive and competitive benefits that are designed
to meet the varying needs of our employees and promote choice. Our package includes paid time off, flexible work schedules, education
assistance programs and more.
These
actions reinforce our culture that values employees and seeks to attract and retain the talent that we need to win in the market. We
believe the combination of our competitive pay-for-performance compensation programs and our comprehensive benefit programs demonstrate
our commitment to a compelling total rewards value proposition for our employees.
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Health
and Safety:
Our
global Total Case Incident Rate (TCIR), which tracks the number of occupational injuries and illnesses per 100 employees, was 0.55 at
the close of 2025. This reflects our continued focus on proactive safety measures. We monitor our health and safety performance through
a balanced scorecard of key performance indicators (KPIs), encompassing both reactive incident management and proactive safety measures.
In addition to thorough incident investigations and root cause analysis, we leverage data from hazard observations, regular health and
safety inspections conducted by line managers and internal audits led by accredited health and safety auditors. These insights enable
us to identify and address potential risks before they lead to incidents, reinforcing our ongoing commitment to the well-being of our
workforce.
Regulatory
Matters
We
are subject to various federal, state, local and foreign government requirements relating to environmental, health and safety protection
standards and permitting, labeling and other requirements regarding, among other things, electronic and wireless communications, safety,
electromagnetic interference and energy efficiency, digital and physical accessibility, government procurement, air emissions, wastewater
discharges, the use, handling and disposal of hazardous or toxic materials, remediation of environmental contamination, data privacy
and security, cybersecurity, artificial intelligence, import and export requirements, anti-bribery and corruption laws, tax laws (including
U.S. taxes on foreign subsidiaries), foreign exchange controls and cash repatriation restrictions, telemarketing, email marketing, other
forms of online advertising and consumer protection, product compliance laws, licensing, regulations and potential expansion of regulations
on suppliers regarding the sources of supplies or products, working conditions for and compensation of our employees and others. Additionally,
government regulations may impose limitations or prohibitions on sales of products manufactured by certain manufacturers. Moreover, we
are subject to audits and inquiries in the normal course of business. These and other laws and regulations impact the manner in which
we conduct our business and changes in legislation or government policies can affect our worldwide operations, both favorably and unfavorably.
For a more detailed description of the various laws and regulations that affect our business, refer to “Risk Factors—Risks
Relating to Legal and Regulatory Matters.”
Properties
Our corporate headquarters
is located in Melville, New York, where we lease approximately 31,703 square feet of office space pursuant to a lease agreement that expires
in May 2032, subject to the terms thereof. The following table shows the types of sites owned or leased by the ADI segment and corporate
functions as of April 4, 2026:
ADI Global
Distribution
Distribution centers
22
Store Locations
198
Other
27
Totals
247
Other
sites owned or leased include offices and engineering, lab and storage sites used by one or more of our functions.
The
following table shows the regional distribution of these sites:
Americas
Asia
Pacific
EMEA
Sites
194
3
50
In
addition to the above sites, we partner with third-party logistics that operate warehousing and transportation sites for some of our
products.
We
believe our properties are adequate and suitable for our business as presently conducted and are adequately maintained.
Legal
Proceedings
We
are subject to various lawsuits, investigations and disputes arising out of the conduct of our business, including matters relating to
commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employment and benefits, intellectual
property and the environment, health and safety. We recognize a liability for any contingency that is probable of occurrence and reasonably
estimable. We continually assess the likelihood of adverse judgments of outcomes in these matters, as well as potential ranges of possible
losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside
legal counsel and, if applicable, other experts. We do not currently believe that such matters are material to our results of operations.
Refer
to Note 12. Commitments and Contingencies to the audited combined financial statements and Note 14. Commitments and Contingencies
to the unaudited interim condensed combined financial statements for information regarding legal proceedings and contingencies, and for
a discussion of risks related to legal proceedings and contingencies, refer to “Risk Factors.”
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MANAGEMENT
Executive
Officers
Following
the separation of ADI from Resideo, we will be an independent, publicly traded company. The following table sets forth information
regarding individuals who are expected to serve as ADI’s executive officers, including their positions, following the
completion of the distribution until the earlier of their resignation or removal, and is followed by a biography of each such
individual. While some of these
executive officers may be current employees of Resideo, following the distribution, none of these individuals will be employees of
Resideo. The information set forth below is as of June 15, 2026.
Name
Age
Position
Robert Aarnes
56
President and Chief Executive Officer
Michael Carlet
58
Executive Vice President, Chief Financial Officer
Jeannine Lane
65
Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer
Alicia Copeland
45
Executive Vice President, Chief Operating Officer
Marco Cardazzi
47
Executive Vice President, Chief Merchandising Officer
James Olender
47
Executive Vice President, Chief Information Officer
Robert Aarnes
– Prior to the separation of ADI from Resideo, Mr. Aarnes has served as President of the ADI Global Distribution segment of Resideo
since 2018. Prior to joining Resideo, Mr. Aarnes served as president of Honeywell’s ADI Global Distribution business since January
2017. Mr. Aarnes served as vice president and general manager of Honeywell’s ADI North America business from November 2014 to January
2017. Mr. Aarnes served as vice president of operations of Honeywell’s ADI North America business from January 2013 to November
2014. Prior to joining Honeywell, Mr. Aarnes served as president and chief executive officer of GUNNAR Optiks, LLC, a company that specializes
in developing and manufacturing digital eyewear, from September 2008 to November 2012. Since 2024, Mr. Aarnes serves on the board of directors
of MSC Industrial Direct Co., Inc. (NYSE: MSM). Mr. Aarnes received his bachelor’s degree in political science from the United States
Naval Academy and his MBA in management from San Diego State University.
We
believe Mr. Aarnes is qualified to serve on our Board due to his deep experience and daily insight into our business.
Michael Carlet –
Prior to the separation of ADI from Resideo, Mr. Carlet has served as the Chief Financial Officer of Resideo since 2024. Prior to joining
Resideo, Mr. Carlet served as the Chief Financial Officer of Snap One Holdings Corp. from 2014 to 2024. Prior to joining Snap One Holdings
Corp., Mr. Carlet served as Chief Operating Officer and Chief Financial Officer of the automotive division of Sears Holdings from 2013
to 2014. Prior to Sears, Mr. Carlet spent over 15 years with Driven Brands, Inc., the parent company of Meineke Car Care Centers, Inc.,
Maaco Franchising, Inc. and other automotive franchise brands, where he served as Chief Financial Officer from 2002 to 2013 and as Controller
from 1997 to 2000. He began his career in public accounting with Ernst & Young Global Ltd. Mr. Carlet received his BA in Accounting
from the Catholic University of America, and his MBA from Wake Forest University School of Business.
Jeannine Lane –
Prior to the separation of ADI from Resideo, Ms. Lane has served as the Executive Vice President, General Counsel and Corporate Secretary
of Resideo since 2018. Prior to joining Resideo, Ms. Lane was the Vice President and General Counsel of Honeywell Homes since January
2018. She was the Vice President and General Counsel of Honeywell Security and Fire from 2015 to 2017, Honeywell Fire Business and Honeywell
Safety Business from 2014 to 2015, Honeywell Life Safety Business from 2013 to 2014 and Honeywell Security from 2004 to 2013. Prior to
Honeywell, Ms. Lane served as the Vice President and General Counsel of Prestone Products Corporation, an automotive consumer car care
company. Ms. Lane serves on the board of directors of Janus International Group, Inc. (NYSE: JBI). Ms. Lane holds a bachelor’s degree
in English and Political Science from SUNY University at Albany and a Doctorate of Law from Albany Law School.
Alicia Copeland –
Prior to the separation of ADI from Resideo, Ms. Copeland has served as the Senior Vice President, Chief Operating Officer of ADI Global,
a division of Resideo (“ADI Global”), since March 2026. Ms. Copeland joined ADI Global in 2016 as Vice President of Americas
Operations before becoming Vice President of Global Operations, Chief Transformation Officer and Chief Commercial Officer. She serves
on the Institute Board of the National Association of Wholesaler-Distributors. Ms. Copeland holds a master’s degree in Industrial
Distribution from Texas A&M University and a BS in Organizational Leadership from Pennsylvania State University.
Marco Cardazzi –
Prior to the separation of ADI from Resideo, Mr. Cardazzi has served as the Senior Vice President, Chief Merchandising Officer of ADI
Global since March 2026. Prior to that, he held multiple leadership roles since he joined ADI Global in 2011, including Chief Marketing
Officer from 2024 to 2026, Vice President, Global Marketing from 2017 to 2024, Vice President, North America Marketing from 2015 to 2017
and Senior Product Manager from 2011 to 2015. Prior to ADI Global, he held various product, marketing and operations roles at Global Industrial
Company and MSC Industrial Direct Co., Inc. He also served on the Security Industry Association Executive Advisory Board from 2023 to
2026. Mr. Cardazzi holds a BBA in Finance from Baruch College, City University of New York.
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James Olender
– Prior to the separation of ADI from Resideo, Mr. Olender has served as Senior Vice President, Chief Information Officer of ADI
Global since May 2026. Prior to joining ADI Global, Mr. Olender served as Chief Information Officer for GE Vernova Inc.’s Wind segment
from 2022 to 2025, where he was responsible for global digital strategy and IT operations for the business. Mr. Olender served as Chief
Information Officer of Product Management, Commercial, and Engineering at General Electric (“GE”) Power from 2015 to 2022,
where he led digital transformation initiatives and enterprise system integrations across the power generation portfolio. Throughout his
tenure at GE and GE Vernova Inc., spanning more than 20 years, Mr. Olender held various leadership positions focused on industrial AI,
cybersecurity, and large-scale business separations. Mr. Olender holds a BS in Business Administration from the University at Buffalo.
Directors
The
following table sets forth information with respect to those persons who are expected to serve on the Board following the completion
of the distribution, and is followed by biographies of each such individual. The Resideo Board will continue to evaluate the
composition of the Board in order to reflect an appropriate mix of skills, experience and attributes and additional individuals may
be added to the Board in the future. The information set forth below is as of June
15, 2026.
Name
Age
Title
Michael Kaufmann
63
Director, Chairman of the Board
Robert Aarnes
56
Director, President and Chief Executive Officer
William Galvin
63
Director
Christine Gorjanc
69
Director
Cynthia Hostetler
63
Director
Stephen O. LeClair
57
Director
Nathan Sleeper
52
Director
Brian Walker
48
Director
Michael Kaufmann
– Mr. Kaufmann previously served as Chief Executive Officer of Cardinal Health, Inc. (“Cardinal Health”), a globally
integrated healthcare services and products company providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory
surgery centers, clinical laboratories, physician offices and patients in the home, from 2018 to 2022. Prior to that, he served as Chief
Financial Officer of Cardinal Health from 2014 to 2017 and as Chief Executive Officer of the Pharmaceutical Segment from 2009 to 2014.
From 2008 to 2009, Mr. Kaufmann was Group President for the medical distribution businesses of Cardinal Health, and he served in other
executive positions with Cardinal Health from 1990 through 2008. Prior to joining Cardinal Health, he worked for almost six years in public
accounting with Arthur Andersen LLP. Since leaving Cardinal Health, Mr. Kaufmann has been actively involved as a member of the advisory
boards of HealthQuest Capital, a private asset firm that provides capital to transformative healthcare companies, and Celonis SE, a global
data process intelligence platform, where he was appointed Chairman of North America in 2024, and as a board member of five different
healthcare start-up companies. In addition, Mr. Kaufmann has served on the board of directors of MSC Industrial Direct Co., Inc. (NYSE:
MSM) since 2015. Mr. Kaufmann holds a BSBA in Accounting and Management from Ohio Northern University.
We believe Mr. Kaufmann is
qualified to serve on our Board due to his broad operational experience and his knowledge and expertise in the industrial distribution
sector relevant to our business.
William Galvin
– Mr. Galvin has over 35 years of experience as a senior executive and leader in the industrial distribution and supply chain services
sector. Mr. Galvin was most recently President and CEO of Anixter International, a global distributor of network and security, electrical
and electronic and utility power solutions, which from 1975 to 2020 was a publicly traded company. He joined Anixter in 1984 as part of
the sales and marketing team. Mr. Galvin held several senior management positions before becoming CEO in 2018. Mr. Galvin led the organization
through significant transformations, focusing on network innovation, sustainability and geographic expansion. He currently sits on the
boards of Integrated Power Services and Engineered & Industrial Solutions and serves as a Trustee and Governance Chair for Cristo
Rey St. Martin College Prep School. Mr. Galvin holds a BS in Business Administration from Manhattan College. Mr. Galvin is an operating advisor of CD&R.
We believe Mr. Galvin is qualified
to serve on our Board due to his experience and expertise in the industrial distribution sector relevant to our business.
Christine Gorjanc
– Ms. Gorjanc currently serves on the boards of directors of Polestar Automotive (NASDAQ: PSNY), an electric performance car brand,
and Forward Air Corporation (NASDAQ: FRWD), a leading asset-light provider of transportation services including related logistic services,
both of which she joined in 2024 and she serves as the chair of both audit committees. From 2019 to 2025, she also served as a member
of the board of directors of Juniper Networks, a leader in secure AI driven networks, where she served on the audit committee and as lead
director. Ms. Gorjanc also served on the board of directors of Invitae, Inc., a genetic testing and services company, from 2015 to 2024,
where she served as chair of the audit committee as well as a member of the compensation committee. Ms. Gorjanc briefly served as the
Interim Chief Financial Officer of Invitae, Inc. from July until August 2023. Following her time as Interim Chief Financial Officer, Invitae,
Inc. entered into Chapter 11 of the Bankruptcy Code in February 2024. From 2021 to 2022, Ms. Gorjanc also served on the board of directors
of Zymergen, Inc., a biotechnology company, and from 2023 until 2024, on the board of directors of Shapeway Holdings, Inc., a publicly-traded
digital manufacturing platform. Ms. Gorjanc served as the Chief Financial Officer of Arlo Technologies, Inc., an intelligent cloud infrastructure
and mobile app platform company, from 2018 to 2020. She previously served as the Chief Financial Officer of NETGEAR, Inc., a provider
of networking products and services from 2008 to 2018, where she also served as Chief Accounting Officer from 2006 to 2008 and Vice President,
Finance from 2005 to 2006. Ms. Gorjanc received her BA in Accounting from the University of Texas at El Paso and her MS in Taxation from
Golden Gate University.
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We believe Ms. Gorjanc is
qualified to serve on our Board due to her extensive experience in senior leadership roles and her financial expertise.
Cynthia
Hostetler – Prior to the separation of ADI from Resideo, Ms. Hostetler has served as a director on the Resideo Board since
2020 and has been chair of the Nominating and Governance Committee and a member of the Finance Committee. Ms. Hostetler has 26 years
of leadership experience managing large investment funds (with significant global markets investments), guiding institutional investors
and allocating capital resources for businesses. An experienced board member, she currently serves on several mutual fund boards, including
as trustee of Invesco Funds, director of TriLinc Global Impact Fund and board member of Investment Company Institute. She has also served
on the board of Vulcan Materials Company (NYSE: VMC) since 2014. From 2020 to 2024, she served on the board of Textainer Group Holdings
Limited. Ms. Hostetler received her bachelor’s degree from Southern Methodist University and her JD from the University of Virginia
School of Law.
We
believe Ms. Hostetler is qualified to serve on our Board due to her board expertise in governance, finance, investment management and
corporate responsibility.
Stephen O. LeClair
– Mr. LeClair previously served as the Executive Chair and Chair of the Board of Core & Main, Inc., a leading specialty distributor
with a focus on water, wastewater, storm drainage and fire protection products, and related services. Mr. LeClair served as the Chair
of the Board of Core & Main beginning in 2024 and then as the Executive Chair of Core & Main from 2025 until April 1, 2026. Prior
to that, Mr. LeClair served as Core & Main’s Chief Executive Officer from August 2017 to March 2025. He also served as president
of HD Supply Waterworks and as president of HD Supply Lumber and Building Materials until its divestiture to ProBuild Holdings in 2008.
Mr. LeClair joined HD Supply in 2005 as senior director of operations and served as HD Supply’s Chief Operating Officer from 2008
to 2011 and as its President from 2011 to 2017. Prior to that, he was senior vice president of GE Equipment Services. He held progressively
responsible roles at GE Appliances and Power Generation in distribution, manufacturing and sales. Mr. LeClair has served on the boards
of directors of Dycom Industries Inc. (NYSE: DY) since 2025 and AAON, Inc. (NASDAQ: AAON) since 2017. Mr. LeClair holds a bachelor’s
degree in Mechanical Engineering from Union College and an MBA from the University of Louisville.
We believe Mr. LeClair is
qualified to serve on our Board due to his deep experience in the industrial distribution sector and his knowledge and expertise of the
day-to-day business and operations of a company like ours.
Nathan Sleeper
– Prior to the separation of ADI from Resideo, Mr. Sleeper has served as a director on the Resideo Board since 2024. Mr. Sleeper
has been with Clayton, Dubilier & Rice, LLC since 2000. He serves as CD&R’s Chief Executive Officer, chairs CD&R’s
executive committee and is a member of its investment, operating review, and compliance committees. He also leads the firm’s industrials
investment vertical and is responsible for firm operations. Prior to CD&R, he worked in the investment banking division of Goldman
Sachs. Since February 2026, Mr. Sleeper has served on the board of Columbus McKinnon Corporation (NASDAQ: CMCO). Previously, Mr. Sleeper
served on the boards of public companies, including Beacon Roofing Supply Inc. (formerly NASDAQ: BECN) from 2015 to 2016 and 2018 to 2023,
Core & Main, Inc. (NYSE: CNM) from 2021 to 2024 and Atkore International Group Inc. (NYSE: ATKR) from 2016 to 2018, as well as on
numerous privately held company boards. Mr. Sleeper received his bachelor’s degree from Williams College and his MBA from Harvard
Business School.
We believe Mr. Sleeper is
qualified to serve on our Board due to his broad experience in the financial and investment communities and his insight into the industrials
markets that are relevant to our business.
Brian Walker –
Mr. Walker is the Senior Vice President, Sales and Onsite Services of W.W. Grainger, Inc. (“Grainger”), a large
broad line distributor with operations primarily in North America and Japan. Since he joined Grainger in 2006 as Purchasing Manager, Mr.
Walker has held many roles of increasing responsibility. Most recently, he served as Chief Product Officer, preceded
by Vice President, Digital Architecture and Operations and President of Gamut.com. While headquartered in London, England, he served
as Vice President of Strategy and Marketing for Grainger’s Online Business with operations in Canada, Germany, Japan,
South Korea, the United Kingdom and the United States. Prior to joining Grainger, Mr. Walker led
teams in warehousing, logistics, supply chain and sales operations at McMaster-Carr Supply Company. Currently,
Mr. Walker serves on the Board of Trustees of the Illinois Institute of Technology and as part of its Board Chair Executive Council and
is a member of Wesleyan University’s President’s Council. Mr. Walker holds a bachelor’s degree in economics from Wesleyan
University, a master’s degree in applied statistics from DePaul University and an MBA from the University of Chicago’s Booth
School of Business.
We believe Mr. Walker is qualified
to serve on our Board due to his deep experience in the distribution sector and the effective implementation and leveraging of digital
platforms therein.
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Our Board
Following the Spin-Off and Corporate Governance Guidelines
Majority
Voting Standard
Upon
completion of the distribution, our bylaws are expected to provide for a majority voting standard for election of directors in uncontested
elections, where each director will be elected by the affirmative vote of a majority of the votes cast. The Board is expected to adopt
a director resignation policy, under which no incumbent director nominee shall qualify for service as a director unless he or she agrees
to submit upon renomination to the Board an irrevocable resignation effective upon such director nominee’s failure to receive a
majority of the votes cast in an uncontested election. The Nominating and Governance Committee (excluding the nominee, if applicable)
will make a recommendation to the Board as to whether to accept or reject the resignation, or whether other action should be taken. The
Board, excluding the nominee, will act on the resignation and publicly disclose its decision in accordance with the bylaws. An election
of directors is considered to be contested if there are more nominees for election than positions on the Board to be filled by election
at the meeting of stockholders. In a contested election, the required vote would be a plurality of votes cast.
Director
Independence
The Board has determined that
Messrs. Kaufmann, Galvin, LeClair, Sleeper and Walker and Mses. Gorjanc and Hostetler are independent directors under the applicable rules
of the NYSE.
The
Board will assess on a regular basis, and at least annually, the independence of directors and, based on the recommendation of the Nominating
and Governance Committee, will make a determination as to which members are independent.
Classified
Board
Our certificate of incorporation
will provide that, until the annual stockholder meeting in 2032, our Board will be divided into three classes, with each class consisting,
as nearly as may be possible, of one-third of the total number of directors:
●
our Class I directors will be Michael Kaufmann, Robert Aarnes and Christine Gorjanc;
●
our Class II directors will be William Galvin, Cynthia Hostetler and Brian Walker; and
●
our Class III directors will be Stephen O. LeClair and Nathan Sleeper.
The directors designated
as Class I directors will have terms expiring at the first annual meeting of stockholders following the distribution in 2027. At the
2027 annual meeting of stockholders, the successors of the Class I directors shall be elected for a term expiring at the 2030 annual
meeting of stockholders and the successors thereof shall be elected for a term expiring at the 2032 annual meeting of stockholders.
The directors designated as Class II directors will have terms expiring at the 2028 annual meeting of stockholders. At the 2028
annual meeting of stockholders, the successors of the Class II directors shall be elected for a term expiring at the 2031 annual
meeting and the successors thereof shall be elected for a term expiring at the 2032 annual meeting of stockholders. The directors
designated as Class III directors will have terms expiring at the 2029 annual meeting of stockholders. At the 2029 annual meeting of
stockholders, the successors of the Class III directors shall be elected for a term expiring at the 2032 annual meeting of
stockholders. Beginning at the 2032 annual meeting, all of our directors
will stand for election each year for annual terms, and our Board will therefore no longer be divided into three classes. Before our
Board is declassified, it would take at least two elections of directors for any individual or group to gain control of our Board.
Accordingly, while the classified board is in effect, these provisions could discourage a third party from initiating a proxy
contest, making a tender offer or otherwise attempting to control us.
Committees
of the Board of Directors
Effective immediately prior
to the commencement of “when issued” trading of shares of our common stock on the NYSE, the Board will have a standing Audit
Committee, and effective upon the completion of the separation, the Board will have a standing Compensation Committee and a standing Nominating
and Governance Committee.
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Audit Committee. The
initial members of the Audit Committee will be Ms. Gorjanc and Messrs. LeClair and Walker, and Ms. Gorjanc will serve as the Chair of
the Audit Committee. The Board has determined that Ms. Gorjanc is an “audit committee financial expert” for purposes of the
rules of the SEC. In addition, the Board has determined that Ms. Gorjanc and Messrs. LeClair and Walker are independent, as defined by
the rules of the NYSE and Section 10A(m)(3) of the Exchange Act. Rule 10A-3 of the Exchange Act and the NYSE rules require that our Audit
Committee have at least one independent member upon the listing of our common stock, have a majority of independent members within 90
days of the date of this information statement and be composed entirely of independent members within one year of the date of this information
statement. The Audit Committee typically meets in executive session, without the presence of management, at each regularly scheduled
meeting, and reports to the Board on its actions and recommendations at each regularly scheduled Board meeting. The Audit Committee will
meet at least quarterly and will assist the Board in:
● appointing
and recommending to the stockholders for approval the firm to be engaged as the Company’s independent auditor and will be directly
responsible for the compensation, retention and oversight of the independent auditor, including the resolution of disagreements between
management and the independent auditor regarding financial reporting;
● reviewing
the results of each external audit and other matters related to the conduct of the audit and advising the Board on whether it recommends
that the combined financial statements be included in the annual report on Form 10-K;
● reviewing
with management and the independent auditors, prior to filing, the interim financial results to be included in quarterly reports on Form
10-Q;
● reviewing
and discussing with the independent auditors any identified critical audit matters;
● evaluating
the independent auditor’s performance at least annually;
● approving
all non-audit engagements with the independent auditor;
●
reviewing reports of the independent auditor and the chief internal auditor related to the adequacy of the Company’s internal accounting controls, disclosure processes and its procedures designed to ensure compliance with laws and regulations;
●
considering and reviewing, in consultation with the independent auditor and the chief internal auditor, the scope and plan for forthcoming external and internal audits;
● reviewing
annually the performance of the internal audit group;
● reviewing
annually the effectiveness of the integrity and compliance program;
● reviewing
management’s assessment of the effectiveness of the Company’s internal control over financial reporting;
● reviewing,
approving and establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting,
internal accounting controls, auditing matters and for the confidential, anonymous submission by employees of concerns regarding questionable
accounting or auditing matters or other legal, ethical, reputational or regulatory concerns;
● producing
the annual Report of the Audit Committee included in the annual proxy statement; and
●
overseeing major financial risks and enterprise exposures and risk assessment and risk management policies, including risks related to cybersecurity, data privacy, primary IT systems of record, artificial intelligence and material litigation instituted against the Company.
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Compensation Committee.
The initial members of the Compensation Committee will be Messrs. LeClair and Galvin and Ms. Hostetler, and Mr. LeClair will serve as
the Chair of the Compensation Committee. The Board has determined that Messrs. LeClair and Galvin and Ms. Hostetler are independent, as
defined by the rules of the NYSE and Section 10C(a) of the Exchange Act. In addition, we expect that Messrs. LeClair and Galvin and Ms.
Hostetler will qualify as “non-employee directors” for purposes of Rule 16b-3 under the Exchange Act. The Compensation Committee
will discharge the Board’s responsibilities relating to the compensation of our executive officers, including setting goals and
objectives for, evaluating the performance of, and approving the compensation paid to, our executive officers. The Compensation Committee
is also responsible for:
● reviewing
and approving the corporate goals and objectives relevant to the compensation of the CEO, evaluating the CEO’s performance relative
to these goals and objectives and determining and approving the CEO’s compensation level;
● reviewing
and approving the annual salary and other remuneration of the executive officers;
● periodically
reviewing the operation and structure of the Company’s compensation programs;
● reviewing
proposals for, and determining total share usage under, the Company’s equity compensation programs;
● overseeing
the Company’s plans, policies and programs related to hiring, development and retention of talent;
● reviewing
or taking such action in connection with the bonus, stock, retirement and other benefit plans of the Company and its subsidiaries;
● establishing
and reviewing annual stock ownership guidelines applicable to directors and senior management;
● advising
the Board with respect to proposed changes in Board or committee compensation;
● reviewing
and discussing with management the Compensation Discussion and Analysis and other executive compensation disclosure included in the annual
proxy statement;
●
assisting the Board in oversight of the Company’s policies and strategies relating to culture and human capital management;
● producing
the annual Compensation Committee report included in the annual proxy statement; and
● exercising
sole authority to retain and terminate a compensation consultant, as well as approving the consultant’s fees and other terms of
engagement.
Nominating and Governance
Committee. The initial members of the Nominating and Governance Committee will be Ms. Hostetler and Messrs. Kaufmann and Sleeper,
and Ms. Hostetler will serve as the Chair of the Nominating and Governance Committee. The Board has determined that Ms. Hostetler and
Messrs. Kaufmann and Sleeper are independent, as defined by the rules of the NYSE. The Nominating and Governance Committee is responsible
for:
● actively
seeking individuals qualified to become Board members and recommending them to the full Board for consideration, including evaluating
all potential candidates, including those suggested or nominated by third parties;
● considering
director candidates holistically to ensure a diversity of perspectives, taking into consideration factors such as skills, experience,
gender, ethnicity, race, nationality and age;
● making
recommendations to the Board on the disclosures in the annual proxy statement on director independence, governance and director nomination
matters;
● overseeing
the Company’s new director orientation program and continuing education program for incumbent directors;
● reviewing
and reassessing the adequacy of the Company’s Corporate Governance Guidelines;
92
● overseeing
and reporting to the Board on the Company’s compliance with its programs relating to the Code of Business Conduct;
● overseeing
and reporting to the Board regarding the Company’s insider trading policies and procedures;
● overseeing and reporting to the Board on the Company’s role as
a responsible corporate citizen; and
● overseeing
the annual performance review of the Board and its Committees.
The
Board is expected to adopt a written charter for each of the Audit Committee, the Compensation Committee and the Nominating and Governance
Committee. These charters will be posted on our website in connection with the separation.
Compensation
Committee Interlocks and Insider Participation
During our fiscal year ended
December 31, 2025, we were not a separate or independent company and did not have a Compensation Committee or any other committee serving
a similar function. Decisions as to the compensation for that fiscal year of those who will serve as our executive officers were made
by Resideo, as described in the sections of this information statement captioned “Executive Compensation” and “Director
Compensation.”
Corporate
Governance
Stockholder
Recommendations for Director Nominees
Our
bylaws will contain provisions that address the process by which a stockholder may nominate an individual to stand for election to the
Board. We expect that the Board will adopt a policy concerning the evaluation of stockholder recommendations of Board candidates by the
Nominating and Governance Committee.
Corporate
Governance Guidelines
The
Board is expected to adopt a set of Corporate Governance Guidelines in connection with the separation to assist it in guiding our governance
practices. These practices will be regularly reevaluated by the Nominating and Governance Committee in light of changing circumstances
and best practices to ensure the Guidelines continue to serve our best interests and the best interests of our stockholders. These guidelines
will cover a number of areas, including the role of the Board of Directors, Board composition, director independence, director selection,
qualification and election, director compensation, executive sessions, key Board responsibilities, CEO evaluation, succession planning,
risk management, Board leadership and operations, conflicts of interest, annual Board assessments, Board committees, director orientation
and continuing education, Board agenda, materials, information and presentations, director access to management and independent advisers
and Board communication with stockholders and others. A copy of our corporate governance guidelines will be posted on our website.
Director
Qualification Standards
Our
Corporate Governance Guidelines will provide that the Nominating and Governance Committee is responsible for reviewing with the Board
the appropriate skills and characteristics required of board members in the context of the makeup of the Board and developing criteria
for identifying and evaluating board candidates. We believe that it is important that our directors possess and demonstrate:
● personal
and professional integrity and character;
● prominence
and reputation in his or her profession;
93
● skills,
knowledge and expertise (including business or other relevant experience) that in aggregate are useful and appropriate in overseeing
and providing strategic direction with respect to our business and serving the long-term interests of our stockholders;
● the
capacity and desire to represent the interests of the stockholders as a whole; and
● ability
to devote sufficient time to overseeing the affairs of ADI.
The
Nominating and Governance Committee will be responsible for recommending to the Board a slate of nominees for election at each annual
meeting of stockholders. Nominees may be suggested by directors, members of management, stockholders or, in some cases, by a third-party
search firm. The Nominating and Governance Committee will consider a wide range of factors when assessing potential director nominees.
This includes consideration of the current composition of the Board, any perceived need for one or more particular areas of expertise,
the balance of management and independent directors, the need for committee- specific expertise, the evaluations of other prospective
nominees and the qualifications of each potential nominee relative to the attributes, skills and experience described above. The Board
does not expect to have a formal or informal policy with respect to diversity but believes that the Board, taken as a whole, should embody
a diverse set of skills, knowledge, experiences and backgrounds appropriate in light of our needs, and in this regard expects to subjectively
take into consideration the diversity (with respect to race, gender and national origin) of the Board when considering director nominees.
The Board does not expect to make any particular weighting of diversity or any other characteristic in evaluating nominees and directors.
A stockholder who wishes to
recommend a prospective nominee for the Board should notify the Nominating and Governance Committee in writing using the procedures described
in this section under “—Corporate Governance—Stockholder Recommendations for Director Nominees” with whatever
supporting material the stockholder considers appropriate. If a prospective nominee has been identified other than in connection with
a director search process initiated by the Nominating and Governance Committee, the Nominating and Governance Committee will make an initial
determination as to whether to conduct a full evaluation of the candidate. The Nominating and Governance Committee’s determination
of whether to conduct a full evaluation will be based primarily on the Nominating and Governance Committee’s view as to whether
a new or additional Board member is necessary or appropriate at such time, the likelihood that the prospective nominee can satisfy the
evaluation factors described above and any other factors as the Nominating and Governance Committee may deem appropriate. The Nominating
and Governance Committee will take into account whatever information is provided to the Nominating and Governance Committee with the recommendation
of the prospective candidate and any additional inquiries the Nominating and Governance Committee may in its discretion conduct or have
conducted with respect to such prospective nominee.
Board’s
Role in Risk Oversight
Our
management will have day-to-day responsibility for assessing and managing our risk exposure and the Board and its committees will oversee
those efforts, with particular emphasis on the most significant risks facing us. Each committee will report to the full Board on a regular
basis, including as appropriate with respect to the committee’s risk oversight activities.
BOARD/COMMITTEE
PRIMARY
AREAS OF RISK OVERSIGHT
Full Board
Risks associated with our
strategic plan, acquisition and capital allocation program, capital structure, liquidity, organizational structure and other significant
risks and overall risk assessment and risk management policies.
Audit Committee
Risks related to financial
controls, legal and compliance risks and major financial, privacy, security and business continuity risks, cybersecurity, artificial
intelligence risk management and risk controls.
Compensation Committee
Risks associated with compensation
policies and practices and human capital management.
Nominating and Governance
Committee
Risks related to corporate
governance and board management, succession planning for the CEO and other executive officers and sustainability.
94
Code
of Business Conduct
In
connection with the separation, we will adopt a Code of Business Conduct that requires all of our business activities to be conducted
in compliance with applicable laws and regulations and ethical principles and values. All of our directors, officers and employees will
be required to read, understand and abide by the requirements of the Code of Business Conduct.
These
documents will be accessible on our website. Any waiver of the Code of Business Conduct for directors or executive officers may be made
only by the Board or a committee of the Board. We will disclose any amendment to, or waiver from, a provision of the Code of Business
Conduct for the principal executive officer, principal financial officer, principal accounting officer or controller or persons performing
similar functions, on our website within four business days following the date of the amendment or waiver. In addition, we will disclose
any waiver from the Code of Business Conduct for our other executive officers and our directors on our website. Our website, and the
information contained therein, or connected thereto, is not incorporated by reference into this information statement.
Procedures
for Treatment of Complaints Regarding Accounting, Internal Accounting Controls and Auditing Matters
In
accordance with the Sarbanes-Oxley Act, we expect that our Audit Committee will adopt procedures for the receipt, retention and treatment
of complaints regarding accounting, internal accounting controls and auditing matters and to allow for the confidential, anonymous submission
by employees and others of concerns regarding questionable accounting or auditing matters.
Website
Disclosure
We intend to disclose any
amendment to the Code of Business Conduct that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation
S-K, and any waiver from a provision of the Code of Business Conduct granted to any of our directors, principal executive officer, principal
financial officer, principal accounting officer or controller or any other executive officer, in the “Investors—Corporate
Governance” section of our corporate website, www.adiglobal.com, within four business days following the date of such amendment
or waiver.
95
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Introduction
ADI is currently a subsidiary of Resideo and not an independent public
company. At the time of the Spin-Off, ADI will have executive compensation programs, policies and practices for its executive officers
that are similar in many respects to those of Resideo. After the Spin-Off, the executive compensation programs, policies and practices
for our executive officers will be subject to the review and approval of a compensation committee (“Compensation Committee”)
of the Board, which will be formed in connection with the Spin-Off. We expect that the executive compensation programs, policies and practices
for our executive officers will align incentives more closely with ADI’s performance, strategic initiatives, industry peers, and
the long-term interests of our stockholders, which is expected to help us attract, retain, and motivate highly qualified personnel.
For
purposes of this Compensation Discussion and Analysis (this “CD&A”) and the disclosure that follows, the following
individuals would have constituted the named executive officers of ADI had it been an independent public company during 2025 and,
subject to approval of the Resideo Board and our Board, are expected to serve in the capacity set forth next to such
individual’s name following the Spin-Off:
● Robert Aarnes, President and Chief Executive Officer;
● Michael Carlet, Executive Vice President, Chief Financial
Officer;
● Jeannine Lane, Executive Vice President, General Counsel,
Corporate Secretary and Chief Compliance Officer;
● Alicia Copeland, Executive Vice President, Chief Operating
Officer; and
● Marco Cardazzi, Executive Vice President, Chief Merchandising
Officer.
We refer to each of Messrs. Aarnes,
Carlet and Cardazzi and Mses. Lane and Copeland as “named executive officers” or “NEOs” for purposes of this
CD&A and the disclosure that follows. This CD&A discusses Resideo’s historical compensation programs, policies and practices
as applied to Messrs. Aarnes, Carlet and Cardazzi and Mses. Lane and Copeland, which were made by the Compensation and Human
Capital Management Committee (the “Resideo CHCMC”) of the Resideo Board or the Resideo management team, as applicable, and
outlines certain aspects of ADI’s anticipated post-Spin-Off compensation structure for such NEOs. Neither of Ms. Copeland nor
Mr. Cardazzi were executive officers or “named executive officers” of Resideo during 2025.
NAMED EXECUTIVE OFFICER
POSITION(S)
Robert Aarnes
President and Chief Executive Officer
Michael Carlet
Executive Vice President, Chief Financial Officer
Jeannine Lane
Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer
Alicia Copeland
Executive Vice President, Chief Operating Officer
Marco Cardazzi
Executive Vice President, Chief Merchandising Officer
Executive
Compensation Philosophy and Approach
Resideo
Practice
Resideo
strives to create a compensation program that rewards for performance and engages its participants by requiring them to focus on driving
the business to generate long-term value for its shareholders, thereby building a performance-driven leadership culture. Utilizing this
philosophy, Resideo’s executive compensation program has been designed to:
● Provide
competitive pay levels using its peer group data for market context;
● Create
sustained increases in shareholder value through incentives designed to drive high performance;
● Drive
revenue growth and margin expansion and accelerate innovation;
● Reward
achievement of near- and long-term business performance targets;
● Make
pay decisions based on an executive’s skills and responsibilities, individual performance, experience, importance to the organization,
retention, affordability and internal pay equity; and
● Deliver
compensation in accordance with good governance practices that do not encourage undue risk-taking. Resideo’s executive compensation
program for 2025 utilized net revenue and operating income margin as components of its annual incentive plan. At least half of its long-term
incentive award is linked to a combination of relative total shareholder return and return on invested capital, which reinforces Resideo’s
belief that the interests of its executive team must be intricately linked to shareholder value.
96
Going
Forward
We
anticipate that our executive compensation objectives and approach will initially be similar to Resideo’s. Following the Spin-Off,
our Compensation Committee will review these objectives and approach to ensure they meet our business needs and strategic objectives.
Commitment
to Compensation Best Practices
Resideo
Practice
In
carrying out its responsibilities, the Resideo CHCMC is committed to regularly reviewing and considering best practices in governance
in executive compensation and maintains the following policies and practices that guide Resideo’s ongoing, annual executive compensation
program:
WHAT RESIDEO
DOES
WHAT RESIDEO DOES NOT
DO
Maintains robust stock ownership guidelines requiring its officers and directors to hold a significant ownership position in Resideo
Allow hedging or pledging of its securities by its directors and employees, including its NEOs
Provides compensation packages heavily weighted toward equity compensation to align incentives with shareholder interests
Backdate or spring-load equity awards
Ties incentive compensation programs to the metrics that are expected to drive shareholder value
Reprice stock options or stock appreciation rights without shareholder approval
Uses multiple performance metrics for its annual incentive plan with goals directly linked to its annual operating plan that drives its growth plan
Offer any compensation programs or policies that reward excessive risk-taking
Ensures a significant portion of its NEOs’ compensation is variable and based on company performance
Provide multi-year guaranteed payments to executive officers
Grants PSUs that require above-median TSR (55th percentile) to earn the target level of shares
Offer tax reimbursement payments or gross-ups on any severance or change in control payments
Retains an independent compensation consultant, selected by the Resideo CHCMC, to advise on competitive compensation practices
Provide any significant perquisites
Requires a double-trigger for any severance benefits to its NEOs provided in connection with a change in control
Enter into or amend an agreement with an executive officer that provides cash severance benefits exceeding 2.99x base plus bonus without advisory shareholder ratification
Requires its NEOs, where permitted by law, to sign non-competition and intellectual property agreements
Sets the annual goals for its CEO with consultation and regular performance evaluations by its independent directors
Maintains a compensation recoupment (“clawback”) policy triggered by an accounting restatement of its financial statements, which is applicable to all of its Section 16 officers, including the NEOs
Evaluates and manages risk in its compensation programs
Going
Forward
We
anticipate that our approach to compensation best practices will generally follow the same policies and practices of Resideo described
above. Following the Spin-Off, our Compensation Committee will review all aspects of its process and may make adjustments that it believes
are appropriate.
97
Peer Group
and Market Data
Resideo
Practice
With
the assistance of its independent compensation consultant, FW Cook, the Resideo CHCMC selected the companies below to include in its
peer group based on similar size revenue and market capitalization as well as alignment with Resideo’s current profile, targeting
industrial and distribution companies and internet and technology companies and focusing on the connected home. The peer companies generally
had reported annual revenues within a range of one-fourth and two times Resideo’s annual revenues and market capitalization within
a range of one-fourth and four times Resideo’s market capitalization at the time of analysis. This peer group was determined without
regard to the Spin-Off. This peer group was used to support Resideo CHCMC’s 2025 compensation decisions.
RESIDEO
PEER GROUP
●
A.O. Smith Corp. (AOS)
●
Lennox International Inc. (LII)
●
Acuity Brands, Inc. (AYI)
●
Masco (MAS)
●
ADT Inc. (ADT)
●
NCR Corporation (VYX)
●
Allegion plc (ALLE)
●
Owens Corning (OC)
●
CommScope Holding Company, Inc. (COMM)
●
Pentair plc (PNR)
●
Fortune Brands Home & Sec. (FBIN)
●
Regal Rexnord Corporation (RRX)
●
Generac Holdings, Inc. (GNRC)
●
UFP Industries (UFPI)
●
Jeld-Wen Holdings, Inc. (JELD)
●
Watsco, Inc. (WSO)
●
Juniper Networks, Inc. (JNPR)
In
addition, the Resideo CHCMC selected the two alternative peer group sets below in anticipation of the Spin-Off, with the assistance of
FW Cook. These companies were selected based on the criteria described above, as applied to both, (1) the remaining business of Resideo
as it is expected to exist and operate following the Spin-Off, and (2) ADI Global Distribution on a standalone basis.
RESIDEO
PEER GROUP (POST SPIN-OFF)
●
A.O. Smith Corp. (AOS)
●
Gibraltar Industries, Inc. (ROCK)
●
AAON, Inc. (AAON)
●
Griffon Corporation (GFF)
●
Acuity Brands, Inc. (AYI)
●
Itron, Inc. (ITRI)
●
Alarm.com Holdings Inc. (ALRM)
●
NCR Voyix Corporation (VYX)
●
Allegion plc (ALLE)
●
Pentair plc (PNR)
●
Atkore Inc. (ATKR)
●
Regal Rexnord Corporation (RRX)
●
Fortune Brands Innovations, Inc. (FBIN)
●
Sunrun Inc. (RUN)
●
Generac Holdings Inc. (GNRC)
●
UFP Industries, Inc. (UFPI)
●
Vistance Networks, Inc. (VISN)
ADI GLOBAL DISTRIBUTION PEER GROUP (POST SPIN-OFF)
●
Accendra Health, Inc. (ACH)
●
Henry Schein, Inc. (HSIC)
●
Adapthealth Corp. (AHCO)
●
LKQ Corporation (LKQ)
●
Applied Industrial Technologies, Inc. (AIT)
●
MSC Industrial Direct Co., Inc. (MSM)
●
BlueLinx Holdings Inc. (BXC)
●
ScanSource, Inc. (SCSC)
●
Boise Cascade Company (BCC)
●
SiteOne Landscape Supply, Inc. (SITE)
●
DNOW Inc. (DNOW)
●
The Andersons, Inc. (ANDE)
●
DXP Enterprise, Inc. (DXPE)
●
The Chefs’ Warehouse, Inc. (CHEF)
●
Watsco, Inc. (WSO)
While
the Resideo CHCMC considers peer group information provided by its independent consultant as part of its benchmarking analysis, it also
refers to other available resources, including published compensation data from surveys, to fully understand competitive compensation
practices in the external marketplace for executive talent.
The
Resideo CHCMC reviews the peer group benchmark data as one reference point to guide its compensation decisions, although actual compensation
levels may vary based on the Resideo CHCMC’s consideration of other factors described below.
Going
Forward
The
ADI Global Distribution peer group established by the Resideo CHCMC with the assistance of FW Cook, as described above, will help inform
our initial decision-making with respect to the Company’s executive compensation program and ensure that such program supports
the Company’s recruitment and retention needs and is fair and efficient. The Resideo CHCMC selected companies for inclusion in
this peer group based on (1) the extent to which they compete with the Company for executive talent because they operate in the same
industry (or in a similar industry), (2) comparability of revenues and market capitalization, and (3) other qualitative factors such
as business fit and complexity.
Following
the Spin-Off, our Compensation Committee will review the peer group on a periodic basis and determine whether any changes are appropriate
based on its view of the competitive environment in which we operate.
98
Elements
of Compensation
Resideo
Practice
The following table provides an overview of Resideo’s executive
compensation program as applied to its NEOs, including Messrs. Aarnes and Carlet and Ms. Lane.
BASE SALARY
●
Salaries are competitive with median market practice for the individual’s role, taking into consideration individual performance, experience, scope of role relative to market benchmarks and other factors
ANNUAL INCENTIVE PLAN
●
Resideo’s 2025 annual incentives were tied to achieving growth
and profitability targets approved by the Resideo Board
●
Financial metrics for 2025 were Net Revenue and Operating Income as a percentage of Net Revenue (“Operating Income Margin”), each on a constant currency basis
LONG-TERM INCENTIVES
●
Target LTI values are generally granted to NEOs through two equity instruments:
●
Restricted stock units (“RSUs”) representing 50% of the total LTI value for NEOs other
than the CEO, who announced his intended retirement from Resideo, vesting annually over three years in equal, one-third
installments; and
●
Performance stock units (“PSUs”) representing 50% of the total LTI value for NEOs other
than the CEO, with potential payout determined based 50% on Resideo’s total shareholder return measured against the total
shareholder return of the companies in the S&P 600 Index (“rTSR”) and 50% based on return on invested capital
(“ROIC”) during a 3-year performance period. Resideo’s CEO did not receive an LTI award in 2025 due to his intended retirement from Resideo
Going
Forward
We
anticipate that our executive compensation program upon the Spin-Off will generally include the same elements as Resideo’s executive
compensation programs. Following the Spin-Off, our Compensation Committee will review the primary elements of our executive compensation
program, and mix thereof, to ensure they meet our business needs and strategic objectives. This will include a review of base salary
as well as short-term and long-term incentive programs and other elements of compensation.
2025
Executive Compensation Decisions
2025
Base Salary
Resideo
Practice
Base salaries provide a competitive level of fixed compensation for
Resideo’s NEOs, which are aligned with their roles and account for additional factors such as their level of experience and individual
performance. The Resideo CHCMC considers competitive fixed cash compensation to be an important foundation of a competitive total compensation
program that will both retain and motivate its executives. At least annually, the Resideo CHCMC reviews the competitiveness of base salaries
relative to external benchmarks and considers changes, as appropriate, taking into consideration market data as well as other relevant
factors, including key elements of the compensation philosophy described above. For 2025, base salaries for Resideo’s NEOs were
generally increased to reflect market-based increases of 4%, which generally align with increases provided to other employees in the United
States. The fiscal 2025 annual base salaries for Messrs. Aarnes, Carlet and Cardazzi and Mses. Lane and Copeland, including any change
from the prior year, are reflected below:
Name
Title
2024 Base
Salary
2025 Base
Salary
Percent
Increase
Robert Aarnes
President and Chief Executive Officer
$
643,700
$
670,000
4.1
%
Michael Carlet
Executive Vice President, Chief Financial Officer
$
575,000
$
600,000
4.3
%
Jeannine Lane
Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer
$
567,600
$
591,000
4.1
%
Alicia Copeland
Executive Vice President, Chief Operating Officer
$
395,000
$
442,000
(1)
11.9
%
Marco Cardazzi
Executive Vice President, Chief Merchandising Officer
$
335,000
$
347,730
3.8
%
(1) Ms. Copeland was promoted
to SVP, Chief Operating Officer - ADI effective September 12, 2025. Prior to her promotion, the base salary payable to Ms. Copeland
was $414,750.
Going
Forward
Following
the Spin-Off, we anticipate that our Compensation Committee will establish base salary levels for our executive officers taking into
account a review of benchmarking data for similar roles, individual performance, and competitive positioning.
99
2025 Annual
Incentive Plan
Resideo
Practice
The fiscal 2025 annual incentive plan provided Resideo’s NEOs
and Ms. Copeland and Mr. Cardazzi the opportunity to earn a cash bonus with a target amount equal to a specified percentage of the executive’s
base salary. Under the 2025 annual incentive plan, Resideo’s NEOs and Ms. Copeland and Mr. Cardazzi were eligible to receive a payout
ranging from a threshold payment of 25% to a maximum of 200% of the target award allocated to the achievement of each financial metric.
No bonus is paid if performance under both metrics is below threshold. If one metric is below threshold and the other is above threshold,
the maximum payout is 90% of target.
In
determining the financial metrics used to set performance targets for the 2025 annual incentive compensation awards, the Resideo CHCMC
considered, among other factors, the importance of a clear and direct link between its financial results and awards under its annual
incentive plan. To that end, for 2025, the Resideo CHCMC selected financial metrics, consisting of Net Revenue and Operating Income Margin,
each on a constant currency basis. At the time the performance metrics and goals were set for 2025, the Resideo CHCMC also determined
that certain items not contemplated at that time would be excluded from the results determined after the end of the year, including the
results of businesses acquired and divested during 2025, unanticipated legal settlements, restructuring and similar unusual events.
The
relative weighting of each financial metric and a definition of the metric under Resideo’s 2025 annual incentive plan is set forth
below:
Financial Metric
Weighting
Definition*
Net Revenue
50%
The aggregate transaction price recognized from satisfied performance obligations for the products and services provided to Resideo’s customers net of discounts, rebates, other customer incentive programs, and gross customer returns. For purposes of this financial metric, net revenue is determined on a constant currency basis to remove the impact of foreign currency fluctuations.
Operating Income Margin
50%
Represents the ratio of operating income to net revenue.
* The
financial metrics are reported on a constant currency basis.
In
setting the 2025 financial targets, the Resideo CHCMC was focused on Resideo’s commitment to aligning executive compensation
with its financial performance and strategic goals, and incentivizing behaviors aligned with shareholder interests. To this end, the
target Goal for Net Revenue for consolidated Resideo and for ADI was set above the actual Net Revenue amount achieved last year. In
addition, the target Goal for Operating Income Margin for the Products and Solutions business of Resideo (“P&S”)
was set above the actual Operating Income Margin achieved last year for P&S. The target Goal for Net Revenue for P&S was
slightly lower compared to the actual amounts achieved last year due primarily to foreign currency exchange impacts. In addition,
the target Goal for Operating Income Margin for consolidated Resideo was set below the actual amount achieved last year due to
anticipated strategic investments and because a higher percentage of consolidated Operating Income was expected from ADI relative to
P&S (which has a lower target Operating Income Margin than P&S) due to the inclusion of a full year of the Snap One business
as part of ADI. The target goal for Operating Income Margin for ADI was set below the actual amounts achieved last year due to
anticipated cash to be used for strategic investments.
In certifying the level of
performance achieved for 2025, the Resideo CHCMC ratified those adjustments previously approved by the Resideo CHCMC when the metrics
were set, including impacts of foreign exchange rates, amounts related to restructuring, impairment and extinguishment costs, unanticipated
legal settlements, and other adjustments that were not contemplated at the time the goals were originally determined. These adjustments
resulted in a $90 million decrease, $46 million decrease, and $44 million decrease in Net Revenue for consolidated Resideo, ADI, and P&S
respectively. Operating Income Margin increased by 50 bps, 10 bps, and 50 bps for consolidated Resideo, ADI, and P&S, respectively.
100
Financial
Performance*
For
the Period January 1, 2025 – December 31, 2025
Total
Resideo
Financial Metrics
(Weight)
Threshold
($M)
Goal
($M)(1)
Maximum
($M)
Actual
($M)
Financial
Performance
% of Goal
Financial
Performance Payout %
Weighted
Payout %
Net
Revenue (50%)
$ 6,652
$ 7,391
$ 8,130
$ 7,382
99.9 %
99.9 %
50 %
Operating
Income Margin (50%)
7.3 %
8.6 %
9.9 %
8.6 %
100.5 %
104.0 %
52 %
Total
Resideo
101.5 %
* Actual
results are reported at constant currency.
Financial
Performance*
For
the Period January 1, 2025 – December 31, 2025
ADI
Global Distribution Financial Metrics (Weight)
Threshold
($M)
Goal
($M)(1)
Maximum
($M)
Actual
($M)
Financial
Performance
% of Goal
Financial
Performance Payout %
Weighted
Payout %
Net
Revenue (50%)
$ 4,343
$ 4,825
$ 5,308
$ 4,738
98.2 %
91.0 %
45 %
Operating
Income Margin (50%)
4.4 %
5.2 %
6.0 %
4.5 %
86.0 %
53.2 %
27 %
ADI
Total
72.1 %
Total
Resideo
101.5 %
Weighted
Total
(50% ADI Total/50% Resideo Total)
86.8 %
* Actual
results are reported at constant currency.
**
For
Ms. Copeland and Mr. Cardazzi, the financial metrics were weighted 60% on the results of the ADI segment and 40% on Resideo’s
consolidated results, which resulted in a weighted payout percentage of 83.8%.
Financial
Performance*
For
the Period January 1, 2025 – December 31, 2025
Products
& Solutions (P&S)Financial Metrics (Weight)
Threshold
($M)
Goal
($M)(1)
Maximum
($M)
Actual
($M)
Financial
Performance
% of Goal
Financial
Performance Payout %
Weighted
Payout %
Net
Revenue (50%)
$ 2,309
$ 2,566
$ 2,823
$ 2,644
103.1 %
130.6 %
65 %
Operating
Income Margin (50%)
17.3 %
20.3 %
23.3 %
21.1 %
104.0 %
126.7 %
63 %
Products
and Solutions Total
128.6 %
Total
Resideo
101.5 %
Weighted
Total (50% Products and Solutions Total/50% Resideo Total)
115.0 %
* Actual
results are reported at constant currency.
101
The
financial metrics for Mr. Carlet and Ms. Lane were based on Resideo’s consolidated results. The financial metrics for Mr. Aarnes’
annual incentive award were weighted 50% on the results of the ADI segment, and 50% on Resideo’s consolidated results. The financial
metrics for Mr. Cardazzi and Ms. Copeland were weighted 60% on the results of the ADI segment, and 40% on Resideo’s consolidated
results. The Bonus Target percentage for each of Messrs. Aarnes, Carlet and Cardazzi and Ms. Lane remained the same as in 2024. For Ms.
Copeland, the Bonus Target percentage was increased from 60% to 70% in September 2025 in connection with Ms. Copeland’s promotion.
To
determine the actual 2025 annual incentive cash awards paid to each of Resideo’s NEOs and to Ms. Copeland and Mr. Cardazzi pursuant
to Resideo’s 2025 annual incentive plan, the following formula was applied (the base salary amount used in the formula was the
NEO’s 2025 base salary rate):
NEO
2025 Base Salary
Bonus Target
%
Financial
Performance
Payout
Percentage
Annual
Incentive Cash
Award(1)
Robert Aarnes
$ 670,000
100.00 %
86.80 %
$ 581,560
Michael Carlet
$ 600,000
100.00 %
101.50 %
$ 609,000
Jeannine Lane
$ 591,000
80.00 %
101.50 %
$ 479,892
Alicia Copeland(2)
$ 442,000
62.96 %
83.80 %
$ 235,892
Marco Cardazzi
$ 347,730
50.00 %
83.80 %
$ 152,984
(1)
The
amounts actually paid to Ms. Copeland and Mr. Cardazzi in respect of an Annual Incentive Cash Award represent an additional
discretionary adjustment of 108% and 105%, respectively.
(2)
Ms. Copeland
was promoted to SVP, Chief Operating Officer - ADI effective September 12, 2025. Prior to her promotion, the base salary payable
to Ms. Copeland was $414,750. In connection with her promotion, Ms. Copeland’s annual incentive target was increased
from 60% to 70%.
Going
Forward
Following
the Spin-Off, we anticipate that our Compensation Committee will develop an annual incentive plan focused on near-term operational and
financial goals that support our unique business objectives, while also allowing for meaningful pay differentiation tied to the performance
of individuals and groups.
2025
Long-Term Incentives
Resideo
Practice
The
goal of Resideo’s LTI plan is to align the compensation of its executives with the interests of shareholders by granting annual
equity awards to encourage strong operational and financial performance that results in long-term shareholder value creation. LTI compensation
also serves as a retention instrument and provides equity-building opportunities for executives. These equity awards are granted under
the Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates (the “Resideo 2018 Stock Incentive
Plan”). In determining the target award value for each executive, the Resideo CHCMC considers competitive LTI award information
among our peer group companies provided by the independent compensation consultant, taking into consideration the total value of all
elements of compensation. Further, the Resideo CHCMC recognizes the importance of LTI awards in providing a compensation package that
will motivate and retain executives.
102
The
tables below show the mix of annual LTI components for 2025:
NEOs (Other Than CEO)*
(% of Total LTI)
Performance Stock Units (PSUs)
50 %
Restricted Stock Units (RSUs)
50 %
* Resideo’s
CEO did not receive an LTI award in 2025 due to his intended retirement from Resideo.
Name
2025 LTI Award
Target Value
2025 PSU Target Value(1)
2025 RSU Target Value
Robert Aarnes
$ 2,200,000
$ 1,100,000
$ 1,100,000
Michael Carlet
$ 2,000,000
$ 1,000,000
$ 1,000,000
Jeannine Lane
$ 1,500,000
$ 750,000
$ 750,000
Alicia Copeland
$ 350,000
$ –
$ 350,000
Marco Cardazzi
$ 252,000
$ –
$ 252,000
(1) Ms. Copeland and Mr. Cardazzi,
who were not named executive officers of Resideo for the year ended December 31, 2025, were not eligible to receive an award of
PSUs in 2025.
The number of shares awarded to an executive for each component of
the award is determined by dividing the target value by the average of the closing stock price of a share of Resideo’s common stock
on the three market trading days leading up to and including the grant date, rounded down to the nearest cent.
2025
RSUs
The
annual RSUs awarded in 2025 will vest ratably over a three-year period, with one-third of the shares vesting on each anniversary of the
grant date, subject to the recipient being employed through each vesting date, but continue to vest after retirement.
2025
PSUs
For 2025, the Resideo CHCMC
approved the redesign of Resideo’s PSU program to include a component based on the three-year average ROIC and retain the three-year
rTSR component, each weighted equally and independent of one another. The performance period for the PSUs granted in 2025 is for the three-year
period ending on December 31, 2027 (the “2025 PSUs”) and the maximum payout of the 2025 PSUs is 200% of the target award.
This change in design was primarily driven by Resideo’s shareholder engagement conversations, which emphasized the importance to
shareholders of linking executive compensation to our financial results, while also remaining aligned with shareholders’ interests
by maintaining a performance metric based on Resideo’s stock price through rTSR. The rTSR component for the 2025 PSUs may be earned
by comparing Resideo’s total shareholder return (“TSR”) to the TSR of other companies in the S&P 600 Index from February 13, 2025 through December 31, 2027. The threshold, target and maximum levels of rTSR achievement that correspond
to the number of shares that may be earned are set forth below. Performance below the threshold level will result in no shares being paid
for the rTSR component of the 2025 PSUs. In addition, there is a cap on the payout for the rTSR performance measure if Resideo’s
TSR is negative for the performance period. Under those circumstances, the maximum payout will be capped at 100% of the target award,
regardless of Resideo’s relative performance against the other companies in the S&P 600 Index.
103
The
new ROIC metric included in the 2025 PSUs will be earned if certain levels of a three-year average ROIC is achieved. There will be no
payout for the ROIC portion of the 2025 PSUs if the performance achieved is below the threshold level set for this component. In addition,
there is a flat funding schedule around the target level to recognize the inherent difficulty in goal-setting over a three-year period
(with a 98%-102% collar around the target goal). ROIC is defined as Net Operating Profit x (1-tax rate) divided by Total Debt + Other
Long-Term Liabilities (excluding any liabilities under the Indemnification Agreement + shareholder equity – excess cash).
Percentile
Rank
Payout as percent of
Target
shares*
Threshold
25th
50 %
Target
55th
100 %
Maximum
75th
200 %
*
Linear interpolations between points
The Resideo CHCMC established
threshold, target and maximum goals for the ROIC performance measure for the 2025 PSUs. The specific ROIC performance goals for the three-year
award period are maintained by Resideo as proprietary and confidential. The Resideo CHCMC believes that disclosure of these specific
performance goals would represent competitive harm to Resideo as the ROIC goals and results are not publicly disclosed and are competitively
sensitive. The Resideo CHCMC believes the attainment of the target performance levels, while uncertain, could be reasonably achieved
with strong execution by the Resideo team of the long-term financial plan. Threshold goals represent the minimum level of performance
necessary for there to be a payout for the ROIC performance measure and the Resideo CHCMC believes the threshold goals are rigorous,
but likely to be achieved. Maximum goals represent the performances at which payouts for the ROIC performance measure are 200% of the
target award and reinforces stretch achievements. Even if actual results exceed the maximum goals, the payouts for the ROIC performance
measure are capped at 200% of the target award to mitigate any incentive to encourage excessive risk taking across Resideo. Maximum goals
represent levels of performance at which the Resideo CHCMC determined a payout of 200% of target would be appropriate. The Resideo CHCMC
believes that the maximum goals established are more aggressive goals. Resideo expects to provide disclosure of the actual ROIC goals
and performance attained for the 2025 PSUs in the proxy statement for our 2028 Annual Meeting. In addition to approving performance measures,
goals and weightings, the Resideo CHCMC also established specific and typical corporate adjustment events and that are consistent with
past practice for determining payouts under the 2025 PSUs. The adjustment events include material impacts from acquisitions and divestitures,
changes in tax or accounting principles, termination, modification, restructuring or settlement of any agreement with Honeywell entered
into at the time Resideo was separated from Honeywell, purchase accounting adjustments, foreign currency exchange rates, restructuring
activities, impairment and extinguishment costs, and other adjustments that were not contemplated as part of Resideo’s financial
plan at the time the goals were originally determined.
The rTSR and ROIC performance metrics in the 2025
PSUs are measured and paid out independently of each other. As such, if the threshold level of the rTSR is not achieved, but is achieved
for ROIC, or vice versa, an amount of the 2025 PSUs would be earned.
2023
PSUs
December
31, 2025 marked the end of the three-year performance period for PSUs granted in February 2023. Those PSUs vested based on the ranking
of Resideo’s total shareholder return (“TSR”) over the three-year period from January 1, 2023 through December 31,
2025 as compared to the TSR of the companies in the S&P 600 Index over the same period. The total shares that could have been earned
by an executive under these awards range from 50% of the target award for achievement of the minimum level of performance to a maximum
of 200% of the target award. Based on Resideo achieving a TSR rank of 78 out of the 527 companies in the S&P 600 Index, which represents
a 85.36 percentile ranking, the 2023 PSU awards achieved a payout of 200% of the target award.
104
Special
Awards to Mr. Aarnes
The
Resideo CHCMC approved a special grant of $5 million in RSUs for Mr. Aarnes in February 2024 for retention. Unlike the standard
annual RSU awards, the special RSU awards vest 50% on each of the third and fourth anniversaries of the grant date and do not provide
for continued vesting in the event of retirement. The Resideo CHCMC considered a variety of factors when making the decision to provide
the special grant, including the outstanding leadership of Mr. Aarnes in driving performance for ADI. For Mr. Aarnes, the acquisition
of Snap One, which expanded Resideo’s smart technology portfolio and broadened its distribution capabilities across the residential
and commercial markets, expanded his responsibilities significantly. In addition, the Resideo CHCMC felt that Mr. Aarnes’
leadership was critical to the successful integration of the business. The total value of Mr. Aarnes outstanding equity in absolute
and relative terms was also considered in the Resideo CHCMC’s decision to make this special award.
Going
Forward
Following the Spin-Off, our
long-term incentive award program will initially be similar to Resideo’s program, and we will have adopted the 2026 Stock Incentive
Plan of ADI Global Distribution Inc. and its Affiliates (the “2026 Equity Plan”), effective as of the effective time of the
Distribution. For additional information regarding certain go-forward compensation arrangements, see “—Compensation Discussion
and Analysis—Material Offer Letters” below. Further, unvested awards under the Resideo 2018 Stock Incentive Plan held by Messrs. Aarnes,
Carlet and Cardazzi and Mses. Lane and Copeland (as well as other employees of Resideo transferring to ADI in connection with the Spin-Off)
will be converted into comparable awards of equivalent value under the 2026 Equity Plan. For additional information regarding the conversion
of such awards, see “—Treatment of Outstanding Equity Awards Resulting from the Distribution” below. Our Compensation
Committee will review our program with the goal of ensuring it is effective in attracting, retaining and motivating skilled executives
and aligning the interests of management and shareholders.
Other
Components of Compensation
Severance
Plans
Resideo
Practice
Officer Severance Plan
Certain of Resideo’s NEOs, including Messrs. Aarnes and
Carlet and Ms. Lane, participate in the Resideo Technologies, Inc. Severance Plan for Designated Officers (the “Resideo Officer
Severance Plan”). The Resideo Officer Severance Plan addresses severance for Resideo’s officers upon a termination of employment
following a change in control (“CIC”), considered a “double trigger,” and is intended to ensure the continued
attention of such officers to their roles and responsibilities without the distraction that may arise from the possibility of a job loss
concurrent with a CIC of Resideo. In addition, the Resideo Officer Severance Plan provides for severance payments and benefits that become
payable if the employment of one of Resideo’s covered officers is terminated by Resideo without “cause” (as defined
in the Resideo Officer Severance Plan), subject to such individual signing and not revoking a release of claims. The Resideo CHCMC adopted
the Resideo Officer Severance Plan to provide competitive post-employment compensation arrangements that promote the continued attention,
dedication and continuity of the members of Resideo’s senior management team, including its NEOs, and enable Resideo to continue
to recruit talented senior executive officers.
The Spin-Off will not constitute a CIC under the Resideo Officer Severance
Plan. However, the Resideo CHCMC adopted an amendment to the Resideo Officer Severance Plan (the “Officer Divestiture Amendment”),
pursuant to which covered officers would be entitled to certain “double trigger” severance protection in the event of their
experiencing a qualifying termination following a “divestiture” (as defined in the Officer Divestiture Amendment and which
would include the Spin-Off). Specifically, the Officer Divestiture Amendment provides that, in the event of an executive’s termination
by Resideo without “cause” or resignation for “good reason” (as each such term is defined in the Resideo Officer
Severance Plan) within 18 months following a divestiture that is consummated prior to December 31, 2027, then the executive would be entitled
to receive the same level of enhanced severance benefits that would be available if the transaction were a CIC, as well as full accelerated
vesting of any then-unvested awards under the Resideo 2018 Stock Incentive Plan (including any successor award received in substitution
or exchange therefor in connection with such divestiture). However, any enhanced severance payable pursuant to the Officer Divestiture
Amendment would be payable in the same time and form as if the qualifying termination were not in connection with a transaction (versus
the accelerated payment timing that would apply in the event of a qualifying termination that is in connection with a CIC).
Executive Severance Plan
Certain of Resideo’s executives who are
not officers, including Ms. Copeland and Mr. Cardazzi during 2025, participate in the Severance Pay Plan for Designated Executive
Employees of Resideo Technologies, Inc. (the “Resideo Executive Severance Plan”). The Resideo Executive Severance Plan
provides for severance payments that become payable if the employment of a covered executive is involuntarily terminated by Resideo without
“cause” (as defined in the Resideo Executive Severance Plan), subject to such individual signing and not revoking a release
of claims. Under the Resideo Executive Severance Plan, a covered executive is entitled to nine months of base salary payable in periodic
installments. The Resideo CHCMC adopted the Resideo Executive Severance Plan to provide competitive post-employment compensation arrangements
that promote the continued attention, dedication and continuity of the members of Resideo’s management team and enable Resideo to
recruit and retain talented executives. Unlike the Resideo Officer Severance Plan, the Resideo Executive Severance Plan does not provide
for enhanced severance payments or benefits.
105
Going
Forward
The Officer Divestiture Amendment requires that the successor in a
divestiture transaction (such as ADI) assume the obligations thereunder. Further, following the Spin-Off, we anticipate that our Compensation
Committee will develop severance programs to provide competitive post-employment compensation arrangements that promote the continued
attention, dedication and continuity of the members of our senior management team, including our NEOs, and enable us to recruit talented
senior executive officers going forward.
For additional information regarding the severance
benefits provided to Messrs. Aarnes, Carlet and Cardazzi and Mses. Lane and Copeland, see “—Potential Payments Upon
Termination or Change in Control Table” below. Following the Spin-Off, Ms. Copeland and Mr. Cardazzi will participate
in ADI’s severance plan for officers along with Messrs. Aarnes and Carlet and Ms. Lane but will not be eligible under
the Resideo Officer Severance Plan for the enhanced severance payments and benefits provided for thereunder.
Nonqualified
Deferred Compensation Plans
Resideo
Practice
Resideo’s
executive officers (including its NEOs) may choose to participate in the Resideo Supplemental Savings Plan, a nonqualified deferred compensation
plan that permits additional tax-deferred retirement savings options. The Resideo Supplemental Savings Plan has two components, the Deferred
Incentive Program (“DIP”) and the Supplemental Savings Program (“SSP”). Executive officers can elect to defer
up to 100% of their annual incentive award under the DIP component. In addition, under the SSP component, executive officers may also
elect to defer eligible compensation that cannot be contributed to the Resideo’s 401(k) plan due to IRS limitations. The amounts
contributed to the SSP are eligible for company matching credits, not to exceed 100% of the first 7% contributed combined between the
SSP and the Resideo’s 401(k) plan. The participant account balances in the SSP are subject to gains and losses, based on the returns
of the Fidelity® U.S. Bond Index Fund.
Going
Forward
Following
the Spin-Off, we do not anticipate the adoption of any nonqualified deferred compensation plans for our executive officers or other employees
in the near term.
Benefits
and Perquisites
Resideo
Practice
Resideo’s
NEOs are eligible to receive the same benefits as its salaried employees in the U.S. Resideo, and the Resideo CHCMC believes this approach
is reasonable and consistent with the overall compensation objectives to attract and retain employees. These benefits include medical,
dental, vision, disability insurance, a 401(k) plan and other plans and programs made available to other eligible employees in the U.S.
Resideo also provides its NEOs with an annual
executive physical paid for by Resideo. These physicals provide a more in-depth review of the health of Resideo’s executive officers.
In addition, Resideo pays the lease expense for a remote office for Mr. Aarnes to provide him with the ability to work out of an office
in close proximity to his home in Florida on days when he is not on business travel or working from the Company’s headquarters in
Melville, New York.
Going
Forward
We
anticipate that our benefits and perquisites upon the Spin-Off will generally include the same benefits and perquisites as provided by
Resideo. Following the Spin-Off, our Compensation Committee will review the benefits and perquisites provided by ADI to ensure they remain
competitive and meet our business needs and strategic objectives.
Stock
Ownership Guidelines
Resideo
Practice
The
Resideo CHCMC believes that the interests of Resideo’s executives, including its NEOs, will be more aligned with those of shareholders,
and its NEOs will more effectively pursue strategies that promote shareholders’ long-term interests, if such executives hold substantial
amounts of Resideo stock. All of Resideo’s executive officers, including its NEOs, are subject to minimum stock ownership guidelines
that are administered by the Resideo CHCMC. Under these guidelines, executive officers must hold shares of Resideo common stock or equivalents
equal in value to the following multiples of their initial base salary as in effect when the executive becomes subject to the policy
(6x base salary, for the CEO, and 3x base salary, for other executive officers). Resideo’s executive officers have five years from
the date they become subject to the guidelines to meet the ownership requirement. Shares owned outright, unvested RSU awards and earned
performance stock awards are counted toward the ownership requirement. Shares may be sold during the accumulation period if satisfactory
progress towards meeting the minimum requirement is demonstrated. As of December 31, 2025, all of Resideo’s executive officers
have met the minimum stock ownership requirement.
106
Going
Forward
In connection with the Spin-Off,
we expect our Board to adopt stock ownership guidelines that are substantially similar to those maintained by Resideo. Under these guidelines,
executive officers and non-employee directors will be required to hold shares of ADI common stock or equivalents equal in value to a specified
multiple of their annual base salary or annual cash retainer, as applicable, in effect when the individual becomes subject to the guidelines
(6x base salary for the CEO, 3x base salary for other executive officers and 5x annual cash retainer for non-employee directors). Executive
officers and non-employee directors will have five years from the date they become subject to the guidelines to meet the applicable ownership
requirement. Unvested restricted stock units, earned performance stock units and shares owned outright will be counted toward the ownership
requirement. Shares may be sold during the accumulation period if satisfactory progress toward meeting the minimum requirement is demonstrated.
The Compensation Committee will review stock ownership levels on at least an annual basis.
Incentive
Recoupment (“Clawback”) Policy
Resideo
Practice
In
2023, the Resideo CHCMC approved a revised Clawback policy to comply with the new NYSE listing standards. Under the policy, in the event
Resideo is required to prepare an accounting restatement, it will take reasonable steps to promptly recover any excess incentive-based
compensation paid to its current and former executive officers based on any misstated financial reporting measure that was received during
the three-year period preceding the date Resideo is required to prepare the restatement.
Going
Forward
We
expect to adopt a substantially similar clawback policy in connection with the Spin-Off.
Insider
Trading Policy
Resideo
Practice
The Resideo Board has adopted an insider trading
policy governing the purchase, sale, and other transactions in Resideo’s securities by directors, officers and employees of Resideo,
and by Resideo itself. Resideo believes its insider trading policy is reasonably designed to promote compliance with insider trading laws,
rules and regulations, and applicable NYSE listing standards. Resideo’s insider trading policy is filed with the SEC as an exhibit
to our Annual Report on Form 10-K.
Going
Forward
We
expect to adopt a substantially similar insider trading policy (and related procedures) in connection with the Spin-Off.
Hedging
and Pledging Policy
Resideo
Practice
It
is the policy of Resideo that all of its directors, officers and employees are prohibited from engaging in short sales of Resideo securities
and selling or purchasing puts or calls or otherwise trading in or writing options on Resideo securities and using certain financial
instruments (including forward sale contracts, equity swaps, collars and exchange funds), holding securities in margin accounts or pledging
Resideo securities as collateral, in each case, that are designed to hedge or offset any decrease in the market value of Resideo securities.
Going
Forward
We
expect to adopt a substantially similar hedging and pledging policy (and related procedures) in connection with the Spin-Off.
Tax
Deductibility of Executive Compensation
Resideo
Practice
Section
162(m) of the Internal Revenue Code limits the federal income tax deduction for annual individual compensation to $1 million for Resideo’s
“covered employees” without any exception for performance-based compensation, subject to a transition rule for certain written
binding contracts in effect on November 2, 2017, and not materially modified after that date. Resideo intends to comply with the transition
rule for written binding contracts in effect on November 2, 2017, to the extent applicable. The Resideo CHCMC seeks to closely align
executive pay with performance, even if there is no longer a “performance-based” provision under Section 162(m), and, in
any case, the Resideo CHCMC reserves the ability to structure compensation arrangements to provide appropriate compensation to its executives,
even where such compensation is not deductible under Section 162(m).
107
Going
Forward
We
anticipate that, similar to the approach followed by the Resideo CHCMC, following the Spin-Off, our Compensation Committee will review
the tax impact of executive compensation on ADI as well as on our executive officers in addition to taking into account other considerations
such as accounting impact, shareholder alignment, market competitiveness, effectiveness and perceived value to employees. Because many
different factors influence a well-rounded, comprehensive and effective executive compensation program, some of the compensation provided
to our executive officers may not be deductible under Section 162(m).
Executive
Compensation Tables
Summary
Compensation Table
Officer Name
Position
Year
Base
Salary
($)(1)
Bonus
($)(2)
Stock
Awards
($)(3)
Non-Equity
Incentive
Plan
Compensation
($)(4)
Changes in
Pension
Value
and
Non
Qual.
Deferred
Comp
Earnings
($)(5)
All
Other
Compensation
($)(6)
Total
Compensation
($)
Robert Aarnes
President and Chief Executive Officer
2025
662,818
-
2,377,828
581,560
27,314
71,985
3,721,505
2024
638,638
-
7,914,367
711,289
83,990
32,071
9,380,356
2023
616,884
-
2,829,023
624,900
82,242
26,222
4,179,271
Michael Carlet(7)
EVP, Chief Financial Officer
2025
593,173
1,286,250
2,161,668
609,000
-
31,410
4,681,501
2024
482,692
-
473,351
382,854
-
6,167
1,345,064
Jeannine Lane
EVP, General Counsel, Corporate Secretary and Chief Compliance Officer
2025
584,610
-
1,621,244
597,226
20,861
52,591
2,876,532
2024
563,131
-
1,509,087
586,671
261,161
52,545
2,972,595
2023
546,692
-
1,671,680
511,328
318,764
30,546
3,079,010
Alicia Copeland
EVP, Chief Operating Officer
2025
416,693
60,000
862,321
235,892
-
44,356
1,619,262
Marco Cardazzi
EVP, Chief Merchandising Officer
2025
344,254
60,000
248,042
152,984
25,341
26,213
856,834
(1) Represents actual base salary
paid in 2025, taking into account any increases based on the timing such increases were actually implemented.
(2) The amount for Mr. Carlet represents a transaction bonus
related to the acquisition of Snap One in 2024. The amounts for Mr. Cardazzi and Ms. Copeland represent retention bonuses paid in April
and February 2025, respectively.
108
(3) Stock awards granted in 2025 consisted of, for Messrs. Aarnes
and Carlet and Ms. Lane, RSU awards and PSU awards and, for Ms. Copeland and Mr. Cardazzi, RSU awards only. The amounts reported in this
column represent the aggregate grant date fair value of the RSU awards for fiscal years 2025, 2024, and 2023 and, for Messrs. Aarnes
and Carlet and Ms. Lane, of the PSU awards for fiscal years 2025, 2024, and 2023, in each case, as applicable. These amounts were calculated
in accordance with the provisions of FASB ASC Topic 718 utilizing the assumptions discussed in Note 8 of the Notes to the Financial
Statements in Resideo’s Form 10-K for the year ended December 31, 2025. The fair values of PSU awards differ from the target values
described in the Compensation Discussion & Analysis, which are determined based on the closing stock price on the three market trading
days leading up to and including the grant date for the target number of units awarded. The value of the 2025 PSUs, if maximum performance
is achieved, are as follows:
Name
PSUs
Maximum
($)
Robert
Aarnes
2,590,148
Michael
Carlet
2,354,689
Jeannine
Lane
1,765,992
The
fair value of the RSUs is based on the average of the high and low prices for Resideo stock on the grant date. The value of the 2025
rTSR PSUs reflect the grant date fair value of the PSUs when granted based on the Monte Carlo simulation model using the assumptions
shown in the table below. The value of the ROIC PSUs (50% of the award) is based on the average of the high and low prices of the target
number of shares of Resideo stock on the grant date.
Grant
Date
Fair
Value
Volatility
Risk
Free Rate
February
12, 2025
$ 29.75
45.18 %
4.28 %
(4)
The amounts in this column represent the annual incentive payments made to each NEO as described in more detail in “—Compensation Discussion & Analysis —Elements of Compensation” above. The amounts shown were paid shortly after the end of the respective fiscal year.
(5)
The amounts in this column represent the aggregate change in the present value of Messrs. Aarnes’ and Cardazzi’s and Ms. Lane’s accumulated benefit under Resideo’s pension plans (as disclosed in the Pension Benefits table below).
(6)
The amounts reported in this column include costs for remote office lease (Mr. Aarnes), employer contributions under the 401(k) plan, employer contributions to the executive’s health savings account, the cost of excess life and liability insurance, and costs for executive physicals (Mr. Aarnes and Mses. Lane and Copeland).
Name
401(k)
Company
Contributions ($)
Deferred
Compensation
Plan Company
Contributions
($)
Other
Benefits
($)(a)(b)
Robert
Aarnes
23,500
-
48,485
Michael
Carlet
23,500
-
7,910
Jeannine
Lane
23,500
-
29,091
Alicia
Copeland
23,500
-
20,856
Marco
Cardazzi
23,500
-
2,713
(a)
Includes
costs paid by Resideo for medical insurance, basic life and accidental death and dismemberment insurance, excess life and liability
insurance premiums and, for Mr. Aarnes and Mses. Lane and Copeland, executive physicals.
(b)
Included
in the amount reported for Mr. Aarnes is $38,275 for lease payments for a remote office.
(7)
Mr.
Carlet became CFO of Resideo effective as of August 9, 2024.
109
Grants
of Plan-Based Awards — Fiscal Year 2025
The
following table summarizes the grants of plan-based awards made to Messrs. Aarnes, Carlet and Cardazzi and Mses. Lane and Copeland during
the fiscal year ended December 31, 2025.
Estimated
Future Payouts Under
Non-Equity Incentive Plan Awards
Estimated
Future Payouts
Under Incentive Plan Awards
All
Other
Grant
Date
Fair Value
of Stock
Officer
Name
Award
Type
Grant
Date
Threshold
($)(1)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Stock
Awards
(#)
and
Option
Awards
($/sh.)(6)
Robert
Aarnes
AIP(2)
January 1,
2025
167,500
670,000
1,340,000
-
-
-
-
-
RSU(3)
February
12, 2025
-
-
-
-
-
-
50,667
1,082,754
PSU(4)
February
12, 2025
-
-
-
25,334
50,668
101,336
-
1,295,074
Michael
Carlet
AIP(2)
January 1,
2025
150,000
600,000
1,200,000
-
-
-
-
-
RSU(3)
February
12, 2025
-
-
-
-
-
-
46,061
984,324
PSU(4)
February
12, 2025
-
-
-
23,031
46,062
92,124
-
1,177,345
Jeannine
Lane
AIP(2)
January 1,
2025
118,200
472,800
945,600
-
-
-
-
-
RSU(3)
February
12, 2025
-
-
-
-
-
-
34,546
738,248
PSU(4)
February
12, 2025
-
-
-
17,273
34,546
69,092
-
882,996
Alicia
Copeland
AIP(2)
January 1,
2025
65,282
261,127
522,254
-
-
-
-
-
RSU(3)
February 12,
2025
-
-
-
-
-
-
16,121
344,506
RSU(5)
July 31,
2025
-
-
-
-
-
-
18,500
517,815
Marco
Cardazzi
AIP(2)
January 1,
2025
43,466
173,865
347,730
-
-
-
-
-
RSU(3)
February 12,
2025
-
-
-
-
-
-
11,607
248,042
(1)
Represents the payment received for the minimum level of performance required to earn a payout under the plan for 2025.
(2)
Annual incentive plan (“AIP”) compensation awarded under the Resideo Bonus Plan for the 2025 performance year, which is paid in early 2026.
(3)
Annual RSUs granted under the Resideo 2018 Stock Incentive Plan, which will vest ratably on the first, second and third anniversaries of the grant date. See the Outstanding Equity Awards at 2025 Fiscal Year-End table below for further details on the equity awards listed above. The fair value of the RSUs reflected in the final column was $21.37, the average of the high and low prices for Resideo stock on the date of grant.
(4)
Fifty percent (50%) of the PSUs granted under the Resideo 2018 Stock Incentive Plan, which are subject to Resideo’s rTSR ranking against the companies in the S&P 600 Index for the period from February 13, 2025 through December 31, 2027, will pay out in February 2028 if earned. See “—Compensation Discussion and Analysis—2025 Executive Compensation Decisions—2025 Long-Term Incentives—2025 PSUs” above for additional information. The amounts in the Target column for the rTSR PSUs represent the number of shares earned at a ranking of the 55th percentile as compared to the companies in the S&P 600 Index. The amounts in the column labeled Threshold represent the total number of shares that would be earned if both Resideo were to achieve a ranking of the 25th percentile and attainment of 85% of the ROIC goal over the performance period. The amounts in the column labeled Maximum represent the total number of shares that would be earned if Resideo were to achieve a ranking of the 75th percentile or above for the rTSR awards, or, for the ROIC PSUs, which represent fifty percent (50%) of the award, the achievement of 115% of the ROIC goal over the performance period. The fair value reflected in the final column is calculated in accordance with the provisions of FASB ASC Topic 718 as shown in footnote 2 to the Summary Compensation Table above. For the 2025 ROIC PSU awards, the fair value was $21.37, the average of the high and low prices of a share on the date of grant.
(5)
This special RSU award was granted under the Resideo 2018 Stock Incentive Plan for retention, and will vest ratably on the first, second and third anniversaries of the grant date. See the Outstanding Equity Awards at 2025 Fiscal Year-End table below for further details on the equity award listed above. The fair value of the RSUs reflected in the final column was $27.99, the average of the high and low prices of a share on the date of grant.
(6)
The fair value of the RSUs reflected in the final column is based on the average of the high and low prices for Resideo stock on the grant date.
110
Outstanding
Equity Awards at 2025 Fiscal Year End
The following table summarizes information regarding
outstanding equity awards held by Messrs. Aarnes, Carlet and Cardazzi and Mses. Lane and Copeland as of the fiscal year ended December
31, 2025.
Option
Awards
Stock
Awards
Officer
Name
Grant
Date
Notes
Number
of
Securities
Underlying Unexercised Options (#) Exercisable
Number
of Securities Underlying Unexercised Options (#) Unexercisable
Option
Price
($)
Unexercised
Option Expiration
Date
Number
of Shares or Units
of Stock That
Have Not Vested
(#)
Market
Value* of Shares or Units That Have Not Vested
($)
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights
Robert
Aarnes
2/20/2020
(1)
107,989
-
10.27
2/19/2027
-
-
-
-
2/14/2023
(2)
-
-
-
-
19,267
676,657
-
-
2/5/2024
(3)
-
-
-
-
-
-
129,334
4,542,210
2/5/2024
(4)
-
-
-
-
43,111
1,514,058
-
-
2/15/2024
(5)
-
-
-
-
248,632
8,731,956
-
-
2/12/2025
(6)
-
-
-
-
-
-
50,668
1,779,460
2/12/2025
(7)
-
-
-
-
-
-
25,334
889,730
2/12/2025
(8)
-
-
-
-
50,667
1,779,425
-
-
Total
107,989
-
-
-
361,677
12,702,096
205,336
7,211,400
Michael
Carlet
6/14/2024
(9)
-
-
-
-
12,019
422,107
-
-
6/14/2024
(10)
-
-
-
-
23,111
811,658
-
-
6/14/2024
(9)
-
-
-
-
917
32,205
-
-
6/14/2024
(11)
-
-
-
-
11,267
395,697
-
-
6/14/2024
(12)
-
-
-
-
19,499
684,805
-
-
8/9/2024
(13)
-
-
-
-
-
-
21,140
742,437
8/9/2024
(14)
-
-
-
-
7,046
247,456
-
-
2/12/2025
(6)
-
-
-
-
-
-
46,062
1,617,697
2/12/2025
(7)
-
-
-
-
-
-
23,031
808,849
2/12/2025
(8)
-
-
-
-
46,061
1,617,662
-
-
Total
-
-
-
-
119,920
4,211,590
90,233
3,168,983
Jeannine
Lane
2/14/2023
(2)
-
-
-
-
11,385
399,841
-
-
2/5/2024
(3)
-
-
-
-
-
-
76,424
2,684,011
2/5/2024
(4)
-
-
-
-
25,474
894,647
-
-
2/12/2025
(6)
-
-
-
-
-
-
34,546
1,213,256
2/12/2025
(7)
-
-
-
-
-
-
17,273
606,628
2/12/2025
(8)
-
-
-
-
34,546
1,213,256
-
-
Total
-
-
-
-
71,405
2,507,744
128,243
4,503,895
Alicia
Copeland
2/14/2023
(2)
-
-
-
-
2,942
103,323
-
-
2/5/2024
(4)
-
-
-
-
9,719
341,331
-
-
2/12/2025
(8)
-
-
-
-
16,121
566,170
-
-
7/31/2025
(15)
-
-
-
-
18,500
649,720
-
-
Total
-
-
-
-
47,282
1,660,544
-
-
Marco
Cardazzi
2/14/2023
(2)
-
-
-
-
2,732
95,948
-
-
8/1/2024
(16)
-
-
-
-
4,966
174,406
-
-
2/5/2024
(4)
-
-
-
-
9,288
326,195
-
-
2/12/2025
(8)
-
-
-
-
11,607
407,638
-
-
Total
-
-
-
-
28,593
1,004,186
-
-
* Based
on the closing stock price for Resideo stock on December 31, 2025 ($35.12).
(1)
These non-qualified stock options were granted on February 20, 2020, and are fully vested.
111
(2)
The remaining RSUs vested on February 14, 2026.
(3)
These PSUs were awarded on February 5, 2024 and can be earned after the end of the three-year performance period ending on December 31, 2026. The number of PSUs that the NEO will receive is dependent upon the ranking of Resideo’s rTSR as compared to the TSR of the companies in the S&P 600 Index. However, in connection with the Spin-Off, these PSUs will be automatically converted into RSUs under the 2026 Equity Plan, which will cover a number of shares of ADI’s common stock determined in accordance with the treatment discussed in “—Compensation Discussion and Analysis—Treatment of Outstanding Equity Awards Resulting from the Distribution” below. Such converted RSUs under the 2026 Equity Plan will otherwise generally be subject to the same terms and conditions as the PSUs (including the service-based vesting condition through December 31, 2026). The number of PSUs shown is the maximum number of shares that can be earned (on a pre-conversion basis).
(4)
The remaining RSUs will vest in equal installments on February 5, 2026 and February 5, 2027.
(5)
These RSUs will vest in equal installments on February 15, 2027 and February 15, 2028.
(6)
These PSUs were awarded on February 12, 2025 and can be earned after the end of the three-year performance period on December 31, 2027. The number of PSUs that the NEO will receive is dependent upon the ranking of Resideo’s rTSR as compared to the TSR of the companies in the S&P 600 Index. However, in connection with the Spin-Off, these PSUs will be automatically converted into RSUs and PSUs, as applicable, under the 2026 Equity Plan, which shall cover a number of shares of ADI’s common stock determined in accordance with the treatment discussed in “—Compensation Discussion and Analysis—Treatment of Outstanding Equity Awards Resulting from the Distribution” below. Such converted RSUs under the 2026 Equity Plan will otherwise generally be subject to the same terms and conditions as the PSUs (including the service-based vesting condition through December 31, 2027), and the converted PSUs will vest based on ADI’s rTSR. The number of PSUs shown is the maximum number of shares that can be earned (on a pre-conversion basis).
(7)
These PSUs were awarded on February 12, 2025 and can be earned after the end of the three-year performance period on December 31, 2027. The number of PSUs that the NEO will receive is dependent upon the achievement of a weighted-average return on invested capital (ROIC) goal for fiscal years 2025, 2026, and 2027. However, in connection with the Spin-Off, these PSUs will be automatically converted into RSUs and PSUs, as applicable, under the 2026 Equity Plan, which shall cover a number of shares of ADI’s common stock determined in accordance with the treatment discussed in “—Compensation Discussion and Analysis—Treatment of Outstanding Equity Awards Resulting from the Distribution” below. Such converted RSUs under the 2026 Equity Plan will otherwise generally be subject to the same terms and conditions as the PSUs (including the service-based vesting condition through December 31, 2027), and the converted PSUs will vest based on ADI’s rTSR. The number of PSUs shown is the target number of shares that can be earned (on a pre-conversion basis).
(8)
These RSUs were awarded on February 12, 2025 and vest in equal installments on February 12, 2026, February 12, 2027 and February 12, 2028.
(9)
These RSUs were issued upon conversion of previous Snap One stock awards on the date of the acquisition of Snap One and the remaining vested on February 15, 2026.
(10)
These RSUs were issued upon conversion of previous Snap One stock awards on the date of the acquisition of Snap One and the remaining will vest in equal installments on February 15, 2026 and February 15, 2027.
(11)
These RSUs were issued upon conversion of previous Snap One stock awards on the date of the acquisition of Snap One and vest in equal quarterly installments until fully vested on February 15, 2027.
(12)
These RSUs were issued upon conversion of previous Snap One stock awards on the date of the acquisition of Snap One and vest as to one-fourth of the shares on the first anniversary of the grant date and then in equal quarterly installments until fully vested on February 15, 2028.
(13)
These PSUs were awarded on August 9, 2024 and can be earned after the end of the three-year performance period ending on December 31, 2026. The number of PSUs that Mr. Carlet will receive is dependent upon the ranking of our rTSR as compared to the TSR of the companies in the S&P 600 Index. However, in connection with the Spin-Off, these PSUs will be automatically converted into RSUs under the 2026 Equity Plan, which will cover a number of shares of ADI’s common stock determined in accordance with the treatment discussed in “—Compensation Discussion and Analysis—Treatment of Outstanding Equity Awards Resulting from the Distribution” below. Such converted RSUs under the 2026 Equity Plan will otherwise generally be subject to the same terms and conditions as the PSUs (including the service-based vesting condition through December 31, 2026). The number of PSUs shown is the maximum number of shares that can be earned (on a pre-conversion basis).
(14)
The remaining RSUs will vest in equal installments on August 9, 2026 and August 9, 2027.
(15)
These RSUs vest in equal installments on July 31, 2026, July 31, 2027 and July 31, 2028.
(16)
The remaining RSUs will vest on August 1, 2026.
112
Option
Exercises and Stock Vested
The following table summarizes information regarding
stock options exercised by our NEOs during the fiscal year ended December 31, 2025 and RSU and PSU awards that vested during that same
period, as applicable.
Option Awards
Stock Awards
Officer Name
# of Shares
Acquired on
Exercise
(#)
Value
Realized
on Exercise
($)
Number of Shares
Acquired on
Vesting
(#)(1)
Value Realized
on Vesting
($)(2)
Robert Aarnes
47,000
833,310
221,482
7,179,807
Michael Carlet
-
-
57,450
1,381,921
Jeannine Lane
111,507
2,153,837
101,329
3,181,156
Alicia Copeland
-
-
15,070
343,135
Marco Cardazzi
7,079
53,331
14,979
348,296
(1)
Represents the total number of RSUs that vested during 2025 before share withholding for taxes, including, where applicable, PSUs granted in 2023, which achieved a payment of 200% of the target shares for the performance period ended December 31, 2025, and were settled in February 2026.
(2)
Represents the total value of RSUs and PSUs (where applicable) at the vesting date calculated as the average of the high and low prices for Resideo stock on the applicable day of vesting multiplied by the total number of RSUs and PSUs that vested. The individual totals may include multiple vesting transactions during the year.
Pension
Benefits
The following table provides
summary information and related disclosures provide information regarding benefits under the Resideo Technologies, Inc. Pension Plan (“RPP”)
and the Resideo Supplemental Pension Plan (“SPP”), a nonqualified plan. The RPP and SPP provide pension benefits only to those
employees who previously participated in the Honeywell pension plans prior to its spin-off of Resideo (which includes Messrs. Aarnes
and Cardazzi and Ms. Lane).
The RPP and SPP benefits depend on the length
of a participant’s employment with Resideo and certain predecessor companies. This information is provided in the table below under
the column entitled “Number of Years of Service.” A participant’s credited service is generally equal to his or her
period of employment with Resideo or an affiliate (or, for periods prior to October 29, 2018, Honeywell International Inc. or a Honeywell
affiliate), excluding periods of employment when the participant was not eligible to participate in the RPP or a predecessor Honeywell
plan. The column in the table below entitled “Present Value of Accumulated Benefits” represents a financial calculation that
estimates the cash value today of the full pension benefit that has been earned by Messrs. Aarnes and Cardazzi and Ms. Lane. It is
based on various assumptions, including assumptions about longevity and future interest rates. Additional details about the pension benefits
for Messrs. Aarnes and Cardazzi and Ms. Lane follow the table.
Officer Name
Plan Names
Number of
Years of
Service
(#)
Present
Value of
Accumulated
Benefits ($)
Payments
During
Last
Year ($)
Robert Aarnes
Resideo Technologies, Inc. Pension Plan (Qualified component)
13.0
126,201
-
Resideo Technologies, Inc. Supplemental Pension Plan (Non-Qualified component)
13.0
346,687
-
Total
472,888
-
Jeannine Lane
Resideo Technologies, Inc. Pension Plan (Qualified component)
31.3
609,137
-
Resideo Technologies, Inc. Supplemental Pension Plan (Non-Qualified component)
31.3
1,140,457
-
Total
1,749,594
-
Marco Cardazzi
Resideo Technologies, Inc. Pension Plan (Qualified component)
14.9
144,442
-
Resideo Technologies, Inc. Supplemental Pension Plan (Non-Qualified component)
14.9
32,282
-
Total
176,724
-
113
Summary
Information
The RPP is a tax-qualified pension plan in which
employees who were participants in the Honeywell pension plans (prior to Honeywell’s spin-off of Resideo) participate. The RPP complies
with tax requirements applicable to broad-based pension plans, which impose dollar limits on the compensation that can be used to calculate
benefits and on the amount of benefits that can be provided. As a result, the pensions that can be paid under the RPP for higher-paid
employees represent a much smaller fraction of current income than the pensions that can be paid to less highly paid employees. This difference
is made up, in part, with supplemental pensions through the SPP. If an NEO who is eligible to receive a benefit under the SPP terminates
employment, the NEO’s benefits under the SPP will be paid to the NEO 105 days after his or her termination date.
Pension
Benefit Calculation Formulas
Within the RPP and the SPP, a variety of formulas
are used to determine pension benefits. Different benefit formulas apply for different groups of employees for historical reasons (e.g.,
past acquisitions by a predecessor company) and the differences in the benefit formulas for our NEOs reflect this history, as applicable.
The
Retirement Earnings Plan (“REP”) formula is used to determine the amount of pension benefits for participants under the RPP
and the SPP. Under this formula, benefits are paid as a lump sum equal to (a) 3% or 6% of final average compensation (the average of
a participant’s annual compensation for the five calendar years that produces the highest average out of the previous 10 calendar
years) multiplied by (b) credited service.
For each pension benefit calculation formula,
compensation includes base pay, short-term incentive compensation, payroll-based rewards and recognition and lump-sum incentives. The
amount of compensation taken into account under the RPP is limited by tax rules. The amount of compensation taken into account under the
SPP is not. The table below describes which formulas are applicable to the relevant NEO:
NAME
DESCRIPTION OF PENSION BENEFITS/FORMULA
Mr. Aarnes
Mr. Aarnes’ pension benefits under the RPP and the SPP are determined under the 3% REP formula.
Ms. Lane
Ms. Lane’s pension benefits under the RPP and the SPP are determined under the 6% REP formula.
Mr. Cardazzi
Mr. Cardazzi’s pension benefits under the RPP and the SPP are determined under the 3% REP formula.
Nonqualified Deferred Compensation
Officer Name
Executive
Contributions
in 2025
($)(1)
Registrant
Contributions
in 2025
($)(2)
Aggregate
Earnings
in 2025
($)(3)
Aggregate
Withdrawals and
Distributions in 2025
($)
Aggregate Balance
at the End of
Fiscal Year 2025
($)(4)
Jeannine Lane
117,334
-
7,152
-
222,046
(1) The amounts in this column
were contributed by Ms. Lane into her account under the deferred compensation plan, which includes amounts reflected in the “Base
Salary” column of the Summary Compensation Table.
(2) The amounts in this column
are contributions made to Ms. Lane’s account in 2026 for the 2025 calendar year.
(3) The amounts in this column
represent changes in Ms. Lane’s account balance, including dividends and interest, during 2025.
(4) Of the balance shown, the following
amounts were previously reported in the Summary Compensation Table for Ms. Lane: 2024: $16,419; 2023: $0.
All SPP and deferred compensation amounts are
unfunded and unsecured obligations of Resideo and are subject to the same risks as any of Resideo’s general obligations.
Resideo Supplemental Savings Plan
The Resideo Supplemental Savings Program (“RSSP”)
is a nonqualified deferred compensation plan that allows eligible Resideo employees, including its NEOs, to save additional amounts in
excess of what is allowed under Resideo’s tax-qualified 401(k) plan due to the annual deferral and compensation limits imposed by
the Internal Revenue Code. The RSSP has two components, the DIP and the SSP. Executive officers can elect to defer up to 100% of their
annual bonus awards under the DIP component. In addition, executive officers may also participate in the SSP component to defer eligible
compensation that cannot be contributed to Resideo’s 401(k) savings plan due to IRS limitations. The amounts contributed to the
SSP component are eligible for matching contributions not to exceed 100% of the first 7% contributed combined between the SSP and the
401(k) plan. Matching contributions are always vested.
114
Interest Rate. All
funds are invested in the Fidelity U.S. Bond Index Fund, and participant accounts are credited with interest based on the fund’s
performance. Matching contributions are also treated as invested in the Fidelity U.S. Bond Index Fund.
Distribution. Amounts transferred from
the Honeywell Supplemental Savings Plan or Honeywell Deferred Incentive Plan to the RSSP will follow the same distribution options as
applied under the Honeywell plan. For deferrals to the RSSP that started in 2019 or later years, payments will commence at the earlier
of the January or July at least six months following the participant’s separation from service; death; or the in-service distribution
date elected by the participant. Amounts will be paid to participants in a lump sum or in installment payments for distributions triggered
by separation from service or an in-service distribution at the election of the participant. Participant RSSP accounts are distributed
in cash only. Participants can make different payment elections under the SSP and the DIP components of the RSSP.
Compensatory Arrangements with NEOs
Resideo is party to an employment agreement with
Mr. Carlet, the material terms of which are summarized below.
The summary below excludes payments and benefits
generally available to all executive officers under the terms of Resideo’s equity award agreements that are described above. Resideo
does not have any individual compensatory arrangements with Messrs. Aarnes or Cardazzi or Mses. Lane or Copeland.
Employment Agreement with Michael Carlet,
Executive Vice President, Chief Financial Officer
Resideo entered into an employment
agreement with Mr. Carlet, effective August 9, 2024, in connection with his appointment as Chief Financial Officer. Pursuant to the agreement,
Mr. Carlet is eligible to receive an annual base salary of $575,000, subject to annual adjustment. Mr. Carlet has a target annual incentive
compensation opportunity equal to 100% of his annual base salary. Mr. Carlet’s 2024 annual bonus was pro-rated as follows: (1) for
the period January 1, 2024 through August 8, 2024, his target bonus percentage was 85% and payout for this period was based on the Snap
One bonus plan metrics and Snap One financial results; and (2) for the period from August 9, 2024 through December 31, 2024, his target
bonus percentage was 100% and payout for this period was based on the Resideo Bonus Plan metrics and Resideo financial results. Beginning
in 2025, Mr. Carlet would be eligible for annual long-term incentive awards targeted at $2,000,000, which may consist of time-based restricted
stock units and performance-based restricted stock units, or some combination thereof. Mr. Carlet received an initial equity award with
a grant date value of $400,000 on August 9, 2024, 50% of which was issued as restricted stock units and 50% of which was issued as performance-based
restricted stock units with measurements and goals as implemented for the Resideo executive team. The restricted stock units will vest
at a rate of one-third of the shares on each of the first, second, and third anniversaries of the grant date, provided in all cases Mr.
Carlet continues to be employed by Resideo on such vesting date. In connection with the Spin-Off, Mr. Carlet’s unvested equity awards
will be converted into awards underlying ADI common stock under the 2026 Equity Plan, as described in “—Treatment of Outstanding
Equity Awards Resulting from the Distribution” below.
See “—Compensation Discussion and Analysis—Material
Offer Letters” below for information regarding our go-forward offer letters.
Potential
Payments Upon Termination or Change in Control
Resideo Severance Plans
These benefits are determined primarily under
the Resideo Officer Severance Plan and the Resideo Executive Severance Plan, each of which has been periodically reviewed and benchmarked
against severance practices of companies in Resideo’s approved compensation peer group. Benefits provided under each plan are conditioned
on the executive executing a full release of claims. In addition, benefits under the Resideo Officer Severance Plan are conditioned on
compliance with certain non-competition and non-solicitation covenants in favor of Resideo. The right to continued severance benefits
under the plans ceases in the event of a violation of such covenants. In addition, Resideo has the right to recover certain severance
benefits already paid to any executive who violates such restrictive covenants.
In addition to the Resideo
Officer Severance Plan and the Resideo Executive Severance Plan, several other benefit plans of Resideo, such as its annual incentive
plan, also have provisions that impact these benefits. These benefits ensure that Resideo’s executives are motivated primarily by
the needs of the businesses for which they are responsible, rather than circumstances that are outside the ordinary course of business
– such as circumstances that might lead to the termination of an executive’s employment or that might lead to a CIC or similar
transaction. Generally, this is achieved by assuring that an executive would receive a level of continued compensation if their employment
is adversely affected in these circumstances, subject to certain conditions. These benefits help ensure that affected executives act in
the best interests of shareholders, even if such actions are otherwise contrary to their personal interests. This is critical because
these are circumstances in which the actions of NEOs may have a material impact on shareholder value. Accordingly, Resideo set the level
and terms of these benefits in a way it believes is necessary to obtain the desired results. The level of benefit and the rights to benefits
are determined by the type of termination event, as described below.
In the case of a CIC, severance benefits under
the Resideo Officer Severance Plan (applicable to Messrs. Aarnes and Carlet and Ms. Lane) are payable only in the event that both parts
of the “double trigger” are satisfied. That is, (i) there must be a CIC of Resideo, and (ii)(A) the NEO must be involuntarily
terminated other than for cause, or (B) the NEO must initiate the termination of his or her own employment for good reason. Similarly,
the Resideo 2018 Stock Incentive Plan does not offer single-trigger vesting of equity awards that are assumed or replaced by an acquirer
upon a CIC.
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Notably, the Spin-Off will not constitute a CIC
under the Resideo Officer Severance Plan. However, the Resideo CHCMC adopted an amendment to the Resideo Officer Severance Plan to provide
enhanced severance protection in connection with the Spin-Off. The Officer Divestiture Amendment provides that NEOs would be entitled
to certain “double trigger” severance protection in the event of their experiencing a qualifying termination following a “divestiture”
(such as the Spin-Off). See “—Compensation Discussion and Analysis—Other Components of Compensation—Severance
Plans” above for additional information regarding the impact of the Officer Divestiture Amendment on severance rights of Messrs.
Aarnes and Carlet and Ms. Lane in relation to the Spin-Off.
Equity
Awards
Death
and Disability – In the case of a recipient’s death or disability, vesting of options and RSUs accelerates in full and
a pro rata portion of the PSUs will vest and settle if, and to the extent of, Resideo’s actual achievement of the performance measures
during the performance period. The options remain exercisable until the earlier of three years after termination or the original expiration
date.
Involuntary Termination Without Cause –
If an executive officer, including Messrs. Aarnes and Carlet and Ms. Lane (but not Ms. Copeland or Mr. Cardazzi since they were not
executive officers of Resideo during 2025), is subject to an involuntary termination without cause by Resideo, a pro rata portion of his
or her options and RSUs will vest immediately upon termination, and a pro rata portion of the PSUs will vest and settle if, and to the
extent of, Resideo’s actual achievement of the performance measures during the performance period. The options will remain exercisable
until the earlier of one year after termination or the original expiration date.
Voluntary
Resignation – If a recipient resigns voluntarily from Resideo (other than as a Retirement as described below), he or she will
forfeit any unvested options, RSUs and PSUs, and will have 30 days to exercise any then-vested options.
Retirement – Equity
awards generally provide that an award recipient is retirement eligible if he or she is age 55 years or older, has at least 10 years
of service to Resideo and also has provided Resideo with at least 6 months’ prior notice that he or she is considering retirement.
If an NEO is retirement eligible, his or her employment with Resideo ends as a result of retirement and he or she accepts certain post-employment
conditions, RSU awards and options will continue to vest in accordance with the original vesting schedule (and options shall remain exercisable
until the earlier of their original expiration date and three (3) years after retirement) and the PSU awards will vest on a pro rata
basis, based on actual performance as measured at the end of the performance period.
“Double
Trigger” Change in Control – In the event of an involuntary termination without cause or resignation for good reason
within 24 months of a CIC, all unvested options and RSUs will vest in full. In the event of an involuntary termination without cause
or resignation for good reason within 24 months of a CIC, PSUs will vest in full (i) if the CIC occurs after the end of the performance
period, based on actual results and (ii) if the CIC occurs during the performance period, based on target. If the surviving entity in
the CIC does not continue, assume, or replace the awards, the options and RSU awards will vest in full immediately, and assuming the
performance period has not been completed, the PSU awards will vest in full based on target performance.
“Double Trigger” Divestiture
– Under the Resideo Officer Severance Plan (applicable to Messrs. Aarnes and Carlet and Ms. Lane), in the event of an involuntary
termination without cause or resignation for good reason within 18 months of a divestiture that is consummated prior to December 31, 2027,
all unvested options, RSUs, and PSUs will generally vest in the same manner as if the transaction constituted a CIC (as described above).
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The following table summarizes estimated payments
and benefits to which Messrs. Aarnes, Carlet and Cardazzi and Mses. Lane and Copeland would be entitled upon the hypothetical occurrence
of various termination scenarios or a CIC. The information in the table below is based on the assumption, in each case, that the termination
of employment occurred on December 31, 2025. Accrued pension and non-qualified deferred compensation benefits, which are described elsewhere
in the registration statement of which this information statement forms a part, are not included in the table below in accordance with
the applicable disclosure requirements, even though they may become payable at the times specified in the table. Following the Spin-Off,
Ms. Copeland and Mr. Cardazzi will participate in ADI’s severance plan for officers along with Messrs. Aarnes and Carlet and Ms.
Lane but will not be eligible under the Resideo Officer Severance Plan for the enhanced severance payments and benefits provided for thereunder.
Payments
and Benefits
Named
Executive
Officer
Termination
by the Company Without Cause
($)
Termination
due to Retirement
($)
Death
($)
Disability
($)
Divestiture,
Termination without Cause, or by NEO for Good Reason
($)
Change-in-Control-
Termination of
Employment by Company without Cause, or by NEO for Good Reason
($)
Cash
Severance(1)
(Base Salary)
Robert
Aarnes
1,005,000
-
-
-
1,340,000
1,340,000
Michael
Carlet
900,000
-
-
-
1,200,000
1,200,000
Jeannine
Lane
886,500
-
-
-
1,182,000
1,182,000
Alicia
Copeland
331,500
-
-
-
331,500
331,500
Marco
Cardazzi
260,798
-
-
-
260,798
260,798
Annual
Incentive
Compensation(2)
-Year of Termination
Robert
Aarnes
-
-
670,000
670,000
1,340,000
1,340,000
Michael
Carlet
-
-
600,000
600,000
1,200,000
1,200,000
Jeannine
Lane
-
-
472,800
472,800
945,600
945,600
Alicia
Copeland(5)
-
-
278,283
278,283
-
-
Marco
Cardazzi
-
-
173,865
173,865
-
-
Outstanding
Equity Awards(3)
Robert
Aarnes
-
18,870,093
23,496,271
23,496,271
23,496,271
23,496,271
Michael
Carlet(6)
-
2,620,718
6,200,506
6,200,506
6,200,506
6,200,506
Jeannine
Lane
-
6,206,358
7,462,122
7,462,122
7,462,122
7,462,122
Alicia
Copeland(7)
-
-
1,660,544
1,660,544
-
1,660,544
Marco
Cardazzi(7)
-
-
1,004,186
1,004,186
-
1,004,186
Benefits(4)
Robert
Aarnes
28,513
-
-
-
38,017
38,017
Michael
Carlet
28,513
-
-
-
38,017
38,017
Jeannine
Lane
18,237
-
-
-
24,316
24,316
Alicia
Copeland
-
-
-
-
-
-
Marco
Cardazzi
-
-
-
-
-
-
Total
Robert
Aarnes
1,033,513
18,870,093
24,166,271
24,166,271
26,214,288
26,214,288
Michael
Carlet
928,513
2,620,718
6,800,506
6,800,506
8,638,523
8,638,523
Jeannine
Lane
904,737
6,206,358
7,934,922
7,934,922
9,614,038
9,614,038
Alicia
Copeland
331,500
-
1,938,827
1,938,827
331,500
1,992,044
Marco
Cardazzi
260,798
-
1,178,051
1,178,051
260,798
1,264,984
(1)
For Messrs. Aarnes and Carlet and Ms. Lane, cash severance is governed
by the Resideo Officer Severance Plan, as described in “—Compensation Discussion and Analysis—Other Components of Compensation—Severance
Plans” above. Cash severance equals 18 months of base salary for a non-transaction involuntary termination, and 24 months of highest
base salary plus two times annual incentive compensation for a qualifying termination following a CIC (payable in a lump sum) or a divestiture
(payable in installments). For Ms. Copeland and Mr. Cardazzi, cash severance is governed by the Resideo Executive Severance Plan, as described
in “—Compensation Discussion and Analysis—Other Components of Compensation—Severance Plans” above. Cash
severance equals nine months of base salary for an involuntary termination, regardless of whether such involuntary termination is in connection
with a CIC. The Resideo Executive Severance Plan does not provide for “good reason” as a qualifying termination trigger or
enhanced severance payments or benefits upon a termination in connection with a CIC. All severance is subject to the individual’s
execution and non-revocation of a release of claims.
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(2)
In addition to the amounts reflected in the final two columns, if any of Messrs. Aarnes or Carlet or Ms. Lane is terminated without cause in qualifying situations following a CIC or divestiture, he or she will also be entitled to a pro-rated annual incentive award for the period of employment during the year of termination.
(3)
Amounts represent the intrinsic value of RSUs and PSUs (as applicable) as of December 31, 2025 for which the vesting would be accelerated pursuant to the award terms described above. The value included for RSUs and PSUs (as applicable) is the product of the number of units for which vesting would be accelerated and $35.12, the closing price of Resideo common stock on December 31, 2025.
(4)
The amounts reflected represent Resideo’s cost for continuation of benefits, such as medical, dental, vision and life insurance, for the “Salary Continuation Period” as defined under the Resideo Officer Severance Plan and Resideo Executive Severance Plan, as applicable.
(5)
The amounts reflected represent Ms. Copeland’s entitlement as of December 31, 2025, which reflects her promotion during 2025.
(6)
The
amounts reflected for Mr. Carlet upon his retirement represent the value of the Resideo RSUs
and PSUs granted to him and not any Resideo awards issued to him upon conversion of previous
Snap One stock awards, as he is not eligible to retire pursuant to the legacy Snap One requirements.
(7)
The
amounts reflected in the final column represent the “double-trigger” CIC vesting pursuant to the Resideo 2018 Stock Incentive
Plan.
Treatment
of Outstanding Equity Awards Resulting from the Distribution
We
expect that equity awards outstanding under the Resideo 2018 Stock Incentive Plan and the 2018 Stock Plan for Non-Employee Directors
of Resideo Technologies, Inc. (the “Resideo 2018 Director Stock Plan”) will be adjusted in connection with the Distribution
with the intent to maintain the economic value of those awards before and after the Spin-Off. Other than stock options, unvested Resideo
equity awards held by ADI employees and non-employee directors will be converted into equity awards of ADI, as further described in the
table below, with terms, such as the vesting schedule, that will generally continue unchanged.
Type of Award
Treatment of Award
Stock Options
Resideo stock options held by one ADI employee, whether vested or unvested as of the Distribution, will remain outstanding at Resideo and subject to the terms of the Resideo stock option award agreement and the Resideo 2018 Stock Incentive Plan (including the term, exercisability and vesting schedule, if any), disregarding the effect of any termination of service with Resideo in connection with the Distribution and, following the date of the Distribution, a termination of service with ADI will be deemed a termination of service with Resideo for purposes of such Resideo stock option awards. The exercise price of, and the number of shares subject to, each such stock option award will be adjusted in a manner intended to preserve the intrinsic value of the Resideo stock option award as measured immediately before and immediately after the Distribution, subject to rounding and applicable law.
Unvested Restricted Stock Units (RSUs)
Each RSU award with respect to Resideo common stock that is unvested as of the Distribution held by an ADI employee or non-employee director will be converted into an RSU award with respect to ADI common stock that preserves the economic value of the original unvested Resideo RSU award as measured immediately before and immediately after the Distribution, subject to rounding. Each such converted ADI RSU award will otherwise be subject to the same terms and conditions as those that applied to the Resideo RSU award immediately prior to the Distribution but subject to the terms of the 2026 Equity Plan.
Deferred Restricted Stock Units (“Deferred RSUs”)
Unvested Deferred RSUs. Each unvested Deferred
RSU award with respect to Resideo common stock held by ADI non-employee directors will be treated in the same manner as unvested RSUs
described above.
Vested Deferred RSUs (Employees). Each
vested Deferred RSU award with respect to Resideo common stock held by ADI employees will remain outstanding at Resideo and be subject
to the same terms and conditions (including deferral schedule and permissible payment events) following the Distribution, disregarding
the effect of any termination of service with Resideo in connection with the Distribution and, following the date of the Distribution,
a termination of service with ADI will be deemed a termination of service with Resideo for purposes of such Deferred RSU awards.
Vested Deferred RSUs (Non-Employee Directors).
Each vested Deferred RSU award with respect to Resideo common stock held by ADI non-employee directors will be converted into two RSU
awards, one in Resideo common stock and one in ADI common stock, with the resulting post-Distribution RSU awards (collectively, the “New
Deferred RSUs”) having a combined intrinsic value immediately following the Distribution equal to the intrinsic value of the existing
Resideo Deferred RSU award immediately before the Distribution. The New Deferred RSUs will be subject to the same terms and conditions
(including deferral schedule and permissible payment events) following the Distribution, and subject to the terms of the Resideo 2018
Director Stock Plan or the 2026 Equity Plan, as applicable, disregarding the effect of any termination of service with Resideo
in connection with the Distribution. Following the date of the Distribution, a non-employee director of ADI will be deemed to experience
a separation from service upon ceasing to provide services to the Board for purposes of such New Deferred RSUs. Non-employee directors
of Resideo who do not serve on our Board immediately following the Distribution will also receive New Deferred RSUs in the same manner
as described above (except that such individual will be deemed to experience a separation from service upon ceasing to provide services
to the Resideo Board).
118
Performance
Stock Units (PSUs)
Each
PSU award with respect to Resideo common stock held by an ADI employee will be converted
into an award of unvested time- and/or performance-based restricted stock units with respect
to ADI common stock that preserves the economic value of the number of Resideo PSUs deemed
earned or issued at target, as applicable (collectively, the “ADI Post-Spin Awards”)
as follows: with respect to any Resideo PSU (i) granted in 2024, the number of units deemed
earned will be based on actual performance measured as of June 30, 2026, which will be converted
into a time-based restricted stock unit with respect to ADI common stock; (ii) granted in
2025, (x) with respect to the units subject thereto that vest based on a return on invested
capital metric, 50% of the target number of units will vest based on actual performance measured
as of December 31, 2025 and such number of units deemed earned will be converted into a time-based
restricted stock unit with respect to ADI common stock, and the remaining 50% of the target
number of such units will be converted into an unvested time and performance-based restricted
stock unit of ADI with vesting terms determined by the Resideo CHCMC, which performance metrics
will be based on relative total shareholder return of ADI common stock; and (y) with respect
to the units subject thereto that vest based on relative total shareholder return of ADI
common stock, 50% of the target number of units will vest based on actual performance measured
as of June 30, 2026 and such number of units deemed earned will be converted into a time-based
restricted stock unit with respect to ADI common stock, and the remaining 50% of the target
number of such units will be converted into an unvested time and performance-based restricted
stock unit of ADI with vesting terms determined by the Resideo CHCMC, which performance metrics
will be based on relative total shareholder return of ADI common stock; and (iii) granted
in 2026, 100% of the target number of units subject thereto will be converted into an unvested
time and performance-based restricted stock unit of ADI with vesting terms determined by
the Resideo CHCMC. Except as provided above, each ADI Post-Spin Award Former PSU award will
otherwise be subject to the same terms and time-based vesting conditions as those that applied
to the Resideo PSU award immediately prior to the Distribution but subject to the terms of
the 2026 Equity Plan.
2026 Equity Plan
Prior to the Spin-Off, we expect our Board to
adopt, and Resideo, as our sole shareowner, to approve, the 2026 Equity Plan for the benefit of certain of our current and future employees,
non-employee directors and other service providers. The following summary of the material terms of the 2026 Equity Plan is qualified in
its entirety by reference to the full text of the 2026 Equity Plan, the form of which is incorporated by reference herein and to be filed
as Exhibit 10.5 to the Form 10 of which this Information Statement forms a part.
In addition, awards will be
issued under the 2026 Equity Plan in connection with the conversion and replacement of awards granted by Resideo prior to the Spin-Off
and held by ADI employees, non-employee directors and other service providers, as well as non-employee directors of Resideo as discussed
above (“Conversion Awards”). Conversion Awards will be denominated in our common stock following the Distribution and will
otherwise be issued in accordance with the Employee Matters Agreement. See “—Treatment of Outstanding Equity Awards Resulting
from the Distribution” above.
Purpose of the 2026 Equity
Plan. The purpose of the 2026 Equity Plan would be to aid ADI in recruiting and retaining highly qualified employees, non-employee
directors and other service providers who are capable of assuring the future success of ADI. We expect that awards of stock-based compensation
and opportunities for stock ownership in ADI will provide incentives to our employees, non-employee directors and other service providers
to exert their best efforts for the success of our business and thereby align their interests with those of our stockholders.
Shares Available for
Awards. If the 2026 Equity Plan is approved by Resideo, as our sole shareholder, and our Board, it is expected that the maximum aggregate
number of shares of our common stock that may be issued under all stock-based awards granted under the 2026 Equity Plan would be six
percent (6%) of the number of shares of common stock outstanding, on an as-converted basis, as of the effective time of the Spin-Off
(the “Share Limit”), of which the number of shares of common stock available for grant in the form of incentive stock options
is capped at up to three percent (3%) of the number of shares of common stock outstanding, on an as-converted basis, as of the effective
time of the Spin-Off. In addition, (i) the number of shares of common stock underlying Conversion Awards will be added to the Share
Limit upon finalization of the adjustment ratios following the effective time of the Spin-Off pursuant to the terms of the Employee Matters
Agreement, and (ii) commencing on January 1, 2027 and on each January 1 thereafter during the term of the 2026 Equity
Plan, the Share Limit will automatically increase by a number of shares of common stock equal to two percent (2%) (or a lesser amount
determined by the Board in its sole discretion prior to such date) of the number of shares of our common stock outstanding, on an as-converted
basis, as of the close of business on the immediately preceding December 31; provided that no such automatic increase
shall occur on any date after the tenth (10th) anniversary of the Effective Date without additional stockholder approval.
In addition, it is expected that the 2026 Equity Plan will contain an annual limit on the aggregate grant date fair value of awards that
may be granted to our non-employee directors of $750,000.
Under the 2026 Equity Plan,
it is expected that ADI will have the flexibility to grant different types of equity compensation awards, including stock options, stock
appreciation rights, restricted stock, RSUs and other awards based, in whole or in part, on the value of ADI equity, as well as cash-based
awards. The grant, vesting, exercise and settlement of awards granted under the 2026 Equity Plan may be subject to the satisfaction of
time- or performance-based conditions, as determined at or after the date of grant of an award under the 2026 Equity Plan. Vested RSUs
held by non-employee directors may be deferred in accordance with the terms of the 2026 Equity Plan.
119
In the event of any change
in corporate structure that affects our outstanding common stock (e.g., a cash or stock dividend, stock split, reverse stock split, spin-off,
recapitalization, merger, reorganization, etc.), our Compensation Committee shall make adjustments that it deems equitable or appropriate,
in its sole discretion, including adjustments to the share limits described above, the number and type of shares subject to outstanding
awards, or the purchase or exercise price of outstanding awards. In the case of any unusual or nonrecurring event (including events described
in the preceding sentence) affecting the Company or changes in applicable laws, regulations, or accounting principles, our Compensation
Committee may make adjustments to outstanding awards in order to prevent dilution or enlargement of the benefits intended to be provided
under the 2026 Equity Plan.
Shares that are subject to
awards that are paid in cash, terminate, lapse or are canceled or forfeited would be available again for grant under the 2026 Equity
Plan and would not be counted for purposes of the limits above. Shares that are reacquired by ADI with cash tendered in payment of the
exercise price of an award and shares that are tendered or withheld in payment of all or part of the exercise price or tax withholding
amount relating to an award will not be added back to the number of shares authorized under the 2026 Equity Plan. In addition, if stock
appreciation rights are settled in shares upon exercise, the total number of shares actually issued upon exercise rather than the number
of shares subject to the award would be counted against the number of shares authorized under the 2026 Equity Plan.
Eligibility. It is
expected that employees, non-employee directors and other service providers of ADI or its affiliates would be eligible to receive awards
under the 2026 Equity Plan. Certain current and former non-employee directors of Resideo who do not serve on our Board will also be eligible
to participate in the 2026 Equity Plan, solely with respect to the grant of New Deferred RSUs (as discussed in “—Compensation
Discussion and Analysis—Treatment of Outstanding Equity Awards Resulting from the Distribution” above).
Administration. It
is expected that our Compensation Committee would have the authority to administer the 2026 Equity Plan, including the authority to select
the persons who receive awards, determine the number of shares subject to the awards and establish the terms and conditions of the awards,
consistent with the terms of the 2026 Equity Plan. Subject to the expected provisions of the 2026 Equity Plan, our Compensation Committee
may specify the circumstances under which the exercisability or vesting of awards may be accelerated or whether awards or amounts payable
under awards may be deferred. Our Compensation Committee may waive or amend the terms of an award, consistent with the terms of the 2026
Equity Plan, but may not reprice a stock option or stock appreciation right, whether through amendment, cancellation and replacement,
or exchange for cash or any other awards. Our Compensation Committee would have the authority to interpret the 2026 Equity Plan and establish
rules for the administration of the 2026 Equity Plan. It is expected that the 2026 Equity Plan will provide that our Compensation Committee
may delegate its powers and duties under the 2026 Equity Plan to one or more directors or other individuals as the committee deems to
be advisable, except that only our Compensation Committee or our Board would have authority to grant and administer awards to executive
officers and non-employee directors.
The
Board may also exercise the powers of our Compensation Committee with respect to the 2026 Equity Plan and awards granted thereunder at
any time.
Tax Consequences of Awards.
The following is a brief summary of the principal United States federal income tax consequences of awards and transactions under the 2026
Equity Plan for the employees, non-employee directors and other service providers selected to participate in the 2026 Equity Plan (the
“Participants”) and the Company. This summary is not intended to be exhaustive and, among other things, does not describe
local, state or foreign tax consequences.
Options
and Stock Appreciation Rights. A Participant will not recognize any income at the time a stock option or stock appreciation right
is granted, nor will the Company be entitled to a deduction at that time. When a stock option is exercised, the Participant will recognize
ordinary income in an amount equal to the excess of the fair market value of the shares received as of the date of exercise over the
exercise price of the option. When a stock appreciation right is exercised, the Participant will recognize ordinary income in an amount
equal to the cash received or, if the stock appreciation right is settled in shares, the shares received as of the date of exercise.
The Company generally will be entitled to a corresponding tax deduction in the same time period and amount as the Participant recognizes
income.
Restricted
Stock and RSUs. A Participant will not recognize any income at the time of grant of a restricted stock unit or share of restricted
stock (whether subject to time-based vesting or performance-based vesting), and the Company will not be entitled to a deduction at that
time. The Participant will recognize ordinary income in an amount equal to the fair market value of the shares received or, if the restricted
stock unit is paid in cash, the amount payable, upon settlement of a restricted stock unit. In the year in which shares of restricted
stock are no longer subject to a substantial risk of forfeiture (i.e., in the year that the shares vest), the Participant will recognize
ordinary income in an amount equal to the excess of the fair market value of the shares on the date of vesting over the amount, if any,
the Participant paid for the shares. Under certain circumstances and if permitted by an individual award, a Participant may elect (within
30 days after being granted restricted stock) to recognize ordinary income in the year of receipt instead of the year of vesting. If
such an election is made, the amount of income recognized by the Participant will be equal to the excess of the fair market value of
the shares on the date of receipt over the amount, if any, the Participant paid for the shares. The Company generally will be entitled
to a corresponding tax deduction in the same time period and amount as the Participant recognizes income.
120
Other
Types of Awards. If other awards are granted under the 2026 Equity Plan, the tax consequences may differ from those described above
for stock options, stock appreciation rights, restricted stock and RSUs. As a general matter, the Company typically would be entitled
to a tax deduction in respect of any such compensatory awards in the same time period and amount as the Participant recognizes income
in respect of such awards.
Withholding
of Taxes. The Company has the right to require, prior to the issuance or delivery of shares in settlement of any award, the Participant
to pay any taxes required by law.
Employee Stock Purchase Plan
Prior to the Spin-Off,
we expect our Board to adopt, and Resideo, as our sole stockholder, to approve, the ADI Employee Stock Purchase Plan (the “ESPP”).
The following summary of the material terms of the ESPP is qualified in its entirety by reference to the full text of the ESPP, the form
of which is filed as Exhibit 10.12 to the Form 10 of which this Information Statement forms a part.
The ESPP is intended to
provide employees of the Company and its participating subsidiaries with a convenient means of purchasing shares of our common stock
from time to time at a discount to market prices through the use of payroll deductions. The ESPP will generally be implemented by a series
of separate offerings, with each offering consisting of a single purchase period. On the first trading day of each purchase period, participating
employees will be granted a right to purchase shares of our common stock, up to the maximum number of whole shares that can be purchased
with the balance in the participant’s recordkeeping account, on the last trading day of the purchase period.
The ESPP is intended to
qualify as an “employee stock purchase plan” under Section 423 of the Code.
Administration.
The ESPP will be administered by our Compensation Committee, which will have full power and authority to determine when each purchase
period shall occur and the terms and conditions of each related offering; designate from time to time which of our affiliates shall be
eligible to participate in the ESPP; and construe and interpret the ESPP and establish, amend and revoke rules, regulations and procedures
for the administration of the ESPP. Our Compensation Committee may delegate ministerial duties associated with the administration of
the ESPP to our officers, employees or agents as our Compensation Committee may determine.
Eligibility. Participation
in the ESPP will generally be limited to employees of the Company and its designated affiliates, except for any employee who, immediately
after a right to purchase is granted under the ESPP, would be deemed, for purposes of Section 423(b)(3) of the Code, to own stock possessing
five percent or more of the total combined voting power or value of all classes of stock of the Company or any affiliate. To be eligible
to participate in the ESPP for a given purchase period, an employee must be an eligible employee on the first day of such purchase period.
Authorized Shares.
If the 2026 Equity Plan is approved by Resideo, as our sole shareholder, and our Board, subject to adjustment as described below, we
expect that the maximum number of shares of our common stock that may be sold under the ESPP would be 1.8% of the number of shares of
common stock outstanding, on an as-converted basis, as of the effective time of the Spin-Off. If the purchases by all participants in
an offering would otherwise cause the aggregate number of shares to be sold under the ESPP to exceed this maximum, the Company will make,
to each participant in that offering, a pro rata allocation in a uniform and nondiscriminatory manner of the remaining number of shares
which may be sold under the ESPP.
Participation.
An eligible employee may elect to participate in the ESPP by filing an election form with the Company (or its agent) before the offering
date for a purchase period, authorizing regular payroll deductions from eligible compensation beginning with the first payday in such
purchase period. An eligible employee may elect to have any whole percent of eligible compensation withheld as a payroll deduction, but
not exceeding ten percent per pay period (or such other maximum percentage as the Compensation Committee may establish from time to time
prior to the commencement of an offering). Any election submitted will remain in effect until the ESPP is terminated or such participant
withdraws from the ESPP, modifies his or her authorization, or ceases to be an eligible employee.
Purchase Periods.
Unless the Compensation Committee determines otherwise, purchase periods under the ESPP will be six months in duration, beginning either
on February 15 of each calendar year and ending on the next August 14, or on August 15 of each calendar year and ending on the next February
14; provided that the Compensation Committee may establish an initial purchase period that is shorter than the purchase periods that
apply thereafter.
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Subject to the limitations
in the ESPP, as described in this summary, on the first trading day of each purchase period, participating employees will be granted
a right to purchase shares of our common stock, except that no participant will be entitled to (a) the right to purchase shares under
the ESPP that accrues at a rate which in the aggregate exceeds $25,000 in fair market value (determined on the offering date when the
right is granted) for each calendar year in which such right is outstanding at any time, determined in accordance with Section 423 of
the Code; or (b) purchase shares in excess of 5,000 shares per offering (or such other maximum share limit as established by the Compensation
Committee in its sole discretion).
Purchase Price.
Unless a different purchase price is established by the Compensation Committee for an offering prior to the commencement of the applicable
purchase period, the purchase price of each share sold pursuant to the ESPP will be the lesser of (i) 90% of the fair market value of
a share on the offering date of the applicable purchase period, and (ii) 90% of the fair market value of a share on the purchase date.
In no event shall the purchase price be less than the lesser of (x) 85% of the fair market value of a share on the offering date of the
applicable purchase period, or (y) 85% of the fair market value of a share on the purchase date.
Changes to Payroll
Authorization. During an enrollment period, a participant may direct the Company to increase or decrease his or her rate of payroll
deduction contributions, with such change to be effective as of the first day of the next purchase period. During a purchase period,
a participant may direct the Company to decrease his or her rate of payroll deduction contributions to zero percent, which shall be considered
a suspension of contributions. Any participant who has decreased his or her rate of payroll deductions to zero percent and does not increase
such rate during the next enrollment period will be withdrawn from the ESPP effective as of the first day of that next purchase period.
A participant may withdraw
from the ESPP at any time by complying with the rules set by the Compensation Committee. Upon withdrawal, the Company will pay to the
participant in cash the entire balance in such participant’s recordkeeping account, and no further deductions will be made from
the participant’s eligible compensation during such purchase period. A participant who withdraws from the ESPP will not be eligible
to reenter the ESPP until the next succeeding purchase period. Upon termination of a participant’s employment for any reason, including
death, disability, or retirement, the entire balance in the participant’s recordkeeping account will be refunded in cash within
30 days after the date of termination of employment.
Holding Period.
The Compensation Committee may adopt rules specifying that shares purchased by a participant during a purchase period may not be sold
by the participant for a specified period of time after the purchase date on which the shares were purchased, and may establish such
procedures as the Compensation Committee may deem necessary to implement such rule. Except for sales through an agent designated by the
Company, a participant may not withdraw shares or otherwise transfer shares from the participant’s share subaccount.
Effect of Certain
Transactions. In the event of a merger, consolidation or other reorganization of the Company with or into another corporation,
or the sale of all or substantially all of the assets of the Company, each right to acquire shares of stock on any purchase date that
is scheduled to occur after the date of the consummation of such transaction may be continued or assumed or an equivalent right may be
substituted by the surviving or successor corporation. If such surviving or successor corporation thereof refuses to continue, assume
or substitute for such outstanding rights, our Compensation Committee may, in its discretion, either terminate the ESPP or shorten the
purchase period then in progress by setting a new purchase date before the date of the consummation of the transaction. In the event
of a dissolution or liquidation of the Company, any offering and purchase period then in progress will terminate immediately prior to
the consummation of such action, unless otherwise provided by our Compensation Committee.
Adjustment Provision.
In the event of any change in our common stock by reason of a stock dividend, stock split, reverse stock split, corporate separation,
recapitalization, merger, consolidation, combination, exchange of shares and the like, the Compensation Committee will make such equitable
adjustments as it deems appropriate in the aggregate number and class of shares or other securities available under the ESPP, the maximum
share limitation, and the number, class and purchase price of shares or other securities subject to purchase under any pending offering.
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Amendment and Termination.
The Compensation Committee, in its sole discretion, may at any time suspend or amend the ESPP in any respect, but no such amendment may,
without stockholder approval, increase the number of shares reserved under the ESPP, or effect any other change in the ESPP that would
require stockholder approval under applicable law or regulations or the rules of any securities exchange on which the shares may then
be listed, or to maintain compliance with Section 423 of the Code. No such amendment or suspension shall adversely affect the rights
of participants pursuant to shares previously acquired under the ESPP. The ESPP and all rights thereunder will terminate (i) at
any time, at the discretion of the Compensation Committee, or (ii) upon the completion of any offering under which the limitation
on the total number of shares of stock to be issued during the entire term of the ESPP has been reached.
Material Offer Letters
In connection with the Spin-Off,
we expect to enter into an offer letter with Mr. Aarnes, pursuant to which he will serve as our President and Chief Executive Officer.
Pursuant to the offer letter, subject to approval of the Board, Mr. Aarnes will receive the following changes in his compensation:
● Effective as of the Spin-Off, an annual base salary of $900,000;
● Effective as of the Spin-Off, a target annual incentive compensation opportunity equal to 125% of annual
base salary; provided, that for calendar year 2026, the bonus will be determined based on a target of 100% of base salary for the portion
of the calendar year prior to the Spin-Off and at a target of 125% of base salary for the portion of the calendar year following the Spin-Off;
● Beginning in 2027, an annual equity award with a target award value of $4,500,000 to be determined by
our Compensation Committee; and
● A one-time equity award with a target award value of $1,000,000 comprised of RSUs that vest on the third
anniversary of the Spin-Off.
In addition, it is expected
that Mr. Aarnes will continue to participate in the same executive benefits maintained by Resideo in which he participates today,
such as company-paid annual premiums for an excess liability insurance policy and an annual executive physical.
Subject to approval by the
Board, it is expected that our other NEOs will also sign a new offer letter with ADI that sets forth the terms of their employment following
the Spin-Off, which will remain substantially the same as immediately prior to the Spin-Off; provided, that following the Spin-Off, Ms. Copeland
and Mr. Cardazzi will participate in ADI’s severance plan for officers along with Messrs. Aarnes and Carlet and Ms. Lane.
Effective as of the Spin-Off, the annual base salaries of Mses. Lane and Copeland and Messrs. Carlet and Cardazzi are expected to remain
$612,000, $464,100, $621,000 and $400,000, respectively, and the target annual incentive compensation opportunities will remain 80%, 70%,
100% and 70% of base salary, respectively.
In addition, Ms. Copeland
and Mr. Cardazzi will be eligible to, and Mr. Carlet and Ms. Lane will remain eligible to, participate in any benefits made available
to our executives, such as company-paid annual premiums for an excess liability insurance policy and an annual executive physical. Beginning
in 2027, our NEOs, other than Mr. Aarnes, whose annual equity award is described above, will also be eligible for an annual equity award
to be determined by our Compensation Committee.
All of our NEOs are also expected
to sign an intellectual property agreement and ADI’s non-compete agreement for senior executives except where prohibited by law
or professional conduct or ethics rules.
ADI Severance Plans
Prior to the Spin-Off,
we expect our Board to adopt severance programs that are substantially similar to those currently maintained by Resideo, including
the Resideo Officer Severance Plan and Resideo Executive Severance Plan. For additional information regarding the Resideo Officer
Severance Plan and Resideo Executive Severance Plan, see “—Compensation Discussion and Analysis—Other Components
of Compensation—Severance Plans” above. Our NEOs will participate in ADI’s severance plan for officers following
the Spin-Off.
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DIRECTOR
COMPENSATION
Following the Spin-Off, we
expect that our Compensation Committee will periodically review and make recommendations to the Board regarding the form and amount of
compensation for non-employee directors. Directors who are also our employees are expected to receive no compensation for service on the
Board. Resideo has approved an initial director compensation program for ADI that is designed to enable continued attraction and retention
of highly qualified directors and to address the time, effort, expertise and accountability required of active Board membership. This
program is described in further detail below.
Annual Compensation
In general, we believe that
annual compensation for non-employee directors should consist of both a cash component, designed to compensate members for their service
on the Board and its committees, and an equity component, designed to align the interests of directors and stockholders and, by vesting
over time, to create an incentive for continued service on the Board.
ADI Board of Directors’ Annual Compensation
Cash Retainer
$90,000
Board Chairman – Additional Cash Retainer
$120,000
Board Committee Membership – Additional Cash Retainer
Audit Committee Chair: $27,500
Audit Committee Member: $12,500
Compensation Committee Chair: $20,000
Compensation Committee Member: $10,000
Other Committee Chair: $15,000
Other Committee Member: $7,500
Annual Equity Grants
RSUs vest on the earliest of the first anniversary of the
date of grant, the next Annual Meeting of Stockholders, the director’s death or disability, or the occurrence of a change in control.
Each non-employee director receives an annual restricted stock unit grant with a target value of $150,000 on the date of the Annual Meeting of Stockholders. Directors will receive a full annual equity grant upon the Spin-Off, which will vest upon the first anniversary of the date of grant, as well as a full annual equity grant upon the first Annual Meeting of Stockholders following the Spin-Off, subject to vesting as set forth herein.
Cash elements are paid in
quarterly installments in arrears and prorated for partial years of service. We do not separately compensate our directors for attending
Board or committee meetings.
Director Deferred Compensation Plan
The ADI Deferred Compensation
Plan for Non-Employee Directors (the “Director Deferred Compensation Plan”) encourages our directors to defer a portion of
their cash compensation to be held in the form of equity or deferred cash, which can only be paid at the end of their tenure on the Board
or in other limited circumstances. In addition, non-employee directors are also permitted to defer their annual equity award in accordance
with the terms of the 2026 Equity Plan.
Prior to the first day of
each calendar year, each non-employee director may (i) elect to defer all of his or her annual cash retainer fees as well as any annual
committee and chair fees other than reimbursements otherwise payable to him or her by ADI into deferred stock units (“DSUs”)
or deferred cash pursuant to the Director Deferred Compensation Plan, and (ii) elect to defer payment of his or her annual equity grant
of RSUs into DSUs, effective once the award has vested in accordance with its terms and conditions. Each DSU under the Director Deferred
Compensation Plan, and each vested RSU that a non-employee director has elected to defer under the terms of the 2026 Equity Plan, represents
the right to receive one share of our common stock generally on the first day of the seventh calendar month following the date the non-employee
director incurs a separation of service from us.
Other Benefits
Non-employee directors
will also be provided with $350,000 in business travel accident insurance.
Stock Ownership Guidelines
We expect to adopt a stock
ownership policy pursuant to which each non-employee director, while serving as a director of the Board, must hold ADI common stock (including
unvested RSUs) with a market value of at least five times the value of the annual cash retainer in effect at the time they became a director
before being permitted to sell any ADI common stock holdings, including net shares from vesting of restricted stock unit grants (i.e.,
shares vested less shares required to pay applicable taxes).
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CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Agreements with Resideo
Following the separation and
distribution, we and Resideo will operate separately, each as a public company. We will enter into a separation and distribution agreement
with Resideo, which is referred to in this information statement as the “separation agreement.” In connection with the separation,
we will also enter into various other agreements to effect the separation and provide a framework for our relationship with Resideo after
the separation, including a transition services agreement, an employee matters agreement, a tax matters agreement and an intellectual
property matters agreement. These agreements will provide for the allocation between us and Resideo of the assets, employees, services,
liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) of Resideo
and its subsidiaries attributable to periods prior to, at and after our separation from Resideo and will govern certain relationships
between us and Resideo after the separation.
The following summaries of
each of the agreements listed above are qualified in their entireties by reference to the full text of the applicable agreements, forms
of which are filed as exhibits to the registration statement of which this information statement forms a part. When used in this section,
“distribution date” refers to the date on which Resideo commences distribution of our common stock to the holders of shares
of Resideo common stock.
The Separation Agreement
We intend to enter into a
separation agreement with Resideo prior to the distribution of our common stock to Resideo common stockholders. The separation agreement
will set forth our agreements with Resideo regarding the principal actions to be taken in connection with the separation. It will also
set forth other agreements that govern certain aspects of our relationship with Resideo following the separation and distribution. This
summary of the separation agreement is qualified in its entirety by reference to the full text of the agreement, which is incorporated
by reference into this information statement.
Transfer of Assets and Assumption of Liabilities
The separation agreement will
identify assets to be transferred, liabilities to be assumed and contracts to be allocated to each of Resideo and us as part of the Reorganization
Transactions described herein, and will describe when and how these transfers, assumptions and assignments will occur, though many of
the transfers, assumptions and assignments will have already occurred prior to the parties’ entering into the separation agreement.
The separation agreement will provide for those transfers of assets and assumptions of liabilities that are necessary in connection with
the separation so that we and Resideo retain the assets necessary to operate our respective businesses and retain or assume the liabilities
allocated in accordance with the separation. The separation agreement will also provide for the settlement or extinguishment of certain
liabilities and other obligations between us and Resideo. In particular, the separation agreement will provide that, subject to the terms
and conditions contained in the separation agreement:
●
“ADI Assets” (as defined in the separation agreement), including, but not limited to, the equity interests of our subsidiaries, assets reflected on our pro forma balance sheet and certain other assets either exclusively or primarily relating to our business, will be retained by or transferred to us or one of our subsidiaries, except as set forth in the separation agreement or one of the other agreements described below;
●
“ADI Liabilities” (as defined in the separation agreement), including, but not limited to, the following will be retained by or transferred to us or one of our subsidiaries:
○
all liabilities to the extent relating to, arising out of or resulting
from (a) the operation or conduct of our ADI Global Distribution business, as conducted at any time prior to, at or after the separation
(including, except as set forth in the separation agreement or other ancillary agreements, any liabilities from any act or failure to
act by us that creates liability under the separation agreements entered into between Honeywell and Resideo as part of Resideo’s
spin-off from Honeywell (the “Honeywell Separation Agreements”) to the extent relating to, arising out of or resulting from
the operation or conduct of our business); (b) the operation or conduct of any business conducted by us or any of our subsidiaries at
any time after the separation (including, except as set forth in the separation agreement or other ancillary agreements, any liabilities
from any act or failure to act by us that creates liability under the Honeywell Separation Agreements to the extent relating to, arising
out of or resulting from the operation or conduct of our business); or (c) any ADI Asset, whether arising before, at or after the separation;
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○
any and all “ADI Environmental Liabilities” (as defined in the separation agreement);
○
liabilities (whether accrued, contingent or otherwise) reflected on our pro forma balance sheet;
○
liabilities (whether accrued, contingent or otherwise) relating to, arising out of or resulting from, any infringement, misappropriation or other violation of any intellectual property of any other person related to the conduct of our business;
○
any product liability claims or other claims of third parties to the extent primarily relating to, arising out of or resulting from any product developed, manufactured, marketed, distributed, leased or sold by our business;
○
any liabilities (whether accrued, contingent or otherwise) relating to, arising out of or resulting from any action exclusively related to our ADI Global Distribution business or any action that is not exclusively related to our ADI Global Distribution business to the extent (but solely to the extent) such liabilities relate to our ADI Global Distribution business;
○
liabilities (whether accrued, contingent or otherwise) relating to, arising out of or resulting from any form, registration statement, schedule or similar disclosure document filed or furnished with the SEC on or after the separation by us or our subsidiaries or as pursuant to any financing arrangements entered into by us or our subsidiaries; and
○
all liabilities (whether accrued, contingent or otherwise) relating to, arising out of or resulting from disclosure documents filed or furnished with the SEC that are related to us or the separation (including the Form 10 registration statement of which this information statement is a part and this information statement) or as a result of any statements (whether oral or written), press releases or other public disclosures made on or prior to the separation by or on behalf of us or Resideo, including by any officer thereof, in respect of the transactions contemplated by the separation agreement and the other ancillary agreements entered into in connection therewith.
“ADI Liabilities”
do not include any liabilities that are expressly contemplated by the
separation agreement or any ancillary agreement as liabilities to be assumed by Resideo or its subsidiaries. In addition, the separation
agreement provides that the fact that a liability constitutes an “ADI Liability” under the separation agreement does not affect
the rights and liabilities of us or Resideo, as applicable, in respect of Resideo products distributed by us pursuant to arrangements
between us and Resideo, whether prior to, at or after the separation.
All other assets and liabilities
(whether accrued, contingent or otherwise) of Resideo will be assumed and retained by or transferred to Resideo or one of its subsidiaries
(other than us or one of our subsidiaries), except as set forth in the separation agreement or one of the other agreements described below
and except for other limited exceptions that will result in us retaining or assuming certain other specified liabilities.
The allocation of liabilities
with respect to taxes, except for payroll taxes and reporting and other tax matters expressly covered by the employee matters agreement,
is solely covered by the tax matters agreement.
Except as expressly set forth
in the separation agreement or in any ancillary agreement, all assets will be transferred on an “as is,” “where is”
basis and the respective transferees will bear the economic and legal risks that any conveyance will prove to be insufficient to vest
in the transferee good title, free and clear of any security interest, that any necessary consents or governmental approvals are not obtained
and that any requirements of laws or judgments are not complied with. In general, neither we nor Resideo will make any representations
or warranties regarding any assets or liabilities transferred or assumed, any consents or approvals that may be required in connection
with such transfers or assumptions or any other matters.
Information in this information
statement with respect to the assets and liabilities of the parties following the separation is presented based on the allocation of such
assets and liabilities pursuant to the separation agreement, unless the context otherwise requires. Certain of the liabilities and obligations
to be assumed by one party or for which one party will have an indemnification obligation under the separation agreement and the other
agreements relating to the separation are, and following the separation may continue to be, the legal or contractual liabilities or obligations
of another party. Each such party that continues to be subject to such legal or contractual liability or obligation will rely on the applicable
party that assumed the liability or obligation or the applicable party that undertook an indemnification obligation with respect to the
liability or obligation, as applicable, under the separation agreement, to satisfy the performance and payment obligations or indemnification
obligations with respect to such legal or contractual liability or obligation.
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Cash Adjustments
In connection with the Spin-Off,
we intend to make a one-time cash dividend of approximately $900 million of the net proceeds of the Financing as partial consideration
for the contribution of assets and liabilities to us by Resideo. Separate from this cash payment, the separation agreement will require
Resideo, as promptly as practicable following the separation, to calculate the Company’s aggregate cash balance as of the time of
the separation.
The separation agreement
will contain cash adjustment provisions, with payment of such adjustments to be made within 5 business days of the determination of the
aggregate cash balance. Pursuant to the adjustment provisions, if our aggregate cash balance at the time of the separation is determined
to have been greater than the reference cash balance of $150 million, we will pay Resideo the excess and if our aggregate cash balance
at the time of the separation is determined to have been less than the reference cash balance of $150 million, Resideo will pay us the
shortfall. For the purpose of these cash adjustment provisions, “cash balance” means cash and cash equivalents as defined
in the separation agreement. Following application of the provisions described above and assuming the Spin-Off and Financing had been
completed on April 4, 2026, we estimate that we would have made a one-time cash dividend to Resideo of $900 million and a one-time separate
cash payment to Resideo of approximately $67 million and retained $150 million of cash and cash equivalents on our balance sheet. See
“Unaudited Pro Forma Combined Financial Statements.” The actual amount of the separate cash payment to Resideo (or the amount
of the separate cash payment that Resideo may be required to make to us) is subject to change based on our actual cash and cash equivalents
at the time of the Spin-Off.
Further Assurances; Separation of Guarantees
To the extent that any transfers
of assets or assumptions of liabilities contemplated by the separation agreement have not been consummated on or prior to the date of
the distribution, the parties will agree to cooperate with each other to effect such transfers or assumptions while holding such assets
or liabilities for the benefit of the appropriate party so that all the benefits and burdens relating to such asset or liability inure
to the party entitled to receive or assume such asset or liability. Each party will agree to use reasonable best efforts to take or to
cause to be taken all actions, and to do, or to cause to be done, all things reasonably necessary under applicable law or contractual
obligations to consummate and make effective the transactions contemplated by the separation agreement and other transaction agreements.
Additionally, we and Resideo will use reasonable best efforts (i) to remove us and our subsidiaries as a guarantor of liabilities retained
by Resideo and its subsidiaries and (ii) to remove Resideo and its subsidiaries as a guarantor of liabilities to be assumed by us and
our subsidiaries.
Shared Contracts
Certain shared contracts are
to be assigned or amended to facilitate the separation of our business from Resideo. If such contracts cannot be assigned or amended,
the parties are required to take reasonable actions to cause the appropriate party to receive the benefit of the contract for a specified
period of time after the separation is complete.
Release of Claims and Indemnification
Except as otherwise provided in the separation agreement or any ancillary
agreement, each party will release and forever discharge the other party and its subsidiaries and affiliates from all pre-separation liabilities.
The releases will not extend to obligations or liabilities under any agreements between the parties that remain in effect following the
separation pursuant to the separation agreement or any ancillary agreement. These releases will be subject to certain exceptions set forth
in the separation agreement, including, but not limited to, liabilities relating to the willful misconduct or fraud of any directors,
officers, agents or employees of each party.
The separation agreement will
provide for cross-indemnities that, except as otherwise provided in the separation agreement, are principally designed to place financial
responsibility for the obligations and liabilities allocated to us under the separation agreement with us and financial responsibility
for the obligations and liabilities allocated to Resideo under the separation agreement with Resideo. Specifically, each party will indemnify,
defend and hold harmless the other party, its affiliates and subsidiaries and each of its officers, directors, employees and agents for
any losses arising out of or due to:
●
the liabilities or alleged liabilities the indemnifying party assumed or retained pursuant to the separation agreement;
●
the assets the indemnifying party assumed or retained pursuant to the separation agreement;
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●
the operation of the indemnifying party’s business, whether prior to, at or after the distribution; and
●
any breach by the indemnifying party of any provision of the separation agreement or any other ancillary agreement unless such other ancillary agreement expressly provides for separate indemnification therein.
Each party’s aforementioned
indemnification obligations will be uncapped; provided that the amount of each party’s indemnification obligations will be
subject to reduction by any insurance proceeds (net of premium increases) received by the party being indemnified. The separation agreement
will also specify procedures with respect to claims subject to indemnification and related matters. Indemnification with respect to taxes
will be governed by the tax matters agreement.
Legal Matters
Except as otherwise set forth
in the separation agreement or in any ancillary agreement (or as otherwise described above), each party to the separation agreement will
assume the liability for, and control of, all pending, threatened and future legal matters related to its own business or its assumed
or retained liabilities and will indemnify the other party for any liability arising out of or resulting from such legal matters.
Dispute Resolution
If a dispute arises between
us and Resideo under the separation agreement, the dispute will be submitted for final and binding arbitration administered in accordance
with the Commercial Arbitration Rules and Mediation Procedures of the American Arbitration Association to be decided in accordance with,
and as otherwise set forth, in the separation agreement.
Insurance
Following the separation,
we will be responsible for obtaining and maintaining at our own cost our own insurance coverage. Additionally, with respect to certain
claims arising prior to the distribution, we may seek coverage under Resideo’s third-party insurance policies to the extent that
the terms of such policies provide for such coverage to our business, and subject to the terms and conditions of such policies, including
any limits on coverage or scope, any deductibles and other fees and expenses. If we and Resideo jointly make any claim for coverage under
Resideo’s third-party insurance policies for amounts that have been or may in the future be incurred partially by Resideo and partially
by us, any insurance recovery resulting therefrom will first be allocated to reimburse us or Resideo for our respective costs, legal and
consulting fees, and other out-of-pocket expenses incurred in pursuing such insurance recovery, with the remaining net proceeds from the
insurance recovery to be allocated as between us and Resideo in proportion to the relative losses experienced by each in respect of such
claim. We will remain liable for all uninsured, uncovered, unavailable or uncollectible amounts, incurred from and after the separation.
Term and Termination
Prior to the distribution,
Resideo has the unilateral right to terminate the separation agreement and related agreements. After the distribution, the term of the
separation agreement is indefinite and it may only be terminated with the prior written consent of both Resideo and us.
Separation Costs and Expenses
All costs and expenses with
respect to the separation incurred prior to the separation will be borne and paid by Resideo, except as provided in the separation agreement
or in any of the ancillary agreements.
All costs and expenses with
respect to the separation incurred after the separation will be borne and paid by us except to the extent such fees and expenses were
incurred in connection with services expressly requested by Resideo in writing.
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Any costs or expenses incurred
in obtaining consents or novation from a third party will be borne by the entity to which such contract is being assigned.
Treatment of Intercompany Loans and Advances
Upon completion of the
separation other than as contemplated by the separation agreement, all loans and advances between Resideo or any subsidiary of Resideo (other than us and our subsidiaries), on the one
hand, and us or any of our subsidiaries, on the other hand, will be terminated.
Other Matters Governed by the Separation
Agreement
Other matters governed by
the separation agreement include confidentiality, access to and provision of records, treatment of outstanding guarantees and similar
credit support.
Commercial Product Purchase Agreement
We and Resideo will enter
into a commercial product purchase agreement, effective upon the distribution, pursuant to which we will purchase certain security and
safety products from Resideo for resale through our channel for a period of two years, with a semi-exclusive right to sell certain security
products in the United States and Canada (with the exception of certain named distributors). Pricing will be agreed as ordered and in
line with typical market prices, except with respect to the security products for which we will be guaranteed a certain fixed price in
line with our distribution margins (which fixed price will not impact the price at which customers purchase the product). Pursuant to
the commercial product purchase agreement, we will also be obligated to purchase in line with certain minimum commitments based on our
sales during calendar year 2026, and the agreement is subject to customary termination rights with the ability to renew without the semi-exclusivity
rights.
Transition Services Agreement
We and Resideo will enter
into a transition services agreement that will be effective upon the distribution, pursuant to which Resideo and its subsidiaries and
we and our subsidiaries will provide to each other, for an interim, transitional period, various services on an arm’s length basis
in order to help ensure an orderly transition following the separation and the distribution. The cost of these services will be negotiated
between us and Resideo as set forth in the transition services agreement.
The transition services
agreement will terminate on the expiration of the term of the last service provided under it, unless earlier terminated by either party
under certain circumstances, including but not limited to, in the event of any uncured material breach by the other party or its applicable
affiliates. If no term period is provided for a specified service, then such service is to terminate on the second anniversary of the
effective date of the transition services agreement. Under the terms of the transition services agreement, no service will extend past
the second anniversary of the effective date of the transition services agreement (inclusive of any extensions). The recipient of a particular
service generally can terminate that service prior to the scheduled expiration date, subject to a minimum notice period equal to 30 days.
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We and Resideo have agreed
to perform our respective services in a manner that is substantially consistent with that provided immediately prior to the distribution.
The transition services agreement
will generally provide that the applicable service recipient indemnifies the applicable service provider for liabilities that such service
provider incurs arising from the provision of services other than liabilities arising from such service provider’s gross negligence
or intentional misconduct, and that the applicable service provider indemnifies the applicable service recipient for liabilities that
such service recipient incurs arising from such service provider’s gross negligence or intentional misconduct. Subject to certain
exceptions, the liabilities of each party providing services under the transition services agreement will generally be limited to the
aggregate charges received by the parties in the preceding three months as of the time of calculation. The transition services agreement
also will provide that the provider of a service will not be liable to the recipient of such service for any special, indirect, incidental,
punitive or consequential or similar damages.
Tax Matters Agreement
In connection with the separation,
we and Resideo will enter into a tax matters agreement that will govern the parties’ respective rights, responsibilities and obligations
with respect to taxes, including responsibility for tax liabilities, entitlement to tax refunds and other tax benefits, allocation of
tax attributes, preparation and filing of tax returns, control of audits and other tax proceedings and other matters relating to taxes.
In general, we will be
responsible for any U.S. federal, state, local or foreign taxes (and any related interest, penalties or audit adjustments) imposed with
respect to tax returns that include only us and/or any of our subsidiaries. We will generally be responsible for preparing and filing
any such tax returns, and will generally have the authority to control tax contests with respect thereto. Further, but only to the extent
such taxes exceed a certain indemnification threshold, we will be responsible for any U.S. federal, state, local or foreign taxes (and
any related interest, penalties or audit adjustments) relating to our business that are imposed on Resideo, including taxes relating
to pre-distribution periods reflected on tax returns that include (i) us and/or any of our subsidiaries and (ii) Resideo and/or any of
its subsidiaries.
In addition, the tax matters
agreement will impose certain restrictions on us and our subsidiaries that will be designed to preserve the tax-free status of the distribution
and certain related transactions, as well as the intended tax treatment of certain transactions entered into pursuant to the internal
restructuring. We (and our subsidiaries) will be barred from taking any action, or failing to take any action, if such action or failure
to act would adversely affect, or could reasonably be expected to adversely affect, the tax-free status or other intended tax treatment
of these transactions. In addition, for the two-year period following the distribution, we (and our subsidiaries) will be subject to specific
restrictions on our ability to enter into certain capital-raising, strategic or other corporate transactions, including restrictions on:
(i) mergers and other acquisition or sale transactions involving our stock, (ii) any corporate transaction which would cause us to undergo
a 50% or greater change in our stock ownership (as determined for purposes of Section 355(e) of the Code), (iii) redemptions or repurchases
of our stock, (iv) liquidation transactions, (v) discontinuing the active conduct of our trade or business, (vi) issuance or sale of our
stock or other securities (including securities convertible into our stock, but excluding certain compensatory arrangements), (vii) sales
of assets outside of the ordinary course of business and (viii) amendments to our certificate of incorporation (or other organizational
documents) or other actions affecting the voting rights of our common stock.
The tax matters agreement
will provide special rules that allocate tax liabilities in the event the distribution, together with certain related transactions, as
well as any transaction entered into pursuant to the Reorganization Transactions that is intended to be tax-free for applicable tax law
purposes, is not tax-free (or otherwise fails to qualify for its intended tax treatment). In general, under the tax matters agreement,
each party is expected to be responsible for any taxes, whether imposed on us or Resideo, that arise from (1) the failure of the distribution,
together with certain related transactions, to qualify for tax-free treatment under the Code or (2) the failure of certain related transactions
or the internal restructuring to qualify for their intended tax treatment, in each case, to the extent that the failure to so qualify
is attributable to post-distribution actions by such party or transactions with respect to such party’s stock, or to a breach of
certain representations or covenants made by that party in the tax matters agreement or in any documents relating to the IRS ruling or
opinion of outside tax advisors obtained in connection with the distribution, certain related transactions or the internal restructuring.
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Employee Matters Agreement
We and Resideo will enter
into an employee matters agreement that will govern our and Resideo’s compensation and employee benefit obligations with respect
to the employees and other service providers of each company, and generally will allocate liabilities and responsibilities relating to
employment matters and employee compensation and benefit plans and programs.
Treatment of Outstanding Resideo Equity
Awards
See “Executive Compensation—Compensation
Discussion and Analysis—Treatment of Outstanding Equity Awards Resulting from the Distribution” for disclosure regarding the
treatment of outstanding equity awards under the 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its affiliates and the 2018
Stock Plan for Non-Employee Directors of Resideo Technologies, Inc. in connection with the distribution.
Treatment of Resideo Benefit Plans
The employee matters agreement
will provide that, following the completion of the distribution, our employees generally will no longer participate in benefit plans sponsored
or maintained by Resideo and will commence participation in our benefit plans, which are described in the section called “Executive
Compensation.”
No Hire of Employees
Subject to customary exceptions,
neither we nor Resideo will, without the consent of the other party, hire or attempt to hire an employee employed in an executive or senior
management capacity at the other party or its subsidiaries, or a former employee who was employed in such capacity within 6 months of
the date of hire or attempted hiring, for 18 months following the distribution.
General Matters
The employee matters agreement
also will set forth the general principles relating to employee matters, including with respect to the assignment and transfer of employees,
the assumption and retention of liabilities and related assets, workers’ compensation, payroll taxes, regulatory filings, leaves
of absence, the provision of comparable benefits, employee service credit, the sharing of employee information and the duplication or
acceleration of benefits.
Term and Termination
Prior to the distribution,
Resideo has the unilateral right to terminate the separation agreement and related agreements, including the employee matters agreement.
After the distribution, the term of the employee matters agreement is indefinite and may only be terminated or amended with the prior
written consent of both Resideo and us.
Intellectual Property Matters Agreement
We and Resideo will enter
into an intellectual property matters agreement pursuant to which Resideo will grant to us a non-exclusive, royalty-free, fully paid-up,
worldwide, irrevocable, sublicensable license to use certain intellectual property rights retained by Resideo. We will be able to sublicense
our rights in connection with activities relating to our and our subsidiaries’ business but not for independent use by third parties,
and we can transfer such rights in connection with certain future business unit and product line divestments.
We will also grant back to
Resideo a non-exclusive, royalty-free, fully paid-up, worldwide, irrevocable, sublicensable (subject to the restrictions below) license
to continue to use certain intellectual property rights owned by or transferred to us. Resideo will be able to sublicense its rights in
connection with activities relating to Resideo’s and its subsidiaries’ retained business but not for independent use by third
parties. This license-back will permit Resideo to continue to use certain of our intellectual property rights in the conduct of its remaining
businesses. We believe that the license-back will have little impact on our businesses because Resideo’s use of our intellectual
property rights is generally limited to products and services that are not part of our businesses.
The intellectual property
matters agreement is intended to provide freedom to operate in the event that any of Resideo’s retained intellectual property is
used in any of our current businesses, and, as such, applies to all portions of our current businesses. However, we believe there may
be relatively little use of such retained intellectual property in our businesses, and as a result, we do not believe that the intellectual
property matters agreement has a material impact on any of our businesses.
The term of the intellectual
property matters agreement is perpetual.
Exchange Agreement, Shareholders Agreement and ADI Preferred Stock
Exchange
In connection with the Spin-Off, Resideo will enter into the Exchange
Agreement with the Preferred Stockholders providing for the exchange by the Preferred Stockholders of 150,000 shares of Resideo preferred
stock held by them for 150,000 shares of ADI preferred stock. The ADI preferred stock will be convertible perpetual participating preferred
stock of the Company, with an initial conversion price equal to $16.152, and accrue dividends at a rate of 7.00% per annum,
compounded quarterly (payable in cash or in-kind, as described further below). The aggregate number of shares of Company common
stock, into which the ADI preferred stock may be converted will initially be equal to 9,286,775 based on the initial conversion price.
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The ADI preferred stock will
rank senior to the shares of Company common stock with respect to dividend rights and with respect to rights on liquidation, winding-up and
dissolution. Holders of shares of ADI preferred stock will be entitled to cumulative dividends which are payable quarterly in arrears,
will accrue on a daily basis from the issuance date of such shares and are payable at the Company’s option either (i) in cash
or (ii) in-kind (by adding the dividend to the Accumulated Amount (as defined in the ADI Certificate of Designations) of such shares),
at a rate of 7.00% per annum, subject to adjustment as described below and as set forth in the ADI Certificate of Designations. Holders
of ADI preferred stock are also entitled to receive certain dividends declared or paid on the Company common stock on an as-converted basis.
No dividends will be payable to holders of shares of Company common stock unless the full dividends are paid at the same time to the holders
of the ADI preferred stock.
Upon the occurrence of a “Triggering
Event” (which shall include, but is not limited to, (i) the Company’s failure to pay dividends when required, (ii) the
Company’s failure to comply with its obligations under the ADI Certificate of Designations to reserve and keep available for issuance
the requisite number of shares of Company common stock issuable upon conversion of the ADI preferred stock, (iii) the Company taking
specified restricted actions without the consent of a majority of the holders of the ADI preferred stock or (iv) the Company’s
failure to maintain the listing of the Company common stock on the NYSE or another national securities exchange), the dividend rate will
become 10.00% per annum for so long as the Triggering Event remains in effect. At any time during which a Triggering Event
is occurring, without the consent of the holders representing at least a majority of the then-issued and outstanding shares of ADI preferred
stock, no dividends will be declared or paid or set apart for payment, or other distributions declared or made, upon any junior equity
securities, including the Company common stock.
Holders of the ADI preferred stock will have the right, at any time
and from time to time (including after any notice of redemption given by the Company), at their option, to convert any or all of their
ADI preferred stock, in whole or in part, into fully paid and non-assessable shares of Company common stock at the then-effective
conversion price, initially equal to $16.152 and subject to adjustment as set forth in the ADI Certificate of Designations and described
below. The number of shares of Company common stock into which a share of ADI preferred stock will be convertible will be determined by
dividing the sum of the Accumulated Amount (as defined in the ADI Certificate of Designations) plus any interim accrued and unpaid dividends
on such share of ADI preferred stock in effect at the time of conversion, by the conversion price in effect at the time of conversion.
Following the expiration (or deemed expiration) of the Lock-Up Period in accordance with the Shareholders Agreement and ADI Certificate
of Designations, the Company may, at its option exercised by written notice to the holders of ADI preferred stock within 10 business days
following the relevant measurement period, require conversion of all (but not less than all) of the outstanding shares of ADI preferred
stock to Company common stock if at any time the Company common stock trading price exceeds 200% of the then-effective conversion price
for at least 20 out of 30 trailing trading days, subject to the satisfaction of the Common Stock Liquidity Conditions (as defined in the
ADI Certificate of Designations).
The conversion price is subject
to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar event.
Subject to certain limitations, following the expiration (or deemed expiration) of the Lock-Up Period in accordance with the
Shareholders Agreement and ADI Certificate of Designations, the Company has the option to redeem the outstanding shares
of ADI preferred stock, in whole or in part, for an aggregate redemption price equal to the two times (2X) the sum of the Accumulated
Amount (as defined in the ADI Certificate of Designations) plus any interim accrued and unpaid dividends (calculated at 1X instead of
2X) on such share of ADI preferred stock in effect at the time of redemption, subject to the satisfaction of the Common Stock Liquidity
Conditions (as defined in the ADI Certificate of Designations), provided that such redemption that is for less than all of the then outstanding
shares of ADI preferred stock may not result in the CD&R Group’s beneficial ownership of Company common stock (on an as-converted basis)
falling below three percent (3.00%) of the Company common stock then outstanding as of such redemption date. In the event of a Change
of Control (as defined in the ADI Certificate of Designations), the Company will have the option, pursuant to the terms of the ADI Certificate
of Designations, to purchase all (but not less than all) of the outstanding shares of ADI preferred stock at a price per share equal to
the 150% of the sum of the Accumulated Amount (as defined in the ADI Certificate of Designations) plus any interim accrued and unpaid
dividends (calculated at 100% instead of 150%) on such share of ADI preferred stock in effect at the time of such purchase. Any holder
of ADI preferred stock may, prior to any such redemption (including after the Company has given notice of redemption), elect to convert
any shares of ADI preferred stock elected to be redeemed by the Company.
Holders of the ADI preferred
stock generally will be entitled to vote with the holders of the shares of Company common stock on all matters submitted for a vote of
holders of shares of Company common stock (voting together with the holders of shares of Company common stock as one class) and will be
entitled to a number of votes equal to the number of votes to which shares of Company common stock issuable upon conversion of such shares
of ADI preferred stock would have been entitled (without any limitations based on the Company’s authorized but unissued shares of
Company common stock) if such shares of Company common stock had been outstanding at the time of the applicable vote and related record
date.
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Additionally, certain matters
will require the approval of the holders of a majority of the outstanding ADI preferred stock, voting as a separate class, including,
without limitation, (1) amendments or modifications to the Company’s certificate of incorporation, bylaws or the
ADI Certificate of Designations that would adversely affect the ADI preferred stock, (2) authorization, creation, increase in the
authorized amount or issuance of any class or series of senior or parity equity securities or any security convertible into, or exchangeable
or exercisable for, shares of senior or parity equity securities, (3) any increase or decrease in the authorized number of shares
of ADI preferred stock or the issuance of additional shares of ADI preferred stock, (4) amendments to the Company’s debt agreements
that would, among other things, adversely affect the Company’s ability to pay dividends in-kind on the ADI preferred stock, subject
to certain exceptions and (5) adoption of any plan of liquidation, dissolution or winding-up of the Company or filing of any voluntary
petition for bankruptcy, receivership or any similar proceeding.
The ADI Certificate of Designations
will provide that, upon closing of the Spin-Off, CD&R Holdings (i) may designate two Company directors, for so long as the CD&R
Group beneficially owns ADI common stock and ADI preferred stock equal to at least 10% of the outstanding shares of Company common stock,
determined on an as-converted basis and calculated in accordance with the ADI Certificate of Designations and (ii) may
designate one Company director, for so long as the CD&R Group beneficially owns ADI common stock and ADI preferred stock equal to
at least 5.00% but less than 10.00% of the outstanding shares of Company common stock, determined on an as-converted basis
and calculated in accordance with the ADI Certificate of Designations.
Pursuant to a Shareholders
Agreement (the “Shareholders Agreement”) to be entered into with the Preferred Stockholders and CD&R Channel Holdings
II, L.P. (“CD&R Holdings II”), for so long as the CD&R Group holds ADI preferred stock (or shares of Company common
stock issued upon conversion of the ADI preferred stock) representing at least 25.00% of the shares of ADI preferred stock initially issued
to the CD&R Group at closing of the Spin-Off, the CD&R Group will have customary preemptive rights to participate in future equity
and equity-linked issuances by the Company up to the extent necessary to maintain its pro rata ownership percentage in the Company, subject
to customary exceptions.
The
Shareholders Agreement will provide that, until the later to occur of (i) June 14, 2027
and (ii) 12 months after the date on which CD&R Holdings no longer has a designee on, or the right to designate a person to, the
Company’s board, subject to customary exceptions, the Preferred Stockholders will be subject to customary standstill restrictions
set forth in the Shareholders Agreement, including restrictions on acquiring additional
shares of Company common stock that would cause the Preferred Stockholders to beneficially own more than 19.9% of the then outstanding
Company common stock (assuming the conversion into Company common stock of all shares of ADI preferred stock then held by the Preferred
Stockholders).
Under the Shareholders Agreement,
subject to certain exceptions, during the Lock-Up Period, the Preferred Stockholders are restricted from transferring to a non-affiliate the
ADI preferred stock, any shares of Company common stock received upon conversion thereof or any shares of Company common stock owned by
them as of immediately following the consummation of the Spin-Off. Upon transfer of any ADI preferred stock to a person not affiliated
with the Preferred Stockholders, such ADI preferred stock must be converted into shares of Company common stock at the time of transfer.
The Preferred Stockholders are also restricted at any time from transferring the shares of ADI preferred stock initially issued to the
Preferred Stockholders, any shares of Company common stock received upon conversion thereof, any shares of Company common stock owned
by them as of immediately following the consummation of the Spin-Off or any shares of capital stock of the Company acquired following
the consummation of the Spin-Off to certain prohibited transferees, including persons who would beneficially own, following such transfer,
five percent (5.00%) or more of any class or series of equity securities of the Company, certain specified competitors and certain potential
activist investors, subject to specified exceptions.
Each of the Exchange Agreement
and Shareholders Agreement contains customary representations and warranties and covenants of each party related to breaches of its respective
representations and warranties and covenants.
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Registration Rights Agreement
In connection with the
Spin-Off and the ADI preferred stock exchange, upon consummation of the Spin-Off, the Company will enter into a registration rights
agreement with CD&R Holdings and CD&R Holdings II, pursuant to which the Company will agree to file a resale shelf
registration statement for the benefit of CD&R Holdings and CD&R Holdings II and their permitted transferees, and pursuant
to which CD&R Holdings and CD&R Holdings II may, subject to any restrictions on transfer imposed by the Shareholders
Agreement described above, request that the Company conduct an underwritten offering of, or register, shares of Company common stock
or Company common stock received upon conversion of ADI preferred stock held by CD&R Holdings and eligible for registration
thereunder (“registrable securities”). CD&R Holdings and CD&R Holdings II will also have customary piggyback
registration rights and may request that the Company include their registrable securities in certain future registration statements
or offerings of Company common stock by the Company. These registration rights will terminate when CD&R Holdings and CD&R
Holdings II no longer own any registrable securities.
Procedures for Approval of Related Person Transactions
The Board is expected to adopt
a written policy on related person transactions, under which we will have a written Policy Concerning Related Party Transactions (the
“Policy”) regarding the review and approval or ratification of transactions between the Company and related parties. The Policy
does not apply to the transactions described above. Each of the agreements between us and Resideo and its subsidiaries that have been
entered into prior to the distribution, and any transactions contemplated thereby, will be deemed to be approved and not subject to the
terms of such Policy.
The Policy applies to any
transaction in which ADI or its subsidiaries are a participant, the amount involved exceeds $120,000 and a related party has a direct
or indirect material interest. A related party means any director or executive officer of the Company, any nominee for director, any stockholder
known to the Company to be the beneficial owner of more than 5% of any class of the Company’s voting securities and any immediate
family member of any such persons. Under the Policy, reviews will be conducted by management to determine which transactions or relationships
should be referred to the Audit Committee for consideration. The Audit Committee will then review the material facts and circumstances
regarding a transaction and determine whether or not the transaction is fair and reasonable and consistent with the Policy. Under the
Policy, any related party transaction will be required to be submitted for prior approval where reasonably possible or, if not approved
in advance, submitted for ratification. The Policy will be in addition to the provisions addressing conflicts of interest in our Code
of Business Conduct and any similar policies regarding conflicts of interest adopted by the Board. Our directors, executive officers and
all other employees will be expected to comply with the Code of Business Conduct.
The definition of “related
person transactions” for purposes of the policy covers the transactions that are required to be disclosed under Item 404(a) of Regulation
S-K promulgated under the Exchange Act.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Before the distribution, all of the outstanding shares of our common
stock will be owned beneficially and of record by Resideo. The following tables set forth information with respect to the expected beneficial
ownership of our common stock by: (1) each person expected to beneficially own more than five percent of our common stock, (2) each expected
director and named executive officer and (3) all of our expected directors and executive officers as a group, in each case based upon
the distribution ratio. We based the share amounts on each person’s beneficial ownership of Resideo common stock as of June 15,
2026, assuming a distribution ratio of one share of our common stock for every two shares of common stock of Resideo. Solely for the purposes
of this table, we assumed that 75,751,181 shares of our common stock were issued and outstanding as of June 15, 2026, based on Resideo
common stock outstanding as of such date and the distribution ratio. The actual number of shares of our common stock to be outstanding
following the distribution will be determined on the record date for the distribution. The following table does not include (i) vested
but unexercised Resideo stock options, which will remain outstanding at Resideo following the completion of the Spin-Off and adjusted
pursuant to the terms of the Employee Matters Agreement, or (ii) shares of ADI common stock relating to Resideo restricted stock units
held by our expected directors or executive officers that are expected to vest within 60 days of June 15, 2026 and that would, following
completion of the Spin-Off, be converted into a number of ADI restricted stock units pursuant to the terms of the Employee Matters Agreement
and based, in part, upon the trading prices of Resideo common stock and ADI common stock prior to and following the Spin-Off. See “Executive
Compensation—Compensation Discussion and Analysis—Treatment of Outstanding Equity Awards Resulting from the Distribution.”
Except as indicated, the address of each director and executive officer shown in the table below is c/o ADI Global Distribution Inc.,
275 Broadhollow Rd Suite 400, Melville, New York, 11747.
Name and address of Beneficial Owner
Amount and
Nature of
Beneficial
Ownership
% of
Class
5% Beneficial Owner
CD&R Channel Holdings II, L.P.(1)
16,739,161
19.69 %
BlackRock, Inc.(2)
9,861,216
13.02 %
Dimensional Fund Advisors LP(3)
3,947,034
5.21 %
Vanguard Portfolio Management LLC(4)
3,789,177
5.00 %
Directors and Named Executive Officers
Non-Employee Directors
Michael Kaufmann
-
-
William Galvin(5)
27,860
*
Christine Gorjanc
-
-
Cynthia Hostetler(6)
3,071
*
Stephen O. LeClair
-
-
Nathan Sleeper
-
-
Brian Walker
-
-
Named Executive Officers
Robert Aarnes(7)
113,647
*
Michael Carlet(8)
33,820
*
Jeannine Lane(9)
80,891
*
Alicia Copeland(10)
3,083
*
Marco Cardazzi(11)
14,088
*
All Directors and Executive Officers as a Group (14 persons)
283,250
*
*
Represents less than 1%.
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(1)
The amount shown and the following information is
derived from a Schedule 13D/A filed November 13, 2025 by CD&R Holdings, CD&R Holdings II, CD&R Investment Associates XII,
Ltd. (“CD&R Investment Associates”) and CD&R Associates XII, L.P. (“CD&R Associates”), which sets
forth their beneficial ownership as of November 13, 2025. According to the Schedule 13D/A, CD&R Holdings II is the beneficial owner
of 33,478,322 shares of Resideo common stock (with sole voting power with respect to 0 shares, shared voting power with respect to 33,478,322
shares, sole dispositive power with respect to 0 shares and shared dispositive power with respect to 33,478,322 shares). The shares reported
represent (i) 18,517,830 shares of Resideo common stock beneficially owned by CD&R Holdings on an as-converted basis (based on an
initial conversion price of Resideo preferred stock of $26.92), which are issuable upon conversion, at the option of the holder, of 498,500
shares of Resideo preferred stock that are held directly by CD&R Holdings, and (ii) 14,960,492 shares of Resideo common stock held
directly by CD&R Holdings II. CD&R Holdings II and CD&R Investment Associates may be deemed to beneficially own the shares
held by CD&R Holdings because CD&R Holdings is wholly owned by CD&R Holdings II and CD&R Investment Associates is the
general partner of CD&R Holdings II, but each of CD&R Holdings II and CD&R Investment Associates expressly disclaims such
beneficial ownership. CD&R Investment Associates may be deemed to beneficially own the 14,960,492 shares of Resideo common stock
that are held directly by CD&R Holdings II because CD&R Investment Associates is the general partner of CD&R Holdings II,
but CD&R Investment Associates expressly disclaims such beneficial ownership. Investment and voting decisions with respect to the
securities reported are made by majority vote of an investment committee of limited partners of CD&R Associates that consists of
more than ten individuals, each of whom is also an investment professional of CD&R (the “Investment Committee”). All
members of the Investment Committee expressly disclaim beneficial ownership of the shares held by CD&R Holdings II. CD&R Investment
Associates is managed by a two-person board of directors. Donald J. Gogel and Nathan K. Sleeper, as the directors of CD&R Investment
Associates, may be deemed to share beneficial ownership of the reported shares, and they expressly disclaim such beneficial ownership.
Based on the shares reported and the distribution ratio, CD&R Holdings II will hold 7,480,246 shares ADI common stock directly following
the Spin-Off, and further taking into account an initial conversion price of ADI preferred stock of $16.152, CD&R Holdings will beneficially
own on an as-converted basis 9,258,915 shares of ADI common stock that are issuable upon conversion of 149,550 shares of ADI preferred
stock to be held directly by CD&R Holdings following the Spin-Off. Based on the foregoing, CD&R Holdings will beneficially own
9,258,915 shares of ADI common stock, and CD&R Holdings II, CD&R Investment Associates and CD&R Associates will beneficially
own 16,739,161 shares of ADI common stock following the Spin-Off. The business address of CD&R Holdings, CD&R Holdings II, CD&R
Investment Associates and CD&R Associates is c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House, South Church Street,
George Town, Grand Cayman, KY1-1104, Cayman Islands, British West Indies.
(2)
The amount shown and the following information is derived from a Schedule
13G/A filed with the SEC on October 17, 2025, according to which BlackRock, Inc. is the beneficial owner of 19,722,433 shares of Resideo
common stock (with sole voting power with respect to 19,389,943 shares, shared voting power with respect to 0 shares, sole dispositive
power with respect to 19,722,433 shares and shared dispositive power with respect to 0 shares). Based on the shares reported and the distribution
ratio, BlackRock, Inc. will be the beneficial owner of 9,861,216 shares of ADI common stock following the Spin-Off. The business address
of BlackRock, Inc. is 50 Hudson Yards, New York, NY 10001.
(3)
The amount shown and the following information is derived from a Schedule
13G filed with the SEC on October 31, 2024, according to which Dimensional Fund Advisors LP, in its capacity as investment adviser to
certain managed accounts and investment fund vehicles on behalf of investment advisory clients, is the beneficial owner of 7,894,069 shares
of Resideo common stock (with sole voting power with respect to 7,640,645 shares, shared voting power with respect to 0 shares, sole dispositive
power with respect to 7,894,069 shares and shared dispositive power with respect to 0 shares). Based on the shares reported and the distribution
ratio, Dimensional Fund Advisors LP will be the beneficial owner of 3,947,034 shares of ADI common stock following the Spin-Off. The business
address of Dimensional Fund Advisors LP is 6300 Bee Cave Road, Building One, Austin, TX 78746.
(4)
The amount shown and the following information is derived from a Schedule
13G filed with the SEC on April 29, 2026, according to which Vanguard Portfolio Management LLC, along with certain affiliates, is the
beneficial owner of 7,578,355 shares of Resideo common stock (with sole voting power with respect to 57,770 shares, shared voting power
with respect to 0 shares, sole dispositive power with respect to 7,578,355 shares and shared dispositive power with respect to 0 shares).
Based on the shares reported and the distribution ratio, Vanguard Portfolio Management LLC will be the beneficial owner of 3,789,177 shares
of ADI common stock following the Spin-Off. The business address of Vanguard Portfolio Management LLC is 100 Vanguard Blvd., Malvern,
PA 19355.
(5)
Based on 450 shares of ADI preferred stock to be held by a trust
of which Mr. Galvin is a trustee and an initial conversion price of ADI preferred stock of $16.152.
(6)
Based on the distribution ratio, consists of 3,071 shares
of ADI common stock to be held by Ms. Hostetler.
(7)
Based on the distribution ratio, consists of 113,647 shares of
ADI common stock to be held by Mr. Aarnes.
(8)
Based on the distribution ratio, consists of 33,820 shares
of ADI common stock to be held by Mr. Carlet. Does not include shares of ADI common stock relating to 3,523 Resideo restricted stock units
held by Mr. Carlet that are expected to vest within 60 days of June 15, 2026 and that would, following completion of the Spin-Off, be
converted into a number of ADI restricted stock units pursuant to the terms of the Employee Matters Agreement and based, in part, upon
the trading prices of Resideo common stock and ADI common stock prior to and following the Spin-Off. See “Executive Compensation—Compensation
Discussion and Analysis—Treatment of Outstanding Equity Awards Resulting from the Distribution.”
(9)
Based on the distribution ratio, consists of 80,891 shares of
ADI common stock to be held by Ms. Lane.
(10)
Based on the distribution ratio, consists of 3,083 shares
of ADI common stock to be issued in settlement of Resideo restricted stock units held by Ms. Copeland that will vest within 60 days of June
15, 2026.
(11)
Based on the distribution ratio, consists of (i) 10,409 and 1,065 shares
of ADI common stock to be held by Mr. Cardazzi and his spouse, respectively and (ii) 2,483 and 131 shares of ADI common stock
to be issued in settlement of Resideo restricted stock units held by Mr. Cardazzi and his spouse, respectively, that will vest within
60 days of June 15, 2026.
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THE SEPARATION AND DISTRIBUTION
Background
On July 30, 2025, Resideo
announced its intention to separate its ADI Global Distribution business from the remainder of its businesses. On July 1, 2026, the Resideo
Board approved the distribution of 100% of the issued and outstanding shares of common stock of ADI, a newly-formed company that will
hold the ADI Global Distribution business.
ADI is currently a wholly-owned
subsidiary of Resideo, and in connection with the distribution, we expect that Resideo will complete the Reorganization Transactions,
as a result of which ADI will become the parent company of the Resideo operations comprising, and the entities that will conduct, the
ADI Global Distribution business. The Resideo Board has approved the distribution of 100% of the issued and outstanding shares of our
common stock on the basis of one share of our common stock for every two shares of Resideo common stock held as of the close of business
on the record date of July 20, 2026.
At 5:00 p.m. Eastern Time, on August 3, 2026, the distribution date,
each Resideo common stockholder will receive one share of our common stock for every two shares of Resideo common stock held at the close
of business on the record date for the distribution, as described below. Resideo common stockholders will receive cash in lieu of any
fractional shares of our common stock that they would have received after application of this ratio. You will not be required to make
any payment, surrender or exchange your Resideo common stock or take any other action to receive your shares of our common stock in the
distribution. The distribution of our common stock as described in this information statement is subject to the satisfaction or waiver
of certain conditions. For a more detailed description of these conditions, see this section under “—Conditions to the Distribution.”
Reasons for the Separation
In 2025, the Resideo Board
conducted a review of Resideo’s business portfolio, with the goal of enhancing stockholder value. Recognizing differences in operational
and strategic focus across its businesses, the Resideo Board evaluated a range of alternatives for separating the ADI Global Distribution
business, including a spin-off, a potential sale transaction and other separation structures, as well as the option of maintaining the
existing portfolio and structure.
In conjunction with the consummation
of the transaction that resulted in the termination of the Indemnification Agreement, the Resideo Board ultimately concluded that the
separation of Resideo’s ADI Global Distribution business from the remainder of its businesses would be in the best interests of
Resideo and its stockholders and approved the pursuit of the separation. A wide variety of factors were considered by the board of directors
in evaluating the separation, including the following potential benefits:
●
Improved Investor Alignment. The separation is intended to allow investors to separately value each company based on its distinctive investment identity. Our business differs from Resideo’s other businesses in important respects. These differences include each respective business’ core competencies, business model, strategic focus and capital and R&D expenditure needs. Post-separation, investors will be able to evaluate the merits, performance and prospects of each company on a standalone basis, which we believe will lead to a better appreciation of these characteristics, a more efficient valuation of each respective business and, in turn, more efficient access to the capital markets.
●
Enhanced Strategic and Management Focus, with Improved Operational Agility. The separation is intended to allow each company to more effectively pursue its distinct operating priorities and strategies with greater focus and flexibility. Dedicated boards and management teams will concentrate on each of the companies’ own unique opportunities for long-term growth and profitability, while maintaining a commitment to our culture of continuous improvement.
●
Tailored Capital Structures and Capital Allocation Strategies. The separation is intended to allow each business to establish its own optimal capital structure and manage its capital allocation strategy with greater agility and focus. Each company will concentrate financial resources solely on its own operations without having to compete with each other for investment capital. This will enable more efficient, company-specific capital allocation based on profitability, cash flow and growth opportunities, driving innovation and improving growth and returns.
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●
Independent Equity Structures and Greater Access to Unique Strategic Opportunities. The separation is intended to create independent equity structures for Resideo and ADI that are aligned with each company’s respective industry and provide each with an enhanced ability to capitalize on unique growth opportunities. In addition, each company will be able to directly access the capital markets and will have more flexibility to pursue growth through selective M&A opportunities that are more closely aligned with each company’s core strategy.
●
Enhanced Talent Management, Recruitment and Retention and Alignment of Management Incentives and Performance. The separation is intended to permit each company to more effectively attract, retain and motivate talent, and to offer stock-based compensation that is more closely aligned to its business model and growth strategy.
The Resideo Board also considered
the following potentially negative factors in evaluating the separation:
●
Loss of Joint Purchasing Power and Increased Costs. As a current part of Resideo, the ADI Global Distribution business
benefits from Resideo’s size and purchasing power in procuring certain goods, services and technologies. After the separation, as
a separate, independent entity, ADI may be unable to obtain these goods, services and technologies at prices or on terms as favorable
as those Resideo obtained prior to the separation. We may also incur costs for certain functions previously performed by Resideo, such
as accounting, tax, legal, human resources and other general administrative functions, that are higher than the amounts reflected in our
historical audited combined financial statements and unaudited interim condensed combined financial statements, which could cause our
profitability to decrease.
●
Disruptions to the Business as a Result of the Separation. The actions required to separate our and Resideo’s respective businesses could disrupt our and Resideo’s operations prior to and after the separation.
●
Increased Significance of Certain Costs and Liabilities. Certain costs and liabilities that were otherwise less significant to Resideo as a whole will be more significant for us and Resideo after the separation as standalone companies.
●
One-time Costs of the Separation. We (and prior to the separation, Resideo) will incur costs in connection with the transition to being a standalone public company that may include accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring or reassigning our personnel and costs to separate information systems.
●
Risk of Failure to Realize Anticipated Benefits of the Separation. We may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others, that: (i) the separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our businesses; and (ii) following the separation, we may be more susceptible to market fluctuations, and other events may be more disadvantageous for us than if we were still part of Resideo, because our businesses will be less diversified than Resideo’s businesses prior to the separation.
●
Limitations on Strategic Transactions. Under the terms of the tax matters agreement that we will enter into with Resideo, for a period of two (2) years following the date of the distribution, we will be restricted from taking certain actions that could cause the distribution or certain related transactions (including certain transactions undertaken as part of the Reorganization Transactions) to fail to qualify as tax-free for U.S. federal income tax purposes or other applicable law. These restrictions may limit our ability to pursue certain strategic transactions or engage in other transactions that might increase the value of our businesses.
While all of the bullets above
are considered to be potentially negative factors to us, only the second, third and fourth bullets above are considered to be potentially
negative factors to Resideo.
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The Resideo Board concluded
that the potential benefits of the separation outweighed these factors.
Formation of a New Company Prior to the Distribution
We were incorporated in Delaware
on December 10, 2025 for the purpose of holding Resideo’s ADI Global Distribution business. As part of the plan to separate these
businesses from the remainder of its businesses, in connection with the Reorganization Transactions, Resideo plans to transfer the equity
interests of certain entities that operate the ADI Global Distribution business and the assets and liabilities of the ADI Global Distribution
business to us, as set forth in the separation agreement.
Reorganization Transactions
As part of the separation,
and prior to the distribution, Resideo and its subsidiaries expect to complete an internal reorganization in order to transfer to ADI
the ADI Global Distribution business that it will hold following the separation (the “Reorganization Transactions”). Among
other things, the Reorganization Transactions are expected to result in ADI owning, directly or indirectly, the operations comprising,
and the entities that conduct, the ADI Global Distribution business.
The Reorganization Transactions
are expected to include various restructuring transactions pursuant to which (i) the operations, assets and liabilities of Resideo and
its subsidiaries used to conduct the ADI Global Distribution business will be separated from the operations, assets and liabilities of
Resideo and its subsidiaries used to conduct Resideo’s other businesses and (ii) the ADI Global Distribution business’ operations,
assets and liabilities will be contributed, transferred or otherwise allocated to ADI or one of its direct or indirect subsidiaries. These
restructuring transactions may take the form of asset transfers, mergers, demergers, dividends, contributions and similar transactions,
and may involve the formation of new subsidiaries in U.S. and non-U.S. jurisdictions to own and operate the ADI Global Distribution business
in such jurisdictions.
As part of the Reorganization
Transactions, Resideo will contribute to ADI certain liabilities and certain assets, including equity interests in entities that are expected
to conduct the ADI Global Distribution business.
Following the completion of
the Reorganization Transactions and immediately prior to the distribution, ADI will be the parent company of the entities that are expected
to conduct the ADI Global Distribution business and Resideo will remain the parent company of the entities that currently conduct all
of Resideo’s operations except the ADI Global Distribution business.
When and How You Will Receive the Distribution
With the assistance of Broadridge, Resideo expects to distribute on
a pro rata basis our common stock by 5:00 p.m. Eastern Time, on August 3, 2026, the distribution date, to all holders of outstanding shares
of Resideo common stock as of the close of business on July 20, 2026, the record date for the distribution, with such distribution deemed
effective as of 12:01 a.m. Eastern Time on August 3, 2026. Broadridge, which currently serves as the transfer agent and registrar for
shares of Resideo common stock, will serve as the settlement and distribution agent in connection with the distribution and the transfer
agent and registrar for our common stock.
If you own shares of Resideo
common stock as of the close of business on the record date for the distribution, our common stock that you are entitled to receive in
the distribution will be issued electronically, as of the distribution date, to you in direct registration form or to your bank or brokerage
firm on your behalf. If you are a registered holder, Broadridge will then mail you a direct registration account statement that reflects
your shares of our common stock. If you hold your shares through a bank or brokerage firm, your bank or brokerage firm will credit your
account for the shares. Direct registration form refers to a method of recording share ownership when no physical share certificates are
issued to stockholders, as is the case in the distribution. If you sell shares of Resideo common stock in the “regular-way”
market up to and including the distribution date, you will be selling your right to receive shares of our common stock in the distribution.
Commencing on or shortly after
the distribution date, if you hold physical share certificates that represent your shares of Resideo common stock and you are the registered
holder of the shares represented by those certificates, the distribution agent will mail to you an account statement that indicates the
number of shares of our common stock that have been registered in book-entry form in your name.
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Most Resideo common stockholders
hold their shares of common stock through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the
shares in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your shares
of Resideo common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for the shares of our common
stock that you are entitled to receive in the distribution. If you have any questions concerning the mechanics of having shares held in
“street name,” please contact your bank or brokerage firm.
Holders of Resideo preferred stock will not be entitled by virtue of
their Resideo preferred stock to receive shares of our common stock in the Spin-Off and instead will exchange a portion of the Resideo
preferred stock they currently hold for shares of ADI preferred stock. In connection with the Spin-Off, we expect certain terms of the
Resideo preferred stock to be amended to be consistent with the terms of the ADI preferred stock described herein. Specifically, we expect
the lock-up period applicable to the Resideo preferred stock to be extended to match the Lock-Up Period applicable to the ADI preferred
stock, and that Resideo’s right, in certain circumstances, to convert or redeem the Resideo preferred stock will not be exercisable
until after the expiration (or deemed expiration) of the Lock-Up Period in accordance with the Shareholders Agreement and ADI Certificate
of Designations. As a result, following the Spin-Off, shares of ADI preferred stock and Resideo preferred stock are expected to have substantially
similar rights, preferences and privileges and qualifications, limitations and restrictions. The amount of Resideo preferred stock exchanged
for ADI preferred stock and the conversion prices of the Resideo preferred stock and ADI preferred stock will be based on the relative
equity values of Resideo and ADI that are expected immediately following the Spin-Off as determined by the Resideo Board, in consultation
with the holders of Resideo preferred stock, in connection with the Resideo Board approving the Spin-Off. As a result, immediately
following the Spin-Off, 350,000 shares of Resideo preferred stock will remain issued and outstanding, 150,000 shares of Resideo preferred
stock will be cancelled and 150,000 shares of ADI preferred stock will be issued and outstanding. All accrued and unpaid dividends on
Resideo preferred stock will be paid in cash immediately prior to the ADI preferred stock exchange and the aggregate liquidation preference
of the preferred stock of Resideo and ADI immediately after the Spin-Off will equal the total liquidation preference (defined as the Accumulated
Amount in the Resideo Certificate of Designations) of the Resideo preferred stock immediately prior to the Spin-Off. See “Description
of Capital Stock—Preferred Stock” and “Certain Relationships and Related Person Transactions—Exchange Agreement,
Shareholders Agreement and ADI Preferred Stock Exchange” for more information on ADI preferred stock.
Immediately following the Spin-Off, the CD&R Group will beneficially
own shares of our common stock and ADI preferred stock, which, taken together on an as-converted basis, represent approximately 19.69%
of our total voting power. As a result, the CD&R Group may have the indirect ability to influence our policies and operations, including
through its ability to designate up to two directors to our board of directors, and its interests as a preferred equity holder may diverge
from, or even conflict with, the interests of the other holders of our common stock. See “Risk Factors—The CD&R Group
will hold a significant equity interest in our business and may exercise influence over us, including through its ability to designate
up to two directors to our Board, and its interests as a preferred equity holder may diverge from, or even conflict with, the interests
of the other holders of our common stock.”
Transferability of Shares You Receive
Shares of our common stock
distributed to holders in connection with the distribution will be transferable without registration under the Securities Act, except
for shares received by persons who may be deemed to be our affiliates. Persons who may be deemed to be our affiliates after the distribution
generally include individuals or entities that control, are controlled by or are under common control with the Company which may include
certain Company executive officers, directors or principal stockholders. Securities held by our affiliates will be subject to resale restrictions
under the Securities Act. Our affiliates will be permitted to sell shares of our common stock only pursuant to an effective registration
statement or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the
Securities Act.
Number of Shares of Our Common Stock You Will Receive
For every two shares of Resideo common stock that you own at the close
of business on July 20, 2026, the record date for the distribution, you will receive one share of our common stock on the distribution
date.
Resideo will not distribute
any fractional shares of our common stock to its stockholders. Instead, Broadridge will aggregate fractional shares into whole shares,
sell the whole shares in the open market at prevailing market prices and distribute the aggregate cash proceeds (net of discounts and
commissions) of the sales pro rata (based on the fractional share such holder would otherwise be entitled to receive) to each holder who
otherwise would have been entitled to receive a fractional share in the distribution. The transfer agent, in its sole discretion, without
any influence by Resideo or us, will determine when, how, through which broker-dealer and at what price to sell the whole shares. Any
broker-dealer used by the transfer agent will not be an affiliate of either Resideo or us. Neither we nor Resideo will be able to guarantee
any minimum sale price in connection with the sale of these shares. Recipients of cash in lieu of fractional shares will not be entitled
to any interest on the amounts of payment made in lieu of such fractional shares.
We estimate that it will take
approximately two weeks from the distribution date for the distribution agent to complete the distributions of the aggregate net cash
proceeds. If you hold your shares of Resideo common stock through a bank or brokerage firm, your bank or brokerage firm will receive,
on your behalf, your pro rata share of the aggregate net cash proceeds of the sales and will electronically credit your account for your
share of such proceeds.
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Incurrence of Indebtedness
In connection with the
Spin-Off, we expect to incur indebtedness in an aggregate principal amount of approximately $1,000 million, which is expected to consist
of a term credit facility and a series of debt securities. The expected terms of such indebtedness are summarized in the section entitled
“Description of Material Indebtedness” and the forms of the credit agreement and indenture we expect to be in place at closing
of the Spin-Off are filed as exhibits to the registration statement of which this information statement forms a part. We intend to make
a one-time cash dividend of approximately $900 million of the net proceeds of the Financing as partial consideration for the contribution
of assets and liabilities to us by Resideo. We will also use the net proceeds to pay related fees and expenses, with any remainder to
be retained for general corporate purposes. We expect that the credit agreement governing the term credit facility described above will
also contain a revolving credit facility with commitments for borrowings of up to $500 million, which we expect will be undrawn upon
completion of the Spin-Off. We expect that Resideo will use these cash proceeds to repay a portion of its outstanding indebtedness and
related fees and expenses and, to the extent any proceeds remain after giving effect to such payments, for general corporate purposes.
See “Description of Material Indebtedness,” “Capitalization,” “Unaudited Pro Forma Combined Financial Statements,”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity.”
The separation agreement will contain cash adjustment provisions pursuant to which, following completion of the cash payment described
above and the Spin-Off, either we or Resideo will make a separate cash payment to the other if our aggregate cash balance at the time
of the Spin-Off is determined to be greater or less than the reference cash balance of $150 million. See “The Separation Agreement—Cash
Adjustments.” Following application of the provisions described above and assuming the Spin-Off and Financing had been completed
on April 4, 2026, we estimate that we would have made a one-time cash dividend to Resideo of $900 million and a one-time separate cash
payment to Resideo of approximately $67 million and retained $150 million of cash and cash equivalents on our balance sheet. See “Unaudited
Pro Forma Combined Financial Statements.” The actual amount of the separate cash payment to Resideo (or the amount of the separate
cash payment that Resideo may be required to make to us) is subject to change based on our actual cash and cash equivalents at the time
of the Spin-Off.
Results of the Distribution
After our separation from Resideo, we will be an independent, publicly
traded company. The actual number of shares to be distributed will be determined at the close of business on July 20, 2026, the record
date for the distribution. The distribution will not affect the number of outstanding shares of Resideo common stock or any rights of
Resideo common stockholders. Resideo will not distribute any fractional shares of our common stock.
We will enter into a separation
agreement and other related agreements with Resideo to effect the separation and provide a framework for our relationship with Resideo
after the separation. These agreements provide for the allocation between Resideo and us of the assets, employees, services, liabilities
and obligations (including investments, property and employee benefits and tax-related assets and liabilities) of Resideo and its subsidiaries
attributable to periods prior to, at and after our separation from Resideo and will govern certain relationships between Resideo and us
after the separation. For a more detailed description of these agreements, please refer to the section entitled “Certain Relationships
and Related Person Transactions.”
Market for Our Common Stock
There is currently no public
trading market for our common stock. We have applied to list our common stock on the NYSE under the symbol “ADIG.” We have
not and will not set the initial price of our common stock. The initial price will be established by the public markets.
We cannot predict the price at which our common stock will trade after
the distribution. In fact, the combined trading prices of one share of Resideo common stock and one-half of a share of our common stock
after the distribution (representing the number of shares of our common stock to be received per one share of Resideo common stock in
the distribution) may not equal the “regular-way” trading price of a share of Resideo common stock immediately prior to the
distribution. The price at which our common stock trades may fluctuate significantly, particularly until an orderly public market develops.
Trading prices for our common stock will be determined in the public markets and may be influenced by many factors. Please refer to the
section entitled “Risk Factors—Risks Relating to Our Common Stock and the Securities Market.”
Trading Between the Record Date and the Distribution Date
We expect a “when-issued”
market in our common stock to develop as early as three trading days prior to the distribution date and continue up to and including the
distribution date. “When-issued” trading refers to a sale or purchase made conditionally on or before the distribution date
because the securities of the spun-off entity have not yet been distributed. If you own shares of Resideo common stock at the
close of business on the record date, you will be entitled to receive shares of our common stock in the Spin-Off. You may trade
this entitlement to receive shares of our common stock, without the shares of Resideo common stock you own, on the “when-issued”
market. We expect “when-issued” trades of our common stock to settle within two trading days after the distribution date.
On the first trading day following the distribution date, we expect that “when-issued” trading of our common stock will end
and “regular-way” trading will begin.
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We also anticipate that, as
early as three trading days prior to the distribution date and continuing up to and including the distribution date, there will be two
markets in Resideo common stock: a “regular-way” market and an “ex-distribution” market. Shares
of Resideo common stock that trade on the regular-way market will trade with an entitlement to receive shares of our common
stock in the Spin-Off. Shares that trade on the ex-distribution market will trade without an entitlement to receive
shares of our common stock in the Spin-Off. Therefore, if you sell shares of Resideo common stock in the regular-way market
up to and including the distribution date, you will be selling your right to receive shares of our common stock in the Spin-Off. However,
if you own shares of Resideo common stock at the close of business on the record date and sell shares of Resideo common stock on the ex-distribution market
up to and including the distribution date, you will still receive the shares of our common stock that you would otherwise be entitled
to receive in the Spin-Off.
If “when-issued”
trading occurs, the listing for our common stock is expected to be under a trading symbol different from our regular-way trading
symbol. We will announce our “when-issued” trading symbol when and if it becomes available. If the Spin-Off does
not occur, all “when-issued” trading will be null and void.
Conditions to the Distribution
The distribution will be effective at 12:01 a.m. Eastern Time, on August
3, 2026, the distribution date, provided that the following conditions will have been satisfied (or waived by Resideo in its sole and
absolute discretion), including:
●
the Resideo Board shall have approved the Spin-Off and not withdrawn such approval, and shall have declared the dividend of our common stock to Resideo common stockholders;
●
the transfer of assets and liabilities to us in accordance with the separation agreement will have been completed, other than any assets and liabilities intended to transfer after the distribution pursuant to the separation agreement;
●
the receipt by Resideo and continuing validity of a private letter ruling from the IRS and/or an opinion of its outside tax advisors, in each case, satisfactory to the Resideo Board, regarding the qualification of the distribution, together with certain related transactions, as a “reorganization” within the meaning of Sections 368(a)(1)(D) and 355 of the Code, and which ruling and/or opinion, as applicable, shall not have been withdrawn, rescinded or modified in any material respect;
●
the SEC will have declared effective the registration statement on Form 10 of which this information statement forms a part, no stop order suspending the effectiveness of the registration statement will be in effect, no proceedings for such purpose will be pending before or threatened by the SEC and this information statement will have been made available to Resideo common stockholders;
●
all registrations, consents and filings required under the securities or blue sky laws of states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the separation will have been received or made;
●
the agreements relating to the separation will have been duly executed and delivered by the parties;
●
no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, the distribution or any of the related transactions will be in effect;
●
the shares of our common stock to be distributed will have been accepted for listing on the NYSE, subject to official notice of distribution;
●
the transactions contemplated by the Exchange Agreement will have been consummated;
● an independent appraisal firm shall have delivered a solvency
opinion relating to Resideo and ADI;
●
the Financing described under the section entitled “Description of Material Indebtedness” will have been completed; and
●
no other event or development will have occurred or exist that, in the judgment of Resideo’s board of directors, in its sole and absolute discretion, makes it inadvisable to effect the separation, the distribution or the other related transactions.
The satisfaction of the foregoing
conditions does not create any obligations on Resideo’s part to effect the separation, and the Resideo Board has reserved the right,
in its sole and absolute discretion, to abandon, modify or change the terms of the separation, including by accelerating or delaying the
timing of the consummation of all or part of the separation, at any time prior to the distribution date. To the extent that the Resideo
Board determines that any modifications by Resideo materially change the material terms of the distribution, Resideo will notify Resideo
common stockholders in a manner reasonably calculated to inform them about the modification as may be required by law.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion
of certain material U.S. federal income tax consequences of the distribution to “U.S. holders” (as defined below) of Resideo
common stock. This discussion is based on the Code, U.S. Treasury Regulations promulgated thereunder, rulings and other administrative
pronouncements issued by the IRS and judicial decisions, in each case as in effect as of the date of this information statement, and all
of which are subject to differing interpretations and change at any time, possibly with retroactive effect. Any such change could affect
the accuracy of the statements and conclusions set forth in this information statement. No assurance can be given that the IRS would not
assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.
This discussion applies only
to U.S. holders of shares of Resideo common stock who hold such shares as a capital asset within the meaning of Section 1221 of the Code
(generally, property held for investment). This discussion is based upon the assumption that the separation and the distribution, together
with certain related transactions, will be consummated in accordance with the separation agreement and the other agreements related to
the separation and as described in this information statement.
This discussion is for general
information purposes only and does not constitute tax advice or an opinion of counsel. This discussion does not address all aspects of
U.S. federal income taxation that may be relevant to particular holders of Resideo common stock in light of their particular circumstances
nor does it address tax considerations applicable to holders that are or may be subject to special treatment under the U.S. federal income
tax laws, including, without limitation:
●
broker-dealers;
●
tax-exempt organizations;
●
banks or other financial institutions;
●
mutual funds, regulated investment companies or insurance companies;
●
certain former U.S. citizens or long-term residents of the United States;
●
partnerships (or entities or arrangements treated as partnerships for U.S. federal income tax purposes) or other pass-through entities or the owners thereof;
●
traders in securities who elect a mark-to-market method of accounting;
●
holders who acquired Resideo common stock upon the exercise of employee stock options or otherwise as compensation;
●
holders who hold their Resideo common stock as part of a “hedge,” “straddle,” “conversion,” “synthetic security,” “integrated investment,” “constructive sale transaction” or other integrated or risk reduction transaction;
●
holders required to accelerate the recognition of any item of gross income as a result of such income being recognized on an applicable financial statement; or
●
holders whose functional currency is not the U.S. Dollar.
This discussion also does
not address any tax consequences arising under any alternative minimum tax, the unearned Medicare contribution tax pursuant to the Health
Care and Education Reconciliation Act of 2010 or the Foreign Account Tax Compliance Act (including the Treasury Regulations promulgated
thereunder and intergovernmental agreements entered into pursuant thereto or in connection therewith). In addition, no information is
provided with respect to any tax considerations under state, local or non-U.S. laws or U.S. federal laws other than those pertaining to
the U.S. federal income tax. This discussion does not address the tax consequences to any person who actually or constructively owns five
percent or more of the outstanding shares of Resideo common stock.
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If a partnership, or any entity
or arrangement treated as a partnership for U.S. federal income tax purposes, holds Resideo common stock, the tax treatment of a partner
in such partnership will generally depend on the status of the partner and the activities of the partnership. Holders of Resideo common
stock that are partnerships and partners in such partnerships should consult their own tax advisors as to the consequences of the distribution.
For purposes of this discussion,
a “U.S. holder” is a beneficial owner of Resideo common stock that is, for U.S. federal income tax purposes:
●
an individual who is a citizen or a resident of the United States;
●
a corporation (or any other entity or arrangement treated as a corporation) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
●
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
●
a trust, if (1) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of the substantial decisions of such trust or (2) it has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
THE FOLLOWING IS A GENERAL
DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW AND IS FOR GENERAL INFORMATION PURPOSES
ONLY. ALL HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM, INCLUDING THE
APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS.
General
It is a condition to the distribution
that Resideo receive a private letter ruling from the IRS and/or an opinion of its outside tax counsel, in each case, satisfactory to
the Resideo Board, regarding the qualification of the distribution, together with certain related transactions, as a “reorganization”
within the meaning of Sections 368(a)(1)(D) and 355 of the Code, and which ruling and/or opinion, as applicable, shall not have been withdrawn,
rescinded or modified in any material respect. The receipt and continued effectiveness of the IRS private letter ruling and/or the opinion
of outside tax counsel, as applicable, is a separate condition to the distribution, which may be waived by the Resideo Board in its sole
and absolute discretion. The IRS private letter ruling and/or the opinion of Resideo’s outside tax counsel will be based upon and
rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of Resideo
and ADI, including facts, assumptions, representations, statements and undertakings relating to the past and future conduct of the companies’
respective businesses and other matters. If any of these facts, assumptions, representations and statements are or become inaccurate or
incomplete, or if any such undertaking is not complied with, Resideo may not be able to rely on the IRS private letter ruling and/or the
opinion of Resideo’s outside tax counsel, and the conclusions reached therein could be jeopardized.
Notwithstanding
Resideo’s receipt of the IRS private letter ruling and/or the opinion of its outside tax counsel, the IRS could determine on audit
that the distribution or any related transaction is taxable for U.S. federal income tax purposes if it determines that any of the facts,
assumptions, representations, statements or undertakings upon which the ruling or the opinion were based are not correct or have been
violated, or if it disagrees with any of the conclusions in the opinion, or for other reasons, including as a result of certain changes
in the stock ownership of Resideo or ADI after the distribution or other post-distribution actions or transactions. Accordingly, notwithstanding
Resideo’s receipt of the IRS private letter ruling and/or the opinion of its outside tax counsel, there can be no assurance that
the IRS will not assert that the distribution or any of the related transactions does not qualify for tax-free treatment for U.S. federal
income tax purposes, or that a court would not sustain such a challenge. In the event the IRS were to prevail in any such challenge or
if the distribution or any related transaction is otherwise determined to be taxable for U.S. federal income tax purposes, Resideo, ADI
and/or Resideo’s common stockholders could incur significant U.S. federal income tax liabilities. Please refer to “—Material
U.S. Federal Income Tax Consequences if the Distribution, Together with Certain Related Transactions, Qualifies as a Transaction That
is Generally Tax-Free under Sections 355 and 368(a)(1)(D) of the Code” below.
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Material U.S. Federal Income Tax Consequences
if the Distribution, Together with Certain Related Transactions, Qualifies as a Transaction That is Generally Tax-Free under Sections
355 and 368(a)(1)(D) of the Code.
If the distribution, together
with certain related transactions, qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections
355 and 368(a)(1)(D) of the Code, the U.S. federal income tax consequences of the distribution generally are as follows:
●
no gain or loss will be recognized by (and no amount will be includible in the income of) Resideo as a result of the distribution, other than gain or income arising in connection with certain internal restructurings undertaken in connection with the separation and distribution or with respect to any “excess loss account” or “intercompany transaction” required to be taken into account by Resideo under Treasury Regulations relating to consolidated federal income tax returns;
●
no gain or loss will be recognized by (and no amount will be included in the income of) U.S. holders of Resideo common stock upon the receipt of ADI common stock in the distribution, except with respect to any cash received in lieu of fractional shares (if any) of ADI common stock (as described below);
●
the aggregate tax basis of the Resideo common stock and the ADI common stock received in the distribution (including any fractional share interest in ADI common stock for which cash is received) in the hands of each U.S. holder of Resideo common stock immediately after the distribution will equal the aggregate basis of Resideo common stock held by such U.S. holder immediately before the distribution, allocated between the Resideo common stock and the ADI common stock (including any fractional share interest in ADI common stock for which cash is received) in proportion to the relative fair market value of each on the date of the distribution; and
●
the holding period of the ADI common stock received by each U.S. holder of Resideo common stock in the distribution (including any fractional share interest in ADI common stock for which cash is received) will generally include the holding period at the time of the distribution for the Resideo common stock with respect to which the distribution is made.
A U.S. holder who receives
cash in lieu of a fractional share of ADI common stock in the distribution will generally be treated as having received such fractional
share in the distribution and then having sold such fractional share for cash, and will recognize capital gain or loss in an amount equal
to the difference between the amount of cash received and such U.S. holder’s adjusted tax basis in such fractional share.
Such gain or loss will be
long-term capital gain or loss if the U.S. holder’s holding period for its Resideo common stock exceeds one year at the time of
the distribution.
If a U.S. holder of Resideo
common stock holds different blocks of Resideo common stock (generally shares of Resideo common stock purchased or acquired on different
dates or at different prices), such holder should consult its tax advisor regarding the determination of the basis and holding period
of shares of ADI common stock received in the distribution in respect of particular blocks of Resideo common stock.
Material U.S. Federal Income Tax Consequences
if the Distribution is Taxable
As discussed above, notwithstanding
receipt by Resideo of the private letter ruling from the IRS and/or the opinion of its outside tax counsel, in each case, regarding the
qualification of the distribution, together with certain related transactions, as a “reorganization” within the meaning of
Sections 368(a)(1)(D) and 355 of the Code, the IRS could assert that the distribution does not qualify for tax-free treatment for U.S.
federal income tax purposes. If the IRS were successful in taking this position, some or all of the consequences described above would
not apply, and Resideo, ADI and Resideo common stockholders could be subject to significant U.S. federal income tax liability. In addition,
certain events that may or may not be within the control of Resideo or ADI could cause the distribution and certain related transactions
to not qualify for tax-free treatment for U.S. federal income tax purposes. Depending on these circumstances, ADI may be required to indemnify
Resideo for taxes (and certain related losses) resulting from the distribution and certain related transactions not qualifying as tax-free.
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If the distribution, together
with certain related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes
under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, Resideo would recognize taxable gain
as if it had sold the ADI common stock in a taxable sale for its fair market value (unless Resideo and ADI jointly make an election under
Section 336(e) of the Code with respect to the distribution, in which case, in general, (1) Resideo would recognize taxable gain as if
ADI had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of the ADI common stock and
the assumption of all of ADI’s liabilities and (2) ADI would obtain a related step up in the basis of its assets), and Resideo common
stockholders who receive ADI common stock in the distribution would be subject to tax as if they had received a taxable distribution equal
to the fair market value of such shares, which would generally be taxed as a dividend to the extent of the stockholder’s pro rata
share of Resideo’s current and accumulated earnings and profits, including Resideo’s taxable gain, if any, on the distribution,
then treated as a non-taxable return of capital to the extent of the stockholder’s basis in Resideo common stock and thereafter
treated as capital gain from the sale or exchange of Resideo common stock.
Even if the distribution,
together with certain related transactions, were to otherwise qualify as a tax-free transaction under Sections 368(a)(1)(D) and 355 of
the Code, it may result in taxable gain to Resideo (but not its stockholders) under Section 355(e) of the Code if the distribution were
deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly,
shares representing a 50% or greater interest (by vote or value) in Resideo or ADI. For this purpose, any acquisitions of Resideo or ADI
shares within the period beginning two years before the distribution and ending two years after the distribution are presumed to be part
of such a plan, although Resideo or ADI may be able to rebut that presumption depending on the circumstances (including by qualifying
for one or more safe harbors under applicable Treasury Regulations).
In connection with the
distribution, Resideo and ADI will enter into a tax matters agreement pursuant to which ADI will be responsible for certain liabilities
and obligations following the distribution. In general, under the terms of the tax matters agreement, if the distribution, together with
certain related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes
under Sections 355 and 368(a)(1)(D) of the Code (including as a result of Section 355(e) of the Code) or if certain related transactions
were to fail to qualify for their intended tax treatment under applicable law, and if such failure were the result of actions taken after
the distribution by Resideo or ADI, then the party responsible for such failure will be responsible for all taxes imposed on Resideo
or ADI to the extent such taxes result from such actions. However, if such failure was the result of any acquisition of ADI shares, or
of certain of ADI’s representations, statements or undertakings being incorrect, incomplete or breached, then ADI will generally
be responsible for all taxes imposed a result of such acquisition or breach. For a discussion of the tax matters agreement, see “Certain
Relationships and Related Person Transactions—Agreements with Resideo” and “Certain Relationships and Related Person
Transactions—Tax Matters Agreement.” Except for a certain indemnification threshold, ADI’s indemnification obligations
to Resideo under the tax matters agreement are not expected to be limited in amount or subject to any cap. If ADI is required to pay
any taxes or indemnify Resideo and its subsidiaries and officers and directors under the circumstances set forth in the tax matters agreement,
ADI may be subject to substantial liabilities.
Information Reporting and Backup Withholding
Payments of cash to U.S. holders
of Resideo common stock in lieu of fractional shares of ADI common stock (if any) may be subject to information reporting and backup withholding
(currently at a rate of 24%), unless such U.S. holder delivers a properly completed IRS Form W-9 certifying such U.S. holder’s correct
taxpayer identification number and certain other information, or otherwise establishes an exemption from backup withholding. Backup withholding
is not an additional tax. Amounts withheld under the backup withholding rules may be refunded or credited against a U.S. holder’s
U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.
THE FOREGOING DISCUSSION
IS A GENERAL DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW. IT IS NOT A COMPLETE ANALYSIS
OR DISCUSSION OF ALL POTENTIAL TAX CONSEQUENCES THAT MAY BE IMPORTANT TO PARTICULAR HOLDERS AND IT DOES NOT CONSTITUTE TAX ADVICE. ALL
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM, INCLUDING THE APPLICABILITY
AND EFFECT OF U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS.
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DESCRIPTION OF MATERIAL INDEBTEDNESS
Prior to or concurrent
with the Spin-Off, we expect to incur approximately $1,000 million of indebtedness and obtain commitments for $500 million in the
form of a revolving credit facility in connection with the Financing. We intend to use the net proceeds of the Financing, in part, to
fund a $900 million one-time cash dividend to Resideo as partial consideration for the transfer of the assets and liabilities of Resideo
to us and to pay related fees and expenses, with the remaining net proceeds to be held in cash and cash equivalents and for general corporate
purposes.
Senior Credit Facilities
On June 16, 2026, ADI
Funding obtained customary syndication commitments in connection with its expected entry into senior credit facilities with a syndicate
of lenders named therein and JPMorgan Chase Bank, N.A., as administrative agent (the “New Credit Agreement”), which we expect
will consist of an aggregate principal amount of up to $1,100 million that will be available through (i) a seven-year secured
term loan facility in an initial aggregate principal amount of up to $600 million (the “Term Facility”), and (ii) a
five-year revolving credit facility with committed availability of $500 million, which we expect will be undrawn as of the date we complete
the Spin-Off (the “Revolving Facility” and, together with the Term Facility, the “Senior Credit Facilities”).
Subject to certain customary
conditions, including the Spin-Off and the payment of certain upfront fees and/or original issue discount in respect of the Senior Credit
Facilities, ADI Funding may draw on the Term Facility on the date of the Spin-Off. The Revolving Facility will be undrawn at the time
we complete the Spin-Off and will be available thereafter to provide funds for our ongoing working capital requirements and general corporate
purposes.
Maturity
The Revolving Facility
is expected to mature five years after the Spin-Off, with certain extension rights in the discretion of each lender. The Term Facility
is expected to mature seven years after the Spin-Off, with certain extension rights in the discretion of each lender.
Interest Rate and Fees
Borrowings under the Term
Facility are expected to be subject to an interest rate based on, at our option, either (a) a base rate determined by reference to the
highest of (1) the rate of interest last quoted by The Wall Street Journal as the “prime rate” in the U.S., (2) the greater
of the federal funds effective rate and the overnight bank funding rate, plus 0.5% and (3) the one month term SOFR rate, plus 1% per
annum (“ABR”), plus an applicable margin of 1.75% per annum or (b) a term SOFR rate (“SOFR”) (which shall not
be less than zero) plus an applicable margin of 2.75% per annum. Borrowings under the Revolving Facility are expected to be subject to
an interest rate based on, at our option, either (a) the ABR plus an applicable margin that is expected to vary from 0.5% to 1.0% per
annum based on ADI’s consolidated total net leverage ratio or (b) SOFR (which shall not be less than zero) plus an applicable margin
that is expected to vary from 1.5% to 2.0% per annum based on ADI’s consolidated total net leverage ratio. Additionally, we expect
that borrowings under the Revolving Facility will be available in certain additional permitted foreign currencies, including Euros, Pounds
Sterling and Canadian Dollars. We expect that borrowings under the Revolving Facility denominated in such permitted foreign currencies
will bear interest based on the applicable reference rate for each such currency customary for financings of this type. We expect that
interest payments with respect to the Senior Credit Facilities will be required either on a quarterly basis (for ABR loans), at the end
of each interest period (for SOFR loans) or, if the duration of the applicable interest period exceeds three months, then every three
months, or in the case of borrowings under the Revolving Facility denominated in Pounds Sterling, every month. In addition to paying
interest on outstanding borrowings under the Revolving Facility, we will be required to pay a quarterly commitment fee based on the unused
portion of the Revolving Facility, which is expected to vary from 0.25% to 0.35% per annum based on our consolidated total net leverage
ratio. We will be obligated to make quarterly principal payments throughout the term of the Term Facility according to the amortization
provisions set forth therein, as such payments may be reduced from time to time in accordance with the terms thereof as a result of the
application of loan prepayments made by us, if any, prior to the scheduled date of payment thereof.
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Prepayments
We expect to be permitted
to voluntarily prepay borrowings under the Senior Credit Facilities without premium or penalty, subject to a 1.00% prepayment premium
in connection with any repricing transaction with respect to the Term Facility in the first six months after the Spin-Off and customary
“breakage” costs with respect to SOFR loans and loans denominated in permitted foreign currencies. We expect to be permitted
to reduce the commitments under the Revolving Facility, in whole or in part, in each case, subject to certain minimum amounts and increments.
We expect the Senior Credit Facilities to also contain certain mandatory prepayment provisions in the event that we incur certain types
of indebtedness, receive net cash proceeds from certain non-ordinary course asset sales or other dispositions of property, or receive
net cash proceeds from certain casualty events with respect to property, in each case subject to thresholds, exceptions and terms and
conditions customary for financings of this kind. We expect to be required to make prepayments on the Term Facility, starting with the
fiscal year ending on December 31, 2027, equal to 50% of excess cash flow on an annual basis (with step-downs to 25% and 0% subject to
satisfaction of certain consolidated total net leverage ratios), subject to thresholds, exceptions and terms and conditions customary
for financings of this kind.
Collateral and Guarantees
ADI Funding will be the
borrower under the Senior Credit Facilities. Upon completion of the Spin-Off, the obligations of ADI Funding under Senior Credit Facilities
will be guaranteed by ADI and certain of the ADI’s existing and future direct and indirect wholly owned material subsidiaries organized
under the laws of the U.S., any state thereof or the District of Columbia, subject to certain customary exceptions set forth in the Senior
Credit Facilities (ADI Funding and the guarantors collectively, the “Loan Parties”). All obligations of the Loan Parties
under the Senior Credit Facilities will be secured by, subject to certain exceptions (including a limitation of pledges of voting equity
interests in certain foreign subsidiaries to no more than 65% of such voting equity interests, and certain thresholds and exclusions
with respect to real property) a first priority lien on substantially all assets of the Loan Parties. The foregoing guarantees and collateral
will also benefit and secure, on a pari passu basis, obligations of the Loan Parties and their restricted subsidiaries under certain
swap contracts, cash management arrangements, supply chain financing arrangements and additional letter of credit facilities with lenders
under the Senior Credit Facilities or their affiliates.
Certain Covenants
We anticipate that the
Senior Credit Facilities will contain customary affirmative and negative covenants that, among other things, limit ADI’s, ADI Funding’s
and their restricted subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental
changes, enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain
indebtedness and to pay dividends, to make other distributions or redemptions/repurchases, in respect of ADI’s, ADI Funding’s
and their respective subsidiaries’ equity interests, to engage in transactions with affiliates or amend certain material documents.
In addition, we expect the Revolving Facility to also contain financial covenants requiring the maintenance of a consolidated total net
leverage ratio of, initially, not greater than 4.75 to 1.00, with step-downs to 4.50:1.00, 4.25:1.00,
4.00:1.00 and 3.50:1.00 at the third, fifth, seventh and ninth fiscal quarters ending after the Spin-Off (subject, from and after
the ninth fiscal quarter ending after the Spin-Off, to step-ups, at out option, to 4.00:1.00 for
the four consecutive fiscal quarters ending after the consummation of an acquisition that involves aggregate consideration of at least
$250 million, subject to certain conditions and limitations), and a consolidated interest coverage ratio of not less than
2.50 to 1.00. We also anticipate that the Senior Credit Facilities will contain customary events of default including with respect to
a failure to make payments under the Senior Credit Facilities, cross-default, certain bankruptcy and insolvency events and customary
change of control events.
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7.125% Senior Notes due 2034
On June 16, 2026, ADI
Escrow Issuer LLC, a wholly owned subsidiary of ADI (the “Escrow Issuer”), sold $400 million in aggregate principal amount
of 7.125% Senior Notes due 2034 (the “Notes”). The Notes are expected to be issued pursuant to an indenture, to be dated
June 30, 2026 (the “Indenture”), between the Escrow Issuer and U.S. Bank Trust Company, National Association, as trustee.
The Notes were sold in a private placement to persons reasonably believed to be qualified institutional buyers in accordance with Rule
144A under the Securities Act, and outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act.
The proceeds from the Notes offering will be held in escrow until satisfaction of the conditions precedent to the Spin-Off and certain
other escrow release conditions. If such conditions are not met by December 31, 2026, the Notes will be redeemed at a redemption price
equal to 100% of their issue price, plus accrued interest.
In connection with the
completion of the Spin-Off, the Escrow Issuer will be merged with and into ADI Funding with ADI Funding surviving and assuming the Escrow
Issuer’s obligations under the Notes and the Indenture. In connection therewith, ADI and each of ADI’s subsidiaries providing
a guarantee of the Senior Credit Facilities will guarantee ADI Funding’s obligations under the Notes and the Indenture. Upon completion
of the Spin-Off the Notes will be senior unsecured obligations of ADI Funding and will be guaranteed on a senior unsecured basis by ADI
and each of ADI Funding’s existing and future domestic subsidiaries that guarantees the Senior Credit Facilities.
The Notes will bear interest
at a rate of 7.125% per annum, payable semi-annually in arrears. The first such payment will be made on January 15, 2027. The Notes will
mature on July 15, 2034. ADI Funding may redeem the Notes, in whole or in part, at any time on or after July 15, 2029 at the redemption
prices set forth in the Indenture. ADI Funding may also redeem up to 40% of the aggregate principal amount of the Notes on or prior to
July 15, 2029 in an amount equal to the net proceeds from certain equity offerings at the redemption price set forth in the Indenture.
Prior to July 15, 2029, ADI Funding may redeem the Notes, in whole or in part, at a price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest, if any, plus the applicable “make-whole” premium set forth in the Indenture. Upon certain
events constituting a change of control under the Indenture, the holders of the Notes will have the right to require ADI Funding to offer
to repurchase the Notes at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, to (but not including)
the date of purchase.
The Indenture contains
covenants that, among other things, limit ADI’s ability and the ability of its restricted subsidiaries to: incur or guarantee additional
indebtedness; pay dividends or distributions on, or redeem or repurchase, capital stock and make other restricted payments; make investments;
consummate certain asset sales; engage in certain transactions with affiliates; grant or assume certain liens; and consolidate, merge
or transfer all or substantially all of its assets.
The Indenture also provides
for customary events of default, which, if any of them occurs, may cause the principal of and accrued interest on the Notes to become,
or to be declared, due and payable. Events of default (subject in certain cases to customary grace and cure periods), include, among
others, nonpayment of principal or interest, breach of other covenants or agreements in the Indenture, failure to pay certain other indebtedness,
failure to pay certain final judgments, failure of certain guarantees to be enforceable and certain events of bankruptcy or insolvency.
The foregoing summarizes
some of the expected terms of our Senior Credit Facilities and the Notes. However, the foregoing summary does not purport to be complete,
and is qualified in its entirety by reference to the full text of the New Credit Agreement and the Indenture (including a form of the
Notes), which are attached as Exhibits 10.22 and 4.1 and 4.2, respectively, to the Form 10 of which this Information Statement forms
a part.
149
DESCRIPTION
OF CAPITAL STOCK
In connection with the
distribution, we will amend and restate our certificate of incorporation and our bylaws. The following is a description of the material
terms of, and is qualified in its entirety by, our certificate of incorporation and bylaws, each of which will be in effect upon the consummation
of the distribution, the forms of which are filed as exhibits to this information statement. Because this is only a summary, it may not
contain all the information that is important to you.
Authorized Capital Stock
Our authorized capital stock consists of 700,000,000 shares of common
stock, par value $0.001 per share and 100,000,000 shares of preferred stock, par value $0.001 per share, of which 150,000 shares are designated
as Series A Cumulative Convertible Participating Preferred Stock. We will issue 150,000 shares of ADI preferred stock to Resideo in connection
with the Spin-Off, which Resideo will in turn exchange with the Preferred Stockholders pursuant to the Exchange Agreement. The
number of authorized shares of either the common stock or preferred stock may be increased or decreased (but not below the number of shares
thereof then outstanding) by a vote of the stockholders entitled to vote, voting as a single
class, subject to the rights of the holders of ADI preferred stock. The common stock is our only class of securities registered
under Section 12 of the Securities Exchange Act of 1934, as amended.
Common Stock
Dividend Rights
The holders of shares of our
common stock are entitled to receive dividends when, as and if declared by our Board at its discretion out of funds legally available
for that purpose, subject to applicable law and the preferential rights of any preferred stock, including the ADI preferred stock, that
may be outstanding.
Voting Rights
The holders of our common
stock and ADI preferred stock (voting together as one class, with the ADI preferred stock voting on as-converted basis) are entitled to
one vote for each share held of record on all matters submitted to a vote of the common stockholders. Corporate actions to be taken by
vote of the stockholders generally require the vote of holders of a majority in voting power of the shares of capital stock of the Company
entitled to vote on the matter and who are present in person or represented by proxy, except as otherwise required by law or provided
in our certificate of incorporation or bylaws. Our certificate of incorporation does not provide for cumulative voting by stockholders
in the election of directors. Directors are elected by the affirmative vote of the majority of votes cast, except that if the number of
nominees exceeds the number of directors to be elected, the directors are elected by a plurality of the votes cast, up to the number of
directors to be elected in such meeting. A majority of the votes cast means that the number of shares voted “for” a director
must exceed the number of votes cast “against” that director.
Liquidation Rights
Subject to the preferential
liquidation rights of any preferred stock that may be outstanding, including the ADI preferred stock, upon our liquidation, dissolution
or winding-up, the holders of our common stock will be entitled to share ratably in our assets legally available for distribution to our
stockholders.
Other Rights
The holders of our common
stock are not entitled to preemptive rights or preferential rights to subscribe for shares of our capital stock or rights to redeem or
convert the holders’ shares of our common stock.
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Preferred Stock
Our certificate of incorporation
authorizes our Board to designate and issue from time to time one or more series of preferred stock without stockholder approval. Our
Board may fix the number of shares constituting each such series and the designation of such series, the voting powers (if any) of the
shares of such series, and the preferences and relative, participating, optional and other rights, if any, and any qualifications, limitations
or restrictions, of the shares of each such series.
As of July 20, 2026, Resideo had 500,000 outstanding shares of Resideo
preferred stock. Holders of Resideo preferred stock will not be entitled by virtue of their Resideo preferred stock to receive shares
of our common stock in the Spin-Off and will instead exchange a portion of the Resideo preferred stock they currently hold for shares
of ADI preferred stock. In connection with the Spin-Off, we expect certain terms of the Resideo preferred stock to be amended to be consistent
with the terms of the ADI preferred stock described herein. Specifically, we expect the lock-up period applicable to the Resideo preferred
stock to be extended to match the Lock-Up Period applicable to the ADI preferred stock, and that Resideo’s right, in certain circumstances,
to convert or redeem the Resideo preferred stock will not be exercisable until after the expiration (or deemed expiration) of the Lock-Up
Period in accordance with the Shareholders Agreement and ADI Certificate of Designations. As a result, following the Spin-Off, shares
of ADI preferred stock and Resideo preferred stock are expected to have substantially similar rights, preferences and privileges and qualifications,
limitations and restrictions. The amount of Resideo preferred stock exchanged for ADI preferred stock and the conversion prices of the
Resideo preferred stock and ADI preferred stock will be based on the relative equity values of Resideo and ADI as have been determined
by the Resideo Board, in consultation with the holders of Resideo preferred stock. As a result, immediately following the Spin-Off, 350,000
shares of Resideo preferred stock will remain issued and outstanding, 150,000 shares of Resideo preferred stock will be cancelled and
150,000 shares of ADI preferred stock will be issued and outstanding. All accrued and unpaid dividends on Resideo preferred stock will
be paid in cash immediately prior to the ADI preferred stock exchange and the aggregate liquidation preference of the preferred stock
of Resideo and ADI immediately after the Spin-Off will equal the total liquidation preference (defined as the Accumulated Amount in the
Resideo Certificate of Designations) of the Resideo preferred stock immediately prior to the Spin-Off. The shares of Resideo preferred
stock that remain outstanding will continue to have the same rights, preferences and privileges and qualifications, limitations and restrictions
set forth in Resideo’s public filings with the SEC except as otherwise specified in this information statement.
For more information on the
ADI preferred stock, see “Certain Relationships and Related Person Transactions—Exchange Agreement, Shareholders Agreement
and ADI Preferred Stock Exchange.”
Anti-Takeover Provisions
Our certificate of incorporation,
our bylaws and the DGCL contain certain provisions that may discourage an unsolicited takeover of the Company or make an unsolicited takeover
of the Company more difficult. The following are some of the more significant anti-takeover provisions that are applicable to the Company:
Charter Documents
Classified Board. Our
certificate of incorporation provides that, until our annual stockholder meeting in 2032, our Board will be divided into three classes,
with each class consisting, as nearly as may be possible, of one-third of the total number of directors. Beginning with the 2032 annual
meeting, all directors will be elected to a term of office that expires at the 2033 annual meeting and thereafter each year for annual
terms, and our Board will therefore no longer be divided into three classes.
Removal. Subject
to the rights of the holders of any outstanding series of preferred stock, our certificate of incorporation provides that (i) until
the election of directors at our annual stockholder meeting in 2032, our stockholders may remove directors only for cause and (ii) from
and after the election of directors at our annual stockholder meeting in 2032, our stockholders may remove directors with or without cause.
Removal requires the affirmative vote of holders of at least a majority of our voting stock entitled generally to vote on the election
of directors of the Company.
Blank-Check Preferred Stock.
Subject to the rights of the holders of any outstanding series of preferred stock, our certificate of incorporation authorizes our Board
to designate and issue, without any further vote or action by the stockholders, preferred stock from time to time in one or more series
and, with respect to each such series, to fix the number of shares constituting the series and the designation of the series, the voting
powers (if any) of the shares of the series, and the preferences and relative, participating, optional and other rights, if any, and any
qualifications, limitations or restrictions, of the shares of such series.
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No Stockholder Action by
Written Consent. Subject to the rights of the holders of any outstanding series of preferred
stock, our certificate of incorporation expressly excludes the right of our stockholders to act by written consent. Stockholder
action must take place at an annual meeting or at a special meeting of our stockholders.
Special Stockholder Meetings.
Our certificate of incorporation and bylaws provide that special meetings of stockholders may be called by (i) the Chairman of our Board,
(ii) a majority of our Board or (iii) a stockholder, or a group of stockholders, owning a twenty-five
percent (25%) or more “net long position,” as defined in the bylaws, of our outstanding stock for at least 30 days, provided
that such stockholder(s) satisfy the requirements set forth in the bylaws.
Requirements for Advance
Notification of Stockholder Nominations and Proposals. Under our bylaws, stockholders of record are able to nominate persons for election
to our Board or bring other business constituting a proper matter for stockholder action only by providing proper notice to our secretary.
In the case of annual meetings, proper notice must be given, generally between 90 and 120 days prior to the first anniversary of the prior
year’s annual meeting as first specified in the notice of meeting (without regard to any postponements or adjournments of such meeting
after such notice was first sent). In the case of an election of directors to be held at a special meeting, proper notice must be given
no earlier than the 90th day prior to the relevant meeting and no later than the later of the 60th day prior to such meeting or the 10th
day following the public announcement of the meeting. Our bylaws also specify requirements as to the substance and form of a stockholder’s
notice.
No Cumulative Voting. Our
certificate of incorporation does not provide for cumulative voting in the election of directors. Accordingly, each share of our voting
stock is entitled to one vote for each director seat to be filled, and stockholders may not aggregate or cumulate votes for a single nominee.
The absence of cumulative voting may, under certain circumstances, make it more difficult for a minority stockholder or group of stockholders
to elect a director nominee without support from a majority of the voting power entitled to vote in the election of directors.
Amendments to Certificate
of Incorporation and Bylaws. The DGCL provides that the affirmative vote of holders of a majority of a company’s voting stock
then outstanding is required to amend the company’s certificate of incorporation unless the company’s certificate of incorporation
provides for a higher threshold, and our certificate of incorporation does not provide for a higher threshold. Our certificate of incorporation
provides that our bylaws may be amended by our Board or by the affirmative vote of holders of at least a majority of our voting stock entitled
generally to vote in the election of directors of the Company.
Delaware Takeover Statute
In general, Section 203 of
the DGCL prohibits a Delaware corporation with a class of voting stock listed on a national securities exchange or held of record by 2,000
or more stockholders from engaging in a “business combination” with an “interested stockholder” for a three-year
period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed
manner. A “business combination” includes, among other things, a merger, asset or stock sale or other transaction resulting
in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates
and associates, owns or did own within three years prior to the determination of interested stockholder status, 15% or more of the corporation’s
voting stock. Under Section 203 of the DGCL, a business combination between a corporation and an interested stockholder is prohibited
unless it satisfies one of the following conditions:
●
Before the stockholder became an interested stockholder, the board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;
●
Upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding shares owned by persons who are directors and also officers and employee stock plans, in some instances; or
●
At or after the time the stockholder became an interested stockholder, the business combination was approved by the board of directors of the corporation and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.
The DGCL permits a corporation
to opt out of, or choose not to be governed by, its anti-takeover statute by expressly stating so in its original certificate of incorporation
(or subsequent amendment to its certificate of incorporation or bylaws approved by its stockholders). The certificate of incorporation
does not contain a provision expressly opting out of the application of Section 203 of the DGCL; therefore, the Company is subject to
the anti-takeover statute.
In connection with the Exchange
Agreement, we have approved the ADI preferred stock exchange and CD&R Holdings as an “interested stockholder” for purposes
of Section 203 of the DGCL such that, without limiting the standstill to which CD&R Holdings is subject, Section 203 of the DGCL will
not be applicable to any business combination with CD&R Holdings. See “Risk Factors—Risks Relating to Our Common Stock
and the Securities Market—The ADI Preferred stock we expect to issue in connection with the Spin-Off will have rights, preferences
and privileges that are not held by, and are preferential to, the rights of our common stock and will reduce the relative voting power
of holders of our common stock.”
152
Limitations on Liability, Indemnification of Officers and Directors
and Insurance
Section 145 of the DGCL provides
that a corporation may indemnify directors and officers against expenses (including attorneys’ fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits
or proceedings in which such person is made a party by reason of such person being or having been a director or officer of the registrant.
The DGCL provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise. Our bylaws will provide for indemnification by the Company of
its directors and officers to the fullest extent permitted by the DGCL or other applicable law.
Section 102(b)(7) of the DGCL
permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases,
redemptions or other distributions, or (iv) for any transaction from which the director derived an improper personal benefit. Our certificate
of incorporation will provide that the Company may, through bylaw provisions, agreements with agents or other persons, votes of stockholders
or disinterested directors or otherwise provide indemnification rights to the fullest extent permitted by the DGCL or any other law of
the State of Delaware.
We expect to maintain standard
policies of insurance under which coverage is provided (a) to our directors and officers against loss rising from claims made by reason
of breach of duty or other wrongful act, and (b) to the Company with respect to payments which may be made by the Company to such officers
and directors pursuant to the above indemnification provision or otherwise as a matter of law.
Exclusive Forum
Our certificate of incorporation
and bylaws will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State
of Delaware will be the exclusive forum for any current or former stockholder (including a current or former beneficial owner) to bring
the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action, suit or proceeding brought
on our behalf; (ii) any action, suit or proceeding asserting a claim that is based upon a violation of a duty owed by any of our current
or former directors, officers or stockholders to us or to our stockholders; (iii) any action, suit or proceeding asserting a claim against
us, or any current or former director, officer or stockholder arising pursuant to the Delaware General Corporation Law (or any successor
provision thereto), our certificate of incorporation or our bylaws (as either may be amended from time to time); (iv) any action, suit
or proceeding asserting a claim against us related to or involving the internal affairs doctrine; or (v) any action asserting an “internal
corporate claim” as that term is defined in Section 115 of the Delaware General Corporation Law shall be the Court of Chancery of
the State of Delaware (or, if the Court of Chancery does not have, or declines to accept, jurisdiction, the federal court for the District
of Delaware).
To the fullest extent permitted
by law, if any action, the subject matter of which is within the scope described above, is filed in a court other than the Court of Chancery
of the State of Delaware (or, if the Court of Chancery does not have, or declines to accept, jurisdiction, the federal court for the District
of Delaware) (a “Foreign Action”), by or on behalf of any current or former stockholder (including a current or former beneficial
owner), such stockholder shall be deemed to have consented (x) to the personal jurisdiction of the Court of Chancery (or the federal court
for the District of Delaware, as applicable) in connection with any action brought in any such court to enforce the applicable provisions
of our certificate of incorporation and bylaws and (y) having service of process made upon such stockholder in any such action by service
upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. Our certificate of incorporation and bylaws
also provide that unless we consent otherwise in writing, the federal district courts of the United States of America will be the exclusive
forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act.
Although our certificate of
incorporation and bylaws contain the choice of forum provision described above, it is possible that a court could find that such a provision
is inapplicable for a particular claim or action or that such provision is unenforceable.
This choice of forum provision
may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes with us
or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims or make
such lawsuits more costly for stockholders, although our stockholders will not be deemed to have waived our compliance with federal securities
laws and the rules and regulations thereunder.
Transfer Agent and Registrar
After the distribution, the
transfer agent and registrar for shares of our common stock will be Broadridge Corporate Issuer Solutions, LLC.
153
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC
a registration statement on Form 10 with respect to the shares of our common stock being distributed as contemplated by this information
statement. This information statement is a part of, and does not contain all of the information set forth in, the registration statement
and the exhibits and schedules to the registration statement. For further information with respect to us and our common stock, please
refer to the registration statement, including its exhibits and schedules. Statements made in this information statement relating to any
contract or other document are not necessarily complete, and you should refer to the exhibits attached to the registration statement for
copies of the actual contract or document. The SEC maintains an Internet site that contains reports, proxy and information statements
and other information regarding issuers that file electronically with the SEC at www.sec.gov.
As a result of the distribution,
we will become subject to the informational requirements of the Exchange Act and will be required to file periodic current reports, proxy
statements and other information with the SEC. We intend to furnish our stockholders with annual reports containing financial statements
audited by an independent accounting firm.
In addition, following the
completion of the distribution, we will make the information filed with or furnished to the SEC available free of charge through our website,
www.adiglobal.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
The information contained in, or that can be accessed through, our website is not incorporated by reference and is not part of this information
statement.
You should rely only on the
information contained in this information statement or to which this information statement has referred you. We have not authorized any
person to provide you with different information or to make any representation not contained in this information statement.
154
INDEX
TO THE COMBINED FINANCIAL STATEMENTS
Page
ADI Global Distribution
Business of Resideo Technologies Audited Combined Financial Statements
Report of Independent Registered Public
Accounting Firm (PCAOB ID No. 34)
F-2
Combined Balance Sheets as of December 31, 2025 and
2024
F-4
Combined Statements of Operations for the years ended
December 31, 2025, 2024 and 2023
F-5
Combined Statements of Comprehensive (Loss) Income
for the years ended December 31, 2025, 2024 and 2023
F-6
Combined Statements of Cash Flows for the years ended
December 31, 2025, 2024 and 2023
F-7
Combined Statements of Changes in Equity for the years
ended December 31, 2025, 2024 and 2023
F-8
Notes to the Combined Financial Statements
F-9
ADI Global Distribution Business
of Resideo Technologies Unaudited Condensed Combined Interim Financial Statements
Condensed Combined Balance Sheets
as of April 4, 2026 and December 31, 2025
F-35
Condensed Combined Statements of Operations
for the three months ended April 4, 2026 and March 29, 2025
F-36
Condensed Combined Statements of Comprehensive
Loss for the three months ended April 4, 2026 and March 29, 2025
F-37
Condensed Combined Statements of Cash
Flows for the three months ended April 4, 2026 and March 29, 2025
F-38
Condensed Combined Statements of Changes
in Equity for the three months ended April 4, 2026 and March 29, 2025
F-39
Notes to the Condensed Combined Financial
Statements
F-40
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders
and the Board of Directors of Resideo Technologies, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying combined balance sheets of ADI Global Distribution (the “Company”), a business of Resideo Technologies,
Inc. (“Resideo”), as of December 31, 2025 and 2024, the related combined statements of operations, comprehensive (loss) income,
changes in equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States
of America.
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 Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
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.
Emphasis
of a Matter
As
described in Note 1 to the financial statements, the accompanying financial statements have been derived from the historical accounting
records maintained by Resideo as if the operations of the Company had been conducted independently from Resideo and were prepared on
a stand-alone basis in accordance with the accounting principles generally accepted in the United States of America. These financial
statements may not be indicative of what they would have been had the Company operated as an independent, stand-alone entity.
Critical
Audit Matter
The
critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that (1) relates 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 financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-2
Corporate
Allocations – Refer to Note 2 and Note 16 to the Financial Statements
Critical
Audit Matter Description
The
Company recorded an allocation of expenses related to certain Resideo corporate functions on the basis of direct usage when identifiable,
with the remainder allocated on a pro rata basis using an applicable measure of operating income, headcount, or other allocation methodologies
reflecting the utilization of services provided or the benefit received by the Company during the periods presented. Additionally, the
balance sheet includes certain assets and liabilities held by Resideo that are specifically identifiable or otherwise attributable to
the Company (collectively, the “corporate allocations”). The allocation of these expenses, assets, and liabilities requires
significant judgement by the Company’s management.
Given
the complexity in allocating certain of these expenses, assets, and liabilities and judgements necessary to estimate them, auditing the
carve-out adjustments required both extensive audit effort due to the volume and complexity of the adjustments and a high degree of auditor
judgement when performing audit procedures and evaluating the results of those procedures.
How the
Critical Audit Matter Was Addressed in the Audit
Our audit
procedures related to the recording of certain corporate allocations included the following, among others:
● We
tested the design and implementation of controls over the allocation of expenses, assets,
and liabilities related to certain Resideo corporate functions.
● We
assessed the reasonableness of management’s process for identifying assets, liabilities,
and expenses attributable to the Company.
● We
assessed the reasonableness of management’s methods and assumptions for allocating
expenses, assets, and liabilities related to certain Resideo corporate functions.
● We
performed detail transaction testing over corporate allocations recorded, including:
o Evaluating
the completeness of the corporate allocations recorded.
o For
certain of the corporate allocations, testing the source information underlying the determination
of the allocation and recalculating the allocation.
o For
other corporate allocations, developing an independent expectation of the allocation and
comparing such expectation to the amount recorded by management.
/s/ DELOITTE
& TOUCHE LLP
Charlotte,
North Carolina
March 31,
2026
We have served
as the Company’s auditor since 2025.
F-3
ADI
GLOBAL DISTRIBUTION
COMBINED
BALANCE SHEETS
December
31,
(in millions)
2025
2024
ASSETS
Current assets:
Cash and
cash equivalents
$ 124
$ 137
Accounts receivable,
net
659
608
Inventories, net
1,036
900
Other
current assets
154
121
Total
current assets
1,973
1,766
Property, plant and equipment, net
107
95
Goodwill
1,066
1,055
Intangible assets, net
744
810
Operating lease right-of-use assets
236
166
Due from related parties - non-current
13
186
Other assets
13
17
Total
assets
$ 4,152
$ 4,095
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$ 717
$ 656
Accrued liabilities
175
164
Current portion of obligations
payable under Indemnification Agreement
-
52
Current portion of operating
lease liabilities
37
33
Due
to related parties - current
68
189
Total
current liabilities
997
1,094
Long-term debt
1,185
475
Non-current portion of operating lease liabilities
209
140
Obligations payable under Indemnification Agreement
-
218
Deferred tax liabilities
60
64
Other liabilities
17
16
Total
liabilities
$ 2,468
$ 2,007
COMMITMENTS AND CONTINGENCIES (Note 12)
Equity
Net parent investment
1,726
2,158
Accumulated
other comprehensive loss, net
(42 )
(70 )
Total
equity
1,684
2,088
Total
liabilities and equity
$ 4,152
$ 4,095
The
accompanying notes are an integral part of these combined financial statements.
F-4
ADI
GLOBAL DISTRIBUTION
COMBINED
STATEMENTS OF OPERATIONS
Years
Ended December 31,
(in millions)
2025
2024
2023
Net revenue
$ 4,784
$ 4,197
$ 3,570
Cost of goods sold
3,719
3,346
2,902
Gross profit
1,065
851
668
Operating expenses:
Selling, general and
administrative expenses
752
598
454
Intangible asset amortization
95
55
13
Transaction related
expenses
16
45
-
Restructuring, impairment
and extinguishment costs
9
22
13
Research
and development expenses
39
17
-
Total
operating expenses
911
737
480
Income from operations
154
114
188
Indemnification Agreement expense
364
79
67
Other (income) expense, net
(2 )
4
(5 )
Interest expense
50
39
32
Interest income
(8 )
(15 )
(18 )
(Loss) income before
taxes
(250 )
7
112
Provision for income
taxes
11
25
50
Net
(loss) income
$ (261 )
$ (18 )
$ 62
The
accompanying notes are an integral part of these combined financial statements.
F-5
ADI
GLOBAL DISTRIBUTION
COMBINED
STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
Years
Ended December 31,
(in millions)
2025
2024
2023
Comprehensive (loss) income:
Net (loss)
income
$ (261 )
$ (18 )
$ 62
Other comprehensive
income (loss), net of tax:
Foreign exchange translation
gain (loss)
30
(21 )
14
Changes
in fair value of effective cash flow hedges
(2 )
(4 )
(4 )
Total
other comprehensive income (loss), net of tax
28
(25 )
10
Comprehensive (loss)
income
$ (233 )
$ (43 )
$ 72
The
accompanying notes are an integral part of these combined financial statements.
F-6
ADI
GLOBAL DISTRIBUTION
COMBINED
STATEMENTS OF CASH FLOWS
Years
Ended December 31,
(in millions)
2025
2024
2023
Cash Flows From Operating Activities:
Net (loss)
income
$ (261 )
$ (18 )
$ 62
Adjustments to reconcile
net income to net cash in operating activities:
Depreciation and amortization
115
71
22
Restructuring, impairment
and extinguishment costs
9
22
13
Stock-based compensation
expense
25
23
15
Deferred income taxes
(1 )
(14 )
(1 )
Operating lease right-of-use-asset
amortization
37
26
19
Other, net
1
4
5
Changes in assets and
liabilities, net of acquired companies:
Accounts receivable,
net
(38 )
(32 )
11
Inventories, net
(119 )
(120 )
(47 )
Other current assets
(30 )
5
(10 )
Accounts payable
44
117
38
Accrued liabilities
(2 )
12
(12 )
Lease liabilities
(33 )
(26 )
(17 )
Due to related parties
- current
(4 )
-
2
Obligations payable under
Indemnification Agreement
(270 )
26
14
Other,
net
5
(11 )
(11 )
Net
cash (used in) provided by operating activities
(522 )
85
103
Cash Flows From Investing
Activities:
Capital expenditures
(54 )
(25 )
(27 )
Proceeds from loans with
related parties
1
123
280
Loans made to related
parties
(15 )
(216 )
(269 )
Other
investing activities, net
-
-
1
Net
cash used in investing activities
(68 )
(118 )
(15 )
Cash Flows From Financing
Activities:
Net increase (decrease)
in due to related parties related to cash pooling arrangements
8
(52 )
44
Net
transfers from/(to) parent
562
109
(86 )
Net
cash provided by (used in) financing activities
570
57
(42 )
Effect of exchange rate
changes on cash and cash equivalents
7
(6 )
4
Net (decrease) increase in cash and cash equivalents
(13 )
18
50
Cash and cash equivalents
at beginning of year
137
119
69
Cash and cash equivalents
at end of year
$ 124
$ 137
$ 119
The
accompanying notes are an integral part of these combined financial statements.
F-7
ADI
GLOBAL DISTRIBUTION
COMBINED
STATEMENTS OF CHANGES IN EQUITY
(in millions)
Net
Parent
Investment
Accumulated
Other
Comprehensive
Loss, net
Total
Equity
Balance as of January 1, 2023
$ 842
$ (55 )
$ 787
Net income
62
-
62
Foreign exchange translation
gain - net of taxes
-
14
14
Changes in fair value
of effective cash flow hedges - net of taxes
-
(4 )
(4 )
Net
transfers to Parent
(35 )
-
(35 )
Balance as of December 31, 2023
$ 869
$ (45 )
$ 824
Net loss
(18 )
-
(18 )
Foreign exchange translation
(loss) - net of taxes
-
(21 )
(21 )
Changes in fair value
of effective cash flow hedges - net of taxes
-
(4 )
(4 )
Net
transfers from Parent
1,307
-
1,307
Balance as of December 31, 2024
$ 2,158
$ (70 )
$ 2,088
Net loss
(261 )
-
(261 )
Foreign exchange translation
gain- net of taxes
-
30
30
Changes in fair value
of effective cash flow hedges - net of taxes
-
(2 )
(2 )
Net
transfers to Parent
(171 )
-
(171 )
Balance as of December
31, 2025
$ 1,726
$ (42 )
$ 1,684
The
accompanying notes are an integral part of these combined financial statements.
F-8
Note
1. Description of the Business and Basis of Presentation
Description
of Business
On
July 30, 2025, Resideo Technologies, Inc. (“Resideo” or “Parent”) announced its plan to separate its business
into two distinct, publicly traded companies. Under the plan, Resideo would execute a spin-off (“Spin-off”) to Resideo shareholders
of its ADI Global Distribution business (“ADI,” the “Company,” “we,” or “our”). The Spin-off
is expected to be completed through a tax-free pro rata distribution of all of the outstanding shares of common stock of ADI to Resideo
shareholders. In connection with the Spin-off, Resideo will also enter into an agreement with preferred stockholders to exchange preferred
stock of Resideo for shares of ADI preferred stock.
ADI
is a leading, global specialty distributor of professionally installed low-voltage products, including security and audio-visual (“AV”)
solutions, serving commercial and residential markets through an omnichannel go-to-market platform. ADI sells primarily to professional
installers, dealers, and integrators. We offer an expansive list of products from leading suppliers across key specialty low-voltage
categories. ADI complements supplier products with a suite of exclusive brands and services offerings. ADI Global Distribution is our
sole reportable segment based upon the information used by our chief operating decision maker (“CODM”) in evaluating the
performance of our business and allocating resources and capital.
Basis
of Presentation
The
Company has historically operated as a part of Resideo; consequently, stand-alone financial statements have not historically been prepared.
The accompanying Combined Financial Statements have been derived from Resideo’s historical accounting records, including the historical
cost basis of assets and liabilities comprising the Company, as well as the historical revenues, direct costs, and allocations of indirect
costs attributable to the operations of the Company. The Combined Financial Statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) and the Parent’s historical accounting
policies. These combined financial statements do not purport to reflect what the financial position, results of operations, comprehensive
income or cash flows would have been had the Company operated as a separate, stand-alone entity during the periods presented.
All
intercompany transactions within the Company have been eliminated in the Combined Financial Statements. Certain financing transactions
with Resideo were deemed to have been settled immediately through net parent investment in the Combined Balance Sheets. Other transactions
that were historically cash settled between Resideo and the Company have been included in the Combined Financial Statements as due from
related parties or due to related parties, primarily related to cash pooling and intercompany loans. In the Combined Statements of Cash
Flows, the cash flows arising from related party loans receivable and payable are reflected in investing activities. The cash flows arising
from cash pooling arrangements are reflected in financing activities. Refer to Note 16. Related Party Transactions to the Combined
Financial Statements.
The
Combined Balance Sheets reflect all of the assets and liabilities of the Company that are specifically identifiable or otherwise attributed
to the Company, including net parent investment as a component of equity. Net parent investment represents Resideo’s historical
investment in the Company and includes accumulated net income attributable to the Company, and as well as the net effect of transactions
with Resideo and its subsidiaries.
Resideo
operates a centralized treasury function domestically and internationally, while also maintaining bank accounts in local jurisdictions
separate from these centralized treasury functions. Certain of our cash is transferred to Resideo according to centrally managed cash
programs and Resideo funds our operations and investing activities, as needed. Cash and cash equivalents and restricted cash in the Combined
Balance Sheets represents cash and cash equivalents and restricted cash held by legal entities of the Company. Some of these legal entities
participate in the cash pooling and others maintain bank accounts in local jurisdictions, which operate outside the cash pooling arrangements.
This arrangement is not reflective of the manner in which the Company would have been able to finance its operations had it been a stand-alone
business separate from Resideo during the periods presented.
F-9
Resideo’s
third-party debt related to Senior Notes and the Term Loan along with the corresponding interest expense and financial statement impacts
of interest rate hedges have been allocated to the Company for the periods presented as the Company was jointly and severally liable
for such debt. The Company is not a counterparty to the interest rate hedges and therefore, the asset and liability balances associated
with the hedges are not included in the Combined Financial Statements. Refer to Note 9. Long-Term Debt to the Combined Financial
Statements.
The
Combined Statements of Operations includes expense allocations for certain corporate expenses provided by Resideo on a centralized basis
(“Resideo Corporate Costs”), including, but not limited to corporate executives, finance, legal, audit, mergers and acquisitions,
human resources, information technology, insurance, employee benefits, costs associated with the Spin-off and other expenses that are
either specifically identifiable or clearly applicable to the Company. These expenses have been allocated to the Company on the basis
of direct usage when identifiable, with the remainder allocated on a pro rata basis using an applicable measure of operating income,
headcount or other allocation methodologies that are considered to be a reasonable reflection of the utilization of services provided
or the benefit received by the Company during the periods presented. However, the Resideo Corporate Costs allocations may not be indicative
of the actual expense that would have been incurred had the Company operated as an independent, stand-alone public entity, nor are they
indicative of the Company’s future expenses. Refer to Note 16. Related Party Transactions to the Combined Financial Statements.
Note 2.
Summary of Significant Accounting Policies
We
consider the following policies to be beneficial in understanding the judgments involved in the preparation of our Combined Financial
Statements and the uncertainties that could impact our financial condition, results of operations and cash flows.
(a)
Use of Estimates - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent
assets and liabilities in the Combined Financial Statements and accompanying notes. Estimates are used for, but not limited to, provisions
for expected credit losses and inventory reserves, revenue recognition, accounting for income taxes, accounting for business combinations,
valuation of the reporting unit for purposes of assessing goodwill for impairment, valuation of
long-lived asset groups for impairment testing, the useful lives of long-lived assets, accruals for employee benefits, stock-based compensation,
warranties, allocation methodology for third-party debt and the Indemnification Agreement obligation, as defined below, and certain contingencies.
We base our estimates on historical experience, market participant fair value considerations, projected future cash flows, and various
other factors that are believed to be reasonable under the circumstances. Actual future results could differ materially from those estimates.
(b)
Business Combinations - Our acquisitions are accounted for under Accounting Standards Codification “ASC” 805, Business
Combinations. Accordingly, the assets and liabilities of acquired companies are included in the Combined Balance Sheets from the acquisition
date, adjusted to reflect their fair value. Intangible assets are measured and recognized at fair value and amortized over their estimated
useful lives. We recognize goodwill equal to the difference between the purchase price and the fair value of identifiable assets and
liabilities. Acquisition-related costs are recognized as incurred.
We
estimate the fair value of acquired assets and liabilities as of the acquisition date utilizing either a cost or income approach. Determining
the fair value of acquired intangible assets involves significant estimates and assumptions, including, but not limited to, forecasted
revenue growth rates, customer attrition rates, market-participant discount rates, assumed royalty rates, and income tax rates. The valuation
of tangible and intangible assets and liabilities resulting from an acquisition is subject to management review and may change materially
between the preliminary allocation and end of the purchase price allocation period, which is a maximum of one year.
Customer
relationships are valued using the multi-period excess earnings method. The multi-period excess earnings method estimates the discounted
net earnings attributable to the customer relationships that are acquired after considering items, such as possible customer attrition.
Estimated useful lives and the length and trend of the projected cash flow period are determined based on the expected attrition of the
customer relationships, which is based on our historical experience and future expectations for renewing and extending similar customer
relationships.
F-10
Technology
and trade names are valued using the relief from royalty method to estimate the cost savings that will accrue to the Company, which would
require royalty payments or license fees on revenue earned by using the asset. The useful lives of the assets are determined based on
management’s estimate of the period of time the technology or name will be in use.
(c)
Cash, Cash Equivalents and Restricted Cash - Cash and cash equivalents may consist of cash on hand, money market instruments,
time deposits, and highly liquid investments. All highly liquid investments with original maturities of three months or less are considered
cash equivalents. Cash and cash equivalents that are restricted as to the withdrawal or use under terms of certain contractual agreements
are recorded in other current assets on the Combined Balance Sheets and are not material. Cash, cash equivalents, and restricted cash
are carried at cost, which approximates fair value. The cash reflected on the Combined Balance Sheets represents cash accounts legally
owned by the Company’s subsidiaries and comprises both (a) bank accounts held by local jurisdictions that do not participate in
centralized cash pooling arrangements as well as (b) bank accounts that participate in centralized cash pooling arrangements and are
owned by the Company’s subsidiaries.
(d)
Accounts Receivable, net of Allowance for Credit Losses - Accounts receivable are recorded at the invoiced amount, presented
net of allowance for credit losses and do not bear interest. We review the adequacy of the allowance for credit losses on an ongoing
basis using historical collection trends and aging of receivables. Management also periodically evaluates individual customers’
financial condition, credit history, and the current economic conditions to make adjustments to the allowance when it is considered necessary.
Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery
is considered remote. Allowance for credit losses was immaterial as of December 31, 2025 and 2024.
(e)
Concentration of Credit Risk - Credit risk represents the loss that would be recognized at the reporting date if counterparties
failed to perform as contracted. We continually monitor the creditworthiness of our customers to which we grant credit terms in the normal
course of business. The terms and conditions of credit sales are designed to mitigate or eliminate concentrations of credit risk with
any single customer. Management does not believe we are exposed to any significant concentrations of credit risk that arise from cash
and cash equivalent investments or accounts receivable.
(f)
Inventories - Inventories are stated at the lower of cost or net realizable value with cost being determined using the moving-average
method. Inventory reserves are maintained for obsolete and surplus items.
The
following table summarizes the details of our inventories, net:
December
31,
(in millions)
2025
2024
Raw materials
$ 4
$ 7
Finished products
1,032
893
Total inventories, net
$ 1,036
$ 900
(g)
Property, Plant and Equipment - Property, plant and equipment are stated at cost, less accumulated depreciation. For financial
reporting purposes, the straight-line method of depreciation is used over the estimated useful lives. Leasehold improvements are capitalized
and amortized using the straight-line method over the shorter of their estimated useful lives or the term of the underlying lease. Depreciation
is recognized in cost of sales and selling, general and administrative expenses based on the nature and use of the underlying assets.
The following
table summarizes the details of our property, plant and equipment, including useful lives:
December
31,
(in millions)
2025
2024
Useful
Lives
Machinery and equipment
$ 58
$ 51
3-16 years
Building improvements
121
116
5-10 years
Construction in progress
28
12
NA
Gross property, plant and equipment
207
179
Accumulated depreciation
(100 )
(84 )
Total property, plant
and equipment, net
$ 107
$ 95
NA = Not
applicable; assets categorized as construction in progress are not depreciated.
F-11
Depreciation
expense was $21 million, $16 million and $9 million for the years ended December 31, 2025, 2024 and 2023, respectively. Capital expenditures
in accounts payable were $7 million, $5 million and $2 million for the years ended December 31, 2025, 2024 and 2023, respectively.
(h)
Impairment of Long-Lived Assets - We assess the recoverability of the carrying amount of property, plant and equipment if events
or changes in circumstances indicate that the carrying amount of the related group of assets may not be recoverable. We perform an impairment
test primarily utilizing the replacement cost method (a Level 3 valuation method) for the fair value of property, plant and equipment.
If the expected undiscounted cash flows are less than the carrying amount of the asset an impairment loss is recognized as the amount
by which the carrying amount of the asset exceeds its fair value.
(i)
Goodwill and Intangible Assets - We review the carrying values of goodwill whenever events or changes in circumstances indicate
that such carrying values may not be recoverable as well as annually, on the first day of the fourth quarter. The fair values calculated
for the goodwill impairment test uses the market approach in combination with the income approach. The fair value is a Level 3 valuation
based on certain unobservable inputs including estimated future cash flows and discount rates aligned with market-based assumptions that
would be utilized by market participants in valuing these assets or prices of similar assets. If the carrying value of a reporting unit
exceeds its fair value, we record a goodwill impairment loss as the amount by which the carrying amount of a reporting unit exceeds its
fair value, not to exceed the total amount of goodwill allocated to that reporting unit. Refer to Note 7. Goodwill and Other Intangible
Assets, net to the Combined Financial Statements.
For definite-lived intangible assets, cost is
generally amortized on a straight-line basis over the asset’s estimated economic life. Definite-lived intangible assets are reviewed
for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. In these
circumstances, they are tested for impairment based on undiscounted cash flows and, if impaired, written down to estimated fair value
based on either discounted cash flows or appraised values. See Note 7. Goodwill and Other Intangible Assets, net to the Combined
Financial Statements for further information.
(j)
Restructuring - We enter into various restructuring initiatives, optimization projects, strategic transactions, and other business
activities that may include the recognition of exit or disposal costs. Exit or disposal costs are typically costs of termination benefits,
such as severance, and costs associated with the closure or consolidation of operating facilities. Impairment of property and equipment
and other current or long-term assets as a result of a restructuring initiative is recognized as a reduction of the appropriate asset.
Refer to Note 5. Restructuring to the Combined Financial Statements.
(k)
Warranties and Guarantees - Expected warranty costs for products sold are recognized based on an estimate of the amount that
will eventually be required to settle such obligations. These accruals are based on factors such as historical experience, warranty period,
and various other considerations. Costs of product recalls, which may include the cost of replacing the product as well as the customer’s
cost of the recall, including labor to remove and replace the recalled part, are accrued as part of the warranty accrual when an obligation
becomes probable and can be reasonably estimated. We periodically adjust these provisions to reflect actual experience and other facts
and circumstances that impact the status of existing claims. Refer to Note 12. Commitments and Contingencies to the Combined Financial
Statements.
(l)
Leases - Lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation
to make lease payments arising from leases. An incremental borrowing rate is used to calculate the present value of the remaining lease
payments.
F-12
Each
contract is reviewed at inception to determine if it contains a lease and whether the lease qualifies as an operating or financing lease.
For short-term leases (leases with a term of one year or less), right-of-use assets or lease liabilities are not recognized in the Combined
Balance Sheets. Operating leases are expensed on a straight-line basis over the term of the lease. In determining the lease term, we
consider the probability of exercising renewal or early termination options. In addition to the monthly base rent, we are often charged
separately for common area maintenance, utilities, and taxes, which are considered non-lease components. These non-lease component payments
are expensed as incurred and are not included in operating lease assets or liabilities.
Right-of-use
assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable
in accordance with our long-lived asset impairment assessment policy. We perform an impairment test primarily utilizing the income method
to estimate the fair value of right-of-use assets, which incorporates Level 3 inputs such as internal business plans, real estate market
capitalization and rental rates, and discount rates. Refer to Note 8. Leases to the Combined Financial Statements.
(m)
Revenue Recognition - We enter into contracts that pertain to products, which are accounted for as separate performance obligations
and are typically one year or less in duration. A contract’s transaction price is allocated to each distinct performance obligation
and recognized as revenue when, or as, the performance obligation is satisfied. For product sales, typically each product sold to a customer
represents a distinct performance obligation. Revenue is measured as the amount of consideration expected to be received in exchange
for our products. We recognize the majority of our revenue from performance obligations that are satisfied at a point in time, generally
when the product has shipped from our facility and control has transferred to the customer. For certain products, it is industry practice
that customers take title to products upon delivery, at which time revenue is then recognized. For contracts with multiple performance
obligations, the Company allocates the contract’s transaction price to each performance obligation based on the relative stand-alone
selling price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation that is not sold
separately. In instances where SSP is not directly observable, the primary method used to estimate the SSP is the expected cost plus
an estimated-margin approach. For services, revenue is recognized ratably over the contract period in an amount that reflects the consideration
expected to be received in exchange for those services as the customer receives such services on a consistent basis throughout the contract
period. Allowances for cash discounts, volume rebates, and other customer incentive programs, as well as gross customer returns, among
others, are recorded as a reduction of sales.
Revenue
is adjusted for variable consideration, which includes customer volume rebates. We measure variable consideration by estimating expected
outcomes using analysis and inputs based upon anticipated performance, historical data, and current and forecasted information. Customer
returns are recorded as a reduction to sales on an actual basis throughout the year and also include an estimate at the end of each reporting
period for future customer returns related to sales recorded prior to the end of the period. We generally estimate customer returns based
upon the time lag that historically occurs between the sale date and the return date, while also factoring in any new business conditions
that might impact the historical analysis such as new product introduction. Measurement of variable consideration is reviewed by management
periodically and revenue is adjusted accordingly. We do not have significant financing components. Sales, use, and value added taxes
collected and remitted to various government authorities are not recognized as revenue and are reported on a net basis. Shipping and
handling fees billed to customers are included in revenue. Refer to Note 4. Revenue Recognition to the Combined Financial Statements.
(n)
Research and Development - We conduct research and development activities, which consist primarily of the development of new
products and solutions as well as enhancements and improvements to existing products that substantially change the product. Research
and development costs primarily relate to employee compensation and consulting fees, which are expensed as incurred.
(o)
Defined Contribution Plans - Certain eligible employees of the Company participate in the various Parent sponsored defined
contribution plans. These plans have various terms depending on the country of employment. For the years ended December 31, 2025, 2024
and 2023, we recognized compensation expense related to the defined contribution plans of $9 million, $10 million and $7 million, respectively.
(p)
Stock-Based Compensation Plans - The principal awards issued under our Parent’s stock-based compensation plans, which are
described in Note 6. Stock-Based Compensation Plans, are restricted stock units (“RSUs”), performance stock units
(“PSUs”) and stock option awards. The cost for such awards is measured at the grant date based on the fair value of the award.
Some awards are issued with a market condition, which are valued on the grant date utilizing a Monte Carlo simulation model. Stock options
are valued on the grant date using the Black-Scholes option pricing model. The Black-Scholes option pricing model and the Monte Carlo
simulation model require estimates of future stock price volatility, expected term, risk-free interest rate, and forfeitures.
F-13
For
all stock-based compensation, the fair value of the award is recognized as expense over the requisite service period (generally the vesting
period of the equity award) and is included in either selling, general and administrative expenses or restructuring, impairment and extinguishment
costs in the Combined Statements of Operations depending on whether the expense relates to our restructuring programs. Our time-based
restricted stock awards are typically subject to graded vesting over a service period, while our performance-or market-based awards are
typically subject to cliff vesting at the end of the service period.
(q)
Pension - A number of the Company’s employees participate in defined benefit pension plans administered and sponsored by
the Parent and the Company. The participation of the Company’s employees in these plans is reflected in the Combined Financial
Statements under the multi-employer approach with a proportionate allocation of net periodic benefit costs associated with the Company
recorded in the Combined Statement of Operations. For the years ended December 31, 2025, 2024 and 2023, the associated costs were immaterial.
The allocated service cost related to these plans is recognized in selling, general and administrative expenses. The allocated interest
costs and allocated expected return on plan assets related to these plans are recognized in other (income) expense, net in the Combined
Statements of Operations.
Certain
plans sponsored by the Parent are only comprised of the Company’s employees. The assets, liabilities and associated costs of the
defined benefit plans in which only the Company’s employees participate are fully reflected in the Combined Financial Statements.
As of December 31, 2025 and 2024, liabilities related to these plans were immaterial and recognized in other liabilities in the Combined
Balance Sheets. Pension related assets and service costs were immaterial. The service cost related to these plans is recognized in selling,
general and administrative expenses. The interest costs and expected return on plan assets related to these plans are recognized in other
(income) expense, net in the Combined Statements of Operations.
(r)
Fair Value Accounting - We classify and disclose assets and liabilities that are carried at fair value in one of the following
three categories:
Level
1- quoted market prices in active markets for identical assets and liabilities
Level
2 - observable market-based inputs or unobservable inputs that are corroborated by market data
Level
3 - unobservable inputs that are not corroborated by market data
Financial
and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the
fair value measurement.
We
conduct business on a multinational basis in a wide variety of foreign currencies. We are exposed to market risks from changes in currency
exchange rates. These exposures may impact future earnings and/or operating cash flows. The exposure to market risk for changes in foreign
currency exchange rates arises from international trade transactions, foreign currency denominated monetary assets and liabilities, and
international financing activities between subsidiaries. We rely on natural offsets to address these market risk exposures. As of December
31, 2025 and 2024, we had no foreign exchange forward or option hedging contracts.
The
carrying amounts of cash and cash equivalents, accounts receivable, other current assets, accounts payable, and accrued liabilities approximate
fair value because of their short-term maturities.
(s)
Foreign Currency Translation and Remeasurement - Assets and liabilities of operations outside the U.S. with a functional currency
other than U.S. dollars are translated into U.S. dollars using year-end exchange rates. Revenue, costs, and expenses are translated at
the average exchange rates in effect during the year. Foreign currency translation gains and losses are included as a component of accumulated
other comprehensive loss, net. Foreign currency remeasurement and transaction gains and losses are included in other (income) expense,
net in the Combined Statements of Operations.
(t)
Advertising Costs - Advertising costs are expensed as incurred. For the years ended December 31, 2025, 2024 and 2023, advertising
costs totaled $13 million, $10 million and $6 million, respectively, and are included in selling, general and administrative expenses.
F-14
(u)
Debt and Debt Issuance Costs - Debt is recorded at initial fair value, which reflects the proceeds received, net of debt
issuance costs. Debt is subsequently stated at amortized cost. Debt issuance costs related to a recognized debt liability are presented
in the Combined Balance Sheets as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts.
The Parent’s third-party long-term debt and the related interest expense have been allocated to the Company for the periods presented
as the Company was jointly and severally liable for such debt. Refer to Note 9. Long-Term Debt to the Combined Financial Statements
for further details.
(v)
Indemnification Agreement - Our Parent separated from Honeywell International Inc. (“Honeywell”) in 2018, becoming
an independently traded public company as a result of a pro rata distribution of our Parent’s common stock to the stockholders
of Honeywell (“the Parent Spin-Off”). In connection with the Parent Spin-Off from Honeywell, our Parent entered into an Indemnification
and Reimbursement Agreement (the “Indemnification Agreement”) pursuant to which our Parent had an obligation to make cash
payments to Honeywell. As the Company is jointly and severally liable for the obligations under the Parent’s agreement with Honeywell,
the expense and liability have been allocated for the periods.
On
July 30, 2025, our Parent entered into a definitive agreement with Honeywell to terminate the Indemnification Agreement. As a result,
our Parent is no longer required to make any further payments to Honeywell under the Indemnification Agreement. Refer to Note 10.
Indemnification Agreement to the Combined Financial Statements for further details.
(w)
Interest Expense and Income - The Company presents interest expense and interest income separately within the Combined Statements
of Operations. Interest expense and interest income arise from the Company’s treasury activities, including related party transactions
with our Parent.
Our
Parent’s interest rate derivative agreements are designated as cash flow hedges with hedge effectiveness assessed at inception
and quarterly thereafter. As the Company is jointly and severally liable for a portion of the Parent’s debt, an allocated portion
of our Parent’s unrealized gains or losses on the related swaps and interest rate hedges were included within the accumulated other
comprehensive loss, net for all periods presented. Refer to Note 17. Interest Expense and Interest Income for additional information.
(x)
Net Parent Investment - The Company’s equity in the Combined Balance Sheets represents the Parent’s net investment
in the Company and is presented as net parent investment. The Combined Statements of Changes in Equity include net cash transfers and
intercompany receivables and payables between the Company and other Parent affiliates. Net parent investment also includes assets and
liabilities that were historically held at the Parent level but are specifically attributable to the Company. Refer to Note 16. Related
Party Transactions for additional information.
(y)
Income Taxes - The Company’s operations have historically been included in the Parent’s combined U.S. and non-U.S.
income tax returns in most locations. The income tax payables and receivables reflected in the financial statements have been recorded
consistently with the stand-alone Company who will retain the income tax payables and receivables on a go forward basis.
Income
tax expense included in the Combined Financial Statements has been calculated following the separate return method, which applies ASC
740, Income Taxes, as if the Company was a stand-alone enterprise and a separate taxpayer for the periods presented. The calculation
of income taxes on a separate return basis requires considerable judgment and the use of both estimates and allocations that affect the
calculation of certain tax liabilities and the determination of the recoverability of certain deferred tax assets, which arise from temporary
differences between the tax and financial statement recognition of revenue and expenses. As a result, the Company’s deferred income
tax rate and deferred tax balances may differ materially from those in Parent’s historical results.
The
provision for income taxes is determined using the asset and liability approach of ASC 740. Under this approach, deferred taxes represent
the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes
result from differences between the financial statement and tax basis of the Company’s assets and liabilities and are measured
using enacted rates in effect for the year in which the temporary differences are expected to be recovered or settled. Valuation allowances
are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The tax carryforwards
reflected in the Company’s Combined Financial Statements have been recorded based on the activity of the Company and may differ
from the historical tax carryforwards of the Parent.
F-15
(z)
Segment Information - We operate as one operating and reportable segment. The segment information is evaluated by the CODM for
the purpose of assessing performance and allocating resources. The Company’s CODM is its Chief Executive Officer. Our CODM utilizes
net income as the primary measure of segment performance because it reflects the underlying business performance and provides the CODM
with a basis for making resource allocation decisions. The CODM uses net income to monitor budget versus actual results, for assessing
performance of the segment and as a component in determining management’s compensation. Our CODM does not utilize assets for making
resource allocation decisions. The CODM does not receive additional expense information beyond what is presented within the Combined
Statements of Operations.
(aa)
Accounting Pronouncements - We consider the applicability and impact of all recent accounting standards updates (“ASU”)
issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and determined to be either
not applicable or are expected to have an immaterial impact on our Combined Financial Statements.
Recent
Adopted Accounting Pronouncements
In
December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which includes amendments that further enhance
income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid
by jurisdiction. We adopted annual requirements under ASU 2023-09 on January 1, 2025 which have been incorporated into Note 14. Income
Taxes to our Combined Financial Statements on a prospective basis.
In
November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU requires
entities to disclose, on an annual and interim basis, significant segment expenses that are regularly reviewed by the CODM and included
within each reported measure of segment profit or loss. The guidance is effective for fiscal years beginning after December 15, 2023,
and interim periods within fiscal periods beginning after December 15, 2024, and requires retrospective application to all prior periods
presented in the financial statements. The Company adopted annual requirements under ASU 2023-07 on January 1, 2024.
Recent
Accounting Pronouncements
In
November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income - Expense Disaggregation Disclosure
(Topic 220): Disaggregation of Income Statement Expenses. This ASU requires entities to disaggregate operating expenses into specific
categories, such as purchases of inventory, employee compensation, depreciation, and amortization, to provide enhanced transparency into
the nature and function of expenses. The guidance is effective for annual reporting years beginning after December 15, 2026 and interim
reporting periods beginning after December 15, 2027. We are currently assessing the impact of adoption on our Combined Financial Statements
and related disclosures.
Note 3.
Acquisitions
2024
On
June 14, 2024, we acquired 100% of the issued and outstanding equity of Snap One Holdings Corp. (“Snap One”), a leading provider
of smart-living products, services, and software to professional integrators, for an aggregate purchase price of $1,405 million. This
acquisition aligns with our strategic objective to expand our distribution network, market presence, and product portfolio within the
smart home and audio-visual sectors, enhancing our competitive positioning in the industry.
The
acquisition was funded by the Parent. The net assets acquired in connection with the acquisition are presented in net transfers from/(to)
Parent in the Combined Statements of Cash Flows. Refer to Note 16. Related Party Transactions for additional information.
F-16
The
acquisition was accounted for using the acquisition method of accounting, and the fair value of the total purchase consideration transferred
was $1,405 million, which included $17 million of non-cash share-based compensation award conversions.
During
the first quarter of 2025, measurement period adjustments were made to income taxes assets and liabilities within the one-year measurement
period. As a result, goodwill related to the acquisition decreased by $5 million, reflecting a net decrease in income tax liabilities.
We subsequently finalized the accounting for the acquisition of Snap One and the following table presents the final fair values of assets
acquired and liabilities assumed as of the date of acquisition.
(in millions)
Assets acquired:
Cash and
cash equivalents
$ 47
Accounts receivable
49
Inventories
240
Other current assets
27
Property, plant and
equipment
63
Goodwill (1)
398
Intangible assets (2)
770
Operating lease right-of-use
assets
61
Other
assets
8
Total assets acquired
1,663
Liabilities assumed:
Accounts payable
48
Accrued liabilities
56
Current portion of operating
lease liabilities
14
Non-current portion
of operating lease liabilities
47
Deferred tax liabilities
71
Other
liabilities
22
Total
liabilities assumed
258
Net
assets acquired
$ 1,405
(1) Of
the $398 million goodwill from the acquisition, $90 million is expected to be tax deductible
over time. Goodwill is comprised of expected synergies for the combined operations and the
assembled workforce acquired in the acquisition.
(2) Includes
customer relationships of $590 million, technology of $110 million, and trademarks of $70
million with weighted average useful lives of 12, 7, and 10 years, respectively.
The
Company expensed approximately $34 million of costs related to the acquisition of Snap One during the twelve months ended December 31,
2024. These costs are included in transaction related expenses in the Combined Statements of Operations and consisted primarily of advisory,
insurance, and legal fees. The Company assumed $21 million of seller success fees which were paid upon the closing of the acquisition.
Snap
One’s contribution in the period post-acquisition for the year ended December 31, 2024 was $553 million of revenue and a $27 million
loss in pre-tax income.
The
Company expensed $9 million of integration costs in connection with the Snap One acquisition during the year ended December 31, 2025.
These costs are recognized in transaction related expenses in the Combined Statements of Operations.
F-17
Unaudited
Pro Forma Financial Information
The following
unaudited pro forma financial information summarizes the results of operations for the periods indicated as if the Snap One acquisition
had been completed on January 1, 2023.
Years
Ended December 31,
(in millions)
2024
2023
Net revenue
$ 4,658
$ 4,631
Net loss
(18 )
(10 )
The
unaudited pro forma financial information includes, where applicable, adjustments for (i) the recognition in cost of goods sold of the
inventory step-up, (ii) amortization expense related to acquired intangible assets, (iii) the recognition of acquisition-related costs
in the year ended December 31, 2023, (iv) associated tax-related impacts of adjustments and (v) other adjustments. These pro forma adjustments
are based on the available information as of the date hereof and upon assumptions that the Company believes are reasonable to reflect
the impact of the acquisition with the Company’s historical financial information on a pro forma basis. Adjustments do not include
costs related to integration activities, cost savings or synergies that have been or may be achieved by the combined business.
Note 4.
Revenue Recognition
Disaggregated
Revenue
We
have a single operating segment: ADI Global Distribution. Disaggregated revenue information for ADI Global Distribution is presented
by region.
A
contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance
obligation is satisfied. For product sales, typically each product sold to a customer represents a distinct performance obligation. We
recognize the majority of our revenue from performance obligations that are satisfied at a point in time. Approximately 1% of our revenue
is satisfied over time. We have current contract liabilities of $28 million and $26 million recognized in accrued liabilities as of December
31, 2025 and 2024, respectively. We have non-current contract liabilities $11 million and $12 million recognized in other liabilities
as of December 31, 2025 and 2024, respectively. The contract liabilities primarily relate to deferred revenues assumed through the acquisition
of Snap One. Additionally, contract assets were not material as of December 31, 2025 and 2024.
The
timing of satisfaction of performance obligations does not significantly vary from the typical timing of payment. For some contracts,
we may be entitled to receive an advance payment.
We
have applied the practical expedient to not disclose the value of remaining performance obligations for (i) contracts with an original
expected term of one year or less or (ii) contracts for which we recognize revenue in proportion to the amount we have the right to invoice
for services performed.
The
following tables present revenue by geographic location and product type, as we believe this presentation best depicts how the nature,
amount, timing, and uncertainty of net revenue and cash flows are affected by economic factors:
Years
Ended December 31,
(in millions)
2025
2024
2023
Americas (1)
$ 4,189
$ 3,680
$ 3,085
International (2)
595
517
485
Total net revenue
$ 4,784
$ 4,197
$ 3,570
(1) Americas
represents North, Central and South America.
(2) International
represents all geographies that are not included in Americas.
Years
Ended December 31,
(in millions)
2025
2024
2023
Third-party brands
$ 3,942
$ 3,673
$ 3,436
Exclusive brands
842
524
134
Total net revenue
$ 4,784
$ 4,197
$ 3,570
F-18
Note 5.
Restructuring
Restructuring,
impairment and extinguishment costs consist of the following:
Years
Ended December 31,
(in millions)
2025
2024
2023
Restructuring expenses
$ 8
$ 21
$ 7
Impairment and extinguishment
costs
1
1
6
Total restructuring,
impairment and extinguishment costs
$ 9
$ 22
$ 13
We
took restructuring actions, including capturing synergies from our Snap One acquisition, to align our cost structure based on our strategic
objectives and our outlook of market conditions. The intent of these actions is to lower costs, increase margins, and position us for
long-term growth. We expect to execute on our restructuring programs over the next 12 months, and the estimated cost of these remaining
actions is approximately $4 million. We may incur additional restructuring expenses associated with these plans or new plans in the future.
Impairment
losses are reflected as reductions to the carrying amount of the related assets with corresponding losses recognized in the Combined
Statements of Operations. Debt extinguishment costs represent Corporate allocated costs associated with third-party debt.
The
following table summarizes the status of our restructuring expenses included within accrued liabilities on the Combined Balance Sheets:
December
31,
(in millions)
2025
2024
Beginning of year
$ 9
$ 3
Charges
8
21
Usage (1)
(13 )
(15 )
End of year
$ 4
$ 9
(1) Usage
primarily relates to cash payments and shares issued associated with employee termination
costs.
Note 6.
Stock-Based Compensation Plans
The
Parent’s Stock Incentive Plan, which consists of the Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc.
and its Affiliates and the 2018 Stock Incentive Plan for Non-Employee Directors of Resideo Technologies, Inc., provides for the grant
of stock options, stock appreciation rights, restricted stock units, restricted stock, and other stock-based awards.
Our
stock-based compensation expense was $27 million, $28 million and $15 million, for the years ended December 31, 2025, 2024 and 2023,
respectively. Stock-based compensation expense is included in either selling, general and administrative expenses or restructuring, impairment
and extinguishment cost in the Combined Statements of Operations based on the nature of the expense. Stock-based compensation expense
recorded in selling, general and administrative expenses was $25 million, $23 million and $15 million for the years ended December 31,
2025, 2024 and 2023, respectively. Stock-based compensation expense recorded in restructuring, impairment and extinguishment costs was
$2 million, $5 million and $0 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Restricted
Stock Unit and Performance Stock Unit Activity
RSUs
are issued to certain key employees and to non-employee directors. These awards entitle the holder to receive one share of the Parent’s
common stock for each unit upon vesting. RSUs typically become fully vested over a three-year period following the grant date; however,
RSU awards granted to our non-employee directors have a one-year service period. We measure stock-based compensation expense based on
the estimated fair value of the award at the grant date.
F-19
PSUs
are issued to certain key employees. These awards entitle the holder to receive a specified number of our common stock, dependent on
our financial metrics or market conditions, for each unit upon vesting. The number of shares of the Parent’s common stock that
may ultimately be issued as settlement for each award may range from 0% to 200% of the target award, subject to the achievement of the
Parent’s market-based Total Shareholder Return (“TSR”) relative to the performance of the S&P SmallCap 600 Index
over a three-year performance period for a portion of the PSUs. A portion of the PSUs granted in 2025 are separately subject to the achievement
of a performance-based return on invested capital (“ROIC”). PSUs typically vest at the end of a three-year period and upon
achievement of the performance target.
The
fair value of market-based PSUs based on relative TSR was estimated using a Monte Carlo simulation model. For PSUs issued during the
years ended December 31, 2025, 2024 and 2023, the calculation of the fair value of these awards was calculated using the following assumptions:
Years
Ended December 31,
2025
2024
2023
Expected volatility
45.2 %
45.9 %
63.4 %
Risk-free interest rate %
4.3 %
4.2 %
4.2 %
Expected term (in years)
2.88
2.90
2.88
Dividend yield (1)
—
— %
— %
(1) The
Parent has never declared or paid any cash dividends on its common stock and does not intend
to pay cash dividends on its common stock.
The
following table summarizes activity related to our Parent’s Stock Incentive Plan for ADI employees:
PSUs
(1)
RSUs
(in thousands except for per share amounts)
Number
of
Performance
Stock Units
Weighted
Average
Grant Date
Fair Value
Per Share
Number
of
Restricted
Stock Units
Weighted
Average
Grant Date
Fair Value
Per Share
Non-vested as of January 1, 2025
206
$ 29.69
2,413
$ 20.50
Granted
42
26.09
586
21.76
Vested
(45 )
36.11
(1,157 )
20.52
Forfeited
(30 )
36.11
(182 )
20.64
Non-vested as of December 31, 2025
173
25.97
1,660
21.09
(1) Includes
PSUs at target payout. Final common shares issued may be different based upon the actual
achievement versus the performance measure target.
As
of December 31, 2025, unrecognized compensation cost related to unvested awards granted to employees under the Parent’s Stock Incentive
Plan is as follows:
As
of December 31, 2025
(in millions)
Unrecognized
Compensation Cost
Weighted-Average
Period
RSUs
$ 23
1 year, 9 months
PSUs
2
1 year, 1 month
Total
unrecognized compensation cost
$ 25
F-20
The
fair value of shares vested is as follows:
Years
Ended December 31,
(in millions)
2025
2024
2023
RSUs
$ 32
$ 16
$ 5
PSUs
1
-
3
Total
$ 33
$ 16
$ 8
Stock
Options
Stock
option awards entitle the holder to purchase shares of our Parent’s common stock at a specific price when the options vest. Stock
options typically vest over 3 years from the date of grant and expire 7 years from the grant date. There were no stock options granted
to employees during the twelve months ended December 31, 2025, 2024 and 2023. For the year ended December 31, 2023, there were no stock
options expired or exercised during the year.
The
following table summarizes stock option activity related to the Parent’s Stock Incentive Plan:
Stock
Options
Number
of Stock
Options (in
thousands)
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Life
Aggregate
Intrinsic
Value (1)
(in millions)
Stock
options outstanding and exercisable as of December 31, 2024
173
$ 11.72
2.0 years
$ 2
Exercised
(65 )
15.97
1
Stock options outstanding
and exercisable as of December 31, 2025
108
$ 10.27
1.1 years
$ 3
(1) Represents
the total intrinsic value (the difference between the fair market value of our Parent’s
common stock as of the relevant date and the exercise price, multiplied by the number of
in-the-money service-based common stock options) that would have been received by the option
holders had all option holders exercised their options on the relevant date. This amount
is subject to change based on changes to the fair market value of our Parent’s common
stock.
For
the years ended December 31, 2025, 2024 and 2023, there was no unrecognized compensation cost related to stock options granted under
the Parent’s Stock Incentive Plan as all stock options were fully vested. Cash received from stock options exercised was not material
for all periods presented.
Note 7.
Goodwill and Other Intangible Assets, net
Our
goodwill balance and changes in carrying value is as follows:
(in millions)
Goodwill
Balance as of January 1, 2024
$ 660
Acquisitions (1)
403
Impact
of foreign currency translation
(8 )
Balance as of December
31, 2024
$ 1,055
Adjustments (1)
(5 )
Impact
of foreign currency translation
16
Balance as of December 31, 2025
$ 1,066
(1) Refer
to Note 3. Acquisitions for additional information.
F-21
All
intangible assets are subject to amortization. These intangible assets consist of the following:
December
31, 2025
(in millions)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Useful
Lives
Weighted
Average
Amortization
Patents and technology
$
110
$
(28
)
$
82
5 - 10 years
7 years
Customer relationships
675
(140
)
535
7 - 15 years
12 years
Trademarks
74
(15
)
59
10 years
10 years
Software
109
(41
)
68
3 - 7 years
5 years
Total
intangible assets
$
968
$
(224
)
$
744
December
31, 2024
(in millions)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Useful
Lives
Weighted
Average
Amortization
Patents and technology
$ 110
$ (10 )
$ 100
5 - 10 years
7 years
Customer relationships
675
(87 )
588
7 - 15 years
12 years
Trademarks
74
(8 )
66
10 years
10 years
Software
81
(25 )
56
3 - 5 years
5 years
Total
intangible assets
$ 940
$ (130 )
$ 810
Intangible
assets are amortized on a straight-line basis or a basis consistent with the expected future cash flows over their expected useful lives.
Intangible asset amortization expense was $95 million, $55 million and $13 million during the years ended December 31, 2025, 2024 and
2023, respectively. Refer to Note 16. Related Party Transactions for the allocation of corporate costs related to intangible asset
amortization.
The estimated
aggregate amortization on these intangible assets for each of the next five years as of December 31, 2025 is as follows:
(in millions)
Amortization
Expense
2026
$ 95
2027
$ 89
2028
$ 86
2029
$ 76
2030
$ 66
Note 8.
Leases
We
are party to operating leases for the majority of our stores, distribution centers, offices, engineering sites, automobiles, and certain
equipment. Certain real estate leases include variable rental payments which adjust periodically based on inflation. Other variable amounts
paid under operating leases, such as taxes and common area maintenance, are charged to selling, general and administrative expenses as
incurred. Generally, lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Operating
lease expense was $68 million, $52 million and $40 million recognized in selling, general and administrative expenses for the years ended
December 31, 2025, 2024 and 2023, respectively.
Total
operating lease costs include variable lease costs of $15 million, $12 million and $8 million recognized in selling, general and administrative
expenses for the years ended December 31, 2025, 2024 and 2023, respectively.
F-22
The following
table summarizes the carrying amounts of our operating leased assets and liabilities along with key inputs used to discount our lease
liabilities:
December
31,
(in millions, except weighted-average
data)
2025
2024
Operating lease right-of-use assets
$ 236
$ 166
Current portion of operating lease liabilities
$ 37
$ 33
Non-current portion of operating lease liabilities
$ 209
$ 140
Weighted-average remaining term
7.17
years
6.05
years
Weighted-average incremental borrowing rate
5.98 %
5.95 %
The
following table summarizes our future minimum lease payments under our non-cancelable leases as of December 31, 2025:
(in millions)
Commitments
2026
$ 49
2027
47
2028
42
2029
35
2030
30
Thereafter
104
Total lease payments
307
Less:
Imputed interest
(61 )
Present value of operating
lease liabilities
$ 246
Supplemental
cash flow information related to operating leases is as follows:
Years
Ended December 31,
(in millions)
2025
2024
2023
Cash paid for operating lease liabilities
$ 45
$ 25
$ 17
Non-cash
activities: operating lease assets obtained in exchange for new operating lease liabilities (1)
$ 101
$ 94
$ 10
(1) The
year ended December 31, 2024 includes $61 million of operating lease assets acquired from
the Snap One acquisition.
As
of December 31, 2025 we have additional operating leases that have not yet commenced. Obligations under these leases are not material.
Note 9.
Long-Term Debt
Our
Parent is the obligor of multiple third-party debt instruments for which subsidiaries of the Company are also jointly and severally liable.
Accordingly, a portion of the Parent’s long-term debt and short-term debt was allocated to the Company for the years ended December
31, 2025 and 2024 as the Company was jointly and severally liable for such debt. The related interest expense and unamortized deferred
financing costs and loss on extinguishments on the debt have been allocated to the Company for the periods presented. Given the lack
of a contractual agreement for the Company to pay a specified amount to Parent (i.e., its co-obligors), the allocation basis was determined
based on what the Company would reasonably expect to pay on behalf of its co-obligors. No payments were made by the Company to third-party
creditors as payments are made by Parent historically and in each reporting period.
F-23
The
outstanding debt of Resideo and the allocations of debt to ADI as of December 31, 2025 and 2024 were as follows:
December
31, 2025
December
31, 2024
(in millions)
Allocation
to
ADI
Total
Resideo
Allocation
to
ADI
Total
Resideo
4.000% Senior Notes due 2029
$ 112
$ 300
$ 72
$ 300
6.500% Senior Notes due 2032
224
600
144
600
Variable rate A&R
Term B Facility
$ 871
$ 2,331
$ 266
$ 1,115
Gross debt
1,207
3,231
482
2,015
Less: current portion of long-term debt (1)
$ (7 )
$ (18 )
(2 )
(6 )
Less: unamortized deferred
financing costs
(15 )
(46 )
(5 )
(26 )
Total long-term debt
$ 1,185
$ 3,167
$ 475
$ 1,983
(1) Included
within accrued liabilities on the Combined Balance Sheets.
A&R
Credit Agreement
Resideo
(“Borrower”) entered into the A&R Credit Agreement to provide an initial seven- year senior secured Term B loan facility
in an aggregate principal amount of $950 million with a maturity date of February 2028. In March 2022, the Borrower amended the A&R
Credit Agreement adding $200 million in additional term loans. In June 2023, the Borrower amended the A&R Credit Agreement to replace
the interest rate reference rate of LIBOR with the secured overnight financing rate (SOFR). Included in the A&R Term B Facility is
a five-year senior secured revolving credit facility in an aggregate capacity of $500 million (the A&R Revolving Credit Facility
and, together with the A&R Term B Facility, the “A&R Senior Credit Facilities”).
In
May 2024, the A&R Term B Facility was amended to (i) reduce the interest rate margin from 2.25% to 2.00%, (ii) eliminate the SOFR
credit spread adjustment, and (iii) reduce the SOFR floor from 0.50% to 0%.
In
June 2024, the Borrower further amended the A&R Credit Agreement to add $600 million of term loans with a maturity date of May 2031
to partially finance the acquisition of Snap One. The Borrower also extended the term of the A&R Revolving Credit Facility for a
new five-year term.
In
July 2024, the Borrower issued $600 in aggregate principal of 6.50% Senior Notes due 2032 (“Senior Notes due 2032”). The
issue price of the Senior Notes due 2032 was equal to 100% of the principal amount. The net proceeds from the Senior Notes due 2032 were
used to repay $596 principal amount of outstanding indebtedness under the Company’s A&R Term B Facility.
In
December 2024, the A&R Term B Facility was further amended to reduce the interest rate margin from 2.00% to 1.75%.
In
August 2025, the A&R Credit Agreement was further amended. Borrower issued $1,225 million of incremental term loans which mature
in August 2032. Net proceeds of $1,198 million were primarily used to fund the termination of the Indemnification Agreement. Refer to
Note 10. Indemnification Agreement to the Combined Financial Statements for further discussion.
As
a result of the August 2025 amendment, the A&R Term B Facility bears interest at a rate per annum based on Term SOFR plus an interest
rate margin of 2.00% per annum. As of December 31, 2025 and December 31, 2024, the weighted average interest rate on the A&R Term
B Facility, excluding the impact of the interest rate swaps, was 5.76% and 6.13%, respectively.
The
Borrower is obligated to make quarterly principal payments throughout the term of the A&R Term B Facility according to the amortization
provisions in the A&R Credit Agreement. In addition to paying interest on outstanding borrowings under the A&R Revolving Credit
Facility, the Borrower is required to pay a quarterly commitment fee between 0.25% and 0.35% based on the unused portion of the A&R
Revolving Credit Facility depending on the Borrower’s consolidated leverage ratio. Up to $75 million may be utilized under the
A&R Revolving Credit Facility for the issuance of letters of credit to the Borrower or any of the Borrower’s subsidiaries.
There were no outstanding borrowings and no letters of credit issued under the A&R Revolving Credit Facility.
F-24
The
A&R Credit Agreement includes customary affirmative and negative covenants and reporting requirements, including limitations on indebtedness,
liens, investments, and other restricted transactions. All obligations under the A&R Credit Agreement are unconditionally guaranteed
jointly and severally by the Borrower and substantially all of the direct and indirect wholly owned subsidiaries of the Borrower that
are organized under the laws of the U.S. (collectively, the “Guarantors”). The A&R Credit Agreement is secured on a first
priority basis by the equity interests of each direct subsidiary of the Borrower, as well as the tangible and intangible personal property
and material real property of the Borrower and each of the Guarantors. As of December 31, 2025, the Borrower is in compliance with
all covenants.
Senior
Notes
In
August 2021, the Borrower issued $300 million in principal amount of 4.00% Senior Notes due 2029 (“Senior Notes due 2029”).
In
July 2024, the Borrower issued $600 million in aggregate principal of Senior Notes due 2032 (“Senior Notes due 2032” and
together with the Senior Notes due 2029, the “Senior Notes”).
The
Senior Notes are senior unsecured obligations of our Parent guaranteed by or Parent’s existing and future domestic subsidiaries
and rank equally with all of our Parent’s senior unsecured debt and senior to all of Parent’s subordinated debt. The Senior
Notes limit the Borrower and restricted subsidiaries’ ability to, among other things, incur additional secured indebtedness; enter
into certain sale and leaseback transactions; incur liens; and consolidate, merge or sell all or substantially all of its assets. These
covenants are subject to a number of limitations and exceptions. Additionally, upon certain events constituting a change of control together
with a ratings downgrade, the holders of the Senior Notes have the right to require the Borrower to offer to repurchase the Senior Notes
at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, to (but not including) the date of purchase.
Interest
Expense Allocation
Interest
expense of Resideo and allocations of interest expense to ADI for the years ended December 31, 2025, 2024 and 2023 is as follows:
Year
Ended
December 31, 2025
(in millions)
Allocation
to
ADI
Total
Resideo
Interest expense
$ 42
$ 150
Amortization of deferred
financing costs
2
6
Total
interest expense allocation
$ 44
$ 156
Year
Ended
December 31, 2024
(in millions)
Allocation
to
ADI
Total
Resideo
Interest expense
$ 28
$ 118
Amortization of deferred
financing costs
1
4
Total
interest expense allocation
$ 29
$ 122
Year
Ended
December 31, 2023
(in millions)
Allocation
to
ADI
Total
Resideo
Interest expense
$ 19
$ 98
Amortization of deferred
financing costs
1
3
Total
interest expense allocation
$ 20
$ 101
F-25
Note 10.
Indemnification Agreement
Our
Parent separated from Honeywell in 2018, becoming an independently traded company as a result of a pro rata distribution of our Parents
common stock to the stockholders of Honeywell (“the Parent Spin-Off”). In connection with the Parent Spin-Off from Honeywell,
our Parent entered into an Indemnification Agreement pursuant to which our Parent has an obligation to make cash payments associated
with Honeywell’s environmental liabilities which were capped at $140 million annually. Prior to the Parent entering into a definitive
agreement with Honeywell to terminate the Indemnification Agreement, the Indemnification Agreement extended until the earlier of (1)
December 31, 2043; or (2) December 31 of the third consecutive anniversary where the annual reimbursement obligation (including accrued
amounts) has been less than $25 million.
Subsidiaries
of the Company are jointly and severally liable for our Parent’s obligations for the Indemnification Agreement. As such, an allocated
portion of our Parent’s Indemnification Agreement expenses are presented within Indemnification Agreement expense in the Combined
Statements of Operations. A portion of the associated liability is presented within current portion of obligations payable under Indemnification
Agreement and obligations payable under Indemnification Agreements in the Combined Balance Sheet as of December 31, 2024, as the Company
was jointly and severally liable for such agreement until our Parent entered into an agreement with Honeywell in the third quarter of
2025 to terminate it as discussed under “Termination Agreement” below. Given the lack of a contractual agreement for the
Company to pay a specified amount to Parent (i.e., its co-obligors), the allocation basis was determined based on what the Company would
reasonably expect to pay on behalf of its co-obligors. No payments were made by the Company to Honeywell as payments were made by Parent
historically in each applicable reporting period.
Termination
Agreement
On
July 30, 2025, our Parent entered into a definitive agreement with Honeywell to terminate the Indemnification Agreement (“Termination
Agreement”). Our Parent made a pre-tax, one-time cash payment of $1,590 million to Honeywell, which occurred in the third quarter
of 2025. In addition, our Parent also paid a regularly scheduled payment of $35 million in the first, second and third quarters of 2025.
Upon completion of the pre-tax, one-time cash payment, the Indemnification Agreement was fully terminated. Our Parent is no longer required
to make any further payments to Honeywell under the Indemnification Agreement and the associated affirmative and negative covenants will
no longer apply. As a result of the Termination Agreement, our Parent recorded $972 million in pre-tax expense in 2025. As of December
31, 2025, the liability in connection with the Indemnification Agreement was fully repaid and is not presented in the Combined Balance
Sheet. As the subsidiaries of the Company are jointly and severally liable for our Parent’s obligations during the periods the
obligations were outstanding, an allocated portion of the expense is presented within Indemnification Agreement expense, net in the Combined
Statements of Operations.
The
allocated portion of the Indemnification Agreement is as follows:
(in millions)
Allocation
to
ADI
Total
Resideo
Balance as of January 1, 2024
$ 243
$ 652
Allocation of accruals
for liabilities deemed probable and reasonably estimable
79
211
Change
in Honeywell obligation
(52 )
(140 )
Balance as of December 31, 2024
270
723
Allocation of accruals for liabilities deemed
probable and reasonably estimable
364
972
Change in Honeywell
obligation
(634 )
(1,695 )
Balance as of December 31, 2025
$ -
$ -
F-26
The
allocated portion of the liabilities related to the Indemnification Agreement included in the following balance sheet accounts are as
follows:
December
31, 2024
(in millions)
Allocation
to
ADI
Total
Resideo
Current portion of Obligations
payable under Indemnification Agreement
$ 52
$ 140
Obligations payable
under Indemnification Agreement
218
583
Total
Indemnification Agreement liability
$ 270
$ 723
As
of December 31, 2025, the liability in connection with the Indemnification Agreement was fully repaid and is not presented in the Combined
Balance Sheet.
The
portion of the Indemnification Agreement expense allocated to the Company is presented within Indemnification Agreement expense account
in the Combined Statements of Operations.
Indemnification
Agreement expense allocated to ADI for the years ended December 31, 2025, 2024 and 2023 are as follows:
Indemnification
Agreement Expense
(in millions)
Allocation
to
ADI
Total
Resideo
Year Ended December 31, 2025
$ 364
$ 972
Year Ended December 31, 2024
79
211
Year Ended December 31, 2023
67
178
Note 11.
Accrued Liabilities
Accrued
liabilities consist of the following:
December
31,
(in millions)
2025
2024
Compensation, benefit and other
employee-related
45
45
Deferred revenue
28
25
Customer rebate reserve
20
12
Other (1)
82
82
Total
accrued liabilities
$ 175
$ 164
(1) Other
includes current portion of long-term debt, accruals for sales allowances, interest, advertising,
taxes payable, product warranties, freight payable, restructuring, rent, travel, professional
fees, legal reserves and other reserves.
Note 12.
Commitments and Contingencies
Other
Matters
We
are subject to lawsuits, investigations and disputes arising out of the conduct of our business, including matters relating to commercial
transactions, government contracts, product liability, acquisitions and divestitures, employee matters, intellectual property, and environmental,
health, and safety matters. We recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We
continually assess the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses,
based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. No such matters
are material to our financial statements.
F-27
Warranties
and Guarantees
In
the normal course of business, we issue product warranties and product performance guarantees. We accrue for the estimated cost of product
warranties and product performance guarantees based on contract terms and historical experience at the time of sale. Adjustments to initial
obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. Product warranties and
product performance guarantees are included in accrued and other liabilities.
The
following table summarizes information concerning recorded obligations for product warranties and product performance guarantees:
December
31,
(in millions)
2025
2024
Beginning balance
$ 10
$ -
Accruals for warranties/guarantees
issued during the year (1)
13
16
Settlement/adjustment
of warranty/guarantee claims
(14 )
(6 )
Ending balance
$ 9
$ 10
(1) For
the years ended December 31, 2025 and 2024 the increase is primarily due to warranties and
guarantees assumed through the acquisition of Snap One.
Purchase
Commitments
Our
unconditional purchase obligations include purchase commitments with suppliers and other obligations entered into during the normal course
of business regarding the purchase of goods and services. For the years ended December 31, 2025, 2024 and 2023, purchases related to
these obligations were $98 million, $98 million and $20 million, respectively.
The following
table summarizes the future aggregate payments on these obligations as of December 31, 2025:
(in millions)
Payments
2026
78
2027
-
2028
-
2029
-
2030 and thereafter
-
Total
$ 78
Note 13.
Other (Income) Expense, net
Other (income)
expense, net consists of the following:
Years
Ended December 31,
(in millions)
2025
2024
2023
Foreign exchange translation (gain)/loss
$ (3 )
$ 3
$ (9 )
Pension interest cost and expected return
1
1
3
Other, net
-
-
1
Total
other (income) expense, net
$ (2 )
$ 4
$ (5 )
Note 14.
Income Taxes
Income
tax expense is based on pretax financial accounting income. Deferred income taxes are recognized for the temporary differences between
the recorded amounts of assets and liabilities for financial reporting purposes and such amounts for income tax purposes.
F-28
The
following is a summary of the components of income (loss) before provision for income taxes:
Years
Ended December 31,
(in millions)
2025
2024
2023
U.S.
$ (270 )
$ (16 )
$ 86
Non-U.S.
20
23
26
Total
$ (250 )
$ 7
$ 112
The components
of the provision for income taxes consisted of the following for the year ended December 31, 2025:
(in millions)
Year
Ended
December 31, 2025
Current:
U.S. federal
$ -
U.S. state
and local
4
Non-U.S.
8
Total
current
12
Deferred:
U.S. federal
(1 )
U.S. state and local
(1 )
Non-U.S.
1
Total
deferred
(1 )
Total income tax expense:
U.S. federal
-
U.S. state and local
2
Non-U.S.
9
Total
income tax expense
$ 11
The components
of the provision for income taxes consisted of the following for the years ended December 31, 2024 and 2023, respectively:
Years
Ended December 31,
(in millions)
2024
2023
Current:
U.S.
$ 28
$ 40
Non-U.S.
11
11
Total
current
39
51
Deferred:
U.S.
(13 )
(1 )
Non-U.S.
(1 )
-
Total
deferred
(14 )
(1 )
Total provision
$ 25
$ 50
F-29
The reconciliation
of income tax computed at the U.S. federal statutory tax rate to the effective income tax rate is as follows for 2025:
Year
Ended December 31, 2025
(in millions)
$
%
U.S. federal statutory income tax
rate
$ (52 )
21.0 %
State and local income tax, net of federal
(national) income tax effect (1)
2
(0.6 )
Foreign Tax Effects
5
(1.9 )
Effect of Cross-Border Tax Laws
-
-
Tax Credits
(1 )
0.4
Nontaxable or Nondeductible Items
Non-deductible indemnification
costs
76
(30.6 )
Interest expense deduction
(23 )
9.2
§162(m) excess
officer compensation
2
(0.8 )
Other Nondeductible
Expenses
1
(0.3 )
Other Adjustments
1
(0.5 )
Effective
income tax rate
$ 11
(4.2 )%
(1) State
Taxes in California, New York, New Jersey, Florida, Georgia, Pennsylvania, and Maryland made
up the majority (greater than 50%) of the tax effect in this category.
The reconciliation
of income tax computed at the U.S. federal statutory tax rate to the effective income tax rate is as follows for 2024 and 2023:
Years
Ended December 31,
(in millions)
2024
2023
U.S. federal statutory income
tax rate
21.0 %
21.0 %
Impact of foreign operations
21.9
1.2
U.S. state income taxes
46.0
7.0
Non-deductible indemnification costs
196.1
11.2
Executive compensation over $1 million
13.7
0.6
U.S. taxation of foreign earnings
9.2
0.6
Tax credits
(26.2 )
-
Change in valuation allowance
47.0
2.4
Non-taxable income items
(4.0 )
(0.1 )
Other non-deductible expenses
3.8
0.3
All other items,
net
(0.8 )
(0.4 )
Effective income
tax rate
327.7 %
43.8 %
F-30
Deferred
income taxes reflect the net impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting
purposes and such amounts recognized for income tax purposes. The tax effects of the temporary differences as of December 31, 2025 and
2024 are as follows:
December
31,
(in millions)
2025
2024
Deferred tax assets:
Operating
lease liabilities
$ 62
$ 44
Employee compensation
and related reserves
8
11
Inventory costing and
related reserves
14
10
Capitalized research
and development
-
36
Other accruals and reserves
18
19
§163(j) carryforward
23
-
Net operating losses,
capital losses, and tax credits
58
47
Other
5
5
Gross deferred tax assets
189
172
Valuation
allowance
(24 )
(24 )
Total deferred tax assets
$ 165
$ 148
Deferred tax liabilities:
Intangibles
$ (142 )
$ (150 )
Property, plant and
equipment
(13 )
(11 )
Operating lease assets
(60 )
(42 )
Other
(6 )
(5 )
Total deferred tax liabilities
$ (220 )
$ (208 )
Net deferred tax liabilities
$ (55 )
$ (60 )
Valuation
allowance
In
assessing the need for a valuation allowance, we consider whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. We evaluate our ability to realize the tax benefits associated with deferred tax assets by analyzing
the relative impact of all the available positive and negative evidence regarding our forecasted taxable income using both historical
and projected future operating results, the reversal of existing taxable temporary differences, taxable income in prior carry-back years
(if permitted), and the availability of tax planning strategies. The ultimate realization of deferred tax assets is dependent upon the
generation of certain types of future taxable income during the periods in which those temporary differences become deductible. In making
this assessment, we consider the scheduled reversal of deferred tax liabilities, our ability to carry back the deferred tax asset, projected
future taxable income, and tax planning strategies. A valuation allowance is recorded in each jurisdiction when it is more likely than
not that the deferred income tax asset will not be realized. Changes in deferred tax asset valuation allowances typically impact income
tax expense.
We
maintain a valuation allowance of $24 million against a portion of deferred tax assets. Valuation allowances principally relate to foreign
net operating loss carryforwards. As of December 31, 2025, we have deferred tax assets relating to foreign net operating loss carryforwards
of $16 million. These tax losses can be carried forward to offset the income tax liabilities on future income in these countries. Cumulative
tax losses of $13 million can be carried forward indefinitely, while the remaining $3 million of tax losses must be used during tax years
2025 to 2045.
The rollforward
of the valuation allowance on deferred taxes is as follows for the periods indicated:
December
31,
(in millions)
2025
2024
Beginning balance
$ 24
$ 10
Additions
-
14
Ending balance
$ 24
$ 24
As
of December 31, 2025, our total undistributed earnings of foreign affiliates were $84 million, of which $20 million was not considered
indefinitely reinvested. While these earnings would not be subject to incremental U.S. tax, if we were to actually distribute these earnings,
they could be subject to additional foreign income taxes and/or withholding taxes payable in foreign jurisdictions. Thus, we provide
for foreign income taxes payable upon future distributions of the earnings not considered indefinitely reinvested annually. For the year
ended December 31, 2025, the tax charge related to earnings that are not considered indefinitely reinvested is not material. Determination
of the unrecognized deferred foreign income tax liability related to these undistributed earnings is not practicable due to the complexities
associated with this hypothetical calculation.
F-31
Uncertain
tax positions
The
following table displays the gross unrecognized tax benefit as a result of uncertain tax positions, excluding interest and penalties
for the years ended December 31, 2025, 2024 and 2023. It is not anticipated that the total unrecognized tax benefits will change significantly
within the next twelve months.
Years
Ended December 31,
(in millions)
2025
2024
2023
Unrecognized tax benefits at beginning
of year
$ 5
$ -
$ -
Acquisitions
-
5
-
Unrecognized tax benefits
at end of year
$ 5
$ 5
$ -
Included
in the balance of unrecognized tax benefits as of December 31, 2025 and 2024 are potential benefits of $5 million that if recognized
would affect the effective tax rate.
We
report accrued interest and penalties related to unrecognized tax benefits in income tax expense. For the years ended December 31, 2025
and 2024, we recognized no net expense for interest and penalties related to unrecognized tax benefits nor were there any related accruals.
Any
movement which impacts the Combined Statements of Operations for an unrecognized tax benefit that is not conveying with the Company in
the Transaction is settled to net parent investment. For the years ended December 31, 2025, 2024 and 2023, no amount impacts the Combined
Statements of Operations.
Cash
paid for taxes
(in millions)
Year
Ended
December 31, 2025
U.S. federal
$ -
U.S. state and local
2
Foreign
Canada
7
Other foreign jurisdictions
2
Total
income tax payments, net of refunds expense
$ 11
The
Company paid $13 million and $11 million of income taxes, net of refunds during the years ended December 31, 2024 and 2023, respectively.
Note 15.
Geographic Areas - Financial Data
Revenue and
long-lived assets by geography are as follows:
Net
Revenue (1)
Long-Lived
Assets (2)
Years
Ended December 31,
December
31,
(in millions)
2025
2024
2023
2025
2024
U.S.
$ 3,883
$ 3,402
$ 2,829
$ 288
$ 218
Europe
538
502
468
33
28
Other International
363
293
273
22
15
Total
$ 4,784
$ 4,197
$ 3,570
$ 343
$ 261
(1) Net
revenue is classified according to its country of origin.
(2) Long-lived
assets are comprised of property, plant and equipment, net and right-of-use lease assets.
F-32
Note 16.
Related Party Transactions
Allocations
of Corporate Costs
The
Combined Financial Statements reflect allocations of certain expenses from Parent, including, but not limited to, corporate executives,
finance, legal, audit, mergers and acquisitions, human resources, information technology, insurance, employee benefits, costs associated
with the Spin-off and other expenses that are either specifically identifiable or clearly applicable to the Company. The allocation methods
used include relative percentage of segment operating income, headcount, and other methods that considered the relative time spent based
on internal resources. Management believes that the methods used to allocate expenses to the Company are reasonable; however, the allocations
may not be indicative of actual expenses that would have been incurred had we operated as an independent, publicly traded company for
the periods presented. Actual costs that the Company may have incurred had it been a stand-alone company would depend on a number of
factors, including the chosen organizational structure, whether functions were outsourced or performed by our employees and strategic
decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure.
Amounts
recorded in selling, general and administrative expenses were $49 million, $76 million and $47 million for the years ended December 31,
2025, 2024 and 2023, respectively.
Amounts
recorded in transaction related expenses were $7 million for the year ended December 31, 2025 and relate to costs incurred by our Parent
associated with the Spin-off. There were no allocated transaction related expenses in the years ended December 31, 2024 and 2023.
Amounts
recorded in intangible asset amortization were $1 million, $2 million and $2 million for the years ended December 31, 2025, 2024 and
2023, respectively.
Transactions
with Parent
Our
intercompany arrangements between the Company and Parent are included within these Combined Financial Statements consist of receivables
and payables arising from trade transactions as well as related party loan balances associated with the participation of certain of our
subsidiaries in the Parent’s centralized cash management programs. Additionally, we have intercompany loans with the Parent and
certain of its subsidiaries. Activity related to loans receivables and payables is presented in the Combined Statement of Cash Flows
in investing activities and financing activities, respectively.
During
the year ended December 31, 2025, certain amounts due from our Parent outstanding as of December 31, 2024 were contributed to our Parent
as equity transactions and reflected as a decrease in net parent investment. The total was $53 million and was comprised of related party
loans due from our Parent of $185 million and cash pooling arrangement balances due to our Parent of $132 million. This activity is reflected
in other non-cash investing and financing activities in the net transfers (to)/from Parent table.
During
the normal course of operations, the Company makes inventory purchases from Parent. During the years ended December
31, 2025, 2024 and December 31, 2023, the Company purchased $175 million, $195 million and $285 million of inventory from
Parent, respectively. Certain purchases are cash settled and reflected net on the Combined Balance Sheets within due to related
parties - current of $1 million and $4 million as of December 31, 2025 and 2024, respectively.
Our
payable balance pursuant to the cash pooling arrangements, presented net as due to related parties - current in the Combined Balance
Sheets, was $67 million and $185 million as of December 31, 2025 and 2024, respectively. Cash pooling arrangements between the Company
and Parent that are not anticipated to be cash settled are reflected in net parent investment in the Combined Balance Sheets and totaled
$71 million and $105 million as of December 31, 2025 and 2024. Our receivable balance pursuant to the intercompany loans,
presented net within due from related parties - non-current on the Combined Balance Sheets, was $13 million and $186 million as of December
31, 2025 and 2024.
The
Company recognized related party interest expense and income from financing transactions with Parent. During the years ended December
31, 2025, 2024 and 2023 the Company recognized $6 million, $10 million and $12 million of related party interest expense, respectively.
During the years ended December 31, 2025, 2024 and 2023 the Company recognized $3 million, $6 million and $10 million of related party
interest income, respectively.
The
Company pays and receives cash interest in connection with the related party loans and cash pooling arrangements. During the years ended
December 31, 2025, 2024 and December 31, 2023 the Company paid interest to the Parent of $6 million, $12 million and $14 million, respectively.
During the years ended December 31, 2025, 2024 and 2023 the Company received interest from the Parent of $3 million, $5 million and $10
million, respectively.
F-33
Net Transfers
(To)/From Parent
Net
transfers (to)/from Parent are included within financing activities in the Combined Statements of Cash Flows and within net parent investment
in the Combined Statements of Changes in Equity. This activity represents the net effect of transactions between the Company and Resideo.
The
components of net transfers (to)/from Parent are as follows:
Years
Ended December 31,
(in millions)
2025
2024
2023
Net
transfers from/(to) Parent as reflected in the Combined Statements of Cash Flows
$ 562
$ 109
$ (86 )
Stock-based compensation expense
27
28
15
Allocation of depreciation & amortization
2
3
3
Allocation of third-party debt and cash flow
hedges
(709 )
(188 )
24
Acquisitions and investments
-
1,355
9
Other non-cash investing
and financing activities
(53 )
-
-
Net
transfers (to)/from Parent as reflected in the Combined Statements of Changes in Equity
$ (171 )
$ 1,307
$ (35 )
Note 17.
Interest Expense and Interest Income
Interest
expense consists of the following:
Years
Ended December 31,
(in millions)
2025
2024
2023
Third-party debt
$ 44
$ 29
$ 20
Related party liabilities
6
10
12
Total
interest expense
$ 50
$ 39
$ 32
Interest
income consists of the following:
Years
Ended December 31,
(in millions)
2025
2024
2023
Related party assets
$ 3
$ 6
$ 10
Interest rate hedges
2
6
6
Interest income on cash
and cash equivalents
3
3
2
Total
interest income
$ 8
$ 15
$ 18
Note 18.
Subsequent Events
The
Company evaluated subsequent events for recognition or disclosure through March 31, 2026, the date the Combined Financial Statements
were available to be issued.
On
February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed by the U.S. government under the IEEPA were unauthorized. The Supreme
Court did not address refunds or remedies but instead remanded the matter to the Court of International Trade (“CIT”) to
address remedies. The CIT ruled that the government must issue refunds and has given the government at least 45 days to update its systems
and processes to manage the refund process with required updates to the court on a weekly basis. In addition, the government has stopped
the collection of IEEPA tariffs. However, the government imposed a new tariff surcharge of l0% under the balance of payments statute
(19 USC 2132) on all imports with certain exceptions for certain commodities (e.g., electronics, critical minerals) and USMCA qualified
products. The new tariffs took effect on February 24, 2026, and will remain in effect for 150 days (the maximum under the statute). Tariffs
have not been previously imposed under this statutory provision. While we are taking measures to preserve our rights to refunds through
the existing administrative processes, it is still unclear when the government will issue refunds. On a go forward basis, on balance
with the new tariffs, the recission of the IEEPA tariffs is not expected to have a material impact to our business.
F-34
ADI GLOBAL DISTRIBUTION
CONDENSED COMBINED BALANCE SHEETS
(UNAUDITED)
(in millions)
April 4,
2026
December 31,
2025
ASSETS
Current assets:
Cash and cash equivalents
$ 135
$ 124
Accounts receivable, net
703
659
Inventories, net
1,036
1,036
Other current assets
146
154
Total current assets
2,020
1,973
Property, plant and equipment, net
107
107
Goodwill
1,065
1,066
Intangible assets, net
725
744
Operating lease right-of-use assets
226
236
Due from related parties - non-current
-
13
Other assets
13
13
Total assets
$ 4,156
$ 4,152
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$ 610
$ 717
Accrued liabilities
148
175
Current portion of operating lease liabilities
37
37
Due to related parties – current
59
68
Total current liabilities
854
997
Long-term debt
981
1,185
Non-current portion of operating lease liabilities
200
209
Deferred tax liabilities
60
60
Other liabilities
17
17
Total liabilities
$ 2,112
$ 2,468
COMMITMENTS AND CONTINGENCIES (Note 14)
Equity
Net parent investment
2,089
1,726
Accumulated other comprehensive loss, net
(45 )
(42 )
Total equity
2,044
1,684
Total liabilities and equity
$ 4,156
$ 4,152
The accompanying notes are
an integral part of these Unaudited Condensed Combined Financial Statements.
F-35
ADI GLOBAL DISTRIBUTION
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
(in millions)
April 4,
2026
March 29,
2025
Net revenue
$ 1,206
$ 1,121
Cost of goods sold
950
879
Gross profit
256
242
Operating expenses:
Selling, general and administrative expenses
199
181
Research and development expenses
12
8
Intangible asset amortization
24
23
Transaction related expenses
8
1
Restructuring expenses
-
4
Total operating expenses
243
217
Income from operations
13
25
Indemnification Agreement expense
-
33
Interest expense
17
8
Interest income
(2 )
(2 )
Loss before taxes
(2 )
(14 )
(Benefit from) provision for income taxes
(1 )
1
Net loss
$ (1 )
$ (15 )
The accompanying notes are an integral part of
these Unaudited Condensed Combined Financial Statements.
F-36
ADI GLOBAL DISTRIBUTION
CONDENSED COMBINED STATEMENTS OF COMPREHENSIVE
LOSS
(UNAUDITED)
Three Months Ended
(in millions)
April 4,
2026
March 29,
2025
Comprehensive loss:
Net loss
$ (1 )
$ (15 )
Other comprehensive (loss) income, net of tax:
Foreign exchange translation (loss) gain
(3 )
12
Changes in fair value of effective cash flow hedges
-
(1 )
Total other comprehensive (loss) income, net of tax
(3 )
11
Comprehensive loss
$ (4 )
$ (4 )
The accompanying notes are an integral part of
these Unaudited Condensed Combined Financial Statements.
F-37
ADI GLOBAL DISTRIBUTION
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
(in millions)
April 4,
2026
March 29,
2025
Cash Flows From Operating Activities:
Net loss
$ (1 )
$ (15 )
Adjustments to reconcile net loss to net cash in operating activities:
Depreciation and amortization
29
29
Restructuring expenses
-
4
Stock-based compensation expense
6
6
Operating lease right-of-use-asset amortization
10
8
Other, net
1
(1 )
Changes in assets and liabilities, net of acquired companies:
Accounts receivable, net
(47 )
(37 )
Inventories, net
(1 )
8
Other current assets
7
-
Accounts payable
(103 )
(80 )
Accrued liabilities
(25 )
(18 )
Lease liabilities
(9 )
(8 )
Due to related parties - current
-
(6 )
Obligations payable under Indemnification Agreement
-
20
Other, net
-
2
Net cash used in operating activities
(133 )
(88 )
Cash Flows From Investing Activities:
Capital expenditures
(13 )
(11 )
Proceeds from loans with related parties
14
-
Net cash provided by (used in) investing activities
1
(11 )
Cash Flows From Financing Activities:
Net (decrease) increase in due to related parties related to cash pooling arrangements
(8 )
2
Net transfers from parent
153
71
Net cash provided by financing activities
145
73
Effect of exchange rate changes on cash and cash equivalents
(2 )
2
Net increase (decrease) in cash and cash equivalents
11
(24 )
Cash and cash equivalents at beginning of period
124
137
Cash and cash equivalents at end of period
$ 135
$ 113
The accompanying notes are an integral part of
these Unaudited Condensed Combined Financial Statements.
F-38
ADI GLOBAL DISTRIBUTION
CONDENSED COMBINED STATEMENTS OF CHANGES IN
EQUITY
(UNAUDITED)
(in millions)
Net Parent
Investment
Accumulated
Other
Comprehensive
Loss, net
Total Equity
Balance at January 1, 2026
$ 1,726
$ (42 )
$ 1,684
Net loss
(1 )
-
(1 )
Foreign exchange translation loss - net of taxes
-
(3 )
(3 )
Changes in fair value of effective cash flow hedges - net of taxes
-
-
-
Net transfers from Parent
364
-
364
Balance at April 4, 2026
$ 2,089
$ (45 )
$ 2,044
Balance at January 1, 2025
2,158
(70 )
2,088
Net loss
(15 )
-
(15 )
Foreign exchange translation gain - net of taxes
-
12
12
Changes in fair value of effective cash flow hedges - net of taxes
-
(1 )
(1 )
Net transfers from Parent
45
-
45
Balance at March 29, 2025
$ 2,188
$ (59 )
$ 2,129
The accompanying notes are an integral part of
these Unaudited Condensed Combined Financial Statements.
F-39
Note 1. Description of the Business and Basis of Presentation
Description of Business
On July 30, 2025, Resideo Technologies, Inc.
(“Resideo” or “Parent”) announced its plan to separate its business into two distinct, publicly traded companies.
Under the plan, Resideo would execute a spin-off (“Spin-off”) to Resideo shareholders of its ADI Global Distribution business
(“ADI,” the “Company,” “we,” or “our”). The Spin-off is expected to be completed through
a tax-free pro rata distribution of all of the outstanding shares of common stock of ADI to Resideo shareholders. In connection with
the Spin-off, Resideo will also enter into an agreement with preferred stockholders to exchange preferred stock of Resideo for shares
of ADI preferred stock.
ADI is a leading, global specialty distributor
of professionally installed low-voltage products, including security and audio-visual (“AV”) solutions, serving commercial
and residential markets through an omnichannel go-to-market platform. ADI sells primarily to professional installers, dealers, and integrators.
We offer an expansive list of products from leading suppliers across key specialty low-voltage categories. ADI complements supplier products
with a suite of exclusive brands and services offerings. ADI Global Distribution is our sole reportable segment based upon the information
used by our chief operating decision maker (“CODM”) in evaluating the performance of our business and allocating resources
and capital.
Basis of Presentation
The Company has historically operated as a part
of Resideo; consequently, stand-alone financial statements have not historically been prepared. The accompanying Unaudited Condensed
Combined Financial Statements have been derived from Resideo’s historical accounting records, including the historical cost basis
of assets and liabilities comprising the Company, as well as the historical revenues, direct costs, and allocations of indirect costs
attributable to the operations of the Company. The Unaudited Condensed Combined Financial Statements have been prepared in accordance
with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information.
Accordingly, the Unaudited Condensed Combined Financial Statements do not include all of the information and notes required by U.S. GAAP
for complete financial statements. In the opinion of management, the Unaudited Condensed Combined Financial Statements included herein
contain all adjustments, which consist of normal, recurring adjustments, necessary to fairly present our financial position, results
of operations, and cash flows for the periods indicated. These combined financial statements do not purport to reflect what the financial
position, results of operations, comprehensive income or cash flows would have been had the Company operated as a separate, stand-alone
entity during the periods presented.
All intercompany transactions within the Company
have been eliminated in the Unaudited Condensed Combined Financial Statements. Certain financing transactions with Resideo were deemed
to have been settled immediately through Net parent investment in the Unaudited Condensed Combined Balance Sheets. Other transactions
that were historically cash settled between Resideo and the Company have been included in the Unaudited Condensed Combined Financial
Statements as due from related parties or due to related parties, primarily related to cash pooling arrangements and intercompany loans.
In the Unaudited Condensed Combined Statements of Cash Flows, the cash flows arising from related party loans receivable and payable
are reflected in investing activities. The cash flows arising from cash pooling arrangements are reflected in financing activities. Refer
to Note 15. Related Party Transactions to the Unaudited Condensed Combined Financial Statements.
The Unaudited Condensed Combined Balance Sheets
reflect all of the assets and liabilities of the Company that are specifically identifiable or otherwise attributed to the Company, including
net parent investment as a component of equity. Net parent investment represents Resideo’s historical investment in the Company
and includes accumulated net income attributable to the Company, and as well as the net effect of transactions with Resideo and its subsidiaries.
Resideo operates a centralized treasury function
domestically and internationally, while also maintaining bank accounts in local jurisdictions separate from these centralized treasury
functions. Certain of our cash is transferred to Resideo according to centrally managed cash programs and Resideo funds our operations
and investing activities, as needed. Cash and cash equivalents and restricted cash in the Unaudited Condensed Combined Balance Sheets
represents cash and cash equivalents and restricted cash held by legal entities of the Company. Some of these legal entities participate
in the cash pooling and others maintain bank accounts in local jurisdictions, which operate outside the cash pooling arrangements. This
arrangement is not reflective of the manner in which the Company would have been able to finance its operations had it been a stand-alone
business separate from Resideo during the periods presented.
F-40
Resideo’s third-party debt related to Senior
Notes and the Term Loan along with the corresponding interest expense and financial statement impacts of interest rate hedges have been
allocated to the Company for the periods presented as the Company was jointly and severally liable for such debt. The Company is not
a counterparty to the interest rate hedges and therefore, the asset and liability balances associated with the hedges are not included
in the Unaudited Condensed Combined Financial Statements.
The Unaudited Condensed Combined Statements of
Operations includes expense allocations for certain corporate expenses provided by Resideo on a centralized basis (“Resideo Corporate
Costs”), including, but not limited to corporate executives, finance, legal, audit, mergers and acquisitions, human resources,
information technology, insurance, employee benefits, costs associated with the Spin-off and other expenses that are either specifically
identifiable or clearly applicable to the Company. These expenses have been allocated to the Company on the basis of direct usage when
identifiable, with the remainder allocated on a pro rata basis using an applicable measure of operating income, headcount or other allocation
methodologies that are considered to be a reasonable reflection of the utilization of services provided or the benefit received by the
Company during the periods presented. However, the Resideo Corporate Costs allocations may not be indicative of the actual expense that
would have been incurred had the Company operated as an independent, stand-alone public entity, nor are they indicative of the Company’s
future expenses. Refer to Note 15. Related Party Transactions to the Unaudited Condensed Combined Financial Statements.
We report financial information on a fiscal quarter
basis using a modified four-four-five week calendar. Our fiscal calendar begins on January 1 and ends on December 31. We have elected
the first, second, and third quarters to end on a Saturday in order to not disrupt business processes. The effects of this election are
generally not significant to reported results for any quarter and only exist within a reporting year.
Note 2. Summary of Significant Accounting Policies
Our significant accounting policies are detailed
in Note 2. Summary of Significant Accounting Policies of the Audited Combined Financial Statements for the year ended December
31, 2025. There have been no significant changes to these policies that have had a material impact on the Unaudited Condensed Combined
Financial Statements and the accompanying disclosure notes for the three months ended April 4, 2026.
We consider the applicability and impact of all
recent accounting standards updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs
not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact.
In November 2024, the FASB issued ASU 2024-03,
Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income
Statement Expenses. This ASU requires entities to disaggregate operating expenses into specific categories, such as purchases of
inventory, employee compensation, depreciation, and amortization to provide enhanced transparency into the nature and function of expenses.
The guidance is effective for annual reporting years beginning after December 15, 2026 and interim reporting periods beginning after
December 15, 2027. We are currently assessing the impact of adoption on our Combined Financial Statements and related disclosures.
Note 3. Revenue Recognition
Disaggregated Revenue
We have a single operating segment: ADI Global
Distribution. Disaggregated revenue information for ADI Global Distribution is presented by region and brand.
F-41
A contract’s transaction price is allocated
to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For product sales,
typically each product sold to a customer represents a distinct performance obligation. We recognize the majority of our revenue from
performance obligations that are satisfied at a point in time. We have current deferred revenue of $28 million recognized in accrued
liabilities as of April 4, 2026 and December 31, 2025. We have non-current deferred revenue of $11 million recognized in other liabilities
as of April 4, 2026 and December 31, 2025. The deferred revenues were primarily assumed through the acquisition of Snap One. Additionally,
contract assets were not material as of April 4, 2026 and December 31, 2025.
The following tables present revenue by geographic
location and product type, as we believe this presentation best depicts how the nature, amount, timing, and uncertainty of net revenue
and cash flows are affected by economic factors:
Three Months Ended
(in millions)
April 4,
2026
March 29,
2025
Americas (1)
$ 1,038
$ 986
International (2)
168
135
Total net revenue
$ 1,206
$ 1,121
(1) Americas represents North, Central and
South America.
(2) International represents all geographies
that are not included in Americas.
Three Months Ended
(in millions)
April 4,
2026
March 29,
2025
Third-party brands
$ 1,000
$ 928
Exclusive brands
206
193
Total net revenue
$ 1,206
$ 1,121
Note 4. Inventories, net
The following table summarizes the details of
our inventories, net:
(in millions)
April 4,
2026
December 31,
2025
Raw materials
$ 6
$ 4
Finished products
1,030
1,032
Total inventories, net
$ 1,036
$ 1,036
Note 5. Goodwill and Other Intangible Assets, net
Changes in the carrying value of goodwill were
as follows:
(in millions)
Goodwill
Balance as of January 1, 2026
$ 1,066
Impact of foreign currency translation
(1 )
Balance as of April 4, 2026
$ 1,065
F-42
All intangible assets are subject to amortization.
These intangible assets consisted of the following:
April 4, 2026
December 31, 2025
(in millions)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Customer relationships
$ 675
$ (153 )
$ 522
$ 675
$ (140 )
$ 535
Patents and technology
110
(32 )
78
110
(28 )
82
Software
114
(47 )
67
109
(41 )
68
Trademarks
74
(16 )
58
74
(15 )
59
Total intangible assets
$ 973
$ (248 )
$ 725
$ 968
$ (224 )
$ 744
Intangible assets amortization expense was $24 million and $23 million
for the three months ended April 4, 2026 and March 29, 2025, respectively.
Note 6. Accrued Liabilities
Accrued liabilities consist of the following:
(in millions)
April 4,
2026
December 31,
2025
Deferred revenue
$ 28
$ 28
Compensation, benefit and other employee-related
26
45
Customer rebate reserve
17
20
Other (1)
77
82
Total accrued liabilities
$ 148
$ 175
(1) Other includes accruals for taxes payable,
advertising, current portion of long-term debt, interest, product warranties, restructuring,
and other miscellaneous items.
Note 7. Leases
Operating lease expense was $20 million and $16
million recognized in selling, general and administrative expenses for the three months ended April 4, 2026 and March 29, 2025, respectively.
Total operating lease costs include variable
lease costs of $4 million and $3 million recognized in selling, general and administrative expenses for the three months ended April
4, 2026 and March 29, 2025, respectively.
The following table summarizes the carrying amounts
of our operating lease assets and liabilities:
(in millions)
April 4,
2026
December 31,
2025
Operating lease right-of-use assets
$ 226
$ 236
Current portion of operating lease liabilities
$ 37
$ 37
Non-current portion of operating lease liabilities
$ 200
$ 209
The following table summarizes supplemental cash
flow information related to operating leases:
Three Months Ended
(in millions)
April 4,
2026
March 29,
2025
Cash paid for operating lease liabilities
$ 12
$ 8
Non-cash activities: operating lease assets obtained in
exchange for new operating lease liabilities
$ 2
$ 4
F-43
As of April 4, 2026, we have additional operating
leases that have not yet commenced. The total undiscounted future lease payments for these leases were $56 million related primarily
to ongoing real estate optimization.
Note 8. Long-Term Debt
Our Parent is the obligor of multiple third-party
debt instruments for which subsidiaries of the Company are also jointly and severally liable. Accordingly, a portion of the Parent’s
long-term debt and short-term debt was allocated to the Company as of April 4, 2026 and December 31, 2025 as the Company was jointly
and severally liable for such debt. The related interest expense and unamortized deferred financing costs and loss on extinguishments
on the debt have been allocated to the Company for the periods presented. Given the lack of a contractual agreement for the Company to
pay a specified amount to Parent (i.e., its co-obligors), the allocation basis was determined based on what the Company would reasonably
expect to pay on behalf of its co-obligors. No payments were made by the Company to third-party creditors as payments are made by Parent
historically and in each reporting period.
The outstanding debt of Resideo and the allocations
of debt to ADI as of April 4, 2026 and December 31, 2025 were as follows:
April 4, 2026
December 31, 2025
(in millions)
Allocation to
ADI
Total
Resideo
Allocation to
ADI
Total
Resideo
4.00% Senior Notes due 2029
$ 93
$ 300
$ 112
$ 300
6.50% Senior Notes due 2032
186
600
224
600
Variable rate A&R Term B Facility
$ 721
$ 2,326
$ 871
$ 2,331
Gross debt
1,000
3,226
1,207
3,231
Less: current portion of long-term debt (1)
$ (6 )
$ (18 )
(7 )
(18 )
Less: unamortized deferred financing costs
(13 )
(43 )
(15 )
(46 )
Total long-term debt
$ 981
$ 3,165
$ 1,185
$ 3,167
(1) Included within accrued liabilities on
the Unaudited Condensed Combined Balance Sheets.
A&R Credit Agreement
In 2021, Resideo (“Borrower”) entered
into a credit agreement with JPMorgan Chase Bank N.A. as administrative agent which was most recently amended on August 13, 2025 (as
amended, the “A&R Credit Agreement”). The remaining principal on the A&R Credit Agreement includes $518 million of
term loans maturing in February 2028 and $589 million of term loans maturing in June 2031, and $1,219 million of incremental term loans
maturing in August 2032 (together, the “A&R Term B Facility”). As of April 4, 2026 and December 31, 2025, the weighted
average interest rate on the A&R Term B Facility, excluding the impact of the interest rate swaps, was 5.67% and 5.76%, respectively.
The A&R Credit Agreement also includes a
senior secured revolving credit facility (the “A&R Revolving Credit Facility”) with an aggregate capacity of $500 million
and a five-year term ending in June 2029. There were no outstanding borrowings and no letters of credit issued under the A&R Revolving
Credit Facility as of April 4, 2026.
The A&R Credit Agreement includes customary
affirmative and negative covenants and reporting requirements, including limitations on indebtedness, liens, investments, and other restricted
transactions. As of April 4, 2026, the Borrower is in compliance with all covenants.
F-44
Senior Notes
In August 2021, the Borrower issued $300 million
in principal amount of 4.00% Senior Notes due 2029 (“Senior Notes due 2029”).
In July 2024, the Borrower issued $600 million
in aggregate principal of 6.50% Senior Notes due 2032 (“Senior Notes due 2032”).
The Senior Notes due 2029 and Senior Notes due
2032 are senior unsecured obligations of the Borrower guaranteed by the Borrower’s existing and future domestic subsidiaries and
rank equally with all of the Borrower’s senior unsecured debt and senior to all of the Borrower’s subordinated debt.
Refer to Note 9. Long-Term Debt in the
Audited Combined Financial Statements for further discussion.
Note 9. Indemnification Agreement
Our Parent separated from Honeywell in 2018,
becoming an independently traded company as a result of a pro rata distribution of our Parent’s common stock to the stockholders
of Honeywell (“the Parent Spin-Off”). In connection with the Parent Spin-Off from Honeywell, our Parent entered into an Indemnification
Agreement pursuant to which our Parent has an obligation to make cash payments associated with Honeywell’s environmental liabilities
which were capped at $140 million annually. Prior to the Parent entering into a definitive agreement with Honeywell to terminate the
Indemnification Agreement, the Indemnification Agreement extended until the earlier of (1) December 31, 2043; or (2) December 31 of the
third consecutive anniversary where the annual reimbursement obligation (including accrued amounts) has been less than $25 million.
Subsidiaries of the Company are jointly and severally
liable for our Parent’s obligations for the Indemnification Agreement. As such, an allocated portion of our Parent’s Indemnification
Agreement expenses are presented within Indemnification Agreement expense in the Unaudited Condensed Combined Statements of Operations,
as the Company was jointly and severally liable for such agreement until our Parent entered into an agreement with Honeywell in the third
quarter of 2025 to terminate it as discussed under “Termination Agreement” below. Given the lack of a contractual agreement
for the Company to pay a specified amount to Parent (i.e., its co-obligors), the allocation basis was determined based on what the Company
would reasonably expect to pay on behalf of its co-obligors. No payments were made by the Company to Honeywell as payments are made by
Parent historically and in each reporting period.
Termination Agreement
On July 30, 2025, our Parent entered into a definitive
agreement with Honeywell to terminate the Indemnification Agreement (“Termination Agreement”). Our Parent made a pre-tax,
one-time cash payment of $1,590 million to Honeywell, which occurred in the third quarter of 2025. In addition, our Parent also paid
a regularly scheduled payment of $35 million in the first, second and third quarters of 2025. Upon completion of the pre-tax, one-time
cash payment, the Indemnification Agreement was fully terminated. Our Parent is no longer required to make any further payments to Honeywell
under the Indemnification Agreement and the associated affirmative and negative covenants no longer apply. As a result of the Termination
Agreement, our Parent recorded $972 million in pre-tax expense in 2025. The liability in connection with the Indemnification Agreement
was fully repaid and is not presented in the Unaudited Condensed Combined Balance Sheets. As the subsidiaries of the Company are jointly
and severally liable for our Parent’s obligations during the periods the obligations were outstanding, an allocated portion of
the expense is presented within Indemnification Agreement expense, net in the Unaudited Condensed Combined Statements of Operations.
Our Parent recorded Indemnification Agreement
expense of $90 million for the three months ended March 29, 2025 and $33 million of allocated Indemnification expense is presented within
Indemnification Agreement expense in the Unaudited Condensed Combined Statements of Operations for the same period. There was no Indemnification
Agreement expense recorded by our Parent for the three months ended April 4, 2026.
F-45
Note 10. Interest Expense and Interest Income
Interest expense consists of the following:
Three Months Ended
(in millions)
April 4,
2026
March 29,
2025
Third-party debt
$ 16
$ 6
Related party liabilities
1
2
Total interest expense
$ 17
$ 8
Interest income consists of the following:
Three Months Ended
(in millions)
April 4,
2026
March 29,
2025
Related party assets
$ 1
$ 1
Interest rate hedges
-
1
Interest income on cash and cash equivalents
1
-
Total interest income
$ 2
$ 2
Note 11. Restructuring
Restructuring actions were taken to better align
our cost structure with our strategic objectives and to improve operating efficiency and we may incur additional restructuring expenses
associated with these plans or new plans in the future. For the three months ended April 4, 2026, there were no restructuring expenses.
For the three months ended March 29, 2025, there was $4 million of restructuring expenses. As of April 4, 2026 and December 31, 2025,
accruals related to restructuring presented within accrued liabilities were $2 million and $4 million, respectively.
Note 12. Stock-Based Compensation Plans
The following table summarizes activity related
to our Parent’s Stock Incentive Plan for ADI employees:
Three Months Ended
April 4, 2026
March 29, 2025
(in thousands except for per share amounts)
Number of
Stock Units
Granted
Weighted
average
grant date
fair value
per share
Number of
Stock Units
Granted
Weighted average grant date fair
value per share
Performance Stock Units (“PSUs”)(1)
31
$ 43.03
42
$ 26.09
Restricted Stock Units (“RSUs”)
327
36.00
393
20.57
(1) Includes PSUs at target payout. Final
common shares issued may be different based upon the actual achievement versus the performance
measure target.
Stock-based compensation expense was $6 million
and $7 million for the three months ended April 4, 2026 and March 29, 2025, respectively. Stock-based compensation expense is included
in either selling, general and administrative expenses or restructuring expenses in the Unaudited Condensed Combined Statements of Operations
based on the nature of the expense.
Note 13. Income Taxes
Income tax is equal to the total of (1) year-to-date
pretax income multiplied by the forecasted effective tax rate plus (2) tax expense items specific to the period. In situations where
we expect to report losses and where we do not expect to receive tax benefits, we apply separate forecast effective tax rates to those
jurisdictions rather than including them in the consolidated forecast effective tax rate.
F-46
For the three months ended April 4, 2026, the
net tax benefit was $1 million. For the three months ended March 29, 2025, tax expense was $1 million. This consists primarily of interim
period tax expense based on year-to-date pretax income multiplied by our forecasted effective tax rate. In addition to items specific
to the period, our income tax rate is impacted by the mix of earnings across the jurisdictions in which we operate and non-deductible
expenses.
Cash paid for taxes
The Company paid $1 million and $3 million of
income taxes, net of refunds for the three months ended April 4, 2026 and March 29, 2025, respectively.
Note 14. Commitments and Contingencies
Other Matters
We are subject to lawsuits, investigations and
disputes arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product
liability, acquisitions and divestitures, employee matters, intellectual property, and environmental, health, and safety matters. We
recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We continually assess the likelihood
of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses, based on a careful analysis of each
matter with the assistance of outside legal counsel and, if applicable, other experts. No such matters are material to our financial
statements.
Warranties and Guarantees
In the normal course of business, we issue product
warranties and product performance guarantees. We accrue for the estimated cost of product warranties and product performance guarantees
based on contract terms and historical experience at the time of sale. Adjustments to initial obligations for warranties and guarantees
are made as changes to the obligations become reasonably estimable. Product warranties and product performance guarantees are included
in accrued and other liabilities.
Note 15. Related Party Transactions
Allocations of corporate costs
The Unaudited Condensed Combined Financial Statements
reflect allocations of certain expenses from Parent, including, but not limited to, costs related to corporate executives, finance, legal,
audit, mergers and acquisitions, human resources, information technology, insurance, employee benefits, costs associated with the Spin-off
and other expenses that are either specifically identifiable or clearly applicable to the Company. The allocation methods used include
relative percentage of segment operating income, headcount, and other methods that considered the relative time spent based on internal
resources. Management believes that the allocation methodologies used to allocate expenses to the Company are reasonable; however, the
allocations may not be indicative of actual expenses that would have been incurred had we operated as an independent, publicly traded
company for the periods presented. Actual costs that the Company may have incurred had it been a stand-alone company would depend on
a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by our employees and
strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and
infrastructure.
F-47
Amounts recorded in selling, general and administrative
expenses were $13 million and $10 million for the three months ended April 4, 2026 and March 29, 2025, respectively.
Amounts recorded in transaction related expenses
were $8 million for the three months ended April 4, 2026 and relate to costs incurred by our Parent associated with the Spin-off. There
were no allocated transaction related expenses for the three months ended March 29, 2025.
Transactions with Parent
Our intercompany arrangements between the Company
and Parent are included within these Unaudited Condensed Combined Financial Statements and consist of receivables and payables arising
from trade transactions as well as related party loan balances associated with the participation of certain of our subsidiaries in the
Parent’s centralized cash management programs. Additionally, we have intercompany loans with the Parent and certain of its subsidiaries.
Activity related to loans receivables and payables is presented in the Unaudited Condensed Combined Statement of Cash Flows in investing
activities and financing activities, respectively.
During the normal course of operations, the Company
makes inventory purchases from Parent. During the three months ended April 4, 2026 and March 29, 2025, the Company purchased $42 million
and $46 million of inventory from Parent, respectively. Certain purchases are cash settled and reflected net within the Unaudited Condensed
Combined Balance Sheets within due to related parties - current of $1 million and $1 million as of April 4, 2026 and December 31, 2025,
respectively.
Our payable balance pursuant to the cash pooling
arrangements, presented net as due to related parties - current in the Unaudited Condensed Combined Balance Sheets, was $58 million and
$67 million as of April 4, 2026 and December 31, 2025, respectively. Cash pooling arrangements between the Company and Parent that are
not anticipated to be cash settled are reflected in net parent investment in the Unaudited Condensed Combined Balance Sheets and totaled
$56 million and $71 million as of April 4, 2026 and December 31, 2025, respectively. Our payable balance pursuant to the intercompany
loans, presented net within other liabilities on the Unaudited Condensed Combined Balance Sheets, was $1 million as of April 4, 2026.
Our receivable balance pursuant to the intercompany loans, presented net within due from related parties - non-current on the Unaudited
Condensed Combined Balance Sheets, was $13 million as of December 31, 2025.
The Company recognized related party interest
expense and income from financing transactions with Parent. During the three months ended April 4, 2026 and March 29, 2025, the Company
recognized $1 million and $2 million of related party interest expense, respectively. During the three months ended April 4, 2026 and
March 29, 2025, the Company recognized $1 million and $1 million of related party interest income, respectively.
The Company pays and receives cash interest in
connection with the related party loans and cash pooling arrangements. During the three months ended April 4, 2026 and March 29, 2025,
the Company did not pay interest to the Parent. During the three months ended April 4, 2026, the Company received interest from the Parent
of $1 million. During the three months ended March 29, 2025, the Company did not receive interest from the Parent.
Net Transfers From Parent
Net transfers from Parent are included within
financing activities in the Unaudited Condensed Combined Statements of Cash Flows and within net parent investment in the Unaudited Condensed
Combined Statements of Changes in Equity. This activity represents the net effect of transactions between the Company and Resideo. The
components of net transfers from Parent are as follows:
Three Months Ended
(in millions)
April 4,
2026
March 29,
2025
Net transfers from Parent as reflected in the Unaudited Condensed Combined Statements of Cash Flows
$ 153
$ 71
Stock-based compensation expense
6
7
Allocation of third-party debt and cash flow hedges
205
20
Other non-cash investing and financing activities
-
(53 )
Net transfers from Parent as reflected in the Unaudited Condensed Combined Statements of Changes in Equity
$ 364
$ 45
Note 16. Subsequent Events
The Company evaluated subsequent events for recognition
or disclosure through June 4, 2026, the date the Unaudited Condensed Combined Financial Statements were available to be issued.
Second A&R Credit Agreement
On June 4, 2026, the A&R Credit Agreement under which Resideo is
the Borrower was amended and restated in its entirety to, among other things, facilitate the proposed Spin-Off and provide for senior
secured financing of up to approximately $2,827 million (the “Second A&R Credit Agreement”). In addition to the senior secured
term B loan facilities under the A&R Credit Agreement, the Second A&R Credit Agreement includes a new senior secured revolving credit facility, which refinanced in full the existing senior secured revolving credit facility, which
provides for commitments in an aggregate principal amount of $500 million, which are undrawn as of the effective date of the Second A&R
Credit Agreement and will mature five years following the effective date of the Second A&R Credit Agreement.
F-48
EX-99.2 — PRESS RELEASE, DATED AUGUST 4, 2026
EX-99.2
Filename: ea030019001ex99-2.htm · Sequence: 14
Exhibit 99.2
ADI Global Distribution Completes Spin-Off from
Resideo Technologies and Begins Trading on the New York Stock Exchange
Positioned to Drive Further Market Leadership
and Profitable Growth as an Independent, Leading Specialty Distribution Company
MELVILLE, New York. – August 4, 2026 – ADI Global
Distribution Inc. (NYSE: ADIG) (“ADI”), a leading global specialty distributor of low-voltage products, today announced the
completion of its spin-off from Resideo Technologies, Inc. (“Resideo”), establishing ADI as an independent publicly traded
company. ADI’s common stock will begin “regular way” trading today on the New York Stock Exchange under the ticker symbol
“ADIG”.
“Today marks a pivotal milestone for ADI as we are officially
an independent specialty distribution company,” said Rob Aarnes, President and Chief Executive Officer of ADI. “We have a
long legacy of industry leadership, built on trusted customer and supplier relationships, a differentiated omnichannel platform and the
best talent in the industry. With strong momentum and a clear go-forward strategic path, ADI is poised to generate above market revenue
growth and meaningful long-term value for our shareholders.”
ADI is a global specialty distributor of professionally installed low-voltage
products, serving residential and commercial markets through a differentiated omnichannel platform. Within North America, ADI is an industry
leader in Security, Residential AV and Fire/Life Safety with growing positions in Data Communications and Professional AV. With $4.8 billion
of revenue in 2025, ADI employs approximately 4,100 team members, offering more than 500,000 products from over 1,000 suppliers and serving
over 100,000 customers through a network of nearly 200 global store locations.
The spin-off was completed through the distribution of all shares of
ADI common stock. Each Resideo common shareholder of record as of the close of business on July 20, 2026, received one share of ADI common
stock for every two shares of Resideo common stock held.
About ADI
ADI is a global specialty distributor of professionally installed low-voltage
products serving commercial and residential markets through an omnichannel go-to-market platform. Within North America, ADI is a market-leading
distributor in the professionally installed security, fire/life safety and residential audio-visual product categories. We offer over
500,000 products from more than 1,000 suppliers across key specialty low-voltage categories with strong proximity to our customers with
a large network of store locations.
Page 1 of 2
Forward-Looking Statements
This press release contains forward-looking statements, including,
but not limited to, those regarding our anticipated market positioning and financial and operational performance following our separation
from Resideo and other future events or developments. Forward-looking statements are typically identified by such words as “anticipate,”
“believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,”
“project,” “should,” “will,” and similar expressions, although not all forward-looking statements
contain these words. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that
could cause actual results to differ materially from those projected. Among the factors that could cause actual results to differ materially
from those expressed or implied in any forward-looking statements are the possibility that the separation may not achieve the intended
strategic, operational, or financial benefits for ADI, its businesses, or its shareholders; that ADI may experience operational or other
disruptions as a result of the separation, including those relating to information technology systems, business processes, internal controls,
customer and vendor relationships, and workforce alignment. ADI’s ability to succeed as an independent enterprise will depend on
numerous factors, including the execution of its strategies and plans, access to capital markets, the competitive landscape, and general
business and economic conditions. Other risks and uncertainties include, but are not limited to, our ability to recognize the expected
savings from, and the timing and impact of, our existing and anticipated cost reduction actions, and our ability to optimize our portfolio
and operational footprint, the ability of ADI to drive increased customer value and financial returns and enhance strategic and operational
capabilities, risks and uncertainties relating to tariffs that have been or may be imposed by the United States and other governments,
and the other risks described under the headings “Risk Factors” and “Cautionary Statement Concerning Forward-Looking
Statements” in ADI’s Registration Statement on Form 10 filed with the SEC.
All statements, other than statements of fact, that address activities,
events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking
statements. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown
risks and uncertainties, which may cause the actual results or performance of ADI to differ materially from such forward-looking statements.
Forward-looking statements are not guarantees of future performance, and actual results, developments, and business decisions may differ
from those envisaged by our forward-looking statements. Except as required by law, we undertake no obligation to update such statements
to reflect events or circumstances arising after the date of this press release and we caution investors not to place undue reliance on
any such forward-looking statements.
Contacts:
Investors:
Hunter Blankenbaker
Senior Director of Investor Relations
Investorrelations@adiglobal.com
Media:
Adrienne Zimoulis
Senior Director of Communications
Adrienne.Zimoulis@adiglobal.com
or
Dan Moore, Tali Epstein
Collected Strategies
Adi-CS@collectedstrategies.com
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v3.26.1
Cover
Jul. 31, 2026
Cover [Abstract]
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8-K
Amendment Flag
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Document Period End Date
Jul. 31, 2026
Current Fiscal Year End Date
--12-31
Entity File Number
001-43281
Entity Registrant Name
ADI Global Distribution
Inc.
Entity Central Index Key
0002105139
Entity Tax Identification Number
41-3033245
Entity Incorporation, State or Country Code
DE
Entity Address, Address Line One
275 Broadhollow Rd
Entity Address, Address Line Two
Suite 400
Entity Address, City or Town
Melville
Entity Address, State or Province
NY
Entity Address, Postal Zip Code
11747
City Area Code
631
Local Phone Number
692-1000
Written Communications
false
Soliciting Material
false
Pre-commencement Tender Offer
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Pre-commencement Issuer Tender Offer
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Title of 12(b) Security
Common Stock, $0.001 Par Value
Trading Symbol
ADIG
Security Exchange Name
NYSE
Entity Emerging Growth Company
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