Table of Contents

As filed with the U.S. Securities and Exchange Commission on September 1, 2021

Registration No. 333-          

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

PERIMETER SOLUTIONS, SA

(Exact name of registrant as specified in its charter)

 

 

 

Grand Duchy of Luxembourg   2800   Not Applicable

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

12E rue Guillaume Kroll, L-1882 Luxembourg

Grand Duchy of Luxembourg

352 2668 62-1

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

Barry Lederman

8000 Maryland Avenue

Suite 350

Clayton, Missouri 63105

(314) 396-7343

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

 

 

Copies to:

 

Alan I. Annex, Esq.
Flora R. Perez, Esq.
Brian J. Gavsie, Esq.
Greenberg Traurig, P.A.
333 S.E. 2nd Avenue
Miami, Florida 33131
(305) 579-0500
 

Tim Cruickshank, Esq.

Jeffrey A. Fine, Esq.

Jeremy S. Liss, Esq.
Kirkland & Ellis LLP
601 Lexington Avenue
New York, New York 10022
(212) 446-4800

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective and after all conditions under the Merger Agreement to consummate the proposed merger are satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company and emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer, ” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ☐       Accelerated filer  ☐   Non-accelerated filer  ☒       Smaller reporting company  ☐   Emerging growth company  ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)   
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)   

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the SEC, acting pursuant to Section 8(a), may determine.

 

 


Table of Contents

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Amount

to be
Registered(1)

  Proposed
Maximum
Offering Price
per Share
 

Proposed
Maximum
Aggregate

Offering Price

 

Amount of

Registration Fee(2)

Ordinary Shares (3)(4)

 

40,832,600

 

$12.50(5)

 

$510,407,500 (5)

 

$55,685.46

Warrants to purchase Ordinary Shares (4)(6)

  34,020,000(7)   $0.18(7)   $6,123,600(7)   668.08(7)

Ordinary Shares issuable upon exercise of warrants (4)(8)

  8,505,000   $12.00(9)   —     (9)

Total

         

$516,531,100

 

$56,353.54(10)

 

 

 

(1)

All securities being registered will be issued by Perimeter Solutions, SA, a newly-formed public company limited by shares (société anonyme) governed by the laws of the Grand Duchy of Luxembourg (“Holdco”). In connection with the business combination described in this registration statement and the enclosed prospectus (the “Business Combination”), among other things, (a) EverArc (BVI) Merger Sub Limited, a company limited by shares incorporated with limited liability in the British Virgin Islands and a wholly-owned subsidiary of Holdco (“Merger Sub”) will merge with and into EverArc Holdings Limited, a company limited by shares incorporated with limited liability in the British Virgin Islands and the parent company of Holdco (“EverArc”), with EverArc surviving such merger as a direct wholly-owned subsidiary of Holdco (the “Merger”); (b) in the context of such Merger, all ordinary shares of EverArc (the “EverArc Ordinary Shares”) outstanding immediately prior to the Merger shall be exchanged for ordinary shares of Holdco (the “Holdco Ordinary Shares”); (c) SK Invictus Holdings, S.à r.l., a limited liability company (société à responsabilité limitée) governed by the laws of the Grand Duchy of Luxembourg (“SK Holdings”) will (i) contribute a portion of its ordinary shares in SK Invictus Intermediate S.à r.l., a limited liability company (société à responsabilité limitée) governed by the laws of the Grand Duchy of Luxembourg (“Perimeter”) to Holdco in exchange for preferred shares of Holdco and (ii) sell its remaining ordinary shares in Perimeter to Holdco for cash and (d) all of the outstanding warrants of EverArc (“EverArc Warrants”), in each case, entitling the holder thereof to purchase one-fourth of an EverArc Ordinary Share at an exercise price of $12.00 per whole EverArc Ordinary Share, will be converted into the right to purchase one-fourth of a Holdco Ordinary Share on substantially the same terms as the EverArc Warrants (the “Holdco Warrants”).

(2)

Determined in accordance with Section 6(b) of the Securities Act at a rate equal to $109.10 per $1,000,000 of the proposed maximum aggregate offering price.

(3)

Represents Holdco Ordinary Shares issuable in exchange for all outstanding EverArc Ordinary Shares in connection with the Merger. The EverArc Founder Shares will automatically convert into EverArc Ordinary Shares on a one-for-one basis in connection with the Business Combination.

(4)

Pursuant to Rule 416(a), an indeterminable number of additional securities are also being registered to prevent dilution resulting from stock splits, stock dividends or similar transactions.

(5)

Pursuant to Rules 457(c) and 457(f)(1) under the Securities Act, and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is equal to the product obtained by multiplying $12.50, which represents the average of the high and low prices of EverArc Ordinary Shares on the London Stock Exchange on August 24, 2021, by 40,832,600, the estimated number of shares of EverArc Ordinary Shares that will be outstanding immediately prior to the closing of the Business Combination.

(6)

EverArc Warrants will automatically convert into Holdco Warrants upon consummation of the Business Combination as described in the prospectus included herein.

(7)

The maximum number of Holdco Warrants and Holdco Ordinary Shares of the registrant issuable upon exercise of the Holdco Warrants are being simultaneously registered hereunder. Consistent with the response to Question 240.06 of the Securities Act Rules Compliance and Disclosure Interpretations, the registration fee with respect to such Holdco Warrants has been allocated to the Holdco Ordinary Shares underlying such warrants and those Holdco Ordinary Shares are included in the registration fee as calculated in footnote (8) below.

(8)

Consists of Holdco Ordinary Shares issuable upon exercise of Holdco Warrants. Each Holdco Warrant will entitle the warrant holder to purchase one-fourth of a Holdco Ordinary Share at a price of $12.00 per whole Holdco Ordinary Share (subject to adjustment).

(9)

No separate registration fee is required pursuant to Rule 457(g) under the Securities Act. Pursuant to Rule 457(g)(1) of the Securities Act and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price of the Holdco Ordinary Shares underlying the Holdco Warrants is calculated based on an exercise price of $12.00 per share.

(10)

Paid herewith.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Table of Contents

The information in this prospectus is not complete and may be changed. We may not issue or sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED SEPTEMBER 1, 2021

PRELIMINARY PROSPECTUS

Perimeter Solutions, SA

49,337,600 Ordinary Shares

34,020,000 Warrants

 

 

This prospectus relates to the issuance of (i) 40,832,600 ordinary shares of Perimeter Solutions, SA, a newly-formed public company limited by shares (société anonyme) governed by the laws of the Grand Duchy of Luxembourg (“Holdco”), (ii) 34,020,000 Holdco Warrants (as defined below) to purchase Holdco Ordinary Shares (as defined below) and (iii) 8,505,000 Holdco Ordinary Shares issuable upon exercise of the Holdco Warrants, in each case, in connection with the business combination described in this prospectus (the “Business Combination”).

On June 15, 2021, we entered into a Business Combination Agreement with EverArc Holdings Limited, a company limited by shares incorporated with limited liability in the British Virgin Islands and the parent company of Holdco (“EverArc”), SK Invictus Holdings S.à r.l., a limited liability company (société à responsabilité limitée) governed by the laws of the Grand Duchy of Luxembourg (“SK Holdings”), SK Invictus Intermediate S.à r.l., a limited liability company (société à responsabilité limitée) governed by the laws of the Grand Duchy of Luxembourg (“Perimeter”), and EverArc (BVI) Merger Sub Limited, a company limited by shares incorporated with limited liability in the British Virgin Islands and a wholly-owned subsidiary of Holdco (“Merger Sub”) (such agreement, as may be amended, supplemented, or otherwise modified from time to time, the “Business Combination Agreement”).

Pursuant to the Business Combination Agreement:

 

   

on the business day prior to the closing of the Business Combination, Merger Sub will merge with and into EverArc, with EverArc surviving such merger as a direct wholly-owned subsidiary of Holdco (the “Merger”);

 

   

pursuant to the Merger, all ordinary shares of EverArc (the “EverArc Ordinary Shares”) outstanding immediately prior to the Merger shall be exchanged for ordinary shares of Holdco (the “Holdco Ordinary Shares”);

 

   

SK Holdings will (i) contribute a portion of its ordinary shares in Perimeter to Holdco in exchange for preferred shares of Holdco and (ii) sell its remaining ordinary shares in Perimeter to Holdco for cash; and

 

   

all of the outstanding warrants of EverArc (“EverArc Warrants”), in each case, entitling the holder thereof to purchase one-fourth of an EverArc Ordinary Share at an exercise price of $12.00 per whole EverArc Ordinary Share, will be converted into the right to purchase Holdco Ordinary Shares on substantially the same terms as the EverArc Warrants (the “Holdco Warrants”).

In connection with the execution of the Business Combination Agreement, EverArc, SK Holdings and Holdco entered into separate subscription agreements (collectively, the “Subscription Agreements”) with a number of institutional investors, investors affiliated with SK Holdings and individual accredited investors (collectively, the “EverArc Subscribers”), pursuant to which the EverArc Subscribers agreed to purchase an aggregate of 115,000,000 EverArc Ordinary Shares at $10.00 per share which will be converted into Holdco Ordinary Shares in connection with the closing of the Business Combination. In addition, members of management of Perimeter (collectively, the “Management Subscribers” and together with the EverArc Subscribers, the “PIPE Subscribers”) agreed to purchase an aggregate of 1,100,212 Holdco Ordinary Shares at $10.00 per share in connection with the closing of the Business Combination.

In connection with the execution of the Business Combination, EverArc obtained a debt commitment letter from certain financial institutions pursuant to which the banks party to the debt commitment letter have agreed to provide financing for the Business Combination through a senior secured revolving credit facility and a senior secured first lien increasing rate bridge facility as further described in this prospectus.

The EverArc Ordinary Shares and EverArc Warrants are currently listed on the Official List of the UK Financial Conduct Authority and admitted to trading on the main market of the London Stock Exchange (“LSE”) under the symbols “EVRA” and “EVWA,” respectively. Holdco intends to apply to list the Holdco Ordinary Shares and Holdco Warrants on either the New York Stock Exchange or Nasdaq Stock Market.

 

 

No action or vote of the EverArc shareholders is required to effect the Business Combination. We are not asking you for a proxy and you are requested not to send us a proxy. See “The Business Combination.

Investing in our ordinary shares and warrants involves risks. See “Risk Factors” beginning on page 24 of this prospectus. You are encouraged to read this prospectus carefully.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

Holdco is an “emerging growth company” as defined under U.S. federal securities laws and, as such, has elected to comply with certain reduced public company reporting requirements with respect to the registration statement.

 

 

Prospectus dated             , 2021


Table of Contents

TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS

     1  

MARKET AND INDUSTRY DATA

     2  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     3  

FREQUENTLY USED TERMS

     5  

SUMMARY OF THE PROSPECTUS

     9  

SELECTED HISTORICAL FINANCIAL DATA OF EVERARC

     21  

SELECTED HISTORICAL FINANCIAL DATA OF PERIMETER

     22  

RISK FACTORS

     24  

SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES

     55  

COMPARATIVE PER SHARE DATA

     67  

THE BUSINESS COMBINATION

     68  

THE BUSINESS COMBINATION AGREEMENT

     80  

CERTAIN AGREEMENTS RELATED TO THE BUSINESS COMBINATION

     91  

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

     93  

MATERIAL LUXEMBOURG INCOME TAX CONSIDERATIONS

     101  

INFORMATION ABOUT EVERARC

     107  

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

     111  

CERTAIN EVERARC RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     113  

INFORMATION ABOUT PERIMETER

     116  

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

     125  

MANAGEMENT OF PERIMETER

     140  

CERTAIN PERIMETER RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     142  

COMPENSATION DISCUSSION AND ANALYSIS OF PERIMETER

     143  

MANAGEMENT OF HOLDCO AFTER THE BUSINESS COMBINATION

     154  

DESCRIPTION OF HOLDCO’S SECURITIES

     159  

COMPARISON OF SHAREHOLDER RIGHTS

     165  

SHARES ELIGIBLE FOR FUTURE SALE

     181  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     184  

ADDITIONAL INFORMATION

     187  

LEGAL MATTERS

     187  

EXPERTS

     187  

WHERE YOU CAN FIND MORE INFORMATION

     187  

INDEX TO FINANCIAL STATEMENTS

     F-1  

ANNEX A

     A-1  

ANNEX B

     B-1  

 

i


Table of Contents

ABOUT THIS PROSPECTUS

This document, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission (the “SEC”) by Holdco, constitutes a prospectus of Holdco under Section 5 of the Securities Act, with respect to the Holdco Ordinary Shares and Holdco Warrants (to be issued to the EverArc shareholders if the Business Combination described herein is consummated) and the Holdco Ordinary Shares issuable upon exercise of the Holdco Warrants.

This document does not constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction or to any person to whom it would be unlawful to make such offer.

The securities are not intended to be offered, sold or otherwise made available to, and should not be offered, sold or otherwise made available to, any persons in member states of the European Economic Area which apply Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (this Regulation together with any implementing measures in any member state, the “Prospectus Regulation”), unless they are qualified investors for the purposes of the Prospectus Regulation in such member state or in any other circumstances falling within Article 1(4) of the Prospectus Regulation, and no person in member states of the European Economic Area that is not a relevant person or qualified investor may act or rely on this document or any of its contents.

This prospectus includes trademarks, tradenames and service marks, certain of which belong to us or Perimeter and others that are the property of other organizations. Solely for convenience, trademarks, tradenames and service marks referred to in this prospectus appear without the ®, TM and SM symbols, but the absence of those symbols is not intended to indicate, in any way, that we or Perimeter will not assert our or their rights or that the applicable owner will not assert its rights to these trademarks, tradenames and service marks to the fullest extent under applicable law. 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 an endorsement or sponsorship of us by, these other parties.

 

1


Table of Contents

MARKET AND INDUSTRY DATA

This prospectus contains estimates, projections, and other information concerning Perimeter’s industry and business, as well as data regarding market research, estimates, and forecasts prepared by Perimeter’s management. 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. The industry in which Perimeter operates is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors.” Unless otherwise expressly stated, Perimeter obtained this industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry and general publications, government data, and similar sources. In some cases, Perimeter does not expressly refer to the sources from which this data is derived. In that regard, when Perimeter refers to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from sources which Perimeter paid for, sponsored, or conducted, unless otherwise expressly stated or the context otherwise requires. While Perimeter has compiled, extracted, and reproduced industry data from these sources, Perimeter has not independently verified the data. 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 prospectus. See “Cautionary Note Regarding Forward-Looking Statements.

 

2


Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this prospectus may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus may include, for example, statements about:

 

   

our ability to consummate the Business Combination;

 

   

the benefits from the Business Combination;

 

   

our ability to initially list, and once listed, maintain the listing of the Holdco Ordinary Shares on the Trading Market following the Business Combination;

 

   

the Company’s future financial performance following the Business Combination, including any expansion plans and opportunities;

 

   

the Company’s success in retaining or recruiting, or changes required in, its officers, key employees or directors following the Business Combination;

 

   

the ability of EverArc and the Company to consummate the PIPE or raise additional financing concurrently with the consummation of the Business Combination or otherwise in the future;

 

   

expectations concerning sources of revenue;

 

   

expectations about demand for fire retardant products, equipment and services;

 

   

the size of the markets in which we compete and potential opportunities in such markets;

 

   

our ability to foster highly responsive and collaborative relationships with existing and potential customers and stakeholders;

 

   

expectations concerning tax consequences of the Business Combination and other tax treatments;

 

   

expectations concerning certain of our products’ ability to protect life and property as population settlement locations change;

 

   

expectations concerning the markets in which we will operate in the coming years;

 

   

our ability to maintain a leadership position in any market following the consummation of the Business Combination;

 

   

the expected outcome of litigation matters and the effect of such claims on business, financial condition, results of operations or cash flows;

 

   

our ability to increase the size of our selling, general and administrative functions to support the growth of our business and whether administrative expenses will decrease as a percentage of revenue over time; and

 

   

expectations about compensation policies following the Business Combination.

These forward-looking statements are based on information available as of the date of this prospectus, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

3


Table of Contents

You should not place undue reliance on these forward-looking statements. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause our actual results to differ include:

 

   

our substantial dependence on sales to the USDA Forest Service and the state of California and the risk of decreased sales to these customers;

 

   

changes in the regulation of the petrochemical industry, a downturn in the oil additives and/or fire-retardant end markets or our failure to accurately predict the frequency, duration, timing, and severity of changes in demand in such markets;

 

   

changes in customer relations or service levels;

 

   

improper conduct of, or use of our products, by employees, agents, government contractors or collaborators;

 

   

changes in the availability of products from our suppliers on a long-term basis;

 

   

production interruptions or shutdowns, which could increase our operating or capital expenditures or negatively impact the supply of our products resulting in reduced sales;

 

   

changes in the availability of third-party logistics suppliers for distribution, storage and transportation;

 

   

increases in supply and raw material costs, supply shortages, long lead times for components or supply changes;

 

   

failure to continuously innovate and to provide products that gain market acceptance, which may cause us to be unable to attract new customers or retain existing customers;

 

   

adverse effects on the demand for our products or services due to the seasonal or cyclical nature of our business or severe weather events;

 

   

introduction of new products, which are considered preferable, which could cause demand for some of our products to be reduced or eliminated;

 

   

current ongoing and future litigation, including multi-district litigation and other legal proceedings;

 

   

heightened liability and reputational risks due to certain of our products being provided to emergency services personnel and their use to protect lives and property;

 

   

future products liabilities claims where indemnity and insurance coverage could be inadequate or unavailable to cover these claims due to the fact that some of the products we produce may cause adverse health consequences;

 

   

compliance with export control or economic sanctions laws and regulations; or

 

   

environmental impacts and side effects of our products, which could have adverse consequences for our business.

 

4


Table of Contents

FREQUENTLY USED TERMS

In this document:

1915 Law” means the Luxembourg law of August 10, 1915 on commercial companies, as amended.

Additional Offering” means EverArc’s placing of 6,800,000 EverArc Ordinary Shares, consummated on January 15, 2020 at a placing price of $10.50 per ordinary share.

Business Combination” means the transactions contemplated by the Business Combination Agreement.

Business Combination Agreement” means the Business Combination Agreement, dated as of June 15, 2021 as may be amended, by and among EverArc, Perimeter, Holdco, Merger Sub and SK Holdings.

Business Day” means any day, except Saturday or Sunday, on which banks are not required or authorized to close in Luxembourg, Grand Duchy of Luxembourg, New York, NY, London, United Kingdom, or the British Virgin Islands.

BVI Companies Act” means the BVI Business Companies Act, 2004 (as amended).

Closing” means the consummation of the Business Combination.

Closing Date” means the date upon which the Closing is to occur.

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

Combined Company” means Holdco and its consolidated subsidiaries after giving effect to the Business Combination.

Computershare BVI” means Computershare Investor Services (BVI) Limited, EverArc’s transfer agent and warrant agent prior to the Closing.

Computershare UK” means Computershare Investor Services plc., EverArc’s depositary interest agent prior to the Closing.

Computershare US” means Computershare Inc., Holdco’s transfer agent and warrant agent following the Closing.

Contribution and Sale” means (i) the contribution by SK Holdings of part of its Perimeter Ordinary Shares to Holdco in exchange for Holdco Preferred Shares and (ii) the sale by SK Holdings of its remaining Perimeter Ordinary Shares to Holdco for cash.

EverArc” refers to EverArc Holdings Limited, a company limited by shares incorporated with limited liability under the laws of the British Virgin Islands.

EverArc Articles” means the Memorandum and Articles of Association of EverArc.

EverArc Founder Entity” means EverArc Founders, LLC, a Delaware limited liability company.

EverArc Founders” means William N. Thorndike, Jr., W. Nicholas Howley, Tracy Britt Cool, Vivek Raj and Haitham Khouri.

 

5


Table of Contents

EverArc Founder Shares” means EverArc’s founder shares of no-par value having the rights, privileges and designations set out in the EverArc Articles.

EverArc Ordinary Shares” means EverArc’s ordinary shares, no par value.

EverArc Securities” means the EverArc Ordinary Shares and EverArc Warrants, collectively.

EverArc Shares” means the EverArc Ordinary Shares and the EverArc Founder Shares, collectively.

EverArc Subscribers” means the institutional investors, investors affiliated with SK Holdings and individual accredited investors that entered into Subscription Agreements with EverArc, SK Holdings and Holdco, to purchase an aggregate of 115,000,000 EverArc Ordinary Shares at $10.00 per share which will be converted into Holdco Ordinary Shares in connection with the closing of the Business Combination.

EverArc Subscription Agreements” means the subscription agreements entered into with the EverArc Subscribers for the purchase of the PIPE Shares.

EverArc Subscription Founder Entities” means TVR EverArc, LLC and Llanerch EverArc, LLC.

EverArc Warrants” means the warrants issued in the IPO, each of which is exercisable for one-fourth of an EverArc Ordinary Share, in accordance with its terms.

EverArc Warrant Instrument” means the warrant instrument executed by EverArc, dated December 12, 2019, setting for the terms and conditions of the EverArc Warrants.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

Founder Advisory Agreement” means that certain Founder Advisory Agreement dated as of December 12, 2019, by and between EverArc and the EverArc Founder Entity.

Founder Advisory Agreement Calculation Number” means such number of Holdco Ordinary Shares outstanding immediately following the Business Combination, including any Holdco Ordinary Shares issued upon the exercise of Holdco Warrants, but excluding any Holdco Ordinary Shares issued to shareholders or other beneficial owners of Perimeter in connection with the Business Combination.

Holdco” means Perimeter Solutions, SA, a public company limited by shares (société anonyme) governed by the laws of the Grand Duchy of Luxembourg with its registered office at 12E, rue Guillaume Kroll, L-1882, Grand Duchy of Luxembourg and registered with the Luxembourg trade and companies register (Registre de Commerce et des Sociétés, Luxembourg) under number B256.548.

Holdco Ordinary Shares” means the ordinary shares of Holdco, with a nominal value of $1.00 per share.

Holdco Preferred Shares” means the redeemable preferred shares of Holdco, with a nominal value of $10.00 per share.

Holdco Warrant Instrument” means the warrant instrument by and between Holdco and Computershare US, as warrant agent, governing the Holdco Warrants, to be entered into at the Closing.

Holdco Warrants” means the EverArc Warrants, as amended at the Merger Effective Time such that each EverArc Warrant becomes a right to acquire one-fourth of a Holdco Ordinary Share on substantially the same terms as were in effect immediately prior to the Merger Effective Time under the terms of the Holdco Warrant Instrument.

 

6


Table of Contents

IFRS” means International Financial Reporting Standards as issued by the International Accounting Standards Board.

IPO” means EverArc’s initial public offering by way of a placing of ordinary shares with matching warrants, consummated on December 17, 2019.

IRS” means the Internal Revenue Service of the United States of America.

LSE” means the London Stock Exchange.

Management Subscribers” means members of management of Perimeter that entered into Subscription Agreements with Holdco to purchase an aggregate of 1,100,212 Holdco Ordinary Shares at $10.00 per share in connection with the closing of the Business Combination.

Management Subscription Agreements” means the subscription agreements entered into with the Management Subscribers for the purchase of the PIPE Shares.

Merger” means the merger of Merger Sub with and into EverArc, with EverArc surviving the Merger as a wholly owned subsidiary of Holdco.

Merger Effective Time” means 12:01 a.m. New York time on the business day immediately following the day of the filing of the Plan and Articles of Merger.

Merger Sub” means EverArc (BVI) Merger Sub Limited, a company limited by shares incorporated with limited liability in the British Virgin Islands.

Nasdaq” means The Nasdaq Stock Market LLC.

NYSE” means the New York Stock Exchange.

Payment Price” means the Average Price (as defined in the Founder Advisory Agreement) per Holdco Ordinary Share for the last ten consecutive trading days in the relevant payment year, or as otherwise determined in accordance with the terms of the Founder Advisory Agreement in the event that the Founder Advisory Agreement is terminated in certain circumstances, including if there is a Sale of the Company (as defined in the Founder Advisory Agreement).

PCAOB” means the U.S. Public Company Accounting Oversight Board.

Perimeter” means SK Invictus Intermediate S.à r.l., a limited liability company (société à responsabilité limitée) governed by the laws of the Grand Duchy of Luxembourg with its registered office at 6, rue Eugène Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg trade and companies register (Registre de Commerce et des Sociétés, Luxembourg) under number B 221.545.

Perimeter Ordinary Shares” means the ordinary shares of Perimeter, with a nominal value of $1.00 per share.

PIPE” means the private placement or placements of PIPE Shares in connection with the consummation of the Transactions.

PIPE Shares” means the Holdco Ordinary Shares (1) issuable to the EverArc Subscribers in exchange for the EverArc Ordinary Shares purchased by them pursuant to the EverArc Subscription Agreements and (2) purchased by the Management Subscribers pursuant to the Management Subscription Agreements.

 

7


Table of Contents

PIPE Share Price” means $10.00, the price per share at which EverArc Ordinary Shares (and with respect to the Management Subscribers, Holdco Ordinary Shares) are being sold in the PIPE.

PIPE Subscribers” means, collectively, the EverArc Subscribers and the Management Subscribers.

Placing Agents” means Morgan Stanley & Co. International plc and UBS AG London Branch.

Plan and Articles of Merger” means that certain Articles of Merger between EverArc and Merger Sub, a copy of which is attached to the Business Combination Agreement as Exhibit F.

Prospectus” means the prospectus included in this Registration Statement on Form S-4 (Registration No. 333-                ) filed with the SEC.

SEC” means the U.S. Securities and Exchange Commission.

Securities Act” means the Securities Act of 1933, as amended.

SK Holdings” means SK Invictus Holdings S.à r.l., a limited liability company (société à responsabilité limitée) governed by the laws of the Grand Duchy of Luxembourg with its registered office at 6, rue Eugène Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg trade and companies register (Registre de Commerce et des Sociétés, Luxembourg) under number B 221.541.

Subscription Agreements” means the EverArc Subscription Agreements and the Management Subscription Agreements.

Trading Market” means the national stock exchange on which the Holdco Ordinary Shares will be listed for trading, which shall be either the NYSE or Nasdaq.

Transactions” means the transactions contemplated by the Business Combination Agreement, the Plan and Articles of Merger and all other ancillary agreements thereto, including the Merger and the Contribution and Sale.

U.K. Corporate Governance Code” means the U.K. Corporate Governance Code issued by the Financial Reporting Council in the U.K. from time to time.

USDA Forest Service” means the United States Department of Agriculture Forest Service.

U.S. GAAP” means U.S. generally accepted accounting principles.

 

8


Table of Contents

SUMMARY OF THE PROSPECTUS

This summary highlights selected information from this prospectus and does not contain all of the information that may be important to you. To better understand the Business Combination, you should read this entire prospectus carefully, including the annexes. See also the section entitled “Where You Can Find More Information.” Certain figures included in this section have been rounded for ease of presentation and, as a result, percentages may not sum to 100%.

Parties to the Business Combination

EverArc

EverArc was formed in the British Virgin Islands on November 8, 2019 to consummate an acquisition of a target company or business (which may be in the form of a merger, capital stock exchange, asset acquisition, stock purchase, scheme of arrangement, reorganization or similar business combination).

EverArc completed its IPO on December 17, 2019 and its Additional Offering on January 15, 2020. EverArc Ordinary Shares and EverArc Warrants are currently listed for trading on the London Stock Exchange under the symbols “EVRA,” and “EVWA,” respectively.

The mailing address of EverArc’s principal executive office is 55 Water Street, 3rd Floor, Brooklyn, New York 11201.

Perimeter

Perimeter is a limited liability company (société à responsabilité limitée) governed by the laws of the Grand Duchy of Luxembourg with its registered office at 6, rue Eugene Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg and registered with the Luxembourg trade and companies register (Registre de Commerce et des Sociétés, Luxembourg) under number B221.545.

Perimeter is a leading global solutions provider for the fire safety and oil additives industries.

The Fire Safety business is a formulator and manufacturer of fire management products that help our customers combat various types of fires, including wildland, structural, flammable liquids and other types of fires. Our Fire Safety business also offers specialized equipment and services, typically in conjunction with our fire management products, to support our customers’ firefighting operations. Our specialized equipment includes airbase retardant storage, mixing, and delivery equipment; mobile retardant bases; retardant ground application units; mobile foam equipment; and equipment that we custom design and manufacture to meet specific customer needs. Our service network can meet the emergency resupply needs of over 150 air tanker bases in North America, as well as many other customer locations in North America and internationally. The segment is built on the premise of superior technology, exceptional responsiveness to our customers’ needs, and a “never-fail” service network. The segment sells products to government agencies and commercial customers around the world. Our wildfire retardant products are the only qualified products for use by the USDA Forest Service.

Perimeter’s Oil Additives business provides high quality P2S5 primarily used in the preparation of ZDDP-based lubricant additives for critical engine anti-wear solutions. P2S5 is also used in pesticide and mining chemicals applications.

The mailing address of Perimeter’s principal executive office is 6, rue Eugene Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg.


 

9


Table of Contents

For more information about Perimeter, see the sections entitled “Information About Perimeter” and “Perimeter’s Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

Holdco

Holdco was incorporated under the laws of the Grand Duchy of Luxembourg on June 21, 2021 as a public company limited by shares (société anonyme) having its registered office at 12E, rue Guillaume Kroll, L-1882, Grand Duchy of Luxembourg, registered with the Luxembourg register of commerce and companies (Registre de Commerce et des Sociétés de Luxembourg) under number B256.548. Holdco was formed solely in contemplation of the Business Combination, has not commenced any operations, has only nominal assets and has no liabilities or contingent liabilities, nor any outstanding commitments other than in connection with the Business Combination.

Holdco expects to apply to list its Holdco Ordinary Shares and Holdco Warrants on the Trading Market.

The address of Holdco’s registered office is 12E, rue Guillaume Kroll, L-1882, Grand Duchy of Luxembourg.

Merger Sub

Merger Sub is a company limited by shares incorporated with limited liability in the British Virgin Islands and is a direct wholly owned subsidiary of Holdco. Merger Sub was formed solely in contemplation of the Business Combination, has not commenced any operations, has only nominal assets and has no liabilities or contingent liabilities, nor any outstanding commitments other than in connection with the Business Combination.

The mailing address of Merger Sub’s principal executive office is Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands.

The Business Combination

The Business Combination Agreement

On June 15, 2021, EverArc, Perimeter, SK Holdings, Holdco and Merger Sub entered into the Business Combination Agreement pursuant to which, following the effectiveness of the transactions contemplated therein, Perimeter and EverArc will become direct, wholly-owned subsidiaries of Holdco. Pursuant to the Business Combination Agreement, each of the following transactions will occur, in the following order:

 

   

on the Business Day prior to the Closing Date, Merger Sub, a wholly-owned subsidiary of Holdco will merge with and into EverArc, with EverArc surviving such merger as a direct wholly-owned subsidiary of Holdco (the “Merger”);

 

   

in the context of such Merger, all EverArc Ordinary Shares outstanding immediately prior to the Merger shall be exchanged for the right to receive Holdco Ordinary Shares pursuant to a share capital increase of Holdco, as set forth in the Business Combination Agreement;

 

   

on the Closing Date, SK Holdings, which holds 100% of the outstanding ordinary shares of Perimeter, will (i) contribute part of its Perimeter Ordinary Shares to Holdco in exchange for Holdco Preferred Shares and (ii) sell its remaining Perimeter Ordinary Shares to Holdco for cash (the “Contribution and Sale”);

 

   

in connection with the Contribution and Sale, the nominal Holdco Ordinary Share held by EverArc will be cancelled via a share capital reduction without any consideration for EverArc; and


 

10


Table of Contents
   

all of the outstanding EverArc Warrants, in each case, entitling the holder thereof to purchase one-fourth of an EverArc Ordinary Share at an exercise price of $12.00 per whole EverArc Ordinary Share, will be converted into the right to purchase one-fourth of a Holdco Ordinary Share on substantially the same terms as the EverArc Warrants.

On the business day immediately prior to the Closing Date, EverArc, Holdco and Merger Sub shall execute and file articles of merger and a plan of merger with the Registrar of Corporate Affairs of the British Virgin Islands (the “Registrar”), in accordance with, the relevant provisions of the BVI Companies Act, together with all other filings or recordings required under the BVI Companies Act in connection with the Merger. The Plan and Articles of Merger shall specify that the Merger shall become effective at such time as the Plan and Articles of Merger are duly registered by the Registrar, or at such later time as the Parties agree in writing (subject to the requirements of the BVI Companies Act). The parties will hold the Closing on the date of the Merger Effective Time, following the satisfaction or waiver of the conditions set forth in the Business Combination Agreement.

For more information, see the section entitled “The Business Combination Agreement—The Structure of the Business Combination.

Consideration to be Received in the Business Combination

At the Merger Effective Time, SK Holdings will receive the cash and Holdco Preferred Stock payable under the Business Combination Agreement. At the Merger Effective Time, each EverArc Ordinary Share issued and outstanding immediately prior to the Merger Effective Time will automatically be converted into and exchanged for the right to receive one Holdco Ordinary Share, which will be valued at $10.00 per share.

The Holdco Preferred Shares are entitled to a preferred annual cumulative right to a dividend equal to 6.5% of its nominal value (the “Preferential Dividend”). The Holdco Preferred Shares are not entitled to vote, except for the matters provided for by the 1915 Law, including any amendment, alteration or change to the rights attached to the Holdco Preferred Shares in a manner adverse to the Holdco Preferred Shares for which the consent of holders owning a majority of the Holdco Preferred Shares is required.

For more information, see the section entitled “The Business Combination Agreement—Consideration to be Received in the Business Combination.”

Conditions to Closing

The obligations of SK Holdings, Perimeter, EverArc, Holdco and Merger Sub to consummate the Business Combination and the transactions contemplated thereby, are subject to customary conditions and waivers. For more information, see the section entitled “The Business Combination Agreement—Conditions to Closing the Business Combination.”

Termination Rights

The Business Combination Agreement includes customary provisions allowing for the termination or abandonment of the Business Combination at any time prior to the Merger Effective Time including, but not limited to:

 

   

by mutual written consent of EverArc and SK Holdings;

 

   

by either EverArc or SK Holdings, if the Merger Effective Time shall not have occurred prior to 5:00 p.m. (New York time) on March 31, 2022, provided that the terminating party is not, either directly or indirectly through its affiliates, in breach or violation of any representation, warranty, covenant,


 

11


Table of Contents
 

agreement or obligation under the Business Combination Agreement and such breach or violation is the principal cause of the failure of a condition set forth in the Business Combination Agreement prior to 5:00 p.m. (New York time) on March 31, 2022;

 

   

by either EverArc or SK Holdings on January 1, 2022 if the Merger Effective Time shall not have occurred prior to 5:00 p.m. (New York time) on December 31, 2021;

 

   

by SK Holdings if (A)(i) certain of the conditions to closing set forth in the Business Combination have been satisfied, (ii) SK Holdings confirms to EverArc in writing that all of the conditions to the obligations of EverArc to consummate the Closing have been satisfied or waived by EverArc and that SK Holdings and Perimeter are ready to consummate the Business Combination and (iii) EverArc has not consummated the Business Combination within three business days of such date or (B)(i) EverArc is in material breach of its covenants under the Business Combination Agreement and such breach results in EverArc being incapable of consummating the Business Combination and (iv) SK Holdings notifies EverArc, in writing, of such material breach and EverArc does not cure such breach by the earlier of (x) the date that is thirty (30) days after written notice of such breach is provided by SK Holdings to EverArc and (y) December 31, 2021, if such written notice of such breach is provided prior to December 31, 2021, or March 31, 2022, if such written notice of such breach is provided after December 31, 2021; or

 

   

by EverArc, on or after December 31, 2021, if as of December 21, 2021, EverArc is unable to consummate the Business Combination solely due to the unavailability of sufficient funds available to EverArc under its financing sources.

In the event that the Business Combination Agreement is validly terminated, subject to certain terms in the Business Combination Agreement, all transaction expenses incurred in connection with the Business Combination will be paid by the party incurring such transaction expenses, except that EverArc shall pay all fees and expenses incurred in connection with any filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) or other applicable antitrust laws. If the Business Combination is consummated, subject to restrictions, Holdco will bear the reasonable and documented transaction expenses of all of the parties.

In the event that the Business Combination Agreement is validly terminated under certain circumstances, EverArc will be obligated to pay to SK Holdings an amount equal to $50 million less the amount of the PCAOB Financials Expenses (as defined in the Business Combination Agreement) and the Financing Cooperation Expenses (as defined in the Business Combination Agreement) actually reimbursed by EverArc to Perimeter pursuant to the Business Combination Agreement.

For more information, see the section entitled “The Business Combination Agreement—Termination of the Business Combination Agreement.”

Other Agreements Related to the Business Combination Agreement

Debt Commitment

In order to finance a portion of the cash consideration payable in the Business Combination and the costs and expenses incurred in connection therewith, EverArc entered into a debt commitment letter with Morgan Stanley Senior Funding, Inc. (“MSSF”), Barclays Bank PLC (“Barclays”) and Goldman Sachs Bank USA (“GS” and, together with MSSF and Barclays, the “Commitment Parties”), dated June 15, 2021 (the “Debt Commitment Letter”), pursuant to which the Commitment Parties agreed to make available to Holdco (i) a five-year first lien senior secured revolving credit facility in an aggregate committed amount of $100 million (the “Revolving


 

12


Table of Contents

Facility”) and (ii) a senior secured first lien increasing rate bridge facility in an aggregate principal amount of $600 million less the aggregate principal amount of first lien secured notes or other demand securities issued prior to the Closing (the “Bridge Facility” and together with the Revolving Facility, the “Debt Commitment Facilities”).

Subscription Agreements

In connection with the execution of the Business Combination Agreement, EverArc, SK Holdings and Holdco entered into Subscription Agreements with the EverArc Subscribers pursuant to which the EverArc Subscribers agreed to purchase an aggregate of 115,000,000 EverArc Ordinary Shares at $10.00 per share which will be converted into Holdco Ordinary Shares in connection with the closing of the Business Combination. In addition, the Management Subscribers entered into Subscription Agreements with Holdco pursuant to which they agreed to purchase an aggregate of 1,100,212 Holdco Ordinary Shares at $10.00 per share in connection with the closing of the Business Combination.

The issuance of the PIPE Shares pursuant to the Subscription Agreements is contingent upon, among other customary closing conditions, the substantially concurrent consummation of the Business Combination.

Pursuant to the Subscription Agreements, Holdco agreed that, within 30 calendar days after the Closing Date, it will file with the SEC (at Holdco’s sole cost and expense) a registration statement registering the resale of the PIPE Shares, and Holdco will use its commercially reasonable efforts to have the registration statement declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) the 60th calendar day (or 90th calendar day if the SEC notifies Holdco that it will “review” the registration statement) following the closing of the sale of the PIPE Shares and (ii) the 5th business day after the date Holdco is notified (orally or in writing, whichever is earlier) by the SEC that the Registration Statement will not be “reviewed” or will not be subject to further review.

For more information about the Subscription Agreements, see the section entitled “Certain Agreements Related to the Business Combination—Subscription Agreements.”

Non-Compete Agreements

In connection with the execution of the Subscription Agreements entered into with the Management Subscribers, EverArc, Holdco and each Management Subscriber entered into Non-Compete Agreements, which placed restrictive employment covenants on such Management Subscriber for a period of three years.

For more information about the Non-Compete Agreements, see the section entitled “Certain Agreements Related to the Business Combination—Non-Compete Agreements.”

Warrant Amendment

In connection with the Closing, Holdco will enter into the Holdco Warrant Instrument with EverArc and Computershare Inc., as warrant agent (the “Warrant Agent”) to, among other things, assume EverArc’s obligations under the existing EverArc Warrant Instrument.

For more information about the Warrant Amendment, see the section entitled “Certain Agreements Related to the Business Combination— Warrant Amendment.”


 

13


Table of Contents

Interests of Certain Persons in the Business Combination

EverArc’s shareholders should be aware that, aside from their interests as shareholders, the EverArc Founders indirectly through the EverArc Founder Entity and EverArc’s directors and officers have interests in the Business Combination that are different from, or in addition to, those of other shareholders and warrant holders generally. EverArc’s directors were aware of and considered these interests, among other matters, in evaluating the Business Combination. These interests include, among other things:

 

   

the amounts payable to the EverArc Founder Entity pursuant to the Founder Advisory Agreement entered into by EverArc and the EverArc Founder Entity which is designed to provide incentives to the EverArc Founders to achieve EverArc’s objectives which includes:

 

   

a fixed annual advisory amount equal to 1.5% of the Founder Advisory Agreement Calculation Number (in each case, payable in Holdco Ordinary Shares or partly in cash, at the election of the EverArc Founder Entity provided that at least 50% of such amounts are paid in Holdco Ordinary Shares). Based on the assumptions described in this prospectus, the fixed annual advisory amount is currently expected to be 2,353,992 Holdco Ordinary Shares which, assuming a stock price of $12.50 per Holdco Ordinary Share, would have a value of $29,424,902. Each additional $1 increase in the stock price of Holdco Ordinary Shares above $12.50 will increase the value of the fixed annual advisory amount payable to the EverArc Founder Entity by $2,353,992; and

 

   

a variable annual advisory amount based on the appreciation of the market price of Holdco Ordinary Shares if such market price exceeds certain trading price minimums (in each case, payable in Holdco Ordinary Shares or partly in cash, at the election of the EverArc Founder Entity provided that at least 50% of such amounts are paid in Holdco Ordinary Shares). Based on assumptions described in this prospectus and assuming a stock price of $12.50 per Holdco Ordinary Share, the variable annual advisory amount payable to the EverArc Founder Entity in year one would have a value of $70,619,765. For each $1 increase in the stock price of Holdco Ordinary Shares above $12.50, or such higher stock price on which a variable annual advisory amount was previously paid to the EverArc Founder Entity, the EverArc Founder Entity will receive a variable annual advisory amount valued at $28,247,906;

the EverArc Founders have advised Holdco that their intention is to elect, via the EverArc Founder Entity, to receive any advisory amounts in Holdco Ordinary Shares and for any cash element to only be such amount as is required to pay any related taxes;

 

   

the potential continuation of certain of EverArc’s directors as directors of Holdco;

 

   

the continued indemnification of current directors and officers of EverArc and the continuation of directors’ and officers’ liability insurance after the Business Combination; and

 

   

the beneficial ownership of the EverArc Founders directly and indirectly through the EverArc Founder Entity and certain of EverArc’s directors of an aggregate of (i) 100 EverArc Founder Shares, acquired for an aggregate purchase price of $1,000, which have an aggregate market value of approximately $1,250 based on the closing price of EverArc Ordinary Shares of $12.50 on the LSE on August 24, 2021 and (ii) 1,725,239 EverArc Ordinary Shares, acquired for an aggregate purchase price of $17,300,000, which have an aggregate market value of approximately $21,565,488 based on the closing price of EverArc Ordinary Shares of $12.50 on the LSE on August 24, 2021.

You should also read the section entitled “The Business Combination—Interests of EverArc’s Directors and Officers in the Business Combination.”


 

14


Table of Contents

Redemption Rights

Pursuant to the EverArc Articles, holders of EverArc Ordinary Shares do not have any right to have EverArc redeem their EverArc Ordinary Shares in connection with the consummation of the Business Combination.

Ownership of Holdco Following the Business Combination

It is anticipated that, upon completion of the Business Combination, (i) EverArc’s existing shareholders will own approximately 26.0% of the issued and outstanding Holdco Ordinary Shares (including 1% owned by the EverArc Founders) and (ii) the PIPE Subscribers will own approximately 74.0% of the issued and outstanding Holdco Ordinary Shares. These relative percentages assume no additional exercise of EverArc Warrants and no additional equity issuances of EverArc are issued at or prior to Closing. If the actual facts are different than these assumptions, the percentage ownership retained by EverArc’s existing shareholders will be different.

The following table illustrates the ownership levels in Holdco (excluding the impact of the shares underlying the Holdco Warrants) immediately after the Closing based on the assumptions described above:

 

     Number      Percentage  

EverArc existing shareholders

     40,832,600        26.0

PIPE Subscribers

     

Institutional Subscribers

     114,240,000        72.8

SK Subscribers

     429,000        0.3

Individual Subscribers

     331,000        0.2

Management Subscribers

     1,100,212        0.7

Total

     156,932,812        100

For more information, see the section entitled “Summary Pro Forma Condensed Consolidated Combined Financial Information.”

Organizational Structure

Prior to the Business Combination

The following diagram shows the current ownership structure of EverArc (excluding the impact of the shares underlying the EverArc Warrants).

 

LOGO

 

(1)

For more information about the ownership interests of our EverArc Founders and the EverArc Founder Entity, prior to the Business Combination, please see the section entitled “Security Ownership of Certain Beneficial Owners and Management.”


 

15


Table of Contents

The following diagram shows the current ownership structure of Perimeter.

 

LOGO

 

(1)

The diagram above only shows select subsidiaries of Perimeter.


 

16


Table of Contents

Following the Business Combination

The following diagram shows the pro forma ownership percentages (excluding the impact of the shares underlying the Holdco Warrants) and structure of Holdco immediately following the consummation of the Business Combination.

 

LOGO

Board of Directors of Holdco Following the Business Combination

EverArc and Perimeter anticipate that the current executive officers of Perimeter will become the executive officers of Holdco. Following the Business Combination, Holdco’s board of directors will expand to 9 members and will consist of W. Nicholas Howley, William N. Thorndike, Jr., Haitham Khouri, Edward Goldberg, Vivek Raj, Tracy Britt Cool, Kevin Stein, Sean Hennessy and Robert S. Henderson. We believe a majority of our board of directors will meet the independence standards under the applicable Trading Market rules. Please see the section entitled “Management of Holdco After the Business Combination.”

Material Tax Consequences

For a detailed discussion of certain U.S. federal income tax consequences and Luxembourg tax consequences of the Business Combination, see the sections titled “Material U.S. Federal Income Tax Considerations” and “Material Luxembourg Income Tax Considerations” in this prospectus.


 

17


Table of Contents

Accounting Treatment

The Merger between Holdco and EverArc will be accounted for as a common control transaction, where substantially all of the net assets of Holdco will be those previously held by EverArc. The acquisition of Perimeter through the Contribution and Sale will be treated as a business acquisition under Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations with Holdco determined to be the legal and accounting acquirer.

Appraisal or Dissenters’ Rights

The BVI Companies Act provides that any member of a BVI company is entitled to payment of the fair value of his, her or its shares upon dissenting from a merger, unless the company is the surviving company of the merger and the member continues to hold the same or similar shares.

Following delivery of the required notice from the Company, a dissenter is in most circumstances is required to follows certain procedures in order to properly assert their dissenters’ rights under BVI law including giving the Company a written notice of their decision to elect to dissent

Upon the giving of a notice of election to dissent, the dissenter ceases to have any of the rights of a shareholder except the right to be paid the fair value of his, her or its shares, and the right to institute proceedings to obtain relief on the ground that the action is illegal.

The Company shall make a written offer to each dissenter to purchase his shares at a specified price that the Company determines to be their fair value. If the Company and the dissenter fail, within 30 days immediately following the date on which the offer is made, to agree on the price to be paid for the shares owned by the dissenter, then fair value shall be determined through a statutory appraisal process.

EverArc caused the required notice to be given to shareholders on July 7, 2021. No member elected to exercise his, her or its right to dissent.

Risk Factor Summary

You should carefully read this prospectus, including the annexes, and especially consider the factors discussed in the section entitled “Risk Factors.” Some of the risks related to EverArc and Perimeter are summarized below:

Risks Related to Perimeter and Our Industry

 

   

a small number of our customers represent a significant portion of our revenue particularly the USDA Forest Service and the state of California;

   

as a supplier and service provider to the U.S. government and many foreign governments, states, and municipalities, we are subject to certain heightened risks;

   

our profitability could be negatively impacted by price and inventory risk;

   

changes in the regulation of the petrochemical industry, a downturn in the oil additives and/or fire-retardant end markets or our failure to accurately predict the frequency, duration, timing, and severity of changes in demand in such markets could adversely affect our business, financial condition and results of operations;

   

risks from the improper conduct of, or use of our products, by employees, agents, government contractors, or collaborators could adversely affect our reputation;

   

there can be no assurance that we will be able to continue purchasing products from our suppliers on a long-term basis and production interruptions or shutdowns could increase our operating or capital expenditures or negatively impact the supply of our products resulting in reduced sales;


 

18


Table of Contents
   

we rely on third-party logistics suppliers for distribution, storage, transportation, operating supplies and products;

   

we are susceptible to supply and raw material cost increases, supply shortages, long lead times for components, and supply changes;

   

if we fail to continuously innovate and to provide products that gain market acceptance, we may be unable to attract new customers or retain existing customers;

   

the seasonal or cyclical nature of our business and severe weather events may cause demand for our products and services to be adversely affected;

   

our industry and the markets in which we operate have few large competitors and increased competitive pressures could reduce our share of the markets we serve;

   

our competitive position could be adversely affected if we fail to protect our patents, trade secrets or other intellectual property rights, if our patents expire or if we become subject to infringement claims and our patents may not provide full protection;

   

risks inherent in our global operations;

Risks Related to Regulatory and Legal Matters

 

   

certain of our products are provided to emergency services personnel and are intended to protect lives and property, so we are subject to heightened liability and reputational risks;

   

some of the products we produce may cause adverse health consequences and we are and may be subject in the future to product liability claims, and indemnity and insurance coverage could be inadequate or unavailable to cover these claims;

   

we are exposed to risks related to litigation, including multi-district litigation and other legal proceedings;

   

a failure to comply with export control or economic sanctions laws and regulations U.S. FCPA and similar anticorruption, anti-bribery and anti-kickback laws, environmental laws and laws related to PFAS substances could have a material adverse impact on our business;

   

our contracts with the federal government subject us to additional oversight and risks;

   

our products are subject to extensive government scrutiny and regulation, including the USDA Forest Service qualification process;

   

increased regulations or limitations of carriers willing to ship materials considered to be hazardous can significantly increase the costs to acquire raw materials or ship finished goods to customers in the oil additives segment;

   

legal and regulatory claims, investigations and proceedings may be initiated against us in the ordinary course of business;

Risks Related to Holdco

 

   

Holdco will incur increased costs as a result of operating as a public company, and its management will devote substantial time to new compliance initiatives;

   

there can be no assurance that the Holdco Ordinary Shares that will be issued in connection with the Business Combination or the Holdco Warrants will be approved for listing on the Trading Market or, if approved, that Holdco will be able to comply with the continued listing standards of the Trading Market;

   

the Combined Company’s failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act could have a material adverse effect on its business, operating results and financial condition;

Risks Related to EverArc and the Proposed Business Combination

 

   

we may fail to realize the strategic and financial benefits currently anticipated from the Business Combination which could negatively impact the Combined Company’s stock price;


 

19


Table of Contents
   

the requirements of being a public company may strain the Combined Company’s resources and divert management’s attention;

   

the Combined Company may be required to take write-downs or write-offs, or the Combined Company may be subject to restructuring, impairment or other charges;

   

failure to consummate the Business Combination would result in a termination fee payable by EverArc;

   

EverArc may not be able to complete its initial business combination prior to December 17, 2022;

   

EverArc’s board of directors did not obtain a fairness opinion in determining whether or not to proceed with the Business Combination;

   

the EverArc Founders and EverArc’s board of directors have potential conflicts of interest in the Business Combination;

   

EverArc’s shareholders may be held liable for claims by third parties against EverArc to the extent of distributions received by them;

   

EverArc’s and Perimeter’s ability to consummate the Business Combination may be materially adversely affected by the COVID-19 pandemic;

Risks Related to Investment in a Luxembourg Company

 

   

Holdco is organized under the laws of the Grand Duchy of Luxembourg. It may be difficult for you to obtain or enforce judgments or bring original actions against Holdco or the members of its board of directors in the U.S.;

   

Luxembourg and European insolvency and bankruptcy laws are substantially different from U.S. insolvency and bankruptcy laws and may offer Holdco’s shareholders less protection than they would have under U.S. insolvency and bankruptcy laws;

   

the rights of Holdco’s shareholders may differ from the rights they would have as shareholders of a U.S. corporation, which could adversely impact trading in Holdco’s Ordinary Shares and its ability to conduct equity financings;

General Risk Factors

 

   

the Combined Company may require additional capital to fund our operations;

   

cybersecurity attack, acts of cyber-terrorism, failure of technology systems and other disruptions to our information technology systems may adversely impact us;

   

the Combined Company results of operations are subject to exchange rate and other currency risks;

   

the Combined Company insurance may not fully cover all of our operational risks;

   

the continuing impacts of the COVID-19 pandemic may have an adverse effect on the Combined Company; and

   

the loss of key personnel or the Combined Company inability to attract and retain new qualified personnel could hurt its business and inhibit our ability to operate and grow successfully.


 

20


Table of Contents

SELECTED HISTORICAL FINANCIAL DATA OF EVERARC

The summary historical statements of income data of EverArc for the period from November 8, 2019 (inception) to October 31, 2020 and the historical balance sheet data as of October 31, 2020 are derived from EverArc’s audited financial statements included elsewhere in this prospectus. The summary historical statements of income data of EverArc for the six months ended April 30, 2021 and the balance sheet data as of April 30, 2021 are derived from EverArc’s unaudited interim condensed financial statements included elsewhere in this prospectus.

EverArc’s historical results are not necessarily indicative of the results that may be expected in the future. The information below is only a summary and should be read in conjunction with the section entitled “EverArc’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the EverArc financial statements, and the notes and schedules related thereto, which are included elsewhere in this prospectus.

 

     As of and
for the six
months ended
April 30,
2021
     As of and for
the period from
November 8,
2019
(inception)
through
October 31,
2020
 

Statement of Income Data:

     

Operating Expenses

   $ 1,028,961      $ 2,620,712  
  

 

 

    

 

 

 

Operating Loss

     (1,028,961      (2,620,712

Other income (expense)

     

Gain on investments

     84,098        1,646,166  

Other income

     —          6  

Total other income

     84,098        1,646,172  
  

 

 

    

 

 

 

Net loss

   $ (944,863    $ (974,540
  

 

 

    

 

 

 

Unrealized (loss) gain on investments

     (9,381      26,708  

Total Comprehensive Loss

     (954,244      (947,832
  

 

 

    

 

 

 

Balance Sheet Data:

     

Total assets

   $ 399,566,250      $ 400,463,434  

Total liabilities

     111,782        87,599  

Total equity

     399,454,468        400,375,835  

 

21


Table of Contents

SELECTED HISTORICAL FINANCIAL DATA OF PERIMETER

The summary historical statements of income data of Perimeter for the year ended December 31, 2020 and the historical balance sheet data as of December 31, 2020 are derived from Perimeter’s audited financial statements included elsewhere in this prospectus. The summary historical statements of income data of Perimeter for the six months ended June 30, 2021 and the balance sheet data as of June 30, 2021 are derived from Perimeter’s unaudited interim condensed financial statements included elsewhere in this prospectus.

Perimeter’s historical results are not necessarily indicative of the results that may be expected in the future. The information below is only a summary and should be read in conjunction with the section entitled “Perimeter’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Perimeter financial statements, and the notes and schedules related thereto, which are included elsewhere in this prospectus.

 

(in thousands, except per share data)

   As of and
for the six
months ended
June 30,
2021
     As of and
for the
year ended
December 31,
2020
 
     (Unaudited)         

Statement of Income Data:

     

Net sales

   $ 121,046      $ 339,577  

Cost of goods sold

     73,814        177,532  
  

 

 

    

 

 

 

Gross profit

     47,232        162,045  

Operating expenses

   $ 54,506      $ 90,569  
  

 

 

    

 

 

 

Operating (loss) income

     (7,274      71,476  

Other (expense) income

     

Interest expense

     (15,886      (42,017

Other (expense) income- net

     (4,703      5,273  
  

 

 

    

 

 

 

Total other (expense)

     (20,589      (36,744
  

 

 

    

 

 

 

Income (loss) before income taxes

   $ (27,863    $ 34,732  
  

 

 

    

 

 

 

Income tax benefit (expense)

     5,486        (10,483
  

 

 

    

 

 

 

Net (loss) income

     (22,377      24,249  
  

 

 

    

 

 

 

Foreign translation adjustments

     (404      4,787  
  

 

 

    

 

 

 

Total comprehensive (loss) income

     (22,781    $ 29,036  
  

 

 

    

 

 

 

Net income (loss) per share

     

Basic

   $ (0.42    $ 0.46  

Diluted

   $ (0.42    $ 0.46  

Weighted-average shares used in computing net income (loss) per share

     

Basic

     53,045,510        53,045,510  

Diluted

     53,045,510        53,045,510  

Balance Sheet Data:

     

Total assets

   $ 1,154,474      $ 1,138,206  

Total liabilities

     885,833        846,784  

Total equity

     268,641        291,422  

 

22


Table of Contents

SUMMARY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL INFORMATION

The following summary unaudited pro forma condensed consolidated combined financial data (the “summary pro forma data”) gives effect to the Business Combination and related transactions described in the section entitled “Unaudited Pro Forma Condensed Consolidated Combined Financial Information.” The Business Combination will be accounted for as a business acquisition under ASC 805. Under this method of accounting, Holdco will be treated as the legal and accounting acquirer. The Merger will be accounted for as a common control transaction. Accordingly, the net assets of Perimeter will be stated at fair value; and the net assets of EverArc will be stated at historical cost, with no goodwill or other intangible assets recorded. The summary unaudited pro forma condensed consolidated combined balance sheet data as of June 30, 2021 gives pro forma effect to the Business Combination and related transactions as if they had occurred on June 30, 2021. The summary unaudited pro forma condensed consolidated combined statement of operations data for the year ended December 31, 2020 and the six months ended June 30, 2021 give pro forma effect to the Business Combination and related transactions as if they had been consummated on January 1, 2020.

The summary pro forma data have been derived from, and should be read in conjunction with, the unaudited pro forma condensed consolidated combined financial information of the combined company appearing elsewhere in this prospectus and the accompanying notes. The unaudited pro forma condensed consolidated combined financial information is based upon, and should be read in conjunction with, the historical financial statements and related notes of Holdco, EverArc, and Perimeter, which are included in this prospectus. The summary pro forma data have been presented for informational purposes only and are not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the Business Combination and related transactions been completed as of the dates indicated. In addition, the summary pro forma data do not purport to project the future financial position or operating results of the combined company.

 

     Pro Forma Combined
(in thousands, except
share and per share
data)
 

Statement of Operations Data for the Six Months Ended June 30, 2021

  

Net sales

   $ 121,046  

Net loss

   $ (67,763

Net loss per share attributable to common stockholders - basic and diluted

   $ (0.43

Weighted average common shares outstanding - basic and diluted

     156,900,000  

Statement of Operations Data for the Year Ended December 31, 2020

  

Net sales

   $ 339,577  

Net loss

   $ (223,218

Net loss per share attributable to common stockholders - basic and diluted

   $ (1.42

Weighted average common shares outstanding - basic and diluted

     156,900,000  

 

23


Table of Contents

RISK FACTORS

The value of your investment in EverArc following consummation of the Business Combination will be subject to the significant risks affecting Perimeter and inherent to the industry in which it operates. You should carefully consider the risks and uncertainties described below and other information included in this prospectus. If any of the events described below occur, the post-acquisition business and financial results could be adversely affected in a material way. This could cause the trading price of its common stock to decline, perhaps significantly, and you therefore may lose all or part of your investment.

As used in the risks described in this subsection, references to “we,” “us” and “our” are intended to refer to Perimeter unless the context clearly indicates otherwise. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to the businesses of EverArc and Perimeter.

Risks Related to Perimeter and Our Industry

A small number of customers represent a significant portion of our revenue, and a loss of one or more of these customers could have a material adverse effect on our business, financial condition and results of operations.

A small number of customers represent a significant portion of our revenue. A certain number of contracts with these customers are on an on-demand, as-needed basis, and there are no guaranteed minimums included in such contracts. In other cases, manufacturing disruptions at customer sites can significantly decrease customer demand. Because of the concentrated nature of our customer base and contract terms applicable to such customers, our quarterly revenue and results of operations may fluctuate from quarter to quarter and are difficult to estimate. In addition, any cancellation of orders or any acceleration or delay in anticipated product purchases by our larger customers could materially affect our revenue and results of operations in any quarterly period. We may be unable to sustain or increase our revenue from our larger customers, or offset any discontinuation or decrease of purchases by our larger customers with purchases by new or other existing customers. To the extent one or more of our larger customers experience significant financial difficulty, bankruptcy or insolvency, this could have a material adverse effect on our sales and our ability to collect on receivables, which could harm our business, financial condition and results of operations.

In addition, certain customers, including some of our larger customers, have negotiated, or may in the future negotiate, volume-based discounts or other more favorable terms from us, which can and have had a negative effect on our gross margins or revenue.

We expect that such concentrated purchases will continue to contribute materially to our revenue for the foreseeable future and that our results of operations may fluctuate materially as a result of such larger customers’ buying patterns.

We are substantially dependent on sales to the USDA Forest Service and the state of California, which account for approximately 58% of our revenue related to our fire safety segment.

Sales to the USDA Forest Service and the state of California represent a substantial portion of our revenues and this concentration of our sales makes us substantially dependent on those customers. In fiscal year 2020, sales to the USDA Forest Service and the state of California accounted for approximately 58% of our revenue related to our fire-safety segment. This customer concentration makes us subject to the risk of nonpayment, nonperformance, re-negotiation of terms or non-renewal by these major customers under our commercial agreements. If the USDA Forest Services and/or the state of California reduce their spend on our fire-retardant products, we may experience a reduction in revenue and may not be able to sustain profitability, and our business, financial condition and results of operations would be materially harmed.

 

24


Table of Contents

As a supplier and service provider to the U.S. government, we are subject to certain heightened risks, such as those associated with the government’s rights to audit and conduct investigations and with its rights to terminate contracts for convenience or default.

As a supplier and service provider to the U.S. government, we are subject to certain heightened risks, such as those associated with the government’s rights to audit and conduct investigations and with its rights to terminate contracts for convenience or default. We may in the future be the subject of U.S. government investigations relating to our U.S. government contracts. Such investigations often take years to complete and could result in administrative, civil or criminal liabilities, including repayments, fines, treble and other damages, forfeitures, restitution or penalties, or could lead to suspension or debarment of U.S. government contracting or of export privileges. For instance, if a business unit were charged with wrongdoing in connection with a U.S. government investigation (including fraud, or violation of certain environmental or export laws), the U.S. government could suspend us from bidding on or receiving awards of new U.S. government contracts or subcontracts. If convicted or found liable, the U.S. government could fine and debar us from receiving new awards for a period generally not to exceed three years and could void any contracts found to be tainted by fraud. We also could suffer reputational harm if allegations of impropriety were made against us, even if such allegations are later determined to be unsubstantiated.

Some of our sales are to foreign buyers, which exposes us to additional risks such as foreign political, foreign exchange, economic and regulatory risks.

We derived approximately 22% of our revenues from customers located in foreign countries in fiscal 2020. The amount of foreign sales we make may increase in the future. The additional risks of foreign sales include:

 

   

potential adverse fluctuations in foreign currency exchange rates;

 

   

higher credit risks;

 

   

restrictive trade policies of the U.S. or foreign governments;

 

   

currency hyperinflation and weak banking institutions;

 

   

changing economic conditions in local markets;

 

   

compliance risk related to local rules and regulations;

 

   

political and economic instability in foreign markets;

 

   

changes in leadership of foreign governments; and

 

   

export restrictions due to local states of emergency for disease or illness.

Some or all of these risks may negatively impact our business, financial condition and results of operations.

Our profitability could be negatively impacted by price and inventory risk related to our business, including commodity price exposure.

Our realized margins depend on the differential of sales prices over our total supply costs. Our profitability is therefore sensitive to changes in product prices caused by changes in supply, transportation and storage capacity or other market conditions.

Generally, we attempt to maintain an inventory position that is substantially balanced between our purchases and sales, including our future delivery obligations. We attempt to obtain a certain margin for our purchases by selling our product to our customers. However, market, weather or other conditions beyond our control may disrupt our expected supply of product, and we may be required to obtain supply at increased prices

 

25


Table of Contents

that cannot be passed through to our customers. For example, some of our supply contracts follow market prices, which may fluctuate through the year, while our product prices may be fixed on a quarterly or annual basis, and therefore, fluctuations in our supply may not be passed through to our customers and can produce an adverse effect on our margins.

Changes in the regulation of the petrochemical industry, a downturn in the oil additives and/or fire-retardant end markets or our failure to accurately predict the frequency, duration, timing, and severity of changes in demand in such markets and the broader necessity for oil additives and/or firefighting related materials could adversely affect our business, financial condition and results of operations.

Our end markets experience constantly changing demand depending on a number of factors that are out of our control. In our oil additives business, we supply phosphorus pentasulfide which is primarily used in the lubricant additives market to produce a critical compound in engine oils. As more electric vehicles emerge on the automobile market, use of the internal combustion engine may decline, thereby lessening demand for our oil additive products. In our fire-retardant business, demand is dependent on the occurrence of fires, which are seasonal and dependent on environmental and other factors. Changes in the occurrence, severity and duration of fires may change demand for our fire-retardant products. For example, in 2019 we experienced the lowest U.S. fire season in 16 years. Seasonality in the fire-retardant end market could periodically result in higher or lower levels of revenue and revenue concentration with a single or small number of customers. See “—The seasonal or cyclical nature of our business and severe weather events may cause demand for our products and services to be adversely affected while certain of our fixed costs remain the same, and prior performance is not necessarily indicative of our future results.” Our inability to offset the volatility of these end markets through diversification into other markets, could materially and adversely affect our business, financial condition and results of operations.

There can be no assurance that we will maintain our relationship with, or serve, our customers at current levels.

There can be no assurance that we will maintain our relationship with, or serve, our customers at current levels. In addition, there is no assurance that any new agreement we enter into to supply or share services or facilities will have terms as favorable as those contained in current arrangements. Less favorable contract terms and conditions under any customer contract or contract for supply, purchase or shared services or facilities, could have a material adverse effect on our business, financial condition and results of operations.

Risks from the improper conduct of, or use of our products by, employees, agents, government contractors, or collaborators could adversely affect our reputation as well as our business, financial condition and results of operations.

Unapproved or improper use of our products, or inadequate disclosure of risks or other information relating to the use of our products can lead to injury or other serious adverse events. These events could lead to recalls or safety alerts relating to our products (either voluntary or as required by governmental authorities), and could result, in certain cases, in the removal of a product from the market. A recall could result in significant costs and lost sales and customers, enforcement actions and/or investigations by state and federal governments or other enforcement bodies, as well as negative publicity and damage to our reputation that could reduce future demand for our products. Personal injuries relating to the use of our products can also result in significant product liability claims being brought against us. See “—Some of the products we produce may cause adverse health consequences, which exposes us to product liability and other claims, and we may, from time to time, be the subject of indemnity claims. Indemnity and insurance coverage could be inadequate or unavailable to cover such product liability and other claims.”

We cannot ensure that our compliance controls, policies, and procedures will in every instance protect us from acts committed by our employees, agents, contractors, or collaborators that would violate the laws or regulations of the jurisdictions in which we operate, including, without limitation, employment, foreign corrupt practices, trade restrictions and sanctions, environmental, competition, and privacy laws and regulations. Such

 

26


Table of Contents

improper actions could subject us to civil or criminal investigations, and monetary and injunctive penalties, and could adversely impact our reputation as well as our business, financial condition and results of operations.

There can be no assurance that we will be able to continue purchasing products from our suppliers on a long-term basis.

There can be no assurance that we will be able to continue purchasing products from our suppliers on a long-term basis. Although some of these contracts are renewable or renew automatically unless notice of termination is given, there can be no assurance that they will be renewed or that notice of termination will not be given. There are also no assurances that if such contracts are not renewed, that we will be able to find suppliers who can provide products at a similar price and of a similar quality. Finding a new supplier may take a significant amount of time and resources, and once we have identified such new supplier, we would have to ensure that they meet our standards for quality control and have the necessary technical capabilities, responsiveness, high-quality service and financial stability. Further, any changes in our supply could result in changes in the quality of our products and may also require approval by the USDA Forest Service. If we are unable to manage our supply chain effectively and ensure that our products are available to meet consumer demand, our operating costs could increase and our profit margins could decrease. Any of these factors could impact our ability to supply our products to customers and consumers and may adversely affect our business, financial condition and results of operations.

Production interruptions or shutdowns could increase our operating or capital expenditures or negatively impact the supply of products resulting in reduced sales.

Manufacturing of our oil additives and fire-retardant products is concentrated at certain facilities. In the event of a significant manufacturing difficulty, disruption or delay, we may not be able to develop alternate or secondary manufacturing locations without incurring material additional costs and substantial delays. Furthermore, these risks could materially and adversely affect our business if our facilities are impacted by a natural disaster or other interruption at a particular location. Transferring manufacturing to another location may result in significant delays in the availability of our products. As a result, protracted regional crises, issues with manufacturing facilities, or the COVID-19 pandemic, could lead to eventual shortages of necessary components. It could be difficult or impossible, costly and time consuming to obtain alternative sources for these components, or to change products to make use of alternative components. In addition, difficulties in transitioning from an existing supplier to a new supplier could create delays in component availability that would have a significant impact on our ability to fulfill orders for our products.

The operation of manufacturing plants involves many risks, including suspension of operations and increased costs or requirements stemming from new government statutes, regulations, guidelines and policies, including evolving environmental regulations.

The operation of manufacturing plants involves many risks, including suspension of operations and increased costs or requirements stemming from new government statutes, regulations, guidelines and policies, including evolving environmental regulations. We need environmental and operational registrations, licenses, permits, inspections and other approvals to operate. The loss or delay in receiving a significant permit or license or the inability to renew it and any loss or interruption of the operations of our facilities may harm our business, financial condition and results of operations.

We rely on third-party logistics suppliers for the distribution, storage and transportation of raw materials, operating supplies and products.

We rely on third-party logistics suppliers for the distribution, storage and transportation of raw materials, operating supplies and products. Delays or disruptions in the supply chain may adversely impact our ability to manufacture and distribute products thus impacting business financials. Any failure to properly store

 

27


Table of Contents

our products may similarly impact our manufacturing and distribution capabilities, impacting business financials. Although no single third-party logistics supplier and no one country is critical to our production needs, if we were to lose a supplier it could result in interruption of product shipments, cancellation of orders by customers and termination of relationships. This, along with the damage to our reputation, could have a material adverse effect on our revenues and, consequently, our business, financial condition and results of operations.

In addition, actions by a third-party logistics supplier that fail to comply with contract terms or applicable laws and regulations could result in such third-party logistics supplier exposing us to claims for damages, financial penalties and reputational harm, any of which could have a material adverse effect in our business, financial condition and results of operations.

Raw materials necessary for the production of our products and with limited sources of supply are susceptible to supply cost increases which we may not be able to pass onto customers, disruptions to the supply chain, and supply changes, any of which could disrupt our supply chain and could lead to us not meeting our contractual requirements.

All of the raw materials that go into the manufacture of our fire-retardant and oil additive products are sourced from third-party suppliers. Some of the key raw materials used to manufacture our products come from limited or sole sources of supply. We are therefore subject to the risk of shortages and long lead times in the supply of these raw materials and the risk that our suppliers discontinue or modify raw materials used in our products. We have a global supply chain and the COVID-19 pandemic has and may continue to adversely affect our ability to source raw materials in a timely or cost-effective manner from our suppliers. For example, reduction in shipping resources have resulted in longer lead times for key raw materials to be transported to our facilities. In addition, the lead times associated with certain raw materials are lengthy and preclude rapid changes in quantities and delivery schedules. We have in the past experienced and may in the future experience raw materials shortages and price fluctuations of certain key raw materials and materials, and the predictability of the availability and pricing of these raw materials may be limited. Raw materials shortages or pricing fluctuations could be material in the future. In the event of a raw materials shortage, supply interruption or material pricing change from suppliers of these raw materials, we may not be able to develop alternate sources in a timely manner or at all in the case of sole or limited sources. Developing alternate sources of supply for these raw materials is time-consuming, difficult, and costly as they require extensive qualifications and testing, and we may not be able to source these raw materials on terms that are acceptable to us, or at all, which may undermine our ability to meet our requirements or to fill customer orders in a timely manner. Any interruption or delay in the supply of any of these raw materials, or the inability to obtain these raw materials from alternate sources at acceptable prices and within a reasonable amount of time, would adversely affect our ability to meet our scheduled product deliveries to our customers. This could adversely affect our relationships with our customers and could cause delays in shipment of our products and adversely affect our business, financial condition and results of operations. In addition, increased raw materials costs could result in lower gross margins. Even where we are able to pass increased raw materials costs along to our customers, there may be a lapse of time before we are able to do so such that we must absorb the increased cost. If we are unable to buy these raw materials in quantities sufficient to meet our requirements on a timely basis, we will not be able to deliver products to our customers, which may result in such customers using competitive products instead of Perimeter’s products.

If the cost of our raw materials fluctuates significantly, this may adversely impact our profit margin and financial position.

Our business uses phosphorus as a key raw material. The price of this raw material may fluctuate in the future. If the price for this raw material increases, our profit margin could decrease for certain business lines.

 

28


Table of Contents

The industries in which we operate and which we intend to operate in the future are subject to change. If we fail to continuously innovate and to provide products that gain market acceptance, we may be unable to attract new customers or retain existing customers, and hence our business, financial condition and results of operations may be adversely affected.

The industries in which we operate and intend to operate in the future are subject to change, including shifts in customer demands and regulatory requirements and emergence of new industry standards and practices. Thus, our success will depend, in part, on our ability to respond to these changes in a cost-effective and timely manner. We need to anticipate the emergence of new technologies and assess their market acceptance. We also need to invest significant resources in research and development in order to keep our products competitive in the market.

However, research and development activities are inherently uncertain, and we might encounter practical difficulties in commercializing our research and development results, which could result in excessive research and development expenses or delays. If we are unable to keep up with the technological developments and anticipate market trends, or if new technologies render our products obsolete, customers may no longer be attracted to our products. As a result, our business, financial condition and results of operations would be materially and adversely affected.

The seasonal or cyclical nature of our business and severe weather events may cause demand for our products and services to be adversely affected while certain of our fixed costs remain the same, and prior performance is not necessarily indicative of our future results.

Our operating revenues of our fire-retardant business tend to be somewhat higher in summer months primarily due to the hotter/drier weather, which is generally correlated with a higher prevalence of wildfires. This is in part offset by the disbursement of our operations in both the northern and southern hemispheres, so that the summer seasons alternate.

Fires caused by severe storms, extended periods of inclement weather or climate extremes resulting from climate change can significantly affect demand for our fire-retardant products in the areas affected. While weather-related and other event-driven increases in demand can boost revenues through additional demand for our products for a limited time, we may incur increased costs in our efforts to produce enough products and to transport our products to our customers in a timely matter.

For these and other reasons, operating results in any interim period are not necessarily indicative of operating results for an entire year, and operating results for any historical period are not necessarily indicative of operating results for a future period. Our stock price may be negatively or positively impacted by interim variations in our results.

Our industry and the markets in which we operate have few large competitors and increased competitive pressures could reduce our share of the markets we serve and adversely affect our business, financial condition and results of operations.

Increased interest and potential competition in our markets from existing and potential competitors may reduce our market share and could negatively impact our business, financial condition and results of operations. Historically we have had relatively few large competitors. Existing and potential competitors may have more resources and better access to capital markets to facilitate continued expansion. If there are new entrants into our markets, the resulting increase in competition may adversely impact our results of operations.

 

29


Table of Contents

If new products are introduced into the market that are lower in cost, have enhanced performance characteristics or are considered preferable for environmental or other reasons, demand for some of our products could be reduced or eliminated.

New fire retardants based on different chemistry or raw materials may be introduced by competitors in the future. These products may be lower in cost, or have enhanced performance characteristics compared to our existing products, and our customers may find them preferable. Replacement of one or more of our products in significant volumes could have a material adverse effect on our business, financial condition and results of operations.

Our businesses depend upon many proprietary technologies, including patents, licenses, trademarks and trade secrets. Our competitive position could be adversely affected if we fail to protect our patents, trade secrets or other intellectual property rights, if our patents expire or if we become subject to claims that we are infringing upon the rights of others.

Our intellectual property is of particular importance for a number of the specialty products that we manufacture and sell. The trademarks and patents that we own may be challenged, and because of such challenges, we could eventually lose our exclusive rights to use and enforce such patented technologies and trademarks, which could adversely affect our competitive position, business, financial condition and results of operations. We are licensed to use certain patents and technology owned by other companies to manufacture products complementary to our own products. We pay royalties for these licenses in amounts not considered material, in the aggregate, to our consolidated results.

We also rely on unpatented proprietary know-how and continuing technological innovation and other trade secrets in all regions to develop and maintain our competitive position. Although it is our policy to enter into confidentiality agreements with our employees and third parties to restrict the use and disclosure of trade secrets and proprietary know-how, those confidentiality agreements may be breached. Additionally, adequate remedies may not be available in the event of an unauthorized use or disclosure of such trade secrets and know-how, and others could obtain knowledge of such trade secrets through independent development or other access by legal means. The failure of our patents, trademarks or confidentiality agreements to protect our processes, technology, trade secrets or proprietary know-how and the brands under which we market and sell our products could have a material adverse effect on our business, financial condition and results of operations.

Our patents may not provide full protection against competing manufacturers in the United States, or in countries outside of the United States, including members of the European Union and certain other countries, and patent terms may also be inadequate to protect our products for an adequate amount of time. Weaker protection may adversely impact our sales, business, financial condition and results of operations.

In some of the countries in which we operate, the laws protecting patent holders are significantly weaker than in the United States, countries in the European Union and certain other countries. Weaker protection may assist competing manufacturers in becoming more competitive in markets in which they might not have otherwise been able to introduce competing products for a number of years. As a result, we tend to rely more heavily upon trade secret and know-how protection in these regions, as applicable, rather than patents and this may adversely impact our sales, business, financial condition and results of operations.

Our commercial success will depend in part on our success in obtaining and maintaining issued patents and other intellectual property rights in the United States and elsewhere. If we do not adequately protect our intellectual property, competitors may be able to use our processes and erode or negate any competitive advantage we may have, which could harm our business.

We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect our products, any additional features we develop or any new products. Patents, if issued, may be challenged, deemed unenforceable, invalidated or circumvented. We also cannot provide any assurances that any of our pending patent applications will be approved and a rejection of a patent application could have a materially adverse effect on our ability to protect our intellectual property from competitors.

 

30


Table of Contents

Furthermore, though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Competitors may also be able to design around our patents. Other parties may develop and obtain patent protection for more effective technologies, designs or methods. We may not be able to prevent the unauthorized disclosure or use of our knowledge or trade secrets by consultants, suppliers, vendors, former employees and current employees. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries. Such claims and proceedings can also distract and divert management and key personnel from other tasks important to the success of our business. In addition, intellectual property litigation or claims could force us to do one or more of the following:

 

   

cease selling products that contain asserted intellectual property;

 

   

pay substantial damages for past use of the asserted intellectual property;

 

   

obtain a license from the holder of the asserted intellectual property, which may not be available on reasonable terms; and

 

   

redesign or rename, in the case of trademark claims, our products to avoid infringing the rights of third parties.

Such requirements could adversely affect our revenue, increase costs, and harm our business, financial condition and results of operations.

Several of our niche products and services are sold in select markets. There can be no assurance that these markets will not attract additional competitors that could have greater financial, technological, manufacturing and/or marketing resources.

Select markets for some of our niche products and services may attract additional competitors. We cannot assure you that we will have the financial resources to fund capital improvements to more effectively compete with such competitors or that even if financial resources are available to us, that projected operating results will justify such expenditures. Smaller companies may be more innovative, better able to bring new products to market and better able to quickly exploit and serve niche markets.

There are other risks that are inherent in our global operations.

A portion of our revenues and earnings are generated by non-U.S. operations. Risks inherent in our global operations include:

 

   

the potential for changes in socio-economic conditions, laws and regulations, including antitrust, import, export, labor and environmental laws, and monetary and fiscal policies;

 

   

unsettled or unstable political conditions;

 

   

government-imposed plant or other operational shutdowns;

 

   

corruption;

 

   

natural and man-made disasters,

 

   

hazards and losses; and

 

   

violence, civil and labor unrest, and possible terrorist attacks.

There can be no assurance that any or all of these events will not have a material adverse effect on our business, financial condition and results of operations.

 

31


Table of Contents

Risks Related to Regulatory and Legal Matters

We are the subject of litigation by customers, suppliers and other third parties and may be the subject of such litigation in the future.

We are the subject of litigation by customers, suppliers and other third parties and may be the subject of such litigation in the future. From time to time, such lawsuits are filed against us and the outcome of any litigation, particularly class or collective action lawsuits and regulatory actions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend any such lawsuits may be significant and may negatively affect our operating results if changes to our business operations are required. There may also be negative publicity associated with litigation that could decrease customer acceptance of our products, regardless of whether the allegations are valid or whether we are ultimately found liable. A significant judgment against us, the loss and/or expiration of a significant permit, license or other approval, or a significant fine, penalty or contractual dispute could have a material adverse effect on our business, financial condition and results of operations.

Certain of our products are provided to emergency services personnel and are intended to protect lives and property, so we are subject to heightened liability and reputational risks if our products fail to provide such protection as intended.

Our fire-retardant products are provided to emergency services personnel and are intended to protect lives and property, so we are subject to heightened liability risks if our products fail to provide such protection. While our products are effective in retarding fires, there is no guarantee such products will be able to stop all fires due to their unpredictability and variation in size and/or speed in which a fire is burning. In addition, fires need to be fought with the cooperation and assistance of local fire authorities as well as the additional tools and resources that they bring. Therefore, while we recognize the importance of the role our products play in these critical efforts, our products are not the only factor in fighting fires and therefore we cannot guarantee that our products will always be able to protect life and property. Any failure to do so could have an adverse effect on our business.

Some of the products we produce may cause adverse health consequences, which exposes us to product liability and other claims, and we may, from time to time, be the subject of indemnity claims. Indemnity and insurance coverage could be inadequate or unavailable to cover such product liability and other claims.

Some of the products we produce may cause adverse health consequences, which exposes us to product liability and other possible claims. A successful class action proceeding or one or a series of claims related to degradation of natural resources, product liability or exposure from usage of a product that exceeds our insurance or indemnity coverage could have a material adverse effect on our business, financial condition and results of operations. Additionally, we are on notice of indemnity claims against us, which we dispute, and may be the subject of such indemnity claims in the future. Such litigation and indemnity claim resolution is expensive, time consuming and may divert management’s attention away from the operation of the business. The outcome of litigation and disputes can never be predicted with certainty and not resolving such matters favorably could have a material adverse effect on our business, financial condition, results of operations and/or reputation, as they may require us to pay substantial damages or make substantial indemnification payments, among other consequences.

We manufacture, among other things, products used to extinguish fires. The products that we manufacture are typically used in applications and situations that involve high levels of risk of personal injury. Failure to use our products for their intended purposes, failure to use our products properly or the malfunction of our products could result in serious bodily injury or death of the user. In such cases, we may be subject to product liability claims arising from the design, manufacture or sale of our products. If these claims are decided against us, and we are found to be liable, we may be required to pay substantial damages, and our insurance costs may

 

32


Table of Contents

increase significantly as a result. We cannot assure you that our indemnity and insurance coverage would be sufficient to cover the payment of any potential claim. In addition, we cannot assure you that this or any other indemnity or insurance coverage will continue to be available or, if available, that we will be able to obtain insurance at a reasonable cost. Any material uninsured loss could have a material adverse effect on our business, financial condition and results of operations.

We are exposed to risks related to litigation, including multi-district litigation and other legal proceedings.

We operate in a highly regulated and litigious environment. We and/or one or more of our subsidiaries are regularly involved in a variety of legal proceedings arising in the ordinary course of our business, including arbitration, litigation (and related settlement discussions), and other claims, and are subject to regulatory proceedings including governmental audits and investigations. Legal proceedings, in general, and class action and multi-district litigation, in particular, can be expensive and disruptive, and may not be insured or exceed any applicable insurance coverage. Additionally, defending against these lawsuits and proceedings may involve significant expense and diversion of management’s attention and resources. Some of these suits may purport or may be determined to be class actions and/or involve parties seeking large and/or indeterminate amounts, including punitive or exemplary damages, and may remain unresolved for several years.

For example, we are a defendant in a multi-district litigation pending in the United States District Court for the District of South Carolina (“MDL”) relating to the manufacture, sale, and distribution of aqueous film forming foam (“AFFF”). The cases allege, among other things, groundwater contamination, drinking water contamination, property damage, damages to natural resources, and bodily injuries from exposure to Per- and polyfluoroalkyl substances (“PFAS”) chemicals in AFFF. There are over 1,300 cases currently pending in the MDL. The plaintiffs include, among others, individual firefighters, municipalities and corporate water providers, and state attorneys general. The lead defendants include 3M Company, Tyco Fire Products LP, and DuPont de Nemours, Inc./The Chemours Company, and approximately 10 to 12 other defendants including, among others, Amerex Corporation (“Amerex”). Amerex was named as a defendant in many of the lawsuits based on its prior ownership of The Solberg Company (“Solberg”), which Perimeter acquired from Amerex on January 1, 2019. Although Amerex retained certain pre-closing liabilities for Solberg, there are litigation matters pending against Perimeter Solutions on the basis of Perimeter Solutions’ ownership of Solberg after the acquisition date. There are also cases pending against Perimeter Solutions on the basis of its manufacturing, distribution, and sale of non-Solberg AFFF products.

We cannot predict with certainty the outcomes of these legal proceedings and other contingencies, and the costs incurred in litigation can be substantial, regardless of the outcome. Proceedings that we believe are insignificant may develop into material proceedings and subject us to unforeseen outcomes or expenses. Additionally, the actions of certain participants in our industry may encourage legal proceedings against us or cause us to reconsider our litigation strategies. As a result, we could from time to time incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could harm our reputation and have a material adverse effect on our business, financial condition and results of operations.

A failure to comply with export control or economic sanctions laws and regulations could have a material adverse impact on our business, financial condition and results of operations. We may be unable to ensure that our distributors comply with applicable sanctions and export control laws.

We operate on a global basis, with 22% of our revenues in fiscal 2020 made to destinations outside the United States, including Canada, Europe, Australia, Mexico and Israel. We face several risks inherent in conducting business internationally, including compliance with applicable economic sanctions laws and regulations, such as laws and regulations administered by U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”), the U.S. Department of State and the U.S. Department of Commerce. We must also comply with all applicable export control laws and regulations of the United States and other countries.

 

33


Table of Contents

Violations of these laws or regulations could result in significant additional sanctions including criminal or civil fines or penalties, more onerous compliance requirements, more extensive debarments from export privileges or loss of authorizations needed to conduct aspects of our international business.

In certain countries, we may engage third party agents or intermediaries, such as customs agents, to act on our behalf and if these third-party agents or intermediaries violate applicable laws, their actions may result in criminal or civil fines or penalties or other sanctions being assessed against us. We take certain measures designed to ensure our compliance with U.S. export and economic sanctions law and we believe that we have never sold our products to Crimea, Cuba, Iran, North Korea or Syria through third party agents or intermediaries or made any effort to attract business from any of these countries. We also take steps to prevent our products from being sold, without the necessary legal authorization, to individuals or entities that are the subject or target of U.S. export and economic sanctions laws. However, it is possible that some of our products were sold or will be sold to distributors or other parties that, without our knowledge or consent, re-exported or will re-export such products to these countries or sanctioned persons. Although none of our non-U.S. distributors are located in, or to our knowledge, conduct business with Crimea, Cuba, Iran, North Korea or Syria, we may not be successful in ensuring compliance with limitations or restrictions on business with these or other countries subject to economic sanctions. There can be no assurance that we will be in compliance with export control or economic sanctions laws and regulations in the future.

Any such violation could result in significant criminal or civil fines, penalties or other sanctions and repercussions, including reputational harm that could have a material adverse impact on our business, financial condition and results of operations.

Because of our international operations, we could be materially adversely affected by violations of the U.S. FCPA and similar anticorruption, anti-bribery and anti-kickback laws.

Our business operations and sales in countries outside the United States are subject to anti-corruption, anti-bribery and anti-kickback laws and regulations, including restrictions imposed by the U.S. Foreign Corrupt Practices Act (the “FCPA”), as well as the United Kingdom Bribery Act of 2010 (the “UK Bribery Act”). The FCPA, UK Bribery Act, and similar anti-corruption, anti-bribery and anti-kickback laws in other jurisdictions generally prohibit companies, their intermediaries and their agents from making improper payments to government officials or any other persons for the purpose of obtaining or retaining business. We operate and sell our products in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-corruption, anti-bribery and anti-kickback laws may conflict with local customs and practices. We have policies in place that prohibit employees from making improper payments. We also include anti-corruption, anti-bribery and anti-kickback law compliance provisions in our contracts with our agents. We continue to implement internal controls and procedures designed to ensure that we comply with anti-corruption, anti-bribery and anti-kickback laws, rules and regulations as well as mitigate and protect against corruption risks. We cannot provide assurance that our internal controls and procedures will protect us from reckless, criminal or other acts committed by our employees or third parties with whom we work. If we are found to be liable for violations of the FCPA or similar anti-corruption, anti-bribery and anti-kickback laws in international jurisdictions, either due to our own acts or out of inadvertence, or due to the acts or inadvertence of others, we could suffer criminal or civil fines or penalties or other repercussions, including reputational harm, which could have a material adverse effect on our business, financial condition and results of operations.

Our contracts with the U.S. federal government subject us to additional oversight and risks inherent in the government procurement process.

We provide products and services, directly and indirectly, to a variety of government entities. In fiscal 2020, we derived approximately 41% of our revenue from multiple contracts with agencies of the U.S. federal government. As such, we must comply with and are affected by laws and regulations relating to the award,

 

34


Table of Contents

administration and performance of U.S. government contracts. Government contract laws and regulations affect how we do business with our customers and impose certain risks and costs on our business.

Risks associated with selling products and services to government entities include extended sales and collection cycles, varying governmental budgeting processes, and adherence to complex procurement regulations and other government-specific contractual requirements. We may be subject to audits and investigations relating to our government contracts and any violations could result in civil and criminal penalties and administrative sanctions, including termination of contracts, payment of fines, and suspension or debarment from future government business, as well as harm to our business, financial condition and results of operations.

Our products are subject to extensive government scrutiny and regulation, including the USDA Forest Service qualification process. There can be no assurance that such regulations will not change and that our products will continue to be approved for usage.

We are subject to regulation by federal, state, local and foreign government authorities. In some cases, for example, for our firefighting products, we need pass the USDA Forest Service qualification process, which is a rigorous process that requires the product passing several tests and standards, including toxicity corrosion and stability. The USDA Forest Service also requires a lengthy field evaluation, which adds to the difficulty of meeting USDA Forest Service standards. We are also subject to ongoing reviews of our products, manufacturing processes and facilities by government authorities, and must also produce product data and comply with detailed regulatory requirements.

The Registration, Evaluation and Authorization of Chemicals (“REACH”) legislation may affect our ability to manufacture and sell certain products in the EU: REACH requires chemical manufacturers and importers in the EU to prove the safety of their products. We were required to pre-register certain products and file comprehensive reports, including testing data, on each chemical substance, and perform chemical safety assessments. Additionally, substances of high concern are subject to an authorization process. Authorization may result in restrictions on certain uses of products or even prohibitions on the manufacture or importation of products. The full registration requirements of REACH have been phased in over several years, and we have incurred additional expense to cause the registration of our products under these regulations. REACH may affect our ability to import, manufacture and sell certain products in the EU. In addition, other countries and regions of the world already have or may adopt legislation similar to REACH that affect our business, affect our ability to import, manufacture or sell certain products in these jurisdictions, and have required or will require us to incur increased costs.

The Frank R. Lautenberg Chemical Safety for the 21st Century Act modified the Toxic Control Substances Act (“TSCA”), by requiring the EPA, to prioritize and evaluate the environmental and health risks of existing chemicals and provided the EPA with greater authority to regulate chemicals posing unreasonable risks. According to this statute, the EPA is required to make an affirmative finding that a new chemical will not pose an unreasonable risk before such chemical can go into production. As a result, TSCA now operates in a similar fashion to the REACH legislation in Europe. These laws and regulations, among others, increase the complexity and costs of transporting our products from the country in which they are manufactured to our customers. Further changes to these and similar regulations could restrict our ability to expand, build or acquire new facilities, require us to acquire costly control equipment, cause us to incur expenses associated with remediation of contamination, cause us to modify our manufacturing or shipping processes or otherwise increase our cost of doing business and have a negative impact on our business, financial condition and results of operations. In addition, the adoption of new laws, rules or regulations related to climate change poses risks that could harm our results of operations or affect the way we conduct our businesses. For example, new or modified regulations could require us to make substantial expenditures to enhance our environmental compliance efforts.

New or stricter laws and regulations may be introduced that could result in additional compliance costs and prevent or inhibit the development, manufacture, distribution and sale of our products. For example,

 

35


Table of Contents

perfluorooctanoic acid substances (“PFOAs”) and perfluorooctanesulfonic acid substances (“PFOS”) may become regulated as hazardous substances, phased out or banned. The USDA Forest Service may change its qualification process or determine that our products no longer qualify under existing requirements. Such outcomes could adversely impact our business, financial condition and results of operations.

Environmental laws and regulations may subject us to significant liabilities. Changes to existing Environmental, Health and Safety (“EHS”) requirements or the adoption of new EHS requirements, changes to the enforcement of EHS requirements, and the discovery of additional or unknown conditions at facilities owned, operated or used by us or at or near which our products were, are, or will be used, to the extent not covered by indemnity, insurance or a covenant not to sue, could have a material adverse effect on our business, financial condition and results of operations.

We operate in jurisdictions where legislative initiatives relating to greenhouse gas (“GHG”) emissions are being considered or adopted. There has been no material effect on any of our facilities to date, and we continue to follow developments closely. Although it is difficult to know what final regulations may be passed in the jurisdictions where our manufacturing facilities are located, we could face increased capital and operating costs to comply with GHG emissions regulations and these costs could be material. The potential impact of current and proposed environmental laws and regulations is uncertain. We cannot predict the nature of these requirements and the impact on our business, but proposed regulations or failure to comply with current and proposed regulations could have a material adverse impact on our business, financial condition and results of operations by substantially increasing capital expenditures and compliance costs, affecting our ability to meet our financial obligations. It may also lead to the modification or cancellation of operating licenses and permits, penalties and other corrective actions.

The regulatory environment in which we operate is subject to change, and new regulations and new or existing claims, such as those related to certain PFAS substances, PFOAs, and PFOS could have a material adverse effect on our business, financial condition and results of operations or make aspects of our business as currently conducted no longer possible. In addition, we are and, in the future may be, subject to claims related to substances such PFAS, including for degradation of natural resources from such PFAS and personal injury or product liability claims as a result of human exposure to such PFAS.

Our operations are subject to extensive environmental regulation in each of the countries in which we maintain facilities. For example, U.S. (federal, state and local), and other countries’ environmental laws applicable to the Company include statutes and regulations intended to impose certain obligations with respect to the manufacture, sale and distribution of firefighting foam that contains intentionally added PFAS chemicals. In addition, certain regulations also impose restrictions on the discharge of PFAS chemicals in wastewater, and may require allocating the cost of investigating, monitoring and remedying soil and groundwater contamination to a party operating the site, as well as to prevent future soil and groundwater contamination; imposing air ambient standards and, in some cases, emission standards, for air pollutants which present a risk to public health, welfare or the natural environment; governing the handling, management, treatment, storage and disposal of hazardous wastes and substances; regulating the chemical content of products; and regulating the discharge of pollutants into waterways.

With regards to our oil additives business, our use of hazardous substances in our manufacturing processes and the generation of hazardous wastes not only by us, but by prior occupants of our facilities, suggest that hazardous substances may be present at or near certain of our facilities or may come to be located there in the future. Consequently, we are required to closely monitor our compliance under all the various environmental laws and regulations applicable to us. Under certain environmental laws, we may be responsible for remediation costs or other liabilities as a result of the use, release or disposal of hazardous substances at or from any property currently or formerly owned or operated or to which we sent waste for treatment or disposal. Liability under these laws may be imposed without regard to whether we were aware of, or caused, the contamination and, in some cases, liability may be joint or several.

 

36


Table of Contents

Our facilities are subject to increasingly more stringent federal, state and local environmental laws and regulations. Some of these laws and regulations relate to what are frequently called “emerging contaminants,” such as PFAS, PFOAs and PFOS. Some of the Company’s products use fluorine as a raw material, which is considered a PFAS chemical. We and some of our competitors have been, are, and in the future may be the target of lawsuits and state enforcement actions because of the alleged discharge of PFAS into the environment, including for degradation of natural resources from such PFAS and personal injury or product liability claims as a result of human exposure to such PFAS. See “—We are exposed to risks related to litigation, including multi-district litigation and other legal proceedings.”

We obtain Phase I or similar environmental site assessments for most of the manufacturing facilities we own or lease at the time we either acquire or lease such facilities. These assessments typically include general inspections. These assessments may not reveal all potential environmental liabilities and current assessments are not available for all facilities. Consequently, there may be material environmental liabilities of which we are not aware. In addition, ongoing cleanup and containment operations may not be adequate for purposes of future laws and regulations. The conditions of our properties could also be affected in the future by neighboring operations or the conditions of the land in the vicinity of our properties. These developments and others, such as increasingly stringent environmental laws and regulations, increasingly strict enforcement of environmental laws and regulations, or claims for damage to property or injury to persons resulting from the environmental, health or safety impact of our operations, may cause us to incur significant costs and liabilities that could have a material adverse effect.

Our facilities are required to maintain numerous environmental permits and governmental approvals for our operations. Some of the environmental permits and governmental approvals that have been issued to us or to our facilities contain conditions and restrictions, including restrictions or limits on emissions and discharges of pollutants and contaminants, or may have limited terms. Maintaining these permits and complying with their terms as well as environmental laws and regulations applicable to our business could require us to incur material costs.

If we fail to satisfy these conditions or to comply with these restrictions or with applicable environmental laws and regulations, we may become subject to enforcement actions and the operation of the relevant facilities could be adversely affected. We may also be subject to fines, penalties, claims for injunctive relief or additional costs. We may not be able to renew, maintain or obtain all environmental permits and governmental approvals required for the continued operation or further development of our facilities, as a result of which the operation of our facilities may be limited or suspended.

Because our oil additives segment manufactures and uses materials that are known to be hazardous, highly combustible and difficult to transport, we are subject to, or affected by, certain product and manufacturing regulations, for which compliance can be costly and time consuming. In addition, we may be subject to personal injury or product liability claims as a result of human exposure to such hazardous materials.

We produce hazardous, highly combustible and difficult to transport chemicals, which subject us to regulation by many U.S. and non-U.S. national, supra-national, state and local governmental authorities. In some circumstances, these authorities must review and, in some cases approve, our products and/or manufacturing processes and facilities before we may manufacture and sell some of these chemicals. To be able to manufacture and sell certain new chemical products, we may be required, among other things, to demonstrate to the relevant authority that the product does not pose an unreasonable risk during its intended uses and/or that we are capable of manufacturing the product in compliance with current regulations. The process of seeking any necessary approvals can be costly, time consuming and subject to unanticipated and significant delays. Approvals may not be granted to us on a timely basis, or at all. Any delay in obtaining, or any failure to obtain or maintain these approvals would adversely affect our ability to introduce new products and to generate revenue from those products. New laws and regulations may be introduced in the future that could result in additional compliance costs, bans on product sales or use, seizures, confiscation, recall or monetary fines, any of which could prevent or

 

37


Table of Contents

inhibit the development, distribution or sale of our products and could increase our customers’ efforts to find less hazardous substitutes for our products. We are subject to ongoing reviews of our products and manufacturing processes.

Phosphorus pentasulfide is transported through a combination of ground and sea. These materials are highly combustible and difficult to transport, so they must be handled carefully and in accordance with applicable laws and regulations. An incident in the transportation of our materials or our failure to comply with laws and regulations applicable to the transfer of such products could lead to human injuries or significant property damage, regulatory repercussions or could make it difficult to fulfill our obligations to our customers, any of which could have a material adverse effect on our business, financial condition and results of operations.

Products we have made or used could be the focus of legal claims based upon allegations of harm to human health. We cannot predict the outcome of suits and claims, and an unfavorable outcome in these litigation matters could exceed reserves or have a material adverse effect on our business, financial condition and results of operations and cause our reputation to decline.

Our products or facilities could have environmental impacts and side effects.

If the products we sell do not have the intended effects, our business may suffer and it may be subject to products liability or other legal actions. Our products contain innovative combinations of materials. While there is data available with respect to the environmental impacts of our fire retardant products that are conducted by governmental agencies, this data is limited to certain locations and periods and therefore, may not capture all the possible environmental impacts and side effects of use or repeated use of our fire retardant products. Similarly, there have been toxicological studies conducted on the impact of our products on certain fish and mammalian species, however, this is limited in scope and therefore, does not present all the potential side effects and/or the products’ interaction with animal biochemistry. As a result, our products could have certain impact on the environment or the animal population that is currently unknown by the Company.

Legal and regulatory claims, investigations and proceedings may be initiated against us in the ordinary course of business. The outcomes and the amounts of any damages awarded or fines or penalties assessed, cannot be predicted, and could have a material adverse effect on our reputation as well as our business, financial condition and results of operations.

We may be the subject of litigation by customers, suppliers and other third parties. A significant judgment against us, the loss of a significant permit, license or other approval, or a significant fine, penalty or contractual dispute could have a material adverse effect on our business, financial condition and results of operations. Some of the products we produce may cause adverse health consequences, which exposes us to product liability claims. See “—Some of the products we produce may cause adverse health consequences, which exposes us to product liability and other claims, and we may, from time to time, be the subject of indemnity claims.” Litigation is expensive, time consuming and may divert management’s attention away from the operation of the business. The outcome of litigation can never be predicted with certainty and an adverse outcome in any of these matters could have a material adverse effect on our reputation as well as our business, financial condition and results of operations.

Risks Related to Holdco

Holdco will incur increased costs as a result of operating as a public company, and its management will devote substantial time to new compliance initiatives.

If Holdco completes the Business Combination and becomes a public company, it will incur significant legal, accounting and other expenses that it did not incur as a private company, and these expenses may increase even more after Holdco is no longer an emerging growth company, as defined in Section 2(a) of the Securities

 

38


Table of Contents

Act. As a public company, Holdco will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and the Trading Market. Holdco’s management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, Holdco expects these rules and regulations to substantially increase its legal and financial compliance costs and to make some activities more time consuming and costly. The increased costs will increase Holdco’s net loss. For example, these rules and regulations could make it more difficult and more expensive for Holdco to obtain director and officer liability insurance and as a result, Holdco may be forced to accept reduced policy limits or incur substantially higher costs to maintain the same or similar coverage. Holdco cannot predict or estimate the amount or timing of additional costs it may incur to respond to these requirements. The impact of these requirements could also make it more difficult for Holdco to attract and retain qualified persons to serve on its board of directors or as executive officers.

Holdco’s management has limited experience in operating a public company.

Holdco’s executive officers have limited experience in the management of a publicly traded company. Holdco’s management team may not successfully or effectively manage its transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the Combined Company. Holdco may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the U.S. The development and implementation of the standards and controls necessary for the Combined Company to achieve the level of accounting standards required of a public company in the U.S. may require costs greater than expected. It is possible that the Combined Company will be required to expand its employee base and hire additional employees to support its operations as a public company, which will increase its operating costs in future periods.

There can be no assurance that the Holdco Ordinary Shares that will be issued in connection with the Business Combination or the Holdco Warrants will be approved for listing on the Trading Market or, if approved, will continue to be so listed following the closing of the Business Combination, or that Holdco will be able to comply with the continued listing standards of the Trading Market.

Holdco intends to apply for the listing of the Holdco Ordinary Shares and Holdco Warrants on the Trading Market. If the Trading Market denies its application for failure to meet the listing standards, Holdco and its shareholders could face significant material adverse consequences including:

 

   

a limited availability of market quotations for its securities;

 

   

reduced liquidity for its securities;

 

   

a determination that Holdco Ordinary Shares are a “penny stock” which will require brokers trading in the Holdco Ordinary Shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for its securities;

 

   

a limited amount of news and analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” If the Holdco Ordinary Shares and the Holdco Warrants are listed on the Trading Market, they will be covered securities. Although the states are preempted from regulating the sale of the Combined Company’s securities, the

 

39


Table of Contents

federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While Holdco is not aware of a state, other than the State of Idaho, having used these powers to prohibit or restrict the sale of securities issued by blank check companies, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if the Combined Company was not listed on the Trading Market, its securities would not be covered securities and it would be subject to regulation in each state in which it offers its securities.

Holdco has no operating or financial history and its results of operations and those of the Combined Company may differ significantly from the unaudited pro forma financial data included in this prospectus.

Holdco has no operating history and no revenues. This prospectus includes unaudited pro forma condensed consolidated combined financial statements for the Combined Company. The unaudited pro forma condensed consolidated combined statement of operations of the Combined Company combines the historical audited results of operations of Perimeter for the fiscal year ended December 31, 2020, with the historical audited results of operations of EverArc for the year ended October 31, 2020, and gives pro forma effect to the Business Combination as if it had been consummated on January 1, 2020. The unaudited pro forma condensed consolidated combined balance sheet of the Combined Company combines the historical balance sheets of EverArc as of October 31, 2020 and of Perimeter as of December 31, 2020 and gives pro forma effect to the Business Combination as if it had been consummated on June 30, 2021.

The unaudited pro forma condensed consolidated combined financial statements are presented for illustrative purposes only, are based on certain assumptions, address a hypothetical situation and reflect limited historical financial data. Therefore, the unaudited pro forma condensed consolidated combined financial statements are not necessarily indicative of the results of operations and financial position that would have been achieved had the Business Combination been consummated on the dates indicated above, or the future consolidated results of operations or financial position of the Combined Company. Accordingly, the Combined Company’s business, assets, cash flows, results of operations and financial condition may differ significantly from those indicated by the unaudited pro forma condensed consolidated combined financial statements included in this document.

If the Combined Company fails to maintain effective internal controls over financial reporting, the price of Holdco securities may be adversely affected.

The Combined Company will be required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect the Combined Company’s public disclosures regarding its business, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in the Combined Company’s internal controls over financial reporting, or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in the Combined Company’s internal controls over financial reporting, or disclosure of management’s assessment of the Combined Company’s internal controls over financial reporting, may have an adverse impact on the price of Holdco securities.

The Combined Company’s failure to timely and effectively implement controls and procedures required by Section 404(a) (“Section 404(a)”) of the Sarbanes-Oxley Act that will be applicable to it after the Business Combination is consummated could have a material adverse effect on its business, operating results and financial condition.

Neither Holdco nor Perimeter is currently subject to Section 404 of the Sarbanes-Oxley Act. However, following the consummation of the Business Combination, the Combined Company will be required to provide

 

40


Table of Contents

management’s attestation on internal controls. The standards required for a public company under Section 404(a) are significantly more stringent than those required of Holdco or Perimeter as privately held companies. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable after the Business Combination. If the Combined Company is not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, it may not be able to assess whether its internal controls over financial reporting are effective or may result in a finding that there is a material weakness in the Combined Company’s internal controls over financial reporting, which may subject it to adverse regulatory consequences and could harm investor confidence and the market price of its securities.

A market for Holdco’s securities may not continue, which would adversely affect the liquidity and price of its securities.

Following the Business Combination, the price of Holdco Ordinary Shares and Holdco Warrants may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. An active trading market for Holdco Ordinary Shares and Holdco Warrants following the Business Combination may never develop or, if developed, it may not be sustained. In addition, the price of Holdco Ordinary Shares and Holdco Warrants after the Business Combination can vary due to general economic conditions and forecasts, its general business condition and the release of its financial reports. If its securities are not listed on, or become delisted from, the Trading Market for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of its securities may be more limited than if it were quoted or listed on the Trading Market or another national securities exchange. You may be unable to sell your Holdco securities unless a market can be established or sustained.

If, following the Business Combination, securities or industry analysts do not publish or cease publishing research or reports about the Combined Company, its business, or its market, or if they change their recommendations regarding Holdco Ordinary Shares adversely, then the price and trading volume of Holdco Ordinary Shares or Holdco Warrants could decline.

The trading market for Holdco Ordinary Shares and Holdco Warrants will be influenced by the research and reports that industry or securities analysts may publish about the Combined Company, its business, its market, or its competitors. Securities and industry analysts do not currently, and may never, publish research on EverArc or the Combined Company. If no securities or industry analysts commence coverage of the Combined Company, Holdco Ordinary Share and Holdco Warrant price and trading volume would likely be negatively impacted. If any of the analysts who may cover the Combined Company change their recommendation regarding Holdco Ordinary Shares and Holdco Warrants adversely, or provide more favorable relative recommendations about Holdco’s competitors, the price of Holdco Ordinary Shares and Holdco Warrants would likely decline. If any analyst who may cover EverArc were to cease coverage of the Combined Company or fail to regularly publish reports on it, Holdco could lose visibility in the financial markets, which could cause the price or trading volume of Holdco Ordinary Shares or Holdco Warrant to decline.

The JOBS Act permits “emerging growth companies” like Holdco to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

Holdco currently qualifies as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, Holdco takes advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act. As a result, Holdco shareholders may not have

 

41


Table of Contents

access to certain information they deem important. Holdco expects to remain an emerging growth company until December 31, 2022.

Holdco cannot predict if investors will find Holdco Ordinary Shares and Holdco Warrants less attractive because it relies on these exemptions. If some investors find Holdco Ordinary Shares or Holdco Warrants less attractive as a result, there may be a less active trading market and share price for Holdco Ordinary Shares or Holdco Warrants may be more volatile. Holdco does not expect to qualify as an emerging growth company after the last day of the fiscal year in which the Business Combination is consummated and may incur increased legal, accounting and compliance costs associated with Section 404 of the Sarbanes-Oxley Act.

Risks Related to EverArc and the Proposed Business Combination

We may fail to realize the strategic and financial benefits currently anticipated from the Business Combination.

The future success of the Business Combination, including anticipated benefits, depends, in part, on our ability to optimize our operations as a public company. The optimization of our operations following the Business Combination will be a complex, costly and time-consuming process and if we experience difficulties in this process, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, which could have an adverse effect on us for an undetermined period. There can be no assurances that we will realize the potential operating efficiencies, synergies and other benefits currently anticipated from the Business Combination.

Some of the factors involved in this are outside of our control, and any one of them could result in delays, increased costs, decreases in the amount of potential revenues, potential cost savings, and diversion of management’s time and energy, which could materially affect our business, financial condition and results of operations.

Failure to consummate the Business Combination would result in a termination fee payable by EverArc.

If the Business Combination Agreement is terminated under certain circumstances including EverArc’s failure to close when all conditions to closing have been satisfied, EverArc would be required to pay a termination fee of $50 million. The payment of such termination fee could have a materially adverse effect on EverArc’s financial condition and impact its ability to pursue a different acquisition in the future. For more information, see the section entitled “The Business Combination Agreement—Termination Fee.”

The requirements of being a public company may strain the Combined Company’s resources and divert management’s attention, and the increases in legal, accounting and compliance expenses that will result from the proposed business combination may be greater than we anticipate.

As a public company, the Combined Company will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the NYSE or Nasdaq rules. The requirements of these rules and regulations will impact the Combined Company’s legal, accounting and compliance expenses, make some activities more difficult, time-consuming or costly and place strain on its personnel, systems and resources. The Sarbanes-Oxley Act requires, among other things, that the Combined Company maintain effective disclosure controls and procedures and internal control over financial reporting. Ensuring that the Combined Company will have adequate internal financial and accounting controls and procedures in place is a costly and time-consuming effort that needs to be re-evaluated frequently. We do not expect that the Combined Company will initially have an internal audit group, and the Combined Company may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Implementing any appropriate changes to the Combined Company’s internal controls may require specific compliance training for the Combined Company’s directors, officers and employees, entail substantial costs, and take a significant period of

 

42


Table of Contents

time to complete. Such changes may not, however, be effective in maintaining the adequacy of the Combined Company’s internal controls and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase the Combined Company’s operating costs and could materially impair its ability to operate its business. Moreover, effective internal controls are necessary for the Combined Company to produce reliable financial reports and are important to help prevent fraud.

In accordance with the Trading Market rules, unless the Combined Company is eligible for an exemption, it will be required to maintain a majority of independent directors on the board. The various rules and regulations applicable to public companies make it more difficult and more expensive for the Combined Company to maintain directors’ and officers’ liability insurance, and the Combined Company may be required to accept reduced coverage or incur substantially higher costs to maintain coverage. If the Combined Company is unable to maintain adequate directors’ and officers’ insurance, its ability to recruit and retain qualified officers and directors will be significantly curtailed.

We expect that the rules and regulations applicable to public companies will result in the Combined Company incurring substantial additional legal and financial compliance costs. These costs will decrease the Combined Company’s net income or increase its net loss and may require it to reduce costs in other areas of its business.

There can be no assurance that the Holdco Ordinary Shares or Holdco Warrants will be approved for listing on the Trading Market or that the Combined Company will be able to comply with the continued listing standards of the Trading Market.

The Combined Company intends to apply to have the Holdco Ordinary Shares and Holdco Warrants listed on the Trading Market, subject to official notice of issuance, and expects that the Holdco Ordinary Shares and Holdco Warrants will begin trading on the Trading Market immediately following the Closing of the Business Combination. Although following the closing of the Business Combination the Combined Company expects to meet the minimum initial listing standards set forth in the Trading Market’s listing standards, it cannot assure you that the Holdco Ordinary Shares or Holdco Warrants will be, or will continue to be, listed on the Trading Market in the future. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. We may not be able to comply with the applicable listing standards and the Trading Market could delist our securities as a result.

The Combined Company cannot assure you that our Holdco Ordinary Shares or Holdco Warrants, if delisted from the Trading Market, will be listed on another national securities exchange. If the Holdco Ordinary Shares or Holdco Warrants are delisted by the Trading Market, the Holdco Ordinary Shares or Holdco Warrants would likely trade on the OTCQB where an investor may find it more difficult to sell the securities or obtain accurate quotations as to the market value of such securities.

Subsequent to the consummation of the Business Combination, the Combined Company may be required to take write-downs or write-offs, or the Combined Company may be subject to restructuring, impairment or other charges that could have a significant negative effect on the Combined Company’s business, financial condition and results of operations as well as the price of our stock, which could cause you to lose some or all of your investment.

Even though we have conducted extensive due diligence on Perimeter, we cannot assure you that this diligence identified all material issues that may be present, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Perimeter’s and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if

 

43


Table of Contents

our due diligence successfully identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about our securities or us. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by Perimeter or by virtue of our obtaining post-combination debt financing. Accordingly, any stockholder or warrant holder who chooses to remain a stockholder or warrant holder, respectively, following our initial business combination could suffer a reduction in the value of their securities. Such stockholders and warrant holders are unlikely to have a remedy for such reduction in value.

If the Business Combination’s benefits do not meet the expectations of investors or securities analysts, the market price of our securities or, following the consummation of the business combination, the Combined Company’s securities, may decline.

The market price of our common stock may decline as a result of our Business Combination if we do not achieve the perceived benefits of our Business Combination as rapidly, or to the extent anticipated by, financial analysts or the effect of our Business Combination on our financial results is not consistent with the expectations of financial analysts. Accordingly, holders of our common stock following the consummation of our Business Combination may experience a loss as a result of a decline in the market price of such common stock. In addition, a decline in the market price of our common stock following the consummation of our Business Combination could adversely affect our ability to issue additional securities and to obtain additional financing in the future.

EverArc may not be able to complete its initial business combination prior to December 17, 2022, in which case EverArc’s directors shall determine whether to recommend to the shareholders if EverArc’s operations should be wound up. EverArc may not be able to complete its initial business combination within this time period.

EverArc’s Articles provide that if EverArc fails to complete its initial business combination by December 17, 2022, EverArc’s directors shall determine whether to recommend to the shareholders if EverArc’s operations should be wound up. EverArc may not be able to complete its initial business combination within such time period. EverArc’s ability to complete its initial business combination may be negatively impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein. If EverArc has not completed its initial business combination within such time period and its directors and shareholders decide to wind up the business, EverArc will be wound up in accordance with the BVI Companies Act. In such case, the holders of EverArc Ordinary Shares may only receive $10.00 per share, and EverArc’s warrants will expire worthless. In certain circumstances, the holders of EverArc Ordinary Shares may receive less than $10.00 per share on the redemption of his, her or its shares.

EverArc’s shareholders cannot be sure of the market value of the Holdco Ordinary Shares to be issued upon completion of the Business Combination.

The holders of EverArc Ordinary Shares issued and outstanding immediately prior to the effective time of the Business Combination will receive one Holdco Ordinary Share in exchange for each EverArc Ordinary Share held by them, rather than a number of shares with a particular fixed market value. The market value of EverArc Ordinary Shares at the time of the Business Combination may vary significantly from its price on the date the Business Combination Agreement was executed or the date of the Registration Statement of which this prospectus is a part. Because the exchange ratio of the shares will not be adjusted to reflect any changes in the market prices of EverArc Ordinary Shares, the market value of the Holdco Ordinary Shares issued in the Business Combination and the EverArc Ordinary Shares surrendered in the Business Combination may be higher or lower than the value of these shares on earlier dates. 100% of the consideration to be received by EverArc’s Shareholders will be Holdco Ordinary Shares. Following consummation of the Business Combination, the market

 

44


Table of Contents

price of Holdco’s securities may be influenced by many factors, some of which are beyond its control, including those described above and the following:

 

   

changes in financial estimates by analysts;

 

   

announcements by it or its competitors of significant contracts, productions, acquisitions or capital commitments;

 

   

fluctuations in its quarterly financial results or the quarterly financial results of companies perceived to be similar to it;

 

   

general economic conditions;

 

   

changes in market valuations of similar companies;

 

   

terrorist acts;

 

   

changes in its capital structure, such as future issuances of securities or the incurrence of additional debt;

 

   

future sales of Holdco Ordinary Shares;

 

   

regulatory developments in the U.S., foreign countries or both;

 

   

litigation involving Holdco, its subsidiaries or its general industry; and

 

   

additions or departures of key personnel.

EverArc’s board of directors did not obtain a fairness opinion in determining whether or not to proceed with the Business Combination and, as a result, the terms may not be fair from a financial point of view to the EverArc shareholders.

In analyzing the Business Combination, the EverArc board of directors conducted significant due diligence on Perimeter. For a complete discussion of the factors utilized by EverArc’s board of directors in approving the Business Combination, see the section entitled, “The Business Combination—EverArc’s Board of Directors’ Reasons for the Approval of the Business Combination.” The EverArc board of directors believes because of the financial skills and background of its directors, it was qualified to conclude that the Business Combination was fair from a financial perspective to its shareholders. Notwithstanding the foregoing, EverArc’s board of directors did not obtain a fairness opinion to assist it in its determination. Accordingly, EverArc’s board of directors may be incorrect in its assessment of the Business Combination.

The EverArc Founders and EverArc’s board of directors have potential conflicts of interest in the Business Combination.

The EverArc Founders and EverArc’s board of directors have interests in the Business Combination that are different from, or in addition to, your interests as a shareholder. These interests include, among other things:

 

   

the amounts payable to the EverArc Founder Entity pursuant to the Founder Advisory Agreement entered into by EverArc and the EverArc Founder Entity which is designed to provide incentives to the EverArc Founders to achieve EverArc’s objectives which includes:

 

   

a fixed annual advisory amount equal to 1.5% of the Founder Advisory Agreement Calculation Number (in each case, payable in Holdco Ordinary Shares or partly in cash, at the election of the EverArc Founder Entity provided that at least 50% of such amounts are paid in Holdco Ordinary Shares). Based on the assumptions described in this prospectus, the fixed annual advisory amount is currently expected to be 2,353,992 Holdco Ordinary Shares which, assuming a stock price of $12.50 per Holdco Ordinary Share, would have a value of $29,424,902. Each additional $1 increase in the stock price of Holdco Ordinary Shares above $12.50 will increase the value of the fixed annual advisory amount payable to the EverArc Founder Entity by $2,353,992; and

 

45


Table of Contents
   

a variable annual advisory amount based on the appreciation of the market price of Holdco Ordinary Shares if such market price exceeds certain trading price minimums (in each case, payable in Holdco Ordinary Shares or partly in cash, at the election of the EverArc Founder Entity provided that at least 50% of such amounts are paid in Holdco Ordinary Shares). Based on assumptions described in this prospectus and assuming a stock price of $12.50 per Holdco Ordinary Share, the variable annual advisory amount payable to the EverArc Founder Entity in year one would have a value of $70,619,765. For each $1 increase in the stock price of Holdco Ordinary Shares above $12.50, or such higher stock price on which a variable annual advisory amount was previously paid to the EverArc Founder Entity, the EverArc Founder Entity will receive a variable annual advisory amount valued at $28,247,906;

the EverArc Founders have advised Holdco that their intention is to elect, via the EverArc Founder Entity, to receive any advisory amounts in Holdco Ordinary Shares and for any cash element to only be such amount as is required to pay any related taxes;

 

   

the potential continuation of certain of EverArc’s directors as directors of Holdco;

 

   

the continued indemnification of current directors and officers of EverArc and the continuation of directors’ and officers’ liability insurance after the Business Combination; and

 

   

the beneficial ownership of the EverArc Founders indirectly through the EverArc Founder Entity and certain of EverArc’s directors of an aggregate of (i) 100 EverArc Founder Shares, acquired for an aggregate purchase price of $1,000, which have an aggregate market value of approximately $1,250 based on the closing price of EverArc Ordinary Shares of $12.50 on the LSE on August 24, 2021 and (ii) 1,725,239 EverArc Ordinary Shares, acquired for an aggregate purchase price of $17,300,000, which have an aggregate market value of approximately $21,565,488 based on the closing price of EverArc Ordinary Shares of $12.50 on the LSE on August 24, 2021.

EverArc’s shareholders will have a reduced ownership and voting interest after consummation of the Business Combination and will exercise less influence over management.

After the completion of the Business Combination, EverArc’s shareholders will own a smaller percentage of Holdco than they currently own of EverArc. Upon completion of the Business Combination, it is anticipated that EverArc’s shareholders, will own approximately 26.1%, of the Holdco Ordinary Shares issued and outstanding immediately after the consummation of the Business Combination. Consequently, EverArc’s shareholders, as a group, will have reduced ownership and voting power in Holdco compared to their ownership and voting power in EverArc.

EverArc’s shareholders may be held liable for claims by third parties against EverArc to the extent of distributions received by them.

If EverArc is forced to enter into an insolvent liquidation, any distributions received by holders of EverArc Ordinary Shares could be viewed as an unlawful payment if it was proved that immediately after the distribution, EverArc was unable to pay its debts as they fell due or the value of its assets did not exceed its liabilities. As a result, a liquidator could seek to recover all amounts received by the holders of EverArc Ordinary Shares. A distribution made to a member at a time when EverArc did not, immediately after the distribution, satisfy the solvency test may be recovered by EverArc (acting by its liquidator) from the member unless (a) the member received the distribution in good faith and without knowledge of EverArc’s failure to satisfy the solvency test; (b) the member has altered his or her position in reliance on the validity of the distribution; and (c) it would be unfair to require repayment in full or at all. Furthermore, EverArc’s directors may be viewed as having breached their fiduciary duties to EverArc or its creditors and/or may have acted in bad faith, thereby exposing themselves and EverArc to claims, by paying holders of EverArc Ordinary Shares prior to addressing the claims of creditors. EverArc cannot assure you that claims will not be brought against it for these reasons.

 

46


Table of Contents

EverArc’s and Perimeter’s ability to consummate the Business Combination may be materially adversely affected by the COVID-19 pandemic.

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout the world, including the U.S. On January 30, 2020, the World Health Organization declared the outbreak of COVID-19 a “Public Health Emergency of International Concern.” On January 31, 2020, the U.S. Department of Health and Human Services declared a public health emergency for the U.S. to aid the U.S., and on March 11, 2020, the World Health Organization characterized COVID-19 as a “pandemic.”

The COVID-19 pandemic has resulted, and other infectious diseases could result, in a widespread health crisis that has and could continue to adversely affect the economies and financial markets worldwide, which may delay or prevent the consummation of the Business Combination. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information, which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.

The disruptions posed by COVID-19 have continued, and other matters of global concern may continue for an extensive period of time, and EverArc’s and Perimeter’s ability to consummate the Business Combination may be materially adversely affected. Each of EverArc, Perimeter and Holdco may also incur additional costs due to delays caused by COVID-19, which could adversely affect EverArc’s and Perimeter’s ability to consummate the Business Combination.

Risks Related to Investment in a Luxembourg Company

Holdco is organized under the laws of the Grand Duchy of Luxembourg. It may be difficult for you to obtain or enforce judgments or bring original actions against Holdco or the members of its board of directors in the U.S.

Holdco is organized under the laws of the Grand Duchy of Luxembourg. In addition, some of the members of Holdco’s board of directors and officers reside outside the U.S. Investors may not be able to effect service of process within the U.S. upon Holdco or these persons or enforce judgments obtained against Holdco or these persons in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the U.S. federal securities laws. Likewise, it also may be difficult for an investor to enforce in U.S. courts judgments obtained against Holdco or these persons in courts located in jurisdictions outside the U.S., including judgments predicated upon the civil liability provisions of the U.S. federal securities laws. Awards of punitive damages in actions brought in the U.S. or elsewhere are generally not enforceable in Luxembourg.

As there is no treaty in force on the reciprocal recognition and enforcement of judgments in civil and commercial matters between the U.S. and Luxembourg, courts in Luxembourg will not automatically recognize and enforce a final judgment rendered by a U.S. court. Pursuant to the general provisions of Luxembourg law for the enforcement of foreign judgments and in particular, but not limited to, section 678 of the Luxembourg New Code of Civil Procedure, a party who obtains a final judgment from a court of competent jurisdiction in the U.S. may initiate enforcement proceedings in Luxembourg (exequatur) and the District Court (Tribunal d’Arrondissement) may authorize the enforcement in Luxembourg of the U.S. judgment without re-examination of the merits, if it is satisfied that the following conditions are met (which conditions may change):

 

   

the judgment of the U.S. court is final and enforceable (exécutoire) in the U.S.;

 

   

the U.S. court had jurisdiction over the subject matter leading to the judgment according to the Luxembourg conflict of jurisdictions rules (that is, its jurisdiction was in compliance both with Luxembourg private international law rules and with the applicable domestic U.S. federal or state jurisdictional rules);

 

47


Table of Contents
   

the U.S. court applied to the dispute the substantive law that would have been applied by Luxembourg courts (based on recent case law and legal doctrine, it is not certain that this condition would still be required for an exequatur to be granted by a Luxembourg court);

 

   

the judgment was granted following proceedings where the counterparty had the opportunity to appear and, if it appeared, to present a defense, and the decision of the foreign court must not have been obtained by fraud, but with the procedural rules of the jurisdiction in which the judgment was rendered, in particular, in compliance with the rights of the defendant;

 

   

the U.S. court acted in accordance with its own procedural laws; and

 

   

the decisions and the considerations of the U.S. court must not be contrary to Luxembourg international public policy rules or have been given in proceedings of a tax or criminal nature or rendered subsequent to an evasion of Luxembourg law (fraude à la loi). Awards of damages made under civil liabilities provisions of the U.S. federal securities laws, or other laws, which are classified by Luxembourg courts as being of a penal or punitive nature (for example, fines or punitive damages), might not be recognized by Luxembourg courts. Ordinarily, an award of monetary damages would not be considered as a penalty, but if the monetary damages include punitive damages, such punitive damages may be considered a penalty.

In addition, actions brought in a Luxembourg court against Holdco, the members of its board of directors, its officers, or the experts named herein to enforce liabilities based on U.S. federal securities laws may be subject to certain restrictions. In particular, Luxembourg courts generally do not award punitive damages. Litigation in Luxembourg also is subject to rules of procedure that differ from the U.S. rules, including, with respect to the taking and admissibility of evidence, the conduct of the proceedings and the allocation of costs. Proceedings in Luxembourg would have to be conducted in the Luxembourgish, French or German language, and all documents submitted to the court would, in principle, have to be translated into Luxembourgish, French or German. For these reasons, it may be difficult for a U.S. investor to bring an original action in a Luxembourg court predicated upon the civil liability provisions of the U.S. federal securities laws against Holdco, the members of its board of directors, its officers, or the experts named herein. In addition, even if a judgment against Holdco, the non-U.S. members of its board of directors, its officers, or the experts named in this prospectus based on the civil liability provisions of the U.S. federal securities laws is obtained, a U.S. investor may not be able to enforce it in U.S. or Luxembourg courts.

The directors and officers of Holdco have entered into, or will enter into, indemnification agreements with Holdco. Under such agreements, the directors and officers will be entitled to indemnification from Holdco to the fullest extent permitted by Luxemburg law against liability and expenses reasonably incurred or paid by him or her in connection with any claim, action, suit, or proceeding in which he or she would be involved by virtue of his or her being or having been a director or officer and against amounts paid or incurred by him or her in the settlement thereof. Luxembourg law permits Holdco to keep directors indemnified against any expenses, judgments, fines and amounts paid in connection with liability of a director towards Holdco or a third party for management errors i.e., for wrongful acts committed during the execution of the mandate (mandat) granted to the director by Holdco, except in connection with criminal offenses, gross negligence or fraud. The rights to and obligations of indemnification among or between Holdco and any of its current or former directors and officers are generally governed by the laws of Luxembourg and subject to the jurisdiction of the Luxembourg courts, unless such rights or obligations do not relate to or arise out of such persons’ capacities listed above. Although there is doubt as to whether U.S. courts would enforce this indemnification provision in an action brought in the U.S. under U.S. federal or state securities laws, this provision could make it more difficult to obtain judgments outside Luxembourg or from non-Luxembourg jurisdictions that would apply Luxembourg law against Holdco’s assets in Luxembourg.

 

48


Table of Contents

Luxembourg and European insolvency and bankruptcy laws are substantially different from U.S. insolvency and bankruptcy laws and may offer Holdco’s shareholders less protection than they would have under U.S. insolvency and bankruptcy laws.

As a company organized under the laws of the Grand Duchy of Luxembourg and with its registered office in Luxembourg, Holdco is subject to Luxembourg insolvency and bankruptcy laws in the event any insolvency proceedings are initiated against it including, among other things, Council and European Parliament Regulation (EU) 2015/848 of 20 May 2015 on insolvency proceedings (recast). Should courts in another European country determine that the insolvency and bankruptcy laws of that country apply to Holdco in accordance with and subject to such European Union (“EU”) regulations, the courts in that country could have jurisdiction over the insolvency proceedings initiated against Holdco. Insolvency and bankruptcy laws in Luxembourg or the relevant other European country, if any, may offer Holdco’s shareholders less protection than they would have under U.S. insolvency and bankruptcy laws and make it more difficult for them to recover the amount they could expect to recover in a liquidation under U.S. insolvency and bankruptcy laws.

The rights of Holdco’s shareholders may differ from the rights they would have as shareholders of a U.S. corporation, which could adversely impact trading in Holdco’s Ordinary Shares and its ability to conduct equity financings.

Holdco’s corporate affairs are governed by Holdco’s articles of association and the laws of Luxembourg, including the Luxembourg Company Law (loi du 10 août 1915 sur les sociétés commerciales, telle que modifiée). The rights of Holdco’s shareholders and the responsibilities of its directors and officers under Luxembourg law are different from those applicable to a corporation incorporated in the U.S. For example, under Delaware law, the board of directors of a Delaware corporation bears the ultimate responsibility for managing the business and affairs of a corporation. In discharging this function, directors of a Delaware corporation owe fiduciary duties of care and loyalty to the corporation and its shareholders. Luxembourg law imposes, among others, a duty on directors of a Luxembourg company to: (i) act in good faith with a view to the best interests of a company; and (ii) exercise the care, diligence, and skill that a reasonably prudent person would exercise in a similar position and under comparable circumstances. Additionally, under Delaware law, a shareholder may bring a derivative action on behalf of a company to enforce a company’s rights. Under Luxembourg law, the board of directors has sole authority to decide whether to initiate legal action to enforce a company’s rights (other than, in certain circumstances, an action against members of Holdco’s board of directors, which may be initiated by the general meeting of the shareholders, or, subject to certain conditions, by minority shareholders holding together at least 10% of the voting rights in the company). See “Comparison of Shareholder Rights” for an additional explanation of the differences. Further, under Luxembourg law, there may be less publicly available information about Holdco than is regularly published by or about U.S. issuers. In addition, Luxembourg laws governing the securities of Luxembourg companies may not be as extensive as those in effect in the U.S., and Luxembourg laws and regulations in respect of corporate governance matters might not be as protective of minority shareholders as are state corporation laws in the U.S. Therefore, Holdco’s shareholders may have more difficulty in protecting their interests in connection with actions taken by Holdco’s directors, officers or principal shareholders than they would as shareholders of a corporation incorporated in the United States. As a result of these differences, Holdco’s shareholders may have more difficulty protecting their interests than they would as shareholders of a U.S. issuer.

Risks Related to Taxes

If Holdco is or becomes a passive foreign investment company for U.S. federal income tax purposes for any taxable year, U.S. Holders of Holdco Ordinary Shares or Holdco Warrants could be subject to adverse U.S. federal income tax consequences.

If Holdco is or becomes a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes for any taxable year during which a U.S. Holder (as defined in “Material U.S. Federal Income Tax Considerations”) holds Holdco Ordinary Shares or Holdco Warrants, certain adverse U.S. federal income tax

 

49


Table of Contents

consequences may apply to such U.S. Holder. Because the Merger, together with certain related transactions, should qualify as an F Reorganization (see “Material U.S. Federal Income Tax Considerations—Tax Consequences of the Business Combination—The Merger”), Holdco should be treated as the same corporation as EverArc for purposes of the PFIC provisions. Accordingly, Holdco’s PFIC status may depend on whether EverArc has qualified for the PFIC start-up exception (see “Material U.S. Federal Income Tax Considerations—Tax Consequences of Ownership and Disposition of Holdco Ordinary Shares and Holdco Warrants—Passive Foreign Investment Company Rules”). EverArc’s and Holdco’s actual PFIC status for any taxable year will not be determinable until after the end of such year and, in the case of the application of the start-up exception to EverArc for its taxable year that ended on October 31, 2020, until after the end of Holdco’s second succeeding taxable year. Accordingly, there can be no assurance that Holdco will not be treated as a PFIC for any taxable year.

If Holdco were treated as a PFIC, a U.S. Holder of Holdco Ordinary Shares or Holdco Warrants may be subject to adverse U.S. federal income tax consequences, such as taxation at the highest marginal ordinary income tax rates on capital gains and on certain actual or deemed distributions, interest charges on certain taxes treated as deferred, and additional reporting requirements. Certain elections (including a “qualified electing fund” or a mark-to-market election) may be available to U.S. Holders of Holdco Ordinary Shares to mitigate some of the adverse tax consequences resulting from PFIC treatment, but U.S. Holders will not be able to make similar elections with respect to Holdco Warrants. See “Material U.S. Federal Income Tax Considerations—Tax Consequences of Ownership and Disposition of Holdco Ordinary Shares and Holdco Warrants—Passive Foreign Investment Company Rules.”

If a United States person is treated as owning at least 10% of Holdco’s shares, such person may be subject to adverse U.S. federal income tax consequences.

If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of Holdco’s shares, such person may be treated as a “United States shareholder” with respect to each of Holdco and its direct and indirect subsidiaries (“Holdco Group”) that is a “controlled foreign corporation,” or CFC, for U.S. federal income tax purposes. If the Holdco Group includes one or more U.S. subsidiaries, certain of Holdco’s non-U.S. subsidiaries could be treated as CFCs regardless of whether Holdco is treated as a CFC. Immediately following the Business Combination, the Holdco Group will include a U.S. subsidiary.

A United States shareholder of a CFC may be required to report annually and include in its U.S. taxable income its pro rata share of the CFC’s “subpart F income” and “tested income” (for purposes of computing “global intangible low-taxed income”) and earnings invested in U.S. property by the CFC, regardless of whether such CFC makes any distributions. Failure to comply with these reporting obligations (or related tax payment obligations) may subject such United States shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such United States shareholder’s U.S. federal income tax return for the year for which reporting (or payment of tax) was due from starting. An individual that is a United States shareholder with respect to a CFC generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. Holdco cannot provide any assurances that it will assist holders in determining whether any of its non-U.S. subsidiaries is treated as a CFC or whether any holder is treated as a United States shareholder with respect to any of such CFCs or furnish to any holder information that may be necessary to comply with reporting and tax paying obligations.

Changes in tax laws may materially adversely affect Holdco’s business, prospects, financial condition and operating results.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect Holdco’s business, prospects, financial condition and operating results. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or

 

50


Table of Contents

applied adversely to Holdco. For example, U.S. federal tax legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act (the “Tax Act”), enacted many significant changes to the U.S. tax laws. Future guidance from the IRS with respect to the Tax Act may affect Holdco, and certain aspects of the Tax Act could be repealed or modified in future legislation. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), has already modified certain provisions of the Tax Act. In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act or any newly enacted federal tax legislation.

General Risk Factors

We may require additional capital to fund our operations. If we are unable to raise additional capital on terms acceptable to us or at all or generate cash flows necessary to maintain or expand our operations, we may not be able to compete successfully, which would harm our business, financial condition and results of operations.

We expect to devote substantial financial resources to our ongoing and planned activities. We expect our expenses to continue to increase as our volumes and revenues increase. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we may need to obtain additional capital to fund our continuing operations.

We believe that our existing cash and other resources will be sufficient to fund our operations and capital expenditure requirements for at least the next 12 months; however, these assumptions are based on estimates that may be wrong. As a result, we could deplete our capital resources sooner than we currently expect.

In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. If we are unable to raise additional capital on terms acceptable to us or at all or generate cash flows necessary to maintain or expand our operations and invest in our business, we may not be able to compete successfully, which would harm our business, financial condition and results of operations.

Cybersecurity attack, acts of cyber-terrorism, failure of technology systems and other disruptions to our information technology systems could compromise our information, disrupt our operations, and expose us to liability, which may adversely impact our business, financial condition and results of operations.

In the ordinary course of our business, we store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our employees in our information technology systems, including in our data servers and on our networks. The secure processing, maintenance and transmission of this data is critical to our operations. Despite our security measures, our information technology systems may be vulnerable to attacks by hackers or breached or disrupted due to employee error, malfeasance or other disruptions. Any such attack, breach or disruption could compromise our information technology systems and the information stored in them could be accessed, publicly disclosed, lost or stolen and our business operations could be disrupted. Any such access, disclosure or other loss of information or business disruption could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and damage to our reputation, which could adversely impact our business, financial condition and results of operations.

Our results of operations are subject to exchange rate and other currency risks. A significant movement in exchange rates could adversely impact our results of operations.

Although we conduct our business primarily in U.S. dollar we also conduct business in many different currencies. Accordingly, currency exchange rates affect our results of operations. The effects of exchange rate fluctuations on our future operating results are unpredictable because of the number of currencies in which we conduct business and the potential volatility of exchange rates. We are also subject to the risks of currency

 

51


Table of Contents

controls and devaluations. Currency controls may limit our ability to convert currencies into U.S. dollars or other currencies, as needed, or to pay dividends or make other payments from funds held by subsidiaries in the countries imposing such controls, which could adversely affect our liquidity. Currency devaluations could also negatively affect our operating margins and cash flows. For example, if the U.S. dollar were to strengthen against a local currency, our operating margin would be adversely impacted in the country to the extent significant costs are denominated in U.S. dollars while our revenues are denominated in such local currency.

Our insurance may not fully cover all of our operational risks, including, but not limited to, environmental risks, and changes in the cost of insurance or the availability of insurance could materially increase our insurance costs or result in a decrease in our insurance coverage.

We have a significant concentration of our manufacturing facilities. Natural disasters and severe weather events (such as hurricanes, earthquakes, fires, floods, landslides and wind or hailstorms) or other extraordinary events subject us to property loss and business interruption. Illegal or unethical conduct by employees, customers, vendors and unaffiliated third parties can also impact our business. Other potential liabilities arising out of our operations may involve claims by employees, customers or third parties for personal injury, product liability or property damage and potential fines and penalties in connection with alleged violations of regulatory requirements.

In certain instances, our insurance may not fully cover an insured loss depending on the magnitude and nature of the claim. Accordingly, we cannot assure you that we will not be exposed to uninsured or underinsured losses that could have a material adverse effect on our business, financial condition and results of operations. Additionally, changes in the cost of insurance or the availability of insurance in the future could substantially increase our costs to maintain our current level of coverage or could cause us to reduce our insurance coverage.

We are subject to general governmental regulation and other legal obligations, including those related to privacy, data protection and information security, and our actual or perceived failure to comply with such obligations could harm our business. Compliance with such laws could also impair our efforts to maintain and expand our customer base, and thereby decrease our revenue.

We receive, store and process personal information and other data from and about customers in addition to our employees and services providers. Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, such as the U.S. Federal Trade Commission (the “FTC”) and various state, local and foreign agencies. Our data handling also is subject to contractual obligations and industry standards.

The U.S. federal and various state governments have adopted or proposed limitations on the collection, distribution, use, storage and security of data relating to individuals, including the use of contact information and other data for marketing, advertising and other communications with individuals and businesses. For example, the California Consumer Privacy Act of 2018 (the “CCPA”) became effective January 1, 2020. The CCPA requires covered businesses to, among other things, make new disclosures to consumers about their data collection, use, and sharing practices, and allows consumers to opt out of certain data sharing with third parties. The CCPA also provides a new private cause of action for certain data breaches. The California Privacy Rights Act (the “CPRA”) which will become effective on January 1, 2023, will significantly modify the CCPA, and also create a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA. The effects of the CCPA and the CPRA are potentially significant and may require us to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation. States such as Virginia have enacted and we expect additional states may also enact legislation similar to the CCPA and CPRA. Additionally, the FTC and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination and security of data.

 

52


Table of Contents

Several foreign countries and governmental bodies, including the European Union, have laws and regulations dealing with the handling and processing of personal information obtained from their residents, which in certain cases are more restrictive than those in the United States, and we expect additional jurisdictions may enact similar regulations. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of various types of data, including data that identifies or may be used to identify an individual, such as names, email addresses and in some jurisdictions, Internet Protocol (“IP”) addresses. Within the European Union, legislators have adopted the General Data Protection Regulation (the “GDPR”) which became effective in May 2018. The GDPR includes more stringent operational requirements for processors and controllers of personal data than previous EU data protection laws and imposes significant penalties for non-compliance.

These domestic and foreign laws and regulations relating to privacy and data security are evolving, can be subject to significant change and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. Interpretation of certain requirements remains unclear and may evolve, in particular for regulations that have recently been enacted. Application of laws may be inconsistent or may conflict among jurisdictions resulting in additional complexity and increased legal risk. In addition, these regulations have increased our compliance costs and may impair our ability to grow our business or offer our service in some locations, may subject us to liability for non-compliance, may require us to modify our data processing and transferring practices and policies and may strain our technical capabilities.

We also handle credit card and other personal information. Due to the sensitive nature of such information, we have implemented procedures in an effort to preserve and protect our data and our customers’ data against loss, misuse, corruption, misappropriation caused by systems failures, unauthorized access or misuse. Notwithstanding these procedures, we could be subject to liability claims by individuals and customers whose data resides in our databases for the misuse of that information. If we fail to meet appropriate compliance levels, this could negatively impact our ability to utilize credit cards as a method of payment, and/or collect and store credit card information, which could disrupt our business.

We may be subject to rules of the FTC, the Federal Communications Commission (the “FCC”) and potentially other federal agencies and state laws related to commercial electronic mail and other messages. Compliance with these provisions may limit our ability to send certain types of messages. If we were found to have violated such rules and regulations, we may face enforcement actions by the FTC or FCC or face civil penalties, either of which could adversely affect our business.

Any failure or perceived failure by us to comply with laws, regulations, policies, legal or contractual obligations, industry standards, or regulatory guidance relating to privacy or data security, may result in governmental investigations and enforcement actions, litigation, fines and penalties or adverse publicity, and could cause our customers and partners to lose trust in us, which could have an adverse effect on our reputation and business. We expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy, data protection, marketing, consumer communications, information security and local data residency in the United States, the European Union and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business, financial condition and results of operations.

The continuing impacts of the COVID-19 pandemic may have an adverse effect on our business, financial condition and results of operations.

In March 2020, the World Health Organization declared COVID-19 a pandemic. Governments and municipalities around the world have instituted measures to control the spread of COVID-19, including quarantines, shelter-in-place orders, school closures, travel restrictions, and closure of non-essential businesses. These measures have led to significant adverse economic impacts which have had, and could continue to have, an adverse impact on our business operations in a number of ways, including, without limitation, (1) disruptions to

 

53


Table of Contents

our sales operations and marketing efforts as a result of the inability of our sales team to travel and meet customers in person, (2) negative impacts on our customers and prospects that could result in (i) extended customer sales cycles, delayed spending on our services, impairment of our ability to collect accounts receivable, and (ii) reduced payment frequencies, demand for our services, renewal rates, and spending on our services, and (3) negative impacts to the financial condition or operations of our vendors and business partners, as well as disruptions to the supply chain of products needed to offer our services. Moreover, as a result of the COVID-19 pandemic, we are temporarily requiring a portion of our employees to work remotely, which may lead to disruptions and decreased productivity and other adverse operational business impacts. The extent to which the COVID-19 pandemic and resultant economic impact affects our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted.

The loss of key personnel or our inability to attract and retain new qualified personnel could hurt our business and inhibit our ability to operate and grow successfully.

Our success depends on the continuing services of certain members of the current management team. Our executive team are incentivized by stock compensation grants that align the interests of investors with the executive team and certain executives have employment retention agreements. The loss of key management, employees or third-party contractors could have a material and adverse effect on our business, financial condition and results of operations. Additionally, the success of our operations will largely depend upon our ability to successfully attract and maintain competent and qualified key management personnel. As with any company with limited resources, there can be no guarantee that we will be able to attract such individuals or that the presence of such individuals will necessarily translate into profitability for our company. If we are successful in attracting and retaining such individuals, it is likely that our payroll costs and related expenses will increase significantly and that there will be additional dilution to existing stockholders as a result of equity incentives that may need to be issued to such management personnel. Our inability to attract and retain key personnel may materially and adversely affect our business operations. Any failure by our management to effectively anticipate, implement, and manage personnel required to sustain our growth would have a material adverse effect on our business, financial condition and results of operations.

 

54


Table of Contents

SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES

Holdco and certain of its subsidiaries (the “non-U.S. companies”) are or will be incorporated under the laws of countries other than the U.S. In addition, certain of the directors and officers of the non-U.S. companies reside outside of the U.S. and most of the assets of the non-U.S. companies and some of the assets of their directors and officers are located outside the U.S. As a result, it may be difficult for investors to effect service of process on the non-U.S. companies or those persons in the U.S. or to enforce in the U.S. judgments obtained in U.S. courts against the non-U.S. companies or those persons based on the civil liability provisions of the U.S. securities laws or other laws. Uncertainty exists as to whether courts in the jurisdiction of organization of the non-U.S. companies will enforce judgments obtained in other jurisdictions, including the U.S., against the non-U.S. companies or their directors or officers under the securities or other laws of those jurisdictions or entertain actions in those jurisdictions against the non-U.S. companies or their directors or officers under the securities or other laws of those jurisdictions.

Luxembourg

It may be possible to effect service of process within Luxembourg upon Holdco and its respective directors and officers provided that The Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters of November 15, 1965 is complied with.

 

55


Table of Contents

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL INFORMATION

Introduction

Holdco, EverArc, and Perimeter are providing the following unaudited pro forma condensed consolidated combined financial information to aid you in your analysis of the financial aspects of the business combination. The unaudited pro forma condensed consolidated combined financial information has been prepared in accordance with Article 11 of Regulation S-X and should be read in conjunction with the accompanying notes.

The unaudited pro forma condensed consolidated combined balance sheet as of June 30, 2021 combines the audited balance sheet of Holdco as of June 30, 2021 with the unaudited condensed balance sheet of Perimeter as of June 30, 2021 and the unaudited condensed consolidated combined balance sheet of EverArc as of April 30, 2021, giving effect to the Business Combination.

The unaudited pro forma condensed consolidated combined statement of operations for the six months ended June 30, 2021 combines the unaudited condensed statement of operations of Holdco for the period from June 21, 2021 (inception) to June 30, 2021 with the unaudited condensed statement of operations and comprehensive income (loss) of Perimeter for the six months ended June 30, 2021 and the unaudited condensed consolidated combined statement of operations of EverArc for the six months ended April 30, 2021. The unaudited pro forma condensed consolidated combined statement of operations for the year ended December 31, 2020 combines the audited condensed statement of operations and comprehensive income (loss) of Perimeter for the year ended December 31, 2020 and the audited condensed consolidated combined statement of operations of EverArc for the period from November 8, 2019 (inception) to October 31, 2020, giving effect to the Business Combination as if it had been consummated on January 1, 2020, the beginning of the earliest period presented.

The unaudited pro forma condensed consolidated combined financial information was derived from, and should be read in conjunction with, the following historical financial statements and the accompanying notes, which are included elsewhere in this prospectus:

 

   

The historical audited balance sheet of Holdco as of June 30, 2021 and the unaudited condensed statement of operations for the period from June 21, 2021 (inception) to June 30, 2021;

 

   

The historical unaudited condensed financial statements of Perimeter as of and for the six months ended June 30, 2021, and the historical audited financial statements of Perimeter as of and for the year ended December 31, 2020; and

 

   

The historical unaudited condensed consolidated financial statements of EverArc as of and for the six months ended April 30, 2021 and the historical audited consolidated financial statements as of October 31, 2020 and for the period from November 8, 2019 (inception) to October 31, 2020.

The foregoing historical financial statements have been prepared in accordance with U.S. GAAP. The unaudited pro forma condensed consolidated combined financial information has been prepared based on the aforementioned historical financial statements and the assumptions and adjustments as described in the notes to the unaudited pro forma condensed consolidated combined financial information. The pro forma adjustments reflect transaction accounting adjustments related to the Business Combination, which is discussed in further detail below. The unaudited pro forma condensed consolidated combined financial statements are presented for illustrative purposes only and do not purport to represent Perimeter’s consolidated results of operations or consolidated financial position that would actually have occurred had the Business Combination been consummated on the dates assumed or to project Perimeter’s consolidated results of operations or consolidated financial position for any future date or period.

The unaudited pro forma condensed consolidated combined financial information should also be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Perimeter

 

56


Table of Contents

and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of EverArc,” and other financial information included elsewhere in this prospectus.

Description of the Business Combination and Related Activity

Prior to the acquisition of Perimeter, the Merger will occur, whereby MergerSub, a wholly-owned subsidiary of Holdco, will merge with and into EverArc, with EverArc surviving such merger and becoming a wholly-owned subsidiary of Holdco. Concurrent with the Merger, PIPE Subscribers invest $1,150.0 million in EverArc shares pursuant to the PIPE Subscription Agreement (“PIPE Financing”), which are exchanged for Holdco shares in connection with the closing of the Business Combination. The Business Combination will then occur, whereby Holdco will acquire 100% of the outstanding ordinary shares of Perimeter. Consideration for the acquisition will be transferred to SK Holdings, which holds 100% of the outstanding ordinary shares of Perimeter, through a combination of Holdco preferred shares, and cash. As part of the Business Combination, all the outstanding shares of EverArc will be exchanged for outstanding shares of Holdco and all of the outstanding EverArc warrants will be converted into the right to purchase one-fourth of a Holdco ordinary share on the substantially the same terms as the EverArc warrants.

Upon Closing, the ownership distribution of the common stock of the successor entity will be as follows:

 

Total Capitalization (in millions)       
     $      Shares      %  

EverArc Holdco stockholders

     408        40.8        26.0  

Management investment in PIPE

     11        1.1        0.7  

PIPE Investors

     1,150        115.0        73.3  
  

 

 

    

 

 

    

 

 

 

Total Shares

     1,569        156.9        100.0  
  

 

 

    

 

 

    

 

 

 

Accounting for the Business Combination and Related Activity

The Merger between Holdco and EverArc will be accounted for as a common control transaction, where substantially all of the net assets of Holdco will be those previously held by EverArc. The acquisition of Perimeter through the Contribution and Sale will be treated as a business acquisition under ASC 805 with Holdco determined to be the legal and accounting acquirer. Accordingly, the net assets of Perimeter will be stated at fair value within the pro formas. This determination was primarily based on i) Holdco being a substantive entity as it engaged in significant pre-combination activities in order to raise capital, market to investors and pursue a business combination; ii) the Holdco equity holders having a relative majority of the voting power of the Post-Combination Company; iii) Holdco having the authority to appoint a majority of directors on the Board of Directors; and iv) that Holdco both transfers cash and issues equity to effect the business combination. In addition, Perimeter has been determined to be the predecessor of the Post-Combination Company. Accordingly, for accounting purposes, the financial statements of the Post-Combination Company will represent a continuation of the financial statements of Perimeter.

Basis of Pro Forma Presentation

The historical financial information has been adjusted to give pro forma effect to the transaction adjustments required for the Business Combination and Merger as well as the financing adjustment related to PIPE Financing. Prior to Closing, new debt in the amount of $600.0 million is expected to be issued and used to pay down an equivalent amount of existing debt currently held on Perimeter’s balance sheet; relevant financing adjustments will be added once a draft agreement is available. The adjustments in the unaudited pro forma condensed consolidated combined financial information have been identified and presented to provide relevant information necessary for an accurate understanding of the Post-Combination Company following the Business Combination.

 

57


Table of Contents

Holdco and Perimeter both have December 31st fiscal year-ends, while EverArc has an October 31st fiscal year-end. In accordance with SEC Regulation S-X Article 11-02(c), the information contained within the unaudited pro forma condensed consolidated combined statement of operations and condensed consolidated combined balance sheet will be presented based on the fiscal year-end of Holdco, the Registrant.

Perimeter constitutes a business, with inputs and processes applied to those inputs that have the ability to contribute to the creation of outputs. Accordingly, the acquisition of Perimeter constitutes the acquisition of a business for purposes of ASC 805, and due to the change in control, will be accounted for using the acquisition method. Under the acquisition method, the acquisition-date fair value of the consideration transferred, consisting of preferred shares and cash, by Holdco to effect the acquisition of Perimeter is allocated to the assets acquired and the liabilities assumed based on their estimated fair values, as reflected in adjustment (A) to the pro formas. Management of Holdco has made significant estimates and assumptions in determining the preliminary allocation of the consideration transferred in the unaudited pro forma condensed consolidated combined financial statements. As the unaudited pro forma condensed consolidated combined financial statements have been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.

In order to appropriately reflect Holdco as the accounting acquirer within the pro formas, the Company has presented the historical financial statements of Holdco within the pro formas, followed by columns representing the EverArc Merger and purchase of Perimeter, which will be treated as a common control transaction and as a business combination under ASC 805, respectively. Based on the determination of the EverArc acquisition as a common control transaction, the net assets of EverArc will be stated at their historical value within the pro formas. Fair value adjustments have been applied to Perimeter’s historical financial statements in order to present the acquisition at fair value. Transaction adjustments related to the Business Combination are then applied to arrive at the combined total pro forma financial statements.

The unaudited pro forma condensed consolidated combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed consolidated combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the Post-Combination Company will experience. Holdco and EverArc have not had any historical relationship with Perimeter prior to the Merger. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

Lastly, the significant accounting policies of EverArc and Perimeter are aligned and did not require any adjustments to be made by Holdco upon consummation of the Business Combination in order to create the significant accounting policies of the post-consummation entity.

 

58


Table of Contents

Unaudited Pro Forma Condensed Combined Balance Sheet

 

As of June 30, 2021

 

(in thousands)

 
    Holdco
Historical
    EverArc
Historical
    Perimeter
Solutions
Historical
    Perimeter
Solutions
Purchase
Price
Allocation
Adjustments
          Pro Forma
Transaction
Adjustments
          Pro Forma
Financing
Adjustments
          Pro
Forma
Combined
 

ASSETS

                   

Current assets:

                   

Cash and cash equivalents

  $ —       $ 1     $ 4,041     $ (1,928,709     (A   $ 398,873       (B   $ 11,000       (F   $ (364,794
                  1,150,000       (G  

Accounts receivable, net

    —         —         64,632                   64,632  

Inventories

    —         —         78,710       30,413       (A             109,123  

Income tax receivable

    —         —         17,305                   17,305  

Short-term investments

    —         398,873       —             (398,873     (B         —    

Prepaid expenses and other current assets

    —         693       6,430                   7,123  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total current assets

    —         399,567       171,118       (1,898,296       —           1,161,000         (166,611

Property, Plant, and Equipment, net

    —         —         49,194       —                       49,194  

Other assets:

                   

Goodwill

    —         —         486,455       1,287,080       (A             1,773,535  

Customer lists—net

    —         —         283,061       461,939       (A             745,000  

Existing technology and patents—net

    —         —         130,245       115,755       (A             246,000  

Other intangible assets—net

    —         —         33,421       60,579       (A             94,000  

Other assets

    —         —         980                   980  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total other assets

    —         —         934,162       1,925,353         —           —           2,859,515  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total assets

  $ —       $ 399,567     $ 1,154,474     $ 27,057       $ —         $ 1,161,000       $ 2,742,098  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

                   

Current liabilities:

                   

Current portion of long-term debt, net

  $ —       $ —       $ 5,610                 $ 5,610  

Accounts payable

    —         112       36,132                   36,244  

Deferred revenue

    —         —         6,701                   6,701  

Accrued expenses and other current liabilities

    —         —         17,288                   17,288  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total current liabilities

      112       65,731       —           —           —           65,843  

Other liabilities:

                   

Long term debt, less current position, net

    —         —         684,746                   684,746  

Deferred income taxes

    —         —         114,404       195,759       (A     (7,279     (E         302,884  

Other liabilities

    —         —         20,952       100,000       (A     40,795       (E         161,747  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total other liabilities

      —         820,102       295,759         33,516         —           1,149,377  

Shareholders’ equity:

                   

Class A Common stock—NewCo

    —         —         —             4       (C     1       (F     16  
                  11       (G  

Class A Common stock—Perimeter

    —         —         53,046       (53,046     (A             —    

Class A Common stock—EverArc

    —         401,358       —             (401,358     (C         —    

Paid-in capital

    40       —         289,344       (289,405     (A     401,354       (C     10,999       (F     1,623,915  
              20,799       (D     1,149,989       (G  
              40,795       (E      

Accumulated deficit

    —         (1,919     (70,171     70,171       (A     (20,799     (D         (97,029
              (74,311     (E      

Subscription receivable

    —         (1     —                     (1

Note receivable

    (40     —         —                     (40

Accumulated other comprehensive loss

    —         17       (3,578     3,578       (A             17  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total shareholders’ equity

    —         399,455       268,641       (268,702       (33,516       1,161,000         1,526,878  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total liabilities and shareholders’ equity

  $ —       $ 399,567     $ 1,154,474     $ 27,057       $ —         $ 1,161,000       $ 2,742,098  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

 

59


Table of Contents
Unaudited Pro Forma Condensed Combined Statement of Operations  
For the Six Months Ended June 30, 2021  
(in thousands, except share and per share amounts)  
    Holdco
Historical
    EverArc
Historical
    Perimeter
Solutions
Historical
    Perimeter
Solutions
Purchase
Price
Allocation
Adjustments
          Pro Forma
Transaction
Adjustments
          Pro Forma
Combined
       

Net sales

  $ —       $ —       $ 121,046             $ 121,046    

Cost of sales

    —         —         73,814               73,814    

Selling, general and administrative expenses

    —         1,029       27,211           8,105       (CC     52,256    
              15,911       (DD    

Amortization

    —         —         26,542       30,563       (AA.1         57,105    

Other operating expense

    —         —         753               753    
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

Total operating expense

    —         1,029       128,320       30,563         24,016         183,928    

Income (loss) from Operations

    —         (1,029     (7,274     (30,563       (24,016       (62,882  

Interest expense, net

    —         —         15,886               15,886    

Loss on contingent earnout

    —         —         2,763               2,763    

Unrealized foreign currency (gain) loss

    —         —         2,258               2,258    

Other (income) expense, net

    —         —         (318             (318  

Investment income

    —         (84     —             84       (BB     (0  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

Income (loss) before income taxes

    —         (945     (27,863     (30,563       (24,100       (83,471  

Income tax expense (benefit)

    —         —         (5,486     (8,079     (AA.2     (2,143     (EE     (15,708  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

Net income (loss)

  $ —       $ (945   $ (22,377   $ (22,484     $ (21,957     $ (67,763  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

Net earnings:

                 

Basic earnings per share

    —         (0.03     (0.42             (0.43     (FF

Average shares outstanding

    —         36,301,525       53,045,510               156,900,000       (FF

 

60


Table of Contents
Unaudited Pro Forma Condensed Combined Statement of Operations  
For the Twelve Months Ended December 31, 2020  
(in thousands, except share and per share amounts)  
    Holdco
Historical
    EverArc
Historical
    Perimeter
Solutions
Historical
    Perimeter
Solutions
Purchase
Price
Allocation
Adjustments
          Pro Forma
Transaction
Adjustments
          Pro Forma
Combined
       

Net sales

  $ —       $ —       $ 339,577             $ 339,577    

Cost of sales

    —         —         177,532     $ 30,413       (GG.2         207,945    

Selling, general and administrative expenses

    —         2,621       37,747         $ 33,165       (II     223,955    
              20,799       (JJ    
              27,535       (KK    
              54,055       (LL    
              16,210       (MM    
              31,823       (NN    

Amortization

    —         —         51,458       62,753       (GG.1         114,211    

Other (income) expense

    —         —         1,364               1,364    
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

Total operating expense

    —         2,621       268,101       93,166         183,587         547,475    

Income (loss) from Operations

    —         (2,621     71,476       (93,166       (183,587       (207,898  

Interest expense, net

    —         —         42,017               42,017    

Other (income) expense, net

    —         —         (5,273             (5,273  

Investment income

    —         (1,646     —             1,646       (HH     —      
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

Income (loss) before income taxes

    —         (975     34,732       (93,166       (185,233       (244,642  

Income tax expense (benefit)

    —         —         10,483       (24,628     (GG.3     (7,279     (OO     (21,424  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

Net income (loss)

  $ —       $ (975   $ 24,249     $ (68,538     $ (177,954     $ (223,218  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

Net earnings:

                 

Basic earnings per share

    —         (0.03     0.46               (1.42     (PP

Average shares outstanding

    —         36,301,525       53,045,510               156,900,000       (PP

 

61


Table of Contents

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL INFORMATION

1. Basis of Presentation

The pro forma adjustments have been prepared as if the Business Combination had been consummated on June 30, 2021, in the case of the unaudited pro forma condensed consolidated combined balance sheet, and as if the Business Combination had been consummated on January 1, 2020, the beginning of the earliest period presented in the unaudited pro forma condensed combined statements of operations.

The unaudited pro forma condensed consolidated combined financial information has been prepared assuming the following methods of accounting in accordance with GAAP.

The Merger between Holdco and EverArc will be accounted for as a common control transaction, where substantially all of the net assets of Holdco will be those previously held by EverArc. The acquisition of Perimeter through the Business Combination will be treated as a business acquisition under ASC 805 with Holdco determined to be the legal and accounting acquirer. Accordingly, the net assets of Perimeter will be stated at fair value within the pro formas. Perimeter has been determined to be the predecessor to the Post-Combination Company. In addition to purchase price allocation adjustments and transaction adjustments, a financing adjustment has been reflected within the pro formas; this adjustment relates to the PIPE Financing, which is an additional source of financing associated with the Business Combination.

The pro forma adjustments represent management’s estimates based on information available as of the date of this prospectus and are subject to change as additional information becomes available and additional analyses are performed. Management considers this basis of presentation to be reasonable under the circumstances.

2. Adjustments and Assumptions to the Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2021

The adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2021 are as follows:

 

  (A)

Reflects the purchase price allocation adjustments to record Perimeter’s assets and liabilities at estimated fair value based on the total purchase price consideration of $2,028.7 million, as detailed below. This consideration includes payment to SK Holdings as per the Business Combination Agreement in the form of $1,928.7 million in cash and $100.0 million in Preferred Equity Contributions. Preferred Equity Contributions to existing Perimeter equity holders, issued at par upon the Business Combination. Par value is considered to approximate fair value as this amount is equal to the redemption value as of Closing. These instruments have been assessed for classification, and it was determined that the instrument should be classified as a liability due to mandatory redemption features. As part of the allocation of the purchase price under ASC 805, Perimeter’s historical accumulated deficit and accumulated other comprehensive loss was also eliminated.

The preliminary purchase price was allocated among the identified assets to be acquired, based on a preliminary analysis. All valuation procedures related to existing assets as no new assets were identified as a result of procedures performed. Goodwill was recognized as a result of the acquisition, which represents the excess fair value of consideration over the fair value of the underlying net assets, largely arising from the extensive industry expertise that has been established by Perimeter. This was considered appropriate based on the determination that the Business Combination would be accounted for as a business acquisition under ASC 805. A deferred tax liability was recorded as part of the purchase price allocation, based on an analysis of the tax impacts of the Business Combination by location and by asset. The estimates of fair value are based upon preliminary valuation assumptions

 

62


Table of Contents

believed to be reasonable but which are inherently uncertain and unpredictable; and, as a result, actual results may differ from estimates.

 

Assets Identified    Fair Value  

Property, Plant, and Equipment

   $ 49,194  

Inventory

     109,123  

Other intangible assets

     94,000  

Customer lists

     745,000  

Existing technology and patents

     246,000  

Goodwill

     1,773,535  

Other assets

     93,449  

Deferred tax liabilities

     (195,759

Other liabilities

     (885,833
  

 

 

 

Total Fair Value

   $ 2,028,709  

 

Value Conveyed       

Cash

   $ 1,928,709  

Preferred Equity Contributions

     100,000  
  

 

 

 

Total preliminary purchase price consideration

   $ 2,028,709  

 

  (B)

Reflects the reclassification of cash and marketable securities held in short-term investments that become available in conjunction with the business combination. This amount relates to EverArc’s IPO proceeds, which are not subject to redemption.

 

  (C)

Reflects the issuance of 40.8 million shares of Class A Common Stock in the Post-Combination Company to EverArc shareholders. The impact to Class A Common Stock in the Post-Combination Company was calculated as the number of shares multiplied by 0.0001, resulting in an adjustment of $4 thousand to common stock. The remaining balance in EverArc Class A Common Stock was recorded to additional paid-in capital in the Post-Combination Company in order to consistently present this balance on a go forward basis.

 

  (D)

Represents recognition of the balance sheet impact of the fair value associated with the portion of the fixed award within the EverArc Founder Advisory Agreement that is fully vested as of the Business Combination. This agreement is referenced at Note 7 to the EverArc financial statements for the six months ended April 30, 2021. This portion of the award fully vests upon a change in control. The related nonrecurring expense was recorded via adjustment (JJ).

 

  (E)

Represents recognition of the balance sheet impact of the fair value associated with the variable award and a portion of the fixed award within the EverArc Founder Advisory Agreement that are partially vested as of the Business Combination. This agreement is referenced at Note 7 to the EverArc financial statements for the six months ended April 30, 2021. These awards have been assessed for classification, and, following the Business Combination, it was determined that half of the awards should be classified as a liability and the other half as equity. This is due to fact that half of these awards are subject to cash settlement at the option of the holder. A deferred tax asset was recorded for the expected tax benefit of the amount vested as of the Business Combination. The related recurring expense expected to be incurred on an ongoing basis for these awards was recorded via adjustments (CC) and (DD), respectively. The related nonrecurring expense incurred from grant date to Closing for these awards was recorded via adjustments (KK) and (LL), respectively, and the associated tax benefit was recorded via adjustment (OO).

 

  (F)

Represents the pro forma adjustment to record the net proceeds of $11.0 million from the issuance of 1.1 million shares of Class A Common Stock to Perimeter management as subscribers in the PIPE. The impact to Class A Common Stock in the Post-Combination Company was calculated as the number of shares multiplied by 0.0001, resulting in an adjustment of $1 thousand to common stock, and the remaining balance was recorded to additional paid-in capital.

 

63


Table of Contents
  (G)

Represents the pro forma adjustment to record the net proceeds of $1,150.0 million from the private placement and issuance of 115.0 million shares of Class A common stock to the PIPE Investors. The impact to Class A Common Stock in the Post-Combination Company was calculated as the number of shares multiplied by 0.0001, resulting in an adjustment of $11 thousand to common stock, and the remaining balance was recorded to additional paid-in capital.

3. Adjustments and Assumptions to the Unaudited Pro Forma Condensed Combined Statement of Operations for the Six Months ended June 30, 2021

The adjustments included in the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 are as follows:

 

  (AA)

Reflects the pro forma impacts related to the purchase price allocation discussed at adjustment (A). This includes the following impacts:

 

  1)

The incremental amortization expense related to intangibles. These intangibles include Customer lists, Existing technology and patents, and Other intangibles, which were previously presented within Perimeter’s historical financial statements but were adjusted to fair value based on the purchase price allocation. The amortization expense for intangibles was calculated on a straight-line basis using the estimated remaining useful lives of the assets, which was determined to be ten years for all intangibles.

 

  2)

Represents the pro forma adjustment to taxes as a result of the purchase price allocation adjustments to the income statement for the six months ended June 30, 2021, which was calculated using the relevant blended statutory income tax rate of 26.44%.

 

  (BB)

Reflects the elimination of interest earned on marketable securities held in the trust account.

 

  (CC)

Reflects the pro forma adjustment to record ongoing stock compensation expense related to the partially vested portion of the fixed award within the EverArc Founder Advisory Agreement, referenced at Note 7 to the EverArc financial statements for the six months ended April 30, 2021. This agreement provides, in part, for compensation to be recognized over a period beginning at the grant date and extending six years following Closing (the service period), as further described at Note 7 to the EverArc financial statements for the six months ended April 30, 2021. The ASC 718 fair value of this award was determined as of August 24, 2021, assuming a share price of $10 per share, which resulted in a total valuation of $124.8 million. This adjustment represents the ongoing compensation expense related to this award in the amount of $8.1 million for the six months ended June 30, 2021. Refer to adjustment (E) for the liability and equity impact related to the vested portions of this award and the award referenced at adjustment (DD).

 

  (DD)Reflects

the pro forma adjustment to record ongoing stock compensation expense related to the partially vested variable award within the EverArc Founder Advisory Agreement, referenced at Note 7 to the EverArc financial statements for the six months ended April 30, 2021. This agreement provides, in part, for compensation to be recognized over a period beginning at the grant date and extending ten years following Closing (the service period), as further described at Note 7 to the EverArc financial statements for the six months ended April 30, 2021. The ASC 718 fair value of this award was determined as of August 24, 2021, utilizing a Monte Carlo simulation, which resulted in a total valuation of $372.3 million. This adjustment represents the ongoing compensation expense related to this award in the amount of $15.9 million for the six months ended June 30, 2021. Refer to adjustment (E) for the liability and equity impact related to the vested portions of this award and the award referenced at adjustment (CC).

 

  (EE)

Represents the pro forma adjustment to taxes as a result of adjustments to the income statement for the six months ended June 30, 2021, which was calculated using the relevant blended statutory income tax rate of 26.44%. The calculation of the pro forma adjustment to taxes was limited to tax impacted

 

64


Table of Contents
  adjustments. No tax impact was recorded with regard to interest earned on marketable securities held in the trust account, representing income with no associated tax expense recorded.

 

  (FF)

Represents net loss per share computed by dividing net loss by the weighted average number of common shares outstanding for the six months ended June 30, 2021. The weighted average shares outstanding was calculated assuming the transaction occurred as of the earliest period presented.

4. Adjustments and Assumptions to the Unaudited Pro Forma Condensed Combined Statement of Operations for the Year ended December 31, 2020

The adjustments included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 are as follows:

 

  (GG)

Reflects the pro forma impacts related to the purchase price allocation discussed at adjustment (A). This includes the following impacts:

1) The incremental amortization expense related to intangibles. These intangibles include Customer lists, Existing technology and patents, and Other intangibles, which were previously presented within Perimeter’s historical financial statements but were adjusted to fair value based on the purchase price allocation. The amortization expense for intangibles was calculated on a straight-line basis using the estimated remaining useful lives of the assets, which was determined to be ten years for all intangibles.

2) The increase in cost of sales related to the step-up in basis associated with inventory. Based on Perimeter’s inventory turnover of approximately twice per year, it was estimated that this would be fully recognized within the first six months of Closing. Thus, this adjustment was treated as a nonrecurring expense for purposes of the pro formas.

3) Represents the pro forma adjustment to taxes as a result of the purchase price allocation adjustments to the income statement for the year ended December 31, 2020, which was calculated using the relevant blended statutory income tax rate of 26.44%.

 

  (HH)

Reflects the elimination of interest earned on marketable securities held in the trust account.

 

  (II)

Reflects the pro forma adjustment to record stock compensation expense for legacy shares granted to Perimeter management that vest upon a change in control. This expense is in the predecessor period of Perimeter, and therefore is not reflected in the equity of the Post-Combination Company within the pro forma balance sheet.

 

  (JJ)

Reflects the pro forma adjustment to record nonrecurring performance based stock compensation expense as of Closing related to the fully vested portion of the fixed award within the EverArc Founder Advisory Agreement, referenced at Note 6 to the EverArc financial statements for the year ended October 31, 2020. The ASC 718 fair value of this award was determined as of August 24, 2021, assuming a share price of $10 per share, which resulted in a total valuation of $20.8 million. This award fully vests upon a change in control. Refer to adjustment (D) for the equity impact related to this award.

 

  (KK)

Reflects the pro forma adjustment to record nonrecurring performance based stock compensation expense as of Closing related to the partially vested portion of the fixed award within the EverArc Founder Advisory Agreement, referenced at Note 6 to the EverArc financial statements for the year ended October 31, 2020. This agreement provides, in part, for compensation to be recognized over a period beginning at the grant date of December 19, 2019 and extending six years following Closing (the service period), as further described at Note 6 to the EverArc financial statements for the year ended October 31, 2020. The ASC 718 fair value of this award was determined as of August 24, 2021, assuming a share price of $10 per share, which resulted in a total valuation of $124.8 million. This adjustment represents the compensation expense related to this award in the amount of $27.5 million, which relates to the period from the grant date to the date at which the performance metrics of the award become probable. Refer to adjustment (CC) for the pro forma adjustment to recognize the

 

65


Table of Contents
  ongoing expense related to this award. Refer to adjustment (E) for the liability and equity impact related to the vested portions of this award and the award referenced at adjustment (LL).

 

  (LL)

Reflects the pro forma adjustment to record nonrecurring performance based stock compensation expense as of Closing related to the partially vested variable award within the EverArc Founder Advisory Agreement, referenced at Note 6 to the EverArc financial statements for the year ended October 31, 2020. This agreement provides, in part, for compensation to be recognized over a period beginning at the grant date of December 19, 2019 and extending ten years following Closing (the service period), as further described at Note 6 to the EverArc financial statements for the year ended October 31, 2020. The ASC 718 fair value of this award was determined as of August 24, 2021, utilizing a Monte Carlo simulation, which resulted in a total valuation of $372.3 million. This adjustment represents the compensation expense related to this award in the amount of $54.1 million, which relates to the period from the grant date to the date at which the performance metrics of the award become probable. Refer to adjustment (DD) for the pro forma adjustment to recognize the ongoing expense related to this award. Refer to adjustment (E) for the liability and equity impact related to the vested portions of this award and the award referenced at adjustment (KK).

 

  (MM)

Reflects the pro forma adjustment to record ongoing stock compensation expense related to the partially vested portion of the fixed award within the EverArc Founder Advisory Agreement, referenced at Note 6 to the EverArc financial statements for the year ended October 31, 2020. This agreement provides, in part, for compensation to be recognized over a period beginning at the grant date of December 19, 2019 and extending six years following Closing (the service period), as further described at Note 6 to the EverArc financial statements for the year ended October 31, 2020. The ASC 718 fair value of this award was determined as of August 24, 2021, assuming a share price of $10 per share, which resulted in a total valuation of $124.8 million. This adjustment represents the ongoing compensation expense related to this award in the amount of $16.2 million for the year ended December 31, 2020. Refer to adjustment (E) for the liability and equity impact related to the vested portions of this award and the award referenced at adjustment (NN).

 

  (NN)

Reflects the pro forma adjustment to record ongoing stock compensation expense related to the partially vested variable award within the EverArc Founder Advisory Agreement, referenced at Note 6 to the EverArc financial statements for the year ended October 31, 2020. This agreement provides, in part, for compensation to be recognized over a period beginning at the grant date of December 19, 2019 and extending ten years following Closing (the service period), as further described at Note 6 to the EverArc financial statements for the year ended October 31, 2020. The ASC 718 fair value of this award was determined as of August 24, 2021, utilizing a Monte Carlo simulation, which resulted in a total valuation of $372.3 million. This adjustment represents the ongoing compensation expense related to this award in the amount of $31.8 million for the year ended December 31, 2020. Refer to adjustment (E) for the liability and equity impact related to the vested portions of this award and the award referenced at adjustment (MM).

 

  (OO)

Represents the pro forma adjustment to taxes as a result of adjustments to the income statement for the year ended December 31, 2020, which was calculated using the relevant blended statutory income tax rate of 26.44%. The calculation of the pro forma adjustment to taxes was limited to tax impacted adjustments. No tax impact was recorded with regard either to interest earned on marketable securities held in the trust account, representing income with no associated tax expense recorded, or to compensation expense that is expected to be nondeductible for tax purposes.

 

  (PP)

Represents net income per share computed by dividing net income by the weighted average number of common shares outstanding for the year ended December 31, 2020. The weighted average shares outstanding was calculated assuming the transaction occurred as of the earliest period presented.

 

66


Table of Contents

COMPARATIVE PER SHARE DATA

The following table sets forth the per share data of the Company on a stand-alone basis and the unaudited pro forma condensed combined per share data for the period ended December 31, 2020 and the six months ended June 30, 2021 after giving effect to the Business Combination.

The information in the following table should be read in conjunction with the selected historical financial information summary included elsewhere in this prospectus, and the historical financial statements of Holdco, EverArc, and Perimeter and related notes that are included elsewhere in this prospectus. The unaudited Holdco, EverArc, and Perimeter pro forma combined per share information is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included elsewhere in this prospectus.

The unaudited pro forma combined net income per share information below does not purport to represent the net income per share which would have occurred had the companies been combined during the periods presented, nor net income per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of Holdco, EverArc, and Perimeter would have been had the companies been combined during the periods presented.

 

     (Unaudited)
Perimeter
Solutions
(Historical)
     EverArc
(Historical)
     Combined Pro
Forma
 
     As of and for the Six Months Ended  

(in thousands, except share and per share amounts)

   June 30, 2021      April 30, 2021      June 30, 2021  

Shareholders’ equity

   $ 268,641      $ 399,455      $ 1,526,878  

Net loss

   $ (22,377    $ (945    $ (67,763

Common shares outstanding as of June 30, 2021 – basic

     53,045,510        40,832,500        156,900,000  

Weighted average common shares outstanding – basic

     53,045,510        36,301,525        156,900,000  

Shareholders’ equity per share – basic

   $ 5.06      $ 9.78      $ 9.73  

Net loss per share attributable to common shareholders – basic

   $ (0.42    $ (0.03    $ (0.43

 

     (Unaudited)
Perimeter
Solutions
(Historical)
     EverArc
(Historical)
     Combined Pro
Forma
 
     As of and for the Year Ended  
     December 31,
2020
     October 31,
2020
     December 31,
2020
 

Net income (loss)

   $ 24,249      $ (975    $ (223,218

Weighted average common shares outstanding – basic

     53,045,510        36,301,525        156,900,000  

Net income (loss) per share attributable to common shareholders – basic

   $ 0.46      $ (0.03    $ (1.42

 

67


Table of Contents

THE BUSINESS COMBINATION

Background of the Business Combination

EverArc was formed in the British Virgin Islands on November 8, 2019 to undertake an acquisition of a target company or business (which may be in the form of a merger, capital stock exchange, asset acquisition, stock purchase, scheme of arrangement, reorganization or similar business combination). The proposed Business Combination with Perimeter is the result of an extensive search for a potential business combination using the investing and operating experience of EverArc’s board of directors and the EverArc Founders.

The terms of the Business Combination are the result of negotiations between representatives of EverArc and SK Holdings. The following is a brief description of the background of these negotiations and the resulting Business Combination.

On December 17, 2019, EverArc consummated its IPO and issued 34,030,000 EverArc Ordinary Shares and 34,030,000 matching EverArc Warrants (which included an aggregate of (i) 1,500,000 EverArc Ordinary Shares (with matching warrants) subscribed for by the EverArc Founders and the EverArc Subscription Founder Entities and (ii) 30,000 EverArc Ordinary Shares (with matching warrants)) subscribed for by certain EverArc directors in each case, outside of the IPO, with each whole warrant entitling the holder to purchase one-fourth of an EverArc Ordinary Share at $12.00 per whole EverArc Ordinary Share. The EverArc Ordinary Shares issued in the IPO and the EverArc Ordinary Shares subscribed for by the EverArc Founders, the EverArc Subscription Founder Entities and certain EverArc directors were sold at a price of $10.00 per EverArc Ordinary Share, generating gross proceeds of $340,300,000. Further gross proceeds of $71,400,000 were raised in January 2020 from a placing of EverArc Ordinary Shares at a placing price of $10.50 per EverArc Ordinary Share.

Prior to the consummation of the IPO, neither EverArc, nor anyone on its behalf, had selected any business combination target or initiated any substantive discussions, directly or indirectly, with respect to identifying any business combination target.

After the IPO, EverArc’s officers and directors commenced an active search for prospective businesses or assets to acquire in the initial business combination. In the prospectus for the IPO, EverArc identified the following general criteria and guidelines that it believed would be important in evaluating acquisition opportunities, although it indicated that it may decide to enter an initial business combination with a target business that does not meet these criteria and guidelines. EverArc intended to acquire companies or assets that it believed had the following attributes:

 

   

predictable and growing revenue streams;

 

   

products or services that account for critical but small portions of larger value streams;

 

   

significant free cash flow generation with high returns on tangible capital;

 

   

secular growth tailwinds; and

 

   

businesses in fragmented industries with potential for opportunistic consolidation.

These criteria were not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination was to be based, to the extent relevant, on some or all of the above factors as well as other considerations deemed relevant to EverArc’s business objective by the board of directors.

During the search process from the consummation of EverArc’s IPO through the signing of the Business Combination Agreement on June 15, 2021, EverArc reviewed self-generated ideas including over 200 potential acquisition targets that potentially met its five attributes.

The terms of the Business Combination are the result of negotiations between representatives of EverArc and SK Holdings. The following is a brief description of the background of these negotiations and the resulting Business Combination.

 

68


Table of Contents

On May 6, 2020, Telly Zachariades and several of his colleagues from The Valence Group of Piper Sandler & Co. (“Valence”) delivered a presentation to Mr. Khouri and Mr. Raj, two of the EverArc Founders. Valence’s presentation detailed several businesses, which, Valence believed, possessed the core economic attributes the EverArc Founders were targeting in an acquisition, and which therefore might be attractive acquisition targets for EverArc. Perimeter Solutions was one of the companies profiled in Valence’s presentation.

On May 15, 2020, the EverArc Founders held a conference call attended by Mr. Howley, Mr. Thorndike, Ms. Britt Cool, Mr. Khouri, and Mr. Raj. During the conference call, the EverArc Founders discussed Perimeter Solutions as a new and interesting potential acquisition candidate and agreed to conduct further research related to Perimeter.

Over the ensuing months, the EverArc Founders conducted independent desktop due diligence on Perimeter. This independent due diligence indicated that Perimeter potentially possessed many of the core economic attributes that the EverArc Founders were targeting in an acquisition.

During this period, the EverArc Founders periodically updated the EverArc Board on the acquisition search process.

Following the desktop diligence, Mr. Khouri and Mr. Raj, on several occasions over the second half of 2020, conveyed their interest in exploring an acquisition of Perimeter directly to representatives of SK Holdings, Perimeter’s sole shareholder, as well as to Mr. Zachariades, who, in turn, conveyed this interest to SK Holdings.

In January 2021, after again speaking to Mr. Khouri and Mr. Raj, and confirming their continued interest in exploring an acquisition of Perimeter, Mr. Zachariades again spoke to representatives of SK Holdings, including Mr. Aaron Davenport, Managing Director at SK Capital Partners, an affiliate of SK Holdings. During the conversation, Mr. Davenport indicated to Mr. Zachariades a willingness to enter into an NDA with EverArc, and to engage in preliminary exploratory conversations around Perimeter Solutions. Mr. Davenport also indicated to Mr. Zachariades a target valuation for Perimeter of approximately $2.0 billion. Mr. Zachariades relayed this conversation to Mr. Khouri and Mr. Raj, who reiterated to Mr. Zachariades their interest in moving forward.

On January 20, 2021, EverArc and SK Holdings entered into an NDA.

On January 27, 2021, an introductory conference call was held between members of EverArc, including Mr. Khouri and Mr. Raj; SK Holdings, including Mr. Davenport; and Valence, including Mr. Zachariades. During the call, Mr. Davenport provided a detailed overview of Perimeter’s business, and discussed the Company’s historical and projected financial performance.

On February 5, 2021, SK Holdings provided EverArc with a presentation outlining Perimeter’s business in further detail, including its historical and projected financial performance.

During the weeks of February 8 and February 15, 2021, EverArc completed a thorough review of the presentation that was provided by SK Holdings on February 5, 2021, and conducted incremental independent desktop due-diligence on Perimeter.

The EverArc Founders continued to keep the EverArc Board apprised of the discussions with SK Holdings and the results of the diligence process.

On February 22, 2021, EverArc sent a letter addressed to Mr. Davenport, re-affirming its interest in further exploring an acquisition of Perimeter. The letter provided a non-binding valuation range of $1.95 billion to $2.1 billion based on the independent research conducted to date, the presentation received from SK Holdings, and the valuation feedback Mr. Davenport had previously provided to Mr. Zachariades. The letter also proposed that EverArc acquire 65% to 80% of the equity in Perimeter, with SK retaining 20% to 35% ownership in the

 

69


Table of Contents

Company. Mr. Davenport indicated receptivity to EverArc’s non-binding proposal and agreed to introduce the EverArc Founders to Perimeter’s management team, while also indicating a target valuation range of $2.0 billion to $2.1 billion.

On March 4, 2021, a conference call was held between the EverArc Founders, including Mr. Howley, Mr. Thorndike, Mr. Khouri, and Mr. Raj; SK Holdings, including Mr. Davenport; Valence, including Mr. Zachariades; and Perimeter, including Mr. Goldberg, Perimeter’s CEO, and Mr. Lederman, Perimeter’s CFO. During the conference call, Mr. Goldberg and Mr. Lederman provided an in-depth overview of Perimeter’s business, including a detailed discussion of the Company’s business strategy, as well as its historical and projected financial performance. Perimeter also provided EverArc with an accompanying slide deck presentation which further detailed the Company’s business strategy and its historical and projected financial performance.

On March 10, 2021, EverArc presented Perimeter with a due-diligence request list prepared by its legal counsel, Greenberg Traurig, P.A. (“Greenberg”). The list included the following sections:

 

   

Financial and accounting

 

   

Organization and people

 

   

Manufacturing and supply chain

 

   

Environmental

 

   

R&D and IP

 

   

M&A

 

   

Other business information

 

   

Competition

 

   

Others

On March 12, 2021, EverArc sent a non-binding letter of intent addressed to Mr. Davenport, outlining preliminary key terms and conditions for the potential transaction. The letter of intent provided for a valuation range of $2.0 billion to $2.1 billion, proposed that EverArc acquire 75% of the equity in Perimeter with SK Holdings retaining 25% ownership, and that EverArc and SK Holdings enter into exclusive negotiations regarding an acquisition of Perimeter.

On the afternoon of March 18, 2021, EverArc held its scheduled Q1 2021 board meeting. A portion of the meeting was devoted to the discussion of a potential acquisition of Perimeter, including the EverArc Founders’ intent to enter into exclusivity, and conduct in-depth due diligence on the Company. The EverArc board indicated its support for proceeding with these next steps regarding Perimeter.

On the evening of March 18, 2021, EverArc and Perimeter entered into an exclusivity agreement with SK Holdings related to EverArc’s potential acquisition of Perimeter. The exclusivity agreement provided for a valuation range of $2.0 billion to $2.1 billion and proposed that EverArc acquire 70% to 85% of the equity in Perimeter, with SK Holdings retaining 15% to 30% ownership in the Company. The exclusivity agreement was set to terminate on April 14, 2021.

On March 19, 2021, Mr. Khouri sent an email to the EverArc board, informing them that EverArc had entered into an exclusivity agreement with Perimeter, and providing them with further information on the company.

Over the ensuing weeks, EverArc received materials consistent with their due-diligence request list, conducted several conference calls and meetings with Perimeter management, and engaged several third-party experts to assist in the due-diligence process, including to perform financial, accounting and tax, environmental, and litigation and other legal analysis.

 

70


Table of Contents

Additionally, following execution of the letter of intent, the attorneys for SK Holdings, which in addition to Kirkland & Ellis included Arendt & Medernach SA in Luxembourg (“Arendt”) and Conyers Dill & Pearman in BVI, and the attorneys for EverArc, which in addition to Greenberg, included Maples Group in Luxembourg and the BVI, had several calls to discuss transaction structure and the documentation required for the transaction. Ultimately, EverArc and SK Holdings mutually agreed that the listed company resulting from the business combination should be an entity incorporated under Luxembourg law, given expectations regarding future growth prospects outside of the U.S., expected tax benefits, and the existence of recent similar market precedents involving the listing of Luxembourg holding vehicles.

On the evening of April 12, 2021, Mr. Howley, Mr. Khouri, and Mr. Raj met with Mr. Goldberg in Cleveland, Ohio, where the parties discussed EverArc’s potential acquisition of Perimeter.

On the morning of April 16, 2021, Mr. Howley and Mr. Khouri called Mr. Davenport. The parties discussed a transaction in which EverArc would acquire 80% of the equity in Perimeter for $2.0 billion, consisting of $1.9 billion in cash and $100 million in seller preferred shares.

On the morning of April 19, 2021, Mr. Khouri called Mr. Davenport, and informed him that EverArc agreed in principle to the terms discussed during their call on the morning on April 16.

On April 23, 2021, EverArc engaged Valence as its financial advisor connection with EverArc’s contemplated acquisition of Perimeter.

On April 27, 2021, EverArc convened a board meeting, during which the Board had an in-depth discussion of EverArc’s potential acquisition of Perimeter.

On May 3, 2021, EverArc initiated conversations with investors regarding a $680 million PIPE to fund the proposed acquisition of 80% of the equity of Perimeter.

On May 6, 2021, Kirkland & Ellis, sent an initial draft of the proposed Business Combination Agreement to Greenberg. Prior to signing the Business Combination Agreement and related documents, several drafts of those documents were negotiated by the parties.

On May 11, 2021, EverArc entered into a Placement Agent Agreement on customary terms with Morgan Stanley & Co. International plc (“Morgan Stanley”), under which Morgan Stanley was appointed to act as placement agent for EverArc in respect of the PIPE. For its services as placement agent, Morgan Stanley was entitled to a commission of an amount equal to 1.875% of the aggregate gross proceeds received by EverArc from the sale of securities in the PIPE. Further, on June 6, 2021, EverArc entered into a Placement Agent Agreement on customary terms with UBS Securities LLC (“UBS”), under which UBS was appointed to act as placement agent for EverArc in respect of the PIPE, alongside Morgan Stanley. For its services as placement agent, UBS was entitled to a commission of an amount equal to 0.625% of the aggregate gross proceeds received by EverArc from the sale of securities in the PIPE.

EverArc continued to hold conversations with potential PIPE investors during the weeks of May 3, May 10, May 17, May 23, and May 31. Simultaneously, EverArc and SK Holdings continued to negotiate the terms of the Business Combination Agreement including the termination provisions and related termination fee, the extent of the representations and warranties, the terms of the preferred stock being issued to SK Holding and other key provisions.

EverArc requested, and received, PIPE indications of interest on June 7, 2021. The PIPE indications totaled approximately $2.0 billion, which significantly exceeded the $680 million EverArc had intended to raise.

On the evening of June 7, 2021, Mr. Howley, Mr. Thorndike, and Mr. Khouri discussed offering to acquire 100% of the equity in Perimeter, rather than the previously contemplated 80%, and agreed to do so.

 

71


Table of Contents

On the morning of June 8, 2021, Mr. Khouri conveyed this proposal to Mr. Davenport. Mr. Davenport acknowledged Mr. Khouri’s proposal and indicated that he would discuss it internally with the SK Capital Partners investment committee and SK Holdings. On the afternoon of June 8, 2021, Mr. Davenport informed Mr. Khouri that SK Holdings would agree to sell 100% of the equity in Perimeter to EverArc.

On the morning of June 11, 2021, EverArc held a board meeting during which the EverArc Founders provided the Board with a detailed update on the Perimeter transaction, including a detailed summary of their due diligence. Several of EverArc’s advisers, as well as Mr. Goldberg, were present for portions of the meeting, and presented to the EverArc board and answered questions.

On the morning of June 14, 2021, EverArc held a board meeting during which the board further discussed, voted on, and approved, the proposed acquisition of Perimeter Solutions.

On the morning of June 15, 2021, Perimeter held a board meeting during which its board discussed, voted on and approved the transaction with EverArc.

On June 15, 2021, EverArc, Perimeter, SK Holdings, Holdco and Merger Sub entered into the Business Combination Agreement.

On the morning of June 16, 2021, EverArc announced that it entered into a definitive agreement to acquire 100% of Perimeter Solutions in a transaction valued at approximately $2 billion.

The parties have continued and expect to continue regular discussions in connection with, and to facilitate, the closing.

EverArc’s Board of Directors’ Reasons for the Approval of the Business Combination

As described under “The Structure of the Business Combination” above, EverArc’s board of directors, in evaluating the Business Combination, consulted with EverArc’s Founders and financial and legal advisors. In reaching its decision to approve the Business Combination Agreement and the transactions contemplated by the Business Combination Agreement, EverArc’s board of directors considered a range of factors, including, but not limited to, the factors discussed below. In light of the complexity of such factors, EverArc’s board of directors, as a whole, did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it took into account in reaching its decision. Individual members of EverArc’s board of directors may have given different weight to different factors.

The explanation of the reasons for the approval by EverArc’s board of directors of the Business Combination, and all other information presented in this section, is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Before reaching its decision, EverArc’s board of directors discussed the results of the due diligence conducted by EverArc’s Founders and financial and legal advisors, and their advisors, which included:

 

   

review of Perimeter’s material contracts, intellectual property, financial, tax, legal, real estate, environmental insurance and accounting due diligence;

 

   

meetings and calls with the management team and advisors of Perimeter’s regarding operations and forecasts;

 

   

consultations with Perimeter’s management and legal and financial advisors;

 

   

discussions with Perimeter’s customers, suppliers and industry partners;

 

   

review of Perimeter’s audited and unaudited financial statements;

 

72


Table of Contents
   

financial review and analysis of Perimeter and the Business Combination;

 

   

financial projections prepared by Perimeter’s management team;

 

   

analysis on comparable target companies; and

 

   

research on comparable transactions.

In approving the Business Combination, EverArc’s board of directors determined not to obtain a fairness opinion. The officers and directors of EverArc have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and background, enabled them to make the necessary analyses and determinations regarding the Business Combination. However, EverArc’s Founders and financial and legal advisors prepared an analysis with respect to the market valuation of comparable companies as described in greater detail in the below section entitled “Information About Perimeter—Competition.

EverArc’s board of directors considered a wide range of factors pertaining to the Business Combination as generally supporting its decision to enter into the Business Combination Agreement and the transactions contemplated thereby, including, but not limited to, the following:

 

   

Strong Market Position. EverArc’s board of directors considered Perimeter’s industry-leading position within its key business lines, including fire retardants and oil additives;

 

   

Large and Growing Market Opportunity. EverArc’s board of directors considered Perimeter’s long-term market opportunity, within key business lines including fire retardants and oil additives, as well as within emerging businesses including international, fluorine-free foams, and preventative retardant applications;

 

   

Preferred Supplier to Multiple Key Customers. EverArc’s board of directors considered Perimeter’s long-standing relationships with key customers, including leading wildland firefighting agencies in the United States and internationally, as well as key customers within the Company’s Oil Additives segment;

 

   

Innovation and R&D Track-record. EverArc’s board of directors considered Perimeter’s long-standing track-record of innovation and customer value-enhancement, including the Company’s in-house R&D capabilities relating to both its products and the associated equipment;

 

   

Due Diligence. The results of EverArc’s due diligence investigation of Perimeter conducted by EverArc’s Founders and their financial, technical and legal advisors;

 

   

Experienced Management Team. EverArc’s board of directors believe that Perimeter has a strong management team experienced in its industry, which is expected to remain with the Post-Combination Company to seek to execute Perimeter’s strategic and growth goals;

 

   

Negotiated Transaction. The financial and other terms of the Business Combination Agreement and the fact that such terms and conditions are reasonable and were the product of arm’s length negotiations between the parties thereto.

In the course of its deliberations, EverArc’s board of directors also considered a variety of uncertainties, risks and other potentially negative factors relevant to the Business Combination, including, but not limited to, the following:

 

   

Perimeter’s Fire Safety business is tied to certain variables outside of the Company’s control, and which may fluctuate from year-to-year, including the severity of the North American fire season and the availability of airtanker capacity.

 

   

Competition in certain of the Company’s end-markets is intense and, as a result, Perimeter may fail to attract and retain customers, which may negatively impact the Company’s operations and growth prospects.

 

73


Table of Contents
   

Certain of the Company’s end-markets may attract additional competitors over time.

 

   

The Company may not be able to execute on its business plans or attain its profitability targets in certain of its growth initiatives, including international, fluorine-free foams, and preventative retardant applications.

 

   

The risk that Perimeter may not be able to execute on the business plan contemplated by EverArc’s Founders, and realize the financial performance as set forth in the financial projections presented to EverArc’s board of directors.

 

   

Perimeter’s growth prospects may suffer if it is unable to develop successful product offerings, if it fails to pursue additional product offerings or if it loses any of its key executives or other key employees. In addition, if Perimeter fails to make optimal investment decisions in its product and service offerings, it may not attract and retain key customers and its revenue and results of operations may be adversely affected.

 

   

Perimeter may be subject to litigation in the operation of its business and Perimeter’s insurance may not provide adequate levels of coverage against any claims. An adverse outcome in one or more legal proceedings or inadequate insurance coverage could adversely affect Perimeter’s business.

 

   

The requirements of being a public company, including compliance with the SEC’s requirements regarding internal controls over financial reporting, may strain Perimeter’s resources and divert management’s attention, and the increases in legal, accounting and compliance expenses that will result from the Business Combination may be greater than Perimeter anticipates.

 

   

The potential benefits of the Business Combination may not be fully achieved or may not be achieved within the expected time frame and the significant fees, expenses and time and effort of management associated with completing the Business Combination.

 

   

The risk that the Business Combination and transactions contemplated thereby might not be consummated or completed in a timely manner or that the closing might not occur despite our best efforts.

 

   

EverArc’s board of directors did not obtain an opinion from any independent investment banking or accounting firm that the consideration EverArc would pay to acquire Perimeter is fair to EverArc or its stockholders from a financial point of view. In addition, EverArc’s board of directors considered the limits of the due diligence performed by EverArc’s rounders and outside advisors and the inherent risk that even a thorough review may not uncover all potential risks of the business. Accordingly, EverArc’s board of directors may be incorrect in its assessment of the Business Combination.

After extensive review, EverArc’s board of directors concluded that the potential benefits that it expects EverArc and its shareholders to realize as a result of the Business Combination outweigh the potential risks associated with the Business Combination. Accordingly, EverArc’s board of directors, based on its consideration of the specific factors listed above, approved and declared advisable the Business Combination Agreement, the other ancillary documents and all transactions contemplated thereby.

Interests of EverArc’s Directors and Officers in the Business Combination

The EverArc Founders and certain of EverArc’s directors and officers have interests in the Business Combination that are different from, or in addition to, your interests as a shareholder. These interests include, among other things:

 

   

the amounts payable to the EverArc Founder Entity pursuant to the Founder Advisory Agreement entered into by EverArc and the EverArc Founder Entity which is designed to provide incentives to the EverArc Founders to achieve EverArc’s objectives which includes:

 

   

a fixed annual advisory amount equal to 1.5% of the Founder Advisory Agreement Calculation Number (in each case, payable in Holdco Ordinary Shares or partly in cash, at the election of the

 

74


Table of Contents
 

EverArc Founder Entity provided that at least 50% of such amounts are paid in Holdco Ordinary Shares). Based on the assumptions described in this prospectus, the fixed annual advisory amount is currently expected to be 2,353,992 Holdco Ordinary Shares which, assuming a stock price of $12.50 per Holdco Ordinary Share, would have a value of $29,424,902. Each additional $1 increase in the stock price of Holdco Ordinary Shares above $12.50 will increase the value of the fixed annual advisory amount payable to the EverArc Founder Entity by $2,353,992; and

 

   

a variable annual advisory amount based on the appreciation of the market price of Holdco Ordinary Shares if such market price exceeds certain trading price minimums (in each case, payable in Holdco Ordinary Shares or partly in cash, at the election of the EverArc Founder Entity provided that at least 50% of such amounts are paid in Holdco Ordinary Shares). Based on assumptions described in this prospectus and assuming a stock price of $12.50 per Holdco Ordinary Share, the variable annual advisory amount payable to the EverArc Founder Entity in year one would have a value of $70,619,765. For each $1 increase in the stock price of Holdco Ordinary Shares above $12.50, or such higher stock price on which a variable annual advisory amount was previously paid to the EverArc Founder Entity, the EverArc Founder Entity will receive a variable annual advisory amount valued at $28,247,906;

the EverArc Founders have advised Holdco that their intention is to elect, via the EverArc Founder Entity, to receive any advisory amounts in Holdco Ordinary Shares and for any cash element to only be such amount as is required to pay any related taxes;

 

   

the potential continuation of certain of EverArc’s directors as directors of Holdco;

 

   

the continued indemnification of current directors and officers of EverArc and the continuation of directors’ and officers’ liability insurance after the Business Combination; and

 

   

the beneficial ownership of the EverArc Founders indirectly through the EverArc Founder Entity and certain of EverArc’s directors of an aggregate of (i) 100 EverArc Founder Shares, acquired for an aggregate purchase price of $1,000, which have an aggregate market value of approximately $1,250 based on the closing price of EverArc Ordinary Shares of $12.50 on the LSE on August 24, 2021 and (ii) 1,725,239 EverArc Ordinary Shares, acquired for an aggregate purchase price of $17,300,000, which have an aggregate market value of approximately $21,565,488 based on the closing price of EverArc Ordinary Shares of $12.50 on the LSE on August 24, 2021.

Regulatory Approvals Required for the Business Combination

Under the HSR Act and related rules, certain transactions, including the Business Combination, may not be completed until notifications have been given and information is furnished to the Antitrust Division of the U.S. Department of Justice (the “DOJ”) and the U.S. Federal Trade Commission (the “FTC”) and all statutory waiting period requirements have been satisfied. Completion of the Business Combination is subject to the expiration or earlier termination of the applicable waiting period under the HSR Act. On June 30, 2021, EverArc and Perimeter filed the required notice and furnished the required information under the HSR to the Antitrust Division of the DOJ and the FTC. The 30-day HSR waiting period expired on July 30, 2021 at 11:59 PM.

In addition, non-U.S. regulatory bodies and U.S. state attorneys general could take action under other applicable regulatory laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin or otherwise prevent the completion of the Business Combination or permitting completion subject to regulatory conditions. Private parties may also seek to take legal action under regulatory laws under some circumstances. There can be no assurance that a challenge to the Business Combination on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful. EverArc and Perimeter are not aware of any other regulatory approvals in the U.S., Luxembourg or elsewhere required for the consummation of the Business Combination.

 

75


Table of Contents

Litigation Relating to the Business Combination

There have been no proceedings brought against EverArc in relation to the Business Combination or the Business Combination Agreement.

Listing of Holdco Ordinary Shares

Approval of the listing on the NYSE or Nasdaq, of the Holdco Ordinary Shares to be issued in the Business Combination, subject to official notice of issuance, is a condition to each party’s obligation to complete the Business Combination.

Accounting Treatment of the Business Combination

The Merger between Holdco and EverArc will be accounted for as a common control transaction, where substantially all of the net assets of Holdco will be those previously held by EverArc. The acquisition of Perimeter through the Contribution and Sale will be treated as a business acquisition under Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations with Holdco determined to be the legal and accounting acquirer.

Appraisal or Dissenters’ Rights

The BVI Companies Act provides that any member of a BVI company is entitled to payment of the fair value of his, her or its shares upon dissenting from a merger, unless the company is the surviving company of the merger and the member continues to hold the same or similar shares. The following is a summary of the position under the BVI Companies Act.

A dissenter is in most circumstances required to give to the company written objection to the merger, which must include a statement that the dissenter proposes to demand payment for his, her or its shares if the merger takes place. This written objection must be given before the meeting of members at which the merger is submitted to a vote, or at the meeting but before the vote. However, no objection is required from a member to whom the company did not give notice of the meeting of members or where the proposed merger is authorized by written consent of the members without a meeting.

Within 20 days immediately following the written consent, or the meeting at which the merger was approved, the company shall give written notice of the consent or resolution to each member who gave written objection or from whom written objection was not required, except those members who voted for, or consented in writing to, the proposed merger.

A member to whom the Company was required to give notice who elects to dissent shall, within 20 days immediately following the date on which the copy of the plan of merger or an outline of the merger is given to him, give to the Company a written notice of his decision to elect to dissent, stating:

 

  (a)

his name and address;

 

  (b)

the number and classes of shares in respect of which he dissents (which must be all shares that he holds in the company); and

 

  (c)

a demand for payment of the fair value of his shares.

Upon the giving of a notice of election to dissent, the dissenter ceases to have any of the rights of a member except the right to be paid the fair value of his shares, and the right to institute proceedings to obtain relief on the ground that the action is illegal.

The Company shall make a written offer to each dissenter to purchase his shares at a specified price that the Company determines to be their fair value. Such offer must be given within seven days immediately following

 

76


Table of Contents

the date of the expiration of the period within which members may give their notices of election to dissent, or within seven days immediately following the date on which the merger is put into effect, whichever is later.

If the Company and the dissenter fail, within 30 days immediately following the date on which the offer is made, to agree on the price to be paid for the shares owned by the dissenter, then within 20 days:

 

  (a)

the Company and the dissenter shall each designate an appraiser;

 

  (b)

the two designated appraisers together shall designate an appraiser;

 

  (c)

the three appraisers shall fix the fair value of the shares owned by the dissenter as of the close of business on the day prior to the date of the meeting or the date on which the resolution was passed, excluding any appreciation or depreciation directly or indirectly induced by the action or its proposal, and that value is binding on the company and the dissenter for all purposes; and

 

  (d)

the Company shall pay to the dissenter the amount in money upon the surrender by him of the certificates representing his shares, and such shares shall be cancelled.

EverArc caused the notice to be given on July 7, 2021. No member elected to exercise his, her or its right to dissent.

Certain Unaudited Perimeter Prospective Financial Information

Perimeter does not as a matter of course make public projections as to future revenues, performance, financial condition or other results. EverArc, based on its due diligence and discussions with Perimeter’s management, prepared and provided to its board of directors certain assumptions regarding Perimeter’s prospective financial growth and performance. The inclusion of the below information should not be regarded as an indication that Perimeter or any other recipient of this information considered — or now considers — it to be necessarily predictive of actual future results.

The unaudited prospective financial information is subjective in many respects. As a result, there can be no assurance that the prospective results will be realized or that actual results will not be significantly higher or lower than estimated. Since the unaudited prospective financial information covers multiple years, that information by its nature becomes less predictive with each successive year.

While presented in this prospectus with numeric specificity, the information set forth in the summary below was based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of Perimeter’s management, including, among other things, the matters described in the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.” EverArc and Perimeter believe the assumptions regarding the prospective financial performance were reasonable at the time the assumptions were determined, in light of available information. However, important factors that may affect actual results and cause the results reflected in the prospective financial information not to be achieved include, among other things, risks and uncertainties relating to Perimeter’s business, industry performance, the regulatory environment and general business and economic conditions. The prospective financial information also reflects assumptions as to certain business decisions that are subject to change. The unaudited prospective financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of Perimeter’s management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management’s knowledge and belief, the expected course of action and the expected future financial performance of Perimeter. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this prospectus are cautioned not to place undue reliance on the prospective financial information.

Neither Perimeter’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the prospective financial information contained

 

77


Table of Contents

herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information. The audit reports included in this prospectus relate to historical financial information. They do not extend to the prospective financial information and should not be read to do so.

EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LAWS, PERIMETER DOES NOT INTEND TO MAKE PUBLICLY AVAILABLE ANY UPDATE OR OTHER REVISION TO THE PROSPECTIVE FINANCIAL INFORMATION. THE PROSPECTIVE FINANCIAL INFORMATION DOES NOT TAKE INTO ACCOUNT ANY CIRCUMSTANCES OR EVENTS OCCURRING AFTER THE DATE THAT INFORMATION WAS PREPARED. READERS OF THIS PROSPECTUS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE UNAUDITED PROSPECTIVE FINANCIAL INFORMATION SET FORTH BELOW. NONE OF PERIMETER, EVERARC OR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, ADVISORS OR OTHER REPRESENTATIVES HAS MADE OR MAKES ANY REPRESENTATION TO ANY PERIMETER SHAREHOLDER, EVERARC SHAREHOLDER OR ANY OTHER PERSON REGARDING ULTIMATE PERFORMANCE COMPARED TO THE INFORMATION CONTAINED IN THE PROSPECTIVE FINANCIAL INFORMATION OR THAT FINANCIAL AND OPERATING RESULTS WILL BE ACHIEVED.

Certain of the measures included in the prospective financial information may be considered non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Perimeter may not be comparable to similarly titled amounts used by other companies. Financial measures provided to a financial advisor in connection with a business combination transaction are excluded from the definition of non-GAAP financial measures and therefore are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-IFRS financial measure to a GAAP financial measure. Accordingly, we have not provided a reconciliation of such financial measures.

The following tables sets forth certain prospective financial information regarding Perimeter provided to the EverArc Board:

 

LOGO

 

78


Table of Contents

The long-term financial outlook for Perimeter described above was based on several key factors, including:

 

   

independent research and due diligence regarding Perimeter specifically;

 

   

independent research and due diligence regarding the fire safety and oil additives industries more generally;

 

   

a thorough review of the various presentations and due diligence materials provided by Perimeter;

 

   

several conversations with Perimeter management; and

 

   

input received from EverArc’s various third-party advisors.

 

79


Table of Contents

THE BUSINESS COMBINATION AGREEMENT

This section of the prospectus describes the material provisions of the Business Combination Agreement but does not purport to describe all of the terms of the Business Combination Agreement. This summary is qualified in its entirety by reference to the Business Combination Agreement, a copy of which is attached as Annex A hereto. Certain figures included in this section have been rounded for ease of presentation and, as a result, percentages may not sum to 100%.

The Business Combination

On June 15, 2021, EverArc, Perimeter, SK Holdings, Holdco and Merger Sub entered into the Business Combination Agreement, which contains customary representations and warranties, covenants, closing conditions, termination fee provisions and other terms relating to the merger and the other transactions contemplated thereby, as summarized below. Capitalized terms used in this section but not otherwise defined herein have the meanings given to them in the Business Combination Agreement.

The Structure of the Business Combination

At the Merger Effective Time, by virtue of the Merger and the Holdco Requisite Approvals, subject to a report from a Luxembourg independent statutory auditor, and without any further action on the part of EverArc, Merger Sub, Holdco or Perimeter or the holders of any of the following securities:

 

  a)

on the Business Day prior to the Closing Date, the Merger will occur;

 

  b)

all EverArc Ordinary Shares outstanding immediately prior to the Merger will be exchanged for the right to receive Holdco Ordinary Shares pursuant to a share capital increase of Holdco, as set forth in the Business Combination Agreement;

 

  c)

on the Closing Date, SK Holdings, which holds 100% of the outstanding ordinary shares of Perimeter, will complete the Contribution and Sale;

 

  d)

in connection with the Contribution and Sale, the Holdco Ordinary Share held by EverArc will be cancelled via a share capital reduction without any consideration for EverArc; and

 

  e)

all of the outstanding EverArc Warrants, in each case, entitling the holder thereof to purchase one-fourth of an EverArc Ordinary Share at an exercise price of $12.00 per whole EverArc Ordinary Share, will be converted into the right to purchase one-fourth of a Holdco Ordinary Share on substantially the same terms as the EverArc Warrants.

On the business day immediately prior to the Closing Date, EverArc, Holdco and Merger Sub will execute and file the Plan and Articles of Merger with the Registrar, in accordance with, the relevant provisions of the BVI Companies Act, together with all other filings or recordings required under the BVI Companies Act in connection with the Merger (including the filing by the Merger Sub’s registered agent of a letter confirming it has no objections to the Merger). The Plan and Articles of Merger will specify that the Merger will become effective at such time as the Plan and Articles of Merger are duly registered by the Registrar, or at such later time as the Parties agree in writing (subject to the requirements of the BVI Companies Act). The parties will hold the closing on the date of the Merger Effective Time, following the satisfaction or waiver (to the extent such waiver is permitted by applicable law) of the conditions set forth in the Business Combination Agreement (other than those conditions that by their nature are to be satisfied at Closing, but subject to the satisfaction or waiver of those conditions at such time). In addition, EverArc will file an election with the IRS to be classified as a disregarded entity for U.S. federal income Tax purposes (the “Tax Classification Election”), which will be effective on the Closing Date.

 

80


Table of Contents

Effective Time and Closing of the Business Combination

The following diagram shows the current ownership structure of EverArc (excluding the impact of the shares underlying the EverArc Warrants).

LOGO

 

(1)

For more information about the ownership interests of our EverArc Founders and the EverArc Founder Entity, prior to the Business Combination, please see the section entitled “Security Ownership of Certain Beneficial Owners and Management.

The following diagram shows the current ownership structure of Perimeter.

 

LOGO

 

(1)

The diagram above only shows select subsidiaries of Perimeter.

 

81


Table of Contents

The following diagram shows the pro forma ownership percentages (excluding the impact of the shares underlying the Holdco Warrants) and structure of Holdco immediately following the consummation of the Business Combination.

LOGO

Consideration to be Received in the Business Combination

At the Merger Effective Time, each Perimeter Shareholder will receive its pro rata portion of the Aggregate Cash Consideration and Aggregate Preferred Share Stock Value (each, as defined in the Business Combination Agreement). At the Merger Effective Time, each EverArc Ordinary Share issued and outstanding immediately prior to the Merger Effective Time will automatically be converted into and exchanged for the right to receive one (1) validly issued, fully paid and nonassessable Holdco Ordinary Share, which will be valued at $10.00 per share.

In addition, at the time of Closing, SK Holdings will also receive redeemable Holdco Preferred Shares.

As long as the Holdco Preferred Shares are in issue and outstanding, no shares ranking pari passu or senior to the Holdco Preferred Shares shall be issued by Holdco, other than additional Holdco Preferred Shares or other equity securities interest issued with the consent of a majority of holders of the Holdco Preferred Shares.

Each Holdco Preferred Share is entitled to a Preferential Dividend amounting to 6.5% (the “Regular Dividend Rate”) of its nominal value (i.e. $10.00 per share). The Preferential Dividend shall be paid each year within 3 business days following the holding of Holdco’s annual general meeting (each, a “Preferential Dividend Payment Date”). On each Preferential Dividend Payment Date, 40% of the Preferential Dividend for such year (or 50% of the Preferential Dividend for such year if Holdco paid a dividend on the Holdco Ordinary Shares during period since the payment of the last Preferential Dividend Payment Date) shall be paid in cash and the

 

82


Table of Contents

remainder of the Preferential Dividend shall be paid in kind, unless Holdco elects to pay any additional portion of the Preferential Dividend in cash; provided, that, (x) Holdco shall not be required to pay any portion of such annual Preferential Dividends in cash on a Preferential Dividend Payment Date to the extent that Holdco or its subsidiaries are prohibited from paying such portion of the annual Preferential Dividend in cash under either (i) that certain senior credit facility agreement to which Holdco and/or certain of its subsidiaries is a party (the “Senior Credit Agreement”) or (ii) that certain bridge term loan credit facility to which Holdco and/or certain of its subsidiaries is a party or any senior secured notes issued by Holdco and/or any of its subsidiaries (as applicable, the “Bridge Loan/Secured Notes”), and (y) in the event that Holdco or its subsidiaries are so prohibited from paying all or a portion of such Preferential Dividends in cash as described in the foregoing clause (x), Holdco shall pay the maximum amount not prohibited by the Senior Credit Agreement or the Bridge Loan/Secured Notes in cash. If Holdco fails to pay any portion of the cash portion of the Preferential Dividend for any reason in a given year by the Preferential Dividend Payment Date (including due to clause (x) of the immediately preceding sentence), then (i) the Preferential Dividend rate for such year (i.e. the year in which Holdco fails to pay any portion of the cash portion of the Preferential Dividend Payment), but not necessarily the subsequent year, will increase to the interest rate being paid (whether default or not) at such time under the Senior Credit Agreement plus 5% (the “Increased Dividend Rate”) and (ii) the Preferential Dividend Rate for the following year will be reset at the Regular Dividend Rate and will be subject to increase to the Increased Dividend Rate for such year (but not necessarily the subsequent year) if Holdco fails to pay any portion of the cash portion of the Preferential Dividend Payment by the Preferential Dividend Payment Date for such year.

If Holdco fails to redeem the Holdco Preferred Shares at the defined maturity date, the Preferential Dividend rate will permanently increase to the interest rate currently being paid (whether default or not) under the Senior Credit Agreement plus 10%.

As long as Holdco Preferred Shares are issued and outstanding, Holdco and its subsidiaries shall not (a) enter into a credit agreement (except to the extent related to the issuance of senior secured notes as contemplated by the Bridge Loan/Secured Notes) or (b) amend the Senior Credit Agreement, in each case, in a manner that would adversely affect the redemption rights of the Holdco Preferred Shares by extending the maturity date under such credit facility beyond the defined maturity date or increase the restrictions on Holdco’s ability to pay the cash portion of Preferential Dividends without the consent of holders owning a majority of the Holdco Preferred Shares. If, in any year, Holdco fails to make any portion of the cash portion of any Preferential Dividend by the Preferential Dividend Payment Date, then, during the following year, Holdco may not, without the consent of the holders of a majority of the outstanding Holdco Preferred Shares, pay a cash dividend on the Holdco Ordinary Shares until such time as Holdco has paid the cash portion of the Preferential Dividend Payment for such following year (which cash portion of the Preferential Dividend Payment may be paid by Holdco in advance of the Preferential Dividend Payment Date for, and at any time during, such following year); for the avoidance of doubt, the restrictions set forth in this sentence shall not apply to any non-pro rata purchase, repurchase or redemption of any equity securities of Holdco or any of its subsidiaries. As long as Holdco Preferred Shares are issued and outstanding, during the occurrence and continuance of a default by Holdco to pay any Preferential Dividend (for the avoidance of doubt, the payment of any cash portion of the Preferential Dividend in kind in accordance with the terms of Holdco’s articles of association shall not constitute a default by Holdco), the approval of holders owning a majority of the outstanding Holdco Preferred Shares shall be required (i) for the declaration of dividends to the benefit of all other categories of Holdco shares issued and outstanding and (ii) for the purchase, repurchase or redemption of any equity securities of Holdco or any of its subsidiaries (other than pursuant to equity incentive agreements with employees).

Holdco Preferred Shares are not entitled to vote, save for the matters provided for by Luxembourg law, including any amendment, alteration or change to the rights attached to the Holdco Preferred Shares in a manner adverse to the Holdco Preferred Shares for which the consent of holders owning a majority of the Holdco Preferred Shares will be required.

 

83


Table of Contents

Holdco Preferred Shares, being non-voting shares, shall not be included for the calculation of the quorum and majority at each general meeting of Holdco, save for the matters provided for by Luxembourg law and in the relevant provisions of the articles of association of Holdco.

In case of liquidation of Holdco, after payment of all the debts of and charges against Holdco and of the expenses of liquidation, the holders of Holdco Preferred Shares, if any, shall be entitled to a preferential right to repayment of the nominal value of the Holdco Preferred Shares plus any accrued but unpaid Preferential Dividends before repayment of the nominal value of the Holdco Ordinary Shares.

The rights attached to the Holdco Preferred Shares under Holdco’s articles of association shall not be amended in a manner adverse to the Holdco Preferred Shares without the consent of holders owning a majority of the Holdco Preferred Shares.

Ownership of the Combined Company Upon Completion of the Business Combination

Following the Business Combination, each of EverArc and Perimeter will be direct, wholly owned subsidiaries of Holdco.

Representation and Warranties

The Business Combination Agreement contains customary representations, warranties and covenants of (a) Perimeter and SK Holdings and (b) Holdco, EverArc and Merger Sub relating to, among other things, their ability to enter into the Business Combination Agreement and their outstanding capitalization.

In connection with the Business Combination, the EverArc obtained a representation and warranty policy with customary terms, exclusions and fees.

Conduct of Business Pending Consummation of the Business Combination; Covenants

Conduct of Business by Perimeter Pending the Merger

From the date of the Business Combination Agreement and until the earlier of the termination of the Business Combination Agreement and the Merger Effective Time, except as (i) expressly contemplated by the Business Combination Agreement or any ancillary agreement, (ii) set forth on the Perimeter disclosure schedule, and (iii) as required by applicable law, unless EverArc otherwise consents in writing, (y) Perimeter will, and will cause their subsidiaries to, conduct their business in all material respects in the ordinary course of business and in a manner consistent with past practice; provided that any actions reasonably taken in response to an emergency or urgent conditions arising from COVID-19 will not be deemed to be outside the ordinary course of business, so long as such actions or omissions are reasonably designed to protect the health or welfare of Perimeter’s employees or comply with clause (z) herein and (z) Perimeter will use its reasonable best efforts to preserve substantially intact the business organization of Perimeter and its subsidiaries and will use commercially reasonable efforts to keep available the services of current officers, key employees and consultants of Perimeter and its subsidiaries and to preserve relationships with customers, suppliers and other persons with which Perimeter has significant business relations.

Except as (i) expressly contemplated by any other provision of the Business Combination Agreement and any ancillary agreement, (ii) as set forth in the Perimeter disclosure schedule and (iii) as required by applicable law, Perimeter will not, and will cause each subsidiary not to, between the date of the Business Combination Agreement and the earlier of the termination of the Business Combination Agreement and the Merger Effective Time, directly or indirectly, do any of the following without the prior written consent of EverArc:

 

  a)

amend or otherwise change its memorandum of association, articles of association, certificate of incorporation, by-laws or equivalent organizational documents;

 

84


Table of Contents
  b)

issue, sell, pledge, dispose of, grant or encumber, solicit, propose, negotiate with respect to, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of, (x) any shares of any class of capital stock of Perimeter or any subsidiary, except for the issuance of Perimeter Ordinary Shares upon exercise or settlement of Perimeter options, if any, (y) any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including any phantom interest) or (z) except in the ordinary course of business, any assets of Perimeter or any subsidiary;

 

  c)

declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock;

 

  d)

reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its capital stock, other than redemptions of equity securities from former employees upon the terms set forth in the underlying agreements governing such equity securities;

 

  e)

merge or consolidate with any other person or restructure, reorganize, dissolve or completely or partially liquidate or otherwise enter into any agreements or arrangements imposing material changes or restrictions on its assets, operations or businesses;

 

  f)

acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets or any other business combination) any corporate partnership, other business organization, or any division thereof, in each case, for an aggregate purchase price that exceeds $1,000,000;

 

  g)

incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, or intentionally grant any security interest in any of its assets, in each case, except in the ordinary course of business and consistent with past practice;

 

  h)

transfer, sell, lease, license, mortgage, pledge, surrender, encumber, divest, cancel abandon or allow to lapse or expire or otherwise dispose of any of its material assets, properties, licenses, operations, rights, production lines, businesses or interests therein, except for sales or other dispositions in the ordinary course of business consistent with past practice;

 

  i)

(v) increase the compensation or benefit payable to any current or former director, officer, employee or consultant of Perimeter or any subsidiary, other than (1) health and welfare plan renewals in the ordinary course of business consistent with past practices or (2) increases in base salary or wage of employees in the ordinary course of business whose annual base salary or wage is not in excess of $300,000; (w) pay or promise to pay any bonus to any such current or former director, officer, employee or consultant of Perimeter or any subsidiary; (x) take any action to accelerate or commit to accelerate the funding, payment, or vesting of any compensation or benefits to any current or former director, officer, employee or consultant; (y) hire or otherwise enter into any employment or consulting agreement or arrangement with any person or terminate (other than for cause) any current or former director, officer, employee or consultant provider whose annual base salary or wage would exceed $300,000; or (z) enter into any new, or materially amend any existing employment or severance or termination agreement with any current or former director, officer, employee or consultant;

 

  j)

adopt, enter into, amend and/or terminate any plan, program, agreement, arrangement or policy for the current or future benefit of any current or former director, officer, employee, consultant or individual independent contractor (including any existing employment or severance or termination agreement with any current or former director, officer, employee or consultant), except as may be required by applicable law or health and welfare plan renewals in the ordinary course of business and consistent with past practice;

 

  k)

materially amend other than reasonable and usual amendments in the ordinary course of business, with respect to accounting policies or procedures, other than as required by the accounting principles or U.S. GAAP (as the case may be);

 

85


Table of Contents
  l)

make change or revoke any material Tax election, change any annual Tax accounting period, adopt or change any method of Tax accounting, amend any Tax Returns or file claims for Tax refunds, enter into any closing agreement, waive or extend any statute of limitations period in respect of an amount of Taxes, settle any Tax claim, audit or assessment, or surrender any right to claim a Tax refund, offset or other reduction in Tax liability;

 

  m)

materially amend, or modify or consent to the termination (excluding any expiration in accordance with its terms) of any material contract or amend, waive, modify or consent to the termination (excluding any expiration in accordance with its terms) of Perimeter’s or any subsidiary’s material rights thereunder, in each case in a manner that is adverse to Perimeter or any subsidiary, taken as a whole, except in the ordinary course of business;

 

  n)

intentionally permit any material item of Perimeter-owned intellectual property to lapse or to be abandoned, invalidated, dedicated to the public, or disclaimed, or otherwise become unenforceable or fail to perform or make any applicable filings, recordings or other similar actions or filings, or fail to pay all required fees and taxes required to maintain and protect its interest in each and every material item of Perimeter-owned intellectual property;

 

  o)

create or incur any lien material to Perimeter or any subsidiary, Holdco or Merger Sub other than permitted liens incurred in the ordinary course of business consistent with past practice;

 

  p)

make any loans, advances, guarantees or capital contributions to or investments in any person (other than Perimeter or any subsidiary) that exceed $250,000 in the aggregate at any time outstanding;

 

  q)

fail to make or authorize any budgeted capital expenditures or make or authorize any unbudgeted capital expenditures in excess of $750,000 in the aggregate;

 

  r)

fail to pay or satisfy when due any material account payable or other material liability, other than in the ordinary course of business consistent with past practice or any such liability that is being contested in good faith by Perimeter or any subsidiary;

 

  s)

fail to keep current and in full force and effect, or comply in all material respects with the requirements of any permits issued to Perimeter or any subsidiary by any governmental authority;

 

  t)

take any steps for liquidation, winding-up, freeze of proceedings, arrangements with creditors or similar action or proceeding by or in respect of Perimeter or any subsidiary;

 

  u)

take any action or fail to take any action, which action or failure to act would reasonably be expected to prevent or impede the Contribution and Sale and the Merger from qualifying for certain tax treatment;

 

  v)

take any actions or omit to take any actions that would, individually or in the aggregate, reasonably be expected to result in any of the Closing conditions set forth in the Business Combination Agreement not being satisfied;

 

  w)

engage in any dealings or transactions (i) with any restricted person in violation of applicable laws; (ii) involving any sanctionable activity; or (iii) otherwise in violation of sanctions laws, export control laws, or import control laws;

 

  x)

amend, or permit the amendment of, any agreement related to the Contribution and Sale; or

 

  y)

enter into any formal or informal agreement or otherwise make a binding commitment to do any of the foregoing.

Conduct of Business by EverArc Pending the Merger

From the date of the Business Combination Agreement and until the earlier of the termination of the Business Combination Agreement and the Merger Effective Time, except as (i) expressly contemplated by the Business

 

86


Table of Contents

Combination Agreement or any ancillary agreement, (ii) set forth on the EverArc disclosure schedule, and (iii) as required by applicable law, unless Perimeter otherwise consents in writing, EverArc will conduct its business in the ordinary course and in a manner consistent with past practice and will not, directly or indirectly, take any action that would reasonably be likely to impede or materially delay the consummation of the transactions proposed under the Business Combination Agreement.

Conditions to Closing the Business Combination

General Conditions

Under the Business Combination Agreement, the obligations of the parties to consummate the Business Combination are conditioned on the satisfaction or waiver (where permissible) of the following conditions at or prior to the Effective Time of the Contribution and Sale and at or prior to the Closing:

 

  a)

the Holdco Requisite Approval will have been obtained and delivered to EverArc;

 

  b)

a Luxembourg statutory independent auditor (réviseur d’entreprises agréé) of Holdco will have issued appropriate reports regarding the contributions relating to the Holdco Ordinary Shares and to the EverArc Ordinary Shares that will be exchanged for Holdco Ordinary Shares as set forth in the Business Combination Agreement Holdco Ordinary Shares;

 

  c)

no governmental authority will have enacted, issued, promulgated, enforced or entered any law, rule, regulation, judgment, decree, executive order or award which is then in effect and has the effect of making the Business Combination illegal or otherwise prohibiting consummation of the Business Combination; and

 

  d)

all waiting periods applicable to the consummation of the Business Combination under the HSR Act (or any extension thereof) will have expired or been terminated and all required filings will have been made and all required approvals obtained (or waiting periods expired or terminated) under applicable antitrust law.

EverArc Conditions to Closing

The obligations of EverArc to consummate the Business Combination are subject to the satisfaction or waiver (where permissible) of the following additional conditions:

 

  a)

certain representations and warranties of Perimeter and SK Holdings will each be true and correct in all respects except where the failure of such representations and warranties to be true and correct does not result in a Company Material Adverse Effect (as defined in the Business Combination Agreement);

 

  b)

Perimeter and SK Holdings will have performed or complied in all material respects with all agreements and covenants required by the Business Combination Agreement;

 

  c)

Perimeter and SK Holdings will have delivered to EverArc a certificate, signed by an officer of the appropriate entity, certifying as to the satisfaction of the conditions specified in the Business Combination Agreement;

 

  d)

no Company Material Adverse Effect (as defined in the Business Combination Agreement) will have occurred;

 

  e)

the Registration Statement will have been declared effective under the Securities Act. No stop order suspending the effectiveness of the Registration Statement will be in effect, and no proceedings for purposes of suspending the effectiveness of the Registration Statement will have been initiated by the SEC and not withdrawn; and

 

  f)

the Holdco Ordinary Shares will have been approved for listing on the NYSE or Nasdaq, subject to official notice of issuance.

 

87


Table of Contents

Perimeter Conditions to Closing

The obligations of Perimeter to consummate the transactions are subject to the satisfaction or waiver (where permissible) of the following additional conditions at or prior to the Merger

Effective Time and at or prior to the Closing:

 

  a)

certain representations and warranties of EverArc will each be true and correct in all respects except where the failure of such representations and warranties to be true and correct does not result in an EverArc Material Adverse Effect (as defined in the Business Combination Agreement);

 

  b)

certain representations and warranties of Holdco and Merger Sub will each be true and correct in all respects and all other representations and warranties of Perimeter and SK Holdings will be true and correct except where the failure of such representations and warranties to be true and correct does not result in a Material Adverse Effect (as defined in the Business Combination Agreement);

 

  c)

each of EverArc, Holdco and Merger Sub will have performed or complied in all material respects with all agreements and covenants required by the Business Combination Agreement;

 

  d)

each of EverArc, Holdco and Merger Sub will have delivered to Perimeter a certificate, signed by an appropriate officer of each, certifying as to the satisfaction of the conditions specified in the Business Combination Agreement; and

 

  e)

no EverArc Material Adverse Effect (as defined in the Business Combination Agreement) will have occurred.

Termination of the Business Combination Agreement

The Business Combination Agreement may be terminated and the transactions may be abandoned at any time prior to the Merger Effective Time, notwithstanding any requisite approval and adoption of the Business Combination Agreement and the transactions by the shareholders of Perimeter or EverArc, as follows:

 

  a)

by mutual written consent of EverArc and SK Holdings;

 

  b)

by either EverArc or SK Holdings if the Merger Effective Time will not have occurred prior to 5:00 p.m. (New York time) on March 31, 2022, provided that the terminating party is not, either directly or indirectly through its affiliates, in breach or violation of any representation, warranty, covenant, agreement or obligation under the Business Combination Agreement and such breach or violation is the principal cause of the failure of a condition set forth in the Business Combination Agreement on or prior to 5:00 p.m. (New York time) on March 31, 2022;

 

  c)

by either EverArc or SK Holdings if any governmental authority will have enacted, issued, promulgated, enforced or entered any injunction, order, decree or ruling (whether temporary, preliminary or permanent) which has become final and non-appealable and has the effect of making consummation of the transactions illegal or otherwise preventing or prohibiting consummation of the Business Combination;

 

  d)

by EverArc upon any breach of any representation, warranty, covenant or agreement set forth in the Business Combination Agreement on the part of SK Holdings or Perimeter that remains uncured for more than 30 days after written notice of such breach is provided by EverArc to Perimeter, such that the conditions set forth in Section 9.02(a) and Section 9.02(b) of the Business Combination Agreement would not be satisfied;

 

  e)

by SK Holdings upon any breach of any representation, warranty, covenant or agreement set forth in the Business Combination Agreement on the part of EverArc that remains uncured for more than 30 days after written notice of such breach is provided by Perimeter to EverArc such that the conditions set forth in Section 9.03(a) and Section 9.03(b) of the Business Combination Agreement would not be satisfied;

 

88


Table of Contents
  f)

by EverArc on or after September 8, 2021 if Perimeter will have failed to deliver the PCAOB Financials (as defined in the Business Combination Agreement) by 11:59 EST on September 7, 2021;

 

  g)

by either EverArc or SK Holdings on January 1, 2022 if the Merger Effective Time will not have occurred prior to 5:00 p.m. (New York time) December 31, 2022, provided that the terminating party is not, either directly or indirectly through its affiliates, in breach or violation of any representation, warranty, covenant, agreement or obligation under the Business Combination Agreement and such breach or violation is the principal cause of the failure of a condition set forth in the Business Combination Agreement on or prior to December 31, 2021;

 

  h)

by SK Holdings if (A)(i) certain conditions precedent to the merger have been satisfied and continue to be satisfied or waived and (ii) SK Holdings confirms to EverArc that all conditions required have been satisfied or waived and that SK Holdings and Perimeter are willing and able to consummate the transactions and (iii) EverArc will not have consummated the closing within three business days of the occurrence of clauses (i) and (ii) above or (B)(i) EverArc will be in material breach of its covenants under the Business Combination Agreement and such material breach results in EverArc being incapable of consummating the transactions thereunder and (ii) SK Holdings notifies EverArc, in writing, of such material breach and EverArc does not cure such breach; and

 

  i)

by EverArc, on or after December 31, 2021, if, as of December 31, 2021, (i) certain conditions precedent to the Merger have been satisfied (and continue to be satisfied) or waived and (ii) EverArc will be unable to consummate the Closing solely due to the unavailability of sufficient funds available to EverArc.

Amendment, Waiver and Extension of the Business Combination Agreement

The Business Combination Agreement may be amended in writing by all parties thereto at any time prior to the Merger Effective Time.

At any time prior to the Merger Effective Time, (a) EverArc may (i) extend the time for the performance of any obligation or other act of SK Holdings or Perimeter, (ii) waive any inaccuracy in the representations and warranties of SK Holdings or Perimeter contained in the Business Combination Agreement or in any document delivered by SK Holdings or Perimeter pursuant to the Business Combination Agreement and (iii) waive compliance with any agreement of SK Holdings or Perimeter or any condition to its own obligations contained in the Business Combination Agreement and (b) Perimeter may (i) extend the time for the performance of any obligation or other act of EverArc, Holdco or Merger Sub, (ii) waive any inaccuracy in the representations and warranties of EverArc, Holdco or Merger Sub contained in the Business Combination Agreement or in any document delivered by EverArc, Holdco or Merger Sub pursuant to the Business Combination Agreement and (iii) waive compliance with any agreement of EverArc, Holdco or Merger Sub or any condition to its own obligations contained in the Business Combination Agreement. Any such extension or waiver will be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby.

Governing Law; Consent to Jurisdiction

The Business Combination Agreement is governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that state, except to the extent mandatorily governed by the laws of the Grand Duchy of Luxembourg, including the provisions relating to the Contribution and Sales and the Exchange Agreements. All legal actions and proceedings arising out of or relating to the Business Combination Agreement will be heard and determined exclusively in any Delaware Chancery Court; provided, that if jurisdiction is not then available in the Delaware Chancery Court, then any such legal action may be brought in any federal court located in the State of Delaware or any other Delaware state court. The parties to the Business Combination Agreement (a) irrevocably submitted to the exclusive jurisdiction of the aforesaid courts for themselves and with respect to their respective properties for the purpose of any action

 

89


Table of Contents

arising out of or relating to the Business Combination Agreement brought by any party hereto, and (b) agreed not to commence any action relating thereto except in the courts described above in Delaware, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described in the Business Combination Agreement. Each of the parties thereto further waived (y) any defense in any action for specific performance that a remedy at law would be adequate and (z) any requirement under any law to post security or a bond as a prerequisite to obtaining equitable relief.

Expenses

In the event that this Business Combination Agreement is validly terminated, all transaction expenses incurred in connection with the Business Combination Agreement, related documents and the Business Combination will be paid by the party incurring such transaction expenses; provided, that EverArc will pay all fees and expenses incurred by Perimeter or its affiliates in connection with (a) the Financing Cooperation Expenses (as defined in the Business Combination Agreement), (b) all costs, fees and expenses incurred in connection with any filing under the HSR Act or other applicable antitrust laws and (c) costs, fees and expenses incurred by Perimeter and its affiliates in connection with the preparation and delivery of the PCAOB Financials (as defined in the Business Combination Agreement). Subject to certain conditions detailed in the Business Combination Agreement, if the Business Combination is consummated, Holdco, subject to certain limitations, will bear the reasonable and documented transaction expenses of all of the parties.

Termination Fee

In the event that this Business Combination Agreement is validly terminated (i) by SK Holdings pursuant to Section 10.01(e) or Section 10.01(h) of the Business Combination Agreement, (ii) by EverArc at a time that SK Holdings could have terminated the Business Combination Agreement pursuant to Section 10.01(e) or Section 10.01(h) of the Business Combination Agreement or (iii) by EverArc pursuant to Section 10.01(i) of the Business Combination Agreement, EverArc will, as promptly as reasonably practicable following such termination, pay to SK Holdings or its designee an amount equal to (x) $50,000,000 less (y) the amount of the PCAOB Financials Expenses (as defined in the Business Combination Agreement) and the Financing Cooperation Expenses (as defined in the Business Combination Agreement) actually reimbursed by EverArc to Perimeter pursuant to Section 8.12 and Section 8.16(c) of the Business Combination Agreement, respectively, at the time of such termination.

 

90


Table of Contents

CERTAIN AGREEMENTS RELATED TO THE BUSINESS COMBINATION

All capitalized terms used but not defined below shall have the meaning assigned to such term in the agreement to which such section is discussing.

Debt Commitment

In order to finance a portion of the cash consideration payable in the Business Combination and the costs and expenses incurred in connection therewith, EverArc entered into the Debt Commitment Letter with the Commitment Parties, dated June 15, 2021, pursuant to which the Commitment Parties have agreed to make available to Holdco (i) a five-year first lien senior secured revolving credit facility in an aggregate committed amount of $100 million and (ii) a senior secured first lien increasing rate bridge facility in an aggregate principal amount of $600 million less the aggregate principal amount of first lien secured notes or other demand securities issued prior to the Closing.

Subscription Agreements

In connection with the execution of the Business Combination Agreement, EverArc, SK Holdings and Holdco entered into the Subscription Agreements with (i) the Institutional Subscribers, pursuant to which the Institutional Subscribers agreed to purchase an aggregate of 114,240,000 EverArc Ordinary Shares at $10.00 per share ($1,142,400,000 in the aggregate) which will be converted into Holdco Ordinary Shares in connection with the closing of the Business Combination, (ii) the SK Subscribers, pursuant to which the SK Subscribers agreed to purchase an aggregate of 429,000 EverArc Ordinary Shares at $10.00 per share ($4,290,000 in the aggregate) which will be converted into Holdco Ordinary Shares in connection with the closing of the Business Combination and (iii) the Individual Subscribers pursuant to which the Individual Subscribers agreed to purchase an aggregate of 331,000 EverArc Ordinary Shares at $10.00 per share ($3,310,000 in the aggregate) which will be converted into Holdco Ordinary Shares in connection with the closing of the Business Combination. In addition, the Management Subscribers entered into Subscription Agreements with Holdco pursuant to which the Management Subscribers agreed to purchase an aggregate of 1,100,212 Holdco Ordinary Shares at $10.00 per share ($11,002,117 in the aggregate).

The issuance of the PIPE Shares pursuant to the Subscription Agreements is contingent upon, among other customary closing conditions, the substantially concurrent consummation of the Business Combination.

Pursuant to the Subscription Agreements, Holdco agreed that (i) within 30 calendar days after the Closing Date, it will file with the SEC (at Holdco’s sole cost and expense) a registration statement registering the resale of the PIPE Shares, and (ii) it will use its commercially reasonable efforts to have the registration statement declared effective as soon as practicable after the filing thereof, but no later than the earlier of (x) the 60th calendar day (or 90th calendar day if the SEC notifies Holdco that it will “review” the registration statement) following the closing of the sale of the PIPE Shares and (y) the 5th business day after the date Holdco is notified (orally or in writing, whichever is earlier) by the SEC that such registration statement will not be “reviewed” or will not be subject to further review.

Non-Compete Agreements

In connection with the execution of the Subscription Agreements entered into with the Management Subscribers, EverArc, Holdco and each Management Subscriber entered into certain Non-Compete Agreements which placed restrictive employment covenants on such Management Subscriber for a period of three years following the Closing Date (as defined therein). These covenants include a covenant (i) not to compete anywhere SK Holdings (directly or through any subsidiary of SK Holdings) conducts its business as of the Closing Date (as defined therein), (ii) not to solicit or transact with any customers or suppliers of the SK Holdings (or any subsidiary of SK Holdings) fire safety and oil additives business, (iii) not to cause any customers or suppliers of the SK

 

91


Table of Contents

Holdings (or any subsidiary of SK Holdings) fire safety and oil additives business to cease doing business with or terminate their respective relationships with SK Holdings, (iv) not to solicit for employment or hire any employees of SK Holdings or its subsidiaries for at least six months following the termination of their employment with SK Holdings and (v) not to disclose any Confidential Information of SK Holdings.

Warrants

Pursuant to the Holdco Warrant Instrument, Holdco will assume, and agree to pay, perform, satisfy and discharge in full, all of EverArc’s liabilities and obligations under the EverArc Warrant Instrument arising from and after the Merger Effective Time.

Each Holdco Warrant is exercisable in multiples of four to purchase one Holdco Ordinary Share and only whole warrants are exercisable. The exercise price of the Holdco Warrants is $12.00 per whole Holdco Ordinary Share, subject to adjustment as described in the EverArc Warrant Instrument. A Holdco Warrant may be exercised at any time prior to 5:00 p.m., New York time on the earlier to occur of: (x) the date that is three (3) years after the date on which the Business Combination is completed or (y) such earlier date as determined by the EverArc Warrant Instrument provided that if such day is not a trading day, the trading day immediately following such day.

 

92


Table of Contents

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

This section describes the material U.S. federal income tax considerations generally applicable to you if you are a U.S. Holder (as defined below) of EverArc Securities as a consequence of (i) the Business Combination and (ii) the ownership and disposition of Holdco Ordinary Shares or Holdco Warrants (collectively, “Holdco securities”) acquired pursuant to the Business Combination. This discussion assumes that any distribution made (or deemed made) on our Holdco Ordinary Shares and any consideration received (or deemed received) by a holder in consideration for the sale or other disposition of our Holdco Ordinary Shares or Holdco Warrants will be in U.S. dollars. This discussion applies only to U.S. Holders that hold EverArc Securities and Holdco securities held as capital assets for U.S. federal income tax purposes (generally property held for investment) and is general in nature and therefore does not discuss all aspects of U.S. federal income taxation that may be relevant to particular investors in light of their particular circumstances or status, including alternative minimum tax and Medicare contribution tax consequences, or to holders subject to special rules, such as:

 

   

our sponsor, officers, directors and their respective affiliates;

 

   

brokers, dealers and other investors that do not own their EverArc Securities or Holdco securities as capital assets;

 

   

traders in securities that elect to use a mark-to-market method of tax accounting for their securities holdings;

 

   

tax-exempt organizations (including private foundations), governments or agencies or instrumentalities thereof, qualified retirement plans, individual retirement accounts or other tax deferred accounts, trusts and estates;

 

   

banks or other financial institutions, financial services entities, underwriters, insurance companies, real estate investment trusts or regulated investment companies;

 

   

persons that own (directly, indirectly, or by attribution) 5% or more (by vote or value) of the EverArc Ordinary Shares or Holdco Ordinary Shares;

 

   

partnerships or other pass-through entities for U.S. federal income tax purposes or beneficial owners of partnerships or other pass-through entities;

 

   

persons holding EverArc Securities or Holdco securities as part of a straddle, hedging or conversion transaction, constructive sale, or other arrangement involving more than one position;

 

   

persons required to accelerate the recognition of any item of gross income with respect to EverArc Securities or Holdco securities as a result of such income being recognized on an applicable financial statement;

 

   

persons who purchase Holdco Ordinary Shares as part of the PIPE;

 

   

persons whose functional currency is not the U.S. dollar;

 

   

U.S. expatriates;

 

   

persons that received EverArc Securities or Holdco securities as compensation for services; or

 

   

persons that are not U.S. Holders, all of whom may be subject to tax rules that differ materially from those summarized below.

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of EverArc Securities or Holdco securities that is, for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

93


Table of Contents
   

an estate whose income is subject to U.S. federal income tax regardless of its source; or

 

   

a trust if (1) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust; or (2) the trust has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

This discussion is based on the Code, its legislative history, existing and proposed Treasury regulations promulgated under the Code (the “Treasury Regulations”), published rulings by the IRS and court decisions, all as of the date hereof. These laws are subject to change, possibly on a retroactive basis. This discussion is necessarily general and does not address all aspects of U.S. federal income taxation, including the effect of the U.S. federal estate and gift tax, or any state, local or non-U.S. tax laws to a holder of EverArc Securities or Holdco securities. We have not and do not intend to seek any rulings from the IRS regarding the Business Combination. There is no assurance that the IRS will not take positions concerning the tax consequences of the Business Combination that are different from those discussed below, or that any such different positions would not be sustained by a court.

ALL HOLDERS OF EVERARC SECURITIES ARE URGED TO CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE BUSINESS COMBINATION AND CONSIDERATIONS RELATING TO THE OWNERSHIP AND DISPOSITION OF HOLDCO SECURITIES, INCLUDING THE APPLICATION AND EFFECTS OF U.S. FEDERAL, STATE, AND LOCAL AND NON-U.S. TAX LAWS IN LIGHT OF THEIR PARTICULAR SITUATION.

Tax Consequences of the Business Combination

The Merger

In the opinion of Greenberg, counsel to EverArc, the Merger, together with certain related transactions, will qualify as a “reorganization” within the meaning of Section 368(a)(1)(F) of the Code (an “F Reorganization”), subject to the assumptions, qualifications and limitations described herein and in the opinion included as Exhibit 8.1 hereto. Assuming the Merger, together with certain related transactions qualifies as an F Reorganization, the tax consequences of the Merger to U.S. Holders of EverArc Securities might depend on whether EverArc is treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes (as discussed in detail below). If EverArc is not treated as a PFIC, a U.S. Holder that exchanges its EverArc Securities in the Merger for Holdco securities should not recognize any gain or loss on such exchange. The aggregate adjusted tax basis of the Holdco Ordinary Shares received in the Merger by a U.S. Holder should be equal to the adjusted tax basis of the EverArc Ordinary Shares surrendered in exchange therefor, and the aggregate adjusted tax basis of the Holdco Warrants received in the Merger by a U.S. Holder should be equal to the adjusted tax basis of the EverArc Warrants surrendered in exchange therefor. The holding period of the Holdco securities should include the period during which the EverArc Securities surrendered in the Merger in exchange therefor were held by the U.S. Holder.

If EverArc is treated as a PFIC, the U.S. federal income tax consequences of the Merger to U.S. Holders of EverArc Securities should generally be similar to those described above. Under proposed Treasury Regulations, if the Merger, together with certain related transactions otherwise qualifies as an F Reorganization, the treatment of EverArc as a PFIC would not adversely impact the tax consequences of the Merger to U.S. Holders of EverArc Securities. The proposed Treasury Regulations, if finalized in their current form, would be effective as of April 1, 1992. Although not entirely clear, in the absence of any final Treasury Regulations, it appears that generally applicable tax rules should apply, which would lead to consequences similar to those described above, even if EverArc is a PFIC.

The opinion described above is based on customary assumptions and representations from EverArc and Holdco. If any of the assumptions or representations is incorrect, incomplete or inaccurate, the validity of the opinion described above may be affected and the tax consequences of the Merger could differ from those described

 

94


Table of Contents

above. Further, an opinion of counsel represents counsel’s best legal judgment but is not binding on the IRS or any court, so there can be no certainty that the IRS will not challenge the conclusion reflected above or that a court would not sustain such a challenge.

U.S. Holders of EverArc Securities are urged to consult their own tax advisors regarding the tax consequences of the Merger to them.

Tax Consequences of Ownership and Disposition of Holdco Ordinary Shares and Holdco Warrants

Distributions on Holdco Ordinary Shares

Subject to the discussion below under “—Passive Foreign Investment Company Rules,” the gross amount of any distribution on Holdco Ordinary Shares that is made out of Holdco’s current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) generally will be taxable to a U.S. Holder as ordinary dividend income on the date such distribution is actually or constructively received. Any such dividends generally will not be eligible for the dividends received deduction allowed to corporations in respect of dividends received from other U.S. corporations. To the extent that the amount of the distribution exceeds Holdco’s current and accumulated earnings and profits (as determined under U.S. federal income tax principles), such excess amount will be treated first as a non-taxable return of capital to the extent of the U.S. Holder’s tax basis in its Holdco Ordinary Shares, and thereafter as capital gain recognized on a sale or exchange. However, it is not expected that Holdco will maintain calculations of its earnings and profits in accordance with U.S. federal income tax principles. U.S. Holders should therefore assume that any distribution by Holdco with respect to Holdco Ordinary Shares will be reported as dividend income. U.S. Holders should consult their own tax advisors with respect to the appropriate U.S. federal income tax treatment of any distribution received from Holdco.

Subject to the discussion below under “—Passive Foreign Investment Company Rules,” dividends received by non-corporate U.S. Holders from a “qualified foreign corporation” may be eligible for reduced rates of taxation, provided that certain holding period requirements and other conditions are satisfied. For these purposes, a non-U.S. corporation will be treated as a qualified foreign corporation if it is eligible for the benefits of a comprehensive income tax treaty with the United States that meets certain requirements. There can be no assurances that Holdco will be eligible for benefits of an applicable comprehensive income tax treaty with the United States. A non-U.S. corporation is also treated as a qualified foreign corporation with respect to dividends it pays on shares that are readily tradable on an established securities market in the United States. U.S. Treasury guidance indicates that shares listed on the Trading Market (which Holdco Ordinary Shares are expected to be) will be considered readily tradable on an established securities market in the United States. There can be no assurance that Holdco Ordinary Shares will be considered readily tradable on an established securities market in future years. Non-corporate U.S. Holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the Code (dealing with the deduction for investment interest expense) will not be eligible for the reduced rates of taxation regardless of Holdco’s status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to the positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. Holdco will not constitute a qualified foreign corporation for purposes of these rules if it is a passive foreign investment company for the taxable year in which it pays a dividend or for the preceding taxable year. See “—Passive Foreign Investment Company Rules.”

Subject to certain conditions and limitations, withholding taxes, if any, on dividends paid by Holdco may be treated as foreign taxes eligible for credit against a U.S. Holder’s U.S. federal income tax liability under the U.S. foreign tax credit rules. For purposes of calculating the U.S. foreign tax credit, dividends paid on Holdco Ordinary Shares will generally be treated as income from sources outside the United States and will generally constitute passive category income. The rules governing the U.S. foreign tax credit are complex and U.S. Holders should consult their tax advisors regarding the availability of the U.S. foreign tax credit under particular circumstances.

 

95


Table of Contents

Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Holdco Ordinary Shares and Holdco Warrants

Subject to the discussion below under “— Passive Foreign Investment Company Rules,” upon any sale, exchange or other taxable disposition of Holdco Ordinary Shares or Holdco Warrants, a U.S. Holder generally will recognize gain or loss in an amount equal to the difference between (i) the amount realized on the disposition and (ii) the U.S. Holder’s adjusted tax basis in such shares or warrants. Any such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period for such shares or warrants exceeds one year. Long-term capital gain realized by a non-corporate U.S. Holder generally will be taxable at a reduced rate. The deductibility of capital losses is subject to limitations. This gain or loss generally will be treated as U.S. source gain or loss.

The U.S. Treasury Department recently published a legislative proposal that, if adopted in its current form, would increase the rates of tax imposed on U.S. Holders with net income exceeding certain thresholds and would also result in long-term capital gain no longer being subject to U.S. federal income tax at a reduced rate in the case of U.S. Holders with net income exceeding certain thresholds.

Exercise or Lapse of a Holdco Warrant

A U.S. Holder generally will not recognize taxable gain or loss on the acquisition of a Holdco Ordinary Share upon exercise of a Holdco Warrant for cash. The U.S. Holder’s tax basis in the Holdco Ordinary Share received upon exercise of the Holdco Warrant generally will be an amount equal to the sum of the U.S. Holder’s tax basis in the Holdco Warrant and the exercise price. The U.S. Holder’s holding period for Holdco Ordinary Shares received upon exercise of the of a Holdco Warrant will begin on the date following the date of exercise (or possibly the date of exercise) of the Holdco Warrant and will not include the period during which the U.S. Holder held the Holdco Warrant. If a Holdco Warrant is allowed to lapse unexercised, a U.S. Holder generally will recognize a capital loss equal to such U.S. Holder’s tax basis in the warrant.

Possible Constructive Distributions

The terms of each Holdco Warrant provide for an adjustment to the number of Holdco Ordinary Shares for which the Holdco Warrant may be exercised or to the exercise price of the Holdco Warrant in certain events. An adjustment that has the effect of preventing dilution generally is not taxable. A U.S. Holder of a Holdco Warrant would, however, be treated as receiving a constructive distribution from Holdco if, for example, the adjustment increases the holder’s proportionate interest in Holdco’s assets or earnings and profits (e.g., through an increase in the number of Holdco Ordinary Shares that would be obtained upon exercise of such warrant) as a result of a distribution of cash to the holders of the Holdco Ordinary Shares, which is taxable to the U.S. Holders of such shares as described under “—Distributions on Holdco Ordinary Shares” above. Such constructive distribution would be subject to tax as described under that section in the same manner as if the U.S. Holder of such warrant received a cash distribution from Holdco equal to the fair market value of such increased interest.

Passive Foreign Investment Company Rules

Generally. The treatment of U.S. Holders of Holdco Ordinary Shares and Holdco Warrants could be materially different from that described above if Holdco is treated as PFIC for U.S. federal income tax purposes. A foreign (i.e., non-U.S.) corporation will be classified as a PFIC for U.S. federal income tax purposes if either (i) 75% or more of its gross income for a taxable year constitutes passive income for purposes of the PFIC rules, or (ii) 50% or more of its assets in any taxable year (generally based on the quarterly average of the value of its assets during such year) is attributable to assets, including cash, that produce passive income or are held for the production of passive income. Passive income generally includes dividends, interest, certain royalties and rents, annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains. The determination of whether a foreign corporation is a PFIC is based upon the composition of such foreign

 

96


Table of Contents

corporation’s income and assets (including, among others, its proportionate share of the income and assets of any other corporation in which it owns, directly or indirectly, 25% (by value) of the stock), and the nature of such foreign corporation’s activities.

We may directly or indirectly hold interests in lower-tier PFICS. Under attribution rules, assuming we are a PFIC, U.S. Holders will be deemed to own their proportionate shares of any lower-tier PFICs and will be subject to U.S. federal income tax according to the rules described in the following paragraphs on (i) certain distributions by a lower-tier PFIC and (ii) a disposition of shares of a lower-tier PFIC, in each case as if the U.S. Holder held such shares directly, even if the U.S. Holder has not received the proceeds of those distributions or dispositions.

A separate determination must be made after the close of each taxable year as to whether a foreign corporation was a PFIC for that year. Once a foreign corporation qualifies as a PFIC it is, with respect to a shareholder or warrant holder during the time it qualifies as a PFIC, and subject to certain exceptions, always treated as a PFIC with respect to such shareholder or warrant holder, regardless of whether it satisfied either of the qualification tests in subsequent years.

Because EverArc is a blank-check company with no current active business, based upon the composition of EverArc’s income and assets, unless EverArc qualifies for the start-up exception (discussed below), EverArc believes it was a PFIC for its taxable year that ended on October 31, 2020. Holdco’s PFIC status following the Business Combination is uncertain and may depend upon the application of the start-up exception, discussed below.

Start-up Exception. Pursuant to the start-up exception, a corporation will not be a PFIC for the first taxable year the corporation has gross income (the “start-up year”), if (1) no predecessor of the corporation was a PFIC; (2) the corporation establishes to the satisfaction of the IRS that it will not be a PFIC for either of the first two taxable years following the start-up year; and (3) the corporation is not in fact a PFIC for either of those years (the “start-up exception”).

Assuming the Merger, together with certain related transactions qualifies as an F Reorganization, Holdco should be treated as the same corporation as EverArc for purposes of the PFIC provisions, including the start-up exception. EverArc’s taxable year that ended on October 31, 2020, should be the start-up year and EverArc should not be treated as a PFIC for such taxable year if EverArc qualifies for the start-up exception, which requires that Holdco (which should be treated as the same corporation as EverArc for this purpose) does not meet the PFIC asset test or income test in either of the following two taxable years. EverArc’s and Holdco’s actual PFIC status for any taxable year will not be determinable until after the end of such year, and in the case of the application of the start-up exception to EverArc for its taxable year that ended on October 31, 2020, until after the end of Holdco’s second succeeding taxable year. Further, if the Merger does not close on or prior to October 31, 2021, EverArc will not qualify for the start-up exception. Accordingly, there can be no assurance with respect to EverArc’s status as a PFIC for its taxable year that ended on October 31, 2020, and there can be no assurance with respect to Holdco’s status as a PFIC for the current or any future taxable year.

If EverArc does not qualify for the start-up exception and is determined to be a PFIC with respect to a U.S. Holder, such U.S. Holder did not make either a qualified electing fund (“QEF”) election or a mark-to-market election (described below) with respect to its EverArc Ordinary Shares, and such U.S. Holder was not subject to tax on the receipt of Holdco Ordinary Shares in exchange for EverArc Ordinary Shares, then, although not free from doubt, Holdco should also be treated as a PFIC as to such U.S. Holder with respect to such Holdco Ordinary Shares even if Holdco did not meet a test for PFIC status in its own right. In addition, if this rule were to apply, such U.S. Holder would be treated for purposes of the PFIC rules as if it held such Holdco Ordinary Shares (treated as shares of a PFIC as to such holder) for a period that includes its holding period for the EverArc Ordinary Shares exchanged therefor.

Consequences if Holdco is a PFIC. If Holdco is treated as a PFIC with respect to the Holdco Ordinary Shares or Holdco Warrants held by a U.S. Holder, there are three separate taxation regimes that could apply to such U.S.

 

97


Table of Contents

Holder under the PFIC rules, which are the (i) excess distribution regime (which is the default regime), (ii) QEF regime, and (iii) mark-to-market regime. A U.S. Holder who holds (actually or constructively) stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to U.S. federal income taxation under one of these three regimes. The effect of the PFIC rules on a U.S. Holder will depend upon which of these regimes applies to such U.S. Holder. However, dividends paid by a PFIC are generally not eligible for the lower rates of taxation applicable to qualified dividend income under any of the foregoing regimes.

Excess Distribution Regime. If you do not make a QEF election or a mark-to-market election, as described below, you will be subject to the default “excess distribution regime” under the PFIC rules with respect to (i) any gain realized on a sale or other disposition (including a pledge) of your Holdco Ordinary Shares or Holdco Warrants, and (ii) any “excess distribution” you receive on your Holdco Ordinary Shares (generally, any distributions in excess of 125% of the average of the annual distributions on Holdco Ordinary Shares during the preceding three years or your holding period, whichever is shorter). Generally, under this excess distribution regime:

 

   

the gain or excess distribution will be allocated ratably over the period during which you held your Holdco Ordinary Shares or Holdco Warrants (as applicable)

 

   

the amount allocated to the current taxable year, will be treated as ordinary income; and

 

   

the amount allocated to prior taxable years will be subject to the highest tax rate in effect for that taxable year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to years prior to the year of disposition or excess distribution will be payable generally without regard to offsets from deductions, losses and expenses. In addition, gains (but not losses) realized on the sale of your Holdco Ordinary Shares or Holdco Warrants cannot be treated as capital gains, even if you hold the shares or warrants as capital assets.

QEF Regime. A QEF election is effective for the taxable year for which the election is made and all subsequent taxable years and may not be revoked without the consent of the IRS. If a U.S. Holder makes a timely QEF election with respect to its direct or indirect interest in a PFIC, the U.S. Holder will be required to include in income each year a portion of the ordinary earnings and net capital gains of the PFIC as QEF income inclusions, even if amount is not distributed to the U.S. Holder. Thus, the U.S. Holder may be required to report taxable income as a result of QEF income inclusions without corresponding receipts of cash. U.S. Holders subject to U.S. federal income tax should not expect that they will receive cash distributions from Holdco sufficient to cover their respective U.S. tax liability with respect to such QEF income inclusions. In addition, U.S. Holders of Holdco Warrants will not be able to make a QEF election with respect to their warrants.

The timely QEF election also allows the electing U.S. Holder to: (i) generally treat any gain recognized on the disposition of its shares of the PFIC as capital gain; (ii) treat its share of the PFIC’s net capital gain, if any, as long-term capital gain instead of ordinary income; and (iii) either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on its share of PFIC’s annual realized net capital gain and ordinary earnings subject, however, to an interest charge on the deferred tax computed by using the statutory rate of interest applicable to an extension of time for payment of tax. In addition, net losses (if any) of a PFIC will not pass through to our shareholders and may not be carried back or forward in computing such PFIC’s ordinary earnings and net capital gain in other taxable years. Consequently, a U.S. Holder may over time be taxed on amounts that as an economic matter exceed our net profits.

A U.S. Holder’s tax basis in Holdco Ordinary Shares will be increased to reflect QEF income inclusions and will be decreased to reflect distributions of amounts previously included in income as QEF income inclusions. No portion of the QEF income inclusions attributable to ordinary income will be treated as qualified dividend

 

98


Table of Contents

income. Amounts included as QEF income inclusions with respect to direct and indirect investments generally will not be taxed again when distributed. You should consult your tax advisors as to the manner in which QEF income inclusions affect your allocable share of Holdco’s income and your basis in your Holdco Ordinary Shares.

In order to comply with the requirements of a QEF election, a U.S. Holder must receive certain information from Holdco. If Holdco determines that it is a PFIC for any taxable year, Holdco will endeavor to provide the information that a U.S. Holder making a QEF election is required to obtain to make and maintain a QEF election, but there is no assurance that Holdco will timely provide such information. There is also no assurance that Holdco will have timely knowledge of its status as a PFIC in the future or of the required information to be provided. In addition, if Holdco holds an interest in a lower-tier PFIC, U.S. Holders will generally be subject to the PFIC rules described above with respect to any such lower-tier PFICs. There can be no assurance that a portfolio company or subsidiary in which Holdco holds an interest will not qualify as a PFIC, or that a PFIC in which Holdco holds an interest will provide the information necessary for a QEF election to be made by a U.S. Holder (in particular if Holdco does not control that PFIC).

Mark-to-Market Regime. Alternatively, a U.S. Holder may make an election to mark marketable shares in a PFIC to market on an annual basis. PFIC shares generally are marketable if they are (i) “regularly traded” on a national securities exchange that is registered with the Securities Exchange Commission or on the national market system established under Section 11A of the Securities and Exchange Act of 1934, or (ii) “regularly traded” on any exchange or market that the Treasury Department determines to have rules sufficient to ensure that the market price accurately represents the fair market value of the stock. It is expected that Holdco Ordinary Shares, which are expected to be listed on the Trading Market, will qualify as marketable shares for the PFIC rules purposes, but there can be no assurance that Holdco Ordinary Shares will be “regularly traded” for purposes of these rules.

Pursuant to such an election, a U.S. Holder would include in each year as ordinary income the excess, if any, of the fair market value of such stock over its adjusted basis at the end of the taxable year. A U.S. Holder may treat as ordinary loss any excess of the adjusted basis of the stock over its fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the election in prior years. A U.S. Holder’s adjusted tax basis in the PFIC shares will be increased to reflect any amounts included in income, and decreased to reflect any amounts deducted, as a result of a mark-to-market election. Any gain recognized on a disposition of Holdco Ordinary Shares will be treated as ordinary income and any loss will be treated as ordinary loss (but only to the extent of the net amount of income previously included as a result of a mark-to-market election).

A mark-to-market election only applies for the taxable year in which the election was made, and for each subsequent taxable year, unless the PFIC shares ceased to be marketable or the IRS consents to the revocation of the election. U.S. Holders should also be aware that the Code and the Treasury Regulations do not allow a mark-to-market election with respect to stock of lower-tier PFICs that is non-marketable. There is also no provision in the Code, Treasury Regulations or other published authority that specifically provides that a mark-to-market election with respect to the stock of a publicly-traded holding company (such as Holdco) effectively exempts stock of any lower-tier PFICs from the negative tax consequences arising from the general PFIC rules. We advise you to consult your own tax advisor to determine whether the mark-to-market tax election is available to you and the consequences resulting from such election. In addition, U.S. Holders of Holdco Warrants will not be able to make a mark-to-market election with respect to their Holdco Warrants.

PFIC Reporting Requirements. If Holdco is a PFIC, a U.S. Holder of Holdco Ordinary Shares will be required to file an annual report on IRS Form 8621 containing such information with respect to its interest in a PFIC as the IRS may require. Failure to file IRS Form 8621 for each applicable taxable year may result in substantial penalties and result in the U.S. Holder’s taxable years being open to audit by the IRS until such Forms are properly filed.

 

99


Table of Contents

The rules dealing with PFICs and with the QEF and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Accordingly, U.S. Holders of Holdco Ordinary Shares and Holdco Warrants are urged to consult their own tax advisors concerning the application of the PFIC rules to Holdco securities under their particular circumstances.

Additional Reporting Requirements

Certain U.S. Holders holding specified foreign financial assets with an aggregate value in excess of the applicable dollar thresholds are required to report information to the IRS relating to Holdco Ordinary Shares or Holdco Warrants, subject to certain exceptions (including an exception for Holdco Ordinary Shares or Holdco Warrants held in accounts maintained by U.S. financial institutions), by attaching a complete IRS Form 8938 (Statement of Specified Foreign Financial Assets) with their tax return for each year in which they hold Holdco Ordinary Shares or Holdco Warrants. Substantial penalties apply to any failure to file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not willful neglect. Also, in the event a U.S. Holder does not file IRS Form 8938 or fails to report a specified foreign financial asset that is required to be reported, the statute of limitations on the assessment and collection of U.S. federal income taxes of such U.S. Holder for the related taxable year may not close before the date which is three years after the date on which the required information is filed. U.S. Holders should consult their tax advisors regarding the effect, if any, of these rules on the ownership and disposition of Holdco Ordinary Shares or Holdco Warrants.

Information Reporting and Backup Withholding

Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries are subject to information reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is a corporation or other exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding.

The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the IRS.

 

100


Table of Contents

MATERIAL LUXEMBOURG INCOME TAX CONSIDERATIONS

The following information is of a general nature only and is based on the laws in force in Luxembourg as of the date of this Prospectus and is subject to any change in law that may take effect after such date. It does not purport to be a comprehensive description of all tax considerations that might be relevant to an investment decision. It is not intended to be, nor should it be construed to be, legal or tax advice. It is a description of the essential material Luxembourg tax consequences with respect to the listing and may not include tax considerations that arise from rules of general application or that are generally assumed to be known to investors. Prospective purchasers should consult their professional advisors with respect to particular circumstances, the effects of state, local or foreign laws to which they may be subject, and as to their tax position.

Please be aware that the residence concept used under the respective headings applies for Luxembourg income tax assessment purposes only. Any reference in this section to a tax, duty, levy impost or other charge or withholding of a similar nature refers to Luxembourg tax law and/or concepts only. In addition, please note that a reference to Luxembourg income tax generally encompasses corporate income tax (impôt sur le revenu des collectivités), municipal business tax (impôt commercial communal), a solidarity surcharge (contribution au fonds pour l’emploi) as well as personal income tax (impôt sur le revenu). Corporate shareholders or warrant holders may further be subject to net worth tax (impôt sur la fortune) as well as other duties, levies or taxes. Corporate income tax, municipal business tax, the solidarity surcharge and net worth tax invariably apply to most corporate taxpayers resident in Luxembourg for tax purposes. Individual taxpayers are generally subject to personal income tax and the solidarity surcharge. Under certain circumstances, where an individual taxpayer acts in the course of the management of a professional or business undertaking, municipal business tax may apply as well.

Taxation of Holdco

Income Taxes

From a Luxembourg tax perspective, Luxembourg companies are considered being resident in Luxembourg provided that they have either their registered office or their central administration located in Luxembourg.

Holdco is a fully taxable Luxembourg company. The net taxable profit of Holdco is subject to corporate income tax (“CIT”) and municipal business tax (“MBT”) at ordinary rates in Luxembourg.

The maximum aggregate CIT and MBT rate amounts to 24.94% (including a solidarity surcharge for the unemployment fund) for companies located in the municipality of Luxembourg-city. Liability to such corporation taxes extends to Holdco’s worldwide income (including capital gains), subject to the provisions of any relevant double taxation treaty. The taxable income of Holdco is computed by application of all rules of the Luxembourg income tax law of December 4, 1967, as amended (loi concernant l’impôt sur le revenu), as commented and currently applied by the Luxembourg tax authorities (“LIR”). The taxable profit as determined for CIT purposes is applicable, with minor adjustments, for MBT purposes. Under the LIR, all income of Holdco will be taxable in the fiscal period to which it economically relates and all deductible expenses of Holdco will be deductible in the fiscal period to which they economically relate. Under certain conditions, dividends received by Holdco from qualifying participations and capital gains realized by Holdco on the sale of such participations, may be exempt from Luxembourg corporation taxes under the Luxembourg participation exemption regime. A tax credit is generally granted for withholding taxes levied at source within the limit of the tax payable in Luxembourg on such income, whereby any excess withholding tax is not refundable (but may be deductible under certain conditions).

Under the participation exemption regime (subject to the relevant anti-abuse rules), dividends derived from shares may be exempt from income tax if

 

(i)

the distributing company is a qualified subsidiary (“Qualified Subsidiary”); and

 

101


Table of Contents
(ii)

at the time the dividend is put at the company’s disposal, the latter holds or commits itself to hold for an uninterrupted period of at least 12 months shares representing either (a) a direct participation of at least 10% in the share capital of the Qualified Subsidiary or (b) a direct participation in the Qualified Subsidiary of an acquisition price of at least €1.2 million (“Qualified Shareholding”).

A Qualified Subsidiary means notably (a) a company covered by Article 2 of the Council Directive 2011/96/EU dated November 30, 2011 (the “Parent-Subsidiary Directive”) or (b) a non-resident capital company (société de capitaux) liable to a tax corresponding to Luxembourg CIT.

Liquidation proceeds are assimilated to a received dividend and may be exempt under the same conditions.

If the conditions of the participation exemption regime are not met, dividends derived by Holdco from the Qualified Subsidiary may be exempt for 50% of their gross amount.

Capital gains realized by Holdco on shares are subject to CIT and MBT at ordinary rates, unless the conditions of the participation exemption regime, as described below, are satisfied.

Under the participation exemption regime (subject to the relevant anti-abuse rules), capital gains realized on shares may be exempt from income tax at the level of Holdco (subject to the recapture rules) if at the time the capital gain is realized, Holdco holds or commits itself to hold for an uninterrupted period of at least 12 months shares representing a direct participation in the share capital of the Qualified Subsidiary (i) of at least 10% or of (ii) an acquisition price of at least €6 million. Taxable gains are determined as being the difference between the price for which shares have been disposed of and the lower of their cost or book value.

For the purposes of the participation exemption regime, shares held through a tax transparent entity are considered as being a direct participation proportionally to the percentage held in the net assets of the transparent entity.

Net Worth Tax

Holdco is as a rule subject to Luxembourg net worth tax (“NWT”) on its net assets as determined for net worth tax purposes. NWT is levied at the rate of 0.5% on net assets not exceeding €500 million and at the rate of 0.05% on the portion of the net assets exceeding €500 million. Net worth is referred to as the unitary value (valeur unitaire), as determined at 1 January of each year. The unitary value is in principle calculated as the difference between (i) assets estimated at their fair market value (valeur estimée de réalisation), and (ii) liabilities.

Under the participation exemption regime, a Qualified Shareholding held by Holdco in a Qualified Subsidiary is exempt for net worth tax purposes.

As from January 1, 2016, a minimum net worth tax (“MNWT”) is levied on companies having their statutory seat or central administration in Luxembourg. For entities for which the sum of fixed financial assets, transferable securities and cash at bank exceeds 90% of their total gross assets and €350,000, the MNWT is set at €4,815. For all other companies having their statutory seat or central administration in Luxembourg which do not fall within the scope of the €4,815 MNWT, the MNWT ranges from €535 to €32,100, depending on their total balance sheet.

Other Taxes

The incorporation of Holdco through a contribution in cash to its share capital as well as further share capital increase or other amendment to the articles of incorporation of Holdco are subject to a fixed registration duty of €75.

 

102


Table of Contents

Withholding Taxes

Dividends paid by Holdco to its shareholders are generally subject to a 15% withholding tax in Luxembourg, unless a reduced treaty rate or the participation exemption applies. Under certain conditions, a corresponding tax credit may be granted to the shareholders. Responsibility for the withholding of the tax is assumed by Holdco.

A withholding tax exemption applies under the participation exemption regime (subject to the relevant anti-abuse rules), if cumulatively (i) the shareholder is an eligible parent (“Eligible Parent”) and (ii) at the time the income is made available, the Eligible Parent holds or commits itself to hold for an uninterrupted period of at least 12 months a Qualified Shareholding in Holdco.

Holding a participation through a tax transparent entity is deemed to be a direct participation in the proportion of the net assets held in this entity. An Eligible Parent includes notably (a) a company covered by Article 2 of the Parent-Subsidiary Directive or a Luxembourg permanent establishment thereof, (b) a company resident in a State having a double tax treaty with Luxembourg and liable to a tax corresponding to Luxembourg CIT or a permanent establishment thereof, (c) a capital company (société de capitaux) or a cooperative company (société coopérative) resident in a Member State of the EEA other than an EU Member State and liable to a tax corresponding to Luxembourg CIT or a Luxembourg permanent establishment thereof or (d) a Swiss capital company (société de capitaux) which is subject to CIT in Switzerland without benefiting from an exemption.

No withholding tax is levied on capital gains and liquidation proceeds.

Taxation of the Shareholders / Warrant Holders

Tax Residency

A Shareholder or warrant holder will not become resident, nor be deemed to be resident in Luxembourg solely by virtue of holding and/or disposing of shares or warrants or the execution, performance, delivery and/or enforcement of his/her rights thereunder.

Income Tax

For the purposes of this paragraph, a disposal may include a sale, an exchange, a contribution, a redemption and any other kind of alienation of the participation or the warrants.

Luxembourg Residents

 

  a.

Luxembourg Resident Individuals

Dividends and other payments derived from the shares held by resident individual shareholders, who act in the course of the management of either their private wealth or their professional/business activity, are subject to income tax at the ordinary progressive rates. Under current Luxembourg tax laws, 50% of the gross amount of dividends received by resident individuals from Holdco may however be exempt from income tax.

Capital gains realized on the disposal of the shares or warrants by resident individual shareholders, who act in the course of the management of their private wealth, are not subject to income tax, unless said capital gains qualify either as speculative gains or as gains on a substantial participation. Capital gains are deemed to be speculative if the shares or warrants are disposed of within six months after their acquisition or if their disposal precedes their acquisition. Speculative gains are subject to income tax as miscellaneous income at ordinary rates. A participation is deemed to be substantial where a resident individual shareholder holds or has held, either alone or together with his/her spouse or partner and/or minor children, directly or indirectly at any time within the five years preceding the disposal, more than 10% of the share capital of the company whose shares are being disposed of the substantial participation (“Substantial Participation”). A shareholder is also deemed to alienate a

 

103


Table of Contents

Substantial Participation if he acquired free of charge, within the five years preceding the transfer, a participation that was constituting a Substantial Participation in the hands of the alienator (or the alienators in case of successive transfers free of charge within the same five-year period). Capital gains realized on a Substantial Participation more than six months after the acquisition thereof are taxed according to the half-global rate method (i.e., the average rate applicable to the total income is calculated according to progressive income tax rates and half of the average rate is applied to the capital gains realized on the Substantial Participation).

Capital gains realized on the disposal of the shares or warrants by resident individual holders, who act in the course of their professional/business activity, are subject to income tax at ordinary rates. Taxable gains are determined as being the difference between the price for which the shares or warrants have been disposed of and the lower of their cost or book value.

 

  b.

Luxembourg Resident Companies

Dividends and other payments derived from the shares held by Luxembourg resident fully taxable companies are subject to income taxes, unless the conditions of the participation exemption regime, as described below, are satisfied. A tax credit is generally granted for withholding taxes levied at source within the limit of the tax payable in Luxembourg on such income, whereby any excess withholding tax is not refundable (but may be deductible under certain conditions). If the conditions of the participation exemption regime are not met, 50% of the dividends distributed by Holdco to a Luxembourg fully taxable resident company are nevertheless exempt from income tax.

Under the participation exemption regime (subject to the relevant anti-abuse rules), dividends derived from the shares may be exempt from CIT and MBT at the level of the shareholder if (i) the shareholder is an Eligible Parent and (ii) at the time the dividend is put at the shareholder’s disposal, the latter holds or commits itself to hold for an uninterrupted period of at least 12 months a shareholding representing a direct participation of at least 10% in the share capital of Holdco or a direct participation in Holdco of an acquisition price of at least €1.2 million. Liquidation proceeds are assimilated to a received dividend and may be exempt under the same conditions. Capital gains realized by a Luxembourg fully taxable resident company on the disposal of the shares are subject to income tax at ordinary rates, unless the conditions of the participation exemption regime, as described below, are satisfied.

Under the participation exemption regime (subject to the relevant anti-abuse rules), capital gains realized on the shares or warrants may be exempt from CIT and MBT (save for the recapture rules) at the level of the shareholder if cumulatively (i) the shareholder is a Eligible Parent and (ii) at the time the capital gain is realized, the shareholder holds or commits itself to hold for an uninterrupted period of at least 12 months shares representing either (a) a direct participation of at least 10% in the share capital of Holdco or (b) a direct participation in Holdco of an acquisition price of at least €6 million. Taxable gains are determined as being the difference between the price for which the shares have been disposed of and the lower of their cost or book value. Under Luxembourg tax law it is debatable to what extent the warrants are eligible for the participation exemption regime although certain case law supports such argumentation in certain circumstances.

For the purposes of the participation exemption regime, shares held through a tax transparent entity are considered as being a direct participation proportionally to the percentage held in the net assets of the transparent entity.

For warrant holders, the exercise of the warrants should not give rise to any immediate Luxembourg tax consequences.

 

  c.

Luxembourg Resident Companies Benefiting From a Special Tax Regime

A shareholder or warrant holder who is a Luxembourg resident company benefiting from a special tax regime, such as (i) a specialized investment fund governed by the amended law of February 13, 2007, (ii) a family wealth

 

104


Table of Contents

management company governed by the amended law of May 11, 2007 (iii) an undertaking for collective investment governed by the amended law of December 17, 2010 or (iv) a reserved alternative investment fund treated as a specialized investment fund for Luxembourg tax purposes and governed by the amended law of July 23, 2016 is exempt from income tax in Luxembourg and profits derived from the shares or warrants are thus not subject to tax in Luxembourg.

Luxembourg Non-Residents

Non-resident shareholders or warrant holders, who have neither a permanent establishment nor a permanent representative in Luxembourg to which or whom the shares or warrants are attributable, are not liable to any Luxembourg income tax, whether they receive payments of dividends or realize capital gains on the disposal of the shares or warrants, except with respect to capital gains realized on a Substantial Participation before the acquisition or within the first 6 months of the acquisition thereof, that are subject to income tax in Luxembourg at ordinary rates (subject to the provisions of any relevant double tax treaty) and except for the withholding tax mentioned above.

Non-resident shareholders or warrant holders having a permanent establishment or a permanent representative in Luxembourg to which or whom the shares or warrants are attributable, must include any income received, as well as any gain realized on the disposal of the shares or warrants, in their taxable income for Luxembourg tax assessment purposes, unless the conditions of the participation exemption regime, as described below are satisfied. If the conditions are of the participation exemption regime are not fulfilled, 50% of the gross amount of dividends received by a Luxembourg permanent establishment or permanent representative are however exempt from income tax. Taxable gains are determined as being the difference between the price for which the shares have been disposed of and the lower of their cost or book.

Under the participation exemption regime (subject to the relevant anti-abuse rules), dividends derived from the shares may be exempt from income tax if cumulatively (i) the shares are attributable to a qualified permanent establishment (“Qualified Permanent Establishment”) and (ii) at the time the dividend is put at the disposal of the Qualified Permanent Establishment, it holds or commits itself to hold a Qualified Shareholding in Holdco. A Qualified Permanent Establishment means (a) a Luxembourg permanent establishment of a company covered by Article 2 of the Parent-Subsidiary Directive, (b) a Luxembourg permanent establishment of a capital company (société de capitaux) resident in a State having a double tax treaty with Luxembourg and (c) a Luxembourg permanent establishment of a capital company (société de capitaux) or a cooperative company (société coopérative) resident in a Member State of the EEA other than an EU Member State. Liquidation proceeds are assimilated to a received dividend and may be exempt under the same conditions. Shares held through a tax transparent entity are considered as being a direct participation proportionally to the percentage held in the net assets of the transparent entity.

Under the participation exemption regime (subject to the relevant anti-abuse rules), capital gains realized on the shares or warrants may be exempt from income tax (save for the recapture rules) if cumulatively (i) the shares or warrants are attributable to a Qualified Permanent Establishment and (ii) at the time the capital gain is realized, the Qualified Permanent Establishment holds or commits itself to hold for an uninterrupted period of at least 12 months shares or warrants representing either (a) a direct participation in the share capital of Holdco of at least 10% or (b) a direct participation in Holdco of an acquisition price of at least €6 million.

Under Luxembourg tax laws currently in force (subject to the provisions of double taxation treaties), capital gains realized by a Luxembourg non-resident shareholder or warrant holder (not acting via a permanent establishment or a permanent representative in Luxembourg through which/whom the shares are held) are not taxable in Luxembourg unless (a) the shareholder or warrant holder holds a Substantial Participation in Holdco and the disposal of the shares or warrants takes place less than six months after the shares or warrants were acquired or (b) the shareholder the warrant holder has been a former Luxembourg resident for more than fifteen years and has become a non-resident, at the time of transfer, less than five years ago. Under Luxembourg tax law

 

105


Table of Contents

it is debatable to what extent the warrants are eligible for the participation exemption regime although certain case law supports such argumentation in certain circumstances.

Net Worth Tax

A Luxembourg resident as well as a non-resident who has a permanent establishment or a permanent representative in Luxembourg to which the shares or warrants are attributable, are subject to Luxembourg NWT (subject to the application of the participation exemption regime) on such shares or warrants, except if the shareholder or warrant holders is (i) a resident or non-resident individual taxpayer, (ii) a securitization company governed by the amended law of March 22, 2004 on securitization, (iii) a company governed by the amended law of June 15, 2004 on venture capital vehicles, (iv) a professional pension institution governed by the amended law of July 13, 2005, (v) a specialized investment fund governed by the amended law of February 13, 2007, (vi) a family wealth management company governed by the law of May 11, 2007, (vii) an undertaking for collective investment governed by the amended law of December 17, 2010 or (viii) a reserved alternative investment fund governed by the amended law of July 23, 2016.

However, (i) a securitization company governed by the amended law of March 22, 2004 on securitization, (ii) a company governed by the amended law of June 15, 2004 on venture capital vehicles (iii) a professional pension institution governed by the amended law dated July 13, 2005 and (iv) an opaque reserved alternative investment fund treated as a venture capital vehicle for Luxembourg tax purposes and governed by the amended law of July 23, 2016 remain subject to the MNWT.

Other Taxes

Under current Luxembourg tax laws, no registration tax or similar tax is in principle payable by the shareholder or warrant holder upon the acquisition, holding or disposal of the shares or warrants. However, a fixed or ad valorem registration duty may be due upon the registration of the shares or warrants in Luxembourg in the case where the shares or warrants are physically attached to a public deed or to any other document subject to mandatory registration, as well as in the case of a registration of the shares or warrants on a voluntary basis.

No inheritance tax is levied on the transfer of the Holdco Ordinary Shares and Holdco Warrants upon the death of a holder in cases where the deceased was not a resident of Luxembourg for inheritance tax purposes at the time of his death.

Gift tax may be due on a gift or donation of shares, or warrants of the gift is recorded in a Luxembourg notarial deed or otherwise registered in Luxembourg.

The disposal of the shares or warrants is not subject to a Luxembourg registration tax or stamp duty, unless recorded in a Luxembourg notarial deed or otherwise registered in Luxembourg.

 

106


Table of Contents

INFORMATION ABOUT EVERARC

References in this section to “we,” “our,” “us,” the “Company” or “EverArc” generally refer to EverArc.

Overview

EverArc is an acquisition company incorporated in the British Virgin Islands as a company limited by shares, on November 8, 2019 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

EverArc completed its initial public offering on December 17, 2019. The EverArc Ordinary Shares and EverArc Warrants are currently listed on the Official List of the UK Financial Conduct Authority and admitted to trading on the main market of the London Stock Exchange under the symbols “EVRA,” and “EVWA,” respectively. At the Merger Effective Time, the outstanding EverArc Ordinary Shares will be converted into Holdco Ordinary Shares.

The mailing address of EverArc’s registered office is Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands. The mailing address of EverArc’s principal executive office is 55 Water Street, 3rd Floor, Brooklyn, New York 11201.

EverArc raised gross proceeds in its IPO of $340 million, consisting of $325 million through the placing of 32,500,000 EverArc Ordinary Shares (with 32,500,000 EverArc Warrants being issued to subscribers on the basis of one EverArc Warrant per EverArc Ordinary Share) at a placing price of $10.00 per share, and $15 million by way of direct subscriptions of 1,500,000 EverArc Ordinary Shares (with 1,500,000 EverArc Warrants being issued to the EverArc Founders on the basis of one EverArc Warrant per EverArc Ordinary Share) by the EverArc Founders at a price of $10.00 per share. In addition, 30,000 EverArc Ordinary Shares (with matching warrants) were subscribed to outside of the Placing to certain EverArc directors at a price of $10.00 per share. Each whole EverArc Warrant entitles the holder to purchase one-fourth of an EverArc Ordinary Share at $12.00 per whole EverArc Ordinary Share. On January 15, 2020, EverArc raised additional gross proceeds in its Additional Offering of $71,400,000 from a placing of 6,800,000 EverArc Ordinary Shares at a placing price of $10.50 per EverArc Ordinary Share.

Financial Position

As of June 30, 2020, EverArc had funds available for a business combination in the amount of approximately $399.6 million, before fees and expenses associated with the Business Combination. Because EverArc is able to complete its business combination using its cash, debt or equity securities, debt or a combination of the foregoing, EverArc has the flexibility to use the most efficient combination that will allow EverArc to tailor the consideration to be paid to the target business to fit its needs and desires.

Permitted Purchases of EverArc’s Securities

The EverArc Founders and EverArc’s directors, officers and advisors, or their affiliates, may purchase shares of EverArc Ordinary Shares in privately negotiated transactions or in the open market prior to the completion of the Business Combination. They will not make any such purchases when they are in possession of any material non-public information not disclosed to the seller or while otherwise prohibited from doing so.

In addition, if such purchases are made, the public “float” of EverArc Ordinary Shares and the number of beneficial holders of EverArc’s securities may be reduced, possibly making it difficult for Holdco to obtain the quotation, listing or trading of its securities on a national securities exchange.

 

107


Table of Contents

Liquidation if No Business Combination

The EverArc Founders, the EverArc Founder Entity and EverArc’s officers and directors have agreed that if EverArc does not complete its initial business combination by December 17, 2022 or such later date that may be approved by EverArc’s shareholders, the Directors shall determine whether to recommend to the shareholders if EverArc’s operations should be wound up. EverArc may not be able to complete its initial business combination within this time period. If EverArc’s shareholders decide to wind up the business and not extend the date by which EverArc may consummate an initial business combination, EverArc will wind up its operations in accordance with the BVI Companies Act.

EverArc expects to use all amounts available to it in its accounts to pay for all costs and expenses associated with implementing its plan of dissolution, as well as payments to any creditors, although EverArc cannot assure you that there will be sufficient funds for such purpose.

Legal Proceedings

From time to time, EverArc may become involved in actions, claims, suits, and other legal proceedings arising in the ordinary course of its business.

Employees

EverArc currently has no executive officers and has no plans to appoint executive officers ahead of the Business Combination. EverArc does not intend to have any employees prior to the consummation of a business combination.

Directors

EverArc’s directors are as follows:

 

Name

  

Age

  

Title

W. Nicholas Howley    69    Co-Chairman
William N. Thorndike, Jr.    57    Co-Chairman
Tracy Britt Cool    36    Director
Bram Belzberg    40    Director
Adam Luke Hall    46    Director
John Staer    68    Director
Michael Tobin OBE    57    Director

W. Nicholas Howley. Mr. Howley has served as Co-Chairman of our board of directors since our inception in November 2019. Mr. Howley co-founded TransDigm Group Inc. (“TransDigm”), an aerospace manufacturing company, in 1993 and has served as the Chairman of TransDigm’s board of directors since 2003 and as Executive Chairman since 2018. Mr. Howley served as President and/or Chief Executive Officer of TransDigm from 2003 through 2018 and as President and/or Chief Executive Officer of TransDigm Inc. from 1998 through 2018. Mr. Howley holds B.S. degree in mechanical engineering from Drexel University and an M.B.A. degree from Harvard Business School.

William N. Thorndike, Jr. Mr. Thorndike has served as Co-Chairman of our board of directors since our inception in November 2019. Mr. Thorndike founded Housatonic Partners, a leading middle market private equity firm with offices in Boston and San Francisco, in 1994 and has been a Managing Director since that time. Prior to founding Housatonic Partners, Mr. Thorndike worked with T. Rowe Price Associates, a global asset management firm, and Walker & Company, a publishing company, where he was named to its board of directors. Mr. Thorndike has served as a director of over 30 companies since founding Housatonic Partners. He is currently

 

108


Table of Contents

a director of CNX Resources Corporation, a natural gas company, and serves on various boards of directors of private companies. He also serves as a Trustee of WGBH, a public broadcaster serving southern New England, and the College of the Atlantic. Mr. Thorndike is the author of “The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success,” which has been translated into 12 languages. Mr. Thorndike holds an A.B. degree in English and American Literature from Harvard University and an M.B.A. degree from Stanford University.

Tracy Britt Cool. Ms. Cool has served as a member of our board of directors since our inception in November 2019. Ms. Cool joined Berkshire Hathaway in December 2009 as financial assistant to the chairman and served in various roles until she left Berkshire Hathaway in March 2020 to co-found Kanbrick, a long-term investment partnership. Most recently, from November 2014 to March 2020, Ms. Cool served as chief executive officer of Pampered Chef, a direct seller of high-quality cooking tools. During her time at Berkshire Hathaway, Ms. Cool also served as chair of the following Berkshire Hathaway subsidiaries: Benjamin Moore & Co., a leading manufacturer and retailer of paints and architectural coatings, Larson-Juhl, a manufacturer and distributor of wood and metal framing products, Oriental Trading Company, a direct merchant of party suppliers, arts and crafts, toys, and novelties, and Johns Manville, a leading manufacturer of insulation, roofing materials, and engineered products. From January 2017 to October 2020, Ms. Cool served as a director of Blue Apron Holdings, Inc., an ingredient-and-recipe meal kit service and from June 2013 to January 2020, Ms. Cool served as a director of The Kraft Heinz Company, and its predecessor H.J. Heinz Company. Ms. Cool holds an A.B. degree in economics from Harvard College and an M.B.A. degree from Harvard Business School.

Bram Belzberg. Mr. Belzberg has served as a member of our board of directors since our inception in November 2019. Since 2009, Mr. Belzberg has served as Chairman and Chief Executive Officer of KEV Group, Inc., the largest provider of cash accounting management and online payment systems for K-12 schools in North America. Prior to joining KEV Group, Inc., Mr. Belzberg served as an associate at Onex Group, an associate at Amaranth and as an investment banking analyst at Goldman Sachs. Mr. Belzberg holds a B.A. degree in psychology from McGill University and an M.B.A. degree from Harvard Business School.

Adam Luke Hall. Mr. Hall has served as a member of our board of directors since our inception in November 2019. Since June 2019, Mr. Hall has served as Chief Development Officer of Orica Limited (“Orica”), the world’s largest provider of commercial explosives and innovative blasting systems, and is listed on the Australian Stock Exchange. Prior to joining Orica, Mr. Hall led corporate development and the Industrial Gases business for CF Industries, one of the world’s largest producers of nitrogen. He has also held a series of regional and corporate roles with Bunge, a global agribusiness leader. Mr. Hall holds an undergraduate degree in law and commerce from the University of Western Australia and an M.B.A. degree with High Distinction from Harvard Business School.

John Staer. Mr. Staer has served as a member of our board of directors since our inception in November 2019. Mr. Staer retired as Chief Executive Officer of Satair A/S, a subsidiary of Airbus, and a distributor of aerospace products, a role he held from 1993 through 2013. In the last five years, Mr. Staer was formerly a director of Dalhoff Larsen & Horneman A/S, a Danish public company that is supplier of timber and wood products, through April 2017.

Michael Tobin OBE. Mr. Tobin has served as a member of our board of directors since our inception in November 2019. In 2014, Mr. Tobin founded Tobin Ventures Ltd., a management consulting company, where he currently serves as Executive Chairman. In 2003, Mr. Tobin was appointed as Chief Executive Officer of Redbus Interhouse plc, having joined in 2002 as Sales and Marketing Director, and continued as Chief Executive Officer following the merger with TelecityGroup plc, leading the company through its initial public offering in 2007 and a period of consolidation in the European data centre industry. Prior to joining TelecityGroup, Mr. Tobin held senior positions in a number of companies internationally, including at Fujitsu’s e-Commerce operations in Frankfurt, Germany and ICL’s Danish outsourcing subsidiary. As a non-executive Director of PACNET in Hong Kong, Mr. Tobin was involved in its transformation from a subsea cable operator to a successful data centre operator culminating in its sale to Telstra for U.S. $700 million in 2015.

 

109


Table of Contents

Number and Terms of Office of Officers and Directors

EverArc has seven directors all of whom are part of a single class. The terms of each of EverArc’s directors will expire at the first annual meeting of shareholders following the consummation of the Business Combination. At that meeting, each of them may stand for re-election. Following the Business Combination, EverArc may terminate a director’s appointment with three-months’ notice. Subject to any other special rights applicable to the shareholders, any vacancies on our board of directors may be filled by the affirmative vote of a majority of the directors present and voting at the meeting of our board of directors.

EverArc’s officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may be a Chairman or Co-Chairman of the Board, a Chief Executive Officer, one or more vice-presidents, secretaries, assistant secretaries and treasurers and such other officers as may from time to time be considered necessary or expedient.

Director Compensation

EverArc’s three founder directors receive no cash compensation for services rendered to EverArc. EverArc’s four non-executive directors are paid $75,000 per year. EverArc pays Oak Fund Services (Guernsey) Limited an annual fee of £36,000 per annum for general corporate services and such other fees agreed from time to time for any additional services that may be provided. Upon completion of EverArc’s initial business combination or its liquidation, EverArc will cease paying these monthly fees. No compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, has been or will be paid by EverArc to its EverArc Founders, officers and directors, or any affiliate of the EverArc Founders or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of EverArc’s initial business combination. However, these individuals are reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Other than board review of such payments, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial business combination.

EverArc is not party to any agreements with its directors that provide for benefits upon termination of employment.

Committees of the Board of Directors

EverArc currently has no standing committees and has no plans to form committees ahead of the Business Combination.

Director Independence

Mr. Thorndike, Mr. Howley and Ms. Britt Cool are not considered by the Board to be “Independent Directors” for the purposes of the U.K. Corporate Governance Code. The Board considers Mr. Tobin, Mr. Belzberg, Mr. Hall and Mr. Staer to be independent in character and judgment and free from relationships or circumstances which are likely to affect or could appear to affect, their judgment. When determining independence, the Board had regard to the Letters of Appointment of the Independent Non-Founder Directors. In addition, in relation to Mr. Staer, the Board had regard to the fact that he is currently an independent director of TransDigm and that Mr. Howley is the Executive Chairman of TransDigm but this was not expected to impair Mr. Staer’s independence and there were no other current cross directorships or other significant links between Mr. Staer and Mr. Howley. The Board believes that, taken as a whole, the aforementioned cross directorship and the number of shares that each Independent Non-Founder Director may obtain pursuant to their Letters of Appointment, are not sufficient to have an impact on their independence.

 

110


Table of Contents

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

References in this section to “we,” “our,” “us,” the “Company” or “EverArc” generally refer to EverArc.

Overview

EverArc is an acquisition company incorporated in the British Virgin Islands as a company limited by shares, on November 8, 2019 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

EverArc completed its IPO on December 17, 2019. The EverArc Ordinary Shares and EverArc Warrants are currently listed on the Official List of the UK Financial Conduct Authority and admitted to trading on the main market of the London Stock Exchange under the symbols “EVRA,” and “EVWA,” respectively.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities from November 8, 2019 (inception) through April 30, 2021 were organizational activities, those necessary to prepare for the IPO, described below, and identifying a target company for an initial business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We generate non-operating income in the form of interest income on marketable securities held after the IPO. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the six months ended April 30, 2021, we had a net loss of $(944,863), which consisted of operating expenses of $(1,028,961), offset by an unrealized gain on investments held in our investment accounts of $84,098.

For the period from November 8, 2019 (inception) through October 31, 2020, we had a net loss of $(458,878), which consisted of operating expenses of $1,790,180, offset by an unrealized gain on investments held in our investment accounts of $1,331,296 and other income of $6.

Liquidity and Capital Resources

EverArc raised gross proceeds in its IPO of $340 million, consisting of $325 million through the placing of 32,500,000 EverArc Ordinary Shares (with 32,500,000 EverArc Warrants being issued to subscribers on the basis of one EverArc Warrant per EverArc Ordinary Share) at a placing price of $10.00 per share, and $15 million by way of direct subscriptions of 1,500,000 EverArc Ordinary Shares (with 1,500,000 EverArc Warrants being issued to the EverArc Founders on the basis of one EverArc Warrant per EverArc Ordinary Share) by the EverArc Founders at a price of $10.00 per share. Each whole EverArc Warrant entitles the holder to purchase one-fourth of an EverArc Ordinary Share at $12.00 per whole EverArc Ordinary Share. On January 15, 2020, EverArc raised additional gross proceeds in its Additional Offering of $71,400,000 from a placing of 6,800,000 EverArc Ordinary Shares at a placing price of $10.50 per EverArc Ordinary Share.

Following the IPO and the Additional Offering, we incurred $10,427,561 in transaction costs, consisting of $9,578,337 of underwriting fees, $608,421 in legal fees and $240,803 of other offering costs.

For the six months ended April 30, 2021, net cash used in operating activities was $(1,193,993). Net loss of $(944,863) was affected by a realized gain on short-term investments of $70,537, stock-based compensation expense of $(32,877) and changes in working capital of $211,470.

For the period from November 8, 2019 to October 31, 2020, net cash used in operating activities was $(1,600,400). Net loss of $(974,540) was affected by a realized gain on short-term investments of $523,408, stock-based compensation of $(267,123) and changes in working capital of $369,575.

 

111


Table of Contents

As of April 30, 2021, we had cash and marketable securities held in our investment accounts of $398.9 million consisting of zero-coupon U.S. Treasury Bills. We intend to use substantially all of the funds held in our investment accounts, including any amounts representing interest earned in our investment accounts (less deferred underwriting commissions and taxes payable) to complete an initial business combination. We may withdraw interest to pay taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete an initial business combination, the remaining proceeds held in our investment accounts will be used as working capital to finance the operations of the target business.

As of April 30, 2021, we had cash and cash equivalents of $803 held outside of our investment accounts. We intend to use the funds held outside our investment accounts primarily to identify and evaluate prospective acquisition candidates, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses, review corporate documents and material agreements of prospective target businesses, select the target business to acquire and structure, negotiate and complete an initial business combination.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amounts necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our Public Shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate our investment accounts. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.

Critical Accounting Policies

For a discussion of our critical accounting policies please see Note 2 to our condensed financial statements included in this prospectus.

 

112


Table of Contents

CERTAIN EVERARC RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

In December 2019, the EverArc Founder Entity acquired 100 Founder Shares for an aggregate purchase price of $1,000. Prior to the initial investment in EverArc of $1,000 by the EverArc Founder Entity, EverArc had no assets, tangible or intangible.

If any of EverArc’s officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she had pre-existing fiduciary or contractual obligations at the time they were appointed as a director of EverArc, he or she will honor his or her pre-existing fiduciary or contractual obligations to present such opportunity to such entity. EverArc’s officers and directors currently have certain relevant fiduciary duties or contractual obligations to entities other than EverArc that may take priority over their duties to EverArc.

No compensation of any kind, including finder’s and consulting fees, will be paid to EverArc’s Founder Entity, officers and directors, or any of their respective affiliates, for services rendered prior to or in connection with the completion of an initial business combination. However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on EverArc’s behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on EverArc’s behalf.

EverArc pays Oak Fund Services (Guernsey) Limited an annual fee of £36,000 per annum for general corporate services and such other fees agreed from time to time for any additional services that may be provided.

Lock Up Arrangements

Pursuant to the Placing Agreement, the EverArc Founders, the EverArc Subscription Founder Entities, the EverArc Founder Entity and each of the Directors have agreed that they shall not, without the prior written consent of the Placing Agents offer, sell, contract to sell, pledge or otherwise dispose of any EverArc Ordinary Shares, Founder Shares or EverArc Warrants they hold directly or indirectly in EverArc (or acquire pursuant to the terms of the Founder Advisory Agreement or EverArc Warrants) or any interest in any entity other than EverArc which they may receive in connection with a Business Combination for their EverArc Ordinary Shares or EverArc Warrants, for a period commencing on the date of the Placing Agreement and ending one year after EverArc has completed the Business Combination or upon the passing of a resolution to voluntarily wind-up EverArc for failure to complete the Business Combination (whichever is earlier).

The restrictions on the ability of the Directors, the EverArc Founders and the EverArc Founder Entity to transfer their EverArc Ordinary Shares, Founder Shares or EverArc Warrants, as the case may be, are subject to certain usual and customary exceptions for: gifts; transfers for estate planning purposes; transfers to trusts (including any direct or indirect wholly-owned subsidiary of such trusts) for the benefit of the Directors, the EverArc Founders or their families or charitable organizations; transfers to the Directors, the EverArc Subscription Founder Entities or the EverArc Founders; transfers to affiliates or direct or indirect equity holders, holders of partnership interests or members of the EverArc Subscription Founder Entities or the EverArc Founder Entity, in each case, subject to certain conditions; transfers among the EverArc Founders, the EverArc Subscription Founder Entities or the EverArc Founder Entity (including any affiliates thereof or direct or indirect equity holders, holders of partnership interests or members of the EverArc Subscription Founder Entities or the EverArc Founder Entity); transfers to any direct or indirect subsidiary of EverArc, a target company or shareholders of a target company in connection with an Business Combination, provided that in each of the foregoing cases, the transferees enter into a lock up agreement for the remainder of the period referred to above which is subject to similar exceptions to those set out in this paragraph; transfers of any EverArc Ordinary Shares or EverArc Warrants acquired after the date of Admission in an open-market transaction, or the acceptance of, or provision of, an irrevocable undertaking to accept, a general offer made to all Shareholders on equal terms; and after the Business

 

113


Table of Contents

Combination, transfers to satisfy certain tax liabilities in connection with, or as a result of transactions related to, completion of the Business Combination, the exercise of EverArc Warrants, or the receipt of share dividends; and, after the Business Combination, transfers by a Director, a Founder, the EverArc Subscription Founder Entities or the EverArc Founder Entity (or certain connected or permitted transferees thereof) of up to 10 per cent of such person’s shares for purposes of charitable gifts.

Founder Advisory Agreement

On December 12, 2019, EverArc entered into the Founder Advisory Agreement with the EverArc Founder Entity, which is owned and operated by the EverArc Founders. Under the Founder Advisory Agreement, the Founder Entity agreed, at the request of EverArc (and only to such extent as is mutually agreed): (i) prior to consummation of its initial business combination, to assist with identifying target opportunities, due diligence, negotiation, documentation and investor relations with respect to the initial business combination; and (ii) following the Business Combination, to provide strategic and capital allocation advice and such other services as may from time to time be agreed. In addition, the EverArc Founder Entity has the right to appoint up to six directors for election to the Board. Upon consummation of the Business Combination, the rights and obligations of EverArc under the Founder Advisory Agreement will be assigned to, and assumed by, Holdco.

In exchange for the services provided thereunder, the EverArc Founder Entity will be entitled to receive both a variable amount (the “Variable Annual Advisory Amount”) and a fixed amount (the “Fixed Annual Advisory Amount,” each an “Advisory Amount” and collectively, the “Advisory Amounts”), each as described below:

 

   

Variable Annual Advisory Amount. Effective upon the consummation of the Business Combination through December 31, 2031, and once the Average Price (as defined in the Founder Advisory Agreement) per Holdco Ordinary Share is at least $10.00 for ten consecutive trading days, the Variable Annual Advisory Amount will be equal in value to:

 

   

in the first year in which the Variable Annual Advisory Amount is payable, (x) 18% of the increase in the market value of one Holdco Ordinary Share over $10.00 (such increase in market value, the “Payment Price”) multiplied by (y) the Founder Advisory Agreement Calculation Number, which based on the assumptions described in this prospectus, is currently expected to be 156,932,812 Holdco Ordinary Shares and, assuming a stock price of $12.50 per Holdco Ordinary Share, the variable annual advisory amount payable to the EverArc Founder Entity in year one would have a value of $70,619,765; and

 

   

in the following years in which the Variable Annual Advisory Amount may be payable (if at all), (x) 18% of the increase in Payment Price over the previous year Payment Price multiplied by (y) the Founder Advisory Agreement Calculation Number, which based on the assumptions described in this prospectus, is currently expected to be 156,932,812 Holdco Ordinary Shares. For each $1 increase in the stock price of Holdco Ordinary Shares above $12.50, or such higher stock price on which a variable annual advisory amount was previously paid to the EverArc Founder Entity, the EverArc Founder Entity will receive a variable annual advisory amount valued at $28,247,906.

 

   

Fixed Annual Advisory Amount. Effective upon the consummation of the Business Combination through December 31, 2027, the Fixed Annual Advisory Amount will be equal to that number of Holdco Ordinary Shares equal to 1.5% of the Founder Advisory Agreement Calculation Number. Based on the assumptions described in this prospectus, the Fixed Annual Advisory Amount is currently expected to be 2,353,992 Holdco Ordinary Shares which, assuming a stock price of $12.50 per Holdco Ordinary Share, would have a value of $29,424,902. Each additional $1 increase in the stock price of Holdco Ordinary Shares above $12.50 will increase the value of the fixed annual advisory amount payable to the EverArc Founder Entity by $2,353,992.

Each Advisory Amount, as applicable, will be paid on the relevant Payment Date in Holdco Ordinary Shares or partly in cash, at the election of the EverArc Founder Entity provided that at least 50% of such Advisory Amount

 

114


Table of Contents

payable is paid in Holdco Ordinary Shares. The EverArc Founders have advised Holdco that their intention is to elect, via the EverArc Founder Entity, to receive any Advisory Amounts payable in Holdco Ordinary Shares and for any cash element (which will be calculated using the Payment Price) to only be such amount as is required to meet any related taxes. The amounts used for the purposes of calculating the Advisory Amounts and the relevant numbers of Holdco Ordinary Shares are subject to adjustment to reflect any split or reverse split of the outstanding Holdco Ordinary Shares after the date of the closing of the Business Combination.

The Founder Advisory Agreement will remain in effect through December 31, 2031 unless terminated earlier in accordance with its terms. The Founder Advisory Agreement may be terminated by EverArc at any time if the EverArc Founder Entity engages in any criminal conduct or in willful misconduct which is harmful to EverArc (as determined by a court of competent jurisdiction in the State of New York). In addition, the Founder Advisory Agreement can be terminated at any time following consummation of the Business Combination (i) by the EverArc Founder Entity if Holdco ceases to be traded on the Trading Market; or (ii) by the EverArc Founder Entity or Holdco if there is (A) a Sale of the Company (as defined in the Founder Advisory Agreement) or (B) a liquidation of Holdco.

Subject to certain limited exceptions, the EverArc Founder Entity’s liability for losses in connection with the services provided is excluded and Holdco will have agreed to indemnify the EverArc Founder Entity and its affiliates in relation to certain liabilities incurred in connection with acts or omissions by or on behalf of Holdco or the EverArc Founder Entity. If the Founder Advisory Agreement is terminated under (i) or (ii)(A), Holdco will pay the EverArc Founder Entity an amount in cash equal to: (a) the Fixed Annual Advisory Amount for the year in which termination occurs and for each remaining year of the term of the agreement, in each case at the Payment Price; and (b) the Variable Annual Advisory Amount that would have been payable for the year of termination and for each remaining year of the term of the agreement. In each case the Payment Price in the year of termination will be calculated on the basis of the Payment Year ending on the trading day immediately prior to the date of termination, save that in the event of a Sale of Holdco, the Payment Price will be calculated on the basis of the amount paid by the relevant third party (or cash equivalent if such amount is not paid in cash). For each remaining year of the term of the agreement the Payment Price in each case will increase by 15% each year. No account will be taken of any Payment Price in any year preceding the termination when calculating amounts due on termination. Payment will be immediately due and payable on the date of termination of the Founder Advisory Agreement. On the entry into liquidation of Holdco, an Advisory Amount will be payable in respect of a shortened year which will end on the trading day immediately prior to the date of commencement of liquidation.

The Founder Advisory Agreement is governed by New York law.

 

115


Table of Contents

INFORMATION ABOUT PERIMETER

References in this section to “we,” “our,” “us,” the “Company” or “Perimeter” generally refer to Perimeter.

Overview

We are a leading global solutions provider, producing high-quality firefighting products and lubricant additives. We develop products that impact critically important issues of life – issues where there often is no room for error and the job doesn’t offer second chances. At Perimeter, we characterize the solutions we develop as ‘Solutions that Save’ – which helps underscore what we are trying to accomplish for our customers and the world at large, across our business segments.

Our product offerings are characterized by superior quality standards, proprietary formulations, and a high level of service and commitment. We are an innovation leader in each industry and for each customer group we serve – we collaborate closely with our customers to consistently innovate on our products in order to deliver superior performance and customer value.

We operate primarily through two business units: Fire Safety and Oil Additives.

Fire Safety Business Segment

The Fire Safety business segment consists of the sale of fire retardants and firefighting foams, as well as specialized equipment and services typically offered in conjunction with our retardant and foam products.

Fire Retardants

Perimeter’s fire retardants help slow, stop and prevent wildfires by chemically altering fuels and rendering them non-flammable. Fire retardant is typically applied ahead of an active wildland fire to stop or slow its spread, in order to support the efforts of ground-based firefighters to safely extinguish the fire. Retardants can be applied aerially via fixed or rotor wing aircraft, or by ground using standard fire engines or Perimeter’s dedicated ground-applied retardant units. All of Perimeter’s products have a high level of retardant effectiveness, with differences in visibility, viscosity, adherence to vegetation, and persistence through weathering.

Perimeter’s fire retardant customers are typically government agencies with responsibility for protecting both government and private land, although the company also serves commercial customers. Perimeter supplies federal, state, provincial, local/municipal, and commercial customers around the world, including in the United States, Canada, France, Italy, Australia and Israel.

Perimeter is the only supplier of USDA Forest Service qualified fire retardant – a standard that many countries have adopted for ensuring fire retardant is effective, safe and environmentally friendly.

While fire retardant is primarily used to stop or slow the spread of active wildland fires, Perimeter fire retardant is also increasingly utilized in a preventative capacity. The company is expanding its offerings to several high hazard industries, with an initial focus on utility companies. Wildfires ignited by utilities have turned into some of the most devastating wildfires in U.S. history, many of which have occurred in recent years. Western U.S. states in particular are becoming increasingly diligent in wildfire prevention efforts and increasing their investments to prevent wildfire risk. Perimeter offers a variety of ways to utilize retardant to prevent ignitions and protect critical infrastructure, including:

 

   

Around electrical or utility poles in place of banned herbicides

 

   

Part of a utility’s wildfire mitigation plan

 

   

Preventatively protecting assets (substations, towers, solar, hydro, and nuclear sites)

 

116


Table of Contents
   

Protecting assets in the event of an approaching fire (Rapid Response)

 

   

Protecting assets and communities alongside prescribed burns

 

   

Protecting utility personnel and ingress/egress routes

 

   

Protecting railroad right of ways and trestle bridges

Perimeter is an innovation leader in fire retardant, driving continuous improvements in product performance to offer increasing value for its customers. Perimeter has made significant enhancements in safety, environmental stewardship and effectiveness, as well as advancements in visibility and aerial drop performance. Working in partnership with the USDA Forest Service Wildland Fire Chemicals group to characterize and develop new products, Perimeter consistently releases new standard-setting products, recently including the PHOS-CHEK® “Fx” family of ultra-high visibility fugitive-colored products, PHOS-CHEK LCE20-Fx next generation liquid concentrate which combines high performance with improvement environmental performance, and PHOS-CHEK FORTIFY