Applied Aerospace & Defense, Inc S-1/A, filed May 26, 2026
Applied Aerospace & Defense, Inc. (AADX)
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As filed with the U.S. Securities and Exchange Commission on May 26, 2026.
Registration No. 333-295691
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Applied Aerospace & Defense, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 3728 | 92-0890338 | ||
| (State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
355 Quality Circle NW
Huntsville, AL 35806
(202) 983 3291
(Address, including zip code and telephone number, including area code, of registrant’s principal executive offices)
James William Ferguson, III
Chief Executive Officer
355 Quality Circle NW
Huntsville, AL 35806
(202) 983 3291
(Name, address, including zip code and telephone number, including area code, of agent for service)
Copies of all communications, including communications sent to agent for service, should be sent to:
| Ross M. Leff Christie W.S. Mok Aaron Z. Simons Kirkland & Ellis LLP 601 Lexington Avenue New York, New York 10022 (212) 446-4800 |
Michael Kaplan Roshni Banker Cariello Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 (212) 450-4000 |
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, 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, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| 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. ☐
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 this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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The information in this prospectus is not complete and may be changed. We may not sell these securities until such time as the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, dated May 26, 2026
32,500,000 Shares
Applied Aerospace & Defense, Inc.
Common Stock
This is an initial public offering of Applied Aerospace & Defense, Inc. We are offering 32,500,000 shares of our common stock, par value $0.01 per share.
Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $18.00 and $21.00. We have applied to list our common stock on the New York Stock Exchange under the symbol “AADX.”
Immediately after this offering, affiliates of Greenbriar Equity Group, L.P. will beneficially own approximately 81.0% of our common stock (or 78.7% of our common stock if the underwriters’ option to purchase additional shares is exercised in full). As a result, after the completion of this offering, we will be a “controlled company” within the meaning of the corporate governance standards of the New York Stock Exchange. See “Management—Controlled Company Exemption.”
We qualify as an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, we have elected to take advantage of certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary—Emerging Growth Company.”
Investing in our common stock involves risks. See “Risk Factors” beginning on page 22 of this prospectus.
| Per Share |
Total | |||||||
| Initial public offering price |
$ | $ | ||||||
| Underwriting discounts and commissions(1) |
$ | $ | ||||||
| Proceeds, before expenses, to us |
$ | $ | ||||||
| (1) | See “Underwriting (Conflicts of Interest)” for a description of compensation to be paid to the underwriters. |
We have granted the underwriters an option to purchase up to an additional 4,875,000 shares of common stock from us at the initial offering price, less underwriting discounts and commissions, for 30 days after the date of this prospectus.
At our request, the underwriters have reserved up to 1,625,000 shares of our common stock, or 5.0% of the shares offered by this prospectus (excluding the 4,875,000 additional shares that the underwriters have an option to purchase), for sale at the initial public offering price through a directed share program to certain of our directors, officers, employees and others. See the section entitled “Underwriting (Conflicts of Interest)—Directed Share Program” for additional information.
Neither the Securities and Exchange Commission nor any state securities commission or 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.
The underwriters expect to deliver the shares of common stock against payment in New York, New York on or about , 2026.
| Morgan Stanley | Jefferies |
| BofA Securities | RBC Capital Markets | Guggenheim Securities | ||
| Baird | Stifel | Wolfe | Nomura Alliance | ||
| Co-Manager
Academy Securities |
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Prospectus dated , 2026
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| UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION |
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Through and including , 2026 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
We are responsible for the information contained in this prospectus and in any free writing prospectus we prepare or authorize. We have not, and the underwriters have not, authorized anyone to provide you with different information, and we and the underwriters take no responsibility for any other information others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the cover of this prospectus.
Persons who come into possession of this prospectus and any applicable free writing prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus and any such free writing prospectus applicable to that jurisdiction.
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ABOUT THIS PROSPECTUS
Unless the context otherwise requires, all references in this prospectus to the “Company,” “Applied Aerospace,” “we,” “us,” “our,” or similar terms refer to Applied Aerospace & Defense, Inc. and its consolidated subsidiaries.
Neither we nor the underwriters have authorized anyone to provide you with information or make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you. We and the underwriters take no responsibility for, and provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date.
For investors outside the United States: we and the underwriters have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.
TRADEMARKS
We own or have rights to use various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus may contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names, or products in this prospectus is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks, and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable owner of these trademarks, service marks and trade names.
MARKET AND INDUSTRY DATA
We use market data and industry forecasts and projections throughout this prospectus, and in particular in the sections captioned “Prospectus Summary” and “Business.” We have obtained the market data from certain third-party sources of information, including publicly available industry publications. Industry forecasts are based on industry surveys and the preparer’s expertise in the industry, and there can be no assurance that any of the industry forecasts will be achieved. Any industry forecasts are based on data (including third-party data), models and experience of various professionals and are based on various assumptions, all of which are subject to change without notice. While we are not aware of any misstatements regarding the market data presented herein, industry forecasts and projections involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors.”
BASIS OF PRESENTATION
Unless otherwise indicated, the information presented in this prospectus, other than our historical financial statements (i) assumes no exercise of the underwriters’ option to purchase up to an additional 4,875,000 shares of common stock from us in this offering and (ii) is adjusted to reflect our 872,901.03-for-1 forward split of our common stock (the “Stock Split”), occurring subsequent to the effectiveness of the registration statement of which
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this prospectus is a part, which will be effective upon filing of our amended and restated certificate of incorporation prior to the completion of this offering. Certain numbers reflected in this prospectus represent approximations due to required rounding in connection with the anticipated Stock Split. The actual numbers will not differ materially from such approximations.
Historical Financial Information of Applied Aerospace & Defense, Inc.
Applied Aerospace & Defense, Inc., the registrant whose name appears on the cover of this registration statement, is a corporation incorporated under the laws of the State of Delaware. We were originally formed as a corporation incorporated under the laws of the State of Delaware on October 7, 2022 under the name GB Eagle Topco, Inc. and subsequently changed our name to Applied Aerospace & Defense, Inc. on November 14, 2025.
On November 14, 2025, AA&D Holdings, LP, our parent company, completed a merger with Rotor Topco, LP (the “Combination”). Upon the completion of the Combination, all outstanding units of Rotor Topco, LP were automatically converted into units of AA&D Holdings, LP and all of Rotor Topco, LP’s existing subsidiaries became subsidiaries of Applied Aerospace & Defense, Inc., resulting in the combination of the businesses previously operating as Applied Aerospace Structures Corporation (“AASC”) and PCX Aerostructures, LLC (“PCX”). The Combination was accounted for as a common control transaction as both AA&D Holdings, LP and Rotor Topco, LP were under the common control of Greenbriar Equity Fund V, L.P., an entity affiliated with Greenbriar Equity Group, L.P. (“Greenbriar”).
The historical consolidated financial statements, the summary historical consolidated financial data and the other financial information included in this prospectus are those of Applied Aerospace & Defense, Inc. and have been retrospectively combined to reflect the Combination between Rotor Topco, LP and AA&D Holdings, LP. The assets, liabilities, equity, revenues, and expenses of the combining entities have been presented on a combined basis for all periods presented using historical carrying amounts, and comparative periods reflect the entities as if they had always been combined. The historical consolidated financial statements, the summary historical consolidated financial data and the other financial information of Applied Aerospace & Defense, Inc. included in this prospectus also reflect our acquisition of each of Innovative Composite Engineering LLC (“ICEL”) and NeXolve Holdings, LLC (“NeXolve”), which were completed on October 1, 2024 and March 4, 2025, respectively, from their acquisition dates and neither was significant under Rule 3-05 of Regulation S-X under the Securities Act of 1933, as amended (the “Securities Act”).
Historical Financial Information of Consolidated Boring Inc.
On March 2, 2026, the Company acquired 100% of the equity interests in Consolidated Boring Inc. (“CBI”). This prospectus contains the audited consolidated financial statements of CBI as of and for the year ended December 31, 2025.
Unaudited Pro Forma Condensed Combined Financial Information
This prospectus contains unaudited pro forma condensed combined financial information for the three months ended March 31, 2026 and the year ended December 31, 2025. The unaudited pro forma condensed combined financial information contained in this prospectus is derived from “Unaudited Pro Forma Condensed Combined Financial Information,” which has been prepared in accordance with Article 11 of Regulation S-X under the Securities Act.
The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2026 combines (i) the unaudited condensed consolidated statement of operations of the Company for the three months ended March 31, 2026, which includes CBI’s operating results from the acquisition date, and (ii) the unaudited operating results for CBI from January 1, 2026 through March 1, 2026. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2025 contained in this prospectus
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combines (i) the audited consolidated statement of operations of the Company for the year ended December 31, 2025 and (ii) the audited consolidated statement of operations of CBI for the year ended December 31, 2025. Both sets of unaudited pro forma consolidated statements of operations give effect to the consummation of the acquisition of CBI, inclusive of the related financing arrangements, as described in “Unaudited Pro Forma Condensed Combined Financial Information” (such transactions, collectively, the “Transactions”) as if they had been consummated on January 1, 2025.
The pro forma adjustments reflected in the unaudited pro forma condensed combined financial information set forth in this prospectus are based upon available information and certain assumptions that management believes to be reasonable. The unaudited pro forma condensed combined financial information contained in this prospectus is provided for illustrative and informational purposes only and does not purport to represent or be indicative of the consolidated results of operations or financial condition of the Company had the Transactions been completed as of the dates presented and should not be construed as representative of the future consolidated results of operations or financial condition of the Company.
Certain amounts, percentages and other figures presented in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals, dollars or percentage amounts of changes may not represent the arithmetic summation or calculation of the figures that precede them.
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This summary highlights selected information contained elsewhere in this prospectus. It does not contain all of the information that may be important to you and your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including the matters set forth under the sections of this prospectus captioned “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. References to financial or other data presented as “pro forma” or “on a pro forma basis” refer to a presentation that applies adjustments to give pro forma effect to the CBI acquisition over the applicable time period or as of the relevant date. For more information, see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” included elsewhere in this prospectus.
Our Company
We are a premier provider of advanced design, engineering, and vertically integrated manufacturing solutions for leading and next-generation space and defense technology companies. We build complex, mission-critical subsystems for extreme operating environments serving three core markets: Space and Launch Systems; Defense Aviation and Airborne Systems; and Command, Control, Communications, Computers, Cyber, Intelligence, Surveillance and Reconnaissance (“C5ISR”) and Precision Strike Systems. With decades of space and defense manufacturing heritage, we combine material science and intellectual property (“IP”)-enabled process expertise with the ability to enable rapid prototyping, enhance new product development, and responsively scale production. Across our nationwide network of advanced manufacturing facilities, we continuously support a balanced mix of next-generation technology and platform development, large scale production programs, and aftermarket sustainment for enduring platforms.
The increasing complexity of next-generation space and defense platforms, combined with decades of underinvestment in scaled, technically differentiated mid-tier manufacturing companies, has created a structural need for engineering-integrated advanced manufacturing partners capable of delivering mission-critical systems at production scale. As a record number of new space and defense programs are accelerating from development into sustained production and long-duration aftermarket support, suppliers with deep process expertise, lifecycle embeddedness, and the capacity to industrialize rapidly are becoming increasingly attractive to the U.S. and allied industrial base.
We are purpose-built to scale with the nation’s accelerating space and defense demands, and we believe the breadth and depth of our manufacturing competencies are essential to the design, production and support of next-generation platforms. We maintain decades-long relationships with both blue-chip aerospace and defense prime contractors and next-generation technology innovators as a critical supply chain partner. These customers depend on us to supply highly-engineered systems to enable their most important platforms. Our track record underlies our sole- or single-source positions that represent approximately 87% of our revenue and approximately 86% of our pro forma revenue for the fiscal year ended December 31, 2025. We believe our full lifecycle, diversified, and IP-enabled capabilities provide outsized value to our customers by delivering uncompromising performance, improving cost efficiencies, and accelerating production.
We are innovators and critical enablers in our three large and growing end markets. Rapid expansion across the commercial, civil, and national security space sectors is accelerating demand in Space and Launch Systems, supported by industry growth where reusable launch architectures have underpinned cost-effective access to space and opened new markets including proliferated satellite constellations. At the same time, an increasingly complex and dynamic global threat environment is driving robust investment in next-generation airborne capabilities and modernization of enduring platforms. This supports significant, broad-based growth in Defense Aviation and Airborne Systems as autonomy, stealth, and high-performance aircraft become strategic priorities. Demand is also rising across C5ISR and Precision Strike Systems as the United States and allies prioritize networked battlefield capabilities, layered missile defense, and large-scale missile and munitions rearmament, positioning these areas for strong, visible, multi-year demand. In each of our end markets, we build mission-critical, high-consequence subsystems and assemblies for marquee platforms which we believe are strategically aligned with the most important U.S. and allied defense priorities.
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Percentages above reflect contribution of each end market to the Company’s pro forma revenue for the fiscal year ended December 31, 2025. On a historical basis for the fiscal year ended December 31, 2025, Space and Launch Systems represented 23%, Defense Aviation and Airborne Systems represented 66% and C5ISR and Precision Strike Systems represented 11% of the Company’s revenue.
Our markets are experiencing strong, sustained growth, but the ability of the space and defense supply chain to manufacture mission-critical subsystems at production scale remains constrained. Over the past several decades, consolidation, offshoring, and underinvestment have reduced the number of scaled, technically differentiated mid-tier manufacturing platforms within the U.S. industrial base. As production requirements increase and next-generation systems move from prototype to full-rate manufacturing, our customers are prioritizing partners with ready capacity, proven process expertise, accelerated qualification capabilities, and repeatable throughput that can responsively scale. We believe that our years of investment in talent, facilities, capacity, and capabilities equip us to successfully service our customers during their next phases of growth.
We enable critical space and defense platforms through high-consequence subsystems engineered for the edge enabling mission-critical functions such as power and propulsion, battlefield connectivity, and survivability in extreme environments. Examples of our systems include reusable landing systems for launch vehicles, control surfaces for next-generation fixed wing platforms, and solid rocket motor cases for missile platforms. Our systems are proven in the most demanding environments, including in the vacuum of space, through atmospheric reentry, and on the battlefield, enabling high-consequence capabilities such as supersonic flight, orbital delivery, and advanced sensing. Our decades of proven performance underpin our ability to scale and adapt to the evolving needs of the U.S. space and defense industrial base across the full platform lifecycle, from design and prototyping through production, aftermarket, and sustainment. Approximately 33% of our revenue and 27% of our pro forma revenue for the fiscal year ended December 31, 2025 is tied to systems for aftermarket and sustainment, providing long-term revenue visibility due to long-duration platform service lives.
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Our purpose-built platform has been developed through disciplined strategic acquisitions and platform investments that have further strengthened our capabilities to meet the growing demands of the space and defense industrial base. Our national manufacturing footprint supports scaled production of American-made critical systems for leading space and defense platforms. We operate eleven state-of-the-art facilities in the United States with approximately 1.5 million square feet of manufacturing space in total. Our facilities enable our breadth of capabilities across systems and material types and include differentiated and hard-to-replicate resources and capabilities such as flow forming facilities, complex composite tube manufacturing, radio frequency (“RF”) transparent composite manufacturing, spin forming for propulsion tanks, near-net shape forming, deep hole boring, and large-scale clean room capacity. Our footprint is designed to scale with our customers and is growing today, with a number of expansion opportunities both in process and identified, and is intended to support the demand to come from next-generation platform production ramps.
For the fiscal year ended December 31, 2025, we generated $498.8 million in revenue, representing 24.8% year over year growth from revenue of $399.8 million in the fiscal year ended December 31, 2024. Additionally, for the fiscal year ended December 31, 2025, we had net loss and Adjusted EBITDA of $17.0 million and $117.9 million, respectively, compared to a net loss and Adjusted EBITDA of $34.8 million and $84.0 million, respectively, in the fiscal year ended December 31, 2024. Our Adjusted EBITDA Margin increased from 21.0% in the fiscal year ended December 31, 2024 to 23.6% in the fiscal year ended December 31, 2025. Our pro forma revenue was $604.3 million, our pro forma net loss was $49.0 million, our Pro Forma Adjusted EBITDA was $141.9 million and our Pro Forma Adjusted EBITDA Margin was 23.5% in the fiscal year ended December 31, 2025, in each case after giving effect to our acquisition of CBI. For the fiscal quarter ended March 31, 2026, we generated $134.4 million in revenue, representing 21.0% year-over-year growth from revenue of $111.0 million in the fiscal quarter ended March 31, 2025. Additionally, for the fiscal quarter ended March 31, 2026, we had net loss and Adjusted EBITDA of $15.1 million and $26.5 million, respectively, compared to a net loss and Adjusted EBITDA of $7.3 million and $25.3 million, respectively, in the fiscal quarter ended March 31, 2025. Our Adjusted EBITDA Margin decreased from 22.8% in the fiscal quarter ended March 31, 2025 to 19.8% in the fiscal quarter ended March 31, 2026. Our pro forma revenue was $152.0 million, our pro forma net loss was $78.8 million, our Pro Forma Adjusted EBITDA was $28.7 million and our Pro Forma Adjusted EBITDA Margin was 18.9% in the fiscal quarter ended March 31, 2026, in each case after giving effect to our acquisition of CBI. See “—Summary Historical and Pro Forma Financial and Other Information” for more information about how we define and calculate Adjusted EBITDA, Pro Forma Adjusted EBITDA, Adjusted EBITDA Margin and Pro Forma Adjusted EBITDA Margin, and for a reconciliation to their most comparable measures under U.S. generally accepted accounting principles (“GAAP”).
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As of March 31, 2026, our total indebtedness was approximately $1,017.8 million, consisting of approximately $971.7 million in principal amount of term loan borrowings under our Credit Agreement (as defined below) and $46.1 million of borrowings under our revolving credit facility. As a result of our substantial indebtedness, we have a history of net losses due to a significant amount of our cash flows historically being used to pay interest and principal on our outstanding indebtedness. See “Risk Factors—Risks Related to our Financial Condition—Our indebtedness and restrictive covenants under our credit facilities could limit our operational and financial flexibility.”
Our History
Our company is the result of a series of transformative business combinations and strategic acquisitions that have brought together complementary space and defense businesses with longstanding heritage and differentiated technical capabilities. The registrant was formed in October 2022 in connection with Greenbriar’s acquisition of AASC, creating an efficient corporate structure that captures the heritage of the acquired businesses, including AASC and PCX.
On November 14, 2025, AA&D Holdings, LP merged with Rotor Topco, LP, combining the businesses previously operating as AASC and PCX under our current corporate structure. Prior to and following the November 2025 combination, we expanded our capabilities, geographic footprint, and manufacturing capacity through a series of acquisitions.
AASC, originally founded in Stockton, California in 1954, expanded its capabilities through the acquisition of ICEL in 2024, which added our White Salmon, Washington facility, and through the acquisition of NeXolve in 2025, which added our Huntsville, Alabama facility.
PCX, founded in 1900 and historically headquartered in Newington, Connecticut, was acquired by Greenbriar in 2021. In 2021 and 2022, PCX completed eight acquisitions that expanded its capabilities, geographic footprint, and capacity.
Following the November 2025 combination, we also acquired CBI, Vestigo Aerospace, Inc. (“Vestigo”) and Rainwater Holdings, Inc. (“Ultracor”), further expanding our capabilities and adding manufacturing facilities, including those in Cincinnati, Ohio and Billerica, Massachusetts.
As a result of these transactions, we provide advanced design, engineering, and vertically integrated manufacturing solutions for mission-critical, highly engineered space and defense systems. Through a national network of IP-enabled, advanced manufacturing facilities, we support leading and next-generation space and defense technology companies with the speed, scale, and technical performance required for demanding applications. Our capabilities have been built over time through legacy businesses with operating histories dating back more than a century. References in this prospectus to our deep customer relationships, workforce experience, manufacturing heritage, and historical performance reflect the combined operating histories of the businesses that now comprise our company.
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Our Market Opportunity
We believe our breadth of capabilities across our three end markets positions us to take advantage of multiple independent and strong tailwinds and key demand drivers of a multi-year modernization and recapitalization cycle, as illustrated in the diagram below:
Space and Launch Systems
Space and Launch Systems is one of our largest and fastest-growing end markets. The World Economic Forum projects that the space economy will reach $1.8 trillion by 2035, nearly three times its $630 billion size in 2023. We believe we are well positioned to benefit through end-to-end exposure across commercial and national security space platforms, propulsion, and de-orbit solutions.
Growth in the launch systems market is driven by higher mission cadence and the need for reliable, cost-efficient access to space. As commercial constellations expand and government timelines accelerate, launch providers are investing in next-generation vehicles that enable faster turnaround, greater throughput, and more predictable scheduling. These capabilities are increasingly critical as operators seek to support frequent deployment and replenishment missions, reinforcing demand for scalable and responsive launch infrastructure. We believe our highly engineered subsystems advance these important initiatives, alongside re-usability, which further improves launch economics leading to continued affordability and proliferation of space systems. Furthermore, we believe our demonstrated solution set, inclusive of intricate material science capabilities embedded into highly specialized manufacturing processes, has contributed to a continued outsourcing trend for flight-critical launch systems, as customers place trust in suppliers like Applied that can consistently deliver effective solutions for harsh environments.
The space systems market is expanding rapidly as satellite deployments accelerate across commercial communications, Earth-observation, and exploration missions. More than 15,000 new on-orbit assets are planned by 2028 according to The World Economic Forum, including communications, earth observation, and navigation satellites for defense and commercial applications, driving demand for increasingly capable and sophisticated spacecraft. At the same time, propulsion systems are undergoing a significant transition as launch firms prioritize higher-energy missions and greater in-orbit maneuverability. Increasing constellation density and regulatory pressure are also elevating the importance of effective maneuvering and end-of-life disposal, making advanced propulsion a critical enabler of modern space architectures.
National security requirements are reshaping the Space and Launch Systems market, with defense programs demanding resilient, distributed constellations capable of supporting operations in contested environments.
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Reliable access to space and predictable launch schedules are essential for responsive defense and rapid replenishment missions, a trend reinforced by rising U.S. defense spending and increased doctrinal focus on space-based assets. Programs such as the Golden Dome for America (the “Golden Dome”), advanced surveillance architectures, and renewed investment in crewed spaceflight underscore the strategic importance of space as a core element of the national security infrastructure.
Defense Aviation and Airborne Systems
Defense Aviation and Airborne Systems consists of manned and unmanned fixed-wing aircraft and rotorcraft. Demand for airborne platforms is accelerating as global militaries reposition their airpower to adapt to an evolving battlefield increasingly shaped by drones, advanced technologies, and low-cost precision weapons. Rising global defense budgets and renewed focus on air dominance against anticipated near-peer threats are driving increased investment in fifth-generation fighters and next-generation vertical lift platforms. International procurement also continues to accelerate as U.S. allies modernize fleets to meet North Atlantic Treaty Organization (“NATO”) standards and counter regional threats, supporting sustained demand across multi-role fighters, Intelligence, Surveillance, and Reconnaissance (“ISR”), maritime patrol, and next-generation unmanned platforms.
The defense aviation market benefits from large, long-lived installed bases across both enduring and next-generation platforms. Many of these rotorcraft platforms are expected to remain in service for multiple decades and require continuous sustainment to maintain operational readiness. Life-limited components are subject to stringent replacement schedules, recurring inspections, and ongoing service life extension programs, creating one of the most durable and predictable aftermarket segments within defense aviation. Approximately 27% of our pro forma revenue is tied to aftermarket and sustainment demand across installed defense rotorcraft fleets for the year ended December 31, 2025, providing visible, recurring cash flow supported by long-duration platform service lives. Recent real-world operational demands for vertical lift assets supporting frequent troop movements and rapid insertion and extraction have further reinforced the importance of reliable, mission-ready platforms and sustained aftermarket support.
Autonomy and advanced technologies are increasingly central to the evolution of airborne platforms across both manned and unmanned systems. Strategic priorities such as the Collaborative Combat Aircraft (“CCA”) programs are accelerating the deployment of autonomous and semi-autonomous aircraft designed to operate alongside crewed fighters in highly contested and demanding performance environments. These platforms are expected to be procured at materially higher volumes than traditional high-end fighter aircraft, increasing the importance of advanced manufacturing partners capable of delivering the requisite precision, repeatability, and scalable throughput.
C5ISR and Precision Strike Systems
The C5ISR and Precision Strike Systems end market is positioned for continued growth, driven by demand across critical strike and sensing systems.
The U.S. government’s national defense budget for the 2026 fiscal year reflects a continued prioritization of contested environment operations, including procurement of a range of sensing and command-and-control platforms and enabling sub-systems. Modernization efforts that emphasize persistent surveillance are driving increased demand for advanced radar, RF, and electro-optical/infrared (“EO/IR”) sensing systems deployed across ground, airborne, maritime, and space-based platforms to enable next-generation situational awareness. The Golden Dome layered missile defense ecosystem underscores this shift toward integrated sensor-to-shooter kill chains—reinforcing demand for high-fidelity, resilient sensing and tracking infrastructure across emerging and enduring platforms.
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Precision strike systems remain a top rearmament priority, driving sustained demand for expanded production of existing missile and propulsion systems as militaries replenish depleted inventories and increase stockpile levels. Current manufacturing capacity remains insufficient to meet projected demand, prompting government initiatives to expand industrial throughput and strengthen qualified supply chains. Solid rocket motor manufacturing has emerged as a key priority given its critical role across interceptors, tactical missiles, long-range fires, and hypersonic systems. We have the capacity and workforce to support such expansion for the key programs for which we already provide effective support.
In parallel, a broad set of next-generation strike programs, including new missile families, interceptors, advanced propulsion systems, and hypersonic platforms, are progressing through development and early production phases, creating a multi-year pipeline of new opportunities across enduring and emerging architectures. According to the Congressional Research Service and Office of the Undersecretary of Defense, U.S. Research, Development, Test, and Evaluation (“RDT&E”) funding for the U.S. Department of War has increased materially over the past decade to support hypersonic glide vehicles, new cruise-missile families, precision-guided munitions, and emerging strike technologies. These investments are reinforced by geopolitical uncertainty and shifting strategic frameworks, including the expiration of the New START treaty, which is driving renewed emphasis on strategic deterrence and advanced missile capabilities.
Our Competitive Strengths
We believe we are uniquely positioned in the market due to our deep technical expertise on complex, mission-critical subsystems and assemblies, long-standing relationships with key customers, and comprehensive advanced manufacturing capabilities. Our ability to rapidly design, engineer, prototype, and deliver systems at scale through vertical integration and IP-enabled processes provide a unique and sustainable competitive advantage. Furthermore, decades of proven superior performance have embedded us as a trusted partner to our diverse and discerning customers, reinforcing a durable and defensible competitive advantage.
IP-Enabled, Integrated Capabilities Enhance Quality, Cost, and Speed Advantages for Space and Defense Innovators
IP-enabled processes form the foundation of our operating model. By embedding our deep materials science expertise, specialized manufacturing equipment and infrastructure, collaborative engineering resources, integrated in-house capabilities, and proprietary workflow designs across the platform, we create differentiated and repeatable processes that enhance quality, speed, and execution certainty. For the fiscal year ended December 31, 2025, approximately 89% of our revenue and 88% of our pro forma revenue is tied to IP-enabled production processes. We believe these processes provide meaningful value to our customers by delivering performance, speed, and cost-efficiency advantages on their most demanding programs, while also reinforcing our competitive position.
We also influence and develop design IP in niche subsystems that are complementary to our broader capability set, such as satellite propellant tanks, antenna reflectors, deorbit technologies, and solar sails. These complementary offerings leverage our advanced materials and manufacturing capabilities, expand our participation in adjacent product categories, and represent an attractive growth vector alongside our core process IP-enabled manufacturing business.
In addition to our IP-enabled processes, the selective and strategic pursuit of vertical integration has further enabled us to enhance customer outcomes. For us, vertical integration is another strategic tool in our efforts to improve quality and performance, lower cost, and deliver shorter lead times. By developing or internalizing select critical capabilities across engineering, manufacturing, and testing capabilities, we maintain greater control over execution and more consistently meet demanding program requirements. We believe our IP-enabled,
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vertically integrated solution set has helped create a durable competitive advantage and supports the 87% and 86% sole/single-source contract positions we hold today on a historical and pro forma basis for the fiscal year ended December 31, 2025, respectively.
Decades of Space and Defense Manufacturing Heritage for Leading-Edge Customers
Our cohesive set of advanced manufacturing capabilities were built over decades to deliver extraordinary value to our customers’ most complex, mission-critical systems and subassemblies. We think differently, operating with an engineering-led, IP-enabled, and vertically integrated model that prioritizes reliability, speed, precision, and delivery at scale. As a result, we have earned the trust of the most demanding customers in space and defense by consistently meeting stringent performance, time-to-market, and durability requirements. Our sustained execution has resulted in entrenched positions across major programs, with approximately 87% of our revenue and 86% of our pro forma revenue stemming from sole-/single-source awards with blue-chip prime contractors for the year ended December 31, 2025. These positions reflect years of proven performance, qualification success, and deep integration into platform architectures, with our average customer relationship spanning 39 years. Because our systems are embedded in long-lived platforms, customers rely on us for multi-decade production and sustainment, making dual-sourcing or insourcing impractical and reinforcing long-standing relationships that extend across programs and generations of platforms. We also benefit from the current rapid evolution of the space and defense landscape and have multiple new customer wins that have resulted from the natural advancement of our trusted engineering and supply chain relationships.
Cohesive and Differentiated Executive Team Driving Mission-Focus and Next-Generation Agility
Our leadership team was intentionally assembled to scale a differentiated advanced manufacturing platform serving high growth space and defense markets. Our team combines mission-oriented leadership, deep advanced manufacturing expertise, experience scaling next-generation defense technology platforms, public company financial reporting and controls, and expansive knowledge of the U.S. aerospace and defense industrial base. Their complementary breadth of experiences underlies our commitment to disciplined growth, operational excellence, and long-term value creation. Across our leadership team, we boast approximately a combined 231 years of industry experience. Our leadership team is supported by over 1,540 dedicated professionals across our footprint, including over 200 engineers and over 400 long-tenured subject matter experts. Our team includes over 400 professionals with more than 10 years of service at Applied, including a substantial number with over 20 years of experience, providing the continuity and depth of expertise that enables our highly specialized capabilities.
Strategic Alignment with Highest-Priority Space and Defense Programs and Initiatives
Our flight- and mission-critical products are embedded across commercial, civil, and national security programs that directly align with U.S. national defense strategy priorities and rapidly expanding commercial space initiatives. We are closely aligned with the programs driving space superiority, resilient national security architectures, and the modernization of the defense industrial base, positioning us alongside customers executing the most critical, well-funded missions and growing programs. As these initiatives advance from development into scaled, long-duration production, our early program involvement and deep integration position us to remain a long-term partner of choice. With customers at the center of these priority efforts, we are well-positioned to benefit from the sustained investment and structural tailwinds shaping the next generation of space and defense markets.
Diversified Across Sub-Markets, Customers, Platforms, and Program Lifecycles
Our capabilities span the full lifecycle of a program, from early design, rapid prototyping, and testing to full-rate production and long-term sustainment. On next-generation platforms, our ability to iterate quickly and
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collaborate directly with our customers shortens development timelines and accelerates time-to-market, enabling customers to meet demanding program milestones. At the same time, our deep experience supporting enduring platforms allows us to support customers through full-rate production, aftermarket demand, and sustainment and service life extension cycles as systems age and require replacement or upgrade. By remaining relevant across every phase of a platform’s life and reinforcing this engagement with IP-enabled processes, we establish entrenched positions and deliver consistent, long-term value.
Specialized Manufacturing Facility Infrastructure, Ready Capacity and Scalability, and National Footprint
We operate a nationwide network of specialized manufacturing facilities designed for scaled production. These sites have been carefully selected and methodically invested in to bring differentiated capabilities, creating a manufacturing footprint with depth and breadth that is difficult to replicate. Our facilities total over 1.5 million square feet and are equipped to support rapid expansion, with additional capacity and expansion opportunities that ensure we can scale to meet rising demand to support next-generation programs. For instance, we have a one-of-a-kind infrastructure that enables our manufacturing and testing of satellites and spacecraft, unmatched capacity of flow forming for solid rocket motor cases, and unique composite tube fabrication for reusable launch and payload deployment applications. Across this network, we enable classified and highly complex programs to be executed at scale, positioning the platform to support long-term growth and increasingly critical applications.
Breadth of Engineering Talent and Extensive Specialized Materials and Production Technical Expertise
We bring hard-earned expertise developed over decades of experience across our workforce. Our over 200 engineers and deep bench of subject matter experts possess broad expertise across multiple advanced materials, including composites, metallics, and polymers. We apply this knowledge across a broad set of manufacturing capabilities. This combination of material science depth and multi-disciplinary expertise, reinforced by a highly tenured and mission-oriented team, enables us to deliver differentiated, highly-engineered products and subassembly systems tailored to extremely stringent qualifications and requirements.
Strong Financial Profile with High Level of Forward Visibility
We have consistently delivered a strong and attractive financial profile, supported by exposure to high-value programs, approximately 86% sole- and single-source positions on a pro forma basis for the fiscal year ended December 31, 2025, and a culture rooted in operational excellence and mission focus. For the fiscal year ended December 31, 2025, we generated revenue growth of 24.8% and Adjusted EBITDA Margin of approximately 23.6%. Our participation in enduring platforms, many of which are expected to remain in production and service for decades, provides meaningful revenue visibility and long-term stability, with a contract backlog of $1,060.1 million as of March 31, 2026. We believe our positions on next-generation programs create a clear and compelling runway for future growth, shown through our approximately $3.8 billion weighted pipeline as of March 31, 2026. Weighted pipeline represents the total expected value of new business opportunities with new or existing customers in the pipeline after adjusting each opportunity for management’s estimates of the probability that it proceeds and Applied’s likelihood of winning the opportunity. The weighted pipeline excludes the value of contracted backlog. See “—Summary Historical and Pro Forma Financial and Other Information” for more information about how we define and calculate Adjusted EBITDA Margin and for a reconciliation of net loss margin, the most comparable measure under GAAP, to Adjusted EBITDA Margin.
Our Growth Strategy
We intend to pursue a focused organic and inorganic growth strategy, executing on the diverse set of opportunities present in each of our growing end markets. Our strategy is aimed at increasing top-line growth, earnings, and cash flow generation, and ultimately creating meaningful value for our shareholders.
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Support Ramping Production of High Growth Platforms
Our complex, highly engineered systems are critical enablers for a number of high-demand, next-generation space and defense platforms today. These platforms are positioned for meaningful production ramps as demand for advanced space and defense systems continues to grow in response to the current global dynamic threat environment, and the platforms we serve meet the critical capability needs of the U.S. and allied nations. We intend to reliably enable performance for these growing customer platforms through the critical systems we offer that are specified in their designs. By enabling ramping production schedules, we can realize significant growth in our business and further establish incumbency and entrenched sole-source positions with our customers. Furthermore, we serve a sizeable installed base of critical U.S. and allied fleets which require regular servicing and modernization for sustainment and fleet readiness. These platforms supply us with a predictable and stable base of recurring revenue, further supporting our ability to grow.
Increase Content on High-Value Platforms
Our business benefits from a diverse set of differentiated and IP-enabled capabilities. These capabilities span multiple system types, domains of material science expertise, advanced equipment types, and ultimately serve varied performance requirements. By leveraging our diverse set of capabilities, we have historically offered multiple critical systems to a single platform. For example, on fixed-wing platforms, we offer a number of different critical systems including flight control surfaces, landing gear systems, and fueling and refueling systems. By leveraging our deep customer relationships established through the proven performance of our systems, we intend to increase our content on the attractive and high-growth platforms we currently serve by offering new systems that enable other aspects of the platform’s performance.
Drive Right-to-Win on Next-Generation Platforms
We offer full lifecycle capabilities to our customers, including advanced design and prototyping capabilities that allow us to collaborate closely with customers to aid their development of novel next-generation platforms. Design and prototype expertise is critical for the development of next-generation “go-fast” platforms, where speed-to-market is an essential differentiator for our customers. By leveraging those capabilities in conjunction with our deep customer relationships, longstanding proven heritage, IP-enabled capabilities, and capacity for scaled production, we have an unrivaled right-to-win on future platforms and opportunities across our customer footprint. Furthermore, by acting as an early partner for these platforms through their design and prototyping phase, we believe we entrench our position on attractive platforms that we hope to serve for the entirety of their lifecycle. We track and continuously update a sizeable funnel of pipeline opportunities that are attractive and actionable for our business and intend to pursue these opportunities in order to realize our long-term growth outlook.
Execute Focused Acquisition Strategy
We view acquisitions as a means to deepen our technical capability, expand our customer relevance, and enhance our position as a differentiated advanced manufacturing partner, rather than as a vehicle for pure scale aggregation. We have a proven track record of acquiring and successfully integrating high impact targets to drive value creation, with multiple successful add-ons over the last five years. We intend to continue to track the landscape of potential acquisition opportunities, which remains sizeable in the highly fragmented small- and mid-sized supplier market. We have the capability to leverage our platform to supercharge the performance of potential add-ons that we integrate, where they may have been undercapitalized prior to acquisition despite having strong and attractive capabilities. We will continue to approach potential acquisitions through a disciplined and focused strategy that reinforces our overall market strategy, enhances returns, and focuses on three main acquisition attributes: (i) focus on space and defense end markets, (ii) add-on capabilities that are relevant and not competitive to our customers, and (iii) differentiated business models as reflected in an attractive margin profile.
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Summary Risk Factors
Our business and our ability to execute our strategy are subject to many risks. Before making a decision to invest in our common stock, you should carefully consider all of the risks and uncertainties described in the section of this prospectus captioned “Risk Factors” immediately following this Prospectus Summary and all of the other information in this prospectus. These risks include, but are not limited to, the risks set forth below:
| • | Macroeconomic and other conditions that adversely affect the aerospace and defense industry may adversely affect our results of operations and liquidity. |
| • | A significant decline in business with key customers could have a material adverse effect on us. |
| • | Defense spending and government defense budgets may change due to various economic conditions and other factors, which may cause our operating results to fluctuate. |
| • | Government agencies may directly or indirectly request or encourage us to make investments into our business that do not directly benefit shareholder interests. |
| • | Our growth strategy includes acquisitions, which entails certain risks to our business and financial performance. |
| • | If we fail to establish and maintain important relationships with government agencies and prime contractors, our ability to successfully maintain and develop new business could be materially adversely affected. |
| • | If we are unable to adapt to technological change, demand for our capabilities may be reduced. |
| • | We may be unable to obtain critical components, raw materials, and services from suppliers and subcontractors, which could disrupt or delay our ability to deliver products to our customers and increase our costs. |
| • | Our operations depend on our manufacturing facilities, which are subject to physical and other risks that could disrupt production. |
| • | We rely on the significant experience and specialized expertise of our senior management and engineering and operational staff, and must retain and attract qualified and highly skilled personnel to grow our business successfully. |
| • | Technology failures, cybersecurity breaches and other unauthorized access to or use of our information technology systems or sensitive or proprietary information could have a material adverse effect on our business and operations. |
| • | Our indebtedness and restrictive covenants under our credit facilities could limit our operational and financial flexibility. |
| • | Our business and operations expose us to numerous legal and regulatory requirements. |
| • | We, our operations and our products are subject to environmental, health and safety laws, regulations and permits, which may result in significant liabilities, obligations and compliance-related costs. |
| • | Our Principal Stockholder (as defined below) controls us and its interests may conflict with ours or yours in the future. |
| • | Our pro forma financial information may not be representative of our future performance. |
Our Principal Stockholder
Greenbriar Equity Group, L.P. (“Greenbriar” or the “Principal Stockholder” and, as the context requires, together with its affiliates) is a private equity firm with over 25 years of experience investing in market-leading services and manufacturing businesses. With more than $15 billion of cumulative capital commitments, its
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investment strategy targets businesses led by experienced management teams capitalizing on strong long-term growth prospects that can benefit from Greenbriar’s deep sectoral expertise, strategic insight, and operating capabilities.
Emerging Growth Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We may take advantage of certain exemptions from various public company reporting requirements, including:
| • | not being required to have our internal control over financial reporting audited by our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); |
| • | reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and |
| • | exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments. |
We may take advantage of these exemptions for up to five years or until we are no longer an emerging growth company, whichever is earlier.
We will cease to be an emerging growth company prior to the end of such five-year period if certain earlier events occur, including if we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our annual gross revenue exceeds $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period. We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of certain reduced reporting burdens in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can delay adopting new or revised accounting standards until those standards apply to private companies. We have elected to use the extended transition period under the JOBS Act. Accordingly, our consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.
See “Risk Factors—Risks Related to this Offering and Ownership of Our Common Stock—We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our common stock less attractive to investors.”
Controlled Company Exemption
After the completion of this offering, Greenbriar will beneficially own approximately 81.0% of our total outstanding shares of common stock (or 78.7% if the underwriters exercise in full their option to purchase additional shares of common stock).
As a result, upon completion of this offering, we will be a “controlled company” as defined under the corporate governance rules of the New York Stock Exchange (the “NYSE”). We intend to avail ourselves of the “controlled company” exemption under the rules of the NYSE, including exemptions from certain of the corporate governance listing requirements. See “Management—Controlled Company Exemption” and “Principal Stockholders.”
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Channels for Disclosure of Information
Investors, the media, and others should note that we intend to announce material information to the public through filings with the SEC, the investor relations page on our website (https://applied-ad.com/investors/), press releases, public conference calls, public webcasts, our X account (www.x.com/applied_ad (@applied_ad)), our Facebook page (www.facebook.com/AppliedAD), our LinkedIn page (www.linkedin.com/company/applied-aerospace-defense/) and our company news webpage (https://applied-ad.com/news/).
The information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels. Information disclosed through these channels does not constitute part of this prospectus and is not incorporated by reference herein.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
Corporate Information
Applied Aerospace & Defense, Inc. was incorporated as a Delaware corporation on October 7, 2022 under the name GB Eagle Topco, Inc. and subsequently changed its name to Applied Aerospace & Defense, Inc. on November 14, 2025. Our principal executive offices are located at 355 Quality Circle NW, Huntsville, AL 35806. Our telephone number is (202) 983-3291. Our website address is https://applied-ad.com/. The information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus or the registration statement of which this prospectus is a part, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock. We are a holding company and all of our business operations are conducted through our subsidiaries.
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Organizational Structure
The diagram below depicts our expected organizational structure immediately following completion of this offering, assuming no exercise by the underwriters of their option to purchase additional shares of common stock.
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THE OFFERING
| Issuer |
Applied Aerospace & Defense, Inc. |
| Common stock offered by us |
32,500,000 shares. |
| Option to purchase additional shares |
We have granted the underwriters an option to purchase up to an additional 4,875,000 shares of common stock from us at the initial offering price, less underwriting discounts and commissions, for 30 days after the date of this prospectus. |
| Common stock to be outstanding immediately after this offering |
170,743,518 shares (or 175,618,518 shares if the underwriters’ option to purchase additional shares is exercised in full). |
| Use of proceeds |
We expect to receive net proceeds of approximately $588.9 million (or $678.7 million if the underwriters’ option to purchase additional shares is exercised in full), based on an assumed initial public offering price of $19.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use approximately $56.1 million of the net proceeds from this offering to repay amounts outstanding under our revolving credit facility and approximately $532.8 million of the net proceeds from this offering to repay term loan borrowings under our Credit Agreement. We intend to use the remainder of the net proceeds from this offering, if any, for other general corporate purposes, including working capital, operating expenses and capital expenditures. See “Use of Proceeds.” |
| Controlled company |
After the completion of this offering, Greenbriar will beneficially own approximately 81.0% of our total outstanding shares of common stock (or 78.7% if the underwriters exercise in full their option to purchase additional shares of common stock). As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the NYSE. See “Management—Controlled Company Exemption.” |
| Conflicts of interest |
Affiliates of Morgan Stanley & Co. LLC and Jefferies LLC are lenders under certain of our facilities under the Credit Agreement (as defined herein), and each of the affiliates of Morgan Stanley & Co. LLC and Jefferies LLC will receive 5% or more of the net proceeds of this offering due to the repayment of borrowings thereunder. Therefore, each of Morgan Stanley & Co. LLC and Jefferies LLC is deemed to have a conflict of interest within the meaning of Rule 5121 of the Financial Industry Regulatory Authority (“FINRA”). Accordingly, this offering will be conducted in compliance with Rule 5121, which requires, among other things, that a “qualified independent underwriter” participate in the preparation of, and exercise the usual standards of “due diligence” with respect to, the registration statement and this prospectus. BofA Securities, Inc. has agreed to act as a qualified independent underwriter for this offering |
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| and to undertake the legal responsibilities and liabilities of an underwriter under the Securities Act, specifically including those inherent in Section 11 thereof. BofA Securities, Inc. will not receive any additional fees for serving as a qualified independent underwriter in connection with this offering. We have agreed to indemnify BofA Securities, Inc. against liabilities incurred in connection with acting as a qualified independent underwriter, including liabilities under the Securities Act. See “Underwriting (Conflicts of Interest)—Conflicts of Interest.” |
| Dividend policy |
We do not intend to pay dividends following the completion of this offering and may never pay dividends. We have not adopted, and do not currently expect to adopt, a written dividend policy. Our future dividend policy will be based on the operating results and capital needs of our business, and any future earnings may be retained to finance our future expansion and for the implementation of our business plan. See “Dividend Policy.” |
| Listing |
We have applied to list our common stock on the NYSE under the symbol “AADX.” |
| Directed share program |
At our request, the underwriters have reserved up to 1,625,000 shares of our common stock, or 5.0% of the shares offered by this prospectus (excluding the 4,875,000 additional shares that the underwriters have an option to purchase), at the initial public offering price, to offer to certain of our directors, officers, employees and others. The sales will be made at our direction by Morgan Stanley & Co. LLC and its affiliates through a directed share program. The number of shares of common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus. Except for any shares acquired by our directors or officers, shares purchased pursuant to the directed share program will not be subject to lock-up agreements with the underwriters. See the section titled “Underwriting (Conflicts of Interest)—Directed Share Program” for additional information. |
| Risk factors |
See “Risk Factors” beginning on page 22 and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock. |
The number of shares of common stock to be outstanding after this offering is based on 170,743,518 shares of common stock outstanding as of the date of this offering and excludes 18,781,787 shares of common stock reserved for future issuance under our equity incentive plan and employee stock purchase plan. Unless we specifically state otherwise or the context otherwise requires, the share information in this prospectus:
| • | gives effect to the 872,901.03-for-1 Stock Split, occurring subsequent to the effectiveness of the registration statement of which this prospectus is a part, which will be effective upon filing of our amended and restated certificate of incorporation prior to the completion of this offering; |
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| • | gives effect to the issuance of 32,500,000 shares of common stock in this offering, at an assumed initial public offering price of $19.50 per share, the midpoint of the price range set forth on the cover page of this prospectus; |
| • | assumes no purchase of shares of our common stock by our directors, officers, employees and others through the directed share program described in the section titled “Underwriting (Conflicts of Interest) —Directed Share Program”; |
| • | assumes no exercise of the underwriters’ option to purchase up to an additional 4,875,000 shares of common stock from us in this offering; and |
| • | excludes 47,180 shares of our common stock, calculated based on an assumed initial public offering price of $19.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, issuable upon the vesting and settlement of certain service-based restricted stock units which we expect to grant under our equity incentive plan in connection with the closing of this offering; and |
| • | assumes the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws, each in connection with the closing of this offering. |
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER INFORMATION
The following tables set forth our summary consolidated historical and unaudited pro forma condensed combined financial and other data. We have derived the summary consolidated statements of operations and comprehensive loss data and the summary consolidated cash flow data for the years ended December 31, 2025 and 2024 and the consolidated balance sheet data as of December 31, 2025 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary condensed consolidated statements of operations data and the summary condensed consolidated cash flow data for the three months ended March 31, 2026 and 2025 and the condensed consolidated balance sheet data as of March 31, 2026 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of our results to be expected in any future period.
The summary unaudited pro forma condensed combined statement of operations data for the three months ended March 31, 2026 and the year ended December 31, 2025 gives effect to the CBI acquisition as if it had occurred on January 1, 2025 and have been derived from the pro forma financial information set forth in the section captioned “Unaudited Pro Forma Condensed Combined Financial Information” appearing elsewhere in this prospectus. References to financial or other data presented as “pro forma” refer to a presentation that applies adjustments to give pro forma effect to the CBI acquisition over the applicable time period. Such pro forma adjustments are based upon available data and certain estimates and assumptions we believe are reasonable. The summary unaudited pro forma condensed combined statement of operations data is for information purposes only and does not purport to represent the results of operations that the Company would actually obtain if the CBI acquisition occurred at any date, nor does such data purport to project the results of operations for any future period.
The summary of our consolidated financial data set forth below should be read together with our audited consolidated financial statements and the related notes, as well as the sections captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Unaudited Pro Forma Condensed Combined Financial Information” appearing elsewhere in this prospectus.
| (in thousands, except share and per share data) Consolidated Statement of Operations |
Pro Forma Three Months Ended March 31, |
Pro Forma Year Ended December 31, |
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| Three Months Ended March 31, |
Years Ended December 31, |
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| 2026 | 2026 | 2025 | 2025 | 2025 | 2024 | |||||||||||||||||||
| Revenue |
$ | 151,983 | $ | 134,351 | $ | 111,024 | $ | 604,343 | $ | 498,763 | $ | 399,790 | ||||||||||||
| Cost of goods sold |
115,443 | 100,772 | 80,140 | 439,826 | 359,384 | 301,715 | ||||||||||||||||||
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| Gross profit |
36,540 | 33,579 | 30,884 | 164,517 | 139,379 | 98,075 | ||||||||||||||||||
| Selling, general, and administrative expenses |
82,753 | 28,302 | 12,367 | 65,226 | 54,447 | 41,748 | ||||||||||||||||||
| Intangible asset amortization expense |
10,822 | 8,110 | 6,538 | 42,335 | 26,063 | 23,461 | ||||||||||||||||||
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| Operating (loss) income |
(57,035 | ) | (2,833 | ) | 11,979 | 56,956 | 58,869 | 32,866 | ||||||||||||||||
| Interest expense, net |
22,943 | 17,771 | 16,720 | 103,838 | 72,806 | 63,705 | ||||||||||||||||||
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| Loss before income taxes |
(79,978 | ) | (20,604 | ) | (4,741 | ) | (46,882 | ) | (13,937 | ) | (30,839 | ) | ||||||||||||
| Non-recurring income tax expense (benefit) |
13,852 | — | — | (13,852 | ) | — | — | |||||||||||||||||
| Income tax (benefit) expense |
(15,032 | ) | (5,472 | ) | 2,572 | 15,989 | 3,087 | 3,927 | ||||||||||||||||
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| Net loss |
$ | (78,798 | ) | $ | (15,132 | ) | $ | (7,313 | ) | $ | (49,019 | ) | $ | (17,024 | ) | $ | (34,766 | ) | ||||||
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| (in thousands, except share and per share Consolidated Statement of Operations |
Pro Forma Three Months Ended March 31, |
Pro Forma Year Ended December 31, |
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| Three Months Ended March 31, |
Years Ended December 31, |
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| 2026 | 2026 | 2025 | 2025 | 2025 | 2024 | |||||||||||||||||||
| Basic and Diluted Net loss Per Share: |
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| Net loss per share – basic and diluted |
$ | (99,553 | ) | $ | (73,130 | ) | $ | (170,240 | ) | $ | (347,660 | ) | ||||||||||||
| Weighted average shares outstanding – basic and diluted |
152 | 100 | 100 | 100 | ||||||||||||||||||||
| Pro forma net loss per share(1) – basic and diluted |
$ | (498,724 | ) | $ | (445,627 | ) | ||||||||||||||||||
| Pro forma weighted average shares outstanding – basic and diluted(2) |
158 | 110 | ||||||||||||||||||||||
| Pro forma as further adjusted net (loss) income per share – basic and diluted(3) . |
$ | (0.39 | ) | $ | 0.03 | |||||||||||||||||||
| Pro forma as further adjusted weighted average shares outstanding – basic and diluted(4) |
170,743,518 | 170,743,518 | ||||||||||||||||||||||
| (1) | Pro forma net loss per share - basic and diluted gives effect to the CBI acquisition as if it occurred on January 1, 2025. |
| (2) | Pro forma weighted average shares outstanding - basic and diluted gives effect to the CBI acquisition. As part of the CBI acquisition, the Company issued an aggregate of 9.8118 shares of common stock to its parent entity, AA&D Holdings, LP. |
| (3) | Pro forma as further adjusted net (loss) income per share - basic and diluted gives pro forma effect to the CBI acquisition and further adjusts to give effect to the Stock Split and the application of approximately $588.9 million of the net proceeds of this offering to repay amounts outstanding under our Credit Agreement, assuming an initial public offering price of $19.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, less estimated underwriting discounts and commissions and estimated offering expenses payable by us, as if such transactions occurred on January 1, 2025 and reduced interest expense, net by $54.6 million for the year ended December 31, 2025 and by $11.7 million for the three months ended March 31, 2026. A $1.00 increase in the assumed initial public offering price of $19.50 per share will result in an increase of $0.02 in the pro forma as adjusted net income per share - basic and diluted for the year ended December 31, 2025 and no change in the pro forma as adjusted net loss per share - basic and diluted for the three months ended March 31, 2026. A $1.00 decrease in the assumed initial public offering price of $19.50 per share will result in a decrease of $0.01 in the pro forma as adjusted net income per share - basic and diluted for the year ended December 31, 2025 and an increase of $0.01 in the pro forma as adjusted net loss per share - basic and diluted for the three months ended March 31, 2026. |
| (4) | Pro forma as further adjusted weighted average shares outstanding - basic and diluted gives pro forma effect to the CBI acquisition and further adjusts to give effect to the Stock Split and the issuance of 32,500,000 shares of common stock in this offering, assuming an initial public offering price of $19.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, less estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
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| (in thousands) | As of March 31, 2026 | As of December 31, 2025 | ||||||||||||||
| Consolidated Balance Sheet Data: | Actual | As Adjusted(1) | Actual | As Adjusted(1) | ||||||||||||
| Cash and cash equivalents |
$ | 15,923 | $ | 15,923 | $ | 15,475 | $ | 15,475 | ||||||||
| Total current assets |
334,742 | 334,742 | 291,574 | 291,574 | ||||||||||||
| Total assets |
$ | 1,483,919 | $ | 1,483,919 | $ | 999,301 | $ | 999,301 | ||||||||
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| Total current liabilities |
160,256 | 114,156 | 94,482 | 94,482 | ||||||||||||
| Total liabilities |
1,250,131 | 661,237 | 839,837 | 250,943 | ||||||||||||
| Total shareholder’s equity |
233,788 | 822,682 | 159,464 | 748,358 | ||||||||||||
| Total liabilities and shareholder’s equity |
$ | 1,483,919 | $ | 1,483,919 | $ | 999,301 | $ | 999,301 | ||||||||
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| (1) | The as adjusted consolidated balance sheet data give effect to our sale of 32,500,000 shares of common stock in this offering at an assumed initial public offering price of $19.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and the application of the net proceeds therefrom as described in “Use of Proceeds,” after deducting underwriting discounts and commissions and anticipated offering expenses payable by us. |
| (in thousands) | Three Months Ended March 31, |
Years Ended December 31, |
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| Consolidated Cash Flows Data: | 2026 | 2025 | 2025 | 2024 | ||||||||||||
| Net cash (used in) provided by operating activities |
$ | (72,031 | ) | $ | (6,911 | ) | $ | (28,941 | ) | $ | 4,649 | |||||
| Net cash used in investing activities |
(315,804 | ) | (15,261 | ) | (27,784 | ) | (49,146 | ) | ||||||||
| Net cash provided by financing activities |
388,283 | 3,220 | 44,734 | 37,657 | ||||||||||||
Other Operating and Financial Data:
| (in thousands, except percentages) |
Pro Forma As of March 31, 2026 |
As of March 31, | Pro Forma As of December 31, 2025 |
As of December 31, | ||||||||||||||||||||
| 2026 | 2025 | 2025 | 2024 | |||||||||||||||||||||
| Contract backlog(1) |
$ | 1,060,071 | $ | 1,060,071 | $ | 793,660 | $ | 1,017,003 | $ | 871,259 | $ | 792,630 | ||||||||||||
| Revenue |
$ | 151,983 | $ | 134,351 | $ | 111,024 | $ | 604,343 | $ | 498,763 | $ | 399,790 | ||||||||||||
| Adjusted EBITDA(2) |
$ | 28,711 | $ | 26,539 | $ | 25,343 | $ | 141,908 | $ | 117,904 | $ | 84,008 | ||||||||||||
| Net loss margin |
(51.8)% | (11.3)% | (6.6)% | (8.1)% | (3.4)% | (8.7)% | ||||||||||||||||||
| Adjusted EBITDA Margin(2) |
18.9% | 19.8% | 22.8% | 23.5% | 23.6% | 21.0% | ||||||||||||||||||
| (1) | This prospectus includes the key performance indicator “contract backlog,” which is a key measure of our business growth. Contract backlog represents the total value of existing contracts, less amounts previously invoiced, as of the backlog date. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion on how this measure is useful to investors. |
| (2) | This prospectus includes non-GAAP financial measures that are supplemental measures of financial performance and not recognized or required under GAAP. The non-GAAP financial measures are supplemental measures of our performance that we believe help investors understand our financial condition and operating results and assess our future prospects. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, as adjusted to eliminate certain non-cash charges and other items not reflective of ongoing operations, which include: acquisition-related expenses, integration expenses and restructuring costs, share-based compensation expense, and other costs. Adjusted EBITDA Margin is defined as Adjusted EBITDA expressed as a percentage of revenue. Pro Forma Adjusted EBITDA and Pro Forma Adjusted EBITDA Margin represent Adjusted EBITDA and Adjusted EBITDA Margin, respectively, after giving pro forma effect to the CBI acquisition as of the applicable date. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further |
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| discussion on how these measures are useful to investors and utilized by management. The following table sets forth the reconciliation of Net loss to Adjusted EBITDA and Pro Forma Adjusted EBITDA and the presentation of net loss margin, Adjusted EBITDA Margin and Pro Forma Adjusted EBITDA Margin for the periods set forth below: |
| Pro Forma Three Months Ended March 31, 2026 |
Three Months Ended March 31, |
Pro Forma Year Ended December 31, 2025 |
Years Ended December 31, |
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| (in thousands, except percentages) | 2026 | 2025 | 2025 | 2024 | ||||||||||||||||||||
| Net loss |
$ | (78,798 | ) | $ | (15,132 | ) | $ | (7,313 | ) | $ | (49,019 | ) | $ | (17,024 | ) | $ | (34,766 | ) | ||||||
| Income tax (benefit) expense |
(1,180 | ) | (5,472 | ) | 2,572 | 2,137 | 3,087 | 3,927 | ||||||||||||||||
| Interest expense, net |
22,943 | 17,771 | 16,720 | 103,838 | 72,806 | 63,705 | ||||||||||||||||||
| Depreciation and amortization |
15,835 | 12,109 | 9,723 | 62,394 | 39,420 | 35,222 | ||||||||||||||||||
| Share-based compensation expense |
35,993 | 756 | 802 | 3,445 | 3,210 | 2,535 | ||||||||||||||||||
| Transaction costs(1) |
31,302 | 13,985 | 514 | 6,419 | 6,419 | 3,809 | ||||||||||||||||||
| Integration and restructuring costs(2) |
2,273 | 2,273 | 2,041 | 8,364 | 6,608 | 4,826 | ||||||||||||||||||
| Legal contingencies loss(3) |
— | — | 7 | 460 | 460 | 1,877 | ||||||||||||||||||
| Management fees(4) |
343 | 249 | 256 | 2,249 | 1,603 | 1,647 | ||||||||||||||||||
| Other(5) |
— | — | 21 | 1,621 | 1,315 | 1,226 | ||||||||||||||||||
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| Adjusted EBITDA |
$ | 28,711 | $ | 26,539 | $ | 25,343 | $ | 141,908 | $ | 117,904 | $ | 84,008 | ||||||||||||
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| Net loss margin |
(51.8)% | (11.3)% | (6.6)% | (8.1)% | (3.4)% | (8.7)% | ||||||||||||||||||
| Adjusted EBITDA Margin |
18.9% | 19.8% | 22.8% | 23.5% | 23.6% | 21.0% | ||||||||||||||||||
| (1) | Includes transaction related costs associated with mergers, acquisitions, and costs related to the initial public offering (“IPO”). |
| (2) | Includes acquisition integration and restructuring costs, including plant consolidation and reconfiguration, reductions in force, and executive severance expense. |
| (3) | Includes losses from legal disputes and settlements from third parties. |
| (4) | Includes management fees paid to our parent company in accordance with our management services agreement which will terminate upon the closing of this IPO. |
| (5) | Includes other costs that we believe are not indicative of day-to-day operations of the business. |
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Investing in our common stock involves a high degree of risk. Before making an investment decision, you should carefully consider the risks and uncertainties described below, together with the other information contained in this prospectus, including in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our audited financial statements and the related notes. These material risks and uncertainties could negatively affect our business, financial condition, results of operations and cash flows and could cause our actual results to differ materially from those expressed in forward-looking statements contained in this prospectus. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us, or that we currently believe are immaterial, also may impair our business, financial condition, results of operations and cash flows. In that event, the trading price of our common stock could decline, and you could lose part or all of your investment.
Risks Related to our Strategy
Macroeconomic and other conditions that adversely affect the aerospace and defense industry may adversely affect our results of operations and liquidity.
Because substantially all of our revenues are from customers in the aerospace and defense industry, our financial performance is closely tied to the funding priorities, procurement cycles and economic condition of the aerospace and defense industry. A more diversified company with significant sales and earnings derived from outside the aerospace and defense industry may be able to recover more quickly from significant market disruptions. During any prolonged period of significant market disruption in this industry, including as a result of adverse macroeconomic or geopolitical developments, natural disasters, pandemics or supply chain disruptions specific to our industry, our business may be disproportionately impacted compared to companies that are more diversified in the industries they serve.
A significant decline in business with key customers could have a material adverse effect on us.
As disclosed in Note 2, Summary of Significant Accounting Policies, in the notes to our consolidated financial statements included elsewhere in this prospectus, a significant portion of our sales are to specific customers in the aerospace and defense industry. As a result, a significant reduction in purchases by these customers could have a material adverse effect on our business, results of operations, prospects, and financial condition.
Any significant cancellation, reduction or deferment of orders by customers could have a material adverse effect on our business, results of operations, prospects, and financial condition.
While we have $1,060.1 million in contract backlog as of March 31, 2026, many of our long-term contracts and purchase orders with customers, including the U.S. government, do not have guaranteed future sales, or have provisions that allow such customers to terminate the contracts or any purchase order thereunder at any time for the customer’s convenience. While we generally have contractual protections for such terminations, they generally are limited to a recovery of a proportion of the sales price based on costs incurred at the termination effective date and do not mitigate the potential for the resulting future sales reductions. As a result, we cannot always accurately plan our manufacturing, inventory and working capital requirements, and we may not realize the full amount of the contract backlog or business opportunities included in weighted pipeline as revenue. In most cases, our customers have not committed to buy any minimum quantity of our products. Uncertainty about current and future global economic conditions may cause customers, including both private sector customers and government agencies, to modify, defer or cancel purchases in response to tighter credit, decreased cash availability, and declining consumer confidence. Accordingly, future demand for our products could differ materially from our current expectations. Additionally, if customers are not successful in generating sufficient revenue or are unable to secure adequate financing for their operational needs, they may not be able to pay, or may delay payment of, accounts receivable that are owed to us. Any inability of current and/or potential customers to pay us for our products may adversely affect our earnings and cash flow.
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Defense spending and government defense budgets may change due to various economic conditions and other factors, which may cause our operating results to fluctuate.
A significant portion of our revenue is directly or indirectly generated from the military and defense market in the U.S. Contracts with the U.S. government typically involve long lead times for design and development and are subject to significant changes in contract scheduling. A significant reduction or deferral in defense expenditures, a shift of expenditures away from key defense spending programs that we support, or a change in federal government contracting policies could cause our customers to reduce their purchases, exercise contract termination rights, or opt to not renew contracts, any of which could result in decreased sales of our products and significant or unanticipated expenses.
Defense spending may be impacted by fluctuations in general business cycles, changes in domestic and foreign trade laws and regulations, including tariffs and monetary policies, and other macroeconomic events. Military and defense markets are significantly dependent upon government budget trends that are beyond our control. In the U.S., military and defense markets are significantly impacted by the DoW’s budget, and Congress generally appropriates funds on a fiscal year basis even though a program may continue for several years. Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations. DoW budgets could be negatively impacted by several factors, including, but not limited to, a change in defense spending policy as a result of a new presidential administration or otherwise, the U.S. government’s budget deficits, spending priorities, the cost of sustaining the U.S. military presence internationally, political pressure to reduce U.S. government military spending, and the ability of the U.S. government to enact appropriations bills and other relevant legislation. The termination or reduction of funding for a government program would result in a loss of anticipated future revenue attributable to that program.
In recent years, the U.S. government has been unable to complete its budget process before the end of its fiscal year, resulting in both governmental shutdowns and continuing resolutions providing only enough funds for U.S. government agencies to continue operating at prior-year levels. Disruptions to government operations could impact our ability to perform our government contracts in a timely manner, deploy staff, or access the relevant government sites necessary to deliver our products and services. Payments due to us from government agencies may be delayed due to failures of governmental budgets to gain congressional and presidential approval in a timely manner during billing cycles. Further, if the U.S. government debt ceiling is not raised and the national debt reaches the statutory debt ceiling, the U.S. government could default on its debts. A significant decline in U.S. military expenditures could result in a reduction in the amount of our products sold to U.S. government agencies. Any adverse changes in government budgetary priorities in the markets in which we operate could directly or indirectly affect our financial performance and could have a material adverse effect on our business, results of operations, prospects and financial condition.
Pricing pressures from customers could reduce the demand and/or price for our products and services.
From time to time, we may face pricing pressures from our customers due to factors beyond our control, including liquidity constraints and adverse macroeconomic conditions. Some of our customers may require substantial financing in order to fund their operations and make purchases from us. The inability of these customers to obtain sufficient credit to continue to make purchases from us may result in those customers applying pricing pressures on us or otherwise seeking to modify contractual terms in a manner adverse to us. Some of our major customers have also completed extensive cost containment efforts, and we expect continued pricing pressures in 2026 and beyond. If we are unable to respond to pricing pressures or otherwise successfully compete for new business, our revenue growth and operating margins may decline.
Regulatory actions and changes in government policies, including procurement policies and trade policies, may have a negative impact on our business.
Regulatory actions and changes in government policies could impact demand for our products or require us to adapt our manufacturing processes in order to comply with such changes. There is no assurance that we will be
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able to adapt to such changes in government procurement policies in a timely and cost-effective manner, if at all. Government agencies have imposed, and may in the future continue to impose, restrictions on procuring products containing certain components, in particular components sourced from foreign jurisdictions. For example, recent initiatives by the U.S. government to reduce U.S. reliance on overseas sources of rare earth minerals and specialized metals could impact supply chains for such raw materials, including those that we incorporate in our products. We may be required to seek alternative sources for components in our products to maintain our government contracts. Even if we can comply with such requirements, the costs associated with transitioning to approved alternative sources of supply could be significant and may not be recoverable under our fixed-price contracts. If we are unable to modify our products or manufacturing processes to comply with government procurement policies and other relevant regulations in a timely and cost-effective manner, we may be unable to fulfill our contractual obligations, which may have an adverse impact on our results of operations and financial performance.
We are also subject to tariffs on certain imports into the U.S. Notwithstanding the decision by the United States Supreme Court on February 20, 2026, in Learning Resources Inc. et al v. Trump, litigation continues in federal courts regarding the treatment and recoverability of certain U.S. tariffs. As the implementation of tariffs is ongoing, more tariffs may be added in the future with little or no advanced notice. Changing our operations in accordance with new or evolving trade restrictions can be expensive, time-consuming, disruptive to our operations and distracting to management, and we may not be able to effectively mitigate all adverse impacts from such measures. These tariffs could have a material adverse effect on our business, results of operations, prospects and financial condition, and if we are unable to pass such price increases through to our customers, it would likely increase our cost of goods sold and, as a result, decrease our profitability. Major U.S. trading partners have also announced retaliatory tariffs and some have negotiated new trade agreements. There continues to be significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties, and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade, including trade between the impacted nations and the U.S. Any of these factors could depress economic activity and restrict our access to suppliers or customers or have a material adverse effect on the business and financial condition of such suppliers and customers or other counterparties we do business with, which in turn would negatively impact us.
Government agencies may directly or indirectly request or encourage us to make investments into our business that do not directly benefit shareholder interests.
Government agencies may directly, or indirectly through our other customers, request or encourage us to make capital commitments. These investments and commitments may require us to deploy significant resources, incur substantial upfront costs, accept lower returns or delay or forego other business opportunities, and there can be no assurance that such expenditures will generate commensurate revenues, margins or other benefits. In addition, if we are unwilling or unable to make requested investments or otherwise demonstrate sufficient participation in supporting our customers’ objectives, we may experience reduced competitiveness for new awards, unfavorable contract terms, diminished prospects for option exercises, renewals or follow-on work, or other adverse contract outcomes, any of which could harm our reputation and customer relationships and materially adversely affect our business, financial condition, results of operations and growth prospects.
If we fail to establish and maintain important relationships with government agencies and prime contractors, our ability to successfully maintain and develop new business could be materially adversely affected.
Our reputation and relationship with the U.S. government, and in particular with the agencies of the DoW, are key factors in maintaining and developing new business opportunities. In addition, we often act as a subcontractor or in teaming arrangements in which we and other contractors bid together on particular contracts or programs for the U.S. government or government agencies. We expect to continue to depend on relationships with other prime contractors for a portion of our revenue for the foreseeable future. Negative press reports regarding conflicts of interest, poor contract performance, employee misconduct, information security breaches or other aspects of our
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business, regardless of accuracy, could harm our reputation. Additionally, as a subcontractor or team member, we generally lack control over fulfillment of a contract as a whole, as prime contractors retain control over key aspects of fulfillment including design authority, inspection and acceptance and customer communication. As a result, poor performance on the contract as a whole could tarnish our reputation, even when we otherwise perform our obligations as a subcontractor or team member as required. As a result, we may be unable to successfully maintain our relationships with government agencies or prime contractors, and any failure to do so could materially adversely affect our ability to maintain our existing business and compete successfully for new business.
Our growth strategy includes acquisitions, which entails certain risks to our business and financial performance. Our business may be materially adversely affected if we cannot consummate acquisitions on satisfactory terms or if we cannot effectively integrate acquired operations.
A significant portion of our growth has occurred through acquisitions. Most recently, we completed our acquisitions of Consolidated Boring Inc., Ultracor, Inc. (formerly known as Rainwater Holdings, Inc.) and NeXolve Holdings, LLC on March 2, 2026, March 2, 2026 and March 4, 2025, respectively. Additionally, our current business was formed as the result of the Combination that was completed on November 14, 2025, which resulted in the combination of the Applied and PCX businesses.
Any future growth through acquisitions will be partially dependent upon the continued availability of suitable acquisition candidates at favorable prices and upon advantageous terms and conditions. We intend to pursue acquisitions and other business opportunities that further our business strategy. However, we may not be able to identify or consummate suitable acquisition opportunities on acceptable terms or at all, including due to a failure to receive necessary regulatory approvals. In addition, we may not be able to raise the capital necessary to fund future acquisitions. Because we may actively pursue various opportunities simultaneously, we may encounter unforeseen expenses, complications, and delays, including regulatory complications or difficulties in employing sufficient staff and maintaining operational and management oversight.
The businesses we acquire may not perform in accordance with expectations; synergies may not be fully realized; key employees, suppliers, or customers of businesses acquired may depart; and we may be exposed to unexpected liabilities, obligations and costs related to acquired businesses. In addition, we may not be able to successfully integrate any business we acquire into our existing business in a timely or cost-effective manner, which may negatively impact our results of operations. Future acquisitions could result in the incurrence of additional debt to finance such acquisitions, increase in interest and amortization expenses or periodic impairment charges related to goodwill and other intangible assets as well as significant charges relating to integration costs. We continue to integrate the Applied and PCX businesses as a result of the Combination, the success of which will depend on our ability to manage these businesses as a combined company. Assimilating operations and products may be unexpectedly difficult, especially given that we have not operated as a combined company for a significant period prior to becoming a public company. The successful integration of future acquisitions may also require substantial attention from our senior management and the management of the acquired business, which could decrease the time that they have to serve and attract customers, develop new products and services, or attend to other acquisition opportunities.
If we are unable to adapt to technological change, demand for our capabilities may be reduced.
The technological complexity of our business has increased significantly over the last several years and may continue to increase in the future. To maintain our customer relationships and market position, we will need to continue to develop our cross-domain expertise and develop our products to support the next-generation technologies of our customers, including by enhancing our manufacturing, assembling, testing, marketing and other capabilities, and supporting new products and product enhancements. We may not be able to do so successfully, if at all, or on a timely, cost effective, or repeatable basis. Our competitors may adapt to technological change more quickly or effectively than we do, which could allow them to offer superior capabilities, manufacture products at a lower cost, or operate with greater efficiency. Moreover, defense
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customers require frequent technological advancements for military superiority, and there is no assurance that we will continue to maintain capabilities meeting customer specifications. Failing to anticipate technological shifts, customer needs, or demand fluctuations could negatively impact our financial results. Product complexity also may lead to manufacturing delays. In addition, our defense prime contractor customers may decide to pursue one or more of our product development areas and insource that technology development and production rather than purchase that capability from us as a supplier. If we fail to keep pace with evolving technological demands, our products and services may become less competitive, our market position may be negatively impacted, and our business, financial condition, and results of operations could be materially adversely affected.
We operate in highly competitive markets with competitors who may have greater resources than we possess.
We operate in a highly competitive global industry with evolving industry standards and technological advances. We compete with domestic and international companies that may have substantially greater manufacturing, purchasing, marketing and financial resources than we do and who may be able to offer more competitive pricing terms and compete more effectively for large-scale contracts by offering different or greater capabilities or benefits such as technical qualifications that we do not have, greater experience and institutional knowledge from past performance on large-scale contracts, and enhanced geographic presence and availability of key professional personnel. Further, within the aerospace and defense industry, suppliers have consolidated to expand their product offerings and to secure long-term sole-source positions. As a result, these competitors may be better able to withstand the effects of periodic economic downturns. Some of our customers are also able to fulfill their manufacturing requirements in-house, thereby reducing their need for our products and services. Our ability to compete depends on high product performance, consistent high quality, short lead time and timely delivery, competitive pricing, superior customer service and support, and continued certification under customer quality requirements and assurance programs. Maintaining or improving our competitive position requires continued investment in manufacturing, engineering, quality standards, marketing, customer service and support, and in our distribution networks. If we do not maintain sufficient resources to make these investments, are unsuccessful in meeting our quality or delivery standards, or are unsuccessful in maintaining our competitive position, we could face pricing pressures or loss in market share, causing our operations and financial performance to suffer.
We have contracts with the U.S. government related to classified programs, which may limit investor insight into portions of our business.
We derive a portion of our revenues from programs with the U.S. government and its agencies that are subject to security restrictions (e.g., contracts involving classified information and classified programs), which preclude the dissemination of information and technology that is classified for national security purposes under applicable law and regulation. In general, access to classified information, technology, facilities, or programs requires appropriate personnel security clearances, is subject to additional contract oversight and potential liability, and also requires appropriate facility security clearances and other specialized infrastructure. In the event of a security incident involving classified information, technology, facilities, programs, or personnel holding clearances, we may be subject to legal, financial, operational, and reputational harm. We are limited in our ability to provide information about these classified programs, their risks or any disputes or claims relating to such programs. As a result, investors have less insight into our classified business or our business overall. However, historically the business risks associated with our work on classified programs have not differed materially from those of our other government contracts.
Further consolidation in the aerospace and defense industry could adversely affect our business and financial results.
The aerospace and defense industry has and continues to experience significant consolidation, including among our customers, competitors and suppliers. Consolidation among our customers may result in delays in the awarding of new contracts and loss of existing business. Consolidation among our competitors may result in
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larger competitors with greater resources and market share, which could adversely affect our ability to compete successfully. Consolidation among our suppliers may result in fewer sources of supply and increased cost to us.
Risks Related to our Operations
When we enter into fixed price contracts or undefinitized contract actions (“UCA”) with our customers, we take the risk for cost overruns.
A substantial portion of our customer relationships consist of long-term, fixed-price contracts. Pursuant to such contracts, we have agreed to perform the work for a fixed price and, accordingly, realize all the benefit or detriment resulting from any decreases or increases in the costs of making these products. This risk is greater in a high inflationary environment. Although we have attempted to minimize the effect of inflation on our business through contractual protections, some of our contracts do not permit us to recover increases in raw material prices, taxes or labor costs. Our inability to pass on increased costs to our customers under fixed-price contracts could have a material adverse effect on our profit margins and financial condition.
We may operate from time to time under UCAs, under which we may begin performance at the direction of the U.S. government prior to completing contract negotiations regarding pricing, specifications, and other terms. Under a UCA, the U.S. government has the ability to unilaterally definitize contracts and, absent a successful appeal of such action, the unilateral definitization of the contract would obligate us to perform under terms and conditions imposed by the U.S. government. Such unilaterally imposed contract terms could include less favorable pricing or terms and conditions more burdensome than those negotiated in other circumstances, which could negatively affect our expected profitability under such contract and could have a material adverse effect on our business, results of operations, prospects and financial condition.
We may be unable to obtain critical components, raw materials, and services from suppliers and subcontractors, which could disrupt or delay our ability to deliver products to our customers and increase our costs.
Our ability to meet customer demands depends, in part, on timely and adequate delivery of quality materials, parts, components, and manufacturing services from our suppliers and subcontractors. We obtain certain of our hardware components and sub-assemblies from a limited group of suppliers, some of which are sole source suppliers. We also rely on certain subcontractors who perform portions of our manufacturing processes, including specialty processing and certain testing and inspection processes. Under certain customer contracts, we are required to purchase specific materials from designated suppliers, which may limit our ability to find alternative sources of supply. Although we hold contracts with certain key suppliers that establish pricing and minimize lead times, we do not have long-term binding agreements with all suppliers to continue producing and selling us required materials. Our business could therefore be adversely impacted by factors affecting our suppliers and contractors, including destruction of their facilities or distribution infrastructure, work stoppages, failure to provide materials or services of requisite quality, natural disasters, pandemics, or inflationary pressures on labor and raw materials to the extent we are unable to pass along such cost increases to our customers.
If any supplier becomes capacity constrained, financially unstable, or otherwise unable or unwilling to supply us, locating alternative suppliers or redesigning products to accommodate different components could require significant time and expense, and result in manufacturing delays and increased inventory of unfinished products subject to obsolescence risk. There are also risks that we may have disputes with our subcontractors regarding the quality and timeliness of their work, customer concerns about the subcontractor, our failure to extend existing task orders or issue new task orders under a subcontract, or our hiring of personnel of a subcontractor. A failure by any of our sole-sourced or group subcontractors to timely and satisfactorily provide the required, defect-free supplies or components, or perform the required services, may materially and adversely impact our ability to perform our obligations as the prime contractor.
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In addition, raw materials and components used in the manufacture of our products, or in development projects we may pursue in the future, may be subject to supply shortages, which may negatively impact our results of operations and growth plans. In recent years, we have experienced price inflation in certain raw materials, including aluminum, nickel, and titanium; increased fuel costs resulting in a rise in shipping and handling costs related to the shipment of goods to our customers; as well as labor market shortages resulting in increased labor costs. Certain geopolitical events, such as Russia’s invasion of Ukraine and conflicts in the Middle East, may also result in escalating energy and commodity prices, increases in the costs of raw materials, and other inflationary pressures. We may not be able to pass through inflationary cost increases under our existing fixed-price contracts.
Any sustained inability to obtain necessary components or services could cause customers to terminate or delay contracts and orders, negatively impact our ability to win new programs, disrupt future development programs, or increase our costs, any of which could have a material adverse effect on our business, results of operations, prospects, and financial condition.
Our operations depend on our manufacturing facilities, which are subject to physical and other risks that could disrupt production.
Our operations and those of our customers and suppliers may be subject to natural disasters, climate change-related events, pandemics, or other business disruptions, which could seriously harm our results of operations and increase our costs and expenses. Some of our manufacturing facilities are located in regions that may experience earthquakes or be impacted by severe weather events, such as increased storm frequency or severity and fires in hotter and drier climates. These could result in potential damage to our physical assets as well as disruptions in manufacturing activities.
We are also vulnerable to damage from other types of disasters, including power loss, fire, explosions, floods, communications failures, pandemics, terrorist attacks, and similar events. Disruptions could also occur due to cyberattacks, computer or equipment malfunction (whether accidental or intentional), operator error, or process failures. If insurance or other risk transfer mechanisms included in our existing disaster recovery and business continuity plans are insufficient to recover all costs, we could experience a material adverse effect on our cash flows, business, results of operations, prospects, and financial condition.
Certain future operational facilities may require significant expenditures in capital improvements and operating expenses to develop, mature, and enhance such operations to meet our customers’ requirements, and the ongoing need to maintain existing operational facilities requires us to expend capital.
As part of our growth strategy, we may need to acquire, build, or utilize additional facilities. Construction of incremental factories or other facilities in which we conduct our operations may require significant capital expenditures to develop, and we may be required to make similar expenditures to expand, improve, or construct adequate facilities for our operations in the future. If we cannot access the capital we need, we may not be able to execute on our growth strategy, take advantage of future opportunities, or respond to competitive pressures.
Any actual or alleged failure or misuse of our products may damage our reputation, necessitate a product recall, or result in regulatory investigations or claims against us that expose us to significant costs.
Our products are extremely complex and must integrate successfully with our customers’ equally complex products and those of their vendors. Defects in the design and manufacture of our products or our subcontractors’ products may occur, particularly when we incorporate new technologies into our customer solutions. If any of our products are defective, we could be required to pay substantial damages or warranty claims, or face actions by regulatory bodies and government authorities. Such an event could result in significant expenses, delay sales, inflate inventory, cause reputational damage, or cause us to withdraw from certain markets. We are also exposed to product liability claims. Many of our products are used in applications where their failure or misuse could
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result in significant property or economic loss and serious personal injury or death. We may also be subject to involuntary product recalls or may voluntarily conduct a product recall. Even an isolated incident, such as a high-profile product recall, or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if such incident or incidents result in adverse publicity, governmental investigations or litigation, and as a result, could tarnish our reputation. The costs associated with any future product recalls could be significant. In addition, any product recall, regardless of direct costs of the recall, may harm consumer perceptions of our products and have a negative impact on our future revenues and results of operations. In addition to government regulation, products that have been or may be developed by us may expose us to potential liability from personal injury or property damage claims by the users of such products. There can be no assurance that a claim will not be brought against us in the future, regardless of merit.
Publicly available information regarding our business has historically been limited, in part due to the sensitivity of our work with customers or contractual requirements limiting or preventing public disclosure of certain aspects of our work or relationships with certain customers. However, as our business grows and attracts greater public attention, we may become the subject of unfavorable news coverage, including unsubstantiated allegations or misleading reports concerning product quality, safety, or regulatory compliance of our products. Such negative publicity could prompt regulatory scrutiny, government audits, or formal investigations by agencies such as the Department of War Inspector General or Defense Contract Management Agency, regardless of whether any actual deficiency exists in our products or processes. Many of our customer contracts prohibit us from issuing any public release of information, or confirmation or denial of same, with respect to the applicable contract or its subject matter without the prior written approval of the customer. As a result, we may be unable to respond publicly to negative or misleading coverage regarding us, our products, or our role in broader defense and aerospace programs, which could cause customers to launch claims against us or result in regulatory actions being taken against us, including audits of our facilities.
We maintain product liability insurance coverage with third-party insurers as part of our overall risk management strategy and in response to certain contracts that require us to maintain specific insurance coverage limits. Not every risk or liability is or can be protected by insurance, and for those risks we insure, the limits of coverage that are reasonably obtainable may not be sufficient to cover all actual losses or liabilities incurred. We are limited in the amount of insurance we can obtain to cover certain risks, such as cybersecurity risks and natural hazards, including earthquakes; fires; and extreme weather conditions, some of which can be worsened by climate change and pandemics. If any of our third-party insurers fail, become insolvent, cancel our coverage, or otherwise are unable to provide us with adequate insurance coverage or to renew our insurance coverage on favorable terms, then our overall risk exposure and our operational expenses could increase, and the management of our business operations could be disrupted. Our insurance may be insufficient to protect us from significant product and other liability claims or losses.
In some circumstances, we are entitled to certain legal protections or indemnifications from our customers through contractual provisions, laws, regulations, or otherwise. However, these protections are not always available, can be difficult to obtain, are typically subject to certain terms or limitations, including the availability of funds, and may not be sufficient to cover all losses or liabilities incurred. If liability claims or losses exceed our current or available insurance coverage, customer indemnifications, or other legal protections, our business, results of operations, prospects, and financial condition could be materially adversely affected. Any significant claim may have a material adverse effect on our industry and market reputation, leading to a substantial decrease in demand for our products and services and reduced revenues, making it more difficult for us to compete effectively, and could affect the cost and availability of insurance coverage at adequate levels in the future.
We may not have the ability to renew facilities leases on terms favorable to us and relocation of operations presents risks due to business interruption.
Certain of our manufacturing facilities are under leases that will expire in the future. We have made significant capital expenditures to improve several of our leased facilities to make them suitable for our purposes
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and meet customer requirements, including, when applicable, requirements to obtain facility security clearances for U.S. government contractors. However, at the end of the lease term and during any renewal period for a facility, we may be unable to renew the lease without substantial additional cost, if at all, and may be unable to offset these cost increases by charging more for our products and services. If we are unable to renew our facility leases, we may close or relocate a facility, which could subject us to construction and other costs and risks, including those that affect our ability to meet certain contractual schedule commitments, which in turn could have a material adverse effect on our business, results of operations, prospects, and financial condition. Additionally, for new facilities, we may need to obtain new qualifications, including security clearances, to meet customer or contractual requirements, and there is no assurance that we will obtain such qualifications on a timely basis, if at all. Further, we may not be able to secure replacement facilities that meet our commercial needs or comply with our contractual obligations. Even a brief closure to relocate a given facility could negatively impact such facility’s sales and contribution to our results of operations.
Many of our facilities are located on leased premises subject to non-cancellable leases. Typically, our leases have initial terms ranging from 4 to 20 years, with options to renew for specified periods of time, and we believe that our future leases will have similar terms. If we close or stop fully utilizing a facility, we may remain obligated to perform under the applicable lease, which could include, among other things, making the base rent payments and paying insurance, taxes, and other expenses on the leased property for the remainder of the lease term. Our inability to terminate a lease could have a material adverse effect on our business, results of operations, prospects, and financial condition.
We rely on the significant experience and specialized expertise of our senior management and engineering and operational staff, and must retain and attract qualified and highly skilled personnel to grow our business successfully.
Because our products are highly engineered, we depend on an educated and trained workforce. There is substantial competition for skilled personnel in our industry, and we could be materially adversely affected by a shortage of skilled employees. We may not be able to continue to hire, train, and retain qualified employees at current wage rates because we operate in a competitive labor market and significant inflationary and other pressures on wages exist and may continue to exist in the future.
In addition, our success depends in part on our ability to attract and motivate our senior management and key employees. For example, we rely on the relationships and reputation that many members of our senior management team have established and maintain with U.S. government personnel to maintain strong customer relationships and to identify new business opportunities. Achieving this objective may be difficult due to a variety of factors, including fluctuations in economic and industry conditions, competitors’ hiring practices, and the effectiveness of our compensation programs. Competition for qualified personnel can be intense, and the loss of any member of our senior management could impair our ability to secure new contracts, maintain good customer relations, and otherwise manage our business. If we are unable to effectively provide for the succession of key personnel and senior management, our business, results of operations, prospects, and financial condition could be materially adversely affected.
We depend on our ability to recruit and retain employees who have advanced engineering and technical services skills and who work well with our customers. These employees are in great demand and are likely to remain a limited resource in the foreseeable future. The current tight labor market and increased restrictions on the import of foreign labor have adversely impacted our ability to recruit qualified personnel, including engineers. If we are unable to recruit and retain a sufficient number of these employees, our ability to maintain our competitiveness and grow our business could be negatively affected. The loss of any significant number of our existing engineering personnel could have a material adverse effect on our business and operating results. Additionally, if our newly recruited employees perform poorly, or if we are unsuccessful in hiring, training, managing, and integrating these new employees, our business may be negatively impacted.
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We are party to a collective bargaining agreement with the International Association of Machinists and Aerospace Workers, which covers employees at our Stockton, California facility and expires on November 30, 2028. We are also party to a collective bargaining agreement with the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers, the industrial division of the Communications Workers of America (IUE-CWA), which covers employees at our Newington, Connecticut facility and expires on March 6, 2027. While there have been no material labor disruptions as a result of strikes, lockouts, or work stoppages in recent years, any failure to successfully negotiate a renewal of the collective bargaining agreement or any labor disruption during the renegotiation process could increase our labor costs or disrupt our operations. In addition, we have in the past and could face in the future a variety of employee claims against us, including but not limited to general discrimination, privacy, wage and hour, labor and employment, Employee Retirement Income Security Act, and disability claims. Any claims could also result in litigation or regulatory proceedings being brought against us by various government agencies that regulate our business, including the U.S. Equal Employment Opportunity Commission. Often these cases raise complex factual and legal issues and create risks and uncertainties. If we were to become subject to such labor disputes, it could have a negative effect on our relationships with our employees and adversely affect our business, financial condition and results of operations.
Misconduct of employees, subcontractors, agents, suppliers or business partners and others working on our behalf could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and customers and could have a material adverse effect on our reputation, business, results of operations, prospects, and financial condition.
Misconduct could include fraud or other improper activities such as falsifying time or other records; violations of laws; or failure to comply with our policies or procedures or various regulations or legislation, including those that govern federal, state, or local governmental procurement; the use and safeguarding of classified or other protected information; the pricing of labor and other costs in government contracts; environmental, health or safety matters; bribery of foreign government officials, import-export control, lobbying or similar activities and any other applicable laws or regulations. Although we have implemented policies, procedures, training, and other compliance controls to prevent and detect these activities, these precautions may not prevent all misconduct, and as a result, we could face unknown risks or losses. This risk of improper conduct may increase as we continue to expand and do business with new partners. Our failure to comply with applicable laws or regulations could damage our reputation and subject us to administrative, civil, or criminal investigations and enforcement actions; fines and penalties; restitution or other damages including civil False Claims Act allegations (which can include civil penalties and treble damages); loss of security clearance; loss of current and future customer contracts; loss of privileges; and other sanctions, including suspension or debarment from contracting with federal, state or local government agencies, any of which would have a material adverse effect on our reputation, business, results of operations, prospects, and financial condition.
If we are unable to grow and scale our facilities and systems, we may not be able to sustain our growth or adapt to evolving customer needs.
We anticipate that further growth of our facilities and systems will be required to expand our customer base and our product and service offerings. However, if we are unsuccessful in our efforts to obtain new or expand existing facilities and expand our systems, we may not be able to achieve our growth plans. Our success will depend in part upon the ability of our senior management to manage our increased complexity and expected growth effectively. To support our expected growth, we must continue to improve our operational, financial, and management information systems. If we are unable to manage our growth while maintaining our quality of service, or if new systems that we implement to assist in managing our growth do not produce the expected benefits, then our business, results of operations, prospects, and financial condition could be materially adversely affected.
We may need to invest in new information technology systems and infrastructure to scale our operations.
We may need to adopt new information technology systems and infrastructure to scale our business and obtain the synergies from prior and future acquisitions. Failures of our existing information technology and
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business systems and infrastructure, or delays, problems, or disruptions in the adoption of new systems, could create product development or production work stoppages, unnecessarily increase our inventory, negatively impact product delivery times and quality, and increase our compliance costs. Failure to invest in newer information technology and business systems and infrastructure may lead to operational inefficiencies and increased compliance costs and risks. Even if we were to invest in adopting upgrades or replacements to our information technology systems and infrastructures, these upgrades or replacements may not improve our productivity to the levels anticipated and may subject us to inherent costs and risks associated with implementing, replacing, and updating these systems, including potential disruption of our internal control structure, substantial capital expenditures, demands on management time and other risks of delays or difficulties in transitioning to new systems or of integrating new systems into other existing systems. If we are unable to maximize the utility and benefit of our information technology and business tools or any upgrades thereto, our ability to scale our operations and realize operational improvement goals may be negatively impacted.
Technology failures, cybersecurity breaches and other unauthorized access to or use of our information technology systems or sensitive or proprietary information could have a material adverse effect on our business and operations.
Our operations rely on the proper functioning of information technology systems and infrastructure, including both systems and infrastructure that we operate for ourselves and systems or infrastructure that we access through or purchase from third parties, to transmit, store, protect and otherwise process electronic information, including sensitive, personal and proprietary information. Any failure of, or disruption to, our information technology systems or those of our third-party service providers, whether as a result of cybersecurity attacks or otherwise, could damage our reputation, subject us to legal claims (including class actions) and proceedings or remedial actions, create risks of violations of data privacy laws and regulations, interfere with our operations and cause us to incur substantial additional costs. For more information on the laws and regulations that govern privacy, data protection, cybersecurity and the collection, storage, transmission, use and other processing of sensitive, personal and proprietary information, see “—Risks Related to Legal and Regulatory Matters—Our business is subject to federal and state laws regarding data protection, privacy, and data security, as well as confidentiality obligations under various agreements, and our actual or perceived failure to comply with such obligations could damage our reputation, expose us to litigation risk and materially adversely affect our business and operating results.”
While we have implemented cybersecurity risk management programs, policies, and internal controls designed to protect our information technology systems and data, including our efforts to comply with applicable DoW security standards, no security measures can provide absolute assurance. Consequently, we cannot guarantee that our protective protocols will be fully effective against all current or future cybersecurity threats, or prevent unauthorized access, data loss, or system disruptions in every instance. For example, we face risks of disruptions, failures, computer viruses or other malicious codes or bugs, malware or ransomware incidents, unauthorized access attempts, theft of intellectual property, trade secrets, or other corporate assets, denial of service attacks and phishing / social engineering, from a diverse set of threat actors, including hacking by individuals, criminal groups or nation-state organizations or social activist (“hacktivist”) organizations, insider threats, and other bad actors. Further, events such as natural disasters, fires, accidents, power outages, systems failures, telecommunications failures, acts of terrorism, vandalism or sabotage, acts of war or other states of emergency, employee error or malfeasance or other catastrophic events could similarly cause interruptions, disruptions or shutdowns, or exacerbate the risk of the failures described above, and threat actors’ malicious activities may be significantly enhanced through the use of artificial intelligence. These risks may increase as more employees work from home or as we integrate new technology systems that may be subject to cybersecurity vulnerabilities. Any data loss, cybersecurity incident, or information security lapse resulting in the unauthorized access, compromise, or improper use of our proprietary information, employee personal data, or customer provided controlled unclassified information (“CUI”) could result in claims, remediation costs, regulatory investigations, the loss of government contracts, interruptions to the services we provide, degradation in the user experience, a loss of confidence and trust in our products and solutions and a decrease in the use of
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our products and solutions. Furthermore, while classified information is strictly maintained in isolated, federally approved enclaves subject to National Industrial Security Program Operating Manual requirements, any security breach of these physically separate systems could result in the revocation of our facility security clearances, criminal sanctions, and severe reputational harm.
In addition, third parties may attempt to fraudulently induce our employees, contractors, vendors, service providers, consultants or customers to disclose information in order to gain access to our or our customers’ proprietary, confidential or sensitive information, including personal information. We may incur significant costs in protecting against or remediating such incidents and as such incidents continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any security or cybersecurity vulnerabilities or any actual or suspected breaches, incidents, compromises or disruptions. While we have certain disaster recovery arrangements in place, our preparations may not be adequate to account for disasters or similar events that may occur in the future and may not effectively permit us to continue operating in the event of any problems with respect to our systems or those of our third-party providers. Our disaster recovery may be inadequate, and our business interruption insurance may not be sufficient to compensate us for the losses that could occur. The third parties with which we do business also are susceptible to the foregoing risks (including regarding the third parties with which they are similarly interconnected or on which they otherwise rely), and our business operations and activities may therefore be affected adversely by failures, terminations, errors or malfeasance by, or attacks or constraints on, such third parties. The failure of these third parties to provide adequate services and technologies, or to adequately maintain or update their services and technologies, could result in significant disruption to our business operations. While we generally perform cybersecurity due diligence on our key vendors, service providers, contractors and consultants, if these third parties fail to adopt or adhere to adequate cybersecurity practices, or in the event of a breach, incident, disruption or other compromise of their networks, systems or applications, our or our customers’ proprietary, confidential or sensitive information, including personal information, may be improperly lost, destroyed, modified, accessed, used, disclosed or otherwise processed, which could subject us to claims, demands, proceedings and liabilities. We cannot control such third parties and cannot guarantee that a compromise, breach, incident or disruption will not occur on their networks, systems or applications. Although we may have contractual protections with our third-party vendors, service providers, contractors and consultants, any actual or perceived cybersecurity breach, incident or disruption could harm our reputation and brand, expose us to potential liability or require us to expend significant resources on cybersecurity and in responding to any such actual or perceived compromise, breach, incident or disruption and negatively impact our business. Any contractual protections we may have from our third-party vendors, service providers, contractors and consultants may not be sufficient to adequately protect us from any such liabilities and losses, and we may be unable to enforce any such contractual protections.
We have experienced, and may experience in the future, either directly or through our supply chain or other channels, cybersecurity incidents. To date, we are not aware of risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition. Existing or emerging threats involving changing attack techniques and tools (including artificial intelligence) may circumvent our existing security controls and evade detection. As a result, we may be unable to anticipate or implement sufficient control measures to successfully defend against these techniques, or to detect, investigate, remediate, or recover from an identified incident in a timely manner. We cannot predict the degree of any impact that increased monitoring, assessing, or reporting of cybersecurity matters would have on our business, results of operations, prospects, and financial condition. Moreover, the costs, potential monetary damages, and operational consequences of responding to cybersecurity incidents may not be covered by any insurance that we may carry from time to time and we cannot be certain that such insurance policies will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our business, financial condition and results of
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operations. Additionally, from time to time, we may implement new information technology systems or replace and/or upgrade our current information technology systems, which may not improve our productivity to the levels anticipated and may subject us to inherent costs and risks associated with implementing, replacing, and updating these systems, including potential disruption of our internal control structure, substantial capital expenditures, demands on management time and other risks of delays or difficulties in transitioning to or integrating new systems.
Risks Related to our Financial Condition
Our indebtedness and restrictive covenants under our credit facilities could limit our operational and financial flexibility.
As of March 31, 2026, our total indebtedness was approximately $1,017.8 million, consisting of approximately $971.7 million in principal amount of term loan borrowings under our Credit Agreement and $46.1 million of borrowings under our revolving credit facility. We may incur additional indebtedness in the future. Our indebtedness could have important consequences. For example, it could: increase our vulnerability to general economic downturns and adverse competitive and industry conditions; increase the risk we are subjected to downgrade or put on a negative watch by the ratings agencies; limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; place us at a competitive disadvantage compared to competitors that have less debt; negatively impact investors’ perception of us; impact our ability to pay dividends and make other distributions or to purchase, redeem or retire capital stock; and limit, along with the financial and other restrictive covenants contained in the documents governing our indebtedness, among other things, our ability to borrow additional funds, make investments, and incur liens.
Although the Credit Agreement contains restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and the indebtedness incurred in compliance with these qualifications and exceptions could be substantial. For more information on the Credit Agreement, see “Description of Material Indebtedness.”
Volatility in the financial markets may impede our ability to successfully access capital markets and ensure adequate liquidity and may adversely affect our customers and suppliers.
Turmoil in the capital markets may impede our ability to access the capital markets when we would like, or need, to raise capital or may restrict our ability to borrow money on favorable terms. Such market conditions could have an adverse impact on our flexibility to react to changing economic and business conditions and on our ability to fund our operations, acquisitions, and capital expenditures in the future. In addition, interest rate fluctuations, financial market volatility, or credit market disruptions may also negatively affect our customers’ and our suppliers’ ability to obtain credit to finance their businesses on acceptable terms. As a result, our customers’ need for and ability to purchase our products or services may decrease, and our suppliers may increase their prices, reduce their output or change their terms of sale. If our customers’ or suppliers’ operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, our customers may not be able to pay, or may delay payment of, accounts receivable owed to us, and our suppliers may restrict credit or impose different payment terms. Any inability of customers to pay us for our products and services or any demands by suppliers for different payment terms may adversely affect our earnings and cash flow.
Servicing our indebtedness requires a significant amount of cash. Our ability to generate cash depends on many factors, and any failure to meet our debt service obligations could have a material adverse effect on our business, results of operations, prospects, and financial condition.
Our ability to make payments on and to refinance our indebtedness and to fund our operations, will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
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Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us under the Credit Agreement or otherwise in amounts sufficient to enable us to service or pay our indebtedness or to fund our other liquidity needs, capital requirements or growth initiatives. If we cannot service our debt, the availability of cash to fund working capital requirements may decrease, and we may have to reduce, delay, or forego certain capital expenditures, acquisitions, research and development efforts, or take other actions such as selling assets, restructuring or refinancing our debt, or seeking additional equity capital. These remedies may not be available to us on commercially reasonable terms, or at all. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments may restrict us from adopting any of these alternatives. Any inability by us to obtain financing in the future or otherwise generate sufficient cash to service our debt or fund our other operational needs could have a material adverse effect on our cash flows, business, results of operations, prospects, and financial condition.
We use estimates and make assumptions in accounting for many of our contracts and programs and changes in our estimates could materially adversely affect our future financial results.
Our consolidated financial statements are prepared in conformity with GAAP. These principles require us to make estimates and assumptions regarding our contracts that affect the reported amounts of revenue and expenses during the reporting period. Accounting for revenue recognized over time requires judgment relative to assessing risks, including technical and schedule risks; estimating contract consideration and costs, including the effects of inflation and other economic projections; and business volume assumptions and asset utilization. Due to the nature of certain of our contracts, the estimation of total sales and cost at completion is complicated and subject to many variables. While we base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances at the time made, actual results may differ materially from those estimated.
Our pro forma financial information may not be representative of our future performance.
In preparing the pro forma financial information included in this prospectus, we have made adjustments to our historical financial information based upon currently available information and upon assumptions that our management believes are reasonable in order to reflect, on a pro forma basis, the impact of the acquisition of CBI. The estimates and assumptions used in the calculation of the pro forma financial information in this prospectus may be materially different from our actual experience. Accordingly, the pro forma financial information included in this prospectus does not purport to indicate the results that would have actually been achieved had the acquisition of CBI been completed on the assumed date or for the periods presented, or which may be realized in the future, nor does the pro forma financial information give effect to any events other than those discussed in our unaudited pro forma condensed combined financial statements of operations and related notes.
Risks Related to Legal and Regulatory Matters
Our business, operations and products expose us to numerous legal and regulatory requirements.
We are subject to numerous state and federal laws, directives and regulations that involve matters central to our business, including data privacy and security, employment and labor relations, environmental, health and safety matters, taxation, anti-corruption, anti-bribery, import-export controls (including tariffs), trade restrictions, sanctions, internal and disclosure control obligations, securities regulation, and anti-competition. Compliance with legal requirements is costly, time-consuming and requires significant resources. Violations of one or more of these legal requirements in the conduct of our business could result in significant fines and other damages, criminal sanctions against us or our officers, prohibitions on doing business, disqualification from bidding on future government contracts, and damage to our reputation. Violations of these regulations or contractual
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obligations related to regulatory compliance in connection with the performance of customer contracts could also result in liability for significant monetary damages, fines and criminal prosecution, unfavorable publicity and other reputational damage, restrictions on our ability to compete for certain work, and allegations by our customers that we have not performed our contractual obligations.
Contracting in the defense industry is subject to significant regulation, including rules related to bidding, billing and accounting, kickbacks and false claims, and any non-compliance could subject us to fines and penalties or possible debarment.
Contracting with government agencies, whether directly or indirectly through our customers, exposes our business to heightened regulation. Contracting in the defense industry is subject to significant regulation, including rules related to bidding, billing and accounting, kickbacks, and false claims, and any non-compliance with such regulation could subject us to substantial civil and criminal fines, penalties, or possible debarment as a government contractor. These fines and penalties could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow cost accounting standards, receiving or paying kickbacks, or filing false claims.
We have been, and expect to continue to be, subjected to routine audits and investigations by government agencies. The failure to comply with the terms of our government contracts could harm our business reputation, which could significantly reduce our sales and earnings. It could also result in withheld progress payments or our suspension or debarment from future government contracts, which could have a material adverse effect on our business, results of operations, prospects, and financial condition. In addition, we could be subject to criminal or civil penalties or administrative sanctions, including contract termination or breach of contract actions including related damages, fines, forfeiture of fees, suspension of payment, and civil False Claims Act allegations (which can include civil penalties and treble damages), any of which could have a material adverse effect on our reputation, business, results of operations, prospects, and financial condition.
Whether we contract directly with the U.S. government and U.S. government agencies or indirectly as a subcontractor or team member, our contracts and subcontracts are subject to special risks, including:
| • | We sell certain products and services to U.S. and international defense contractors or directly to the U.S. government on a commercial item basis, eliminating the requirement to disclose and certify cost data. To the extent that there are interpretations or changes in the Federal Acquisition Regulations (“FAR”) regarding the qualifications necessary to sell commercial items, there could be a material impact on our business and operating results. For example, there have been legislative proposals to narrow the definition of a “commercial item” (as defined in the FAR) or to require cost and pricing data on commercial items that could limit or adversely impact our ability to contract under commercial item terms. Changes could be accelerated due to changes in our mix of business, in federal regulations, or in the interpretation of federal regulations, which may subject us to increased oversight by the Defense Contract Audit Agency for certain of our products or services. Such changes could also trigger contract coverage for a larger percentage of our contracts under the Cost Accounting Standards (“CAS”), requiring compliance with a defined set of business systems criteria. Failure to comply with applicable CAS requirements could adversely impact our ability to win future CAS-type contracts and subject us to 5% billing withholding on open cost type contracts. We may also need to implement or enhance our processes and information systems to support certified cost and pricing and earned value management systems. |
| • | We are subject to the DoW Cybersecurity Maturity Model Certification (“CMMC”) in connection with our defense work for the U.S. government and defense prime contractors. Inability to meet the qualifications to the CMMC and any amendments may increase our costs or delay the award of contracts if we are unable to certify that we satisfy such cybersecurity requirements at our Company level and into our supply chain. Further, our suppliers in general are not as prepared to comply with |
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| CMMC requirements today as we are, and thus we may have to change suppliers or delay production to the extent the application of such requirements materially affects our supply chain. |
| • | The U.S. government or a defense prime contractor customer could require us to relinquish data rights to a product in connection with performing work on a defense contract, which could lead to a loss of valuable technology and intellectual property in order to participate in a government program. |
| • | The U.S. government or a defense prime contractor customer could require us to enter into cost reimbursable contracts that could offset our cost efficiency initiatives. |
| • | We anticipate that sales to our U.S. prime defense contractor customers as part of foreign military sales (“FMS”) programs will be an increasing part of our business going forward. These FMS sales combine several different types of risks and uncertainties, including risks related to government contracts, risks related to defense contracts, timing and budgeting of foreign governments and approval from the U.S. and foreign governments related to the programs, all of which may be impacted by macroeconomic and geopolitical factors outside of our control. |
| • | Certain of our contracts with the U.S. government and subcontractor contracts do not contain a limitation of liability provision, creating a risk of responsibility for indirect, incidental damages and consequential damages, which could be substantial. |
We must also comply with security requirements pursuant to 32 CFR Part 117, formerly known as the National Industrial Security Program Operating Manual (“NISPOM”), and other U.S. government security protocols when accessing sensitive information. Many of our facilities maintain a facility security clearance and many of our employees maintain a personal security clearance to access sensitive information necessary to the performance of our work on certain U.S. government contracts and subcontracts. Certain of our products are used in government programs requiring our Company to maintain a National Security Clearance at the “Secret” level, and certain of our employees hold personal clearances at the same level. As a result, certain information may need to be withheld from employees who do not hold such clearances, including members of management, which could impact management’s ability to oversee all aspects of our business. Failure to comply with such security requirements may also subject us to civil or criminal penalties, loss of access to sensitive information, loss of a U.S. government contract or subcontract, or potentially debarment as a government contractor. We may need to invest additional capital to build out higher level security infrastructure at certain of our facilities to capture new design wins on defense programs with higher level security requirements.
Our business may be adversely affected if we were to lose our government or industry approvals, if more stringent government regulations were enacted or if industry oversight were to increase.
The industry we do business in is highly regulated in the U.S. These laws and regulations, among other things, may require certification and disclosure of all cost and pricing data in connection with contract negotiation, define allowable and unallowable costs and otherwise govern our right to reimbursement under certain cost-based U.S. government contracts, and restrict the use and dissemination of classified information and the exportation of certain products and technical data. Additionally, in order to sell our products, we and the products we manufacture must be certified by the Federal Aviation Administration, the DoW, and by individual manufacturers. If new and more stringent government regulations are adopted or if industry oversight increases, we might incur significant expenses to comply with any new regulations or heightened industry oversight. In addition, if any existing material authorizations or approvals were revoked or suspended, our business, results of operations, prospects, and financial condition could be materially adversely affected. Failure to comply with applicable government or industry regulations may lead to civil or criminal penalties, termination of our government contracts, civil False Claims Act allegations (which can include civil penalties and treble damages) or suspension or debarment from contracting with government agencies.
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As our business expands, we may become exposed to risks associated with international operations and markets.
We currently market and sell our products primarily in U.S. domestic markets. However, we may expand into international markets in the future, both directly to foreign customers and indirectly to customers based in the U.S. that have global operations. There are inherent risks in transacting business internationally, including: changes in applicable laws and regulatory requirements; tariffs and other trade barriers; less favorable intellectual property laws; difficulties in staffing and managing foreign operations; longer payment cycles; problems in collecting accounts receivable; adverse economic conditions in foreign markets; political instability that may result in price fluctuations of raw materials; fluctuations in currency exchange rates, which may lead to lower operating margins, or may cause us to raise prices which could result in reduced revenues; pandemics and disasters, natural or otherwise; expatriation controls; and potential adverse tax consequences.
If we expand into international markets, we may be required to comply with more complex laws and regulations, including those administered and enforced by U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the U.S. Department of State, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”), the United Nations Security Council, the Directorate of Defense Trade Controls and other relevant authorities. Such laws and regulations prohibit or restrict certain operations, investment decisions, and sales activities, including dealings with certain countries or territories, and with certain governments and designated persons. We may incur significant costs to develop the systems and hire personnel necessary to comply with such laws and regulations, which costs we may not be able to recoup through our fixed-price contracts. Even if we establish policies and procedures designed to maintain compliance with applicable economic and trade sanctions and export controls, we cannot ensure that such policies will be effective in preventing violations or allegations of violations. Our employees, representatives, or other third parties acting on our behalf may engage in conduct for which we might be held responsible. If we or our intermediaries fail to comply with the requirements of economic and trade sanctions, export controls, anti-bribery and corruption laws and other laws that may apply if we expand into international markets, governmental authorities in the U.S. or the countries in which we operate in the future could seek to impose civil and criminal penalties, or restrict or limit our ability to do business, which could have a material adverse effect on our cash flows, business, results of operations, prospects, and financial condition.
We may be subject to periodic litigation and regulatory proceedings, which may adversely affect our business and financial performance.
From time to time, we are involved in lawsuits and regulatory actions brought or threatened against us in the ordinary course of business. These actions and proceedings may involve claims for, among other things, compensation for alleged personal injury, workers’ compensation, employment discrimination, environmental, health or safety violations, obligations or liabilities or breach of contract. In addition, we may be subject to class action lawsuits, including those involving allegations of violations of consumer product statutes or the Fair Labor Standards Act and state wage and hour laws. Due to the inherent uncertainties of litigation and government investigations, we cannot accurately predict the ultimate outcome of any such actions or proceedings. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify, as plaintiffs may seek recovery of very large or indeterminate amounts in these types of lawsuits, and the magnitude of the potential loss may remain unknown for substantial periods of time. In addition, plaintiffs in many types of actions may seek punitive damages, civil penalties, consequential damages, or other losses, or injunctive or declaratory relief, and monetary damages or fines may exceed our insurance coverage limits, or we may settle on unfavorable terms. These proceedings could result in substantial cost and may require us to devote substantial resources to defend ourselves. The ultimate resolution of these matters through settlement, mediation, or court judgment could have a material adverse effect on our cash flows, business, results of operations, prospects, and financial condition.
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If we are unable to adequately maintain, enforce and protect our intellectual property or defend against assertions of infringement, misappropriation or other violations, our business and our ability to compete could be harmed.
We own certain patents, trademarks, trade secrets and know-how, both internally developed and acquired, that support our ability to maintain our competitive advantage. We strive to protect our intellectual property rights by relying on foreign, federal, state and common law rights, as well as contractual restrictions. However, the steps we take to protect our intellectual property and proprietary rights, afford only limited protection, require significant resources and may be inadequate. Effective trade secret, copyright, trademark, patent and domain name protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and expenses and the costs of defending and enforcing our rights. Given the costs and expenses of obtaining, maintaining, protecting, exploiting, defending and enforcing our intellectual property rights, we may choose not to obtain, maintain, protect, exploit, defend or enforce certain intellectual property rights that later turn out to be important. We cannot guarantee that our efforts to obtain, maintain, protect, exploit, defend or enforce our intellectual property rights are adequate or that we have secured, or will be able to secure, appropriate permissions or protections for all of the intellectual property rights we use or rely on.
Our patent rights and other intellectual property protections may be in the future, infringed, misappropriated, misrepresented, copied without authorization, circumvented, invalidated or otherwise violated. Our inability to protect and defend against the unauthorized use of these rights and assets could have a material adverse effect on our business, results of operations, prospects, and financial condition. Our proprietary rights may expire, and third parties may develop capabilities similar or superior to our capabilities or design around our proprietary rights. Litigation may be necessary to enforce or protect our intellectual property rights, defend against claims of infringement, protect our trade secrets or determine the validity and scope of proprietary rights claimed by others. This litigation could result in significant costs and divert our management’s focus away from operations. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative it could have an adverse impact on the price of our shares.
We seek to protect our proprietary position by filing patent applications related to certain technologies that are important to our business. The patent prosecution process is expensive, time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. We may not be able to obtain or maintain patent applications and patents due to the subject matter claimed in such patent applications and patents being in disclosures in the public domain. Furthermore, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Further, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability and our patents may be challenged in courts or patent offices in the United States and abroad. Our patents and other intellectual property rights may be challenged, invalidated, circumvented or rendered unenforceable. The outcome following legal assertions of invalidity and unenforceability is unpredictable. An adverse result in any legal proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly and could allow third parties to commercialize our products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition, we may become involved in derivation, reexamination, inter partes review, post-grant review or interference proceedings and other similar proceedings in foreign jurisdictions (e.g., opposition proceedings) challenging the validity, priority or other features of patentability of our patent rights.
Further, we cannot provide assurance that any pending patent application we may file from time to time will result in an issued patent or, if patents are issued to us, that those patents will provide meaningful protection
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against competitors or against competitive technologies. The failure of our patents or other measures to protect our patents, trade secrets and know-how could have a material adverse effect on our cash flows, business, results of operations, prospects, and financial condition.
We may be subject to claims that we infringe, misappropriate or otherwise violate a third party’s intellectual property rights, which could result in substantial damages, diversion of management’s efforts and attention, and have a material adverse effect on our business, financial condition, and results of operations.
We may from time-to-time face allegations that we are infringing, misappropriating, or otherwise violating the intellectual property rights of third parties, including the intellectual property rights of our competitors. We may be unaware of the intellectual property rights that others may claim cover some or all of our technology or services. Irrespective of the validity of any such claims, we could incur significant costs and diversion of resources in defending against them. There is no guarantee any such defense would be successful, and such claims could result in injunctions against us or the payment of damages by us, result in expensive changes to our business model, result in the payment of substantial damages or injunctions against us, result in ongoing royalty payments or significant settlement payments, require us to enter into costly royalty or licensing agreements, if available, or could have a material adverse effect on our business, financial condition, and results of operations. Even if these matters do not result in litigation or are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could divert the time and resources of our management team and harm our business, financial condition, our results of operations, and our reputation. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.
The protections we have in place with our employees, consultants, and contractors involved in the development of intellectual property may not provide meaningful protection for our trade secrets or other confidential information, and if we are unable to protect the confidentiality of our trade secrets or other confidential information, the value of our products and solutions and our business and competitive position could be materially adversely affected.
We rely on trade secret laws and confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information and to maintain our competitive position. With respect to our products and solutions, we consider trade secrets and know-how to be one of our primary sources of intellectual property. Trade secrets and know-how can be difficult to protect. While it is our policy to enter into confidentiality agreements with our employees, contractors and third parties to protect our material intellectual property rights, we cannot guarantee that we have entered into such agreements with each party who has developed intellectual property on our behalf and each party that has or may have had access to our confidential information, know-how or trade secrets. These confidentiality agreements are designed to protect our proprietary information. These agreements may not be sufficient and there can be no assurances that our confidentiality agreements will not be breached. Such agreements may not provide meaningful protection against the unauthorized use or disclosure of our trade secrets or other confidential information, and adequate remedies may not exist if unauthorized use or disclosure were to occur. Further, we may not have executed, or may in the future fail to execute, invention assignment agreements with employees, contractors, consultants, and third parties who may be involved in the development of our intellectual property. Additionally, individuals not subject to invention assignment agreements may make adverse ownership claims to our current and future intellectual property and, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. The exposure of our trade secrets and other proprietary information would impair our competitive advantages and could have a material adverse effect on our business, results of operations, and financial condition. In particular, a failure to protect our confidential information may allow competitors to copy our processes, which could adversely affect our pricing and market share. Further, other parties may independently develop substantially equivalent know-how and technology.
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Furthermore, individuals executing agreements with us may have preexisting or competing obligations to third parties, and thus an agreement with us may be ineffective in perfecting ownership of intellectual property developed by those individuals. We may in the future become subject to claims that we or our employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, we may be forced to pay monetary damages or be enjoined from using certain technology, aspects of our platforms, aspects of our programs, or knowledge. Even if we are successful in defending against these claims, litigation could result in substantial costs and demand on management resources.
In addition to contractual measures, we seek to protect the confidential nature of our proprietary information using commonly accepted physical and technological security measures. Such measures may not, for example, in the case of misappropriation of a trade secret by an employee, consultant, or other third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent an employee, consultant, contractor, or other third party from misappropriating our trade secrets and providing them to a competitor, and the recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our intellectual property, trade secrets, or confidential information will be effective. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our platform and programs that we consider proprietary. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome is unpredictable. Trade secret violations are often a matter of state law, and the criteria for protection of trade secrets can vary among different jurisdictions, with some courts inside and outside the United States less willing or unwilling to protect trade secrets and know-how. In addition, trade secrets may otherwise become known or be independently developed by others, including our competitors, in a manner that could prevent legal recourse by us.
We may use artificial intelligence in our business or systems, and challenges with properly managing its use could result in competitive and reputational harm and negatively impact the operations and profitability of our business.
We may incorporate artificial intelligence, generative artificial intelligence, machine learning and similar tools and technologies (collectively, “AI”) solutions into our core offerings, and these applications may become important in our business and operations over time, exposing us to additional risks, such as damage to our reputation, competitive position and business, legal and regulatory risks and additional costs. Our competitors or other third parties may incorporate AI into their products or services more quickly or more successfully than we may, which could impair our ability to compete effectively and adversely affect our results of operations. Additionally, generative AI has been known to produce false or “hallucinatory” inferences or output, and certain generative AI uses machine learning and predictive analytics, which can create deficient, inaccurate or misleading output, unintended biases and other discriminatory or unexpected results, errors or inadequacies, any of which may not be easily detectable. Accordingly, if the content, analyses, or recommendations that AI applications assist in producing are or are alleged to be deficient, inaccurate, or misleading, biased, unethical or otherwise flawed, our business, financial condition, and results of operations may be adversely affected.
Additionally, if any of our employees, contractors, consultants, vendors or service providers use any third-party AI-powered software in connection with our business or the services they provide to us, it may lead to the inadvertent disclosure or incorporation of our confidential information into publicly available training sets, which may impact our ability to realize the benefit of, or adequately maintain, protect and enforce our intellectual property or confidential information, harming our competitive position and business. Any output created by us using AI tools may not be subject to copyright protection, which may adversely affect our intellectual property rights in, or ability to commercialize or use, any such content. In the United States, a number of civil lawsuits have been initiated related to the foregoing and other concerns, any one of which may, among other things, require us to limit the ways in which AI systems are trained and may affect our ability to develop AI-powered products and solutions. Additionally, the use of AI applications has resulted in, and may in the future result in,
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cybersecurity incidents. To the extent that we do not have sufficient rights to use the data or other material or content used in or produced by the AI tools used in our business, or if we experience cybersecurity incidents related to our use or any third-party service provider’s use of AI applications, it could adversely affect our reputation and results of operations and expose us to legal liability or regulatory risk, including with respect to third-party intellectual property, privacy, data security, cybersecurity, publicity, contractual or other rights.
It is possible that new laws and regulations will be adopted in the United States and in non-U.S. jurisdictions, or that existing laws and regulations may be interpreted in new ways, that would affect our use of AI-powered solutions in our business and operations. We may not be able to adequately anticipate or respond to these evolving laws and regulations, and we may need to expend additional resources to adjust our offerings in certain jurisdictions if applicable legal frameworks are inconsistent across jurisdictions. Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations. The rapid evolution of AI, including government regulation of AI, will require significant resources to develop, test and maintain our platform, offerings, services, and features to help us implement AI ethically in order to minimize unintended, harmful impact.
Our business is subject to federal and state laws regarding data protection, privacy, and data security, as well as confidentiality obligations under various agreements, and our actual or perceived failure to comply with such obligations could damage our reputation, expose us to litigation risk and materially adversely affect our business and operating results.
In the course of our business, we receive, store, use and otherwise process information that relates to individuals and/or constitutes “personal data,” “personal information,” “personally identifiable information,” or similar terms under applicable data privacy and security laws. We are therefore subject to a variety of federal and state laws, regulations and rules, industry standards, contractual obligations and other requirements relating to the privacy, security and processing of personal information. These laws, rules and regulations may require us to modify our data processing practices and policies and may cause us to incur substantial costs and expenses in order to comply. Like all DoW contractors that store, transmit or otherwise process controlled unclassified information, we must meet minimum security standards or risk losing our contracts that directly or indirectly serve the DoW. In addition, in the ordinary course of our business, we receive, collect, retain and otherwise process certain personal information about our customers, vendors and employees. As a result, we are subject to the evolving and increasingly complex data protection laws, including state comprehensive privacy laws, such as the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, the “CCPA”). These laws impose obligations in relation to the collection, use, disclosure and other processing of personal information, including providing consumers with certain rights to access, correct, delete, and restrict the processing of their personal information. Failure to comply with applicable laws may result in regulatory scrutiny, enforcement actions, fines, litigation, reputational harm or other liabilities or costs, and the evolving complexity of the privacy landscape could impact our ability to collect, use, disclose or otherwise process personal information, decrease demand for our products, require us to restrict our business operations, increase our costs and impair our ability to maintain and grow our customer base and increase our revenue. We are also subject to the DoW CMMC requirements, which require companies that do business with the DoW to, depending on the level of security required, meet, or exceed certain specified cybersecurity standards to be eligible for new contract awards. To the extent we are unable to achieve or maintain certification at the level required for a particular contract award, we will be unable to bid on such contract awards or follow-on awards for existing work with the DoW, which could materially adversely impact our revenue, profitability, and cash flows.
Additionally, our subcontractors, and certain of our vendors, may also need to comply with CMMC requirements. We may be negatively impacted if our subcontractors or vendors are not compliant with CMMC requirements. The obligations imposed on us under the CMMC may be different from, or in addition to those, otherwise required by the data protection laws to which we are subject. The costs to comply with the new CMMC requirements are significant and may increase, which could materially adversely affect our business,
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financial condition, or results of operations. Failure to comply with CMMC requirements may also make us subject to bid protest challenges or False Claims Act allegations claiming damages to the government based on such non-compliance. We have implemented internal controls and procedures designed to comply with the data protection laws to which we are subject, the CMMC and other applicable standards, as well as contractual obligations related to data protection.
We currently market and sell our products primarily in U.S. domestic markets. However, we may expand into international markets in the future, both directly to foreign customers and indirectly to customers based in the U.S. that have global operations. If we expand into international markets, we may be required to comply with additional laws and regulations, such as the European Union General Data Protection Regulation (“EU GDPR”), and the U.K. General Data Protection Regulation, as amended by the Data (Use and Access) Act 2025 (“U.K. GDPR”). These laws impose obligations in relation to the collection, use, disclosure and other processing of personal information, including providing consumers with certain rights to access, correct, delete, and restrict the processing of their personal information. Failure to comply with applicable laws may result in regulatory scrutiny, enforcement actions, fines, litigation, reputational harm or other liabilities or costs, and the evolving complexity of the privacy landscape could impact our ability to collect, use, disclose or otherwise process personal information, decrease demand for our products, require us to restrict our business operations, increase our costs and impair our ability to maintain and grow our customer base and increase our revenue.
Data protection laws, regulations, standards, and obligations are evolving and may be modified, replaced, interpreted, and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements, or legal obligations. At the federal level, we are subject to, among other laws, rules and regulations, the rules and regulations promulgated under the authority of the Federal Trade Commission, which has the authority to regulate and enforce against unfair or deceptive acts or practices in or affecting commerce, including acts and practices with respect to privacy, data protection and cybersecurity. Moreover, Congress has considered, and continues to consider, many proposals for comprehensive national data privacy and cybersecurity legislation. At the state level, we are subject to laws, rules and regulations, such as the CCPA which imposes requirements on covered companies that process California consumers’ personal information, including requirements to provide disclosures to California consumers and afford such consumers numerous data privacy rights (such as the right to access and request deletion of their personal information and to opt out of certain sharing and sales of personal information), and provides for civil penalties for violations, as well as a private right of action for certain data breaches that may increase the likelihood of and risks associated with data breach litigation. Numerous other states have enacted, or are in the process of enacting or considering, comprehensive state-level privacy, data protection and cybersecurity laws, rules and regulations that share similarities with the CCPA, which creates the potential for a patchwork of overlapping but different state laws. In addition, all 50 states have laws that require the provision of notification for security breaches of personal information to affected individuals, state officers or others.
Further, we expect that new industry standards, laws, and regulations will continue to be proposed regarding privacy and data security in many jurisdictions. We cannot yet determine the impact that such future laws, regulations, and standards may have on our business. Our efforts to comply with these evolving obligations may cause us to incur significant costs or require changes to our business practices, which could materially adversely affect our business, financial condition, and results of operations. Any failure or perceived failure by us to comply with applicable laws or regulations, or other contractual or legal obligations, or to adequately address privacy and data security concerns, even if unfounded, may result in governmental enforcement actions, private litigation (including class actions), fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have a material adverse effect on our reputation, inhibit sales, and materially adversely affect our business, financial condition, and results of operations.
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We, our operations and our products are subject to environmental, health and safety laws, regulations and permits, which may result in significant liabilities, obligations and compliance-related costs.
Our operations involve the handling, storage and use of various industrial chemicals and the generation of hazardous wastes. As a result, we and our operations, products and facilities are subject to a number of complex and increasingly stringent international, foreign, federal, state and local environmental, health and safety laws, regulations and permits that govern, among other things, discharges of pollutants into the air and water; the generation, handling, storage and disposal of hazardous materials and wastes; the remediation of contamination; chemical content of products; and the health and safety of our employees. Compliance with such existing and evolving laws, regulations and permits requires and is expected to continue to require significant operating and capital costs. The nature and extent of any changes in these laws, regulations and permits may be unpredictable and may have material effects on our business. We may be subject to government investigations by various government agencies, including the U.S. Environmental Protection Agency (“USEPA”), the Occupational Safety and Health Administration (“OSHA”) and counterpart state and local agencies, which could lead to substantial administrative, civil, or criminal fines, penalties, obligations, liabilities or other sanctions (including suspension and debarment from contracting with governments). If we are found to be in violation of the Federal Clean Air Act or the Clean Water Act, the facility or facilities involved in the violation could be placed by the USEPA on a list of facilities that generally cannot be used in performing on U.S. government contracts until the violation is corrected. In addition, our operations may present a risk of injury to our employees or third parties, and material liabilities or obligations relating to injury, death, or other workers’ compensation claims could have a material adverse effect on our business or result in reputational harm.
Environmental laws and regulations may also require that we investigate and remediate the effects of the release or disposal of hazardous materials at sites associated with past, present, or future operations, including at sites historically owned or operated by our business or at third-party sites used by our business for material and waste handling and disposal. Stricter or different remediation standards or enforcement of existing laws and regulations; new requirements, including regulation of new substances; discovery of previously unknown contamination or new contaminants; imposition of fines, penalties, or damages (including natural resource damages); a determination that certain remediation or other costs are unallowable; rulings on allocation or insurance coverage; and/or the insolvency, inability, or unwillingness of other responsible parties to pay their share could require us to incur material additional costs in excess of those anticipated. We may become a party to legal proceedings and disputes involving government and private parties (including individual and class actions) relating to alleged impacts from pollutants released into the environment, including bodily injury and property damage. Additionally, certain of our facilities have in the past, and may in the future be, subject to investigations as a result of our operations or historical manufacturing, industrial, or agricultural operations conducted by prior owners or operators of the site. Any of these matters could result in material compensatory or other damages, remediation costs and obligations, fines, penalties, non-monetary relief and adverse allowability or insurance coverage determinations. The impact of these factors is difficult to predict, but one or more of them could harm our reputation and business and have a material adverse effect on our results of operations, prospects and financial condition.
Further, our operations and the operations of our suppliers and customers are subject to laws and regulations limiting emissions and to other climate-related laws and regulations, including requirements related to the disclosure of greenhouse gas emissions and climate change impacts. The increased prevalence of global climate change concerns may result in new laws and regulations that may negatively impact us, our suppliers and customers. We are continuing to evaluate short-, medium- and long-term risks related to climate change. We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted, or what environmental conditions may be found to exist. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers, in which case, the costs of raw materials and component parts could increase.
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Failure to maintain a level of corporate social responsibility could damage our reputation and could have a material adverse effect on our business, results of operations, prospects, and financial condition.
Our reputation could be materially adversely impacted by a failure, or perceived failure, to maintain appropriate standards of corporate social responsibility, whether arising from our operations, including our environmental impact and supply chain practices, or the actions of our employees, agents, customers, suppliers, or other third parties. Governmental authorities across different jurisdictions have imposed, and may continue to impose, varying and potentially conflicting substantive or disclosure requirements with respect to corporate social responsibility, including in certain U.S. states that seek to discourage or penalize consideration of such factors, resulting in increased complexity, compliance costs, and litigation risks. Customers and investors may likewise impose their own social and environmental responsibility requirements or expectations. If we are unable to satisfy applicable requirements or expectations, customers may cease purchasing our products, investors may divest, and either may pursue legal action against us. We may also become subject to new or more stringent laws, regulations or industry standards that could impose additional costs and restrictions. Any of the foregoing could have a material adverse effect on our reputation, competitive position, business, results of operations, prospects, and financial condition.
We may be subject to risks relating to changes in our tax rates or exposure to additional income tax liabilities.
Our future results of operations could be materially and adversely affected by changes in our effective tax rate, changes in the valuation of deferred tax assets, challenges by tax authorities or changes in domestic tax laws or regulations. Significant judgment is also required in determining our provision for income taxes. The amount of income taxes we pay may be subject to ongoing audits by U.S. federal, state, and local tax authorities. If these audits result in assessments different from amounts reserved, future financial results may include unfavorable adjustments to our tax liabilities, which could have a material adverse effect on our results of operations. The final determination of tax audits and any related litigation could be materially different from our historical income tax expenses and accruals.
Risks Related to This Offering and Ownership of Our Common Stock
Our Principal Stockholder controls us and its interests may conflict with ours or yours in the future.
Immediately following the completion of this offering and the application of net proceeds therefrom, our Principal Stockholder will beneficially own approximately 81.0% of our outstanding common stock (or 78.7% if the underwriters exercise in full their option to purchase additional shares of our common stock). Moreover, in connection with this offering, we intend to enter into a stockholders agreement with our Principal Stockholder, pursuant to which it will have the right to nominate up to all of the members of our board of directors, for so long as it beneficially owns at least 40% of the total number of our shares of common stock that it beneficially owns as of the date of this offering. See “Certain Relationships and Related Party Transactions—Agreements to be Entered in Connection with this Offering—Stockholders Agreement” and “Description of Capital Stock.”
Even when our Principal Stockholder ceases to own shares of our capital stock representing a majority of the total voting power, for so long as our Principal Stockholder continues to own a significant percentage of our common stock, it will still be able to significantly influence the composition of our board of directors and the approval of actions requiring stockholder approval through its voting power. Accordingly, for such period of time, our Principal Stockholder will have significant influence with respect to our management, business plans and policies, including the appointment and removal of our officers. In particular, for so long as our Principal Stockholder continues to own a significant percentage of our common stock, our Principal Stockholder will be able to cause or prevent a change of control of our company or a change in the composition of our board of directors and could preclude any unsolicited acquisition of our company. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of our common stock as part of a sale of our company and ultimately might adversely affect the market price of our common stock.
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Our amended and restated certificate of incorporation will not limit the ability of our Principal Stockholder to compete with us, and they and certain of our directors may have investments in businesses whose interests conflict with ours.
Our Principal Stockholder and its affiliates engage in a broad spectrum of activities, including investments in businesses that may compete with us. In the ordinary course of its business activities, our Principal Stockholder and its affiliates may engage in activities in which their interests conflict with our interests or those of our stockholders. Our amended and restated certificate of incorporation provides that none of our Principal Stockholder, any of its affiliates or any of our directors who are not employed by us (including any non-employee director who serves as one of our officers in both his or her director and officer capacities) or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. See “Description of Capital Stock—Conflicts of Interest.” Our Principal Stockholder and its affiliates may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. In addition, our Principal Stockholder may have an interest in our pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to us and our stockholders.
Upon the listing of our common stock on the NYSE, we will be a “controlled company” within the meaning of the NYSE corporate governance standards and, as a result, will qualify for, and intend to rely on, exemptions and relief from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.
After completion of this offering, our Principal Stockholder will beneficially own approximately 81.0% of our outstanding shares of common stock (or 78.7% if the underwriters exercise in full their option to purchase additional shares of common stock). As a result, we will be a “controlled company” within the meaning of the NYSE corporate governance standards. Under these corporate governance standards, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including those which require that within one year of the date of the listing of our common stock:
| • | a majority of our board of directors consist of independent directors; |
| • | our board of directors has a compensation committee that is comprised entirely of independent directors; and |
| • | our board of directors has a nominating and corporate governance committee that is comprised entirely of independent directors. |
Following this offering, we intend to utilize these exemptions. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements. See “Management—Controlled Company Exemption.”
We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For so long as we remain an emerging growth company, we are permitted by SEC rules to (and plan to) rely on exemptions and relief from certain reporting requirements that are applicable to other SEC-registered public companies that are not emerging growth companies. These exemptions and relief include: not being required to have our internal control over financial reporting audited by our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act (“Section 404”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute
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arrangements. We may take advantage of these exemptions for up to five years or until we are no longer an emerging growth company, whichever is earlier. As a result, the information we provide stockholders will be different than the information that is available with respect to other public companies that are not emerging growth companies.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can delay adopting new or revised accounting standards until those standards apply to private companies. We may use the extended transition period under the JOBS Act. Accordingly, our consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.
We will cease to be an emerging growth company prior to the end of such five-year period if certain earlier events occur, including if we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, our annual gross revenue exceeds $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period. We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of certain reduced reporting burdens in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.
We cannot predict if investors will find our common stock less attractive as a result of relying on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and our stock price may be more volatile.
An active trading market for our common stock may never develop or be sustained.
Prior to this offering, there has been no public market for any of our common stock. We have applied to list our common stock on the NYSE under the symbol “AADX.” We cannot predict the extent to which investor interest in us will lead to the development of an active trading market on that exchange or elsewhere or how liquid that market might become. An active public market for our common stock may not develop or be sustained after this offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you or at all. The initial public offering price for our common stock has been determined through negotiations among us and the representatives of the underwriters and may not be indicative of the market price of our common stock after this offering or to any other established criteria of the value of our business. If you purchase shares of our common stock, you may not be able to resell those shares at or above the initial public offering price.
You will experience immediate and substantial dilution in the net tangible book value of the shares of common stock you purchase in this offering.
The initial public offering price of our common stock is substantially higher than the pro forma net tangible book value per share of our common stock immediately after this offering. If you purchase shares of our common stock in this offering, you will suffer immediate dilution of $20.23 per share, representing the difference between the assumed initial public offering price of $19.50 per share and our pro forma net tangible book value per share after giving effect to the sale of common stock in this offering at the assumed initial public offering price of $19.50 per share. See “Dilution.”
You may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions, or otherwise.
After this offering, we will have 829,256,482 shares of common stock authorized but unissued (assuming no exercise of the over-allotment option by the underwriters). Our amended and restated certificate of incorporation
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authorizes us to issue these shares of common stock and options, rights, warrants and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise. Additionally, we have reserved an aggregate of 18,781,787 shares of common stock for issuance under our 2026 Omnibus Incentive Plan and employee stock purchase plan. Any common stock that we issue, including under our 2026 Omnibus Incentive Plan, employee stock purchase plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by the investors who purchase common stock in this offering.
If we or our pre-IPO owners sell additional shares of our common stock after this offering or are perceived by the public market as intending to sell them, the market price of our common stock could decline.
The sale of substantial amounts of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell shares of our common stock in the future at a time and at a price that we deem appropriate. Upon completion of this offering, we will have a total of 170,743,518 shares of our common stock outstanding, or 175,618,518 shares if the underwriters exercise in full their option to purchase additional shares of common stock. All of the shares of our common stock sold in this offering will be freely tradable without restriction or further registration under the Securities Act, by persons other than our “affiliates,” as that term is defined under Rule 144 of the Securities Act (“Rule 144”). See “Shares Available for Future Sale.”
We, our executive officers, our directors and other stockholders owning all of our common stock prior to this offering have agreed, subject to certain exceptions, not to dispose of or hedge any shares of our common stock or securities convertible into or exchangeable for shares of our common stock during the period starting on the date of this prospectus and ending at 4:00 PM, Eastern Time, on the first day on which the NYSE is open for the buying and selling of securities (a “Trading Day”) on or after the 180th day (the “180th Day”) after the date of this prospectus, or, if the 180th Day is not a Trading Day, immediately after 4:00 PM, Eastern Time, on the last Trading Day immediately preceding the 180th Day, except with the prior written consent of Morgan Stanley & Co. LLC and Jefferies LLC on behalf of the underwriters. See “Underwriting (Conflicts of Interest).” Upon the expiration of these lock-up agreements, all of such shares will be eligible for resale in the public market, subject, in the case of shares held by our affiliates, to volume, manner of sale and other limitations under Rule 144. We expect that our Principal Stockholder will continue to be considered an affiliate following the expiration of the lock-up period based on its expected share ownership. In addition, Morgan Stanley & Co. LLC and Jefferies LLC, on behalf of the underwriters, may, in their sole discretion, release all or some portion of the shares subject to the lock-up agreements prior to the expiration of the lock-up period.
Further, in connection with this offering, we intend to file a registration statement with the SEC on Form S-8 providing for the registration of shares of our common stock issued or reserved for issuance under our 2026 Omnibus Incentive Plan. Subject to the satisfaction of vesting conditions, the expiration of lock-up agreements and the requirements of Rule 144 under the Securities Act, shares registered pursuant to the registration statement on Form S-8 will be available for resale immediately in the public market without restriction.
In addition, at our request, the underwriters have reserved up to 1,625,000 shares of our common stock, or 5.0% of the shares to be issued by us and offered by this prospectus (excluding the additional shares that the underwriters have an option to purchase) for sale, at the initial public offering price, to certain of our directors, officers, employees and others under the directed share program. Participants in the directed share program will not be subject to the terms of any lock-up agreement with respect to any shares purchased through the directed share program, except in the case of shares purchased by any of our directors or officers. Future sales of such shares may cause the price of our shares of common stock to be reduced or become more volatile. See “Underwriting (Conflicts of Interest)—Directed Share Program.”
In the future, we may also issue shares of our common stock in connection with investments or acquisitions. The number of shares of our common stock (or securities convertible into or exchangeable for our common
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stock) issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of common stock. As restrictions on resale end, the market price of our shares of common stock could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our common stock or other securities or to use our common stock as consideration for acquisitions of other businesses, investments or other corporate purposes.
We cannot predict the size of future issuances of our common stock or securities convertible into or exchangeable for our common stock or other securities, or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our common stock.
The trading price of our common stock may be volatile, and you could lose all or part of your investment.
Shares of our common stock sold in this offering may experience significant volatility on the NYSE. An active, liquid and orderly market for our common stock may not be sustained, which could depress the trading price of our common stock or cause it to be highly volatile or subject to wide fluctuations. The market price of our common stock may fluctuate or may decline significantly in the future, and you could lose all or part of your investment, and you may not be able to sell your shares at or above the purchase price. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include:
| • | actual or anticipated changes in our results of operations or fluctuations in our results of operations, including possible changes due to the cyclical nature of the aerospace and defense industry and fluctuations in OEM and aftermarket ordering, which could cause short-term swings in profit margins; |
| • | the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; |
| • | actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; |
| • | announcements by our competitors of new offerings, products or services; |
| • | rumors and market speculation involving us or other companies in our industry; |
| • | announced or completed acquisitions by us or our competitors; |
| • | price and volume fluctuations in the overall stock market from time to time; |
| • | changes in operating performance and stock market valuations of other aerospace companies generally; |
| • | volatility in the market due to macroeconomic developments, including rising interest rates, increased inflation, international trade relationships and geopolitical uncertainty; |
| • | litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; |
| • | new laws, regulations, rules or industry standards or new interpretations of existing laws, regulations, rules or industry standards applicable to our business; |
| • | changes in accounting standards, policies, guidelines, interpretations or principles; and |
| • | any significant change in our management or board of directors. |
These broad market and industry factors may decrease the trading price of our common stock for reasons unrelated to our business, financial condition or results of operations. The trading price of our common stock
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might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. The stock market in general has from time-to-time experienced extreme price and volume fluctuations, including recently. In addition, in the past, following periods of volatility in the overall market and decreases in the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources, which could have a material adverse effect on our business, financial condition and results of operations.
Anti-takeover provisions in our organizational documents and under Delaware law might discourage or delay acquisition attempts, other changes of control or changes in our management that you might consider favorable.
Our amended and restated certificate of incorporation and our amended and restated bylaws will contain provisions that may make a merger with or acquisition of our company, or changes in our management, more difficult without the approval of our board of directors, even if such a transaction was considered favorable by our stockholders.
Our amended and restated certificate of incorporation and our amended and restated bylaws will contain provisions, among other things:
| • | permitting the board of directors to establish the number of directors and fill any vacancies and newly created directorships; |
| • | providing that our board of directors will be classified into three classes of directors with staggered three-year terms; |
| • | prohibiting cumulative voting for directors; |
| • | providing that directors may only be removed pursuant to the provisions of Section 141(k) of the Delaware General Corporation Law (the “DGCL”); |
| • | requiring super-majority voting to amend some provisions in our amended and restated bylaws; |
| • | permitting our board of directors, without further action by our stockholders, to fix the rights, preferences, privileges and restrictions of preferred stock, the rights of which may be greater than the rights of our common stock; |
| • | restricting the forum for certain litigation against us to Delaware; |
| • | eliminating the ability of stockholders to call special meetings of stockholders; and |
| • | establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings. |
Moreover, Section 203 of the DGCL provides that if a person acquires 15% or more of the voting stock of a Delaware corporation, such person becomes an “interested stockholder” and may not engage in certain “business combinations” with the corporation for a period of three years from the time such person acquired 15% or more of the corporation’s voting stock, unless (i) the board of directors approves the acquisition of stock or the merger transaction before the time that the person becomes an interested stockholder, (ii) the interested stockholder owns at least 85% of the outstanding voting stock of the corporation at the time the merger transaction commences (excluding voting stock owned by directors who are also officers and certain employee stock plans) or (iii) the merger transaction is approved by the board of directors and by the affirmative vote at a meeting, not by written consent, of stockholders of two-thirds of the holders of the outstanding voting stock which is not owned by the interested stockholder.
While we will elect in our amended and restated certificate of incorporation to opt out of Section 203 of the DGCL, our amended and restated certificate of incorporation will contain provisions that have the same effect as
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Section 203 of the DGCL, except that they provide that our Principal Stockholder will be deemed not to be an “interested stockholder” and, accordingly, will not be subject to such restrictions. Although we have elected to opt out of Section 203 of the DGCL, we could elect to be subject to Section 203 in the future.
The provision of our amended and restated certificate of incorporation requiring exclusive forum in certain courts in the State of Delaware or the federal district courts of the U.S. for certain types of lawsuits may have the effect of discouraging lawsuits against us, our directors and officers or other employees.
Our amended and restated certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for any of the following claims or causes of actions under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; (iii) any action asserting a claim against us, any of our current or former directors, officers or employees arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws, or as to which the DGCL confers jurisdiction on the Court of Chancery; or (iv) any action asserting a claim against us or any of our current or former directors, officers or employees that is governed by the internal affairs doctrine (the “Delaware Forum Provision”).
Our amended and restated certificate of incorporation will provide that the Delaware Forum Provision will be applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the Delaware Forum Provision will not apply to any causes of action arising under the Securities Act or the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction.
Our amended and restated certificate of incorporation will further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”). In addition, our amended and restated certificate of incorporation will provide that any person or entity holding, owning or otherwise acquiring any interest in any of our shares of capital stock will be deemed to have notice of and consented to the provisions of our amended and restated certificate of incorporation, including the Delaware Forum Provision and the Federal Forum Provision; provided that, for the avoidance of doubt, the forum selection provision that identifies the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation, including any “derivative action,” will not apply to suits to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
The Delaware Forum Provision and the Federal Forum Provision in our amended and restated certificate of incorporation may impose additional litigation costs on our stockholders in pursuing any such claims. Additionally, these forum selection clauses may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage the filing of lawsuits against us and our directors, officers or employees, even though an action, if successful, might benefit our stockholders. In addition, while the Delaware Supreme Court and other state courts have upheld the validity of federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court, there is uncertainty as to whether other courts will enforce our Federal Forum Provision. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all lawsuits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on our stockholders that assert that the provision is not enforceable or invalid. If a court were to find that such provisions of our amended and restated certificate of incorporation are inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with
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resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
We will incur increased costs and become subject to additional regulations and requirements as a result of becoming a public company, which could impair our profitability, make it more difficult to run our business, or divert management’s attention from our business.
As a public company, we 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, the listing requirements of the NYSE, and other applicable securities rules and regulations. These rules and regulations have increased and will continue to increase our legal, accounting and financial compliance costs, and have made and will continue to make some activities more time-consuming and costly, particularly after we cease to be an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the JOBS Act.
These laws, regulations and standards are subject to varying interpretations, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased selling, general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on our business, financial condition and results of operations. The increased costs will decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business or increase the prices of our products or services. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as executive officers. If, notwithstanding our efforts, we fail to comply with new laws, regulations and standards, regulatory authorities may initiate legal proceedings against us, and our business may be harmed.
Our management team and other personnel will need to devote a substantial amount of time to new compliance initiatives, and we may not successfully or efficiently manage our transition to a public company. To comply with the requirements of being a public company, including the Sarbanes-Oxley Act, we will need to undertake various actions, such as implementing new internal controls and procedures, new disclosure controls and procedures and hiring accounting or internal audit staff, which would require us to incur additional expenses and harm our results of operations. Our internal infrastructure may not be adequate to support our increased reporting obligations and we may be unable to hire, train or retain necessary staff and may be reliant on engaging outside consultants or professionals to overcome our lack of experience or team members. If our internal infrastructure is inadequate and we are unable to engage outside consultants at a reasonable rate or attract talented team members to perform these functions or are otherwise unable to fulfill our public company obligations, it could have a material adverse effect on our business, financial condition and results of operations. As a public company, we are also required to report, among other things, control deficiencies that constitute a “material weakness” or changes in internal controls that, or that are reasonably likely to, materially affect internal control over financial reporting. If our executive management is unable to conclude that we have effective internal control over financial reporting, or to certify the effectiveness of such controls, or if our independent registered public accounting firm cannot render an unqualified opinion on our internal control over financial reporting, when required, we could be subject to sanctions or investigations by the SEC or other regulatory authorities, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets and our share price may be materially adversely affected.
Failure to comply with these rules might also make it more difficult for us to obtain certain types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events would also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as senior management.
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We do not intend to pay dividends on our common stock in the foreseeable future.
Following the completion of this offering, our board of directors may elect to declare cash dividends on our common stock, subject to our compliance with applicable law. The declaration and amount of any future dividends is subject to the discretion of our board of directors, and we have no obligation to pay any dividends at any time. We do not intend to pay dividends following the completion of this offering and may never pay dividends. We have not adopted, and do not currently expect to adopt, a written dividend policy. Our future dividend policy will be based on the operating results and capital needs of our business, and any future earnings may be retained to finance our future expansion and for the implementation of our business plan.
The payment of dividends is dependent on, among other things, economic conditions, our financial condition, results of operations, projections, liquidity and earnings and legal requirements. Our ability to pay dividends to holders of our common stock is limited as a practical matter by our Credit Agreement, insofar as we may seek to pay dividends out of funds made available to us by our subsidiaries, because our subsidiaries’ debt instruments directly or indirectly restrict our subsidiaries’ ability to pay dividends or make loans to us. Any financing arrangements or debt arrangements that we enter into in the future may also include restrictive covenants that limit our ability to pay dividends.
As an investor, you should take note of the fact that a lack of a dividend may affect the market value of our common stock and could affect the value of any investment.
We are a holding company and our only material assets are our equity interests in our subsidiaries and, accordingly, we will be dependent on the ability of our subsidiaries to pay dividends and make other payments and distributions to us in order to meet our obligations.
Upon completion of this offering, we will be a holding company and will have no material assets other than our ownership interests in our subsidiaries. As a result, our ability to pay taxes, operating expenses, and any dividends in the future, if any, will be dependent upon the financial results and cash flows of our subsidiaries and the distributions we receive from them. Our subsidiaries may not generate sufficient cash flow to make such distributions, and applicable state and foreign law and contractual restrictions, including negative covenants in our Credit Agreement, may not permit such distributions. If the cash we receive from our subsidiaries pursuant to dividends and other arrangements is insufficient to fund any of our obligations, or if a subsidiary is unable to pay future dividends or distributions to us to meet our obligations, we may be required to raise cash through, among other things, the incurrence of debt (including convertible or exchangeable debt), the sale of assets or the issuance of equity. Thus, our liquidity and capital position are highly dependent on the performance of our subsidiaries and their ability to pay future dividends and distributions to us as anticipated. The evaluation of future dividend sources and our overall liquidity plans are subject to a variety of factors, including current and future market conditions, which are subject to change.
If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline.
Equity research analysts do not currently provide coverage of our common stock, and we cannot assure that any equity research analysts will adequately provide research coverage of our common stock after the listing of our common stock on the NYSE. A lack of adequate research coverage may harm the liquidity and trading price of our common stock. To the extent equity research analysts do provide research coverage of our common stock, we will not have any control over the content and opinions included in their reports. The trading price of our common stock could decline if one or more equity research analysts downgrade our stock or publish other unfavorable commentary or research. If one or more equity research analysts cease coverage of our company or fail to regularly publish reports on us, the demand for our common stock could decrease, which in turn could cause our trading price or trading volume to decline.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations or financial condition, business strategy, prospects, plans and objectives, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would,” the negative of these words or other similar terms or expressions, although not all forward-looking statements contain these identifying words.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in “Risk Factors” and elsewhere in this prospectus. Such risks, uncertainties and other factors include, but are not limited to:
| • | a significant decline in business with key customers could have a material adverse effect on us; |
| • | any significant cancellation, reduction or deferment of orders by customers could have a material adverse effect on our business, results of operations, prospects, and financial condition; |
| • | if we are unable to adapt to technological change, demand for our capabilities may be reduced; |
| • | if we fail to establish and maintain important relationships with government agencies and prime contractors, our ability to successfully maintain and develop new business could be materially adversely affected; |
| • | government agencies may directly or indirectly request or encourage us to make investments into our business that do not directly benefit shareholder interests; |
| • | our growth strategy includes acquisitions, which entails certain risks to our business and financial performance, and our business may be materially adversely affected if we cannot consummate acquisitions on satisfactory terms or if we cannot effectively integrate acquired operations; |
| • | we rely on the significant experience and specialized expertise of our senior management and engineering and operational staff, and must retain and attract qualified and highly skilled personnel to grow our business successfully; |
| • | we may be unable to obtain critical components, raw materials, and services from suppliers and subcontractors, which could disrupt or delay our ability to deliver products to our customers and increase our costs; |
| • | our operations depend on our manufacturing facilities, which are subject to physical and other risks that could disrupt production; |
| • | we may not have the ability to renew facilities leases on terms favorable to us and relocation of operations presents risks due to business interruption; |
| • | technology failures, cybersecurity breaches and other unauthorized access to or use of our information technology systems or sensitive or proprietary information could have a material adverse effect on our business and operations; |
| • | defense spending and government defense budgets may change due to various economic conditions and other factors, which may cause our operating results to fluctuate; |
| • | our business and operations expose us to numerous legal and regulatory requirements, and any violation of these requirements could have a material adverse effect on our business, results of operations, prospects and financial condition; |
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| • | we, our operations and our products are subject to environmental, health and safety laws, regulations and permits, which may result in significant liabilities, obligations and compliance-related costs; |
| • | we may be subject to periodic litigation and regulatory proceedings, which may adversely affect our business and financial performance; |
| • | our failure to comply with applicable economic and trade sanctions could materially adversely affect our reputation and results of operations; |
| • | if we are unable to adequately enforce and protect our intellectual property or defend against assertions of infringement, our business and our ability to compete could be harmed; |
| • | tariffs on certain imports to the United States and other potential changes to U.S. tariff and import/export regulations could have a material adverse effect on global economic conditions and our business, results of operations, prospects and financial condition; |
| • | our indebtedness and restrictive covenants under our credit facilities could limit our operational and financial flexibility; |
| • | servicing our indebtedness requires a significant amount of cash, our ability to generate cash depends on many factors, and any failure to meet our debt service obligations could have a material adverse effect on our business, results of operations, prospects, and financial condition; |
| • | our pro forma financial information may not be representative of our future performance; and |
| • | other matters described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” |
The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.
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We estimate that, based on an assumed initial public offering price of $19.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, we will receive net proceeds from this offering of approximately $588.9 million (or $678.7 million if the underwriters exercise in full their option to purchase additional shares of common stock), after deducting the underwriting discounts and commissions, and estimated offering expenses payable by us.
Each $1.00 increase (decrease) in the assumed initial public offering price of $19.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us by approximately $30.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and the estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 1,000,000 shares in the number of shares offered by us would increase (decrease) the net proceeds to us by approximately $18.4 million, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and the estimated offering expenses payable by us.
We intend to use approximately $56.1 million of the net proceeds from shares sold by us in this offering for the repayment of our revolving credit facility and approximately $532.8 million of the net proceeds from this offering to repay term loan borrowings under our Credit Agreement. The outstanding term loans under our Credit Agreement accrue interest based on either (i) term secured overnight financing rate (“SOFR”) or (ii) an alternate base rate (“Base Rate”), in each case plus an applicable margin. The applicable margin for SOFR loans and Base Rate loans is determined by reference to a pricing grid based on the first lien net leverage ratio of the Borrower group, as set forth in the Credit Agreement. As of March 31, 2026, the applicable margin was 4.75% per annum for SOFR loans and 3.75% per annum for Base Rate loans. Thereafter, the margin may step down based on improvements in the first lien net leverage ratio. The term loans require quarterly principal payments, with the remaining outstanding principal required to be paid on December 1, 2030. The revolving credit facility does not amortize and is payable in full on December 1, 2030. See the section entitled “Description of Material Indebtedness.”
Affiliates of Morgan Stanley & Co. LLC and Jefferies LLC are lenders under certain of our facilities under the Credit Agreement, and each of the affiliates of Morgan Stanley & Co. LLC and Jefferies LLC will receive 5% or more of the net proceeds of this offering due to the repayment of borrowings thereunder. Therefore, each of Morgan Stanley & Co. LLC and Jefferies LLC is deemed to have a conflict of interest within the meaning of FINRA Rule 5121. Accordingly, this offering will be conducted in compliance with Rule 5121, which requires, among other things, that a “qualified independent underwriter” participate in the preparation of, and exercise the usual standards of “due diligence” with respect to, the registration statement and this prospectus. BofA Securities, Inc. has agreed to act as a qualified independent underwriter for this offering and to undertake the legal responsibilities and liabilities of an underwriter under the Securities Act, specifically including those inherent in Section 11 thereof. BofA Securities, Inc. will not receive any additional fees for serving as a qualified independent underwriter in connection with this offering. We have agreed to indemnify BofA Securities, Inc. against liabilities incurred in connection with acting as a qualified independent underwriter, including liabilities under the Securities Act. See “Underwriting (Conflicts of Interest)—Conflicts of Interest.”
We intend to use the remainder of the net proceeds from this offering, if any, for other general corporate purposes, including working capital, operating expenses and capital expenditures.
Our expected use of net proceeds from this offering represents our intentions based upon our present plans and business conditions. We cannot predict with certainty all of the particular uses for the proceeds of this offering or the amounts that we will actually spend on the uses set forth above. Accordingly, our management will have broad discretion to direct the use of the remaining proceeds.
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In the fiscal year ended December 31, 2024, we declared a dividend of $80.0 million on our common stock. After the completion of this offering, we anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Subject to our compliance with applicable law, any decision to declare and pay dividends in the future will be made at the sole discretion of our Board of Directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our Board of Directors may deem relevant. We have not adopted, and do not currently expect to adopt, a written dividend policy.
Our Credit Agreement also limits our ability to, among other things, pay dividends or make other distributions or payments on account of our common stock, in each case, subject to certain exceptions. Any financing arrangements or debt arrangements that we enter into in the future may also include restrictive covenants that limit our ability to pay dividends. Additionally, as a holding company with no material direct operations, our ability to pay dividends on our common stock is dependent on the earnings and distributions of funds from our operating subsidiaries.
See “Risk Factors—Risks Related to this Offering and Ownership of Our Common Stock—We do not intend to pay dividends on our common stock in the foreseeable future.”
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The following table sets forth our cash and cash equivalents and our consolidated capitalization as of March 31, 2026 on:
| • | an actual basis; and |
| • | an as adjusted basis, after giving effect to the Stock Split and our sale of 32,500,000 shares of common stock in this offering at an assumed initial public offering price of $19.50 per share, and the application of the net proceeds therefrom as described in “Use of Proceeds,” after deducting underwriting discounts and commissions and anticipated offering expenses payable by us. |
The as adjusted information set forth in the table below is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. You should read the following table in conjunction with the sections entitled “Use of Proceeds,” “Summary Historical and Pro Forma Financial and Other Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included in this prospectus.
| (in thousands, except share data) |
As of March 31, 2026 | |||||||
| Actual | As Adjusted | |||||||
| Cash and cash equivalents(1) |
$ | 15,923 | $ | 15,923 | ||||
|
|
|
|
|
|||||
| Long-term debt: |
||||||||
| Term Loan |
971,676 | 438,882 | ||||||
| Revolving Credit Facility(1)(2) |
46,100 | — | ||||||
| Shareholder’s equity: |
||||||||
| Common stock, $0.01 par value; 200 shares authorized, 158 issued and outstanding, actual; 1,000,000,000 shares authorized, 170,743,518 shares issued and outstanding, as adjusted |
— | 1,707 | ||||||
| Additional paid-in capital |
312,603 | 899,790 | ||||||
| Accumulated deficit |
(78,169 | ) | (78,169 | ) | ||||
| Total shareholder’s equity |
233,788 | 822,682 | ||||||
|
|
|
|
|
|||||
| Total capitalization |
$ | 1,251,564 | $ | 1,261,564 | ||||
|
|
|
|
|
|||||
| (1) | Cash and cash equivalents and amount outstanding under the Revolving Credit Facility do not reflect an additional $10.0 million drawn under the facility subsequent to March 31, 2026, that is expected to be repaid with the proceeds of this offering. |
| (2) | As of March 31, 2026, our Revolving Credit Facility had unused borrowing capacity of $78.9 million. For more information on our Revolving Credit Facility, see “Description of Material Indebtedness.” |
Each $1.00 increase (decrease) in the assumed initial public offering price of $19.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us by approximately $30.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and the estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 1,000,000 shares in the number of shares offered by us would increase (decrease) the net proceeds to us by approximately $18.4 million, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and the estimated offering expenses payable by us.
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Investors purchasing our common stock in this offering will experience immediate and substantial dilution in the pro forma as adjusted net tangible book value of their shares of common stock. Dilution in pro forma as adjusted net tangible book value represents the difference between the initial public offering price of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after the offering.
Historical net tangible book value per share represents our total tangible assets (total assets excluding goodwill and other intangible assets, net) less total liabilities, divided by the number of shares of outstanding common stock. After giving effect to (i) the Stock Split, (ii) the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the closing of this offering and (iii) the sale of shares of common stock in this offering by us at an assumed initial public offering price of $19.50 per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting $34.9 million in underwriting discounts and commissions and estimated offering expenses of $10.0 million, the pro forma as adjusted net tangible book value as of March 31, 2026 would have been approximately $(124.2) million, or $(0.73) per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $4.43 per share to our existing stockholders and an immediate dilution of $20.23 per share to new investors purchasing common stock in this offering.
The following table illustrates this dilution on a per share basis to new investors.
| Assumed initial public offering price per share |
$ | 19.50 | ||||||
| Pro forma historical net tangible book value per share as of March 31, 2026 |
$ | (5.16 | ) | |||||
| Increase in as adjusted net tangible book value per share attributable to the investors in this offering |
$ | 4.43 | ||||||
| Pro forma as adjusted net tangible book value per share after giving effect to this offering |
$ | (0.73 | ) | |||||
| Dilution per share to new investors participating in this offering |
$ | 20.23 |
The following table summarizes on the pro forma as adjusted basis described above, as of March 31, 2026, the difference between the number of shares of common stock purchased from us, the total consideration paid or to be paid and the average price per share paid or to be paid by our existing stockholders and new investors in this offering at an assumed initial public offering price of $19.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table shows, new investors purchasing common stock in this offering will pay an average price per share substantially higher than our existing stockholders paid.
| Shares Purchased | Total Consideration | Average Price Per Share |
||||||||||||||||||
| Number | Percent | Amount | Percent | |||||||||||||||||
| Existing stockholders(1) |
138,243,518 | 81.0% | $ | 393,448,694 | 38.3% | $ | 2.85 | |||||||||||||
| New investors |
32,500,000 | 19.0% | $ | 633,750,000 | 61.7% | $ | 19.50 | |||||||||||||
| Total |
170,743,518 | 100.0% | $ | 1,027,198,694 | 100.0% | $ | 6.02 | |||||||||||||
| (1) | The presentation in this table regarding ownership by existing stockholders does not give effect to any purchases that existing stockholders may make through our directed share program or otherwise purchase in this offering. |
If the underwriters exercise their option to purchase additional shares of our common stock in full, the percentage of shares of common stock held by existing stockholders will decrease to approximately 78.7% of the
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total number of shares of our common stock outstanding after this offering, and the number of shares held by new investors will increase to 37,375,000, or approximately 21.3% of the total number of shares of our common stock outstanding after this offering.
Each $1.00 increase or decrease in the assumed initial public offering price of $19.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease our pro forma as adjusted net tangible book value by approximately $0.18 per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and the estimated offering expenses payable by us. Similarly, each increase or decrease of one million in the number of shares of common stock offered by us would increase or decrease our pro forma as adjusted net tangible book value by approximately $0.11 per share, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and the estimated offering expenses payable by us.
To the extent that equity awards are issued under our compensatory stock plans, or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information set forth below should be read in conjunction with the consolidated financial statements included elsewhere in this prospectus. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this prospectus, particularly in “Risk Factors” and “Forward-Looking Statements.” The following discussion and analysis of our financial results should be read in conjunction with the audited consolidated financial statements and unaudited condensed consolidated financial statements and corresponding notes included within this prospectus. The information in this section does not give effect to the Stock Split.
Business Overview
We are a premier provider of advanced design, engineering, and vertically integrated manufacturing solutions for leading and next-generation space and defense technology companies. We build complex, mission-critical subsystems for extreme operating environments serving three core markets: Space and Launch Systems, Defense Aviation and Airborne Systems, and C5ISR and Precision Strike Systems. With decades of space and defense manufacturing heritage, we combine deep material science and intellectual property (“IP”)-enabled process expertise with the ability to enable rapid prototyping, enhance new product development, and responsively scale production. Across our nationwide network of advanced manufacturing facilities, we continuously support a balanced mix of next-generation technology and platform development, large scale production programs, and aftermarket sustainment for enduring platforms.
Our core service offerings include (i) design and analysis, including concurrent engineering, structural design and analysis, and tooling; (ii) fabrication and assembly, including composite and metallic fabrication, forming and precision machining, and finishing; and (iii) inspection, qualification, and testing, including in-process inspection, three-dimensional metrology, non-destructive testing, and thermal and structural testing. These offerings are enabled by our complementary metal, composite, and polymer manufacturing capabilities and support the delivery of mission-critical subsystems and assemblies designed to perform in demanding environments.
Recent Developments
On November 14, 2025, AA&D Holdings, LP, our parent company, completed a merger with Rotor Topco, LP (the “Combination”). Upon the Combination, all outstanding units of Rotor Topco, LP were automatically converted into units of AA&D Holdings, LP, resulting in the combination of the businesses previously operating as Applied Aerospace Structures Corporation (“AASC”) and PCX Aerostructures, LLC (“PCX”). Immediately following the completion of the Combination, AA&D Holdings, LP contributed its entire ownership interest in Rotor Topco, LP’s existing subsidiaries to the Company. The Combination, which occurred under the common control of Greenbriar Equity Fund V, L.P., was accounted for as a common control transaction. See Note 1, Organization and Nature of the Business, in the notes to our audited consolidated financial statements and the notes to our unaudited condensed consolidated financial statements included elsewhere in this prospectus, for further information about the Combination.
On October 1, 2024, we acquired 100% of the equity ownership of Innovative Composite Engineering LLC. (“ICEL”), bringing carbon fiber technology capabilities to the Company to deliver lightweight, durable, and technically complex composite solutions.
On March 4, 2025, we acquired 100% of the equity ownership of NeXolve Holdings, LLC (“NeXolve”), bringing deployable space technology and advanced polymer expertise to the Company. See Note 4, Business Combinations, in the notes to our audited consolidated financial statements included elsewhere in this prospectus, for additional information about our acquisitions of NeXolve and ICEL.
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On January 16, 2026, we acquired 100% of the issued and outstanding equity of Vestigo Aerospace, Inc. (“Vestigo”), a business that designs and develops passive de-orbit systems, including the Spinnaker product line of dragsail technology, and related assemblies for reliable end-of-mission space vehicle and other low-earth orbit satellite disposal.
On March 2, 2026, we acquired 100% of the issued and outstanding equity of CBI and Ultracor. CBI is a vertically integrated two-site advanced manufacturing platform that specializes in complex assemblies and highly-engineered components for a broad range of precision strike systems. Ultracor is a supplier of highly specialized and IP-enabled honeycomb core materials that are used in defense aviation and space platforms, including next generation tiltrotor aircraft and navigational satellites. See Note 4, Business Combinations, in the notes to our unaudited condensed consolidated financial statements included elsewhere in this prospectus, for additional information about our acquisitions of Vestigo, CBI, and Ultracor. The Company’s acquisition of CBI is significant pursuant to SEC Regulation S-X, Rule 1-02(w). See “Unaudited Pro Forma Condensed Combined Financial Information” for pro forma financial information related to the Company’s acquisition of CBI. The Company’s acquisitions of Vestigo and Ultracor are not significant pursuant to SEC Regulation S-X, Rule 1-02(w).
Key Trends Affecting Our Performance
We operate in an industry and in markets that are experiencing strong, sustained growth. Demand is increasing for spacecraft and related systems capable of meeting the complex mission requirements of commercial launch firms and space companies, the U.S. government, and its allies. Likewise, the emerging and ongoing geopolitical conflicts affecting the U.S. and its allies and the dynamic global threat environment are driving demand across existing platforms as well as investment in the development of next-generation technology. The replenishment and rearmament needs of the U.S. and its allies as a result of these geopolitical conflicts has prompted us to collaborate closely with the U.S. government and our suppliers and customers to expand production and deliver critical offerings that support U.S. and allied security needs. These factors have increased demand for our products and capabilities, which in turn has contributed to revenue growth that we believe has partially offset the effects of supply chain challenges, inflationary pressures, and other causes of market volatility in our operating environment.
Our operating results are significantly influenced by U.S. government spending priorities and budget and appropriations decisions. Increases in U.S. defense spending, particularly for advanced space, defense aviation, C5ISR, and precision strike equipment, drive growth in our business. Budget restrictions, cost-reduction initiatives, or changes in the budgeted volume and relative mix of specific U.S. government programs may result in reduced or deferred U.S. government spending, which could in turn impact our business and the results of our operations. In particular, shifts in U.S. government spending and investment priorities relating to defense, space, intelligence, homeland security, innovation, and technology are most likely to impact our results.
As a newly public company, we will implement additional procedures and processes to address the standards and requirements applicable to public companies. Specifically, accounting, legal, and personnel-related expenses and directors’ and officers’ insurance costs will increase as we establish more comprehensive compliance and governance functions, enhance and mature our internal controls over financial reporting as we comply with the requirements of the Sarbanes-Oxley Act, and prepare and distribute periodic reports in accordance with SEC rules. Our financial statements for the year ending December 31, 2026 onward will begin to reflect the impact of these expenses.
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Results of Operations
The following table presents the results of our operations and percentages of revenue for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| (in thousands, except percentages) | Dollars | % of Revenue |
Dollars | % of Revenue |
||||||||||||
| Revenue |
$ | 134,351 | 100.0 | % | $ | 111,024 | 100.0 | % | ||||||||
| Cost of goods sold |
100,772 | 75.0 | % | 80,140 | 72.2 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Gross profit |
33,579 | 25.0 | % | 30,884 | 27.8 | % | ||||||||||
| Selling, general, and administrative expenses |
28,302 | 21.1 | % | 12,367 | 11.1 | % | ||||||||||
| Intangible asset amortization expense |
8,110 | 6.0 | % | 6,538 | 5.9 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating (loss) income |
(2,833 | ) | (2.1 | )% | 11,979 | 10.8 | % | |||||||||
| Interest expense, net |
17,771 | 13.2 | % | 16,720 | 15.1 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss before income taxes |
(20,604 | ) | (15.3 | )% | (4,741 | ) | (4.3 | )% | ||||||||
| Income tax (benefit) expense |
(5,472 | ) | (4.1 | )% | 2,572 | 2.3 | % | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
$ | (15,132 | ) | (11.3 | )% | $ | (7,313 | ) | (6.6 | )% | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
The following table sets forth the results of our operations and percentages of revenue for the years ended December 31, 2025 and 2024:
| Years Ended December 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| (in thousands, except percentages) | Dollars | % of Revenue |
Dollars | % of Revenue |
||||||||||||
| Revenue |
$ | 498,763 | 100.0 | % | $ | 399,790 | 100.0 | % | ||||||||
| Cost of goods sold |
359,384 | 72.1 | % | 301,715 | 75.5 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Gross profit |
139,379 | 27.9 | % | 98,075 | 24.5 | % | ||||||||||
| Selling, general, and administrative expenses |
54,447 | 10.9 | % | 41,748 | 10.4 | % | ||||||||||
| Intangible asset amortization expense |
26,063 | 5.2 | % | 23,461 | 5.9 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income |
58,869 | 11.8 | % | 32,866 | 8.2 | % | ||||||||||
| Interest expense, net |
72,806 | 14.6 | % | 63,705 | 15.9 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss before income taxes |
(13,937 | ) | (2.8) | % | (30,839 | ) | (7.7) | % | ||||||||
| Income tax expense |
3,087 | 0.6 | % | 3,927 | 1.0 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
$ | (17,024 | ) | (3.4) | % | $ | (34,766 | ) | (8.7) | % | ||||||
|
|
|
|
|
|
|
|
|
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Revenue
| Three Months Ended March 31, | ||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | % Change | ||||||||||||
| Space and Launch Systems |
$ | 35,051 | $ | 26,331 | $ | 8,720 | 33.1 | % | ||||||||
| Defense Aviation and Airborne Systems |
79,423 | 72,042 | 7,381 | 10.2 | % | |||||||||||
| C5ISR and Precision Strike Systems |
19,877 | 12,651 | 7,226 | 57.1 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Revenue |
$ | 134,351 | $ | 111,024 | $ | 23,327 | 21.0 | % | ||||||||
|
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|
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Revenue for the three months ended March 31, 2026 increased by approximately $23.3 million, or 21.0%, to $134.4 million as compared to $111.0 million for the three months ending March 31, 2025, with revenue increases attributable to growth across all end markets, as described in further detail below. The increase in revenue included approximately $13.4 million generated from the acquisitions in 2025 and 2026.
Space and Launch Systems
Revenue growth in Space and Launch Systems of $8.7 million was primarily attributable to increased volumes on launch vehicle, satellite, and spacecraft production programs amid higher launch cadence, proliferated constellations, and rising demand for more capable spacecraft.
Defense Aviation and Airborne Systems
Revenue growth in Defense Aviation and Airborne Systems of $7.4 million was primarily attributable to sustained aftermarket demand across a large installed base of aircraft, as well as continued new production activity. Demand is supported by increases in global defense budgets across a broad range of fixed-wing and rotorcraft platforms, including increasing funding for next-generation fixed-wing, vertical lift, and autonomous airborne systems.
C5ISR and Precision Strike Systems
Revenue growth in C5ISR and Precision Strike Systems of $7.2 million was primarily attributable to higher revenue across a range of integrated air and missile defense systems and precision strike programs, partially offset by lower volumes on select radar and surveillance programs. Near term demand is expected to remain supported by missile and munition rearmament, layered missile defense priorities, and continued national defense and budget investments in next-generation precision strike systems.
| Years Ended December 31, | ||||||||||||||||
| (in thousands, except percentages) | 2025 | 2024 | Change | % Change | ||||||||||||
| Space and Launch Systems |
$ | 114,098 | $ | 99,718 | $ | 14,380 | 14.4 | % | ||||||||
| Defense Aviation and Airborne Systems |
331,364 | 249,234 | 82,130 | 33.0 | % | |||||||||||
| C5ISR and Precision Strike Systems |
53,301 | 50,838 | 2,463 | 4.8 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Revenue |
$ | 498,763 | $ | 399,790 | $ | 98,973 | 24.8 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Revenue for the twelve months ended December 31, 2025 increased by approximately $99.0 million, or 24.8%, to $498.8 million as compared to $399.8 million for the twelve months ended December 31, 2024, with revenue increases attributable to growth across all end-markets, as described in further detail below. The increase in revenue included approximately $39.1 million generated from the recent acquisitions of NeXolve and ICEL.
Space and Launch Systems
Revenue growth in Space and Launch Systems of $14.4 million was primarily attributable to increased volumes on launch vehicle and spacecraft production programs amid higher launch cadence, proliferated constellations, and rising demand for more capable spacecraft. This growth was partially offset by lower volumes on select satellite and spacecraft programs.
Defense Aviation and Airborne Systems
Revenue growth in Defense Aviation and Airborne Systems of $82.1 million was primarily attributable to sustained aftermarket demand across a large installed base of aircraft, as well as continued new production activity. Demand is supported by increases in global defense budgets across a broad range of fixed-wing and rotorcraft platforms, including increasing funding for next-generation fixed-wing, vertical lift, and autonomous airborne systems.
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C5ISR and Precision Strike Systems
Revenue growth in C5ISR and Precision Strike Systems of $2.5 million was primarily attributable to higher revenue across a range of integrated air and missile defense, surveillance, and advanced radar programs. Near-term demand is expected to remain supported by missile and munition rearmament, layered missile defense priorities, and continued national defense and budget investments in next-generation precision strike systems.
Gross Profit and Costs of Goods Sold
| Three Months Ended March 31, | ||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | % Change | ||||||||||||
| Cost of goods sold |
$ | 100,772 | $ | 80,140 | $ | 20,632 | 25.7 | % | ||||||||
| Gross profit |
33,579 | 30,884 | 2,695 | 8.7 | % | |||||||||||
| Gross profit margin |
25.0 | % | 27.8 | % | ||||||||||||
Cost of goods sold increased $20.6 million, or 25.7%, primarily reflecting approximately $10.6 million associated with revenue growth excluding acquisitions and approximately $10.0 million of incremental cost of goods sold from recent acquisitions in 2025 and 2026. Gross profit increased by $2.7 million, or 8.7%, with acquisitions contributing $3.4 million of incremental gross profit. Gross profit margin decreased by 2.8 percentage points, as increased sales volume and improved throughput were offset by a change in product mix towards ramping programs with lower initial margins.
| Years Ended December 31, | ||||||||||||||||
| (in thousands, except percentages) | 2025 | 2024 | Change | % Change | ||||||||||||
| Cost of goods sold |
$ | 359,384 | $ | 301,715 | $ | 57,669 | 19.1 | % | ||||||||
| Gross profit |
139,379 | 98,075 | 41,304 | 42.1 | % | |||||||||||
| Gross profit margin |
27.9 | % | 24.5 | % | ||||||||||||
Cost of goods sold increased $57.7 million, or 19.1%, primarily reflecting approximately $39.3 million associated with revenue growth excluding acquisitions and approximately $18.4 million of incremental cost of goods sold from recent acquisitions.
Gross profit increased by $41.3 million, or 42.1%, and gross profit margin increased by 3.4 percentage points, primarily due to approximately $20.5 million of incremental gross profit driven by increased sales and improved throughput, disciplined cost management, overhead leverage, and other continued operational improvements which more than offset inflationary pressure on material costs. Acquisitions contributed $20.7 million of incremental gross profit, reflecting favorable drop-through of acquired revenue.
Operating Expenses
| Three Months Ended March 31, | ||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | % Change | ||||||||||||
| Selling, general and administrative expenses |
$ | 28,302 | $ | 12,367 | $ | 15,935 | 128.9 | % | ||||||||
| Intangible asset amortization expense |
8,110 | 6,538 | 1,572 | 24.0 | % | |||||||||||
Selling, general and administrative expenses increased primarily due to professional services and other transaction costs related to acquisitions and the IPO of $14.0 million for the three months ended March 31, 2026 as compared with $0.5 million of acquisition related costs for the three months ended March 31, 2025. Additionally, the operations of recent acquisitions in 2025 and 2026 contributed incremental selling, general and administrative expense of $1.5 million.
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Intangible asset amortization expense increased due to an increase in our acquired intangible assets in connection with acquisitions disclosed in Note 4, Business Combinations, in the notes to our unaudited condensed consolidated financial statements included elsewhere in this prospectus.
| Years Ended December 31, | ||||||||||||||||
| (in thousands, except percentages) | 2025 | 2024 | Change | % Change | ||||||||||||
| Selling, general and administrative expenses |
$ | 54,447 | $ | 41,748 | $ | 12,699 | 30.4 | % | ||||||||
| Intangible asset amortization expense |
26,063 | 23,461 | 2,602 | 11.1 | % | |||||||||||
Selling, general and administrative expenses increased primarily due to a $6.1 million increase in operating costs for professional services and a $3.8 million increase in administrative human capital costs, reflecting ongoing expansion of operational support capabilities and integration activities related to the Combination, as well as an increase of $3.5 million related to recent acquisitions. This increase was partially offset by a decrease in credit losses during the year ended December 31, 2025 compared to December 31, 2024.
Intangible asset amortization expense increased due to an increase in our acquired intangible assets in connection with the NeXolve and ICEL acquisitions. See Note 4, Business Combinations, in the notes to our audited consolidated financial statements included elsewhere in this prospectus, for additional information.
Interest Expense, Net
| Three Months Ended March 31, | ||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | % Change | ||||||||||||
| Interest expense, net |
$ | 17,771 | $ | 16,720 | $ | 1,051 | 6.3 | % | ||||||||
Interest expense, net increased by $1.1 million for three months ended March 31, 2026, compared to the same period in the prior year. The increase was primarily attributable to higher outstanding debt balances resulting from borrowings incurred in connection with acquisitions completed during the quarter. See Note 10, Long-Term Debt, in the notes to our unaudited condensed consolidated financial statements included elsewhere in this prospectus, for additional information.
| Years Ended December 31, | ||||||||||||||||
| (in thousands, except percentages) | 2025 | 2024 | Change | % Change | ||||||||||||
| Interest expense, net |
$ | 72,806 | $ | 63,705 | $ | 9,101 | 14.3 | % | ||||||||
Interest expense, net increased due to increased financing costs on higher debt levels, as well as amortization and write-offs of previously deferred debt issuance costs and debt discount resulting from the related debt modification and extinguishments, which increased by $3.2 million during the year ended December 31, 2025 compared to the year ended December 31, 2024. These increases were partially offset by declining interest rates. See Note 10, Long-Term Debt, in the notes to our audited consolidated financial statements included elsewhere in this prospectus, for additional information.
Income Tax Expense
| Three Months Ended March 31, | ||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | % Change | ||||||||||||
| Income tax (benefit) expense |
$ | (5,472 | ) | $ | 2,572 | $ | (8,044 | ) | (312.8 | )% | ||||||
The Company recognized an income tax benefit of $5.5 million for the three months ended March 31, 2026, as compared with income tax expense of $2.6 million in the three months ended March 31, 2025. The change was driven by a $13.8 million benefit attributable to the partial release of the Company’s valuation allowance
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associated with the increased capacity to realize deferred tax assets after the acquisition of CBI. This increase was partially offset by $8.4 million in income tax expense resulting from the application of the Company’s estimated annual effective tax rate to year-to-date pre-tax losses. No comparable valuation allowance release occurred in the prior year period. See Note 11, Income Taxes, in the condensed notes to the Company’s unaudited condensed consolidated financial statements included elsewhere in this prospectus for additional information.
| Years Ended December 31, | ||||||||||||||||
| (in thousands, except percentages) | 2025 | 2024 | Change | % Change | ||||||||||||
| Income tax expense |
$ | 3,087 | $ | 3,927 | $ | (840 | ) | (21.4)% | ||||||||
Income tax expense decreased principally as a result of a decrease in the incremental valuation allowance recorded during the year ended December 31, 2025 as compared to the year ended December 31, 2024 and a decrease in state and local tax expense. See Note 13, Income Taxes, in the notes to our audited consolidated financial statements included elsewhere in this prospectus, for additional information.
Key Performance Indicators and Non-GAAP Financial Measures
We manage and evaluate our business using key performance indicators (“KPIs”) and non-GAAP measures, including contract backlog, Adjusted EBITDA, and Adjusted EBITDA Margin, to monitor operating performance, assess contract execution, and support capital allocation decisions.
Contract Backlog
We believe contract backlog, which represents the total value of existing contracts, less amounts previously invoiced, as of the backlog date, is a key measure of our business growth.
As of March 31, 2026, contract backlog was $1,060.1 million. The increase of $188.8 million during the three months ended March 31, 2026 was primarily driven by approximately $171.1 million of incremental backlog from the acquisition of CBI, as well as the net effect of new orders received in excess of billings during the three months ended March 31, 2026.
As of December 31, 2025 and 2024, contract backlog was $871.3 million and $792.6 million, respectively.
Non-GAAP Financial Measures
Our chief operating decision maker, who is the Chief Executive Officer, makes resource and operating decisions by evaluating performance and business results on a consolidated basis using the non-GAAP financial measures Adjusted EBITDA. The non-GAAP financial measures are supplemental measures of our performance that we believe help investors understand our financial condition and operating results and assess our future prospects. We believe that presenting these non-GAAP financial measures, in addition to the corresponding GAAP financial measures, are important supplemental measures that exclude non-cash or other items that may not be indicative of or are unrelated to our core operating results and the overall health of our company. We believe that providing this information assists our investors in understanding our operating performance and the methodology used by management to evaluate and measure such performance. When read in conjunction with our GAAP results, these non-GAAP financial measures provide a baseline for analyzing trends in our underlying businesses and can be used by management as one basis for financial, operational and planning decisions. Finally, these measures are often used by analysts and other interested parties to evaluate companies in our industry.
We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, as adjusted to eliminate certain non-cash charges and other items not reflective of ongoing operations, which include: acquisition-related expenses, integration expenses and restructuring costs, share-based compensation expense, and other costs. We define Adjusted EBITDA Margin as Adjusted EBITDA expressed as a percentage of revenue.
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Although we use Adjusted EBITDA and Adjusted EBITDA Margin and for the purposes described above, these non-GAAP financial measures have inherent limitations and should neither be considered in isolation nor as substitutes for analyzing our financial results as reported under U.S. GAAP. For example:
| • | Adjusted EBITDA and Adjusted EBITDA Margin do not reflect significant interest expense or the related cash requirements to service our debt; |
| • | These measures exclude depreciation and amortization, which are non-cash charges, but do not account for the future cash needs to replace depreciated or amortized assets; |
| • | These measures exclude substantial amortization expense associated with our intangible assets, limiting the measures’ usefulness; |
| • | These measures do not include our provision for income taxes which generally represents taxes paid in the period or that are payable in the future, which are necessary aspects of our operations; |
| • | These measures exclude share-based compensation expense, which is an important component of employee compensation; and |
| • | These measures exclude costs related to the IPO and certain acquisition-related and post-merger integration and restructuring costs, which are necessary elements of certain acquisitions. |
Because of these limitations, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as measures of cash available for investment in our business. Management addresses these limitations by evaluating these metrics alongside other U.S. GAAP measures, such as revenue, to assess our operating performance. These metrics are non-GAAP financial measures, are not defined by U.S. GAAP, and should not be considered alternatives to net loss or cash flows from operations as determined under U.S. GAAP. Moreover, our methods of calculating Adjusted EBITDA and Adjusted EBITDA Margin may differ from those used by other companies with similarly titled measures, and therefore may not be directly comparable.
The following table sets forth the reconciliation of net loss to Adjusted EBITDA and presentation of net loss margin and Adjusted EBITDA Margin for the three months ended March 31, 2026 and 2025, and for the years ended December 31, 2025 and 2024:
| Three Months Ended March 31, | Years Ended December 31, | |||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | 2025 | 2024 | ||||||||||||
| Net loss |
$ | (15,132 | ) | $ | (7,313 | ) | $ | (17,024 | ) | $ | (34,766 | ) | ||||
| Income tax (benefit) expense |
(5,472 | ) | 2,572 | 3,087 | 3,927 | |||||||||||
| Interest expense, net |
17,771 | 16,720 | 72,806 | 63,705 | ||||||||||||
| Depreciation and amortization |
12,109 | 9,723 | 39,420 | 35,222 | ||||||||||||
| Share-based compensation expense |
756 | 802 | 3,210 | 2,535 | ||||||||||||
| Transaction costs(1) |
13,985 | 514 | 6,419 | 3,809 | ||||||||||||
| Integration and restructuring costs(2) |
2,273 | 2,041 | 6,608 | 4,826 | ||||||||||||
| Legal contingencies loss(3) |
— | 7 | 460 | 1,877 | ||||||||||||
| Management fees(4) |
249 | 256 | 1,603 | 1,647 | ||||||||||||
| Other(5) |
— | 21 | 1,315 | 1,226 | ||||||||||||
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| Adjusted EBITDA |
$ | 26,539 | $ | 25,343 | $ | 117,904 | $ | 84,008 | ||||||||
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(11.3 | )% | (6.6) | % | (3.4) | % | (8.7) | % | ||||||||
| Adjusted EBITDA Margin |
19.8 | % | 22.8 | % | 23.6 | % | 21.0 | % | ||||||||
| (1) | Includes transaction related costs associated with mergers, acquisitions, and costs related to the IPO. |
| (2) | Includes acquisition integration and restructuring costs, including plant consolidation and reconfiguration, reductions in force, and executive severance expense. |
| (3) | Includes losses from legal disputes and settlements from third parties. |
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| (4) | Includes management fees paid to our parent company in accordance with our management services agreement which will terminate upon the closing of the IPO. |
| (5) | Includes other costs that we believe are not indicative of day-to-day operations of the business. |
Unaudited Quarterly Results
The following table sets forth certain financial and operating information for each of our fiscal quarters since the first quarter of 2024. We have prepared the following unaudited quarterly financial information on the same basis as our audited consolidated financial statements and have included all adjustments, consisting only of normal recurring adjustments that in our opinion are necessary to fairly state the financial information set forth in those statements. This information should be read in conjunction with the audited consolidated financial statements and related notes thereto included elsewhere in this prospectus.
| For the Three Months Ended | ||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | March 31, | December 31, | September 30, | June 30, | March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||||||||||||
| 2026 | 2025 | 2025 | 2025 | 2025 | 2024 | 2024 | 2024 | 2024 | ||||||||||||||||||||||||||||
| Revenue |
$ | 134,351 | $ | 151,724 | $ | 122,516 | $ | 113,499 | $ | 111,024 | $ | 97,869 | $ | 103,699 | $ | 105,355 | $ | 92,867 | ||||||||||||||||||
| Cost of goods sold |
100,772 | 109,592 | 88,180 | 81,472 | 80,140 | 75,945 | 76,739 | 77,405 | 71,626 | |||||||||||||||||||||||||||
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| Gross profit |
33,579 | 42,132 | 34,336 | 32,027 | 30,884 | 21,924 | 26,960 | 27,950 | 21,241 | |||||||||||||||||||||||||||
| Selling, general, and administrative expenses |
28,302 | 18,382 | 12,119 | 11,579 | 12,367 | 15,374 | 7,229 | 10,130 | 9,015 | |||||||||||||||||||||||||||
| Intangible asset amortization expense |
8,110 | 6,449 | 6,538 | 6,538 | 6,538 | 6,257 | 5,722 | 5,739 | 5,743 | |||||||||||||||||||||||||||
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| Operating (loss) income |
(2,833 | ) | 17,301 | 15,679 | 13,910 | 11,979 | 293 | 14,009 | 12,081 | 6,483 | ||||||||||||||||||||||||||
| Interest expense, net |
17,771 | 21,856 | 17,296 | 16,934 | 16,720 | 18,782 | 15,091 | 15,248 | 14,584 | |||||||||||||||||||||||||||
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| Loss before income taxes |
(20,604 | ) | (4,555 | ) | (1,617 | ) | (3,024 | ) | (4,741 | ) | (18,489 | ) | (1,082 | ) | (3,167 | ) | (8,101 | ) | ||||||||||||||||||
| Income tax (benefit) expense |
(5,472 | ) | 3,221 | (4,357 | ) | 1,651 | 2,572 | 2,300 | 46 | 409 | 1,172 | |||||||||||||||||||||||||
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| Net (loss) income |
$ | (15,132 | ) | $ | (7,776 | ) | $ | 2,740 | $ | (4,675 | ) | $ | (7,313 | ) | $ | (20,789 | ) | $ | (1,128 | ) | $ | (3,576 | ) | $ | (9,273 | ) | ||||||||||
Liquidity and Capital Resources
The following table summarizes our capitalization as of March 31, 2026, and December 31, 2025 and 2024, respectively:
| March 31, | December 31, | |||||||||||
| (in thousands, except ratios) | 2026 | 2025 | 2024 | |||||||||
| Cash and cash equivalents |
$ | 15,923 | $ | 15,475 | $ | 27,466 | ||||||
| Total term debt (including current portion) |
971,676 | 643,443 | 569,851 | |||||||||
| Revolving line of credit |
46,100 | — | 15,000 | |||||||||
| Shareholder’s equity |
233,788 | 159,464 | 165,845 | |||||||||
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$ | 1,251,564 | $ | 802,907 | $ | 750,696 | ||||||
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0.81 | 0.80 | 0.78 | |||||||||
Our principal historical liquidity requirements have been for acquisitions, capital expenditures, servicing indebtedness and working capital needs. Other than as a result of the growth of our business both organically and through acquisitions we may make, we do not expect there to be substantial changes in our future capital requirements. We fund our investing activities primarily from cash provided by our operating and financing activities.
On December 1, 2022, we entered into a credit agreement (the “Credit Agreement”) to obtain a term loan of $130.0 million and a revolving line of credit of $20.0 million. On October 1, 2024, we amended the Credit
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Agreement in connection with our acquisition of ICEL. The amendment increased aggregate borrowing, resulting in a total term loan of $250.0 million. It also included new delayed draw term loan commitments equal to $100.0 million and restructured the revolving line of credit commitments to a total of $40.0 million. On November 14, 2025, we entered into a second amendment to the Credit Agreement in connection with the payoff and refinancing of our prior senior credit agreement debt and subordinated note payable, and to facilitate the Combination. The amendment increased aggregate borrowing, resulting in a total term loan and delayed draw term loan principal balance of $645.0 million (through additional borrowings, incremental commitments, and the refinancing of previously undrawn delayed draw term loans). It also included new delayed draw term loan commitments equal to $150.0 million and restructured the revolving line of credit commitments to a total of $100.0 million.
On March 2, 2026, we entered into an additional amendment to the Credit Agreement in connection with our acquisition of CBI. Pursuant to the additional amendment, we obtained incremental term loans of $180.0 million, drew the full $150.0 million available under our existing delayed draw term loan commitment, increased our revolving line of credit commitments by $25.0 million to a total of $125.0 million, and drew $31.1 million under our revolving line of credit. The proceeds from these borrowings were primarily used to fund the acquisition of CBI and pay related transaction costs. As a result of this amendment, our aggregate principal amount of term loans outstanding (including amounts drawn under delayed draw term loans) increased to $973.4 million.
As of March 31, 2026, we had $78.9 million available under our revolving line of credit and no remaining availability under our delayed draw term loan commitment. As of December 31, 2025, we had $150.0 million of delayed draw term loan commitments available and $100.0 million available under our revolving line of credit.
See Note 10, Long-Term Debt, in the notes to our audited consolidated financial statements and unaudited condensed consolidated financial statements included elsewhere in this prospectus, for additional details regarding our debt arrangements. Based on our current outlook, we believe that net cash provided by operating activities and available borrowings under the Credit Agreement will be sufficient to fund our cash requirements for at least the next 12 months.
Cash Flows
The following table summarizes our cash flows for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | ||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | % Change | ||||||||||||
| Net cash used in operating activities |
$ | (72,031 | ) | $ | (6,911 | ) | $ | (65,120 | ) | 942.3 | % | |||||
| Net cash used in investing activities |
$ | (315,804 | ) | $ | (15,261 | ) | $ | (300,543 | ) | 1,969.4 | % | |||||
| Net cash provided by financing activities |
$ | 388,283 | $ | 3,220 | $ | 385,063 | 11,958.5 | % | ||||||||
Cash Flows from Operating Activities
Cash used in operating activities increased by $65.1 million. This increase was primarily the result of an approximately $22.5 million net increase in contract assets and inventory from the timing of customer orders and the production investment needed to meet ramping demand under orders expected to be delivered over the balance of the fiscal year. The cash outflows associated with these investments were partially offset by favorable changes in accounts receivable resulting from the collection of receivables generated by strong sales in the fourth quarter of fiscal 2025. Additionally, the increase in acquisitions and IPO related transaction expenses as compared with the prior year period also contributed to the increase in cash used in operating activities.
Cash Flows from Investing Activities
The increase in cash used in investing activities was primarily attributable to higher net cash payments related to acquisitions, as well as from increased capital expenditures. We now expect capital expenditures in
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fiscal 2026 to be in the range of $50.0 million. The majority of our planned fiscal 2026 capital expenditures are growth capital investments to acquire new equipment, improve our manufacturing efficiency, expand our capabilities, and respond to ramping demand signals from our customers.
Cash Flows from Financing Activities
The increase in cash provided by financing activities was driven primarily by increased proceeds from the issuance of long-term debt and draws on the revolving line of credit, as well as increased capital contributions received. These increases were partially offset by higher payments of long-term debt, payments on finance lease liabilities, payment of stock issuance costs directly related to the anticipated IPO, and payments on equipment and leaseback financing obligations.
The following table summarizes our cash flows for the years ended December 31, 2025 and 2024:
| Years Ended December 31, | ||||||||||||||||
| (in thousands, except percentages) | 2025 | 2024 | Change | % Change | ||||||||||||
| Net cash (used in) provided by operating activities |
$ | (28,941 | ) | $ | 4,649 | $ | (33,590 | ) | (722.5 | )% | ||||||
| Net cash used in investing activities |
$ | (27,784 | ) | $ | (49,146 | ) | $ | 21,362 | 43.5 | % | ||||||
| Net cash provided by financing activities |
$ | 44,734 | $ | 37,657 | $ | 7,077 | 18.8 | % | ||||||||
Cash Flows from Operating Activities
Operating cash flows decreased from cash generation of $4.6 million in 2024 to cash use of $28.9 million in 2025, a decrease of $33.6 million. The decrease was primarily the result of operating cash outflows of approximately $36.1 million to support inventory and production increases in response to rising demand for military rotorcraft components, as well as strong fourth quarter shipments for which cash collection will occur in 2026. These decreases were partially offset by the full year increase in sales volume and decreased losses as compared with the prior year. Transaction expenses related to acquisitions and the Combination were materially consistent between 2025 and 2024.
Cash Flows from Investing Activities
The decrease in cash used in investing activities was primarily attributable to lower net cash payments related to acquisitions, partially offset by capital expenditures. We currently expect capital expenditures in fiscal 2026 to be in the range of $50.0 million. The majority of our planned fiscal 2026 capital expenditures are growth capital investments to acquire new equipment, improve our manufacturing efficiency and expand our capabilities.
Cash Flows from Financing Activities
The increase in cash provided by financing activities was driven primarily by incremental debt financing activity and the absence of distributions paid from the prior year, partially offset by net debt repayments and contingent consideration payments related to the ICEL acquisition.
Contractual Obligations
Our material contractual obligations at March 31, 2026 and December 31, 2025 consist primarily of borrowings under the Credit Agreement (and related interest payments), operating and finance lease obligations, and the leaseback financing obligation related to our Enfield facility sale-leaseback arrangement. Refer to Note 10, Long-Term Debt, and Note 11, Leases, in the notes to our audited consolidated financial statements and Note 10, Long-Term Debt in the notes to our unaudited condensed consolidated financial statements included elsewhere in this prospectus, for additional information.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements, as defined in Regulation S-K, that have or are reasonably likely to have current or future effect on our financial condition, results of operations, or cash flows, as of March 31, 2026, December 31, 2025, and December 31, 2024.
Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and also affect the amounts of revenue and expenses reported for each period. Critical accounting estimates are those estimates that involve a significant level of estimation uncertainty and management judgment and that have had or are reasonably likely to have a material impact on our financial condition or results of operations. Management’s estimates are based on the relevant information available at the end of each period. We have disclosed our accounting policies for each of our critical accounting estimates below.
Revenue Recognition
Our accounting policy regarding revenue recognition is disclosed in Note 2, Summary of Significant Accounting Policies, in the notes to our audited consolidated financial statements included elsewhere in this prospectus. As described in Note 2, when revenue is recognized over time, we measure our progress toward complete satisfaction of a performance obligation using an input method that requires us to estimate the total estimated costs at completion (“EAC”). For contracts involving new or emerging technology or for long-term contracts, developing EACs requires significant judgment. Cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends, and other economic projections. Significant factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, and asset utilization. Unanticipated project developments may result in changes to these estimates, impacting both revenue and profit recognition. We account for changes in contract estimates on a cumulative catch-up basis in the period such changes are identified. This may lead to the recognition or reversal of revenue for performance obligations satisfied or partially satisfied in prior periods. Additionally, if we were to determine that our cost estimates exceed the total consideration we expect to receive under the contract, the expected losses would be recognized in full in the period identified as forward loss reserves. See Note 3, Revenue, in the notes to our audited consolidated financial statements and unaudited condensed consolidated financial statements included elsewhere in this prospectus, for further information on our revenue recognition.
Business Combinations
Upon acquiring a business, we recognize acquired identifiable intangible assets at their estimated fair values as of the acquisition date and recognize goodwill for the excess of the purchase price over the fair value of the net identifiable assets acquired. The valuation of acquired identifiable intangible assets is a critical accounting estimate because it requires significant judgment, including the selection of valuation methodologies and the determination of key assumptions such as projected revenues and cash flows, projected margins, discount rates, useful lives, and market comparables. These valuations also require judgments regarding the expected economic benefits attributable to each acquired intangible asset, including the amount, timing, and duration of the cash flows the asset is expected to generate or enable, which affects whether an intangible asset is separately identifiable, the allocation of purchase price among identifiable intangible assets and goodwill, and the resulting amortization expense and potential impairment. Changes in these assumptions could materially affect the fair values assigned to acquired identifiable intangible assets and goodwill and could have a material impact on our results of operations in future periods. We engage valuation specialists to assist in estimating the fair values of acquired identifiable intangible assets and may refine preliminary valuations as additional information becomes available during the measurement period (up to one year from the acquisition date).
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We may also be required to pay additional consideration related to business combinations if certain future events occur or conditions are met. We estimate the fair values of contingent consideration liabilities based on the likelihood that the underlying event that would trigger the contingent consideration to be owed will occur. Typically, such contingent consideration is tied to the achievement of certain earnings targets of the acquired company in periods following the acquisition, and therefore involves assumptions regarding sales and margins of a recently acquired company with which we have comparatively less experience. Changes in any of these assumptions and the ultimate success or failure of the underlying acquired company to achieve the relevant earnings targets could result in significantly higher or lower estimated contingent consideration liabilities, which could have a significant impact on our results of operations in periods subsequent to the acquisition date. See Note 4, Business Combinations, and Note 5, Fair Value Measurements, in the notes to our audited consolidated financial statements and unaudited condensed consolidated financial statements included elsewhere in this prospectus, for further information regarding our contingent consideration arrangements.
Income Taxes
The determination of income tax expense requires us to make certain estimates and judgments concerning the calculation of deferred tax assets and liabilities, as well as the deductions and credits that are available to reduce taxable income. We recognize deferred tax assets and liabilities for the expected future tax consequences of events. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates for the year in which the differences are expected to reverse.
In evaluating our ability to recover deferred tax assets, we consider all available positive and negative evidence, including our past operating results, our forecast of future earnings, future taxable income and tax planning strategies. The assumptions utilized in determining future taxable income require significant judgment. We record a valuation allowance against deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. If it becomes more likely than not that a deferred tax asset will be used for which a reserve has been provided, we reverse the related valuation allowance. If our actual future taxable income by tax jurisdiction differs from estimates, additional allowances or reversals of reserves may be necessary.
See Note 13, Income Taxes, in the notes to our audited consolidated financial statements and Note 11, Income Taxes, in the condensed notes to our unaudited condensed consolidated financial statements included elsewhere in this prospectus, for further information on income taxes.
Recently Issued and Adopted Accounting Pronouncements
Recently issued and adopted accounting pronouncements are described in Note 2, Summary of Significant Accounting Policies, in the notes to our audited consolidated financial statements and unaudited condensed consolidated financial statements included elsewhere in this prospectus.
Emerging Growth Company
We currently qualify as an “emerging growth company” under the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. Accordingly, we have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
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Internal Controls and Procedures
Currently, we are not required to comply with the SEC’s rules implementing Section 404 of the Sarbanes-Oxley Act and, therefore, are not required to include management’s annual report on internal control over financial reporting (“ICFR”) in our annual reports for that purpose. Upon becoming a public company, we will be subject to the requirements of Section 302 of the Sarbanes-Oxley Act, which will require management to certify, among other things, the accuracy of the financial and other information in our quarterly and annual reports and the effectiveness of our disclosure controls and procedures. We will also be required to maintain ICFR and to disclose any change in ICFR that occurred during each fiscal quarter that has materially affected, or is reasonably likely to materially affect, our ICFR. However, as an emerging growth company, we expect to be permitted to omit management’s annual report on ICFR in our first annual report on Form 10-K following our initial public offering and to include our first management ICFR report in our second annual report on Form 10-K, subject to applicable SEC rules and any exceptions that may apply to us.
Furthermore, our independent registered public accounting firm is currently not required to provide an attestation on the effectiveness of our internal control over financial reporting and will be exempt from this requirement for as long as we qualify as an “emerging growth company” pursuant to the JOBS Act.
Quantitative and Qualitative Disclosures about Market Risks
Interest Rate Risk
Our primary exposure to interest rate risk arises from outstanding borrowings under the Credit Agreement, which has a variable interest rate component.
We estimate that a 1.0% increase in applicable average interest rates would have resulted in an approximately $1.9 million increase in interest expense for the three months ended March 31, 2026, based on borrowings outstanding during the period. The increase in estimated sensitivity is primarily attributable to incremental borrowings in connection with the acquisition of CBI. See Note 10, Long-Term Debt, in the condensed notes to our unaudited condensed consolidated financial statements included elsewhere in this prospectus, for additional information.
We estimate that a 1.0% increase in the applicable average interest rates for the year ended December 31, 2025 and 2024 would have resulted in an estimated $6.0 million and $4.9 million increase, respectively, in interest expense.
We will continue to monitor market risk due to fluctuations in interest rates and potential impacts to the fair value of our holdings and operating cash flows.
Inflation Risk
We have generally experienced increases in the costs of labor, materials, and services in line with broader inflationary trends; however, we do not believe that inflation has had a material impact on our business, results of operations, or financial condition to date. We anticipate that the effect of future cost increases will continue to be mitigated by our ongoing efforts to improve manufacturing efficiencies, pursue alternative sourcing options, and adjust pricing strategies when appropriate, as we have done in prior periods. Nevertheless, continued cost inflation and supply chain disruptions may require us to continue these or similar mitigation efforts to reduce their impact on our results of operations. Our inability or failure to offset cost increases could adversely affect our business, results of operations, or financial condition.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(in thousands, except share and per share amounts)
The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X under the Securities Act, as amended, and should be read in conjunction with the accompanying notes. The unaudited pro forma condensed combined financial information is presented to provide relevant information necessary for an understanding of the Company upon consummation of the acquisition of Consolidated Boring Inc. (“CBI”) (the “Acquisition”), inclusive of the related financing arrangements, as further explained below.
On March 2, 2026, the Company acquired 100% of the equity interests in CBI for a base purchase price of $425,000, including transaction costs and subject to certain customary purchase price adjustments. A portion of the purchase price was satisfied by the Company’s parent company (AA&D Holdings, LP) through the issuance of shares of its limited partnership units with a fair value of $70,000 to the sellers. The remainder of the purchase price was paid by the Company in cash. The Acquisition, including related transaction expenses, was funded with proceeds from (1) the issuance of additional equity interests by the Company’s parent company, AA&D Holdings, LP, in the amount of $18,000 (the “Equity Financing”) and (2) $361,100 of additional funding received from existing lenders under the Company’s Credit Agreement, consisting of $180,000 of incremental term loans, $150,000 of amounts drawn under the existing delayed draw term loan commitment, and $31,100 of proceeds from the revolving line of credit (the “Debt Financing”). The Equity Financing and Debt Financing both closed concurrently with the Acquisition (collectively, the “Transactions”). As part of the Acquisition, the Company issued an aggregate of 9.8118 shares of common stock to its parent entity, AA&D Holdings, LP.
The unaudited pro forma condensed combined financial information related to the Acquisition has been prepared by the Company using the acquisition method of accounting in accordance with U.S. GAAP. The Company has been treated as the accounting acquirer for accounting purposes, and thus accounts for the Acquisition as a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). The consideration transferred and valuations of the assets acquired and liabilities assumed, and therefore the purchase price allocations, are preliminary and have not yet been finalized as of the date of this filing. As a result of the foregoing, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2026 combines (i) the unaudited condensed consolidated statement of operations of the Company for the three months ended March 31, 2026, which includes CBI’s operating results from the acquisition date, and (ii) the unaudited operating results for CBI from January 1, 2026 through March 1, 2026. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2025 combines (i) the audited consolidated statement of operations of the Company for the year ended December 31, 2025 and (ii) the audited consolidated statement of operations of CBI for the year ended December 31, 2025. Both sets of unaudited pro forma consolidated statements of operations give effect to the Transactions as if they had been consummated on January 1, 2025.
The unaudited pro forma condensed combined financial information was derived from, and should be read in conjunction with, the following historical financial statements and the accompanying notes:
| • | The historical unaudited condensed consolidated financial statements of the Company for the three months ended March 31, 2026, included elsewhere in this prospectus; |
| • | The historical audited consolidated financial statements of the Company for the year ended December 31, 2025, included elsewhere in this prospectus; and |
| • | The historical audited consolidated financial statement of CBI for the year ended December 31, 2025, included elsewhere in this prospectus. |
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The pro forma adjustments are based upon available information and certain assumptions that management believes to be reasonable. The unaudited pro forma condensed combined financial information is provided for illustrative and informational purposes only and does not purport to represent or be indicative of the consolidated results of operations or financial condition of the Company had the Transactions been completed as of the dates presented and should not be construed as representative of the future consolidated results of operations or financial condition of the Company.
The unaudited pro forma condensed combined financial information does not reflect any expected cost savings, operating synergies or revenue enhancements that the Company may achieve as a result of the Transactions or the costs necessary to achieve any such cost savings, operating synergies or revenue enhancements.
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Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 2026
(in thousands, except share and per share data)
| Historical | Pro Forma | |||||||||||||||||||||||||||
| Company Historical |
CBI As Reclassified (Note 2) |
Acquisition Accounting Adjustments |
Note | Financing Adjustments |
Note | Pro Forma Combined |
||||||||||||||||||||||
| Revenue |
$ | 134,351 | $ | 17,632 | $ | — | $ | — | $ | 151,983 | ||||||||||||||||||
| Cost of goods sold |
100,772 | 14,312 | 359 | 3(b) | — | 115,443 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Gross profit |
33,579 | 3,320 | (359 | ) | — | 36,540 | ||||||||||||||||||||||
| Selling, general, and administrative expenses |
28,302 | 54,451 | — | — | 82,753 | |||||||||||||||||||||||
| Intangible asset amortization expense |
8,110 | 602 | 2,110 | 3(a) | — | 10,822 | ||||||||||||||||||||||
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|
|
|
|
|
|
|
|||||||||||||||||||
| Operating loss |
(2,833 | ) | (51,733 | ) | (2,469 | ) | — | (57,035 | ) | |||||||||||||||||||
| Interest expense, net |
17,771 | 1,453 | (1,453 | ) | 3(c) | 5,172 | 3(d) | 22,943 | ||||||||||||||||||||
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|
|
|
|
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|
|
|
|
|||||||||||||||||||
| Loss before income taxes |
(20,604 | ) | (53,186 | ) | (1,016 | ) | (5,172 | ) | (79,978 | ) | ||||||||||||||||||
| Non-recurring income tax expense |
— | — | 13,852 | 3(e) | — | 13,852 | ||||||||||||||||||||||
| Income tax benefit |
(5,472 | ) | — | (9,483 | ) | 3(f) | (77 | ) | 3(f) | (15,032 | ) | |||||||||||||||||
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|
|
|
|||||||||||||||||||
| Net loss |
$ | (15,132 | ) | $ | (53,186 | ) | $ | (5,385 | ) | $ | (5,095 | ) | $ | (78,798 | ) | |||||||||||||
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|
|||||||||||||||||||
| Net loss per share – basic and diluted |
$ | (99,553 | ) | $ | (498,724 | ) | ||||||||||||||||||||||
| Weighted average shares outstanding – basic and diluted |
152 | 158 | ||||||||||||||||||||||||||
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Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2025
(in thousands, except share and per share data)
| Historical | Pro Forma | |||||||||||||||||||||||||||
| Company Historical |
CBI As Reclassified (Note 2) |
Acquisition Accounting Adjustments |
Note | Financing Adjustments |
Note | Pro Forma Combined |
||||||||||||||||||||||
| Revenue |
$ | 498,763 | $ | 105,580 | $ | — | $ | — | $ | 604,343 | ||||||||||||||||||
| Cost of goods sold |
359,384 | 78,289 | 2,153 | 3(b) | — | 439,826 | ||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Gross profit |
139,379 | 27,291 | (2,153 | ) | — | 164,517 | ||||||||||||||||||||||
| Selling, general, and administrative expenses |
54,447 | 10,779 | — | — | 65,226 | |||||||||||||||||||||||
| Intangible asset amortization expense |
26,063 | 3,613 | 12,659 | 3(a) | — | 42,335 | ||||||||||||||||||||||
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|
|
|||||||||||||||||||
| Operating income |
58,869 | 12,899 | (14,812 | ) | — | 56,956 | ||||||||||||||||||||||
| Interest expense, net |
72,806 | 5,161 | (5,165 | ) | 3(c) | 31,036 | 3(d) | 103,838 | ||||||||||||||||||||
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|
|||||||||||||||||||
| (Loss) income before income taxes |
(13,937 | ) | 7,738 | (9,647 | ) | (31,036 | ) | (46,882 | ) | |||||||||||||||||||
| Non-recurring income tax benefit |
— | — | (13,852 | ) | 3(e) | — | (13,852 | ) | ||||||||||||||||||||
| Income tax expense |
3,087 | 288 | 2,068 | 3(g) | 10,546 | 3(g) | 15,989 | |||||||||||||||||||||
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|
|
|||||||||||||||||||
| Net (loss) income |
$ | (17,024 | ) | $ | 7,450 | $ | 2,137 | $ | (41,582 | ) | $ | (49,019 | ) | |||||||||||||||
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|
|||||||||||||||||||
| Net loss per share – basic and diluted |
$ | (170,240 | ) | $ | (445,627 | ) | ||||||||||||||||||||||
| Weighted average shares outstanding – basic and diluted |
100 | 110 | ||||||||||||||||||||||||||
The accompanying notes are an integral part of this unaudited pro forma condensed combined financial information.
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(in thousands, except share and per share amounts)
1. Basis of Presentation
The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X under the Securities Act, as amended, and is presented to provide relevant information necessary for an understanding of the Company upon consummation of the Transactions.
The unaudited pro forma condensed combined financial information and related notes are based upon (i) the Company’s unaudited condensed consolidated financial statements for the three months ended March 31, 2026, which includes CBI’s operating results from the acquisition date, (ii) CBI’s unaudited operating results from January 1, 2026 through March 1, 2026, (iii) the Company’s audited consolidated financial statements for the year ended December 31, 2025, and (iv) CBI’s audited consolidated financial statement for the year ended December 31, 2025, adjusted for certain pro forma adjustments described below. The unaudited pro forma condensed combined statements of operations give effect to the Transactions as if these occurred on January 1, 2025.
The unaudited pro forma condensed combined financial information related to the Acquisition has been prepared by the Company using the acquisition method of accounting in accordance with U.S. GAAP. The Company has been treated as the acquirer for accounting purposes, and thus accounts for the Acquisition as a business combination in accordance with ASC 805. The consideration transferred and valuations of the assets acquired and liabilities assumed, and therefore the purchase price allocations, are preliminary and have not yet been finalized as of the date of this filing. The purchase price allocation is expected to be finalized within the measurement period, which is one year following the closing date of the Acquisition. As a result of the foregoing, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information.
The accounting policies followed in preparing the unaudited pro forma condensed combined financial information are those used by the Company as set forth in the audited historical financial statements. The unaudited pro forma condensed combined financial information reflects any material adjustments to conform CBI’s historical financial statements to the Company’s significant accounting policies based on the Company’s initial review and understanding of CBI’s summary of significant accounting policies from the date of the Acquisition. Additionally, the Company has included certain reclassification adjustments for consistency in the financial statement presentation. See Note 2 for more information.
The Company’s management believes that the assumptions used provide a reasonable basis for presenting the significant effects of the Transactions, and that the pro forma adjustments in the unaudited pro forma condensed combined financial information give appropriate effect to the assumptions.
One-time direct and incremental transaction costs have been expensed as incurred under ASC 805. All transaction costs are reflected in the Company and CBI’s historical financial statements, and as such, no pro forma adjustment is included herein.
The Company and CBI have not had any historical material relationship prior to the Acquisition. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
2. CBI Reclassification Adjustments
In preparing the unaudited pro forma condensed combined financial information, the Company performed a preliminary review of CBI’s financial statement presentation and significant accounting policies. The Company has made reclassification adjustments to conform CBI’s historical financial statement presentation to the Company’s presentation.
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The following sets forth the reclassification adjustments made to conform CBI’s presentation to the Company’s presentation in the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2026 and the year ended December 31, 2025 (in thousands):
| For the Three Months Ended March 31, 2026 | ||||||||||||||||
| CBI Caption |
Company Caption |
CBI Historical | Reclassification Adjustments |
Note | CBI As Reclassified |
|||||||||||
| Revenue |
Revenue | $ | 17,632 | $ | — | $ | 17,632 | |||||||||
| Cost of revenues |
Cost of goods sold | 14,312 | — | 14,312 | ||||||||||||
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|
|
|
|
|||||||||||
| Gross profit |
Gross profit | 3,320 | — | 3,320 | ||||||||||||
| Selling, general and administrative expenses |
Selling, general, and administrative expenses | 54,959 | (508 | ) | (a) (b) |
54,451 | ||||||||||
| Related party management fees |
94 | (94 | ) | (a) | — | |||||||||||
| Intangible asset amortization expense | — | 602 | (b) | 602 | ||||||||||||
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|
|
|
|
|||||||||||
| Income before other items |
Operating loss | (51,733 | ) | — | (51,733 | ) | ||||||||||
| Interest expense |
Interest expense, net | 1,453 | — | 1,453 | ||||||||||||
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|
|
|
|
|
|||||||||||
| Income (loss) before income tax expense |
Loss before income taxes | (53,186 | ) | — | (53,186 | ) | ||||||||||
| Income tax expense |
Income tax expense | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) |
Net loss | $ | (53,186 | ) | — | $ | (53,186 | ) | ||||||||
|
|
|
|
|
|
|
|||||||||||
| a. | Represents the change in presentation of CBI’s related party management fees into selling, general, and administrative expenses to conform to the Company’s statement of operations. |
| b. | Represents the change in presentation of CBI’s selling, general and administrative expenses into intangible asset amortization expense to conform to the Company’s statement of operations. |
| For the Year Ended December 31, 2025 | ||||||||||||||||
| CBI Caption |
Company Caption |
CBI Historical | Reclassification Adjustments |
Note | CBI As Reclassified |
|||||||||||
| Revenue |
Revenue | $ | 105,580 | $ | — | $ | 105,580 | |||||||||
| Cost of revenues |
Cost of goods sold | 78,289 | — | 78,289 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Gross profit |
Gross profit | 27,291 | — | 27,291 | ||||||||||||
| Selling, general and administrative expenses |
Selling, general, and administrative expenses |
|
13,379 |
|
|
(2,600 |
) |
(a) (b) (c) |
|
10,779 |
| |||||
| Related party management fees |
646 | (646 | ) | (a) | — | |||||||||||
| Intangible asset amortization expense | — | 3,613 | (b) | 3,613 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Income before other items |
Operating income | 13,266 | (367 | ) | 12,899 | |||||||||||
| Interest expense |
Interest expense, net | 5,165 | (4 | ) | (d) | 5,161 | ||||||||||
| Interest income |
(4 | ) | 4 | (d) | — | |||||||||||
| Miscellaneous income |
(10 | ) | 10 | (c) | — | |||||||||||
| Other expense |
377 | (377 | ) | (c) | — | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Income (loss) before income tax expense |
(Loss) income before income taxes | 7,738 | — | 7,738 | ||||||||||||
| Income tax expense |
Income tax expense | 288 | — | 288 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net income (loss) |
Net (loss) income | $ | 7,450 | $ | — | $ | 7,450 | |||||||||
|
|
|
|
|
|
|
|||||||||||
| a. | Represents the change in presentation of CBI’s related party management fees into selling, general, and administrative expenses to conform to the Company’s statement of operations. |
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| b. | Represents the change in presentation of CBI’s selling, general and administrative expenses into intangible asset amortization expense to conform to the Company’s statement of operations. |
| c. | Represents the change in presentation of CBI’s other income and expense into selling, general, and administrative expenses to conform to the Company’s statement of operations. |
| d. | Represents the change in presentation of CBI’s interest income into interest expense, net to conform to the Company’s statement of operations. |
| 3. | Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations |
| a. | Represents the incremental amortization expense due to the adjustment to fair value of CBI’s historical intangible assets, which included customer relationships, developed technology, and trade names and had an aggregate carrying value of $40,850 as of the acquisition date. While the Company has performed a preliminary valuation of CBI’s historical intangible assets, these amounts are preliminary and could be subject to change throughout the measurement period. The following table summarizes the estimated increase in fair value of CBI’s customer relationship, developed technology, and trade name intangible assets and the estimated incremental amortization expense based on the estimated remaining useful lives and a straight-line method of amortization: |
| (in thousands, except useful life) | Incremental fair value |
Remaining useful life (years) |
Incremental expense for 1/1/26 – 3/1/26 |
Incremental expense for 1/1/25 – 12/31/25 |
||||||||||||
| Customer relationships |
$ | 137,309 | 12 | $ | 1,907 | $ | 11,442 | |||||||||
| Developed technology |
4,766 | 6 | 132 | 794 | ||||||||||||
| Trade names |
1,265 | 3 | 70 | 422 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Acquisition accounting adjustment |
$ | 2,110 | $ | 12,659 | ||||||||||||
An increase or decrease in the incremental fair value of the intangible assets of 10% would result in an increase or decrease in amortization expense for the three months ended March 31, 2026 and the year ended December 31, 2025 of $253 and $1,519, respectively.
| b. | Represents the incremental depreciation expense due to the adjustment to fair value of CBI’s historical property, plant and equipment, which had an aggregate carrying value of $21,583 as of the acquisition date. The valuation is estimated using the cost approach, whereby the fair value is determined by calculating the current cost to replace the asset new, then subtracting deductions for physical deterioration, functional obsolescence, and economic obsolescence. While the Company has performed a preliminary valuation of CBI’s historical property, plant and equipment, these amounts are preliminary and could be subject to change throughout the measurement period. The following table summarizes the estimated increase in fair value of CBI’s property, plant and equipment and the estimated incremental depreciation expense based on the estimated remaining useful lives and a straight-line method of depreciation: |
| (in thousands, except useful life) | Incremental fair value |
Remaining useful life (years) |
Incremental expense for 1/1/26 – 3/1/26 |
Incremental expense for 1/1/25 – 12/31/25 |
||||||||||||
| Machinery and equipment |
$ | 11,247 | 4 – 9 | $ | 270 | $ | 1,622 | |||||||||
| Other property, plant and equipment |
1,446 | 0 – 14 | 89 | 531 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Acquisition accounting adjustment |
$ | 359 | $ | 2,153 | ||||||||||||
An increase or decrease in the incremental fair value of the property, plant and equipment of 10% would result in an increase or decrease in depreciation expense for the three months ended March 31, 2026 and the year ended December 31, 2025 of $90 and $537, respectively.
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For purposes of these unaudited pro forma condensed combined financial statements, the Company has concluded that the carrying amounts of CBI’s inventory is not materially different from its fair value.
| c. | Reflects an elimination of interest expense related to repayment of debt of CBI. |
| d. | Reflects an adjustment related to the Debt Financing obtained by the Company to fund the Acquisition. The incremental interest expense consists of the following components: |
| • | An increase in interest expense associated with the increase in the principal amount of the term loans, drawn amounts under the existing delayed draw term loan commitment, and drawn amounts under the revolving line of credit of $5,057 and $30,344 for the three months ended March 31, 2026 and year ended December 31, 2025, respectively. The effective interest rate of 8.40% was determined using the three-month term SOFR plus an additional spread based on the Company’s total net leverage ratio. An increase or decrease in the effective interest rate of 1/8 of a percent results in an increase or decrease in interest expense for the year ended December 31, 2025 of $451. |
| • | An increase associated with the incremental lender fees and third-party debt issuance costs allocated to the term loan and drawn amounts under the delayed draw term loan commitment that are amortized using the effective interest method over the remaining term of the Debt Financing, which is 71 months. The amount by which interest expense increased was $108 and $650 for the three months ended March 31, 2026 and the year ended December 31, 2025, respectively. |
| • | An increase in interest expense associated with the lender fees allocated to the revolving credit facility of $7 and $42 for the three months ended March 31, 2026 and the year ended December 31, 2025, respectively. Lender fees allocated to the incremental revolving credit facility are amortized on a straight-line basis over the remaining term of the revolving credit facility, which is 71 months. |
| e. | A non-recurring increased tax benefit of $13,852 for the year ended December 31, 2025 related to the valuation allowance release associated with additional capacity to recognize deferred tax assets based on the additional deferred tax liabilities generated as a result of the acquisition has been pushed back to the year ended December 31, 2025. For the three months ending March 31, 2026, this figure was reversed to avoid double-counting, since it already appears in the Company’s historical column. |
| f. | The estimated tax impact differs from the statutory rate of 21% and has been calculated to be 18.8% for the three months ended March 31, 2026. The difference between this rate and the statutory rate is mainly due to valuation allowance considerations, transaction costs, and state taxes. The tax expense recorded for the Company historical and CBI as reclassified were held constant while the remaining columns were adjusted to result in an overall effective tax rate of 18.8%. The amounts reported are based on estimates made by management and could change once final information becomes available. Management has not yet completed a formal study of the potential limitation on the utilization of pre-transaction net operating losses and other tax attributes under Section 382 of the Internal Revenue Code. Accordingly, the unaudited pro forma condensed combined financial information does not reflect any final adjustments that may result from such study. The Company has also assumed the safe-harbor method related to transaction costs incurred related to the acquisition. Management intends to complete a transaction cost study, which could have a material impact on these amounts. These items may also lead to changes in the valuation allowance analysis. |
| g. | The estimated tax impact differs from the statutory rate of 21% and has been calculated to be (34.1)% for the year ended December 31, 2025. The difference between this rate and the statutory rate is mainly due to valuation allowance considerations. The tax expense recorded for the Company historical and CBI as reclassified were held constant while the remaining columns were adjusted to result in an overall effective tax rate of (34.1)%. The amounts reported are based on estimates made by management and could change once final information becomes available. Management has not yet completed a formal study of the potential limitation on the utilization of pre-transaction net operating losses and other tax attributes under Section 382 of the Internal Revenue Code. Accordingly, the unaudited pro forma condensed combined financial information does not reflect any final adjustments |
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| that may result from such study. The Company has also assumed the safe-harbor method related to transaction costs incurred related to the acquisition. Management intends to complete a transaction cost study, which could have a material impact on these amounts. These items may also lead to changes in the valuation allowance analysis. |
4. Unaudited Pro Forma Net Loss Per Share
The pro forma net loss per share calculations have been performed for the three months ended March 31, 2026 and the year ended December 31, 2025, assuming the Transactions occurred on January 1, 2025.
| (in thousands, except share and per share amounts) | For the Three Months Ended March 31, 2026 |
For the Year Ended December 31, 2025 |
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| Numerator |
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| Pro forma net loss |
$ | (78,798 | ) | $ | (49,019 | ) | ||
| Denominator |
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| Company pro forma weighted average common shares outstanding |
152 | 100 | ||||||
| Add: Incremental shares issued in Equity Financing |
6 | 10 | ||||||
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| Pro forma weighted average common shares outstanding – basic and diluted |
158 | 110 | ||||||
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| Pro forma net loss per share – basic and diluted |
$ | (498,724 | ) | $ | (445,627 | ) | ||
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As part of the Acquisition, the Company issued an aggregate of 9.8118 shares of common stock to its parent entity, AA&D Holdings, LP. For purposes of calculating net loss per share, the weighted average shares outstanding has been rounded to the closest whole number. For purposes of calculating the pro forma weighted average common shares outstanding for the three months ended March 31, 2026 and the year ended December 31, 2025, the incremental shares issued as part of the acquisition are treated as having been issued and outstanding as of January 1, 2026 and January 1, 2025, respectively.
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Our Company
We are a premier provider of advanced design, engineering, and vertically integrated manufacturing solutions for leading and next-generation space and defense technology companies. We build complex, mission-critical subsystems for extreme operating environments serving three core markets: Space and Launch Systems, Defense Aviation and Airborne Systems, and C5ISR and Precision Strike Systems. With decades of space and defense manufacturing heritage, we combine material science and IP-enabled process expertise with the ability to enable rapid prototyping, enhance new product development, and responsively scale production. Across our nationwide network of advanced manufacturing facilities, we continuously support a balanced mix of next-generation technology and platform development, large scale production programs, and aftermarket sustainment for enduring platforms.
The increasing complexity of next-generation space and defense platforms, combined with decades of underinvestment in scaled, technically differentiated mid-tier manufacturing companies, has created a structural need for engineering-integrated advanced manufacturing partners capable of delivering mission-critical systems at production scale. As a record number of new space and defense programs are accelerating from development into sustained production and long-duration aftermarket support, suppliers with deep process expertise, lifecycle embeddedness, and the capacity to industrialize rapidly are becoming increasingly attractive to the U.S. and allied industrial base.
We are purpose-built to scale with the nation’s accelerating space and defense demands, and we believe the breadth and depth of our manufacturing competencies are essential to the design, production and support of next-generation platforms. We maintain decades-long relationships with both blue-chip aerospace and defense prime contractors and next-generation technology innovators as a critical supply chain partner. These customers depend on us to supply highly-engineered systems to enable their most important platforms. Our track record underlies our sole- or single-source positions that represent approximately 87% of our revenue and approximately 86% of our pro forma revenue for the fiscal year ended December 31, 2025. We believe our full lifecycle, diversified, and IP-enabled capabilities provide outsized value to our customers by delivering uncompromising performance, improving cost efficiencies, and accelerating production.
We are innovators and critical enablers in our three large and growing end markets. Rapid expansion across the commercial, civil, and national security space sectors is accelerating demand in Space and Launch Systems, supported by industry growth where reusable launch architectures have underpinned cost-effective access to space and opened new markets including proliferated satellite constellations. At the same time, an increasingly complex and dynamic global threat environment is driving robust investment in next-generation airborne capabilities and modernization of enduring platforms. This supports significant, broad-based growth in Defense Aviation and Airborne Systems as autonomy, stealth, and high-performance aircraft become strategic priorities. Demand is also rising across C5ISR and Precision Strike Systems as the United States and allies prioritize networked battlefield capabilities, layered missile defense, and large-scale missile and munitions rearmament, positioning these areas for strong, visible, multi-year demand. In each of our end markets, we build mission-critical, high-consequence subsystems and assemblies for marquee platforms which we believe are strategically aligned with the most important U.S. and allied defense priorities.
Percentages above reflect contribution of each end market to the Company’s pro forma revenue for the fiscal year ended December 31, 2025. On a historical basis for the fiscal year ended December 31, 2025, Space and Launch Systems represented 23%, Defense Aviation and Airborne Systems represented 66% and C5ISR and Precision Strike Systems represented 11% of the Company’s revenue.
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Our markets are experiencing strong, sustained growth, but the ability of the space and defense supply chain to manufacture mission-critical subsystems at production scale remains constrained. Over the past several decades, consolidation, offshoring, and underinvestment have reduced the number of scaled, technically differentiated mid-tier manufacturing platforms within the U.S. industrial base. As production requirements increase and next-generation systems move from prototype to full-rate manufacturing, our customers are prioritizing partners with ready capacity, proven process expertise, accelerated qualification capabilities, and repeatable throughput that can responsively scale. We believe that our years of investment in talent, facilities, capacity, and capabilities equip us to successfully service our customers during their next phases of growth.
We enable critical space and defense platforms through high-consequence subsystems engineered for the edge enabling mission-critical functions such as power and propulsion, battlefield connectivity, and survivability in extreme environments. Examples of our systems include reusable landing systems for launch vehicles, control surfaces for next-generation fixed wing platforms, and solid rocket motor cases for missile platforms. Our systems are proven in the most demanding environments, including in the vacuum of space, through atmospheric reentry, and on the battlefield, enabling high-consequence capabilities such as supersonic flight, orbital delivery, and advanced sensing. Our decades of proven performance underpin our ability to scale and adapt to the evolving needs of the U.S. space and defense industrial base across the full platform lifecycle, from design and prototyping through production, aftermarket, and sustainment. Approximately 33% of our revenue and 27% of our pro forma revenue for the fiscal year ended December 31, 2025 is tied to systems for aftermarket and sustainment, providing long-term revenue visibility due to long-duration platform service lives.
Our purpose-built platform has been developed through disciplined strategic acquisitions and platform investments that have further strengthened our capabilities to meet the growing demands of the space and defense industrial base. Our national manufacturing footprint supports scaled production of American-made critical systems for leading space and defense platforms. We operate eleven state-of-the-art facilities in the United States with approximately 1.5 million square feet of manufacturing space in total. Our facilities enable our breadth of capabilities across systems and material types and include differentiated and hard-to-replicate resources and capabilities such as flow forming facilities, complex composite tube manufacturing, RF transparent composite manufacturing, spin forming for propulsion tanks, near-net shape forming, deep hole boring, and large-scale clean room capacity. Our footprint is designed to scale with our customers and is growing today, with a number of expansion opportunities both in process and identified, and is intended to support the demand to come from next-generation platform production ramps.
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For the fiscal year ended December 31, 2025, we generated $498.8 million in revenue, representing 24.8% year over year growth from revenue of $399.8 million in the fiscal year ended December 31, 2024. Additionally, for the fiscal year ended December 31, 2025, we had net loss and Adjusted EBITDA of $17.0 million and $117.9 million, respectively, compared to a net loss and Adjusted EBITDA of $34.8 million and $84.0 million, respectively, in the fiscal year ended December 31, 2024. Our Adjusted EBITDA Margin increased from 21.0% in the fiscal year ended December 31, 2024 to 23.6% in the fiscal year ended December 31, 2025. Our pro forma revenue was $604.3 million, our pro forma net loss was $49.0 million, our Pro Forma Adjusted EBITDA was $141.9 million and our Pro Forma Adjusted EBITDA Margin was 23.5% in the fiscal year ended December 31, 2025, in each case after giving effect to our acquisition of CBI. For the fiscal quarter ended March 31, 2026, we generated $134.4 million in revenue, representing 21.0% year-over-year growth from revenue of $111.0 million in the fiscal quarter ended March 31, 2025. Additionally, for the fiscal quarter ended March 31, 2026, we had net loss and Adjusted EBITDA of $15.1 million and $26.5 million, respectively, compared to a net loss and Adjusted EBITDA of $7.3 million and $25.3 million, respectively, in the fiscal quarter ended March 31, 2025. Our Adjusted EBITDA Margin decreased from 22.8% in the fiscal quarter ended March 31, 2025 to 19.8% in the fiscal quarter ended March 31, 2026. Our pro forma revenue was $152.0 million, our pro forma net loss was $78.8 million, our Pro Forma Adjusted EBITDA was $28.7 million and our Pro Forma Adjusted EBITDA Margin was 18.9% in the fiscal quarter ended March 31, 2026, in each case after giving effect to our acquisition of CBI. See “Prospectus Summary—Summary Historical and Pro Forma Financial and Other Information” for more information about how we define and calculate Adjusted EBITDA, Pro Forma Adjusted EBITDA, Adjusted EBITDA Margin and Pro Forma Adjusted EBITDA Margin, and for a reconciliation to their most comparable measures under U.S. GAAP.
As of March 31, 2026, our total indebtedness was approximately $1,017.8 million, consisting of approximately $971.7 million in principal amount of term loan borrowings under our Credit Agreement and $46.1 million of borrowings under our revolving credit facility. As a result of our substantial indebtedness, we have a history of net losses due to a significant amount of our cash flows historically being used to pay interest and principal on our outstanding indebtedness. See “Risk Factors—Risks Related to our Financial Condition—Our indebtedness and restrictive covenants under our credit facilities could limit our operational and financial flexibility.”
Our History
Our company is the result of a series of transformative business combinations and strategic acquisitions that have brought together complementary space and defense businesses with longstanding heritage and differentiated technical capabilities. The registrant was formed in October 2022 in connection with Greenbriar’s acquisition of AASC, creating an efficient corporate structure that captures the heritage of the acquired businesses, including AASC and PCX.
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On November 14, 2025, AA&D Holdings, LP merged with Rotor Topco, LP, combining the businesses previously operating as AASC and PCX under our current corporate structure. Prior to and following the November 2025 combination, we expanded our capabilities, geographic footprint, and manufacturing capacity through a series of acquisitions.
AASC, originally founded in Stockton, California in 1954, expanded its capabilities through the acquisition of ICEL in 2024, which added our White Salmon, Washington facility, and through the acquisition of NeXolve in 2025, which added our Huntsville, Alabama facility.
PCX, founded in 1900 and historically headquartered in Newington, Connecticut, was acquired by Greenbriar in 2021. In 2021 and 2022, PCX completed eight acquisitions that expanded its capabilities, geographic footprint, and capacity.
Following the November 2025 combination, we also acquired CBI, Vestigo and Ultracor, further expanding our capabilities and adding manufacturing facilities, including those in Cincinnati, Ohio and Billerica, Massachusetts.
As a result of these transactions, we provide advanced design, engineering, and vertically integrated manufacturing solutions for mission-critical, highly engineered space and defense systems. Through a national network of IP-enabled, advanced manufacturing facilities, we support leading and next-generation space and defense technology companies with the speed, scale, and technical performance required for demanding applications. Our capabilities have been built over time through legacy businesses with operating histories dating back more than a century. References in this prospectus to our deep customer relationships, workforce experience, manufacturing heritage, and historical performance reflect the combined operating histories of the businesses that now comprise our company.
Our Market Opportunity
We believe our breadth of capabilities across our three end markets positions us to take advantage of multiple independent and strong tailwinds and key demand drivers of a multi-year modernization and recapitalization cycle, as illustrated in the diagram below:
Space and Launch Systems
Space and Launch Systems is one of our largest and fastest-growing end markets. The World Economic Forum projects that the space economy will reach $1.8 trillion by 2035, nearly three times its $630 billion size in 2023. We believe we are well positioned to benefit through end-to-end exposure across commercial and national security space platforms, propulsion, and de-orbit solutions.
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Growth in the launch systems market is driven by higher mission cadence and the need for reliable, cost-efficient access to space. As commercial constellations expand and government timelines accelerate, launch providers are investing in next-generation vehicles that enable faster turnaround, greater throughput, and more predictable scheduling. These capabilities are increasingly critical as operators seek to support frequent deployment and replenishment missions, reinforcing demand for scalable and responsive launch infrastructure. We believe our highly engineered subsystems advance these important initiatives, alongside re-usability, which further improves launch economics leading to continued affordability and proliferation of space systems. Furthermore, we believe our demonstrated solution set, inclusive of intricate material science capabilities embedded into highly specialized manufacturing processes, has contributed to a continued outsourcing trend for flight-critical launch systems, as customers place trust in suppliers like Applied that can consistently deliver effective solutions for harsh environments.
The space systems market is expanding rapidly as satellite deployments accelerate across commercial communications, Earth-observation, and exploration missions. More than 15,000 new on-orbit assets are planned by 2028 according to The World Economic Forum, including communications, earth observation, and navigation satellites for defense and commercial applications, driving demand for increasingly capable and sophisticated spacecraft. At the same time, propulsion systems are undergoing a significant transition as launch firms prioritize higher-energy missions and greater in-orbit maneuverability. Increasing constellation density and regulatory pressure are also elevating the importance of effective maneuvering and end-of-life disposal, making advanced propulsion a critical enabler of modern space architectures.
National security requirements are reshaping the Space and Launch Systems market, with defense programs demanding resilient, distributed constellations capable of supporting operations in contested environments. Reliable access to space and predictable launch schedules are essential for responsive defense and rapid replenishment missions, a trend reinforced by rising U.S. defense spending and increased doctrinal focus on space-based assets. Programs such as the Golden Dome for America (the “Golden Dome”), advanced surveillance architectures, and renewed investment in crewed spaceflight underscore the strategic importance of space as a core element of the national security infrastructure.
Defense Aviation and Airborne Systems
Defense Aviation and Airborne Systems consists of manned and unmanned fixed-wing aircraft and rotorcraft. Demand for airborne platforms is accelerating as global militaries reposition their airpower to adapt to an evolving battlefield increasingly shaped by drones, advanced technologies, and low-cost precision weapons. Rising global defense budgets and renewed focus on air dominance against anticipated near-peer threats are driving increased investment in fifth-generation fighters and next-generation vertical lift platforms. International procurement also continues to accelerate as U.S. allies modernize fleets to meet NATO standards and counter regional threats, supporting sustained demand across multi-role fighters, Intelligence, Surveillance, and Reconnaissance (“ISR”), maritime patrol, and next-generation unmanned platforms.
The defense aviation market benefits from large, long-lived installed bases across both enduring and next-generation platforms. Many of these rotorcraft platforms are expected to remain in service for multiple decades and require continuous sustainment to maintain operational readiness. Life-limited components are subject to stringent replacement schedules, recurring inspections, and ongoing service life extension programs, creating one of the most durable and predictable aftermarket segments within defense aviation. Approximately 27% of our pro forma revenue is tied to aftermarket and sustainment demand across installed defense rotorcraft fleets for the year ended December 31, 2025, providing visible, recurring cash flow supported by long-duration platform service lives. Recent real-world operational demands for vertical lift assets supporting frequent troop movements and rapid insertion and extraction have further reinforced the importance of reliable, mission-ready platforms and sustained aftermarket support.
Autonomy and advanced technologies are increasingly central to the evolution of airborne platforms across both manned and unmanned systems. Strategic priorities such as the CCA programs are accelerating the
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deployment of autonomous and semi-autonomous aircraft designed to operate alongside crewed fighters in highly contested and demanding performance environments. These platforms are expected to be procured at materially higher volumes than traditional high-end fighter aircraft, increasing the importance of advanced manufacturing partners capable of delivering the requisite precision, repeatability, and scalable throughput.
C5ISR and Precision Strike Systems
The C5ISR and Precision Strike Systems end market is positioned for continued growth, driven by demand across critical strike and sensing systems.
The U.S. government’s national defense budget for the 2026 fiscal year reflects a continued prioritization of contested environment operations, including procurement of a range of sensing and command-and-control platforms and enabling sub-systems. Modernization efforts that emphasize persistent surveillance are driving increased demand for advanced radar, RF, and electro-optical/infrared (“EO/IR”) sensing systems deployed across ground, airborne, maritime, and space-based platforms to enable next-generation situational awareness. The Golden Dome layered missile defense ecosystem underscores this shift toward integrated sensor-to-shooter kill chains—reinforcing demand for high-fidelity, resilient sensing and tracking infrastructure across emerging and enduring platforms.
Precision strike systems remain a top rearmament priority, driving sustained demand for expanded production of existing missile and propulsion systems as militaries replenish depleted inventories and increase stockpile levels. Current manufacturing capacity remains insufficient to meet projected demand, prompting government initiatives to expand industrial throughput and strengthen qualified supply chains. Solid rocket motor manufacturing has emerged as a key priority given its critical role across interceptors, tactical missiles, long-range fires, and hypersonic systems. We have the capacity and workforce to support such expansion for the key programs for which we already provide effective support.
In parallel, a broad set of next-generation strike programs, including new missile families, interceptors, advanced propulsion systems, and hypersonic platforms, are progressing through development and early production phases, creating a multi-year pipeline of new opportunities across enduring and emerging architectures. According to the Congressional Research Service and Office of the Undersecretary of Defense, U.S. RDT&E funding for the U.S. Department of War has increased materially over the past decade to support hypersonic glide vehicles, new cruise-missile families, precision-guided munitions, and emerging strike technologies. These investments are reinforced by geopolitical uncertainty and shifting strategic frameworks, including the expiration of the New START treaty, which is driving renewed emphasis on strategic deterrence and advanced missile capabilities.
Our Competitive Strengths
We believe we are uniquely positioned in the market due to our deep technical expertise on complex, mission-critical subsystems and assemblies, long-standing relationships with key customers, and comprehensive advanced manufacturing capabilities. Our ability to rapidly design, engineer, prototype, and deliver systems at scale through vertical integration and IP-enabled processes provide a unique and sustainable competitive advantage. Furthermore, decades of proven superior performance have embedded us as a trusted partner to our diverse and discerning customers, reinforcing a durable and defensible competitive advantage.
IP-Enabled, Integrated Capabilities Enhance Quality, Cost, and Speed Advantages for Space and Defense Innovators
IP-enabled processes form the foundation of our operating model. By embedding our deep materials science expertise, specialized manufacturing equipment and infrastructure, collaborative engineering resources, integrated in-house capabilities, and proprietary workflow designs across the platform, we create differentiated and repeatable processes that enhance quality, speed, and execution certainty. For the fiscal year ended
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December 31, 2025, approximately 89% of our revenue and 88% of our pro forma revenue is tied to IP-enabled production processes. We believe these processes provide meaningful value to our customers by delivering performance, speed, and cost-efficiency advantages on their most demanding programs, while also reinforcing our competitive position.
We also influence and develop design IP in niche subsystems that are complementary to our broader capability set, such as satellite propellant tanks, antenna reflectors, deorbit technologies, and solar sails. These complementary offerings leverage our advanced materials and manufacturing capabilities, expand our participation in adjacent product categories, and represent an attractive growth vector alongside our core process IP-enabled manufacturing business.
In addition to our IP-enabled processes, the selective and strategic pursuit of vertical integration has further enabled us to enhance customer outcomes. For us, vertical integration is another strategic tool in our efforts to improve quality and performance, lower cost, and deliver shorter lead times. By developing or internalizing select critical capabilities across engineering, manufacturing, and testing capabilities, we maintain greater control over execution and more consistently meet demanding program requirements. We believe our IP-enabled, vertically integrated solution set has helped create a durable competitive advantage and supports the 87% and 86% sole/single-source contract positions we hold today on a historical and pro forma basis for the fiscal year ended December 31, 2025, respectively.
Decades of Space and Defense Manufacturing Heritage for Leading-Edge Customers
Our cohesive set of advanced manufacturing capabilities were built over decades to deliver extraordinary value to our customers’ most complex, mission-critical systems and subassemblies. We think differently, operating with an engineering-led, IP-enabled, and vertically integrated model that prioritizes reliability, speed, precision, and delivery at scale. As a result, we have earned the trust of the most demanding customers in space and defense by consistently meeting stringent performance, time-to-market, and durability requirements. Our sustained execution has resulted in entrenched positions across major programs, with approximately 87% of our revenue and 86% of our pro forma revenue stemming from sole-/single-source awards with blue-chip prime contractors for the year ended December 31, 2025. These positions reflect years of proven performance, qualification success, and deep integration into platform architectures, with our average customer relationship spanning 39 years. Because our systems are embedded in long-lived platforms, customers rely on us for multi-decade production and sustainment, making dual-sourcing or insourcing impractical and reinforcing long-standing relationships that extend across programs and generations of platforms. We also benefit from the current rapid evolution of the space and defense landscape and have multiple new customer wins that have resulted from the natural advancement of our trusted engineering and supply chain relationships.
Cohesive and Differentiated Executive Team Driving Mission-Focus and Next-Generation Agility
Our leadership team was intentionally assembled to scale a differentiated advanced manufacturing platform serving high growth space and defense markets. Our team combines mission-oriented leadership, deep advanced manufacturing expertise, experience scaling next-generation defense technology platforms, public company financial reporting and controls, and expansive knowledge of the U.S. aerospace and defense industrial base. Their complementary breadth of experiences underlies our commitment to disciplined growth, operational excellence, and long-term value creation. Across our leadership team, we boast approximately a combined 231 years of industry experience. Our leadership team is supported by over 1,540 dedicated professionals across our footprint, including over 200 engineers and over 400 long-tenured subject matter experts. Our team includes over 400 professionals with more than 10 years of service at Applied, including a substantial number with over 20 years of experience, providing the continuity and depth of expertise that enables our highly specialized capabilities.
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Strategic Alignment with Highest-Priority Space and Defense Programs and Initiatives
Our flight- and mission-critical products are embedded across commercial, civil, and national security programs that directly align with U.S. national defense strategy priorities and rapidly expanding commercial space initiatives. We are closely aligned with the programs driving space superiority, resilient national security architectures, and the modernization of the defense industrial base, positioning us alongside customers executing the most critical, well-funded missions and growing programs. As these initiatives advance from development into scaled, long-duration production, our early program involvement and deep integration position us to remain a long-term partner of choice. With customers at the center of these priority efforts, we are well-positioned to benefit from the sustained investment and structural tailwinds shaping the next generation of space and defense markets.
Diversified Across Sub-Markets, Customers, Platforms, and Program Lifecycles
Our capabilities span the full lifecycle of a program, from early design, rapid prototyping, and testing to full-rate production and long-term sustainment. On next-generation platforms, our ability to iterate quickly and collaborate directly with our customers shortens development timelines and accelerates time-to-market, enabling customers to meet demanding program milestones. At the same time, our deep experience supporting enduring platforms allows us to support customers through full-rate production, aftermarket demand, and sustainment and service life extension cycles as systems age and require replacement or upgrade. By remaining relevant across every phase of a platform’s life and reinforcing this engagement with IP-enabled processes, we establish entrenched positions and deliver consistent, long-term value.
Specialized Manufacturing Facility Infrastructure, Ready Capacity and Scalability, and National Footprint
We operate a nationwide network of specialized manufacturing facilities designed for scaled production. These sites have been carefully selected and methodically invested in to bring differentiated capabilities, creating a manufacturing footprint with depth and breadth that is difficult to replicate. Our facilities total over 1.5 million square feet and are equipped to support rapid expansion, with additional capacity and expansion opportunities that ensure we can scale to meet rising demand to support next-generation programs. For instance, we have a one-of-a-kind infrastructure that enables our manufacturing and testing of satellites and spacecraft, unmatched capacity of flow forming for solid rocket motor cases, and unique composite tube fabrication for reusable launch and payload deployment applications. Across this network, we enable classified and highly complex programs to be executed at scale, positioning the platform to support long-term growth and increasingly critical applications.
Breadth of Engineering Talent and Extensive Specialized Materials and Production Technical Expertise
We bring hard-earned expertise developed over decades of experience across our workforce. Our over 200 engineers and deep bench of subject matter experts possess broad expertise across multiple advanced materials, including composites, metallics, and polymers. We apply this knowledge across a broad set of manufacturing capabilities. This combination of material science depth and multi-disciplinary expertise, reinforced by a highly tenured and mission-oriented team, enables us to deliver differentiated, highly-engineered products and subassembly systems tailored to extremely stringent qualifications and requirements.
Strong Financial Profile with High Level of Forward Visibility
We have consistently delivered a strong and attractive financial profile, supported by exposure to high-value programs, approximately 86% sole- and single-source positions on a pro forma basis for the fiscal year ended December 31, 2025, and a culture rooted in operational excellence and mission focus. For the fiscal year ended December 31, 2025, we generated revenue growth of 24.8% and Adjusted EBITDA Margin of approximately 23.6%. Our participation in enduring platforms, many of which are expected to remain in production and service for decades, provides meaningful revenue visibility and long-term stability, with a contract backlog of $1,060.1 million as of March 31, 2026. We believe our positions on next-generation programs create a clear and compelling runway for future growth, shown through our approximately $3.8 billion weighted pipeline as of
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March 31, 2026. Weighted pipeline represents the total expected value of new business opportunities with new or existing customers in the pipeline after adjusting each opportunity for management’s estimates of the probability that it proceeds and Applied’s likelihood of winning the opportunity. The weighted pipeline excludes the value of contracted backlog. See “Prospectus Summary—Summary Historical and Pro Forma Financial and Other Information” for more information about how we define and calculate Adjusted EBITDA Margin and for a reconciliation of net loss margin, the most comparable measure under GAAP, to Adjusted EBITDA Margin.
Our Growth Strategy
We intend to pursue a focused organic and inorganic growth strategy, executing on the diverse set of opportunities present in each of our growing end markets. Our strategy is aimed at increasing top-line growth, earnings, and cash flow generation, and ultimately creating meaningful value for our shareholders.
Support Ramping Production of High Growth Platforms
Our complex, highly engineered systems are critical enablers for a number of high-demand, next-generation space and defense platforms today. These platforms are positioned for meaningful production ramps as demand for advanced space and defense systems continues to grow in response to the current global dynamic threat environment, and the platforms we serve meet the critical capability needs of the U.S. and allied nations. We intend to reliably enable performance for these growing customer platforms through the critical systems we offer that are specified in their designs. By enabling ramping production schedules, we can realize significant growth in our business and further establish incumbency and entrenched sole-source positions with our customers. Furthermore, we serve a sizeable installed base of critical U.S. and allied fleets which require regular servicing and modernization for sustainment and fleet readiness. These platforms supply us with a predictable and stable base of recurring revenue, further supporting our ability to grow.
Increase Content on High-Value Platforms
Our business benefits from a diverse set of differentiated and IP-enabled capabilities. These capabilities span multiple system types, domains of material science expertise, advanced equipment types, and ultimately serve varied performance requirements. By leveraging our diverse capabilities, we have historically offered multiple critical systems to a single platform. For example, on fixed-wing platforms, we offer a number of different critical systems including flight control surfaces, landing gear systems, and fueling and refueling systems. By leveraging our deep customer relationships established through the proven performance of our systems, we intend to increase our content on the attractive and high-growth platforms we currently serve by offering new systems that enable other aspects of the platform’s performance.
Drive Right-to-Win on Next-Generation Platforms
We offer full lifecycle capabilities to our customers, including advanced design and prototyping capabilities that allow us to collaborate closely with customers to aid their development of novel next-generation platforms. Design and prototype expertise is critical for the development of next-generation “go-fast” platforms, where speed-to-market is an essential differentiator for our customers. By leveraging those capabilities in conjunction with our deep customer relationships, longstanding proven heritage, IP-enabled capabilities, and capacity for scaled production, we have an unrivaled right-to-win on future platforms and opportunities across our customer footprint. Furthermore, by acting as an early partner for these platforms through their design and prototyping phase, we believe we entrench our position on attractive platforms that we hope to serve for the entirety of their lifecycle. We track and continuously update a sizeable funnel of pipeline opportunities that are attractive and actionable for our business and intend to pursue these opportunities in order to realize our long-term growth outlook.
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Execute Focused Acquisition Strategy
We view acquisitions as a means to deepen our technical capability, expand our customer relevance, and enhance our position as a differentiated advanced manufacturing partner, rather than as a vehicle for pure scale aggregation. We have a proven track record of acquiring and successfully integrating high impact targets to drive value creation, with multiple successful add-ons over the last five years. We intend to continue to track the landscape of potential acquisition opportunities, which remains sizeable in the highly fragmented small- and mid-sized supplier market. We have the capability to leverage our platform to supercharge the performance of potential add-ons that we integrate, where they may have been undercapitalized prior to acquisition despite having strong and attractive capabilities. We will continue to approach potential acquisitions through a disciplined and focused strategy that reinforces our overall market strategy, enhances returns, and focuses on three main acquisition attributes: (i) focus on space and defense end markets, (ii) add-on capabilities that are relevant and not competitive to our customers, and (iii) differentiated business models as reflected in an attractive margin profile.
Our Capabilities
Applied enables our customers to industrialize complex aerospace structures rapidly, reliably, and at scale through a fully integrated capability set that spans concept design and development through full-rate production and aftermarket sustainment. Our capabilities are purpose-built to support both exquisite, low-rate systems with complex engineering requirements and automated, high-throughput production programs for next-generation space and defense platforms.
Design and Prototyping
Our design and analysis services include concurrent engineering, structural design, analysis, and tooling services supported by an engineering team specializing in high-performance aerospace structures and combining innovative design with deep manufacturing expertise. We collaborate closely with customers to optimize designs for efficiency, precision, cost-effectiveness, and speed to market. Our capabilities enable rapid prototyping and design iteration, helping customers accelerate development timelines and industrialize complex aerospace structures rapidly, reliably, and at scale.
Tailored Manufacturing Processes
We maintain a broad and flexible set of specialized manufacturing processes tailored to the unique requirements of each program. Our vertically integrated operations include advanced composite and metallic fabrication, complex multi-material bonding, precision machining, filament winding, and highly complex assembly and integration. We support proprietary and customer-specific manufacturing processes, enabling us to manufacture mission-critical subsystems and assemblies that must perform in extreme operating environments. Our in-house manufacturing and inspection capabilities, including certain Nadcap-accredited processes such as non-destructive testing, chemical processing, heat treating, and composites and bonding-related processes, help ensure consistent quality, repeatability, and compliance across a wide range of aerospace materials and configurations. We pursue vertical integration where it directly enhances customer outcomes, as a strategic tool to deliver shorter lead times, lower cost, and superior quality and performance.
Low-to-Full Rate Production Capacity
We are purpose-built to support programs across the production lifecycle, from low-rate initial production to sustained full-rate manufacturing. Our nationwide network of advanced manufacturing facilities provides significant capacity, redundancy, and scalability, enabling us to ramp production as programs transition from development into deployment. Our ability to industrialize complex hardware rapidly, reliably, and at scale positions us as a strategic supplier to both next-generation programs and large installed platform bases.
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Inspection, Qualification, and Testing
We offer comprehensive inspection, qualification, and testing services, including in-process inspection and testing, three-dimensional metrology, non-destructive testing, thermal distortion and thermal cycle testing, and structural load testing. Our in-house capabilities, including certain Nadcap-accredited processes, help ensure component integrity, repeatability, and compliance across demanding aerospace and defense applications.
Full Lifecycle and Sustainment Solutions
We support platforms across their operational life, ensuring continuity of supply, technical responsiveness, and sustained performance in the field. Beyond initial production, we provide full lifecycle and sustainment support for enduring aerospace and defense platforms. Our services include aftermarket manufacturing, repair and overhaul support, revision and configuration management, and logistics and delivery coordination.
Solutions Across Our Markets
We provide mission-critical solutions across our three core markets: Space and Launch Systems, Defense Aviation and Airborne Systems, and C5ISR and Precision Strike Systems. Our solutions are embedded in customer platforms across these markets and support critical functions such as power and propulsion, battlefield connectivity, and survivability in extreme environments.
Space and Launch Systems
Our Space and Launch Systems solutions support satellites, launch vehicles, and related space architectures. They include launch and payload deployment systems, spacecraft mission assemblies, spacecraft communications, sensing, and RF systems, and spacecraft power, thermal management, deployable, and deorbit systems. Example subsystems and assemblies include bus and payload assemblies, solar array assemblies, sunshade assemblies, solar sails, deorbit systems, radar and communications antennas, and reusable landing systems.
Defense Aviation and Airborne Systems
Our Defense Aviation and Airborne Systems solutions support manned and uncrewed fixed-wing aircraft and rotorcraft. They include flight control systems, landing gear systems, refueling and fuel tank systems, and power transmission and engine systems. Example subsystems and assemblies include flight control surfaces, fuselage assemblies, internal and external fuel tanks, landing gear and arrestor hook assemblies, rotor hub assemblies, power transmissions, engine shafts, and ISR sensor mounts.
C5ISR and Precision Strike Systems
Our C5ISR and Precision Strike Systems solutions support sensing and command-and-control, layered missile defense, and precision strike applications across ground, airborne, maritime, and space-based platforms. They include networked sensing, communications, and RF systems, RF testing capabilities, missile bodies and launch subsystems, and propulsion and survivability solutions. Example subsystems and assemblies include radomes, electronic and ballistic enclosures, ISR sensor mounts, missile body and launch assemblies, and solid rocket motor cases.
Competition
The markets in which we operate are highly fragmented, with suppliers largely focused on piece-part components or individual subsystems. We believe we occupy a differentiated position as one of the few manufacturers capable of delivering integrated, flight- and mission-critical subsystems and assemblies across the full range of capabilities, space and defense end markets, and specific applications.
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We face competition from piece-part manufacturers across our product lines. These suppliers typically emphasize production throughput over engineering depth and possess more limited qualifications, design expertise, and domain knowledge. We provide tremendous value to our customers on the basis of our technical capability and ability to produce complex, flight- and mission-critical systems at scale and on time. These benefits make us the partner of choice even for customers who traditionally manufacture in-house. Our long-standing engineering relationships and record of supporting both enduring and next-generation platforms reinforce our position as a strategic partner rather than a transactional vendor. Our expertise in qualification, rapid design iteration, and lifecycle support has strengthened customer retention and expanded our shipset content across enduring and emerging architectures.
A central element of our competitive strategy is our deliberate decision not to pursue prime-level system positions. We do not compete with our customers for platform-level roles and instead focus on providing high-performance, high-complexity hardware that complements their capabilities. This approach enhances customer alignment, supports access to classified and next-generation programs, and enables continued growth in customer market- and mind-share and thus shipset values.
Intellectual Property
We rely on a range of patents, trade secrets and proprietary knowledge and technology, both internally developed and acquired, to maintain a competitive advantage. As of December 31, 2025 (after giving pro forma effect to the CBI acquisition), we held 25 issued U.S. patents, one pending U.S. patent application and two issued foreign patents. We continue to develop and acquire new intellectual property on an ongoing basis. Our patents will expire between 2027 and 2035. Based on the broad scope of our product offerings, we believe that the loss or expiration of any single intellectual property right would not have a material effect on our consolidated financial statements. We also have registered domain names for websites that we use in our business. We have eight registrations for trademarks and one registration for copyright.
Government Contracts
For the fiscal year ended December 31, 2025, approximately 83% of our revenue was derived from contracts with the U.S. government and other government agencies, either directly or through prime contractors. These contracts are subject to a unique set of risks and requirements not typically found in commercial arrangements. We are subject to the business risks specific to the defense industry, including the ability of the U.S. government to unilaterally: (1) suspend us from receiving new contracts; (2) terminate existing contracts at its convenience and without significant notice; (3) reduce the value of existing contracts; (4) audit our contract-related costs and fees, including allocated indirect costs; and (5) revoke required security clearances. Violations of government procurement laws could result in civil or criminal penalties.
Governmental Regulation
As a provider of flight, space and defense hardware, we are required to obtain and maintain certifications and approvals from the Federal Aviation Administration, the Department of War, the Department of State, including the Office of Defense Trade Controls Compliance, and similar regulatory bodies in other countries, as well as from OEMs. Our robust Quality Management System includes regular internal and re-certification audits. We have been certified to ISO 9001 and AS9100 since 2003, and we continuously meet the latest standards. Additionally, we hold current manufacturing registrations under the Office of Defense Trade Controls Compliance.
We are also required to satisfy the requirements of our customers, and we hold Nadcap certifications for composites, chemical processing and non-destructive testing. Since we sell defense products, we can be subject to various laws and regulations governing pricing, bidding, billing, accounting and prohibitions related to kickbacks and false claims.
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Furthermore, we are at times subject to trade laws and regulations, including the International Traffic in Arms Regulations (the “ITAR”) and the U.S. Export Administration Regulations (“EAR”). The ITAR generally restricts the export of hardware, software, technical data, and services that have defense or strategic applications. The EAR similarly regulate the export of hardware, software, and technology that has commercial or “dual-use” applications (i.e., for both military and commercial applications) or that have less sensitive military or space-related applications that are not subject to the ITAR. The regulations exist to advance the national security and foreign policy interests of the United States.
The U.S. government agencies responsible for administering the ITAR and the EAR have significant discretion in the interpretation and enforcement of these regulations. The agencies also have significant discretion in approving, denying, or conditioning authorizations to engage in controlled activities, and such decisions may be influenced by the U.S. government’s commitments to multilateral export control regimes.
Many different types of internal controls and efforts are required to ensure compliance with such export control rules. In particular, we are required to maintain a registration under the ITAR; determine the proper licensing jurisdiction and classification of products, software and technology; and obtain licenses or other forms of U.S. government authorizations to engage in activities, including the performance of services for foreign persons, related to and that support our business. The authorization requirements include the need to get permission to release controlled technology to foreign person employees and other foreign persons. The inability to secure and maintain necessary licenses and other authorizations could negatively affect our ability to compete successfully or to operate our business as planned. Any changes in the export control regulations or U.S. government licensing policy, such as that necessary to implement U.S. government commitments to multilateral control regimes, may restrict our operations. Failures by us to comply with export control laws and regulations could result in civil or criminal penalties, fines, investigations, more onerous compliance requirements, loss of export privileges, debarment from government contracts, or limitations on our ability to enter into contracts with the U.S. government.
Additionally, we are subject to data protection laws, including but not limited to the CCPA.
There has been no material adverse effect to our consolidated financial statements or business as a result of these governmental regulations. Our operations may in the future be subject to new and more stringent regulatory requirements. If new or more stringent regulations are adopted, or if industry oversight increases, we may incur significant additional costs to achieve and maintain compliance. Any revocation, suspension or failure to obtain required certifications or approvals could prevent us from selling our products or providing our services, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.
Environmental, Health and Safety Matters
We and our operations, products and facilities are subject to a number of complex and increasingly stringent international, foreign, federal, state and local environmental, health and safety laws, regulations and permits that govern, among other things, discharges of pollutants into the air and water; the generation, handling, storage and disposal of hazardous materials and wastes; the remediation of contamination; chemical content of products; and the health and safety of our employees. In addition, we are subject to various and potentially conflicting substantive requirements and disclosure requirements with respect to greenhouse gas emissions and climate change. From time to time, environmental laws and regulations have required and may in the future require that the Company investigate, remediate and/or contribute to the costs of investigating and remediating the effects of the release or disposal of materials at sites associated with past and present operations or at third-party sites used by our business for material and waste handling and disposal. For more information, see “Risk Factors.”
Facilities
Our corporate headquarters, located in Huntsville, Alabama, serves as the central hub for our executive, financial and engineering functions. We also have eleven production facilities (after giving pro forma effect to the CBI acquisition) located in White Salmon, Washington; Santa Ana, California; Long Beach, California; Boylston, Massachusetts; Billerica, Massachusetts; Newington, Connecticut; Enfield, Connecticut; Manchester, Connecticut; Cincinnati, Ohio; Huntsville, Alabama; and Stockton, California, covering an aggregate of
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approximately 1.5 million square feet of production floorspace. All of our properties are located in the United States. Our property located in Stockton, California is owned, and the remaining facilities set forth above are subject to leases with initial terms generally ranging from 4 to 20 years, with options to renew for specified periods of time. We believe our facilities are suitable and adequate for our present needs and that, should the need arise, we will be able to secure additional space on commercially reasonable terms. We are not subject to any material restrictions on the use of our facilities.
Manufacturing and Engineering
We continually strive to optimize productivity and achieve value pricing over inflation, implementing precision engineering and manufacturing to produce parts essential for today’s aircraft systems and structures. We strive to differentiate ourselves from our competitors by manufacturing products in an accurate, reliable and repeatable manner without sacrificing attention to detail, which is evident in the durability and precision of our products. We are able to keep capital expenditure levels low since we do not constantly need new state of the art equipment, which contributes to our lean entrepreneurial structure and helps us drive continuous improvement. As a result of the recent combination of our predecessor Applied and PCX businesses, we have benefitted from certain cost and operational synergies, including enhanced abilities to insource select machining and processes that were previously outsourced to third-party suppliers and improved purchasing power with key suppliers.
Raw Materials
We require the use of a variety of raw materials and manufactured component parts in our manufacturing processes, and we purchase these from various suppliers. The primary raw materials used to produce our products include sheet metal, forgings, castings, bar stock and extrusions, machined parts, adhesives, carbon graphite, fiberglass, quartz prepregs, honeycomb core, and fasteners. We believe most of our raw materials and component parts are generally available from multiple suppliers at competitive prices. These disruptions in raw material supply could temporarily impair our ability to manufacture our products for our customers or require us to pay higher prices to obtain these raw materials from other sources. However, we believe that the loss of any one source, although potentially disruptive in the short-term, would not materially affect our long-term operations. We try to limit the volume of raw materials and component parts on hand, and we are highly dependent on the availability of essential materials, so continued inflationary pressures could impact material costs. Although we believe in most cases that we could identify alternative suppliers, or alternative raw materials or component parts, the lengthy and expensive OEM certification processes associated with our products could prevent efficient replacement of a supplier, raw material or component part. Additionally, an open conflict or war across any region, including, but not limited to, the conflicts in Ukraine and Israel, could affect our ability to obtain raw materials.
Human Capital Management
As of December 31, 2025 (after giving pro forma effect to the CBI acquisition), we employed approximately 1,542 full-time employees, of whom 201 were in engineering and engineering services, 1,189 were in direct labor and manufacturing support functions, and 152 were in selling, general and administrative functions. We are party to a collective bargaining agreement with the International Association of Machinists and Aerospace Workers, which covers employees at our Stockton, California facility and expires on November 30, 2028. We are also party to a collective bargaining agreement with the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers, the industrial division of the Communications Workers of America (IUE-CWA), which covers employees at our Newington, Connecticut facility and expires on March 6, 2027. We have not experienced any work stoppages, and we consider our relations with our employees to be good.
Legal Proceedings
From time to time, we are party to litigation and administrative proceedings arising in the ordinary course of business. We do not believe that any such proceedings, individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations, liquidity or capital resources. See “Risk Factors––Risks Related to Legal and Regulatory Matters–– We may be subject to periodic litigation and regulatory proceedings, which may adversely affect our business and financial performance.”
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Below is a list of the names, ages, positions and a brief account of the business experience of the individuals who serve as (i) our executive officers and (ii) our directors.
| Name |
Age |
Position | ||
| Executive Officers |
||||
| James William (“Trip”) Ferguson, III |
46 |
Chief Executive Officer and Director | ||
| Kevin Bidlack |
60 |
Chief Operating Officer | ||
| Jeff McRae |
62 | Chief Financial Officer | ||
| Christopher Rogers |
50 | Chief Growth Officer | ||
| Directors |
||||
| David King |
64 |
Chairman | ||
| Noah Blitzer |
39 |
Director | ||
| Scott Goldstein |
62 | Director | ||
| James Katzman |
59 | Director | ||
| Susan Lynch |
64 | Director | ||
| Jack Morris |
35 |
Director | ||
| Noah Roy |
50 |
Director |
Executive Officers
James William (“Trip”) Ferguson, III has served as our Chief Executive Officer since November 2025 and as a member of our board of directors since 2026. Before joining Applied, Mr. Ferguson was President, Space, Cyber and Directed Energy at AeroVironment, Inc. (Nasdaq: AVAV) from May 2025 to October 2025. From September 2022 to May 2025, Mr. Ferguson served as Chief Operations Officer of Blue Halo prior to its acquisition by AeroVironment, Inc., where he oversaw program management and ensured performance excellence across all business sectors. From November 2018 to September 2022, Mr. Ferguson was Chief Operations Officer of Dynetics, Inc., an applied science and information technology company that provides advanced, mission-critical services and solutions to the U.S. Government. Prior to joining Dynetics, Inc., Mr. Ferguson served in operational leadership roles across multidisciplinary industries with experience in defense, medical, energy, firearms, and non-profit sectors. A veteran of the United States Marine Corps, Mr. Ferguson was commissioned as an officer and attained the rank of Captain while completing three overseas tours. Mr. Ferguson holds a Bachelor of Science in Economics with merit from the United States Naval Academy and a Master of Business Administration degree from the University of Alabama in Huntsville. We believe that Mr. Ferguson is qualified to serve on our board of directors based on his experience working with companies in the aerospace and defense sectors.
Kevin Bidlack has served as our Chief Operating Officer since November 2025. Mr. Bidlack joined Applied in 1991 and, over the course of more than 30 years, held positions of increasing responsibility. Mr. Bidlack holds a Bachelor of Science in Industrial Engineering from California Polytechnic State University, San Luis Obispo, and a Master of Business Administration from California State University, Stanislaus.
Christopher Rogers has served as our Chief Growth Officer since December 2025. Prior to joining Applied, Mr. Rogers was an investment banker at Harris Williams from June 2005 to June 2025, where he served as a Managing Director and Head of the Aerospace, Defense & Government Services (ADG) Group. Earlier in his career, Mr. Rogers served as an officer in the United States Marine Corps, where he attained the rank of Captain. Mr. Rogers holds a Bachelor of Science in History, with Honors and Distinction, from the United States Naval Academy and a Master of Business Administration from Harvard Business School.
Jeff McRae has served as our Chief Financial Officer since November 2025. Prior to his current role, Mr. McRae served as Chief Financial Officer for PCX Aerostructures, LLC from February 2018 to November 2025. From 2010 to 2016, Mr. McRae served in various financial management and senior leadership roles, including Senior
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Vice-President and Chief Financial Officer, at Triumph Group (the NYSE: TGI), a global aerospace manufacturer. Earlier in his career, Mr. McRae served as Vice President of Business Operations for Triumph Aerostructures and as Division Controller and Interim President of BAE Systems’ Armament Systems division. Mr. McRae holds a Bachelor of Arts in Accounting from Michigan State University.
Directors
David King has served as chairman of our board of directors since 2026. Mr. King has been a member of the board of directors of AA&D Holdings, LP, our parent entity, since December 2022. Since March 2026, Mr. King has served as a member of the board of directors of Kratos Defense & Security Solutions, Inc. From February 2020 to April 2022, Mr. King served as Group President of Dynetics at Leidos, Inc. Prior to the acquisition of Dynetics, Inc. by Leidos, Inc., Mr. King served as Chief Executive Officer of Dynetics, Inc. from 2015 to 2020 and as a member of its board of directors from 2009 to 2020. Earlier in his career, Mr. King also held numerous leadership positions at NASA. Mr. King holds a Bachelor of Science in Mechanical Engineering from the University of South Carolina and a Master of Business Administration degree from Florida Institute of Technology. We believe that Mr. King is qualified to serve on our board of directors based on his knowledge of the aerospace and defense sectors.
Noah Blitzer has served as a member of our board of directors since our formation in October 2022. Mr. Blitzer is a Managing Director and member of the Investment Committee at Greenbriar, where he focuses on the aerospace, aviation, and defense sectors. Mr. Blitzer joined Greenbriar in 2011 and previously worked at Citi. Mr. Blitzer currently serves on the boards of Pursuit Aerospace, Sunvair Aerospace Group, and West Star Aviation and previously was responsible for investments in Alliance Ground International, Arotech, EDAC Technologies, PCX Aerosystems, STS Aviation, and Whitcraft. Mr. Blitzer holds a Bachelor of Arts in Civil Engineering and Economics from Brown University and a Master of Business Administration degree from the Wharton School at the University of Pennsylvania. We believe that Mr. Blitzer is qualified to serve on our board of directors based on his experience in working with companies in the aerospace, aviation, and defense sectors.
Scott Goldstein has served as a member of our board of directors since 2026. Dr. Goldstein is Senior Vice President and Fellow at Parsons Corporation, where he has led critical technology and strategy activities across its Defense and Intelligence sector since August 2023. He previously served as Chief Scientist at Anduril Industries from April 2021 to August 2023 and had a military career spanning more than 40 years in the U.S. Army and U.S. Air Force. Dr. Goldstein retired from the Air Force as a Major General, where he led space, cyber, and RDT&E activities across the U.S. Department of War and intelligence community. His industry experience ranges from VC-backed startups to Fortune 500 companies, where he has served as chief technology officer, chief strategy officer, and chief scientist. Dr. Goldstein holds B.S. and M.S. degrees in Electrical Engineering from George Mason University and a Ph.D. in Electrical Engineering from the University of Southern California. He has published more than 200 publications, holds five U.S. patents, is an IEEE Fellow, and has received both the IEEE Fred Nathanson Award and the IEEE Warren White Award. Dr. Goldstein also serves on the boards of several companies, professional associations, university advisory boards, and DoD advisory boards. We believe Dr. Goldstein is qualified to serve on our board of directors based on his experience working with companies in the aerospace and defense sectors.
James Katzman has served as a member of our board of directors since 2026. Mr. Katzman held the position of Senior Vice President, Corporate Development for GE and GE Aerospace, a world-leading provider of jet and turboprop engines, as well as integrated systems for commercial, military, business, and general aviation aircraft, from October 2021 to December 2025. Mr. Katzman is a retired Partner of Goldman Sachs, having served in that role from December 2004 to March 2015. Mr. Katzman currently sits on the Board of Directors of Brinker International, Inc., Hershey Trust Company and Milton Hershey School. He also serves on the Board of Directors of Boys & Girls Clubs of The Valley (Arizona) and on the Advisory Board of the Program for Financial Studies at Columbia Business School. Mr. Katzman formerly served as a director of The Hershey Company from 2018 to 2024. Mr. Katzman graduated from Dartmouth College and Columbia Business School, where he was a Merit
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Fellow. We believe that Mr. Katzman is qualified to serve on our board of directors based on his experience in investment banking, corporate development, public company board service, and the aerospace and defense sectors.
Susan Lynch has served as a member of our board of directors since 2026. Ms. Lynch is also the chair of our Audit Committee. Since 2024, Ms. Lynch has also served on the boards of various other companies including Crane Company, Onto Innovation and Allegro MicroSystems. From August 2019 to September 2023, Ms. Lynch held the position of Senior Vice-President and Chief Financial Officer of V2X (formerly Vectrus, Inc.), a builder of innovative solutions that integrate physical and digital environments supporting the Aerospace, Defense and Aviation industries. Ms. Lynch holds a Bachelor of Arts in Accounting and Business Administration from MidAmerica Nazarene University. We believe that Ms. Lynch is qualified to serve on our board of directors based on her knowledge of the aerospace and defense sectors.
Jack Morris has served as a member of our board of directors since our formation in October 2022. Mr. Morris is a Director at Greenbriar, where he focuses on the aerospace, aviation, and defense sectors. Mr. Morris joined Greenbriar in 2015 and previously worked at Barclays. Mr. Morris previously was responsible for investments in Aergen, DART Aerospace, and PCX Aerosystems. Mr. Morris holds a Bachelor of Science in Engineering in Electrical and Computer Engineering from Duke University. We believe that Mr. Morris is qualified to serve on our board of directors based on his experience in working with companies in the aerospace, aviation, and defense sectors.
Noah Roy has served as a member of our board of directors since our formation in October 2022. Mr. Roy is a Managing Partner and member of the Investment Committee at Greenbriar, where he focuses on the aerospace, aviation, and defense sectors. Mr. Roy joined Greenbriar in 2008 and previously was a Managing Director and head of the aerospace and defense sector within the Investment Banking Division of Goldman Sachs & Co. where he worked from 2003 to 2008. Mr. Roy currently serves on the boards of Pursuit Aerospace, Sunvair Aerospace Group, and West Star Aviation and previously was responsible for investments in Alliance Ground International, Aergen, Arotech, DART Aerospace, EDAC Technologies, PCX Aerosystems, STS Aviation, and Whitcraft. Mr. Roy graduated Magna Cum Laude with a Bachelor of Science from Georgetown University. We believe that Mr. Roy is qualified to serve on our board of directors based on his experience in working with companies in the aerospace, aviation, and defense sectors.
Composition of the Board after this Offering
Upon the consummation of this offering, our Board will be composed of eight members. The authorized number of directors may be changed by resolution of our Board, subject to the terms of the stockholders agreement described in “Certain Relationships and Related Party Transactions—Agreements to be Entered in Connection with this Offering—Stockholders Agreement.” Our Board has determined that David King, Scott Goldstein, James Katzman and Susan Lynch are independent directors under the standards of the NYSE. In accordance with our amended and restated certificate of incorporation, which will be filed immediately prior to the completion of this offering, our directors will be divided into three classes serving staggered three-year terms. At each annual meeting of stockholders, our directors will be elected to succeed the class of directors whose terms have expired. Our directors will be divided among the three classes as follows:
| • | the Class I directors will consist of Noah Blitzer and Scott Goldstein, and their terms will expire at the first annual meeting of stockholders occurring after this offering; |
| • | the Class II directors will consist of James Katzman, Susan Lynch and Noah Roy, and their terms will expire at the second annual meeting of stockholders occurring after this offering; and |
| • | the Class III directors will consist of David King, James “Trip” Ferguson and Jack Morris, and their terms will expire at the third annual meeting of stockholders occurring after this offering. |
Directors in a particular class will be elected for three-year terms at the annual meeting of stockholders in the year in which their terms expire. As a result, only one class of directors will be elected at each annual
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meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Each director’s term continues until the election and qualification of his successor, or his earlier death, resignation, retirement, disqualification or removal.
The classification of our Board, together with the ability of the stockholders to remove our directors only for cause and the inability of stockholders to call special meetings from and after the time when Greenbriar or its affiliated companies cease to beneficially own, in the aggregate, more than 40.0% of the voting power of our outstanding shares of capital stock, may have the effect of delaying or preventing a change of control or management. See the section titled “Description of Capital Stock— Anti-Takeover Effects of Our Amended and Restated Certificate of Incorporation and Our Amended and Restated Bylaws” for a discussion of other anti-takeover provisions that are included in our amended and restated certificate of incorporation and amended and restated bylaws.
In addition, the stockholders agreement we intend to enter into with our Principal Stockholder in connection with this offering will grant them certain board nomination rights so long as they maintain a certain percentage of ownership of our outstanding common stock. See “Certain Relationships and Related Party Transactions—Agreements to be Entered in Connection with this Offering—Stockholders Agreement.”
Controlled Company Exemption
After the completion of this offering, Greenbriar will beneficially own approximately 81.0% of our total outstanding shares of common stock (or 78.7% if the underwriters exercise in full their option to purchase additional shares of common stock). As a result, we will be a “controlled company” within the meaning of the NYSE corporate governance standards. Under these corporate governance standards, a company of which more than 50% of the voting power is beneficially owned by an individual, group or other company is a “controlled company” and may elect not to comply with certain corporate governance standards, including the requirements (1) that a majority of its board of directors consist of independent directors, (2) that its board of directors have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities and (3) that its board of directors have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements. In the event that we cease to be a “controlled company” and our common stock continues to be listed on the NYSE, we will be required to comply with these provisions within the applicable transition periods.
Board Committees
We anticipate that, prior to the completion of this offering, our Board will establish an audit committee, a compensation committee and a nominating and corporate governance committee. The composition and responsibilities of each committee are described below. Our Board may also establish from time to time any other committees that it deems necessary or desirable. Members serve on these committees until their resignation or until otherwise determined by our Board.
Audit Committee
Our Board will establish, effective upon the consummation of this offering, an audit committee which is responsible for, among other matters: (1) appointing, compensating, retaining, evaluating, terminating and overseeing our independent registered public accounting firm; (2) discussing with our independent registered public accounting firm its independence from us; (3) reviewing with our independent registered public accounting firm the matters required to be reviewed by applicable auditing requirements; (4) approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm; (5) overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; (6) reviewing and monitoring our internal controls, disclosure controls
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and procedures and compliance with legal and regulatory requirements; and (7) establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls, auditing and federal securities law matters.
Our audit committee will consist of Susan Lynch, James Katzman and Jack Morris with Ms. Lynch serving as chair. Rule 10A-3 of the Exchange Act and applicable NYSE rules require us to have one independent audit committee member upon the listing of our common stock on the NYSE, a majority of independent directors within 90 days of the date of listing and all independent audit committee members within one year of the date of listing. We intend to comply with the independence requirements within the time periods specified. Our Board has determined that Susan Lynch is an “audit committee financial expert” as defined by applicable SEC rules. Our Board will adopt, effective upon the consummation of this offering, a written charter for the audit committee, which will be available on our website upon the completion of this offering.
Compensation Committee
Our Board will establish, effective upon the consummation of this offering, a compensation committee which is responsible for, among other matters: (1) reviewing officer and executive compensation goals, policies, plans and programs; (2) reviewing and approving or recommending to our Board or the independent directors, as applicable, the compensation of our directors, Chief Executive Officer and other executive officers; (3) reviewing and approving employment agreements and other similar arrangements between us and our officers and other key executives; and (4) appointing and overseeing any compensation consultants.
Our compensation committee will consist of Noah Blitzer, David King and Noah Roy, with Noah Blitzer serving as chair. The composition of our compensation committee will meet the requirements for independence under current rules and regulations of the SEC and the NYSE, including the NYSE’s controlled company exemption. Each member of the compensation committee will also be a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act. Our Board will adopt, effective upon the consummation of this offering, a written charter for the committee, which will be available on our website upon the completion of this offering.
Nominating and Corporate Governance Committee
Our Board will establish, effective upon the consummation of this offering, a nominating and corporate governance committee that is responsible for, among other matters: (1) identifying individuals qualified to become members of our Board, consistent with criteria approved by our Board; (2) overseeing the organization of our Board to discharge the Board’s duties and responsibilities properly and efficiently; (3) developing and recommending to our Board a set of corporate governance guidelines and principles; and (4) reviewing and approving related person transactions.
Our nominating and corporate governance committee will consist of Noah Blitzer, David King and Noah Roy, with Noah Blitzer serving as chair. The composition of our nominating and corporate governance committee will meet the requirements for independence under current rules and regulations of the SEC and the NYSE, including the NYSE’s controlled company exemption. Our Board will adopt, effective upon the consummation of this offering, a written charter for the nominating and corporate governance committee, which will be available on our website upon the completion of this offering.
Code of Ethics
Our Board has adopted a code of ethics that will apply to all of our employees, officers and directors, including our executive and senior financial officers. The full text of our code of ethics will be posted on the investor relations page of our website prior to completion of this offering. The information on our website is not part of this prospectus. We intend to disclose any amendments to our code of ethics, or waivers of its requirements, on our website or in filings under the Exchange Act.
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Compensation Committee Interlocks and Insider Participation
None of our executive officers has served as a member of a compensation committee (or if no committee performs that function, the Board) of any other entity that has an executive officer serving as a member of our Board.
Limitations on Liability and Indemnification Matters
Our amended and restated certificate of incorporation, which will be effective immediately prior to the completion of this offering, and our amended and restated bylaws, which will become effective immediately prior to the completion of this offering, limits our directors’ and officers’ liability, and may indemnify our directors and officers to the fullest extent permitted under the DGCL. The DGCL provides that directors and officers of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors and officers, except for liability for:
| • | any transaction from which the director or officer derives an improper personal benefit; |
| • | any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
| • | with respect to any director, any unlawful payment of dividends or redemption of shares; |
| • | any breach of a director’s or officer’s duty of loyalty to the corporation or its stockholders; and |
| • | with respect to any officer, any action by or in the right of the corporation. |
The DGCL and our amended and restated bylaws provide that we will, in certain situations, indemnify our directors and officers and may indemnify other employees and other agents, to the fullest extent permitted by law. Any indemnified person is also entitled, subject to certain limitations, to payment or reimbursement of reasonable expenses, including attorneys’ fees and disbursements, in advance of the final disposition of the proceeding.
We have entered or intend to enter into indemnification agreements with each of our directors and officers. These indemnification agreements may require us, among other things, to indemnify our directors and officers for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of his or her service as one of our directors or officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request.
We maintain a directors’ and officers’ insurance policy pursuant to which our directors and officers are insured against liability for actions taken in their capacities as directors and officers. We believe that these provisions in our amended and restated certificate of incorporation and amended and restated bylaws and these indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or control persons, in the opinion of the SEC, such indemnification is against public policy, as expressed in the Securities Act and is therefore unenforceable.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and our stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought and we are not aware of any threatened litigation that may result in claims for indemnification.
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We are an “emerging growth company,” as defined in the JOBS Act, for purposes of the SEC’s executive compensation disclosure rules. In accordance with such rules, we are required to provide our Summary Compensation Table and our Outstanding Equity Awards as of December 31, 2025, as well as limited narrative disclosures regarding executive compensation for our last completed fiscal year. Further, our reporting obligations extend only to our “named executive officers,” who are the individuals who served as our principal executive officer and our next two other most highly compensated officers as of December 31, 2025. Accordingly, our named executive officers (“Named Executive Officers” or “NEOs”) are:
| Name |
Principal Position | |
| James “Trip” Ferguson |
Chief Executive Officer (“CEO”) | |
| Kevin Bidlack |
Chief Operating Officer (“COO”)* | |
| Jeff McRae |
Chief Financial Officer (“CFO”) | |
| Christopher Rogers |
Chief Growth Officer (“CGO”) |
| * | Kevin Bidlack was the former Chief Executive Officer of Applied prior to the Combination. Following the Combination, James “Trip” Ferguson is our Chief Executive Officer and Mr. Bidlack is our Chief Operating Officer. |
Summary Compensation Table
The following table summarizes the compensation awarded to, earned by or paid to our NEOs for the fiscal year ended December 31, 2025:
| Name and Principal Position |
Year | Salary(1) ($) |
Bonus(2) ($) |
Option Awards(3) ($) |
Non-Equity Incentive Plan Compensation(4) ($) |
All Other Compensation(5) ($) |
Total ($) | |||||||
| James “Trip” Ferguson, CEO |
2025 | 76,922 | 165,000 | 2,400,189 | 93,056 | — | 2,735,167 | |||||||
| Kevin Bidlack, COO |
2025 | 450,008 | — | — | 261,000 | 23,266 | 734,274 | |||||||
| Jeff McRae, CFO |
2025 | 453,368 | — | — | 158,600 | 16,500 | 628,468 | |||||||
| Christopher Rogers, CGO |
2025 | 20,192 | — | 306,852 | 18,958 | — | 346,002 |
| (1) | Amounts in this column represent the base salary earned by each of our NEOs. For Mr. Ferguson, represents the base salary earned from his start date on October 27, 2025. For Mr. Rogers, represents the base salary earned from his start date on December 1, 2025. For Mr. McRae, reflects his salary adjustment from $442,643 to $455,922 effective March 8, 2025. |
| (2) | Amounts in this column represent a sign-on bonus for Mr. Ferguson. |
| (3) | In fiscal 2025 Mr. Ferguson and Mr. Rogers were awarded Incentive Units that are intended to constitute profits interests for U.S. federal income tax purposes. Despite the fact that the Incentive Units do not require the payment of an exercise price, they are most similar economically to stock options. Accordingly, they are classified as “options” under the definition provided in Item 402(a)(6)(i) of Regulation S-K as an instrument with an “option-like feature.” |
Amounts in this column represent the aggregate grant date fair value of awards granted to our NEOs in fiscal year 2025, computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the Incentive Units reported in this column are set forth in Note 15 “Share-based Compensation” to the consolidated financial statements appearing elsewhere in this prospectus. See the “Outstanding Equity Awards at Fiscal Year End” table below for further details on these grants.
| (4) | Amounts in this column represent annual performance-based cash bonuses earned by our NEOs in fiscal year 2025 and paid in the subsequent fiscal year. Messrs. Ferguson and Rogers’ bonus amounts reflect |
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| pro-rata amounts for their partial year of service based on their start dates of October 27, 2025 and December 1, 2025, respectively. |
| (5) | For Mr. Bidlack, represents (i) a 401(k) company match of $20,900 and health insurance subsidy of $2,366. For Mr. McRae represents a 401(k) company match of $16,500. |
Narrative Description to the Summary Compensation Table for the 2025 Fiscal Year
Employment Agreements
We have entered into an employment agreement with each of Messrs. Ferguson, Bidlack and McRae and expect to enter into an employment agreement with Mr. Rogers, in substantially similar form, subject to executive-specific terms, including title, reporting relationship, annual base salary, target bonus opportunity and severance benefits (collectively, the “NEO Agreements”). For a summary of the compensation and benefits that NEOs are entitled to receive upon certain terminations or a change in control, please see “Potential Payments Upon Termination and Change in Control” below.
Each of Messrs. Bidlack, McRae and Rogers previously entered into an employment agreement or offer letter with the Company or an affiliate of the Company, as applicable (collectively, the “Prior NEO Agreements”). As of the date of this filing, Mr. Rogers has not yet executed his NEO Agreement. Until such execution, he remains party to his Prior NEO Agreement, which will be superseded and replaced by the NEO Agreement upon execution of his NEO Agreement.
Prior NEO Agreements
The Prior NEO Agreements consist of: (i) Mr. Bidlack’s Amended and Restated Employment Agreement with AASC, dated December 1, 2022, (ii) Mr. McRae’s employment agreement with PCX, dated July 23, 2018, and (iii) Mr. Rogers’ offer letter with AASC, dated November 25, 2025. The Prior NEO Agreements generally provide for base salary, bonus opportunities and employee benefits. In the case of Mr. Bidlack, the Prior NEO Agreement also provides for (i) an initial term through December 1, 2027, subject to automatic renewal unless either party provides at least sixty (60) days’ notice prior to the end of the term and (ii) non-competition during employment and non-solicitation (relating to employees and customers) during employment and for one year thereafter. In the case of Mr. McRae, the Prior NEO Agreement provides for (i) an initial term of three (3) years subject to automatic renewal unless either party provides at least sixty (60) days’ notice prior to the end of the term and (ii) non-competition during employment and for six (6) months thereafter, non-solicitation (relating to employees and customers) for six (6) months following the termination of his employment and perpetual non disparagement of the Company and its affiliates. Mr. Rogers’ offer letter also provides for certain discretionary and safety-based bonus opportunities.
NEO Agreements
Messrs. Ferguson, Bidlack and McRae’s NEO Agreements provide for an initial term of two years, which will automatically renew for one-year periods unless either party provides written notice of non-renewal at least sixty (60) days prior to the end of the then-current term. Pursuant to the NEO Agreements, Messrs. Ferguson, Bidlack and McRae are entitled to (i) an annual base salary of $500,000, $450,000 and $471,879, respectively, (ii) an annual target bonus opportunity equal to 100% of base salary, 66.67% of base salary and 40% of base salary, respectively and (iii) eligibility to participate in employee benefit plans and programs. Messrs. Ferguson, Bidlack and McRae’s NEO Agreements also contain reference to certain restrictive covenants, which generally include non-competition and non-solicitation of employees and customers during employment and non-solicitation of employees and customers for one year following the termination of employment, subject to applicable law.
The NEO Agreement with Mr. Rogers is expected to be in substantially similar form, subject to executive-specific terms.
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Base Salaries and Bonuses
Each of our NEOs receives a base salary. Base salary is a key, fixed element of each NEO’s compensation and is intended to recognize the NEO’s experience, skills, knowledge and responsibilities. Each NEO’s base salary for the year ended December 31, 2025 is set forth in the table below.
| Name |
Annual Base Salary ($)(1) |
Target Bonus (% of Base Salary)(2) |
||||||
| James “Trip” Ferguson |
500,000 | 100 | ||||||
| Kevin Bidlack |
450,008 | 66.7 | ||||||
| Jeff McRae |
455,922 | 40 | ||||||
| Christopher Rogers |
350,000 | 65 | ||||||
| (1) | Mr. McRae received a salary adjustment from $442,643 to $455,922 effective March 8, 2025. |
| (2) | Bonus payouts for Messrs. Ferguson, Bidlack and Rogers were based on the performance of certain Applied properties against budgeted management EBITDA and were achieved at 87% of target performance. Mr. McRae’s bonus was based on certain PCX properties prior to the Combination, which was based on achieving certain consolidated Adjusted EBITDA performance targets and were achieved at 76% of target performance. |
Equity-Based Compensation
We believe that equity-based compensation is an important component of our executive compensation program and that providing a significant portion of our executive officers’ total compensation package in equity-based compensation aligns the incentives of our executives with the interests of our stockholders and with our long-term corporate success. Additionally, we believe that equity-based compensation awards enable us to attract, motivate, retain, and adequately compensate executive talent. To that end, we award equity-based compensation to our NEOs in the form of profits interests (“Incentive Units”) under the Amended and Restated Agreement of Limited Partnership of AA&D Holdings, LP.
Mr. Ferguson was granted Incentive Units upon his hire on October 27, 2025, which vest 50% subject to time-based vesting and 50% subject to performance-based vesting. The time-based portion of the award vests one-fifth on each of the first, second, third, fourth and fifth anniversaries of the grant date, subject to his continued employment through such date. The performance-based portion of the award vests upon a Partnership Sale if Mr. Ferguson continues his employment through such date, and if, as of the Partnership Sale, the aggregate Greenbriar return multiple is achieved (as further described in the underlying award agreement). Mr. Ferguson was also granted Incentive Units on October 27, 2025, which vest 100% upon a Partnership Sale if Mr. Ferguson continues his employment through such date, and if, as of the Partnership Sale, the aggregate Greenbriar return multiple is achieved (as further described in the award agreement). Additionally, Mr. Ferguson was granted Incentive Units on November 17, 2025, which vest 100% upon a Partnership Sale, subject to his continued employment through such date.
Mr. Rogers was granted Incentive Units upon his hire on November 24, 2025, which vest 100% subject to time-based vesting, with one-fourth vesting on each of the second, third, fourth and fifth anniversaries of the date of grant, subject to his continued employment through such date.
For purposes of the Incentive Units, a “Partnership Sale” means any bona fide transaction or series of related transactions pursuant to which any person(s) or entity(ies) (in each case, unaffiliated with Greenbriar) in the aggregate acquire(s) (A) capital stock of AA&D Holdings, LP possessing the voting power (other than voting rights accruing only in the event of a default, breach or event of noncompliance) to elect a majority of the AA&D Holdings, LP board of directors (whether by merger, consolidation, reorganization, combination, sale or transfer of AA&D Holdings, LP (or AASC) capital stock, shareholder or voting agreement, proxy, power of attorney or otherwise) or (B) all or substantially all of AA&D Holdings, LP (or AASC) assets determined on a consolidated
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basis; provided, that in no event will a Partnership Sale be deemed to include any transaction effected for the purpose of (i) changing, directly or indirectly, the form of organization or the organizational structure of AA&D Holdings, LP or any of its subsidiaries or (ii) contributing capital interests to entities controlled by AA&D Holdings, LP, in either case, unless following or contemporaneously with such transaction a person or persons who are not affiliates of Greenbriar makes an acquisition described in clause (a) or (b) above. For the avoidance of doubt, following an IPO, greater than 50% of the publicly traded ownership interests of AA&D Holdings, LP (or any of its subsidiaries or any surviving or resulting company) then outstanding being owned by persons who are not affiliates of Greenbriar will not constitute a Partnership Sale.
Outstanding Equity Awards at Fiscal Year End Table
The following table shows, for each of the NEOs, all Incentive Units that were outstanding as of December 31, 2025.
| Option Awards(1) | ||||||||||||||||||||||||||
| Name |
Grant Date |
Type of Units | Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Option Exercise Price ($) |
Option Expiration Date |
|||||||||||||||||||
| James “Trip” Ferguson |
10/27/25 | (2) | Performance | — | — | 1,125 | — | — | ||||||||||||||||||
| 10/27/25 | (2) | Time-Vesting | — | 1,125 | — | — | — | |||||||||||||||||||
| 10/27/25 | (3) | Performance | — | — | 750 | — | — | |||||||||||||||||||
| 11/17/25 | (4) | Performance | — | — | 750 | — | — | |||||||||||||||||||
| Kevin Bidlack |
12/8/22 | (5) | Performance | — | — | 1,150 | — | — | ||||||||||||||||||
| 12/8/22 | (5) | Time-Vesting | 690 | 460 | — | — | — | |||||||||||||||||||
| 6/20/24 | (6) | Performance | — | — | 350 | — | — | |||||||||||||||||||
| 6/20/24 | (6) | Time-Vesting | 70 | 280 | — | |||||||||||||||||||||
| Jeff McRae |
5/11/21 | (7) | Performance | — | — | 931 | — | — | ||||||||||||||||||
| 5/11/21 | (7) | Time-Vesting | 465 | 155 | — | — | — | |||||||||||||||||||
| Christopher Rogers |
11/24/25 | (8) | Time-Vesting | — | 410 | — | — | — | ||||||||||||||||||
| (1) | This table reflects information regarding Incentive Units granted to our NEOs that were outstanding as of December 31, 2025. The Incentive Units are intended to constitute profits interests for U.S. federal income tax purposes. Despite the fact that the Incentive Units do not require the payment of an exercise price, they are most similar economically to stock options. Accordingly, they are classified as “options” under the definition provided in Item 402(a)(6)(i) of Regulation S-K as an instrument with an “option-like feature.” The treatment of these awards upon certain employment terminations and change in control events is described in the section below titled “Potential Payments Upon Termination or Change in Control”. |
| (2) | Represents a grant of Incentive Units to Mr. Ferguson, 50% of such award is subject to time-based vesting and 50% subject to performance-based vesting. The time-vesting portion of the Incentive Units vests one-fifth on each of the first, second, third, fourth and fifth anniversary of the grant date, subject to his continued employment through such date. The performance-vesting portion vests upon a Partnership Sale, if the aggregate Greenbriar return multiple (as described in the underlying award agreement) is achieved as of such Partnership Sale, subject to his continued employment through such date of the Partnership Sale. |
| (3) | Represents a grant of Incentive Units to Mr. Ferguson, 100% of such award is subject to performance-based vesting. The Incentive Units vest upon a Partnership Sale, if the aggregate Greenbriar return multiple (as described in the underlying award agreement) is achieved as of such Partnership Sale, subject to his continued employment through such date of the Partnership Sale. |
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| (4) | Represents a grant of Incentive Units to Mr. Ferguson, 100% of such award is subject to performance-based vesting. The Incentive Units vest upon a Partnership Sale, subject to his continued employment through such date of the Partnership Sale. |
| (5) | Represents a grant of Incentive Units to Mr. Bidlack, 50% of such award is subject to time-based vesting and 50% is subject to performance-based vesting. The time-vesting portion of the Incentive Units vests one-fifth on each of the first, second, third, fourth and fifth anniversary of the grant date, subject to his continued employment through such date. The performance-vesting portion vests upon a Partnership Sale, if the aggregate Greenbriar return multiple (as described in the underlying award agreement) is achieved as of such Partnership Sale, subject to his continued employment through such date of the Partnership Sale. |
| (6) | Represents a grant of Incentive Units to Mr. Bidlack, 50% of such award is subject to time-based vesting and 50% is subject to performance-based vesting. The time-vesting portion of the Incentive Units vests one-fifth on each of the first, second, third, fourth and fifth anniversary of the grant date, subject to his continued employment through such date. The performance-vesting portion vests upon a Partnership Sale, if the aggregate Greenbriar return multiple (as described in the underlying award agreement) is achieved as of such Partnership Sale, subject to his continued employment through such date of the Partnership Sale. |
| (7) | Represents a grant of profits interests to Mr. McRae, which were initially granted on May 11, 2021 (the “Initial Grant Date”) and were converted to Incentive Units pursuant to an amended and restated incentive unit award agreement dated December 8, 2025 in connection with the Combination. 40% of such award is subject to time-based vesting and 60% is subject to performance-based vesting. The time-vesting portion of the Incentive Units vests one-fourth on each of the second, third, fourth and fifth anniversary of the Initial Grant Date, subject to his continued employment through such date. The performance-vesting portion vests if the Greenbriar return multiple (as described in the underlying award agreement) is achieved as of such Partnership Sale, subject to his continued employment through such date of the Partnership Sale. |
| (8) | Represents a grant of Incentive Units to Mr. Rogers, which vest 100% subject to time-based vesting, with one-fourth vesting on each of the second, third, fourth and fifth anniversaries of the date of grant, subject to his continued employment through such date. |
Potential Payments Upon Termination or Change in Control
Individual Severance Entitlements
Prior NEO Agreements
As of December 31, 2025, Mr. Ferguson and Mr. Rogers were not entitled to any severance payments or benefits upon termination of employment. Under the Prior NEO Agreements, (i) Mr. Bidlack was entitled, upon a termination by the Company without “Cause” (as defined in the Prior NEO Agreement) to twelve (12) months of base salary continuation and a pro-rata annual bonus, and, upon voluntary resignation, to a pro-rata annual bonus, and (ii) Mr. McRae was entitled, upon a termination by the Company without “Cause” (as defined in the Prior NEO Agreement) or resignation for “Good Reason” (as defined in the Prior NEO Agreement) to six (6) months of base salary continuation, any earned but unpaid prior-year bonus and up to six (6) months of COBRA reimbursement. These severance payments and benefits were generally subject to execution and nonrevocation of a release of claims and continued compliance with restrictive covenant obligations.
NEO Agreements
Under Messrs. Ferguson, Bidlack and McRae’s NEO Agreements, upon the NEO’s termination without “Cause” (as defined in the NEO Agreement), the NEO’s resignation for “Good Reason” (as defined in the NEO Agreement), or if the Company does not extend the NEO’s employment term, then the NEO will receive the following severance payments and benefits, subject to the NEO’s execution and nonrevocation of a release of claims and continued compliance with restrictive covenant obligations: (i) 1x (1.5x for Mr. Ferguson) the sum of the NEO’s base salary and target bonus, payable in monthly installments, (ii) any earned but unpaid annual bonus with respect to the calendar year preceding the date of termination (“Prior Year Bonus”), (iii) a pro-rata portion of the NEO’s annual bonus for the year in which the termination occurs based on actual performance and paid at
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the time annual bonuses are paid to other executives (“Pro-Rata Bonus”) and (iv) reimbursement for the monthly COBRA premium for a period of twelve (12) months (eighteen (18) months for Mr. Ferguson). Additionally, upon the NEO’s death or Disability (as defined in his NEO Agreement), the NEO will be entitled to (i) any Prior Year Bonus and (ii) a Pro-Rata Bonus.
The NEO Agreement with Mr. Rogers is expected to be in substantially similar form, subject to executive-specific terms.
Equity Award Treatment
Under the terms of the underlying Incentive Unit award agreements, all time-based Incentive Units become 100% vested upon a Partnership Sale. Upon an employee’s termination for any reason, any unvested Incentive Units will be immediately forfeited.
Director Compensation
The following table presents the total compensation for each person who served as a non-employee member of our Company board of directors and/or AA&D Holdings, LP board of directors during the year ended December 31, 2025. Other than as set forth in the table, we did not pay any compensation, make any equity awards or non-equity awards to, or pay any other compensation to, any of the other non-employee members of the Company board of directors or AA&D Holdings, LP board of directors in the year ended December 31, 2025.
| Name |
Fees Earned or Paid in Cash ($) |
Option Awards ($)(1) |
Total ($) |
|||||||||
| Noah Roy |
— | — | — | |||||||||
| Noah Blitzer |
— | — | — | |||||||||
| Jack Morris |
— | — | — | |||||||||
| David King(2) |
250,000 | — | 250,000 | |||||||||
| (1) | Messrs. Roy, Blitzer and Morris did not hold any outstanding equity awards as of December 31, 2025. Mr. King held 1,500 Incentive Units as of December 31, 2025, which were granted 50% subject to time-based vesting and 50% subject to performance-based vesting. Mr. King’s time-based portion vests one-fifth on each of the first, second, third, fourth and fifth anniversaries of January 3, 2023. Mr. King’s performance-based portion vests upon a Partnership Sale if the Greenbriar return multiple is achieved (as described in the underlying award agreement). Outstanding time-based Incentive Units 100% vest upon a Partnership Sale. |
| (2) | Mr. King served as a director of AA&D Holdings, LP during fiscal year 2025 and the compensation included in the table reflects compensation earned for such service. |
Actions Taken in Connection with this Offering
2026 Omnibus Incentive Plan
In order to incentivize our employees and other service providers following the completion of this offering, we anticipate that our board of directors will adopt the Applied Aerospace & Defense, Inc. 2026 Omnibus Incentive Plan (the “2026 Omnibus Incentive Plan”) for employees, consultants and directors prior to the completion of this offering. Our NEOs will be eligible to participate in the 2026 Omnibus Incentive Plan, which we expect will become effective upon the consummation of this offering. We anticipate that the 2026 Omnibus Incentive Plan will provide for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, other stock-based awards, cash awards and substitute awards intended to align the interests of service providers, including our NEOs, with those of our stockholders.
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Securities to be Offered
Subject to adjustment in the event of certain transactions or changes of capitalization in accordance with the 2026 Omnibus Incentive Plan, a number of shares of common stock equal to 10% of the number of shares of common stock outstanding at the closing of this offering (on a fully diluted basis) (the “Share Reserve”) will be reserved for issuance pursuant to awards under the 2026 Omnibus Incentive Plan. The total number of shares reserved for issuance under the 2026 Omnibus Incentive Plan will be increased annually on January 1 of each calendar year beginning in 2027 and ending and including January 1, 2036, by the lesser of (i) 3% of the aggregate number of shares of common stock outstanding on December 31 of the immediately preceding calendar year and (ii) the number of shares of common stock as is determined by our board of directors. No more than the initial Share Reserve may be issued pursuant to incentive stock options. Shares of common stock subject to an award that expires or is canceled, forfeited, exchanged, settled in cash or otherwise terminated without delivery of shares and shares withheld to pay the exercise price of, or to satisfy the withholding obligations with respect to, an award will again be available for delivery pursuant to other awards under the 2026 Omnibus Incentive Plan.
Administration
The 2026 Omnibus Incentive Plan will be administered by a committee of our board of directors (the “Committee”), except to the extent our board of directors does not duly authorize such Committee to administer the 2026 Omnibus Incentive Plan and in which case our board of directors will serve as the administrator. The Committee has broad discretion to administer the 2026 Omnibus Incentive Plan, including the power to determine the eligible individuals to whom awards will be granted, the number and type of awards to be granted and the terms and conditions of awards. The Committee may also accelerate the vesting or exercise of any award and make all other determinations and to take all other actions necessary or advisable for the administration of the 2026 Omnibus Incentive Plan. To the extent the 2026 Omnibus Incentive Plan administrator is not the Committee, our board of directors will retain the authority to take all actions permitted by the administrator under the 2026 Omnibus Incentive Plan. Additionally, our board of directors retains the right to exercise the authority of the Committee to the extent consistent with applicable law.
Eligibility
Our employees, consultants and non-employee directors, and employees and consultants of our affiliates, will be eligible to receive awards under the 2026 Omnibus Incentive Plan.
Non-Employee Director Compensation Limits
Under the 2026 Omnibus Incentive Plan, in a single fiscal year, a non-employee director may not be granted awards for such individual’s service on our board of directors having a value, taken together with any cash fees paid to such non-employee director, in excess of $750,000 (except that the Committee may make exceptions to such limit and for any year in which a non-employee director (i) first commences service on our board of directors, (ii) serves on a special committee of our board of directors or (iii) serves as lead director or non-executive chair of our board of directors, such limit may be increased to $1,000,000).
Types of Awards
Stock Options. We may grant stock options to eligible persons, except that incentive stock options may only be granted to persons who are our employees or employees of one of our subsidiaries, in accordance with Section 422 of the Code. The exercise price of a stock option generally cannot be less than 100% of the fair market value of a share of common stock on the date on which the stock option is granted and the stock option must not be exercisable for longer than 10 years following the date of grant. In the case of an incentive stock option granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power
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of all classes of our equity securities, the exercise price of the option must be at least 110% of the fair market value of a share of common stock on the date of grant and the option must not be exercisable more than five years from the date of grant.
Stock Appreciation Rights. A stock appreciation right (“SAR”) is the right to receive an amount equal to the excess of the fair market value of one share of common stock on the date of exercise over the grant price of the SAR. The grant price of a SAR generally cannot be less than 100% of the fair market value of a share of common stock on the date on which the SAR is granted. The term of a SAR may not exceed 10 years. SARs may be granted in connection with, or independent of, other awards. The Committee has the discretion to determine other terms and conditions of a SAR award.
Restricted Stock Awards. A restricted stock award is a grant of shares of common stock subject to the restrictions on transferability and risk of forfeiture imposed by the Committee. Unless otherwise determined by the Committee and specified in the applicable award agreement, the holder of a restricted stock award has rights as a stockholder, including the right to vote the shares of common stock subject to the restricted stock award or to receive dividends on the shares of common stock subject to the restricted stock award during the restriction period. In the discretion of the Committee or as set forth in the applicable award agreement, dividends distributed prior to vesting may be subject to the same restrictions and risk of forfeiture as the restricted stock with respect to which the distribution was made.
Restricted Stock Units. A restricted stock unit is a right to receive cash, shares of common stock or a combination of cash and shares of common stock at the end of a specified period equal to the fair market value of one share of common stock on the date of vesting. Restricted stock units may be subject to the restrictions, including a risk of forfeiture, imposed by the Committee. If the Committee so provides, a grant of restricted stock units may provide a participant with the right to receive dividend equivalents.
Performance Awards. A performance award is an award that vests and/or becomes exercisable or distributable subject to the achievement of certain performance goals during a specified performance period, as established by the Committee. Performance awards (which include performance stock units) may be granted alone or in addition to other awards under the 2026 Omnibus Incentive Plan, and may be paid in cash, shares of common stock, other property or any combination thereof, in the sole discretion of the Committee. If the Committee so provides, a grant of a performance award may provide a participant with the right to receive dividend equivalents.
Stock Awards. A stock award is a transfer of unrestricted shares of common stock on terms and conditions, if any, determined by the Committee.
Dividend Equivalents. Dividend equivalents entitle a participant to receive cash, shares of common stock, other awards or other property equal in value to dividends or other distributions paid with respect to a specified number of shares of common stock. Dividend equivalents may be granted on a free-standing basis or in connection with another award (other than stock options, SARs, restricted stock or stock awards).
Other Stock-Based Awards. Other stock-based awards are awards denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, the value of our shares of common stock.
Cash Awards. Cash awards may be granted on terms and conditions, including vesting conditions, and for consideration, including no consideration or minimum consideration as required by applicable law, as the Committee determines in its sole discretion.
Substitute Awards. In connection with an entity’s merger or consolidation with the Company or the Company’s acquisition of an entity’s property or stock, awards may be granted in substitution for any other award granted before the merger or consolidation by such entity or its affiliates.
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Certain Transactions
If any change is made to our capitalization, such as a share split, share combination, share dividend, exchange of shares or other recapitalization, merger or otherwise, that results in an increase or decrease in the number of outstanding shares of common stock, appropriate adjustments will be made by the Committee in the shares subject to an award under the 2026 Omnibus Incentive Plan. The Committee will also have the discretion to make certain adjustments to awards in the event of a change in control, such as accelerating the vesting or exercisability of awards, requiring the surrender of an award, with or without consideration, or making any other adjustment or modification to the award that the Committee determines is appropriate in light of such transaction.
Clawback
All awards granted under the 2026 Omnibus Incentive Plan will be subject to clawback, cancellation, recoupment, rescission, payback, reduction, or other similar action in accordance with any Company clawback or similar policy or any applicable law related to such actions.
Plan Amendment and Termination
Our board of directors or the Committee may amend or terminate any award, award agreement or the 2026 Omnibus Incentive Plan at any time; however, stockholder approval will be required for any amendment to the extent necessary to comply with applicable law. Stockholder approval will be required to make amendments that (i) increase the aggregate number of shares that may be issued under the 2026 Omnibus Incentive Plan or (ii) change the classification of individuals eligible to receive awards under the 2026 Omnibus Incentive Plan. The 2026 Omnibus Incentive Plan will remain in effect for a period of 10 years (unless earlier terminated by our board of directors).
IPO Grants
In connection with this offering, we anticipate that we will grant an aggregate of 47,180 restricted stock units under the 2026 Omnibus Incentive Plan (collectively, the “IPO Grants”). IPO Grants to employees will vest in three substantially equal installments on each of the first, second and third anniversaries of the applicable vesting commencement date, subject generally to continued employment through the applicable vesting date. IPO grants to our non-employee directors will fully vest on the sooner of the first anniversary of the applicable vesting commencement date or the day immediately preceding the first annual meeting of stockholders occurring after this offering, subject generally to continued service through the applicable vesting date.
2026 Employee Stock Purchase Plan
In order to incentivize employees of the Company, its designated affiliates and subsidiaries (the “Designated Subsidiaries”), we anticipate that our board of directors will adopt, and our shareholders will approve, the Applied Aerospace & Defense, Inc. 2026 Employee Stock Purchase Plan (the “ESPP”), the material terms of which are summarized below, prior to the completion of this offering. The ESPP is comprised of two distinct components in order to provide increased flexibility to grant rights to purchase shares under the ESPP to U.S. and to non-U.S. employees. Specifically, the ESPP authorizes (i) the grant of rights to purchase shares to U.S. employees that are intended to qualify for favorable U.S. federal tax treatment under Section 423 of the Code (the “Section 423 Component”), and (ii) the grant of rights to purchase shares that are not intended to be tax-qualified under Section 423 of the Code (the “Non-Section 423 Component”). Although not yet adopted, we expect that the ESPP will have the features described below.
Shares Available for Awards; Administration
A total number of shares of common stock equal to 1% of the number of shares of common stock outstanding at the closing of this offering (on a fully diluted basis) will initially be reserved for issuance under
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the ESPP. In addition, the number of shares available for issuance under the ESPP will be increased annually on January 1 of each calendar year beginning in 2027 and ending and including January 1, 2036, by an amount equal to the lesser of (i) 1% of the shares outstanding on December 31 of the immediately preceding calendar year and (ii) such smaller number of shares as determined by our board of directors; provided, that no more than 1,707,435 shares may be issued in the aggregate under the Section 423 Component of the ESPP. Our Committee or other individuals to which authority has been delegated under the ESPP will administer and will have authority to interpret the terms of the ESPP and determine eligibility of participants. The entity that conducts the general administration of this ESPP (which is the Committee unless the board of directors assumes the authority for administration) is referred to herein as the “plan administrator.”
Eligibility
We expect that all of our employees and employees of any Designated Subsidiary will be eligible to participate in the ESPP, with certain exclusions as determined by the plan administrator. However, an employee may not be granted rights to purchase stock under the ESPP if the employee, immediately after the grant, would own (directly or through attribution) stock possessing 5% or more of the total combined voting power of all classes of our stock.
Grant of Rights
Under the ESPP, participants will be offered the right to purchase shares of our common stock at a discount during one or more offering periods, which may be successive or overlapping and will be selected by the plan administrator in its sole discretion with respect to which rights will be granted to participants. The plan administrator will designate the terms and conditions of each offering in writing, including the offering period, and may change the duration and timing of offering periods in its discretion. However, in no event may an offering period be longer than 27 months in length.
Unless otherwise set forth in the ESPP or in an offering document, a participant may participate in the ESPP only by means of payroll deductions of up to a specified percentage of their eligible compensation. In non-U.S. jurisdictions where participation in the ESPP through payroll deductions is prohibited, the plan administrator may provide that an eligible employee may elect to participate through contributions to the participant’s account under the ESPP in a form acceptable to the plan administrator in lieu of or in addition to payroll deductions. The plan administrator will establish a maximum number of shares that may be purchased by a participant during any purchase period or offering period. In addition, no employee will be permitted to accrue the right to purchase stock under the Section 423 Component at a rate in excess of $25,000 worth of shares during any calendar year during which such a purchase right is outstanding (based on the fair market value per share of our common stock as of the first day of the offering period).
On the first trading day of each offering period, each participant will automatically be granted the right to purchase shares of our common stock. The right will expire at the end of the applicable offering period and will be exercised on each applicable purchase date during an offering period to the extent of the payroll deductions accumulated during the applicable purchase period. Participants may voluntarily end their participation in the ESPP at any time during a specified period prior to the end of the applicable offering period and will be paid their accrued payroll deductions that have not yet been used to purchase shares of common stock.
A participant may not transfer rights granted under the ESPP other than by will or the laws of descent and distribution, and such rights are generally exercisable only by the participant.
Purchase Price
The purchase price will be designated by the plan administrator, but, with respect to the Section 423 Component, will not be less than 85% of the fair market value of a share of our common stock on the applicable enrollment date or the applicable exercise date, whichever is lower.
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Certain Transactions
In the event of certain transactions or events affecting our common stock, the plan administrator will make equitable adjustments to the ESPP and outstanding rights. In the event of certain unusual or non-recurring transactions or events, the plan administrator may provide for (i) either the termination of outstanding rights in exchange for cash or the replacement of outstanding rights with other rights or property, (ii) the assumption or substitution of outstanding rights by the successor or survivor corporation, or a parent or subsidiary thereof, (iii) the adjustment in the number and type of shares of stock subject to outstanding rights, (iv) the use of participants’ accumulated payroll deductions to purchase stock on a new purchase date prior to the next scheduled purchase date and termination of any rights under ongoing offering periods, or (v) the termination of all outstanding rights.
ESPP Amendment and Termination
The plan administrator may amend, suspend or terminate the ESPP at any time. However, shareholder approval will be required for any amendment that (i) increases the aggregate number or changes the type of shares subject to the ESPP or (ii) changes the ESPP in any manner that would be considered the adoption of a new plan within the meaning of Treasury Regulation § 1.423-2(c)(4). In the event that the plan administrator determines that the ongoing operation of the ESPP may result in unfavorable financial accounting consequences, the plan administrator may modify or amend the ESPP to reduce or eliminate those consequences. Upon termination of the ESPP, the balance in each participant’s plan account will be refunded as soon as practicable.
New Director Compensation Program
In connection with this offering, we anticipate that our board of directors will adopt a non-employee director compensation policy pursuant to which our non-employee directors will receive the following compensation in the form of cash and equity retainers as set forth below:
| • | an annual restricted stock unit award under the 2026 Omnibus Incentive Plan with a grant date value of approximately $175,000; |
| • | an annual cash retainer of $90,000; |
| • | an additional annual cash retainer of $35,000 for service as the chair of the board of directors; |
| • | an additional annual cash retainer of $25,000 for service as the chair of a committee of the board of directors; and |
| • | an additional annual cash retainer of $10,000 for service as a member of a committee of the board of directors. |
Each non-employee director may also elect to have the Company pay all or a portion of such director’s cash compensation in the form of shares of Company common stock in lieu of cash. Our non-employee directors will be reimbursed for expenses directly related to their activities as directors such as expenses incurred to attend meetings. The board of directors may revise the compensation arrangements for our directors from time to time.
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The following table sets forth certain information regarding the beneficial ownership of our common stock as of May 26, 2026, with respect to:
| • | each person known to us to beneficially own more than 5% of any class of our outstanding common stock; |
| • | each of our Named Executive Officers; |
| • | each member of our board of directors; and |
| • | all of our directors and executive officers as a group. |
Applicable percentage of beneficial ownership prior to this offering is based on 138,243,518 shares of common stock outstanding as of May 26, 2026, after giving effect to the Stock Split.
Applicable percentage of beneficial ownership after this offering also assumes the foregoing and the issuance and sale by us of 32,500,000 shares of common stock (or 37,375,000 shares of common stock if the underwriters exercise in full their option to purchase additional shares).
Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. A security holder is also deemed to be, as of any date, the beneficial owner of all securities that such security holder has the right to acquire within 60 days after such date through (1) the exercise of any option or warrant; (2) the conversion of a security; (3) the power to revoke a trust, discretionary account or similar arrangement; or (4) the automatic termination of a trust, discretionary account or similar arrangement. Shares issuable pursuant to options are deemed to be outstanding for computing the beneficial ownership percentage of the person holding those options but are not deemed to be outstanding for computing the beneficial ownership percentage of any other person. Except as otherwise noted, the person or entities listed below have sole voting and investment power with respect to all shares of our Common Stock beneficially owned by them, except to the extent this power may be shared with a spouse. All information with respect to beneficial ownership has been furnished by the directors or Named Executive Officers, as the case may be. Unless otherwise noted, the mailing address of each listed beneficial owner is c/o Applied Aerospace & Defense, Inc., 355 Quality Circle NW, Huntsville, AL 35806. The following table does not reflect any shares of our common stock that may be purchased pursuant to our directed share program described under “Underwriting (Conflicts of Interest)—Directed Share Program.”
| Common Stock Beneficially Owned Before Offering |
Common Stock Beneficially Owned After Offering Assuming No Exercise of the Underwriters’ Option |
Common
Stock Beneficially Owned After Offering Assuming Full Exercise of the Underwriters’ Option |
||||||||||||||||||||||
| Name of Beneficial Owner |
Shares | % | Shares | % | Shares | % | ||||||||||||||||||
| 5% Stockholders: |
||||||||||||||||||||||||
| AA&D Holdings, LP(1). |
138,243,518 | 100 | % | 138,243,518 | 81.0 | % | 138,243,518 | 78.7 | % | |||||||||||||||
| Directors and Named Executive Officers: |
||||||||||||||||||||||||
| James William Ferguson, III |
— | — | — | — | — | — | ||||||||||||||||||
| Kevin Bidlack |
— | — | — | — | — | — | ||||||||||||||||||
| Jeff McRae |
— | — | — | — | — | — | ||||||||||||||||||
| Christopher Rogers |
— | — | — | — | — | — | ||||||||||||||||||
| David King |
— | — | — | — | — | — | ||||||||||||||||||
| Noah Blitzer |
— | — | — | — | — | — | ||||||||||||||||||
| Scott Goldstein |
— | — | — | — | — | — | ||||||||||||||||||
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| Common Stock Beneficially Owned Before Offering |
Common Stock Beneficially Owned After Offering Assuming No Exercise of the Underwriters’ Option |
Common
Stock Beneficially Owned After Offering Assuming Full Exercise of the Underwriters’ Option |
||||||||||||||||||||||
| Name of Beneficial Owner |
Shares | % | Shares | % | Shares | % | ||||||||||||||||||
| James Katzman |
— | — | — | — | — | — | ||||||||||||||||||
| Susan Lynch |
— | — | — | — | — | — | ||||||||||||||||||
| Jack Morris |
— | — | — | — | — | — | ||||||||||||||||||
| Noah Roy |
— | — | — | — | — | — | ||||||||||||||||||
| All directors and executive officers as a group (11 individuals) |
— | — | — | — | — | — | ||||||||||||||||||
| (1) | AA&D Holdings is a Delaware limited partnership managed by affiliates of Greenbriar. GB Eagle GP, LLC (“GB Eagle GP”) is the general partner of AA&D Holdings. Greenbriar Equity Capital V, L.P. (“Greenbriar Equity Capital”) is the sole member of GB Eagle GP. Greenbriar Equity Capital is controlled by its general partner, Greenbriar Holdings V, LLC, which is managed by a board of managers (the “Board of Managers”). Voting and dispositive power of the securities held directly by AA&D Holdings is exercised by majority vote of the Board of Managers, which includes Noah Roy, who also serves as a member of the Company’s board of directors. The address of the foregoing persons is c/o Greenbriar Equity Group, L.P., 1 Greenwich Plaza, Greenwich, CT 06830. |
Each of the executive officers and certain of the directors own an indirect interest in the Company through ownership of partnership units in AA&D Holdings. Following this offering and prior to expiration of the lock-up agreement with the representatives described elsewhere in this prospectus, we expect that a portion of such partnership interests in AA&D Holdings will be exchanged into shares of the Company, at which time the executive officers and certain of the directors will obtain beneficial ownership in the shares of common stock of the Company received upon such exchange.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The agreements described in this section, or forms of such agreements as they will be in effect at the time of this offering, are filed as exhibits to the registration statement of which this prospectus forms a part, and the following descriptions are qualified by reference to all of the provisions of such agreements. Because these descriptions are only summaries of the applicable agreements, they do not necessarily contain all of the information that you may find useful. We, therefore, urge you to review the agreements in their entirety. Copies of the forms of the agreements have been filed as exhibits to the registration statement of which this prospectus forms a part.
Agreements to be Entered in Connection with this Offering
Stockholders Agreement
In connection with this offering, we will enter into a stockholders agreement with our Principal Stockholder. The stockholders agreement will provide our Principal Stockholder the right to nominate to the Board a number of directors equal to at least: (i) all of the total number of directors comprising the Board, so long as our Principal Stockholder beneficially owns shares of common stock representing at least 40% of the total number of shares of common stock it owns as of the date of this offering, (ii) 40% of the total number of directors, in the event that our Principal Stockholder beneficially owns shares of common stock representing at least 30% but less than 40% of the total number of shares of common stock it owns as of the date of this offering, (iii) 30% of the total number of directors, in the event that our Principal Stockholder beneficially owns shares of common stock representing at least 20% but less than 30% of the total number of shares of common stock it owns as of the date of this offering, (iv) 20% of the total number of directors, in the event that our Principal Stockholder beneficially owns shares of common stock representing at least 10% but less than 20% of the total number of shares of common stock it owns as of the date of this offering and (v) one director, in the event that our Principal Stockholder beneficially owns shares of common stock representing at least 5% of the total number of shares of common stock it owns as of the date of this offering. In each case, our Principal Stockholder’s nominees must comply with applicable law and stock exchange rules. In addition, our Principal Stockholder shall be entitled to nominate the replacement for any of its Board nominees whose Board service terminates prior to the end of the director’s term, regardless of our Principal Stockholder’s beneficial ownership at that time. Our Principal Stockholder shall also have the right to have its nominees participate on committees of our Board proportionate to its voting power, subject to compliance with applicable law and stock exchange rules. The stockholders agreement will also prohibit us from increasing or decreasing the size of our Board without the prior written consent of our Principal Stockholder. The director nomination rights will terminate at such time as our Principal Stockholder beneficially owns less than 5% of the shares of common stock it beneficially owns as of the date of this offering. Further, the stockholders agreement provides our Principal Stockholder with information rights.
Registration Rights Agreement
In connection with this offering, we intend to enter into a registration rights agreement with our Principal Stockholder. Our Principal Stockholder will be entitled to request that we register its shares of capital stock on a long-form or short-form registration statement on one or more occasions in the future, which registrations may be “shelf registrations.” Our Principal Stockholder will be entitled to certain piggyback registration rights, subject to the restrictions in the Registration Rights Agreement. We will pay expenses in connection with the exercise of these rights and indemnify against certain liabilities that may arise under the Securities Act. The registration rights described in this paragraph apply to (1) shares of our common stock held directly or indirectly by our Principal Stockholder and its affiliates, and (2) any of our capital stock (or that of our subsidiaries) issued or issuable with respect to the shares of common stock described in clause (1) with respect to any dividend, distribution, recapitalization, reorganization, or certain other corporate transactions, subject to certain exceptions (“Registrable Securities”). These registration rights are also for the benefit of any subsequent holder of Registrable Securities to whom such registration rights are transferred by our Principal Stockholder.
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Other Related Party Transactions
Certain Transactions with Greenbriar
Our Principal Stockholder and its affiliates have ownership interests in a broad range of companies. We have entered and may in the future enter into commercial transactions in the ordinary course of our business with some of these companies, including the sale of goods and services and the purchase of goods and services.
Management Services Agreement
We are party, through our subsidiary Applied Aerospace Structures, Corp., to a Management Services Agreement, dated December 1, 2022, with our Principal Stockholder (the “Management Services Agreement”), pursuant to which we receive certain financial advisory and consulting services in relation to business, management, financial and strategic matters. As consideration for such services, the Management Services Agreement initially required us to pay our Principal Stockholder an annual fee of $500,000, which was increased pursuant to its terms to $1.0 million per annum, subject to annual adjustments. We have also agreed pursuant to the Management Services Agreement to reimburse our Principal Stockholder for any reasonable out-of-pocket expenses incurred by it or its affiliates in connection with the provision of their services. In each of the years ended December 31, 2023, 2024 and 2025, we incurred $1.0 million in fees payable to our Principal Stockholder under the Management Services Agreement. We expect to terminate the Management Services Agreement in connection with the consummation of this offering.
Directed Share Program
At our request, the underwriters have reserved for sale, at the initial public offering price, up to 1,625,000 shares of our common stock, or 5.0% of the shares being offered by this prospectus, to certain of our directors, officers, employees and others as part of a directed share program. The directed share program will not limit the ability of our directors, officers and their family members, or holders of more than 5% of our capital stock, to purchase more than $120,000 in value of our common stock. We do not currently know the extent to which these related persons will participate in our directed share program, if at all, or the extent to which they will purchase more than $120,000 in value of our common stock. See “Underwriting (Conflicts of Interest)—Directed Share Program” for additional information.
Policies and Procedures for Transactions with Related Parties
The audit committee of our Board will have primary responsibility for reviewing and approving transactions with related parties. Our audit committee charter will provide that the audit committee shall review and approve in advance any related party transactions. We will adopt, effective upon the consummation of this offering, a formal written policy providing that our executive officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of our voting stock, any member of the immediate family of any of the foregoing persons, and any firm, corporation or other entity in which any of the foregoing persons is employed, is a general partner or principal or in a similar position, or in which such person has a 5% or greater beneficial ownership interest, is not permitted to enter into a related party transaction with us without the consent of our audit committee, subject to the exceptions described below. In approving or rejecting any such proposal, our audit committee is to consider the relevant facts and circumstances available and deemed relevant to our audit committee, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction. Our audit committee is expected to determine that certain transactions will not require audit committee approval, including certain employment arrangements of executive officers, director compensation, transactions with another company at which a related party’s only relationship is as a non-executive employee or beneficial owner of less than 5% of that company’s shares, transactions where a related party’s interest arises solely from the ownership of our common stock and all holders of our common stock received the same benefit on a pro rata basis, and transactions available to all employees generally.
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Limitation of Liability and Indemnification of Officers and Directors
As discussed elsewhere in this prospectus, our amended and restated certificate of incorporation and amended and restated bylaws will provide that we shall indemnify each of our directors and officers to the fullest extent permitted by the DGCL. For further information, see the section entitled “Description of Capital Stock—Limitations on Liability and Indemnification of Officers and Directors.” We intend to enter into customary indemnification agreements with each of our executive officers and directors that provide them, in general, with customary indemnification in connection with their service to us or on our behalf.
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DESCRIPTION OF MATERIAL INDEBTEDNESS
Set forth below is a summary of certain provisions of the instruments evidencing our material indebtedness, prior to giving effect to the consummation of this offering and the transactions described in this prospectus. This summary does not purport to be complete and is qualified by reference to the Credit Agreement (as defined below) referred to herein, a copy of which has been filed as an exhibit to the registration statement of which this prospectus forms a part. The following summary should be read in conjunction with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company” and the consolidated financial statements and related notes included elsewhere in this prospectus.
Credit Facilities
On December 1, 2022 (the “Initial Closing Date”), AA&D Midco, Inc., a Delaware corporation (the “Borrower”) and an indirect wholly-owned subsidiary of the Company, and AA&D Parent, Inc., a Delaware corporation (“Holdings”) and a direct wholly-owned subsidiary of the Company, entered into a Credit Agreement (as amended by the First Amendment (as defined below), the Second Amendment (as defined below) and the Third Amendment (as defined below), the “Credit Agreement”) with Barings Finance LLC, as administrative agent and as collateral agent (in such capacities, the “Agent”) and the lenders party thereto.
The Credit Agreement initially provided for senior secured credit facilities in an aggregate amount of $150.0 million, consisting of an initial term loan facility in an aggregate principal amount of $130.0 million (the “Initial Term Loan Facility”) and a revolving credit facility in an aggregate principal amount of $20.0 million (the “Revolving Credit Facility”).
On October 1, 2024 (the “First Amendment Effective Date”), the Borrower, Holdings and the other subsidiaries of Holdings party thereto entered into the First Amendment to the Credit Agreement with the lenders party thereto and the Agent (the “First Amendment”). Under the First Amendment, the Borrower (i) incurred senior secured incremental term loans in an aggregate principal amount of approximately $137.8 million (the “First Amendment Incremental Term Loan Facility”), (ii) established a senior secured delayed draw term loan facility in an aggregate principal amount of $100.0 million (the “First Amendment Delayed Draw Term Loan Facility”), and (iii) increased the then outstanding commitments under the Revolving Credit Facility by approximately $20.0 million such that the aggregate commitments under the Revolving Credit Facility became $40.0 million.
On November 14, 2025 (the “Second Amendment Effective Date”), the Borrower, Holdings and the other subsidiaries of Holdings party thereto entered into the Second Amendment to the Credit Agreement with the lenders party thereto and the Agent (the “Second Amendment”). Under the Second Amendment, the Borrower (i) incurred senior secured incremental term loans in an aggregate principal amount of approximately $355.0 million (the “Second Amendment Incremental Term Loan Facility”), (ii) established a senior secured delayed draw term loan facility in an aggregate principal amount of $150.0 million (the “Second Amendment Delayed Draw Term Loan Facility”), and (iii) increased the then outstanding commitments under the Revolving Credit Facility by approximately $60.0 million such that the aggregate commitments under the Revolving Credit Facility became $100.0 million.
On March 2, 2026 (the “Third Amendment Effective Date”), the Borrower, Holdings and the other subsidiaries of Holdings party thereto entered into the Third Amendment to the Credit Agreement with the lenders party thereto and the Agent (the “Third Amendment”). Under the Third Amendment, the Borrower (i) incurred senior secured incremental term loans in an aggregate principal amount of $180.0 million (the “Third Amendment Incremental Term Loan Facility”; and together with the Initial Term Loan Facility, the First Amendment Incremental Term Loan Facility, the First Amendment Delayed Draw Term Loan Facility, the Second Amendment Incremental Term Loan Facility and the Second Amendment Delayed Draw Term Loan Facility, the “Term Loan Facilities”) and (ii) increased the then outstanding commitments under the Revolving Credit Facility by approximately $25.0 million such that the aggregate commitments under the Revolving Credit Facility became $125.0 million.
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As of March 31, 2026, the Borrower has (i) $78.9 million of commitments available to be drawn under the Revolving Credit Facility. As of March 31, 2026, the aggregate principal amount of term loans (including delayed draw term loans) outstanding under the Credit Agreement was $971.7 million.
Interest Rates and Fees
Borrowings under the Credit Agreement accrue interest at a rate based on either (i) SOFR or (ii) an alternate Base Rate, in each case plus an applicable margin. The applicable margin for SOFR loans and Base Rate loans is determined by reference to a pricing grid based on the first lien net leverage ratio of the Borrower group, as set forth in the Credit Agreement. As of December 31, 2025, the applicable margin was 4.50% per annum for SOFR loans and 3.50% per annum for Base Rate loans. Thereafter, the margin may step down based on improvements in the first lien net leverage ratio.
In addition, the Borrower is required to pay commitment fees on the outstanding Revolving Credit Facility commitments, in an amount equal to 0.50% of such unused amounts (which percentage may also step down based on improvements in the first lien net leverage ratio of the Borrower group) pursuant to the terms of the Credit Agreement.
Prepayments
The Credit Agreement allows the Borrower to make optional prepayments on the Term Loan Facilities at any time, subject to minimum amounts and notice requirements, with a 1.00% prepayment premium applying if such loans are prepaid or assigned within one year of the Second Amendment Effective Date (with certain exceptions, such as prepayments in connection with a qualified IPO, lender-participated refinancings, declined amounts, transformative acquisitions or changes of control); after the first anniversary of the Second Amendment Effective Date, no premium applies. Mandatory prepayments are required from asset sale proceeds, excess cash flow and certain debt issuances, with leverage-based step-downs and thresholds with respect to excess cash flow, thresholds with respect to asset sale proceeds, and lenders may generally opt out of receiving such prepayments except for those from debt proceeds. Borrowings under the Revolving Credit Facility may be prepaid at any time without premium or penalty, but must be repaid if exposures exceed commitments or upon facility termination, and all prepayments must include accrued interest.
Maturity and Amortization
The facilities under the Credit Agreement each mature on December 1, 2030. The Term Loan Facilities are subject to scheduled quarterly amortization payments equal to 0.25% of the aggregate principal amount of the respective term loans, with the remaining principal due at maturity. The Revolving Credit Facility does not amortize and is payable in full on the maturity date.
Guarantees and Security
The obligations of the Borrower under the Credit Agreement are guaranteed by Holdings and by certain direct and indirect subsidiaries of Holdings. The guarantees are joint and several.
The facilities under the Credit Agreement are secured by a first priority perfected security interest in substantially all of the assets of Holdings, the Borrower and the other guarantors, including all personal property and material real property, equity interests in the Borrowers and their subsidiaries (subject to certain limitations for foreign subsidiaries and other customary exceptions) and intellectual property, accounts receivable, inventory, equipment, and other tangible and intangible assets. The security interests are subject to certain exceptions and permitted liens as set forth in the Credit Agreement and related security documents.
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Covenants and Events of Default
The Credit Agreement contains customary affirmative and negative covenants. The negative covenants restrict the Borrowers’ and their subsidiaries’ ability, among other things, to (subject to certain exceptions, baskets and thresholds set forth in the Credit Agreement):
| • | incur additional indebtedness; |
| • | create liens on their assets; |
| • | make certain investments and acquisitions; |
| • | pay dividends or make other restricted payments; |
| • | merge, consolidate, or sell all or substantially all of their assets; |
| • | dispose of and pledge certain of their assets; |
| • | enter into transactions with affiliates; |
| • | materially alter the business they conduct or change their fiscal year; and |
| • | make certain prepayments of subordinated or junior indebtedness. |
The Credit Agreement also includes a springing financial covenant requiring compliance with a maximum first lien net leverage ratio if the Revolving Credit Facility is drawn over a certain threshold, tested as set forth in the Credit Agreement.
The Credit Agreement includes customary events of default, including: non-payment of principal, interest or other amounts; breach of covenants; cross-defaults to other material indebtedness; certain bankruptcy or insolvency events; and the occurrence of a change of control. Upon an event of default, the lenders may accelerate the maturity of the loans and exercise remedies with respect to the collateral.
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General
Upon completion of this offering, our authorized capital stock will consist of 1,000,000,000 shares of common stock, par value $0.01 per share, and 50,000,000 shares of undesignated preferred stock, par value $0.01 per share. As of May 26, 2026, we had 158.3725 shares of common stock outstanding held by one stockholder of record and no shares of preferred stock outstanding. After the Stock Split and the consummation of this offering, we will have 170,743,518 shares of our common stock outstanding, assuming no exercise by the underwriters of their option to purchase additional shares and no shares of preferred stock outstanding. The following description of our capital stock is intended as a summary only and is qualified in its entirety by reference to our amended and restated certificate of incorporation and amended and restated bylaws to be in effect at the closing of this offering, which are filed as exhibits to the registration statement of which this prospectus forms a part, and to the applicable provisions of the DGCL.
Common Stock
Dividend Rights
Subject to preferences that may apply to shares of preferred stock outstanding at the time, holders of outstanding shares of common stock will be entitled to receive dividends out of assets legally available at the times and in the amounts as our Board may determine from time to time.
Voting Rights
Each outstanding share of common stock will be entitled to one vote on all matters submitted to a vote of stockholders. Holders of shares of our common stock shall have no cumulative voting rights.
Preemptive Rights
Our common stock will not be entitled to preemptive or other similar subscription rights to purchase any of our securities.
Conversion or Redemption Rights
Our common stock will be neither convertible nor redeemable.
Liquidation Rights
Upon our liquidation, dissolution or winding up, the holders of our common stock will be entitled to receive pro rata our assets that are legally available for distribution, after payment of all debts and other liabilities and subject to the prior rights of any holders of preferred stock then outstanding.
Preferred Stock
On the completion of this offering and under our amended and restated certificate of incorporation, our Board may, without further action by our stockholders, from time to time, direct the issuance of shares of preferred stock in series and may, at the time of issuance, determine the designations, powers, preferences, privileges and relative participating, optional or special rights, as well as the qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of the common stock. Satisfaction of any dividend preferences of outstanding shares of preferred stock would reduce the amount of funds available for the payment of dividends on shares of our common stock. Holders of shares of preferred stock may be entitled to
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receive a preference payment in the event of our liquidation before any payment is made to the holders of shares of our common stock. Under certain circumstances, the issuance of shares of preferred stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities or the removal of incumbent management. Upon the affirmative vote of a majority of the total number of directors then in office, our Board, without stockholder approval, may issue shares of preferred stock with voting and conversion rights which could adversely affect the holders of shares of our common stock and the market value of our common stock.
Anti-Takeover Effects of Our Amended and Restated Certificate of Incorporation and Our Amended and Restated Bylaws
Our amended and restated certificate of incorporation and amended and restated bylaws will contain, and the DGCL contains, provisions, which are summarized in the following paragraphs that are intended to enhance the likelihood of continuity and stability in the composition of our Board. These provisions are intended to avoid costly takeover battles, reduce our vulnerability to a hostile change of control and enhance the ability of our Board to maximize stockholder value in connection with any unsolicited offer to acquire us. However, these provisions may have an anti-takeover effect and may delay, deter or prevent a merger or acquisition of the Company by means of a tender offer, a proxy contest or other takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the prevailing market price for the shares of common stock held by stockholders.
Classified Board
Our amended and restated certificate of incorporation will provide that our Board will be divided into three classes of directors, with the classes as nearly equal in number as possible and with the directors serving three-year terms. As a result, approximately one-third of our Board will be elected each year. The classification of directors will have the effect of making it more difficult for stockholders to change the composition of our Board. Our amended and restated certificate of incorporation will also provide that, subject to any rights of holders of preferred stock to elect additional directors under specified circumstances, the number of directors will be fixed exclusively pursuant to a resolution adopted by our Board. Upon completion of this offering, we expect that our Board will have eight members. In addition, from and after the time when Greenbriar or its affiliated companies beneficially owns, in the aggregate, less than 40.0% of the voting power of our outstanding shares of capital stock, directors may only be removed from the board of directors for cause and only by the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class. The existence of a classified board could delay a potential acquirer from obtaining majority control of our board of directors, and the prospect of that delay might deter a potential acquirer.
Stockholder Action by Written Consent
Our amended and restated certificate of incorporation and amended and restated bylaws will provide that, from and after the time when Greenbriar or its affiliated companies beneficially owns, in the aggregate, less than 40.0% of the voting power of our outstanding shares of capital stock, our stockholders may not take action by written consent unless such action is recommended by all directors then in office, but may only take action at annual or special meetings of our stockholders; provided, however, that any action required or permitted to be taken by the holders of preferred stock may be taken without a meeting, without prior notice and without a vote, to the extent expressly so provided by the applicable certificate of designation relating to such series of preferred stock.
Special Meetings of Stockholders
Our amended and restated certificate of incorporation and amended and restated bylaws will provide that, except as required by law, special meetings of our stockholders may be called at any time only by or at the
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direction of our Board or the chairman of our Board; provided, however, at any time when Greenbriar and its affiliated companies beneficially owns, in the aggregate, at least 40.0% of the voting power of our outstanding shares of capital stock, special meetings of our stockholders shall also be called by our Board or the chairman of our Board at the request of Greenbriar and its affiliated companies. Our bylaws will prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers or changes in control or management of the Company.
Advance Notice Procedures
Our bylaws will establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our Board. Stockholders at an annual meeting will only be able to consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our Board or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given our Secretary timely written notice, in proper form, of the stockholder’s intention to bring that business before the meeting. Although our bylaws will not give our Board the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting, our bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed or may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of the Company.
Removal of Directors; Vacancies
Our amended and restated certificate of incorporation will provide that (i) prior to the date on which Greenbriar and its affiliated companies cease to beneficially own in the aggregate (directly or indirectly) 40.0% of the voting power of our outstanding shares of capital stock, any director may be removed with or without cause with the affirmative vote of stockholders representing a majority of the voting power of the then outstanding shares of voting stock, at a meeting of our stockholders called for that purpose and (ii) on and after the date on which Greenbriar and its affiliated companies cease to beneficially own in the aggregate (directly or indirectly) 40.0% of the voting power of our outstanding shares of capital stock, directors may only be removed for cause and only upon the affirmative vote of stockholders representing at least 662/3% of the voting power of the then outstanding shares of voting stock, at a meeting of our stockholders called for that purpose. In addition, our amended and restated certificate of incorporation will provide that, subject to the stockholders agreement and the rights granted to one or more series of preferred stock then outstanding, any newly created directorship on our Board that results from an increase in the number of directors and any vacancies on our Board will be filled only by the affirmative vote of a majority of the remaining directors, even if less than a quorum, or by a sole remaining director or by stockholders; provided, however, subject to the stockholders agreement, from and after the date on which Greenbriar and its affiliated companies cease to beneficially own in the aggregate (directly or indirectly) 40.0% of the voting power of our outstanding shares of capital stock, any newly created directorship on the Board that results from an increase in the number of directors and any vacancy occurring in the Board may only be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director (and not by the stockholders).
Supermajority Approval Requirements
Our amended and restated certificate of incorporation and bylaws will provide that our Board is expressly authorized to make, alter, amend, change, add to, rescind or repeal, in whole or in part, our bylaws without a stockholder vote in any matter not inconsistent with the DGCL and our amended and restated certificate of incorporation. For as long as Greenbriar and its affiliated companies beneficially own, in the aggregate, at least 40.0% of the voting power of our outstanding shares of capital stock, any amendment, alteration, rescission or repeal of our bylaws by our stockholders will require the affirmative vote of a majority in voting power of the outstanding shares of our stock entitled to vote on such amendment, alteration, change, addition, rescission or repeal. At any time when Greenbriar and its affiliated companies beneficially own, in the aggregate, less than
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40.0% of the voting power of our outstanding shares of capital stock, any amendment, alteration, rescission or repeal of our bylaws by our stockholders will require the affirmative vote of the holders of at least 662/3% in voting power of all the then-outstanding shares of our common stock entitled to vote thereon, voting together as a single class.
The DGCL provides generally that the affirmative vote of a majority of the outstanding shares entitled to vote thereon, voting together as a single class, is required to amend a corporation’s certificate of incorporation, unless the certificate of incorporation requires a greater percentage.
Our amended and restated certificate of incorporation will provide that at any time when Greenbriar and its affiliated companies beneficially own, in the aggregate, less than 40.0% of the voting power of our outstanding shares of capital stock, the following provisions in our amended and restated certificate of incorporation may be amended, altered, repealed or rescinded only by the affirmative vote of the holders of at least 662/3% (as opposed to a majority threshold that would apply if Greenbriar and its affiliated companies beneficially own, in the aggregate, 40.0% or more) in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class.
| • | The provision requiring a 662/3% supermajority vote for stockholders to amend our bylaws; |
| • | The provisions providing for a classified Board (the election and term of our directors); |
| • | The provisions regarding resignation and removal of directors; |
| • | The provisions regarding entering into corporate opportunities and business combinations with interested stockholders; |
| • | The provisions relating to choice of forum and the interpretation of our amended and restated certificate of incorporation; |
| • | The provisions regarding stockholder action by written consent; |
| • | The provisions regarding calling special meetings of stockholders; |
| • | The provisions regarding filling vacancies on our Board and newly created directorships; |
| • | The provisions eliminating monetary damages for breaches of fiduciary duty by a director; and |
| • | The amendment provision requiring that the above provisions be amended only with a 662/3% supermajority vote. |
The combination of the classification of our Board, the lack of cumulative voting and the supermajority voting requirements will make it more difficult for our existing stockholders to replace our Board as well as for another party to obtain control of us by replacing our Board. Because our Board has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management.
Authorized but Unissued Shares
Our authorized but unissued shares of common stock and preferred stock will be available for future issuance without stockholder approval, subject to stock exchange rules. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. One of the effects of the existence of authorized but unissued common stock or preferred stock may be to enable our Board to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive our stockholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices.
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Business Combinations
Upon completion of this offering, we will not be subject to the provisions of Section 203 of the DGCL (“Section 203”). In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that the person becomes an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns, or did own within three years prior to the determination of interested stockholder status, 15% or more of the corporation’s voting stock.
Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions: (i) before the stockholder became an interested stockholder, the board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our outstanding Common Stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining our outstanding Common Stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances; or (iii) at or after the time the stockholder became an interested stockholder, the business combination was approved by the board of directors and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.
A Delaware corporation may “opt out” of these provisions with an express provision in its original certificate of incorporation or an express provision in its certificate of incorporation or bylaws resulting from a stockholders’ amendment approved by at least a majority of the outstanding voting shares.
We will opt out of Section 203; however, our amended and restated certificate of incorporation will contain similar provisions providing that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the stockholder became an interested stockholder, unless:
| • | Prior to such time, our Board approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder. |
| • | Upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding certain shares. |
| • | At or subsequent to that time, the business combination is approved by our Board and by the affirmative vote of holders of at least 662/3% of our outstanding voting stock that is not owned by the interested stockholder. |
Under certain circumstances, this provision will make it more difficult for a person who would be an “interested stockholder” to effect various business combinations with our Company for a three-year period. This provision may encourage companies interested in acquiring our Company to negotiate in advance with our Board because the stockholder approval requirement would be avoided if our Board approves either the business combination or the transaction which results in the stockholder becoming an interested stockholder. These provisions also may have the effect of preventing changes in our Board and may make it more difficult to accomplish transactions which stockholders may otherwise deem to be in their best interests.
Our amended and restated certificate of incorporation will provide that Greenbriar or any of its affiliated companies, any direct or indirect transferees of Greenbriar or any of its affiliated companies or any other person with whom any of the foregoing are acting as a group or in concert, do not constitute “interested stockholders” for purposes of this provision.
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Dissenters’ Rights of Appraisal and Payment
Under the DGCL, with certain exceptions, our stockholders will have appraisal rights in connection with a merger or consolidation of us. Pursuant to the DGCL, stockholders who properly request and perfect appraisal rights in connection with such merger or consolidation will have the right to receive payment of the fair value of their shares as determined by the Delaware Court of Chancery.
Stockholders’ Derivative Actions
Under the DGCL, any of our stockholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the stockholder bringing the action is a holder of our shares at the time of the transaction to which the action relates or such stockholder’s stock thereafter devolved by operation of law.
Exclusive Forum
Our amended and restated certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the United States District Court for the District of Delaware) will be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action asserting a claim against the Company or any director or officer of the Company arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our bylaws or (4) any other action asserting a claim against the Company or any director or officer of the Company that is governed by the internal affairs doctrine; provided that for the avoidance of doubt, the forum selection provision that identifies the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation, including any “derivative action,” will not apply to suits to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Our amended and restated certificate of incorporation will also provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above. Although we believe these provisions benefit us by providing increased consistency in the application of Delaware law or the Securities Act, as applicable, for the specified types of actions and proceedings, the provisions may have the effect of discouraging lawsuits against us or our directors and officers. Alternatively, if a court were to find any of the forum selection provisions contained in our certificate of incorporation to be inapplicable or unenforceable, we may incur additional costs associated with having to litigate such action in other jurisdictions, which could have an adverse effect on our business, financial condition, results of operations, cash flows and prospects and result in a diversion of the time and resources of our employees, management and Board.
Conflicts of Interest
Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its officers, directors or stockholders. Our amended and restated certificate of incorporation will, to the maximum extent permitted from time to time by Delaware law, renounce any interest or expectancy that we have in, or right to be offered an opportunity to participate in, specified business opportunities that are from time to time presented to certain of our officers, directors or stockholders or their respective affiliates, other than those officers, directors, stockholders or affiliates who are our or our subsidiaries’ employees. Our amended and restated certificate of incorporation will provide that, to the fullest extent permitted by law, none of Greenbriar, its affiliated companies and Exempted Persons (as defined in
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our amended and restated certificate of incorporation) will have any duty to refrain from (i) engaging in a corporate opportunity in the same or similar lines of business in which we or our affiliates now engage or propose to engage or (ii) otherwise competing with us or our affiliates. In addition, to the fullest extent permitted by law, in the event that Greenbriar, its affiliated companies and Exempted Persons (as defined in our amended and restated certificate of incorporation) acquires knowledge of a potential transaction or other business opportunity which may be a corporate opportunity for itself or himself or its or his affiliates or for us or our affiliates, such person will have no duty to communicate or offer such transaction or business opportunity to us or any of our affiliates and they may take any such opportunity for themselves or offer it to another person or entity. Our amended and restated certificate of incorporation will not renounce our interest in any business opportunity that is expressly offered to a person in his or her capacity as a director or officer of the Company; offered to, or acquired by, a person while he or she is a full-time employee of the Company; or that has been developed using the confidential information of the Company or any of its subsidiaries. To the fullest extent permitted by law, no business opportunity will be deemed to be a potential corporate opportunity for us unless we would be permitted to undertake the opportunity under our amended and restated certificate of incorporation, we have sufficient financial resources to undertake the opportunity and the opportunity would be in line with our business.
Limitations on Liability and Indemnification of Officers and Directors
The DGCL authorizes corporations to limit or eliminate the personal liability of directors and officers to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties, subject to certain exceptions. Our amended and restated certificate of incorporation will include a provision that eliminates the personal liability of directors and officers for monetary damages for any breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL. The effect of these provisions will be to eliminate the rights of us and our stockholders, through stockholders’ derivative suits on our behalf, to recover monetary damages from a director for breach of fiduciary duty as a director and officer, including breaches resulting from grossly negligent behavior. However, exculpation will not apply to any director if the director has acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions, or derived an improper benefit from his or her actions as a director or officer.
Our amended and restated bylaws will provide that we must indemnify and advance expenses to our directors and officers to the fullest extent authorized by the DGCL. We also will be expressly authorized to carry directors’ and officers’ liability insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe that these indemnification and advancement provisions and insurance will be useful to attract and retain qualified directors and officers.
The limitation of liability, indemnification and advancement provisions that will be included in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breaches of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Fidelity Stock Transfer Solutions LLC. The transfer agent’s address is 245 Summer Street, Boston, MA 02210 and its phone number is (617) 563-5800.
Listing
We have applied to list our common stock on the NYSE under the symbol “AADX.”
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SHARES AVAILABLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock. As described below, only a limited number of shares currently outstanding will be available for sale immediately after this offering due to contractual and legal restrictions on resale. Nevertheless, future sales of substantial amounts of our common stock, including shares issued upon the exercise of outstanding options, in the public market after this offering or the perception that those sales may occur, could cause the prevailing market price for our common stock to fall or impair our ability to raise capital through sales of our equity securities.
Based on the number of shares of our common stock outstanding as of May 26, 2026, after giving effect to the Stock Split and the consummation of this offering, we will have 170,743,518 shares of our common stock outstanding, assuming no exercise by the underwriters of their option to purchase additional shares.
Of the shares that will be outstanding immediately after the closing of this offering, we expect that the shares to be sold in this offering will be freely tradable without restriction under the Securities Act unless purchased by our “affiliates,” as that term is defined in Rule 144. Shares purchased by our affiliates may not be resold except pursuant to an effective registration statement or an exemption from registration, including the safe harbor under Rule 144 described below.
The remaining shares of our common stock outstanding after this offering will be “restricted securities,” as that term is defined under Rule 144, or certain shares sold pursuant to our directed share program that are subject to “lock-up” restrictions as described under “—Lock-up Agreements” below and in the section titled “Underwriting (Conflicts of Interest)—Directed Share Program,” and we expect that substantially all of these restricted securities will be subject to the lock-up agreements described below. These restricted securities may be sold in the public market only if the sale is registered or pursuant to an exemption from registration, such as Rule 144 or Rule 701, which are summarized below.
We intend to file with the SEC a registration statement on Form S-8 covering the shares of common stock reserved for issuance under our 2026 Omnibus Incentive Plan. Such registration statement is expected to be filed and become effective as soon as practicable after completion of this offering. Upon effectiveness, the shares of common stock covered by this registration statement will generally be eligible for sale in the public market, subject to certain contractual and legal restrictions summarized below.
Lock-up Agreements
We, our executive officers, our directors and other stockholders owning all of our common stock prior to this offering have agreed that, without the prior written consent of Morgan Stanley & Co. LLC and Jefferies LLC on behalf of the underwriters, we and they will not, subject to certain exceptions, dispose of or hedge any shares of our common stock or securities convertible into or exchangeable for shares of our common stock (including any shares purchased by any of our directors or officers pursuant to the directed share program) during the period starting on the date of this prospectus and ending at 4:00 PM, Eastern Time, on the first Trading Day on or after the 180th Day after the date of this prospectus, or, if the 180th Day is not a Trading Day, immediately after 4:00 PM, Eastern Time, on the last Trading Day immediately preceding the 180th Day. The lock-up restrictions are described in more detail under “Underwriting (Conflicts of Interest).”
Following the lock-up periods set forth in the agreements described above and assuming that the representatives of the underwriters do not release any parties from these agreements, all of the shares of our common stock that are restricted securities or are held by our affiliates as of the date of this prospectus will be eligible for sale in the public market in compliance with Rule 144.
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Registration Rights Agreement
In connection with this offering, we will enter into a registration rights agreement with our Principal Stockholder, which will provide customary demand and piggyback registration rights. The registration rights agreement will also provide that we will pay customary expenses relating to such registrations and indemnify against certain liabilities that may arise under the Securities Act. See “Certain Relationships and Related Party Transactions—Agreements to be Entered in Connection with this Offering—Registration Rights Agreement.”
Rule 144
In general, under Rule 144, beginning 90 days after we become subject to the public company reporting requirements of the Exchange Act, any person who is not our affiliate, who was not our affiliate at any time during the preceding three months and who has held their shares for at least six months, including the holding period of any prior owner other than one of our affiliates, may sell shares without restriction, subject to the availability of current public information about us and subject to applicable lock-up restrictions. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than one of our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.
Beginning 90 days after we become subject to the public company reporting requirements of the Exchange Act and subject to applicable lock-up restrictions, a person who is our affiliate or who was our affiliate at any time during the preceding three months and who has beneficially owned restricted securities for at least six months, including the holding period of any prior owner other than one of our affiliates, is entitled to sell a number of shares within any three-month period that does not exceed the greater of: (i) 1% of the number of shares of our common stock outstanding, which will equal approximately 1,707,435 shares immediately after this offering; and (ii) the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
Sales under Rule 144 by our affiliates are also subject to certain manner of sale provisions, notice requirements and to the availability of current public information about us.
Rule 701
In general, under Rule 701, any of our employees, directors or officers who acquired shares from us in connection with a compensatory stock or option plan or other compensatory written agreement before the effective date of this offering are, subject to applicable lock-up restrictions, eligible to resell such shares in reliance upon Rule 144 beginning 90 days after the date of this prospectus. If such person is not an affiliate and was not our affiliate at any time during the preceding three months, the sale may be made subject only to the manner-of-sale restrictions of Rule 144. If such a person is an affiliate, the sale may be made under Rule 144 without compliance with the holding period requirements under Rule 144, but subject to the other Rule 144 restrictions described above.
Equity Incentive Plans
Following this offering, we intend to file with the SEC a registration statement on Form S-8 under the Securities Act covering the shares of common stock that are subject to outstanding options and other awards issuable pursuant to our 2026 Omnibus Incentive Plan. Shares covered by such registration statement will be available for sale in the open market following its effective date, subject to certain Rule 144 limitations applicable to affiliates and the terms of lock-up agreements, if applicable to those shares.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a general discussion of the material U.S. federal income tax considerations applicable to non-U.S. holders (as defined herein) with respect to their purchase, ownership and disposition of shares of our common stock issued pursuant to this offering. All prospective non-U.S. holders of our common stock should consult their own tax advisors with respect to the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership and disposition of our common stock. In general, a non-U.S. holder means a beneficial owner of our common stock (other than a partnership or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not or is not treated as, for U.S. federal income tax purposes:
| • | an individual who is a citizen or resident of the United States; |
| • | a corporation created or organized under the laws of the United States or of any state thereof or the District of Columbia; |
| • | an estate, the income of which is includable in gross income for U.S. federal income tax purposes regardless of its source; or |
| • | a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (the “Code”)) have the authority to control all of the trust’s substantial decisions or (ii) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person. |
This discussion is based on current provisions of the Code, existing and proposed U.S. Treasury Regulations promulgated thereunder, published rulings and administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect as of the date of this prospectus. These authorities are subject to change and to differing interpretation, possibly with retroactive effect. Any change or differing interpretation could alter the tax consequences to non-U.S. holders described herein.
We assume in this discussion that a non-U.S. holder holds shares of our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a non-U.S. holder in light of that non-U.S. holder’s particular circumstances, nor does it address any non-income tax consequences, such as estate or gift tax consequences, and any aspects of U.S. state, local or non-U.S. taxation, including the application or impact of any tax treaties or the base erosion and anti-abuse tax. This discussion also does not consider any specific facts or circumstances that may apply to a non-U.S. holder, including the impact of the Medicare contribution tax on net investment income and any minimum tax, and does not address the special tax rules applicable to particular non-U.S. holders, including, but not limited to, holders that own, or are deemed to own, more than 5% of our capital stock (except to the extent specifically set forth below), corporations that accumulate earnings to avoid U.S. federal income tax, tax-exempt or governmental organizations, banks, financial institutions, insurance companies, regulated investment companies, real estate investment trusts, brokers, dealers or traders in securities, commodities or currencies, tax-qualified retirement plans, “qualified foreign pension funds” as defined in Section 897(1)(2) of the Code and entities in which all of the interests of which are held by qualified foreign pension funds, “qualified shareholders” (within the meaning of Section 897(k)(3) of the Code) or investors therein, U.S. expatriates and former long-term residents of the United States, holders that are subject to the special tax accounting rules of Section 451(b) of the Code, holders who hold or receive our common stock pursuant to the exercise of employee stock options, through a tax-qualified retirement plan or otherwise as compensation, holders holding our common stock as part of a hedge, straddle, constructive sale, synthetic security or other risk reduction strategy, conversion transaction or other integrated investment, holders deemed to sell our common stock under the constructive sale provisions of the Code, controlled foreign corporations, foreign controlled foreign corporations and passive foreign investment companies.
In addition, this discussion does not address the tax treatment of partnerships (or entities or arrangements that are treated as partnerships for U.S. federal income tax purposes) or persons that hold our common stock
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through such partnerships. If a partnership, including any entity or arrangement treated as a partnership for U.S. federal income tax purposes, holds shares of our common stock, the U.S. federal income tax treatment of a partner in such partnership will generally depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. Such partners and partnerships should consult their own tax advisors regarding the tax consequences of the purchase, ownership and disposition of our common stock.
There can be no assurance that a court or the IRS will not challenge one or more of the tax consequences described herein, and we have not obtained, nor do we intend to obtain, a ruling from the IRS with respect to the U.S. federal income tax consequences to a non-U.S. holder of the purchase, ownership or disposition of our common stock.
Distributions on Our Common Stock
As described above in the section titled “Dividend Policy,” we do not anticipate declaring or paying dividends on our common stock for the foreseeable future. However, if we do make distributions of cash or property on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, the excess will be applied against and reduce the non-U.S. holder’s basis in its common stock (but not below zero). Any remaining excess will be treated as capital gain from the sale or exchange of such common stock and subject to the tax treatment described below in “—Gain on Sale, Exchange or other Taxable Disposition of Our common stock.” Any such distribution will also be subject to the discussion below regarding effectively connected income, backup withholding and FATCA withholding.
Subject to any backup withholding or FATCA withholding (each discussed below), dividends paid to a non-U.S. holder will generally be subject to withholding of U.S. federal income tax at a 30% rate of the gross amount of dividends or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence.
Dividends that are treated as effectively connected with a trade or business conducted by a non-U.S. holder within the United States and, if an applicable income tax treaty so provides, that are attributable to a permanent establishment or a fixed base maintained by the non-U.S. holder within the United States, are generally exempt from the 30% U.S. federal withholding tax described above if the non-U.S. holder satisfies applicable certification and disclosure requirements. However, such U.S. effectively connected income, net of specified deductions and credits, is taxed at the same regular U.S. federal income tax rates applicable to United States persons. Any U.S. effectively connected dividends of a non-U.S. holder that is a corporation may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the U.S. and such holder’s country of residence.
To claim a reduction or exemption from the U.S. federal withholding tax described above, a non-U.S. holder generally will be required to provide (i) a properly executed IRS Form W-8BEN or W-8BEN-E (or successor form), as applicable, and satisfy applicable certification and other requirements to claim the benefit of an applicable income tax treaty between the U.S. and such holder’s country of residence, or (ii) a properly executed IRS Form W-8ECI stating that dividends are not subject to withholding because they are effectively connected with such non-U.S. holder’s conduct of a trade or business within the United States. A non-U.S. holder that is eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. holders are urged to consult their tax advisors regarding their entitlement to benefits under a relevant income tax treaty.
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Gain on Sale, Exchange or Other Taxable Disposition of Our common stock
Subject to the discussion below regarding backup withholding and FATCA withholding, in general, a non-U.S. holder will not be subject to any U.S. federal income tax on any gain realized upon such holder’s sale, exchange or other taxable disposition of shares of our common stock unless:
| • | The gain is effectively connected with a U.S. trade or business of the non-U.S. holder, and, if an applicable income tax treaty so provides, is attributable to a permanent establishment or a fixed base maintained in the United States by such non-U.S. holder, in which case such gain will be taxed at the regular U.S. federal income tax rates applicable to United States persons and the non-U.S. holder will be required to file a U.S. federal income tax return. If the non-U.S. holder is treated as a corporation for U.S. federal income tax purposes, the branch profits tax described above in “—Distributions on Our Common Stock” also may apply; |
| • | The non-U.S. holder is an individual who is treated as present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met, in which case the non-U.S. holder will be subject to a flat 30% tax (or such lower rate as may be specified by an applicable income tax treaty) on the gain derived from the disposition, which may be offset by certain U.S. source capital losses of the non-U.S. holder, if any (even though the individual is not considered a resident of the United States); or |
| • | Our common stock constitutes a “United States real property interest” because we are, or have been, at any time during the five-year period ending on the date of such disposition (or the non-U.S. holder’s holding period of our common stock, if shorter) a “United States real property holding corporation” for U.S. federal income tax purposes. Generally, a corporation is a United States real property holding corporation only if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Although there can be no assurance, we do not believe that we currently are, or have been, a United States real property holding corporation, or that we are likely to become one in the future. Even if we are or become a United States real property holding corporation, provided that our common stock is “regularly traded,” as defined by applicable U.S. Treasury Regulations, on an established securities market during the calendar year in which the sale or other taxable disposition occurs, only a non-U.S. holder that holds more than 5% of our outstanding common stock, directly or indirectly, actually or constructively, during the shorter of the five-year period ending on the date of the disposition or the period that the non-U.S. holder held our common stock will be subject to U.S. federal income tax on the sale or other taxable disposition of our common stock. In such case, such non-U.S. holder generally will be taxed on its net gain derived from the sale or other taxable disposition at the regular U.S. federal income tax rates applicable to United States persons. No assurance can be provided that our common stock will continue to be regularly traded on an established securities market for purposes of the rules described above. |
Information Reporting and Backup Withholding
We (or an applicable agent or intermediary) must report annually to the IRS and to each non-U.S. holder the gross amount of the distributions, regardless of whether such distributions constitute dividends or whether any tax was actually withheld, on our common stock paid to such holder and the tax withheld, if any, with respect to such distribution. These information reporting requirements apply even if no withholding was required because the dividends were effectively connected with the holder’s conduct of a U.S. trade or business, or withholding was reduced or eliminated by an applicable income tax treaty. A non-U.S. holder will have to comply with specific certification procedures to establish that the holder is not a United States person in order to avoid backup withholding at the applicable rate (currently 24%) with respect to dividends on our common stock. A non-U.S. holder generally will not be subject to backup withholding with respect to payments of dividends on our common stock if such holder establishes an exemption by certifying his, her or its non-U.S. status by providing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI (or other applicable or successor form); provided the applicable withholding agent does not have actual knowledge or reason to know that such holder is a United States person.
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Information reporting and backup withholding will generally apply to the proceeds of a sale or other taxable disposition of our common stock by a non-U.S. holder effected by or through the U.S. office of any broker, U.S. or non-U.S., unless the holder establishes an exemption by certifying his, her or its status as a non-U.S. holder and satisfies certain other requirements or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of sale or other taxable disposition proceeds to a non-U.S. holder where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. However, for information reporting purposes, a sale or other taxable disposition effected through a non-U.S. office of a broker with substantial U.S. ownership or operations generally will be treated in a manner similar to a sale or other taxable disposition effected through a U.S. office of a broker. Non-U.S. holders should consult their own tax advisors regarding the application of the information reporting and backup withholding rules to them.
Copies of information returns may be made available to the tax authorities of the country in which the non-U.S. holder resides or is incorporated under the provisions of a specific treaty or agreement.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder may be allowed as a credit against the non-U.S. holder’s U.S. federal income tax liability, if any, or may entitle such holder to a refund from the IRS, provided that the required information is timely furnished to the IRS.
FATCA Withholding
Sections 1471 through 1474 of the Code, and the U.S. Treasury Regulations and other administrative guidance issued thereunder, commonly referred to as “FATCA,” generally impose a U.S. federal withholding tax of 30% on dividends on, and, subject to the proposed U.S. Treasury Regulations discussed below, the gross proceeds from a sale or other disposition of, our common stock paid to (i) a “foreign financial institution” (as defined in the Code), unless such institution enters into an agreement with the U.S. government to, among other things, withhold on certain payments and to collect and provide to the U.S. tax authorities certain information regarding certain U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or otherwise qualifies for an exemption from these rules, or (ii) a “non-financial foreign entity” (as defined in the Code), unless such entity provides the withholding agent with either a certification that it does not have any direct or indirect “substantial United States owners” (as defined in the Code) or provides the applicable withholding agent with a certification identifying, and information regarding, such substantial United States owners or otherwise qualifies for an exemption from these rules. An intergovernmental agreement between the United States and the non-U.S. holder’s country of residence may modify the requirements described in this paragraph.
Proposed U.S. Treasury Regulations eliminate FATCA withholding on the gross proceeds from a sale or other disposition of our common stock and may be relied upon by taxpayers until final U.S. Treasury Regulations are issued. We will not pay additional amounts or “gross up” payments to non-U.S. holders as a result of any withholding or deduction for taxes imposed under FATCA, if applicable. Under certain circumstances, certain non-U.S. holders might be eligible for refunds or credits of such taxes.
Investors are encouraged to consult with their tax advisors regarding the implications of FATCA to their particular circumstances.
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR REGARDING ITS PARTICULAR U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK.
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UNDERWRITING (CONFLICTS OF INTEREST)
We and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Morgan Stanley & Co. LLC, Jefferies LLC, BofA Securities, Inc. and RBC Capital Markets, LLC are the representatives of the underwriters.
| Underwriters |
Number of Shares |
|||
| Morgan Stanley & Co. LLC |
||||
| Jefferies LLC |
||||
| BofA Securities, Inc. |
||||
| RBC Capital Markets, LLC |
||||
| Guggenheim Securities, LLC |
||||
| Robert W. Baird & Co., Incorporated |
||||
| Stifel, Nicolaus & Company, Incorporated |
||||
| Nomura Securities International, Inc. |
||||
| WR Securities, LLC |
||||
| Academy Securities, Inc. |
||||
|
|
|
|||
| Total |
32,500,000 | |||
The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.
The underwriters have an option to buy up to an additional 4,875,000 shares from us. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters by us. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase 4,875,000 additional shares.
| No Exercise | Full Exercise | |||||||
| Per Share |
$ | $ | ||||||
| Total |
$ | $ | ||||||
Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. After the initial offering of the shares, the representatives may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part. The underwriters may offer and sell the shares to the public through one or more of their respective affiliates or other registered broker-dealers or selling agents.
We estimate that our share of the total expenses of this offering, excluding underwriting discounts and commissions, will be approximately $10,000,000. We have agreed to reimburse the underwriters for certain FINRA-related expenses incurred by them in connection with this offering in an amount up to $45,000. The underwriters have agreed to reimburse certain of our expenses in connection with this offering.
We have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act.
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We have agreed that, without the prior written consent of Morgan Stanley & Co. LLC and Jefferies LLC on behalf of the underwriters, we will not, and will not publicly disclose an intention to, during the period starting on the date of this prospectus and ending at 4:00 PM, Eastern Time, on the first Trading Day on or after the 180th Day after the date of this prospectus, or, if the 180th Day is not a Trading Day, immediately after 4:00 PM, Eastern Time, on the last Trading Day immediately preceding the 180th Day (the “lock-up period”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock, or (2) enter into any swap, loan or other arrangement (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward or any other derivative transaction or instrument, however described or defined) that transfers to another, in whole or in part, directly or indirectly, any of the economic consequences of ownership of our common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise, or (3) file or confidentially submit any registration statement with the SEC relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock, provided that any confidential or non-public submissions to the SEC of any registration statements under the Securities Act may be made (including in connection with the exercise of any registration rights described herein), and any preparations related thereto may be made, if no public announcement of such confidential or non-public submission will be made during the lock-up period and no such confidential or non-public submission will become a publicly filed registration statement during the lock-up period.
The restrictions above will not apply to:
(A) the shares of common stock to be sold in this offering;
(B) the issuance by us of shares of common stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date of this prospectus as described herein;
(C) grants of any options, restricted stock, restricted stock units or other equity awards and the issuance of shares of common stock or securities convertible into or exercisable for shares of common stock (whether upon the exercise of stock options or otherwise) to our employees, officers, directors, advisors or consultants pursuant to any employee benefit or stock-based compensation plan or agreement described herein;
(D) the filing of a registration statement on Form S-8 to register common stock issuable pursuant to any employee benefit plans, qualified stock option plans, or other employee compensation plans, described herein or any assumed benefit plan pursuant to an acquisition or similar strategic transaction contemplated by clause (F) below;
(E) facilitating the establishment of a trading plan on behalf of a shareholder, officer or director of ours pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of common stock, provided that (i) such plan does not provide for the transfer of common stock during the lock-up period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made by us regarding the establishment of such plan, such announcement or filing will include a statement to the effect that no transfer of common stock may be made under such plan during the lock-up period;
(F) the sale or issuance by us of shares of common stock or any securities convertible into, or exercisable or exchangeable for, common stock, or the entrance into an agreement to issue common stock or any securities convertible into, or exercisable or exchangeable for, common stock, in connection with any merger, joint venture, strategic alliances, commercial or other collaborative transaction or the acquisition or license of the business, property, technology or other assets of another individual or entity and the filing of a registration statement on Form S-4 or other appropriate form required by the Securities Act and any amendments thereto in connection therewith; provided that the aggregate number of shares of common stock or any securities convertible into, or
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exercisable or exchangeable for, common stock that we may issue or agree to issue pursuant to this clause (F) will not exceed 10.0% of the total number of shares of common stock outstanding immediately following the issuance of the shares of common stock to be sold in this offering; and provided, further, that the recipients thereof provide to the representatives a lock-up agreement if such recipient has not already delivered one;
(G) the withholding of common stock by us in connection with the vesting, settlement or exercise of equity awards, including for the payment of exercise price and tax, remittance and other obligations due as a result of vesting, settlement or exercise of equity awards (in each case, whether by way of “net” or “cashless” exercise, “net settlement” or otherwise) or in connection with the conversion of convertible securities; or
(H) the issuance by us of shares of common stock in connection with the Stock Split.
Our executive officers, our directors and other stockholders owning all of our common stock prior to this offering (such persons, collectively, the “lock-up parties”) have agreed that, without the prior written consent of Morgan Stanley & Co. LLC and Jefferies LLC, he, she or it will not, and will not cause any direct or indirect affiliate to, and will not publicly disclose an intention to, during the lock-up period, (1) offer, pledge, hypothecate or grant any security interest in, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, make any short sale or otherwise transfer or dispose of, directly or indirectly, any shares of common stock beneficially owned (as such term is used in Rule 13d-3 of the Exchange Act), by the lock-up party or any other securities so owned that are convertible into or exercisable or exchangeable (directly or indirectly) for, or that represent the right to receive, shares of common stock, including, without limitation, our preferred stock or securities which may be issued upon exercise of stock options, restricted stock units or warrants (collectively, the “Other Securities”), or (2) enter into any swap, hedging transaction or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock or Other Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or Other Securities, in cash or otherwise (a “Swap”).
The restrictions in the immediately preceding paragraph will not apply to the transfer of shares of common stock or Other Securities:
(i) as a bona fide gift or to a charitable organization or educational institution or for bona fide estate planning purposes;
(ii) by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or any immediate family member of the lock-up party;
(iii) to a trust, partnership, limited liability company or other entity for the direct or indirect benefit of the lock-up party and/or any immediate family member of the lock-up party;
(iv) by operation of law pursuant to a qualified domestic order, divorce settlement, divorce decree or separation agreement, or related court order related to the distribution of assets in connection with the dissolution of a marriage or civil union;
(v) to a corporation, partnership, limited liability company or other entity of which the lock-up party or any immediate family member is the legal and beneficial owner of all of the outstanding equity securities or similar interests;
(vi) if the lock-up party is a trust, to a trustor, trustee or beneficiary of the trust or to the estate of a beneficiary of such trust;
(vii) to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (i) through (vi) above;
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(viii) if the lock-up party is a corporation, partnership, limited liability company, trust or other business entity, to any shareholder, current or former partners, limited partner, manager, equityholder, or member of, or owner of a similar equity interest in, the lock-up party, as the case may be;
(ix) if the lock-up party is a corporation, partnership, limited liability company, trust or other business entity, (A) to another corporation, partnership, limited liability company, trust or other business entity so long as the transferee is an affiliate of the lock-up party, or to any investment fund or other entity which fund or entity controls, is controlled by, manages, is managed by or is under common control with the lock-up party (including, where the lock-up party is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership and, if the lock-up party is a trust, to a trustor or beneficiary of the trust) or affiliates of the lock-up party, or (B) as part of a distribution or other transfer or distribution to general or limited partners, members or shareholders of, or other holders of equity interest in, the lock-up party, or to the estate, nominee or custodian of any such general or limited partners, members, shareholders or other holders of equity interests;
(x) that the lock-up party may (A) purchase from the underwriters in this offering (if the lock-up party is not one of our officers or directors) or (B) acquire in open market transactions after the completion of this offering, provided that no public disclosure or filing under the Exchange Act will be voluntarily made reporting a reduction in beneficial ownership in connection with subsequent sales of shares of common stock or Other Securities acquired in this offering or in such open market transactions;
(xi) in connection with the exercise, conversion, vesting or settlement of options, restricted stock, restricted stock units, warrants or other rights to purchase shares of common stock or Other Securities (including, in each case, by way of “net” or “cashless” exercise, “net settlement” or otherwise), including any transfer to us or sale in an open market transaction for the payment of exercise price or tax withholdings or remittance payments due as a result of the exercise, conversion, vesting or settlement of such options, restricted stock, restricted stock units, warrants or rights; provided that any shares of common stock or Other Securities received as a result of such exercise, conversion, vesting or settlement will remain subject to the terms of the lock-up agreement; and provided, further, that any such options, restricted stock, restricted stock units, warrants or rights are held by the lock-up party pursuant to an agreement or equity award granted under a stock incentive plan or other equity award plan, each such agreement or plan which is described herein;
(xii) pursuant to a bona fide third-party tender offer, merger, amalgamation, consolidation or other similar transaction that is approved by our Board and made to all holders of our capital stock after this offering involving a Change of Control (as defined below) of us (for purposes hereof, “Change of Control” means any bona fide third party tender offer, merger, amalgamation, consolidation or other similar transaction, in one transaction or a series of related transactions, the result of which is that any “person” (as defined in Section 13(d)(3) of the Exchange Act), or group of persons, other than us or our subsidiaries, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of 50% or more of the total voting power of our voting stock (or of the surviving entity)) (including, without limitation, the entering into any lock-up, voting or similar agreement pursuant to which the lock-up party may agree to transfer, sell, tender or otherwise dispose of shares of common stock or Other Securities or other such securities in connection with such transaction, or vote any shares of common stock or Other Securities or other such securities in favor of any such transaction), provided that in the event that such tender offer, merger, amalgamation, consolidation or other similar transaction is not completed, the lock-up party’s shares of common stock and Other Securities will remain subject to the provisions of the lock-up agreement;
(xiii) to us in connection with (A) the termination of the lock-up party’s employment with us, (B) the lock-up party’s death or disability or (C) pursuant to agreements under which we have the option to repurchase such shares of common stock or Other Securities;
(xiv) in connection with the conversion, exchange or reclassification of any Other Securities into shares of common stock, or any conversion, exchange or reclassification of the common stock, including the Stock Split,
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provided that any such shares of common stock received upon such conversion, exchange or reclassification will be subject to the provisions of the lock-up agreement; or
(xv) with the prior written consent of Morgan Stanley & Co. LLC and Jefferies LLC;
provided, however, that in any such case, it will be a condition to such transfer that:
| • | in the case of any transfer pursuant to clauses (i) through (ix) above, each transferee agrees in writing to be bound by substantially the same terms described in the lock-up agreement to the extent and for the duration that such terms remain in effect at the time of such transfer (as if such transferee had been an original signatory hereto); |
| • | in the case of any transfer pursuant to clauses (i) through (iii), (v) through (ix) and (xiv) above, such transfer will not involve a disposition for value; and |
| • | in the case of any transfer pursuant to clauses (i) through (ix), (xi) and (xiii)(C) above, prior to the expiration of the lock-up period, it will be a condition to such transfer that no public disclosure or filing under the Exchange Act by any party to the transfer (donor, donee, transferor or transferee) will be made voluntarily during the lock-up period, and if the lock-up party is required to file a report under the Exchange Act reporting a change in beneficial ownership of shares of common stock or Other Securities during the lock-up period, the lock-up party will include a statement in such report indicating the circumstances of such transfer and, in the case of a transfer pursuant to clauses (i) through (ix), that the transferee has agreed to be bound by the terms of the lock-up agreement. |
Each lock-up party has also agreed that, to the extent such lock-up party has any demand and/or piggyback registration rights pursuant to any registration rights agreement described herein, such lock-up party may notify us privately during the lock-up period that such lock-up party is or will be exercising his, her or its registration rights under any such registration rights agreement following the expiration of the lock-up period and undertake preparations related thereto during the lock-up period; provided that, without the prior written consent of Morgan Stanley & Co. LLC and Jefferies LLC, the foregoing notification and/or preparations do not request, require or result in the public filing of a registration statement with the SEC or any other public announcement of such proposed registration by the lock-up party, us or any third party during the lock-up period (and no such filing, public announcement or activity will be voluntarily made or taken by the lock-up party, us or any third party during the lock-up period).
Furthermore, notwithstanding the restrictions imposed by any lock-up agreement, each lock-up party may establish or amend a written trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act relating to the transfer of shares of common stock or Other Securities, provided that such plan does not provide for any transfers of shares of common stock or Other Securities during the lock-up period other than as permitted by the lock-up agreement and any required public disclosure, announcement or filing under the Exchange Act made by us or any person regarding the establishment or amendment of such plan during the lock-up period will include a statement that the lock-up party is not permitted to transfer, sell or otherwise dispose of securities under such plan during the lock-up period in contravention of the lock-up agreement, and no public announcement, report or filing under the Exchange Act, or any other public filing, report or announcement, will be voluntarily made regarding the establishment or amendment of such plan during the lock-up period.
Prior to the offering, there has been no public market for the shares. The initial public offering price has been negotiated among us and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be our historical performance, estimates of our business potential and earnings prospects, an assessment of our management and the consideration of the above factors in relation to market valuation of companies in related businesses.
We have applied to list our shares of common stock on the NYSE under the symbol “AADX.”
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In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering, and a short position represents the amount of such sales that have not been covered by subsequent purchases. A “covered short position” is a short position that is not greater than the amount of additional shares for which the underwriters’ option described above may be exercised. The underwriters may cover any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to cover the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option described above. “Naked” short sales are any short sales that create a short position greater than the amount of additional shares for which the option described above may be exercised. The underwriters must cover any such naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representative has repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of our stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. The underwriters are not required to engage in these activities and may end any of these activities at any time. These transactions may be effected on the NYSE, in the over-the-counter market or otherwise.
A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of shares of common stock to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make internet distributions on the same basis as other allocations.
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and/or their respective affiliates have provided, and may in the future provide, a variety of these services to the issuer and to persons and entities with relationships with the issuer, for which they received or will receive customary fees and expenses.
In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and instruments of the issuer (directly, as collateral securing other obligations or otherwise) and persons and entities with relationships with the issuer. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and publish or express independent research views in respect of such assets,
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securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and short positions in such assets, securities and instruments.
“Wolfe | Nomura Alliance” is the marketing name used by Wolfe Research Securities and Nomura Securities International, Inc. in connection with certain equity capital markets activities conducted jointly by the firms. Both Nomura Securities International, Inc. and WR Securities, LLC are serving as underwriters in this offering. In addition, WR Securities, LLC and certain of its affiliates may provide sales support services, investor feedback, investor education and/or other independent equity research services in connection with this offering.
Conflicts of Interest
Affiliates of Morgan Stanley & Co. LLC and Jefferies LLC are lenders under certain of our facilities under the Credit Agreement, and each of the affiliates of Morgan Stanley & Co. LLC and Jefferies LLC will receive 5% or more of the net proceeds of this offering due to the repayment of borrowings thereunder. Therefore, each of Morgan Stanley & Co. LLC and Jefferies LLC is deemed to have a conflict of interest within the meaning of FINRA Rule 5121. Accordingly, this offering will be conducted in compliance with Rule 5121, which requires, among other things, that a “qualified independent underwriter” participate in the preparation of, and exercise the usual standards of “due diligence” with respect to, the registration statement and this prospectus. BofA Securities, Inc. has agreed to act as a qualified independent underwriter for this offering and to undertake the legal responsibilities and liabilities of an underwriter under the Securities Act, specifically including those inherent in Section 11 thereof. BofA Securities, Inc. will not receive any additional fees for serving as a qualified independent underwriter in connection with this offering. We have agreed to indemnify BofA Securities, Inc. against liabilities incurred in connection with acting as a qualified independent underwriter, including liabilities under the Securities Act. Pursuant to Rule 5121, neither of the Conflicted Parties will confirm any sales to any account over which it exercises discretionary authority without the specific written approval of the account holder.
Directed Share Program
At our request, the underwriters have reserved up to 1,625,000 shares of our common stock, or 5.0% of shares of common stock to be issued by us and offered by this prospectus (excluding the additional shares that the underwriters have an option to purchase), for sale, at the initial public offering price, to certain of our directors, officers, employees and others. Eligible participants must reside in the United States and be at least 18 years of age. Management will provide the list of prospective participants to Morgan Stanley & Co. LLC, an underwriter in this offering, who will administer the directed share program.
We cannot provide any assurance that any eligible participant will receive an invitation or will receive an allocation in the directed share program. Prospective participants must submit required documentation to the program administrator. If the directed share program is oversubscribed, allocations will be made at the discretion of management to eligible participants that indicated an interest in purchasing. The program administrator will notify each participant of his or her respective share allocation, along with the total purchase price due upon confirmation of participation. The shares under the directed share program will be allocated following pricing and settlement in the same manner as the shares sold to the general public.
Any shares sold in the directed share program to our directors or officers who have entered into lock-up agreements described above will be subject to the provisions of such lock-up agreements. The number of shares of our common stock available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus. We have agreed to indemnify Morgan Stanley & Co. LLC against certain liabilities and expenses, including liabilities under the Securities Act, in connection with the directed share program.
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Selling Restrictions
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of shares of common stock offered by this prospectus in any jurisdiction where action for that purpose is required. The shares of common stock offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such shares of common stock be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any shares of common stock offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
European Economic Area
In relation to each Member State of the European Economic Area (each, a “Relevant Member State”), an offer to the public of any shares of common stock may not be made in that Relevant Member State prior to the publication of a prospectus in relation to the shares of common stock which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Regulation, except that an offer to the public in that Relevant Member State of any shares of common stock may be made at any time under the following exemptions under the Prospectus Regulation:
| • | to any legal entity which is a “qualified investor” as defined under the Prospectus Regulation; |
| • | to fewer than 150 natural or legal persons (other than “qualified investors” as defined under the Prospectus Regulation), subject to obtaining the prior consent of the underwriters for any such offer; or |
| • | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
provided that no such offer of shares of common stock shall result in a requirement for the company or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or a supplemental prospectus pursuant to Article 23 of the Prospectus Regulation and each person who initially acquires any shares of common stock or to whom any offer is made will be deemed to have represented, warranted and agreed to and with each of the underwriters and the company that it is a qualified investor within the meaning of Article 2 of the Prospectus Regulation.
In the case of any shares of common stock being offered to a financial intermediary as that term is used in Article 1(4) of the Prospectus Regulation, each financial intermediary will also be deemed to have represented, warranted and agreed that the shares of common stock acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares of common stock to the public, other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances in which the prior consent of the underwriters has been obtained to each such proposed offer or resale.
For the purposes of this provision, the expression an “offer to the public” in relation to any shares of common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of common stock to be offered so as to enable an investor to decide to purchase or subscribe for any shares of common stock, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
United Kingdom
This prospectus has been prepared on the basis that the offering of the shares of common stock falls within one of the exceptions specified in Part 1 of Schedule 1 of the Public Offers and Admissions to Trading
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Regulations 2024 (the “POATRs”) and, accordingly, there will not be a prospectus prepared or published for the purposes of the POATRs. This prospectus does not constitute a prospectus for the purposes of the POATRs.
Each underwriter has represented and agreed that it has not made and will not make an offer of shares of common stock which are the subject of this prospectus to the public in the United Kingdom, except that it may make an offer:
| • | at any time to any legal entity which is a qualified investor as defined in paragraph 15 of Schedule 1 to the POATRs; |
| • | at any time to fewer than 150 persons (other than qualified investors as defined in paragraph 15 of Schedule 1 to the POATRs) in the United Kingdom subject to obtaining the prior consent of the relevant underwriters nominated by us for any such offer; or |
| • | at any time in any other circumstances falling within Part 1 of Schedule 1 to the POATRs. |
For the purposes of this provision, the expression an “offer of shares of common stock” to the public in relation to any shares of common stock in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and the shares of common stock to be offered so as to enable an investor to decide to purchase or subscribe for the shares of common stock.
Canada
The shares of common stock may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations. Any resale of the shares of common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Hong Kong
The shares of common stock have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571 of the laws of Hong Kong) (the “SFO”) and any rules made thereunder; or (b) in other circumstances which do not result in this prospectus being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (the “CO”) or which do not constitute an offer to the public within the meaning of the CO. No advertisement, invitation or document relating to the shares of common stock has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the shares of common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made thereunder.
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Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, the shares of common stock may not be offered or sold, or made the subject of an invitation for subscription or purchase, nor may this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase of the shares of common stock be circulated, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act 2001 of Singapore, as modified or amended from time to time (the “SFA”)) pursuant to Section 274 of the SFA or (ii) to an accredited investor (as defined in Section 4A of the SFA) pursuant to and in accordance with the conditions specified in Section 275 of the SFA.
Japan
The shares of common stock have not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act. Accordingly, none of the shares of common stock nor any interest therein may be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any “resident” of, Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to or for the benefit of a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws, regulations and ministerial guidelines of Japan in effect at the relevant time.
Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission in relation to this offering. This prospectus does not constitute a prospectus, product disclosure statement, or other disclosure document under Chapter 6D.2 of the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares of common stock may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares of common stock without disclosure to investors under Chapter 6D of the Corporations Act.
The shares of common stock applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise, or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any shares of common stock recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances and, if necessary, seek expert advice on those matters.
Dubai International Financial Centre
This prospectus relates to an “Exempt Offer” in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (the “DFSA”). This prospectus is intended for distribution only to persons of a type
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specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares of common stock to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares of common stock should conduct their own due diligence on the shares of common stock. If you do not understand the contents of this prospectus, you should consult an authorized financial advisor.
United Arab Emirates
The shares of common stock have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (including the Dubai International Financial Centre) other than in compliance with the laws of the United Arab Emirates (and the Dubai International Financial Centre) governing the issue, offering and sale of securities. Further, this prospectus does not constitute a public offer of shares of common stock in the United Arab Emirates (including the Dubai International Financial Centre) and is not intended to be a public offer. This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Securities and Commodities Authority, Financial Services Regulatory Authority (FSRA) or the Dubai Financial Services Authority.
Switzerland
The shares of common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this prospectus nor any other offering or marketing material relating to the offering, us or the shares of common stock has been or will be filed with or approved by any Swiss regulatory authority. In particular, this prospectus will not be filed with, and the offer of shares of common stock will not be supervised by, FINMA, and the offer of shares of common stock has not been and will not be authorized under CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of the shares of common stock.
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Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements at December 31, 2025 and 2024, and for each of the two years in the period ended December 31, 2025, as set forth in their report. We’ve included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.
The consolidated financial statements of Consolidated Boring Inc. as of and for the year ended December 31, 2025 included in this prospectus have been so included in reliance on the report of Barnes, Dennig & Co., Ltd., an independent registered public accounting firm, upon the authority of said firm as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some items of which are contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or document referred to are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit.
The SEC maintains a website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov. As a result of this offering, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available at the website of the SEC referred to above. We also maintain a website at https://applied-ad.com/. Upon completion of this offering, you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
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Audited Consolidated Financial Statements of Applied Aerospace & Defense, Inc.
Unaudited Condensed Consolidated Financial Statements of Applied Aerospace & Defense, Inc.
| Page | ||||
| Unaudited Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025 |
F-36 | |||
| F-37 | ||||
| F-38 | ||||
| F-39 | ||||
| Notes to Unaudited Condensed Consolidated Financial Statements |
F-40 | |||
Audited Consolidated Financial Statements of Consolidated Boring Inc.
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Report of Independent Registered Public Accounting Firm
To the Shareholder and the Board of Directors of Applied Aerospace & Defense, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Applied Aerospace & Defense, Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive loss, shareholder’s equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2025.
Philadelphia, PA
March 16, 2026
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Applied Aerospace & Defense, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 15,475 | $ | 27,466 | ||||
| Accounts receivable, net |
71,386 | 51,337 | ||||||
| Contract assets |
140,817 | 110,567 | ||||||
| Inventories |
57,375 | 50,494 | ||||||
| Prepaid expenses and other current assets |
6,521 | 5,101 | ||||||
|
|
|
|
|
|||||
| Total current assets |
291,574 | 244,965 | ||||||
| Property, plant and equipment, net |
119,777 | 116,609 | ||||||
| Goodwill |
342,491 | 332,965 | ||||||
| Intangible assets, net |
199,672 | 215,934 | ||||||
| Other assets |
45,787 | 39,319 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 999,301 | $ | 949,792 | ||||
|
|
|
|
|
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| Liabilities and shareholder’s equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 37,894 | $ | 33,649 | ||||
| Contract liabilities |
21,550 | 32,000 | ||||||
| Accrued expenses and other current liabilities |
26,342 | 25,718 | ||||||
| Revolving line of credit |
— | 15,000 | ||||||
| Current portion of long-term debt |
7,068 | 5,678 | ||||||
| Current portion of finance lease liabilities |
1,628 | 1,496 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
94,482 | 113,541 | ||||||
| Long-term debt, net |
626,975 | 554,947 | ||||||
| Finance lease liabilities, net of current portion |
30,405 | 31,177 | ||||||
| Deferred income taxes |
35,184 | 34,479 | ||||||
| Other non-current liabilities |
52,791 | 49,803 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
839,837 | 783,947 | ||||||
| Shareholder’s equity: |
||||||||
| Common shares, $0.01 par value; 200 shares authorized, 149 and 101 shares issued and outstanding at December 31, 2025 and 2024 |
— | — | ||||||
| Additional paid-in capital |
223,147 | 212,276 | ||||||
| Accumulated deficit |
(63,037 | ) | (46,013 | ) | ||||
| Accumulated other comprehensive loss |
(646 | ) | (418 | ) | ||||
|
|
|
|
|
|||||
| Total shareholder’s equity |
159,464 | 165,845 | ||||||
|
|
|
|
|
|||||
| Total liabilities and shareholder’s equity |
$ | 999,301 | $ | 949,792 | ||||
|
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|
|
|
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The accompanying notes are an integral part of these consolidated financial statements.
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Applied Aerospace & Defense, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue |
$ | 498,763 | $ | 399,790 | ||||
| Cost of goods sold |
359,384 | 301,715 | ||||||
|
|
|
|
|
|||||
| Gross profit |
139,379 | 98,075 | ||||||
| Selling, general, and administrative expenses |
54,447 | 41,748 | ||||||
| Intangible asset amortization expense |
26,063 | 23,461 | ||||||
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| Operating income |
58,869 | 32,866 | ||||||
| Interest expense, net |
72,806 | 63,705 | ||||||
|
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|
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| Loss before income taxes |
(13,937 | ) | (30,839 | ) | ||||
| Income tax expense |
3,087 | 3,927 | ||||||
|
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|||||
| Net loss |
$ | (17,024 | ) | $ | (34,766 | ) | ||
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| Other comprehensive loss: |
||||||||
| Net loss from postretirement benefit plans |
(228 | ) | (275 | ) | ||||
|
|
|
|
|
|||||
| Comprehensive loss |
$ | (17,252 | ) | $ | (35,041 | ) | ||
|
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|
|
|
|||||
| Net loss per share – basic and diluted |
$ | (170,240 | ) | $ | (347,660 | ) | ||
| Weighted average shares outstanding – basic and diluted |
100 | 100 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
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Applied Aerospace & Defense, Inc.
Consolidated Statements of Shareholder’s Equity
(in thousands, except share data)
| Common Shares | Accumulated Deficit |
Accumulated Other Comprehensive Loss |
Total Shareholder’s Equity |
|||||||||||||||||||||
| Shares | Amount | Additional Paid-in Capital |
||||||||||||||||||||||
| Balance as of December 31, 2023 |
100 | $ | — | $ | 289,293 | $ | (11,247 | ) | $ | (143 | ) | $ | 277,903 | |||||||||||
| Net loss |
(34,766 | ) | (34,766 | ) | ||||||||||||||||||||
| Other comprehensive loss, net of tax |
(275 | ) | (275 | ) | ||||||||||||||||||||
| Share-based compensation expense |
483 | 483 | ||||||||||||||||||||||
| Capital contributions |
1 | — | 2,500 | 2,500 | ||||||||||||||||||||
| Distributions paid |
(80,000 | ) | (80,000 | ) | ||||||||||||||||||||
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|
|
|
|
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| Balance as of December 31, 2024 |
101 | $ | — | $ | 212,276 | $ | (46,013 | ) | $ | (418 | ) | $ | 165,845 | |||||||||||
| Net loss |
(17,024 | ) | (17,024 | ) | ||||||||||||||||||||
| Other comprehensive loss, net of tax |
(228 | ) | (228 | ) | ||||||||||||||||||||
| Share-based compensation expense |
810 | 810 | ||||||||||||||||||||||
| Reclassification of liability to equity share-based compensation |
5,061 | 5,061 | ||||||||||||||||||||||
| Capital contributions |
48 | — | 5,000 | 5,000 | ||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||||
| Balance as of December 31, 2025 |
149 | $ | — | $ | 223,147 | $ | (63,037 | ) | $ | (646 | ) | $ | 159,464 | |||||||||||
|
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|
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|
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|
|
|
|
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The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
Applied Aerospace & Defense, Inc.
Consolidated Statements of Cash Flows
(in thousands)
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (17,024 | ) | $ | (34,766 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
||||||||
| Depreciation and amortization |
39,420 | 35,222 | ||||||
| Share-based compensation expense |
3,210 | 2,535 | ||||||
| Non-cash interest expense of debt discount and issuance costs |
6,466 | 3,778 | ||||||
| Deferred income taxes |
(274 | ) | (4,708 | ) | ||||
| Net changes in operating assets and liabilities, excluding the effects of acquisitions: |
||||||||
| Accounts receivable, net |
(19,565 | ) | (6,175 | ) | ||||
| Contract assets |
(29,582 | ) | 4,518 | |||||
| Inventories |
(6,484 | ) | (2,959 | ) | ||||
| Prepaid expenses and other assets |
(6,651 | ) | 563 | |||||
| Accounts payable |
5,532 | 3,986 | ||||||
| Contract liabilities |
(12,393 | ) | 3,318 | |||||
| Accrued expenses and other current liabilities |
6,421 | (1,953 | ) | |||||
| Operating lease right-of use assets and liabilities |
1,983 | 1,290 | ||||||
|
|
|
|
|
|||||
| Net cash (used in) provided by operating activities |
(28,941 | ) | 4,649 | |||||
|
|
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(17,433 | ) | (14,878 | ) | ||||
| Payment for acquisitions, net of cash acquired |
(10,351 | ) | (34,268 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(27,784 | ) | (49,146 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of long-term debt, net of discount |
433,336 | 134,769 | ||||||
| Repayments of long-term debt |
(365,389 | ) | (20,190 | ) | ||||
| Proceeds from revolving line of credit |
27,000 | 8,000 | ||||||
| Repayments of revolving line of credit |
(42,000 | ) | — | |||||
| Payment of third-party debt issuance costs |
(952 | ) | (3,082 | ) | ||||
| Payments on finance lease liabilities |
(1,010 | ) | (1,334 | ) | ||||
| Payments on equipment financing obligations |
(1,251 | ) | (506 | ) | ||||
| Payment of contingent consideration |
(5,000 | ) | — | |||||
| Distributions paid |
— | (80,000 | ) | |||||
|
|
|
|
|
|||||
| Net cash provided by financing activities |
44,734 | 37,657 | ||||||
|
|
|
|
|
|||||
| Net decrease in cash and cash equivalents |
(11,991 | ) | (6,840 | ) | ||||
| Cash and cash equivalents, beginning of period |
27,466 | 34,306 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents, end of period |
$ | 15,475 | $ | 27,466 | ||||
|
|
|
|
|
|||||
| Supplemental disclosures of cash flow information: |
||||||||
| Cash paid for income taxes |
$ | 9,425 | $ | 7,056 | ||||
| Cash paid for interest |
62,743 | 62,561 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
| 1. | Organization and Nature of the Business |
Applied Aerospace & Defense, Inc. (the “Company”) specializes in providing advanced engineering and vertically integrated manufacturing solutions for leading and next-generation space and defense technology companies. The Company builds complex hardware for extreme operating environments, combining deep material science and IP-enabled process expertise with the ability to enable rapid prototyping, enhance new product development, and responsively scale production. The Company operates various manufacturing locations throughout the United States. As of December 31, 2025, the Company was wholly owned by AA&D Holdings, LP (“AA&D Holdings”).
Combination Transaction
On November 14, 2025, AA&D Holdings completed a merger with Rotor Topco, LP (“Rotor Topco”), pursuant to the Agreement and Plan of Merger (the “Combination”). Upon completion of the Combination, all outstanding units of Rotor Topco were automatically converted into units of AA&D Holdings and all of Rotor Topco’s existing subsidiaries became subsidiaries of the Company, resulting in the combination of the businesses previously operating as Applied Aerospace Structures Corporation (“AASC”) and PCX Aerostructures, LLC (“PCX”). The Combination was accounted for as a common control transaction as both AA&D Holdings and Rotor Topco were under the common control of Greenbriar Equity Fund V, L.P. (“Greenbriar”).
Innovative Composite Engineering Acquisition
On October 1, 2024, the Company completed its acquisition of Innovative Composite Engineering, LLC (the “ICEL Acquisition”), which expands the range of solutions offered by the Company and increases the Company’s ability to use carbon fiber technology to deliver lightweight, durable, and technically complex composite solutions. Refer to Note 4, Business Combinations, for additional information about the Company’s acquisition of ICEL.
NeXolve Acquisition
On March 4, 2025, the Company completed its acquisition of NeXolve Holdings, LLC (the “NeXolve Acquisition”), bringing deployable space technology and advanced polymer expertise to the Company. Refer to Note 4, Business Combinations, for additional information about the Company’s acquisition of NeXolve.
Unless specifically noted otherwise, as used throughout these consolidated financial statements, “the Company” refers to the business, operations and financial results of the Company and its wholly owned subsidiaries. Refer to Note 2, Summary of Significant Accounting Policies - Basis of Presentation and Use of Estimates, for further details on the presentation of the accompanying financial statements as a result of the Combination, as well as the ICEL and NeXolve Acquisitions.
| 2. | Summary of Significant Accounting Policies |
Basis of Presentation and Use of Estimates
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation and combination.
F-6
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). References to Financial Accounting Standards Board (“FASB”) standards are made to the FASB Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”).
The historical periods included in the accompanying consolidated financial statements have been retrospectively combined to reflect the Combination between the subsidiaries of Rotor Topco and AA&D Holdings that are consolidated by the Company, as discussed in Note 1, Organization and Nature of the Business. The assets, liabilities, equity, revenues, and expenses of the combining entities have been presented on a combined basis for all periods presented using historical carrying amounts.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Business Combinations
The Company initially assesses each acquisition to determine whether it qualifies as a business combination or should be treated as an asset acquisition for accounting purposes. If the acquired set of activities and assets does not meet the definition of a business, as defined by GAAP, the transaction is accounted for as an asset acquisition using the cost accumulation method.
If the acquired set of activities and assets meets the definition of a business, the Company applies the acquisition method of accounting and accounts for the transaction as a business combination. In a business combination, assets acquired and liabilities assumed are generally recorded at their respective fair values as of the acquisition date. The excess of the purchase price over the fair value of the acquired net assets, if applicable, is recorded as goodwill. In a business combination, the operating results of the acquired business are included in the Company’s Consolidated Statements of Operations and Comprehensive Loss, beginning on the closing date of the acquisition. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.
Significant judgment is involved in determining the fair value assigned to assets acquired and liabilities assumed in a business combination, as well as the estimated useful lives of assets. These estimates can materially affect the Company’s Consolidated Statements of Operations and Comprehensive Loss and Consolidated Balance Sheets. The fair value of intangible assets are determined using information available as of the acquisition date and are based on estimates and assumptions that are deemed reasonable by management. Significant estimates and assumptions include but are not limited to revenue growth, projected margins, useful lives of intangible assets, and the discount rate used to calculate the present value of expected future cash flows.
The Company may be required to pay additional consideration related to business combinations if certain milestones are achieved or other contractual conditions are fulfilled. The Company recognizes this obligation as a contingent consideration liability measured at fair value within Accrued expenses and other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets. The determination of fair value requires significant management judgment and involves the review of key assumptions such as projected revenues. In each reporting period after the acquisition, the Company revalues the contingent consideration liability and records increases or decreases in the fair value of the liability on the Consolidated Statements of Operations and Comprehensive Loss.
F-7
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
While the Company uses its best estimates and assumptions to accurately value assets acquired, liabilities assumed, and the consideration transferred as of the acquisition date, estimates are inherently uncertain and may require adjustment. Additionally, following the acquisition date, there may be adjustments to the purchase price for net working capital and other post-closing adjustments. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired, liabilities assumed, or the measurement of the consideration transferred with a corresponding offset to goodwill. After the measurement period ends, any subsequent adjustments are recorded in the Consolidated Statements of Operations and Comprehensive Loss in the period in which they are identified.
Further details are provided in Note 4, Business Combinations and Note 5, Fair Value Measurements.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks and highly liquid investments with maturities of three months or less when purchased. The carrying value of cash and cash equivalents approximates their estimated fair value due to their short maturities. At December 31, 2025 and 2024, and at various times throughout the years then ended, the Company had deposits in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes there is little or no exposure to any significant credit risk.
Concentration of Credit Risk
The Company currently generates a majority of its revenue from customers in the aerospace and defense industry. For the year ended December 31, 2025, the Company had 3 customers that generated greater than 10% of the Company’s revenues, and these customers collectively comprised 59% of the Company’s total revenues during the year. As of December 31, 2025, these 3 customers accounted for 60% of accounts receivable. For the year ended December 31, 2025, the Company had revenues from Customer A, Customer B, and Customer C of 31%, 18%, and 10% respectively, of consolidated revenues. For the year ended December 31, 2025, the Company had amounts owed from Customer A, Customer B, and Customer C of 31%, 10%, and 19%, respectively, of consolidated accounts receivable.
For the year ended December 31, 2024, the Company had 2 customers that generated greater than 10% of the Company’s revenues, and these customers collectively comprised 53% of the Company’s total revenues during the year. As of December 31, 2024, 3 customers accounted for 49% of accounts receivable. For the year ended December 31, 2024, the Company had revenues from Customer A and Customer B of 31% and 22%, respectively, of consolidated revenues. For the year ended December 31, 2024, the Company had amounts owed from Customer A, Customer B, and Customer C of 21%, 12%, and 16%, respectively, of consolidated accounts receivable.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable represents customer obligations due under normal trade terms and is presented net of any allowance for credit losses. The Company recognizes an allowance for expected credit losses in accordance with ASC 326, Financial Instruments – Credit Losses. Accounts receivable with similar risk characteristics are evaluated together on a pooled basis to determine the amount of the allowance for credit losses based on historical loss experience, current economic conditions, and the Company’s expectations of future economic conditions and specific collectability matters. The allowance for credit losses reduces the accounts receivable balance to the estimated net amount expected to be collected. When a receivable is determined to be uncollectible, the balance is written off against the allowance for current expected credit losses. Provisions for
F-8
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
credit losses are included in Selling, general, and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss. Allowance for credit loss activity for the years ended December 31, 2025 and 2024 was immaterial.
Inventories
Inventories, consisting of various components such as raw materials, work-in-process, and finished goods, are recorded at the lower of cost, determined under the first-in, first-out basis, or net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. The majority of inventories represents raw materials for contracts where control has not yet transferred to the customer.
Property, Plant and Equipment
Property, plant and equipment are initially recorded at cost and depreciated on a straight-line basis over the estimated useful lives of the related assets. Major repairs that extend service lives are capitalized, and routine maintenance and repairs are expensed as incurred. The estimated useful lives of the Company’s depreciable property, plant, and equipment by major asset category are as follows:
| Years | ||||
| Land improvements |
10-30 | |||
| Buildings and improvements |
10-40 | |||
| Machinery and equipment |
5-20 | |||
| Furniture and fixtures |
5-10 | |||
| Construction in progress |
N/A | |||
Property, plant and equipment, net also includes capitalized amounts for leasehold improvements and finance lease right-of-use assets. Leasehold improvements are amortized on a straight-line basis using the shorter of their estimated useful lives or the lease term. Additional information is provided in Note 11, Leases.
Impairment of Long-Lived and Intangible Assets
The Company evaluates the recoverability of long-lived assets, including finite-lived intangible assets, whenever events and changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. When factors indicate that long-lived assets may be impaired, the Company assesses whether the carrying amount of a long-lived asset or asset group is recoverable by comparing it to the estimate of future undiscounted cash flows that the asset or asset group is expected to generate over the remaining useful life of the asset or the primary asset in the asset group. If the estimated undiscounted cash flows are less than the carrying amount, the Company recognizes an impairment charge in the current period for the difference between the asset or asset group’s fair value and its carrying amount. The Company did not have any long-lived or intangible asset impairments during the years ended December 31, 2025 and 2024.
Goodwill and Intangible Assets
Goodwill is recognized in a business combination as the excess of the purchase price over the fair value of the identifiable net assets, including intangible assets, acquired. Intangible assets with finite lives are amortized over their useful lives, and the remaining useful lives of intangible assets are updated when facts or circumstances warrant a revision.
F-9
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
The Company evaluates goodwill for potential impairment at least annually, or more often, if and when events and circumstances indicate that goodwill may be impaired. The annual evaluation typically begins with an assessment of qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. This includes, but is not limited to, significant adverse changes in the business climate, market conditions, or other relevant events and circumstances that could negatively affect the fair value of the reporting unit. If, after considering all relevant events and circumstances in the qualitative assessment, the Company cannot conclude that goodwill is not impaired, a quantitative assessment is performed.
A quantitative assessment involves estimating the fair value of the reporting unit and comparing to its carrying amount. The Company estimates the fair value of its reporting unit using discounted cash flow models or other appropriate valuation techniques, such as comparative transactions or market multiples. Determining fair values requires the exercise of significant judgments on key assumptions, including but not limited to, the amount and timing of expected future cash flows, long-term growth rates, and discount rates. Key assumptions are based on the best estimate, including consideration of related factors such as market conditions, expected future business plans, existing contracts with customers and suppliers, and historical performance. The fair value estimates resulting from the application of these methodologies are based on inputs classified within Level 3 of the fair value hierarchy, as described below. If the carrying amount of the reporting unit exceeds its fair value, the difference is recognized as goodwill impairment in the period identified.
Revenue Recognition
The Company’s revenue is principally from contracts with customers to provide design, analysis, fabrication, assembly, inspection, and testing of specialized aerospace and defense components as well as the repair and overhaul of such components. Generally, contracts are identified for accounting and reporting when a purchase order or similar statement of work is issued by a customer for a specified number of units of product or services as this is the point when enforceable rights and obligations are established. The Company is the principal in substantially all current contracts.
A performance obligation is defined as a promised distinct good or service, and revenue is recognized when control of the underlying good or service is transferred to the customer in an amount that reflects the consideration to which the Company expects to be entitled. The Company considers a number of factors when determining whether a promise is a distinct performance obligation, including whether the customer can benefit from the good or service on its own or together with other resources that are readily available to the customer, whether the Company provides a significant service of integrating goods or services to deliver a combined output to the customer, or whether the goods or services are highly interdependent. The Company’s performance obligations range from engineering design (often referred to as nonrecurring engineering services) and overhaul and repair services to component fabrication for original equipment manufacturers (“OEMs”).
The amount of consideration to which the Company expects to be entitled as it satisfies each performance obligation is based on the allocation of the total estimated transaction price within the contract to each performance obligation based on its estimated stand-alone selling price. In most contracts, the transaction price comprises only fixed consideration. For performance obligations where the stand-alone selling price is not directly observable, the Company estimates the stand-alone selling price using a cost-plus-margin approach.
Service related performance obligations, principally representing nonrecurring engineering and repair and overhaul services, are recognized over the contractual period as services are rendered. The majority of the aerospace and defense components that the Company manufactures do not have an alternative use because of their highly specialized nature. The Company recognizes revenue over time as it manufactures these components when contractual terms provide the Company with an enforceable right to payment for work completed to date.
F-10
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Otherwise, revenue for these components is recognized at a point in time, generally based on shipping terms.
For revenue recognized over time, the Company typically measures its progress toward complete satisfaction using an input method based on costs incurred as a percentage of the total estimated costs at completion (“EAC”) to satisfy each performance obligation. The Company reassesses its EAC at each reporting date. Cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends, and other economic projections. Significant factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, and asset utilization. Changes in estimates of the transaction price or EAC are recognized on a cumulative catch-up basis. Forward loss reserves for anticipated losses on long-term contracts are recorded in full when such losses become evident. As of December 31, 2025 and 2024, no significant forward loss reserves have been recognized, and cumulative catch-up adjustments resulting from changes in estimated transaction prices or EACs were immaterial.
Payment terms vary by contract, including payment upon shipment or delivery, and milestone payments that occur throughout the contract term. The Company has elected as a practical expedient not to adjust the amount of consideration for the effects of a significant financing component when the period between customer payment and transfer of the related good or service is one year or less. The Company does not currently have any material contracts with significant financing components. The Company generally is not subject to collecting sales tax and has made an accounting policy election to exclude from the transaction price any sales and other similar taxes collected from customers. As a result, any such collections are accounted for on a net basis.
Shipping and handling activities are considered costs to fulfill the Company’s promises to customers rather than separate performance obligations.
Contract assets and contract liabilities are recorded to represent the difference between revenue recognized to date and customer billings. Contract assets represent revenue recognized in excess of amounts billed, and are generally derecognized when the customer is billed in accordance with the terms of the contract. Contract liabilities represent amounts billed in excess of revenue recognized, and are generally derecognized when revenue is recognized. The contract asset and contract liability balances may also change as a result of business combinations or divestitures, as further discussed in Note 4, Business Combinations.
See additional revenue recognition information in Note 3, Revenue.
Leases
The Company, at the inception of a contract, determines whether the arrangement is or contains a lease in accordance with ASC 842, Leases (“ASC 842”). A contract contains a lease when the Company can control the use of an identified asset and has the right to obtain substantially all of the economic benefits or outputs from the asset. The Company enters into both finance and operating leases. For each lease, the Company recognizes a lease liability as of the lease commencement date, initially measured at the present value of future lease payments expected to be made over the lease term, and a corresponding right-of-use asset equal to the lease liability adjusted for prepaid lease payments, lease incentives, and initial direct costs.
If the rate implicit in a lease is not readily determinable, the Company uses its applicable incremental borrowing rate to calculate the present value of lease payments, which is determined using the Company’s credit rating and other, relevant information available as of the lease commencement date. The lease term is defined as the noncancelable period of the lease, and is affected by options to extend or terminate the lease based on whether the Company is reasonably certain to exercise such options. When assessing whether it is reasonably certain that an option will be exercised, the Company primarily considers the existence of significant economic incentives.
F-11
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Future lease payments may include fixed rent escalation clauses or payments that depend on an index, such as the consumer price index, which are initially measured using the applicable index or rate at lease commencement. Subsequent differences in such payments arising from changes in the applicable index and other periodic market-rate adjustments to base rent are accounted for like other variable lease payments and expensed as incurred.
Across all classes of underlying assets, the Company has elected the short-term lease exemption permitted under ASC 842, and therefore does not recognize a right-of-use asset and lease liability for leases with an initial term of 12 months or less. The Company has also elected the practical expedient to not recognize a right-of-use asset and lease liability for acquired leases in a business combination that have 12 months or less remaining as of the acquisition date. The Company’s lease agreements may contain both lease and non-lease components. Non-lease components are combined with the related lease components and accounted for together as a single lease component for all classes of underlying assets.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”) and calculates its provision for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the anticipated future tax effects of differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, using enacted tax rates expected to apply in the periods in which the differences are expected to reverse. A valuation allowance is recorded if it is more likely than not, based on available evidence, that some or all of the deferred tax assets will not be realized.
As of December 31, 2025 and 2024, the Company established valuation allowances against certain deferred tax assets associated with tax attributes that management believes are not more likely than not to be realized. In assessing the realizability of deferred tax assets, management evaluates all relevant positive and negative evidence, including projections of future taxable income. Notably, the cumulative losses incurred over the three-year period ended December 31, 2025 represented significant negative evidence in this assessment. Further details regarding the Company’s income tax positions and valuation allowances can be found in Note 13, Income Taxes.
ASC 740 also prescribes a two-step approach for evaluating and measuring uncertain tax positions. First, a determination is made as to whether it is more-likely-than-not that a given tax position will be sustained upon examination. For positions that meet this threshold, the largest amount of benefit that is more than 50% likely to be realized upon ultimate settlement is recognized in the consolidated financial statements. Interest and penalties related to unrecognized tax benefits are included as a component of income tax expense.
The effective income tax rate for any given period may be significantly affected by factors such as the overall level and geographic mix of pre-tax earnings or losses, changes in tax laws or rates (which may be applied retroactively), the recognition or reversal of uncertain tax benefits, adjustments to valuation allowances, and the implementation of other tax planning strategies.
Share-based Compensation
The Company accounts for share-based compensation in accordance with ASC 718, Compensation – Share Compensation (“ASC 718”). Share-based payment awards are in the form of equity incentive units. AA&D Holdings (the Company’s parent) grants both time-based units and performance-based units to the Company’s employees. Prior to the Combination, a portion of the equity incentive units were subject to a repurchase feature triggering liability classification. Upon the Combination, this feature was amended such that all equity incentive
F-12
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
units are now classified as equity awards. For equity incentive units classified as equity awards, the Company measures the fair value of these units at the grant date. For equity incentive units classified as liability awards prior to the Combination, the Company remeasured the fair value of these units at each reporting date and adjusted compensation cost for the portion of service already rendered, until the date when the units were modified.
Time-based Units
Time-based units are equity incentive units for which vesting is solely based on the passage of time, subject to the grantee remaining employed throughout the vesting period stated in the award agreement. The time-based units are subject to graded vesting over five years, with accelerated vesting upon a change in control. Compensation expense for the time-based units is measured at fair value on the grant date using a Black-Scholes model and recognized on a straight-line basis over the requisite service period for the entire award.
Performance-based Units
Performance-based units are equity incentive units that vest upon the occurrence of a change in control subject to the achievement of certain internal rate of return thresholds. Such awards are subject to both performance and market conditions, with fair value determined using the option pricing method. Compensation cost for performance-based units is recognized only when it becomes probable that the performance condition will be achieved. As it pertains to performance conditions related to a change in control, such condition is only considered probable upon the consummation of such change in control.
Share-based compensation expense for awards is recognized in Cost of goods sold or Selling, general, and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss depending on the nature of work performed by employees that are granted awards. The Company has elected to account for forfeitures when they occur. Share-based payment awards are discussed further in Note 15, Share-based Compensation.
Net Loss Per Share
The Company computes net loss per share in accordance with ASC 260, Earnings per Share. Basic net loss per share is calculated by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding during each period. Diluted net loss per share is calculated in the same manner as basic net loss per share because the Company does not currently have any potentially dilutive securities as all incentive units represent shares of AA&D Holdings. See Note 14, Net Loss per Share, for further information.
Deferred Offering Costs
The Company capitalizes certain legal, accounting and other third-party fees that are directly attributable to the Company’s planned initial public offering (“IPO”) as deferred offering costs until such IPO is consummated. After consummation of the IPO, these costs will be recorded in shareholder’s equity as a reduction of proceeds generated as a result of the IPO. In the event the IPO is not completed, such deferred offering costs will be expensed immediately as a charge to Selling, general, and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss. There were no deferred offering costs capitalized as of December 31, 2024. As of December 31, 2025, there was $869 of deferred offering costs capitalized and included in Other assets on the Consolidated Balance Sheets.
F-13
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Emerging Growth Company
The Company intends to operate as an “emerging growth company,” as defined under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act provides emerging growth companies with the option to utilize an extended transition period for complying with new or revised accounting standards, allowing for the adoption of these standards at the time they become effective for private companies rather than public companies. The Company has elected to use this extended transition period, which permits it to defer adoption of new or revised accounting standards that have different effective dates for public and private companies, until the earlier of the date it (i) ceases to qualify as an emerging growth company or (ii) elects to irrevocably opt out of such extended transition period. As a result, the Company’s consolidated financial statements may not be comparable to those of other companies that adopt accounting standards as of the effective dates applicable to public companies.
Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In March 2024, the FASB issued ASU 2024-01, Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. This update clarifies the scope of profits interests and similar awards and adds illustrative examples to the existing ASC 718 standard to demonstrate how an entity should apply the scope guidance in ASC 718-10-15-3 to determine whether a profits interest award should be accounted for in accordance with ASC 718. The Company early adopted ASU 2024-01 on January 1, 2025 on a retrospective basis. The adoption of ASU 2024-01 did not have a material effect on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires a public business entity to disclose specific categories in its annual effective tax rate reconciliation and provide disaggregated information about significant reconciling items by jurisdiction and by nature. ASU 2023-09 also requires entities to disclose their income tax payments (net of refunds) to international, federal, and state and local jurisdictions. ASU 2023-09 makes several other changes to income tax disclosure requirements. The Company early adopted ASU 2023-09 on January 1, 2024 on a prospective basis. The only impact under ASU 2023-09 was to the Company’s income tax disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands disclosures about reportable segments, and provides requirements for more detailed reporting of a segment’s expenses that are regularly provided to the CODM and included within each reported measure of a segment’s profit or loss. Additionally, ASU 2023-07 requires all segment profit or loss and asset disclosures to be provided on an annual and interim basis. The Company adopted ASU 2023-07 on January 1, 2024. The only impact under ASU 2023-07 was to the Company’s segment disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which simplifies the application of the current expected credit loss model for current accounts receivable and contract assets under ASC 606. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The amendments provide all entities with a practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on current accounts receivable and contract assets. The Company is assessing the effect of ASU 2025-05 on its consolidated financial statements and related disclosures.
F-14
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires disclosure of disaggregated information about certain income statement costs and expenses for public entities. ASU 2024-03 does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories within the notes to the financial statements. ASU 2024-03 is effective for fiscal year beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of ASU 2024-03 on its financial statement disclosures.
| 3. | Revenue |
Disaggregation of Revenue
The following table presents the Company’s revenue disaggregated by end market for the years ended December 31, 2025 and 2024:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Space and Launch Systems |
$ | 114,098 | $ | 99,718 | ||||
| Defense Aviation and Airborne Systems |
331,364 | 249,234 | ||||||
| C5ISR(1) and Precision Strike Systems |
53,301 | 50,838 | ||||||
|
|
|
|
|
|||||
| Total revenue |
$ | 498,763 | $ | 399,790 | ||||
|
|
|
|
|
|||||
| (1) | Command, Control, Communication, Computers, Cyber, Intelligence, Surveillance, and Reconnaissance |
Total revenue recognized at a point in time and over time for the years December 31, 2025 and 2024 was as follows:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue recognized at a point in time |
$ | 54,164 | $ | 38,444 | ||||
| Revenue recognized over time |
444,599 | 361,346 | ||||||
|
|
|
|
|
|||||
| Total revenue |
$ | 498,763 | $ | 399,790 | ||||
|
|
|
|
|
|||||
Remaining Performance Obligations
As of December 31, 2025, the aggregate amount of the transaction price for the Company’s contracts with customers that was not yet recognized as revenue was $740,400. The Company expects to recognize approximately 62% of this amount as revenue in 2026, 31% in 2027, and 7% thereafter.
Contract Balances
During the year ended December 31, 2025, the Company recognized $25,374 of revenue from the contract liabilities balance at December 31, 2024. During the year ended December 31, 2024, the Company recognized $22,020 of revenue from the contract liabilities balance at December 31, 2023.
There were no significant credit or impairment losses related to contract assets during the years ended December 31, 2025 and 2024. The Company anticipates billing its customers for the majority of the contract asset balance as of December 31, 2025 during 2026.
F-15
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
| 4. | Business Combinations |
NeXolve Acquisition
The Company acquired 100% of the equity interests of NeXolve on March 4, 2025, whereby the Company transferred consideration of $20,688 to the NeXolve sellers, which included $5,000 for the acquisition date fair value of the contingent consideration that will be paid to the sellers based on the achievement of certain earnings targets during fiscal years 2025 and 2026. If NeXolve achieves the specified earnings targets, the Company will pay the NeXolve sellers a one-time payment of $5,000 in cash. If NeXolve does not achieve the specified targets, no amount will be paid to the NeXolve sellers. As part of the consideration transferred at the NeXolve closing date, the Company’s parent company (AA&D Holdings) issued shares of the Company’s parent company with an estimated fair value of $2,500 to the sellers.
On the closing date of the NeXolve Acquisition, the Company recognized a contingent consideration liability of $5,000 reflecting the estimated fair value of the contingent consideration. As of December 31, 2025, the contingent consideration liability is recorded within Other non-current liabilities on the Consolidated Balance Sheet. Further details regarding the determination of the fair value of the contingent consideration liability can be found in Note 5, Fair Value Measurements.
The following table summarizes the final allocation of the purchase price to the fair value of assets acquired and liabilities assumed in connection with the NeXolve Acquisition:
| Amount | ||||
| Cash and cash equivalents |
$ | 2,837 | ||
| Accounts receivable, net |
999 | |||
| Contract assets |
667 | |||
| Inventories |
397 | |||
| Prepaid expenses and other current assets |
142 | |||
| Property, plant and equipment, net |
320 | |||
| Intangible assets, net |
9,800 | |||
| Other assets |
11 | |||
|
|
|
|||
| Total fair value of assets acquired |
15,173 | |||
| Accounts payable |
(154 | ) | ||
| Contract liabilities |
(1,943 | ) | ||
| Accrued expenses and other current liabilities |
(423 | ) | ||
| Deferred tax liability |
(978 | ) | ||
|
|
|
|||
| Total fair value of liabilities assumed |
(3,498 | ) | ||
|
|
|
|||
| Total identifiable net assets |
11,675 | |||
| Goodwill |
9,013 | |||
|
|
|
|||
| Fair value of consideration transferred |
$ | 20,688 | ||
|
|
|
|||
The total acquired intangible assets of $9,800 includes $5,400, $4,200, and $200 of customer relationships, developed technology, and trade names, respectively. The remaining useful life for the customer relationships, developed technology, and trade name identifiable intangible assets recognized in connection with the NeXolve Acquisition are 8 years, 5 years, and 4 years, respectively.
F-16
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
The Company recorded $491 of acquisition related costs during the year ended December 31, 2025. These costs are included in Selling, general and administrative expenses in the Company’s Consolidated Statements of Operations and Comprehensive Loss.
ICEL Acquisition
The Company acquired 100% of the equity interests of ICEL on October 1, 2024, whereby the Company transferred consideration of $46,989 to the ICEL seller, which included $7,500 for the acquisition date fair value of the contingent consideration paid to the seller based on the achievement of a specified earnings target. As part of the consideration transferred at the ICEL closing date, the Company’s parent company (AA&D Holdings) issued shares of the Company’s parent company with an estimated fair value of $2,500 to the seller.
On the closing date of the ICEL Acquisition, the Company recognized a contingent consideration liability of $7,500 reflecting the estimated fair value of the contingent consideration. As of December 31, 2024, the contingent consideration liability was recorded within Accrued expenses and other current liabilities on the Consolidated Balance Sheet. The required earnings threshold was achieved during the year ended December 31, 2024. During the second quarter of 2025, the Company paid $7,500 to the seller to settle its obligation related to the contingent consideration liability. Two-thirds of the contingent consideration was paid to the seller in cash and one-third of the contingent consideration was paid to the seller in shares of AA&D Holdings. Further details regarding the determination of the fair value of the contingent consideration liability can be found in Note 5, Fair Value Measurements.
The following table summarizes the allocation of the purchase price to the fair value of assets acquired and liabilities assumed in connection with the ICEL Acquisition as of December 31, 2024 and subsequent adjustments made during the year ended December 31, 2025:
| Amount | ||||
| Cash and cash equivalents |
$ | 2,721 | ||
| Accounts receivable, net |
1,596 | |||
| Inventories |
5,198 | |||
| Prepaid expenses and other assets |
216 | |||
| Property, plant and equipment, net |
1,251 | |||
| Intangible assets, net |
17,750 | |||
|
|
|
|||
| Total fair value of assets acquired |
28,732 | |||
| Accounts payable |
(833 | ) | ||
| Contract liabilities |
(531 | ) | ||
| Accrued expenses and other current liabilities |
(892 | ) | ||
| Deferred tax liability |
(3,773 | ) | ||
|
|
|
|||
| Total fair value of liabilities assumed |
(6,029 | ) | ||
|
|
|
|||
| Total identifiable net assets |
22,703 | |||
| Goodwill as of December 31, 2024 |
24,286 | |||
|
|
|
|||
| Total purchase price as of December 31, 2024 |
46,989 | |||
| Measurement period adjustment |
513 | |||
|
|
|
|||
| Goodwill as of December 31, 2025 |
24,799 | |||
| Total purchase price as of December 31, 2025 |
$ | 47,502 | ||
|
|
|
|||
The total acquired intangible assets of $17,750 includes $12,300, $5,300, and $150 of customer relationships, developed technology, and trade names, respectively. The remaining useful life for the customer relationships,
F-17
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
developed technology, and trade name identifiable intangible assets recognized in connection with the ICEL Acquisition are 9 years, 5 years, and 1 year, respectively.
The Company recorded $1,460 of acquisition related costs during the year ended December 31, 2024. These costs are included in Selling, general and administrative costs in the Company’s Consolidated Statements of Operations and Comprehensive Loss.
Acquisition Goodwill
Goodwill was recognized in connection with both the NeXolve and ICEL Acquisitions. For both acquisitions, goodwill primarily relates to anticipated cost synergies, opportunities for additional growth platforms, and an expanded revenue base resulting from the integration of the acquired assets. Goodwill of $7,594 and $29,169 from the NeXolve and ICEL Acquisitions, respectively, is expected to be deductible for income tax purposes.
Revenue and Net Loss of NeXolve and ICEL
The operations of NeXolve and its subsidiaries, as well as ICEL and its subsidiaries, have been included in the Company’s Consolidated Statements of Operations and Comprehensive Loss for all periods subsequent to the closing dates. From the acquisition date through December 31, 2025, NeXolve revenues and net loss were $6,959 and $(186), respectively.
Supplemental pro forma financial information is not presented as the results of NeXolve and ICEL are insignificant compared to those of the Company.
| 5. | Fair Value Measurements |
The Company measures the fair value of financial instruments using observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. The Company determines and reports the fair value of its assets and liabilities using a three-level measurement hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value. When observable market data is not available, the Company uses the best information available, which may include its own assumptions.
Level 1 – Valuations based on unadjusted quoted prices in active markets that are accessible at measurement date for identical assets.
Level 2 – Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-based valuations in which all significant inputs are observable in the market, either directly or indirectly (e.g., interest rates; yield curves).
Level 3 – Valuations using significant inputs that are unobservable in the market and inputs that reflect the Company’s own assumptions.
Contingent Consideration
The Company’s contingent consideration liability is related to the ICEL Acquisition in 2024 and the NeXolve Acquisition in 2025, as described in Note 4, Business Combination. The contingent consideration liability is measured at fair value on a recurring basis using the income approach.
F-18
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
The Company classifies its contingent consideration liability as Level 3 fair value measurements based on the significant unobservable inputs used to estimate fair value. These reflect the inputs and assumptions the Company believes would be made by market participants.
The Company’s contingent consideration liability was $5,000 and $7,500 at December 31, 2025 and 2024, respectively.
| 6. | Inventories |
Inventories as of December 31, 2025 and 2024 consisted of the following:
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Raw materials |
$ | 47,987 | $ | 34,822 | ||||
| Work-in-process and subassemblies |
333 | 9,251 | ||||||
| Finished goods |
9,055 | 6,421 | ||||||
|
|
|
|
|
|||||
| Inventories |
$ | 57,375 | $ | 50,494 | ||||
|
|
|
|
|
|||||
When inventory is determined to be excess, obsolete, or otherwise impaired, the Company writes it down to its estimated net realizable value, with write-downs recognized as a component of Costs of goods sold in the period identified.
| 7. | Property, Plant and Equipment |
Property, plant and equipment, net as of December 31, 2025 and 2024 consisted of the following:
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Land and land improvements |
$ | 10,102 | $ | 10,101 | ||||
| Buildings and improvements |
47,914 | 27,699 | ||||||
| Machinery and equipment |
69,304 | 61,492 | ||||||
| Furniture and fixtures |
4,433 | 2,848 | ||||||
| Construction in progress |
4,005 | 19,663 | ||||||
| Leasehold improvements |
3,017 | 1,125 | ||||||
| Finance lease right-of-use assets |
29,324 | 30,859 | ||||||
|
|
|
|
|
|||||
| Property, plant and equipment, cost |
168,099 | 153,787 | ||||||
| Less: Accumulated depreciation |
(48,322 | ) | (37,178 | ) | ||||
|
|
|
|
|
|||||
| Property, plant and equipment, net |
$ | 119,777 | $ | 116,609 | ||||
|
|
|
|
|
|||||
Excluding amortization related to finance lease right-of-use assets, the Company recorded $11,515 and $10,464 of depreciation expense during the years ended December 31, 2025 and 2024, respectively, within Cost of goods sold and Selling, general, and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss.
Property, plant, and equipment, net as of December 31, 2025 and 2024, includes leasehold improvements and right-of-use assets associated with finance leases. For additional details, refer to Note 11, Leases.
F-19
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
| 8. | Goodwill and Intangible Assets |
The Company conducted a goodwill quantitative impairment test during the years ended December 31, 2025 and 2024 by estimating the fair value of its sole reporting unit and comparing that amount to its carrying value. The fair value determination required significant judgment and was based on key assumptions, including, but not limited to, projected future cash flows, long-term growth rates, market multiples, and discount rates. As a result of this analysis, no goodwill impairment charges were recognized for the years ended December 31, 2025 and 2024.
The table below presents a summary of the carrying amount of goodwill for the years ended December 31, 2025 and 2024:
| Amount | ||||
| Balance at January 1, 2024 |
$ | 308,679 | ||
| Acquisitions |
24,286 | |||
| Impairments |
— | |||
|
|
|
|||
| Balance at December 31, 2024 |
332,965 | |||
| Acquisitions |
9,013 | |||
| Measurement period adjustments |
513 | |||
| Impairments |
— | |||
|
|
|
|||
| Balance at December 31, 2025 |
$ | 342,491 | ||
|
|
|
|||
The gross carrying value and accumulated amortization by class of intangible assets as of December 31, 2025 and 2024 were as follows:
| December 31, 2025 | ||||||||||||||||
| Weighted Average Estimated Useful Lives |
Gross Carrying Amounts |
Accumulated Amortization |
Net Book Value |
|||||||||||||
| Finite-lived intangible assets |
||||||||||||||||
| Developed technology |
9 | $ | 46,636 | $ | (15,450 | ) | $ | 31,186 | ||||||||
| Trade names |
10 | 28,678 | (9,093 | ) | 19,585 | |||||||||||
| Acquired customer relationships |
10 | 220,100 | (71,199 | ) | 148,901 | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total intangible assets |
$ | 295,414 | $ | (95,742 | ) | $ | 199,672 | |||||||||
|
|
|
|
|
|
|
|||||||||||
| December 31, 2024 | ||||||||||||||||
| Weighted Average Estimated Useful Lives |
Gross Carrying Amounts |
Accumulated Amortization |
Net Book Value |
|||||||||||||
| Finite-lived intangible assets |
||||||||||||||||
| Developed technology |
9 | $ | 42,436 | $ | (10,039 | ) | $ | 32,397 | ||||||||
| Trade names |
10 | 28,478 | (6,585 | ) | 21,893 | |||||||||||
| Acquired customer relationships |
10 | 214,700 | (53,056 | ) | 161,644 | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total intangible assets |
$ | 285,614 | $ | (69,680 | ) | $ | 215,934 | |||||||||
|
|
|
|
|
|
|
|||||||||||
F-20
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Amortization expense for intangible assets was $26,063 and $23,461 for the years ended December 31, 2025 and 2024, respectively. This amount was recognized within Intangible asset amortization expense on the Consolidated Statements of Operations and Comprehensive Loss.
The following table sets forth the estimated annual amortization expense for finite-lived intangible assets. Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and asset impairments, among other factors:
| Years Ended December 31, |
Amount | |||
| 2026 |
$ | 26,378 | ||
| 2027 |
26,283 | |||
| 2028 |
25,848 | |||
| 2029 |
25,293 | |||
| 2030 |
24,361 | |||
| Thereafter |
71,509 | |||
|
|
|
|||
| Total |
$ | 199,672 | ||
|
|
|
|||
There were no intangible asset impairments during the years ended December 31, 2025 and 2024.
| 9. | Accrued Expenses and Other Current Liabilities |
Accrued expenses and other current liabilities as of December 31, 2025 and 2024 consisted of the following:
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Accrued compensation and vacation pay |
$ | 15,111 | $ | 10,861 | ||||
| Income tax payable |
— | 1,792 | ||||||
| Current portion of operating lease liabilities |
2,997 | 1,719 | ||||||
| Contingent consideration |
— | 7,500 | ||||||
| Other |
8,234 | 3,846 | ||||||
|
|
|
|
|
|||||
| Accrued expenses and other current liabilities |
$ | 26,342 | $ | 25,718 | ||||
|
|
|
|
|
|||||
| 10. | Long-term Debt |
Long-term debt, net as of December 31, 2025 and 2024 consisted of the following:
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Term loans |
$ | 643,443 | $ | 394,080 | ||||
| Delayed draw term loan |
— | 145,771 | ||||||
| Subordinated note payable |
— | 30,000 | ||||||
|
|
|
|
|
|||||
| Total debt |
643,443 | 569,851 | ||||||
| Less: Debt discount and debt issuance costs |
(9,400 | ) | (9,226 | ) | ||||
| Less: Current maturities |
(7,068 | ) | (5,678 | ) | ||||
|
|
|
|
|
|||||
| Long-term debt, net |
$ | 626,975 | $ | 554,947 | ||||
|
|
|
|
|
|||||
The fair values of the Company’s long-term debt are estimated using quoted market prices for the same or similar instruments and current interest rates available for comparable instruments. These fair value measurements are
F-21
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
classified as Level 2 within the fair value hierarchy. The carrying amount of the Company’s long-term debt approximates its fair value as of December 31, 2025 and 2024.
The carrying amount of the Company’s debt under the revolving lines of credit is considered a reasonable estimate of its fair value. In addition to long-term debt, the Company had $0 and $15,000 amounts outstanding under its revolving line of credit as of December 31, 2025 and 2024, respectively. This amount is shown within Revolving line of credit on the Consolidated Balance Sheets.
Prior to the Combination, the Company had two existing credit facilities and a note payable with a third party. Upon the Combination, borrowings under one of the credit facilities and the note payable were paid in full, resulting in an extinguishment of the outstanding indebtedness. Further, upon the Combination, the Company expanded its other credit facility. Details about the historical borrowings and amendments upon the Combination are included below.
2021 Credit Agreement
On April 22, 2021, the Company entered into a senior credit agreement (the “2021 Credit Agreement”). The 2021 Credit Agreement initially included a term loan of $150,000, delayed draw term loan commitments of $75,000, and a revolving line of credit of $15,000.
Interest on the outstanding borrowings initially accrued at a per annum rate equal to LIBOR plus 6.25% and was payable quarterly. The original maturity date of each facility under the 2021 Credit Agreement was April 22, 2027. The Company was required to repay 0.25% of the aggregate initial principal amount of the term loans on the last business day of each calendar quarter, with the option to prepay any outstanding borrowings at any time without incurring a penalty.
Between 2022-2025, the Company entered into multiple amendments to the 2021 Credit Agreement, which collectively increased the amount of delayed draw term loan commitments by an additional $75,000, replaced the benchmark reference rate from Eurocurrency to Secured Overnight Financing Rate (“SOFR”), modified certain affirmative debt covenants, and increased the borrowing capacity of the revolving line of credit by an additional $20,000.
Borrowings under all facilities were secured by substantially all of the Company’s assets. The 2021 Credit Agreement contained customary financial and non-financial covenants, including but not limited to: (i) a maximum total net leverage ratio, (ii) a minimum fixed charge coverage ratio, (iii) limitations on additional indebtedness, (iv) restrictions on distributions and investments, and (v) limitations on certain asset sales and subsidiary distributions. As of the extinguishment date, the Company was in compliance with all financial and non-financial covenants under the 2021 Credit Agreement.
As of December 31, 2024, the Company had drawn upon the full $150,000 under its delayed draw term loan commitment, and had drawn $15,000 under its revolving line of credit. The interest rate for the revolving line of credit was 10.77% as of December 31, 2024.
On November 14, 2025, in connection with the Combination, the Company repaid in full all outstanding indebtedness under the 2021 Credit Agreement. As of the Combination date, there were approximately $143,625 of term loans outstanding, $144,646 of amounts drawn on the delayed draw term loans outstanding, and $27,000 of the revolving line of credit outstanding. The total payoff amount of approximately $322,007 included principal repayment of $315,271, accrued interest of $6,688, and fees of $48. Upon extinguishment of the debt, the Company wrote off $2,206 of unamortized debt discount and debt issuance costs to Interest expense, net on the Consolidated Statement of Operations and Comprehensive Loss.
F-22
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
2022 Credit Agreement
On December 1, 2022, the Company entered into a credit agreement (the “2022 Credit Agreement”) to obtain a term loan of $130,000 and a revolving line of credit of $20,000. The original maturity date for the term loan and revolving line of credit was October 1, 2028. Interest on the outstanding borrowings accrues at a rate equal to the term SOFR plus an additional spread based on the Company’s total net leverage ratio, which was initially 6.25%. The Company is required to make quarterly interest payments on the outstanding loans.
The Company is required to repay 0.25% of the aggregate initial principal amount of the term loans on the last business day of each calendar quarter, with the option to prepay the term loans at any time, in whole or in part, subject to a penalty of up to 1.0% of the aggregate principal amount repaid depending on the timing of repayment.
On October 1, 2024, in connection with the acquisition of ICEL, the Company entered into Amendment No. 1. Pursuant to Amendment No. 1, the Company partially repaid the original lender’s outstanding term loan. The amendment was accounted for as a modification under ASC 470-50. As a result of the partial repayment, $356 of the existing debt discount and debt issuance costs were written off to Interest expense, net on the Consolidated Statement of Operations and Comprehensive Loss. As a result of the new term loans, the aggregate principal amount of the term loans increased to $250,000 and the aggregate amount of the revolving line of credit increased to $40,000. Amendment No. 1 also added delayed draw term loan commitments in the amount of $100,000. Further, Amendment No. 1 amended the maturity date for all borrowings to be December 1, 2030. The Company expensed $887 of debt issuance costs in connection with the modification.
On November 14, 2025, in connection with the Combination, the Company entered into Amendment No. 2 to expand the current borrowings of the term loans, delayed draw term loans, and revolving line of credit. Under Amendment No. 2, the Company partially and fully repaid certain lenders, which resulted in a write-off of $914 of the existing debt discount and debt issuance costs to Interest expense, net on the Consolidated Statement of Operations and Comprehensive Loss. The remaining lenders increased their outstanding term loans, and three new lenders were added under Amendment No. 2. The aggregate principal amount of the term loans upon Amendment No. 2 was $645,000. Amendment No. 2 also increased the total delayed draw term loan commitments and revolving line of credit to $150,000 and $100,000, respectively. The amendment was accounted for as a modification under ASC 470-50. The Company expensed $414 of debt issuance costs in connection with the modification.
The 2022 Credit Agreement includes customary affirmative and negative covenants, such as: (i) a springing maximum first lien net leverage ratio, (ii) limitations on indebtedness, liens, and guarantees, (iii) restrictions on dividends, distributions, and certain payments, (iv) restrictions on mergers, asset sales, and changes in the nature of the Company’s business, and (v) reporting requirements and maintenance of insurance and properties; provided that, in the case of clauses (ii) through (iv), subject to significant carveouts and permitted basket capacity. As of December 31, 2025, the Company was in compliance with all applicable covenants under the 2022 Credit Agreement.
As of December 31, 2025, the Company had $150,000 and $100,000 available under its delayed draw term loan commitment and revolving line of credit, respectively. As of December 31, 2024, the Company had $100,000 and $40,000 available under its delayed draw term loan commitment and revolving line of credit, respectively.
Note Purchase Agreement
On November 1, 2022, the Company entered into a note purchase agreement (the “Note Purchase Agreement”) with a third party lender, providing for an initial subordinated note payable with a principal amount of $30,000 and a maturity date of November 1, 2027. On May 3, 2024, the Company entered into the first amendment to the
F-23
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Note Purchase Agreement, amending an affirmative debt covenant. The note payable bore interest at a fixed annual rate of 12.5%, with all remaining unpaid principal and interest due upon maturity on November 1, 2027. In conjunction with the Combination on November 14, 2025, the Company repaid in full the subordinated note payable for $30,487, including $469 in accrued interest and $18 in legal fees. Upon extinguishment of the note payable, the Company wrote off $298 of unamortized debt discount to Interest expense, net on the Consolidated Statement of Operations and Comprehensive Loss.
Future Principal Repayments
Future principal repayments on the Company’s outstanding term loans as of December 31, 2025 consisted of the following:
| Years Ended December 31, |
Amount | |||
| 2026 |
$ | 7,068 | ||
| 2027 |
7,068 | |||
| 2028 |
7,068 | |||
| 2029 |
7,068 | |||
| 2030 |
615,171 | |||
| Thereafter |
— | |||
|
|
|
|||
| Total |
$ | 643,443 | ||
|
|
|
|||
| 11. | Leases |
The Company’s leased property, which includes both finance and operating leases, consists of manufacturing facilities, warehouses, vehicles, and equipment.
The Company’s lease assets and obligations as of December 31, 2025 and 2024 consisted of the following:
| December 31, | ||||||||||
| Balance Sheet Location |
2025 | 2024 | ||||||||
| Assets |
||||||||||
| Operating |
Other assets | $ | 37,322 | $ | 36,108 | |||||
| Finance |
Property, plant and equipment, net | 29,324 | 30,859 | |||||||
|
|
|
|
|
|||||||
| Total right-of-use assets |
$ | 66,646 | $ | 66,967 | ||||||
|
|
|
|
|
|||||||
| Liabilities |
||||||||||
| Current: |
||||||||||
| Operating |
Accrued expenses and other current liabilities | $ | 2,997 | $ | 1,719 | |||||
| Finance |
Current portion of finance lease liabilities | 1,628 | 1,496 | |||||||
| Noncurrent: |
||||||||||
| Operating |
Other non-current liabilities | 38,125 | 36,293 | |||||||
| Finance |
Finance lease liabilities, net of current portion | 30,405 | 31,177 | |||||||
|
|
|
|
|
|||||||
| Total lease liabilities |
$ | 73,155 | $ | 70,685 | ||||||
|
|
|
|
|
|||||||
F-24
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
The components of the Company’s lease cost for the years ended December 31, 2025 and 2024 consisted of the following:
| Statements of Operations and Comprehensive Loss Location |
Years Ended December 31, |
|||||||||||
| 2025 | 2024 | |||||||||||
| Operating lease cost |
Cost of goods sold | $ | 6,713 | $ | 5,139 | |||||||
| Finance lease cost |
||||||||||||
| Amortization of leased assets |
Cost of goods sold | 1,842 | 1,297 | |||||||||
| Interest on lease liabilities |
Interest expense, net | 2,377 | 1,926 | |||||||||
| Variable lease cost |
Cost of goods sold | 1,238 | 1,068 | |||||||||
|
|
|
|
|
|||||||||
| Total lease cost |
$ | 12,170 | $ | 9,430 | ||||||||
|
|
|
|
|
|||||||||
Maturity of the Company’s lease liabilities as of December 31, 2025 was as follows:
| Years Ended December 31, |
Operating Leases | Finance Leases | ||||||
| 2026 |
$ | 5,345 | $ | 3,916 | ||||
| 2027 |
5,880 | 3,931 | ||||||
| 2028 |
6,657 | 3,839 | ||||||
| 2029 |
7,062 | 3,032 | ||||||
| 2030 |
7,470 | 2,676 | ||||||
| Thereafter |
23,801 | 46,668 | ||||||
|
|
|
|
|
|||||
| Total lease payments |
56,215 | 64,062 | ||||||
| Less: Amount to discount to present value |
(15,093 | ) | (32,029 | ) | ||||
|
|
|
|
|
|||||
| Present value of lease liabilities |
$ | 41,122 | $ | 32,033 | ||||
|
|
|
|
|
|||||
Supplemental cash flow information related to leases was as follows:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: |
||||||||
| Operating cash flows for operating leases |
$ | 4,730 | $ | 3,849 | ||||
| Operating cash flows for finance leases |
2,377 | 1,926 | ||||||
| Financing cash flows for finance leases |
1,010 | 1,334 | ||||||
| Right-of-use assets obtained in exchange for leases liabilities |
||||||||
| Operating leases |
4,904 | 32,293 | ||||||
| Finance leases |
370 | 9,738 | ||||||
F-25
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
The weighted average lease term and discount rate for the Company’s leases as of December 31, 2025 and 2024 consisted of the following:
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Weighted average remaining lease term (years): |
||||||||
| Operating leases |
8.0 | 8.7 | ||||||
| Finance lease |
21.0 | 21.6 | ||||||
| Weighted average discount rate: |
||||||||
| Operating lease |
7.4 | % | 7.3 | % | ||||
| Finance lease |
7.3 | % | 7.4 | % | ||||
The weighted average discount rate represents the estimated incremental borrowing rate, assuming a secured borrowing. The weighted average remaining lease term is based on the remaining lease term as of year end.
Leaseback Financing Obligation
On April 14, 2022, the Company entered into an agreement to sell its Enfield manufacturing facility followed by a leaseback arrangement. In addition, in November 2024, the Company entered into an agreement to sell certain equipment also followed by a leaseback arrangement. These transactions did not qualify for sale-leaseback accounting under sale leaseback arrangements. Under a failed sale-leaseback arrangement, the assets are accounted for as Property, plant and equipment, net, subject to depreciation, and the related leases are accounted for as a financing obligation. As of December 31, 2025, the financing liability of $7,470 was recorded in Accrued expenses and other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets.
As of December 31, 2025, the future principal payments for the leaseback financing obligation are as follows:
| Years Ended December 31, |
Amount | |||
| 2026 |
$ | 870 | ||
| 2027 |
878 | |||
| 2028 |
886 | |||
| 2029 |
853 | |||
| 2030 |
410 | |||
| Thereafter |
17,968 | |||
|
|
|
|||
| Total sale-leaseback financing obligation |
21,865 | |||
| Less: Amount to discount to present value |
(14,395 | ) | ||
|
|
|
|||
| Present value of sale-leaseback financing obligation |
$ | 7,470 | ||
|
|
|
|||
| 12. | Related Party Transactions |
As discussed in Note 1, Organization and Nature of the Business, AA&D Holdings and Rotor Topco merged through a common control transaction in November 2025. Upon consummation of the Combination, Rotor Topco ceased to exist as a separate legal entity. Accordingly, legacy related party agreements of the predecessor entities were either assumed by or replaced with new agreements entered into by the Company.
From time to time, in the ordinary course of business, the Company and its predecessor entities have engaged in transactions with affiliated entities, as well as certain officers and directors. Management believes that all such
F-26
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
transactions, including those described below, were conducted on terms no less favorable to the Company than could have been obtained in arm’s length transactions with unaffiliated parties.
Management Services Agreement
The Company has a management services agreement with Greenbriar Equity Group, L.P. (“Greenbriar Parent”). Under the management services agreement, Greenbriar Parent provides business consultation services for an unspecified term, subject to mutual written agreement for termination for an aggregate base annual consulting fee of $1,000, subject to annual adjustments. Under the agreement, the fee to Greenbriar Parent is payable in equal quarterly installments.
During the years ended December 31, 2025 and 2024, the Company incurred related-party fees and director fees totaling $1,603 and $1,647, respectively, pursuant to management services agreements. Related-party fees and director fees were recorded in Selling, general, and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2025 and 2024.
As of December 31, 2025 and 2024, amounts payable to related parties for management and director fees were $812 and $519, respectively.
| 13. | Income Taxes |
Income tax expense as of December 31, 2025 and 2024 was as follows:
| Years Ended December 31, |
||||||||
| 2025 | 2024 | |||||||
| Current: |
||||||||
| Federal |
$ | 2,365 | $ | 6,836 | ||||
| State and local |
996 | 1,799 | ||||||
| Deferred: |
||||||||
| Federal |
703 | (2,888 | ) | |||||
| State and local |
(977 | ) | (1,820 | ) | ||||
|
|
|
|
|
|||||
| Total income tax expense |
$ | 3,087 | $ | 3,927 | ||||
|
|
|
|
|
|||||
Income taxes paid, net of refunds, as of December 31, 2025 and 2024 was as follows:
| Years Ended December 31, |
||||||||
| 2025 | 2024 | |||||||
| U.S. Federal |
$ | 7,904 | $ | 5,383 | ||||
| U.S. State and local(1) |
1,521 | 1,673 | ||||||
|
|
|
|
|
|||||
| Total income taxes paid |
$ | 9,425 | $ | 7,056 | ||||
|
|
|
|
|
|||||
| (1) | The following state accounted for more than 5% of the total income taxes paid for the years ended December 31, 2025 and 2024: California. |
F-27
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
The Company’s effective tax rate, as of December 31, 2025 and 2024, was (22.2)% and (12.7)%, respectively. The following table provides a reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate for the years then ended:
| Years Ended December 31, |
||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Amount | % | Amount | % | |||||||||||||
| Federal statutory rate |
$ | (2,927 | ) | 21.0 | % | $ | (6,476 | ) | 21.0 | % | ||||||
| State and local taxes, net of federal income tax |
16 | (0.1 | )% | (17 | ) | 0.1 | % | |||||||||
| Tax credits: |
||||||||||||||||
| General business credit |
(352 | ) | 2.5 | % | (352 | ) | 1.1 | % | ||||||||
| Change in valuation allowance |
5,382 | (38.6 | )% | 10,143 | (32.9 | )% | ||||||||||
| Nontaxable or nondeductible items: |
||||||||||||||||
| Share-based compensation |
674 | (4.8 | )% | 533 | (1.7 | )% | ||||||||||
| Other nontaxable or nondeductible items |
74 | (0.5 | )% | 28 | (0.1 | )% | ||||||||||
| Other adjustments |
220 | (1.6 | )% | 68 | (0.2 | )% | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total income tax expense / effective tax rate |
$ | 3,087 | (22.2 | )% | $ | 3,927 | (12.7 | )% | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
State taxes in California comprise the majority (greater than 50%) of the tax effect in this category for the years ended December 31, 2025 and 2024.
The Company is no longer subject to U.S. federal income tax examinations for years prior to 2023 based on the statute of limitations with the exception that operating loss or tax credit carryforwards generated prior to 2023 may be subject to tax audit adjustment.
The Company accounts for uncertain income tax positions pursuant to the guidance in ASC 740. The Company recognizes interest and penalties related to uncertain tax positions, if any, within Income tax expense on the Consolidated Statements of Operations and Comprehensive Loss. For the years ended December 31, 2025 and 2024, the Company’s accrued interest and penalties related to uncertain tax positions were not material.
As of December 31, 2025 and 2024, respectively, the Company had no unrecognized tax benefits. Management believes the current income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change.
The significant components of the Company’s deferred income taxes, as of December 31, 2025 and 2024, were as follows:
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Deferred tax assets: |
||||||||
| Net operating loss carryforwards |
$ | 10,888 | $ | 11,628 | ||||
| Accrued compensation |
2,091 | 1,150 | ||||||
| Inventories |
2,401 | 3,522 | ||||||
| Capitalized research and development |
88 | 4,816 | ||||||
F-28
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Interest |
29,893 | 20,928 | ||||||
| Lease liabilities |
19,582 | 17,633 | ||||||
| Other |
820 | 1,390 | ||||||
| Less: Valuation allowance |
(15,834 | ) | (10,364 | ) | ||||
|
|
|
|
|
|||||
| Total deferred tax assets, net of valuation allowance |
49,929 | 50,703 | ||||||
| Deferred tax liabilities: |
||||||||
| Prepaid expenses |
(515 | ) | (414 | ) | ||||
| Property, plant and equipment |
(10,702 | ) | (10,093 | ) | ||||
| Right-of-use assets |
(17,841 | ) | (16,725 | ) | ||||
| Intangible assets, net |
(54,727 | ) | (56,164 | ) | ||||
| Other |
(1,328 | ) | (1,786 | ) | ||||
|
|
|
|
|
|||||
| Total deferred tax liabilities |
(85,113 | ) | (85,182 | ) | ||||
|
|
|
|
|
|||||
| Net deferred income taxes |
$ | (35,184 | ) | $ | (34,479 | ) | ||
|
|
|
|
|
|||||
In assessing the realizability of deferred income tax assets, the Company considers whether it is more-likely-than-not that some or all of the deferred income tax assets will not be realized. The ultimate realization of the deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the net operating loss (“NOL”) is available. The Company considers projected future taxable income, the scheduled reversal of deferred income tax liabilities, and available tax planning strategies that can be implemented by the Company in making this assessment. Based upon the scheduled reversal of deferred income tax liabilities over the periods in which the NOL and credit carryforwards are available to reduce income taxes payable, the Company had determined it is not more-likely-than-not to realize a portion of such net deferred tax assets.
A reconciliation of the Company’s deferred tax asset valuation allowance, as of December 31, 2025 and 2024 is as follows:
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Beginning balance |
$ | (10,364 | ) | $ | — | |||
| Additions |
(5,470 | ) | (10,364 | ) | ||||
|
|
|
|
|
|||||
| Ending balance |
$ | (15,834 | ) | $ | (10,364 | ) | ||
|
|
|
|
|
|||||
The Company has NOL carryforwards in several jurisdictions. The utilization of net operating loss carryforwards that can be used to offset future taxable income are subject to annual limits in accordance with Internal Revenue Code (“IRC”) provisions, as well as similar state provisions. In addition, states may also impose other future limitations through state legislation or similar measures. Despite the NOL carryforwards, the Company may incur higher federal and state income tax expense in the future.
The Company had U.S. federal NOL carryforwards of approximately $45,473 and $51,290 and state NOL carryforwards of approximately $22,004 and $13,499, as of December 31, 2025 and 2024, respectively, which will expire in various years beginning in 2031. The Company utilized federal NOLs of approximately $5,817 and $5,817 and state NOLs of approximately $13 and $0, as of December 31, 2025 and 2024, respectively.
F-29
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
For tax year beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the option to currently deduct research and experimental (“R&E”) expenditures in the period incurred and requires taxpayers to capitalize and amortize such expenditures over a period of five years for U.S.-based research, pursuant to Section 174 of the Internal Revenue Code. As of December 31, 2024, the Company capitalized an estimated $30,406 of R&E expenditures which were amortized ratably over a five-year period. For the tax year beginning in 2025, the One Big Beautiful Bill Act of 2025 (“OBBBA”) eliminated the requirement to capitalize and amortize such R&E expenditures over a period of five years for U.S.-based research, pursuant to Section 174 of the IRC. Additionally, the OBBBA allows taxpayers to accelerate the remaining amortization on domestic R&E expenditures incurred in 2022-2024 tax years. The Company has elected to immediately expense its 2025 domestic R&E expenditures. Additionally, the Company has elected to deduct the remaining unamortized balance of previously capitalized domestic R&E in 2025.
At December 31, 2025, the Company had California research and development credit carryforwards of $120. These credits carryforward indefinitely.
| 14. | Net Loss Per Share |
Basic and diluted net loss per share for the years ended December 31, 2025 and 2024 is calculated as follows:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Numerator: |
||||||||
| Net loss |
$ | (17,024 | ) | $ | (34,766 | ) | ||
| Denominator: |
||||||||
| Weighted average common shares outstanding |
100 | 100 | ||||||
|
|
|
|
|
|||||
| Net loss per share – basic and diluted |
$ | (170,240 | ) | $ | (347,660 | ) | ||
|
|
|
|
|
|||||
| 15. | Share-based Compensation |
As discussed in Note 2, Summary of Significant Accounting Policies, the Company has an equity incentive plan pursuant to which employees, directors, consultants, and advisors of the Company and its subsidiaries can be granted incentive units subject to both time and performance vesting.
Time-based Units
The fair value of time-based units is determined using a Black-Scholes model, using the assumptions and inputs described below. The aggregate fair value of the time-based units outstanding as of December 31, 2025 is $15,297.
During the years ended December 31, 2025 and 2024, the Company recognized share-based compensation expense related to time-based units of $3,210 and $2,535, respectively, the majority of which is included in Selling, general, and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss.
F-30
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
The following table summarizes time-based unit activity for the years ended December 31, 2025 and 2024:
| Liability Awards | Equity Awards | |||||||||||
| Number of Units | Number of Units |
Weighted-Average Grant Date Fair Value per Unit(1) |
||||||||||
| Unvested time-based units as of January 1, 2024 |
5,263 | 3,432 | $ | 600.35 | ||||||||
| Granted |
2,900 | — | — | |||||||||
| Vested |
— | (982 | ) | 528.19 | ||||||||
| Forfeited |
(455 | ) | — | — | ||||||||
|
|
|
|
|
|
|
|||||||
| Unvested time-based units as of December 31, 2024 |
7,708 | 2,450 | 629.28 | |||||||||
| Granted |
2,362 | 535 | 748.42 | |||||||||
| Forfeited |
(75 | ) | — | — | ||||||||
| Change in classification due to modification |
(9,995 | ) | 9,995 | 1,249.02 | ||||||||
| Vested |
— | (1,890 | ) | 949.34 | ||||||||
|
|
|
|
|
|
|
|||||||
| Unvested time-based units as of December 31, 2025 |
— | 11,090 | $ | 1,139.04 | ||||||||
|
|
|
|
|
|
|
|||||||
| (1) | Weighted-average fair value for time-based units previously classified as a liability is based on the fair value on the Combination date because the modification of these units resulted in a change from liability to equity classification. |
The aggregate fair value of time-based units that vested during the years ended December 31, 2025 and 2024 was $1,794 and $519, respectively. Total unrecognized share-based compensation expense for all outstanding time-based units as of December 31, 2025 was $7,994. This amount is expected to be recognized as compensation expense over time through December 2030, based on current vesting arrangements, with a weighted average remaining recognition period of approximately 3.2 years.
Performance-based Units
The fair value of performance-based units is determined using the option pricing method, using the assumptions and inputs described below. As of December 31, 2025 and 2024, the performance condition for performance-based units granted and outstanding was not probable of occurring, and thus no compensation expense has been recognized.
The following table summarizes the performance-based unit activity for the years ended December 31, 2025 and 2024:
| Liability awards | Equity awards | |||||||||||
| Number of Units |
Number of Units |
Weighted Average Grant Date Fair Value Per Unit(1) |
||||||||||
| Unvested performance-based units as of January 1, 2024 |
5,263 | 6,353 | $ | 1,032.30 | ||||||||
| Granted |
2,900 | — | — | |||||||||
| Vested |
— | — | — | |||||||||
| Forfeited |
(925 | ) | — | — | ||||||||
|
|
|
|
|
|
|
|||||||
F-31
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
| Liability awards | Equity awards | |||||||||||
| Number of Units |
Number of Units |
Weighted Average Grant Date Fair Value Per Unit(1) |
||||||||||
| Unvested performance-based units as of December 31, 2024 |
7,238 | 6,353 | 1,032.30 | |||||||||
| Granted |
3,112 | 125 | 748.42 | |||||||||
| Forfeited |
(75 | ) | — | — | ||||||||
| Change in classification due to modification |
(10,275 | ) | 10,275 | 1,077.20 | ||||||||
| Vested |
— | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Unvested performance-based units as of December 31, 2025 |
— | 16,753 | $ | 1,057.72 | ||||||||
|
|
|
|
|
|
|
|||||||
| (1) | Weighted-average fair value per unit is determined as of the Combination date given the performance-based units were improbable of vesting prior to the modification that occurred on the Combination date. |
Total unrecognized share-based compensation expense for all outstanding performance-based units as of December 31, 2025 was $17,720. This amount will be recognized as compensation expense upon a change in control.
Valuation of Incentive Units
For the years ended December 31, 2025 and 2024, the following assumptions were utilized to calculate the fair value of time-based and performance-based units:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Expected term (years) |
5.00 | 5.00 | ||||||
| Expected volatility |
43.00% | 45.00% | ||||||
| Expected dividends |
0.00% | 0.00% | ||||||
| Risk-free rate |
3.71% | 4.33% | ||||||
| Discount for lack of marketability |
25.00% - 31.00% | 26.00% - 29.00% | ||||||
The risk free interest rate is determined using a zero-coupon U.S. Treasury yield-curve on the valuation date of the time-based units, with a maturity matched to the underlying performance. Expected volatility is calculated based on a weighted average of historical volatility from comparable, publicly traded companies, as well as from implied volatility when appropriate and available. The expected term is derived from the average contractual period, reflecting continued service, as well as the weighted average vesting duration of the time-based units. As no dividends have been paid or are anticipated to be paid, the expected dividends assumption remains at zero.
| 16. | Employee Benefit Plans |
401(k) Savings Plan
The Company has an employee 401(k) savings plan covering eligible employees. Company contributions to the plan are not significant. Contributions are expensed as incurred and included in Cost of goods sold or Selling, general, and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss depending on the nature of work performed by employees that are granted awards.
F-32
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Multi-employer Pension Plan
The Company maintains a union-administered defined benefit pension plan that principally covers union production workers under the Pension Protection Act of 2006 (PPA). Contributions are made to the plan in accordance with the union agreement, which provides for specified contributions based upon hours worked. The risks of participating in this multi-employer plan are different from single-employer plans in the following aspects:
| • | Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers. |
| • | If a participating employer stops contributing into the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. |
| • | If the Company chooses to stop participating in the multi-employer plans, the Company may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability. |
The Company’s participation in this plan is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employee Identification Number (EIN). The most recent “Pension Protection Act Zone Status” zone status available in 2025 is for the plan’s year end at March 31, 2024. The zone status is based on information that the Company received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded, and plans in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (FIP) or rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date of the collective bargaining agreement to which the plans are subject.
| Pension Fund |
EIN / Pension Plan Number |
Pension Protection Act Zone Status |
FIP/RP Status Pending / Implemented |
Contributions of the Company(1) |
Expiration date of Collective Bargaining Agreement |
|||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||
| I.A.M. National Pension Fund |
51-6031295 | Red | Red | Implemented | $ | 1,464 | $ | 1,343 | November 30, 2028 | |||||||||||||||||||
| (1) | The Company has not received information from the plan’s administrator to determine its share of unfunded vested benefits. However, the Company does not anticipate withdrawal from the plan, nor is the Company aware of any expected plan termination. |
For the plan’s year ended March 31, 2019, the I.A.M. National Pension Fund certified a yellow PPA zone status. Subsequently, on April 17, 2019, a voluntary election was made to assign a red PPA zone status to the plan, due to a declining credit balance. Effective May 27, 2019, a rehabilitation plan was adopted. Under the rehabilitation plan, the employer’s contribution rate increased by a factor of 2.5% and will remain in effect until a green PPA zone status is achieved.
| 17. | Segment Information |
The Company operates as a single operating and reportable segment. The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer (“CEO”). The CEO evaluates segment performance, makes significant capital expenditure decisions, and decides how to allocate resources, for the Company on a consolidated basis based on adjusted EBITDA. Adjusted EBITDA means earnings before interest, taxes, depreciation and amortization, and adjusted for other items within a relevant period which are not reflective of the segment’s operating performance in the period.
F-33
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
The following table provides a reconciliation of the Company’s segment adjusted EBITDA to net loss for the years ended December 31, 2025 and 2024 (unaudited):
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue |
$ | 498,763 | $ | 399,790 | ||||
| Significant segment expenses: |
||||||||
| Cost of goods sold (adjusted) (1) |
344,936 | 282,979 | ||||||
| Selling, general and administrative expenses (adjusted) (2) |
35,923 | 32,803 | ||||||
|
|
|
|
|
|||||
| Adjusted EBITDA |
117,904 | 84,008 | ||||||
| Income tax expense |
3,087 | 3,927 | ||||||
| Interest expense, net |
72,806 | 63,705 | ||||||
| Depreciation and amortization |
39,420 | 35,222 | ||||||
| Share-based compensation expense |
3,210 | 2,535 | ||||||
| Transaction costs (3) |
6,419 | 3,809 | ||||||
| Integration and restructuring costs (4) |
6,608 | 4,826 | ||||||
| Legal contingencies loss (5) |
460 | 1,877 | ||||||
| Management fees (6) |
1,603 | 1,647 | ||||||
| Other (7) |
1,315 | 1,226 | ||||||
|
|
|
|
|
|||||
| Net loss |
$ | (17,024 | ) | $(34,766) | ||||
|
|
|
|
|
|||||
| (1) | Represents Cost of goods sold adjusted to exclude depreciation and amortization of long-lived and intangible assets, share-based compensation expense, and other adjustments (including transaction costs, integration and restructuring costs, legal contingencies losses, management fees, and other costs) to the extent such items are included in Cost of goods sold. |
| (2) | Represents Selling, general, and administrative expenses adjusted to exclude depreciation and amortization of long-lived and intangible assets, share-based compensation expense, and other adjustments (including transaction costs, integration and restructuring costs, legal contingencies losses, management fees, and other costs) to the extent such items are included in Selling, general, and administrative expenses. |
| (3) | Includes transaction related costs associated with mergers, acquisitions, and costs related to the IPO. |
| (4) | Includes acquisition integration and restructuring costs, including plant consolidation and reconfiguration, reductions in force, and executive severance expense. |
| (5) | Includes losses from legal disputes and settlements from third parties. |
| (6) | Includes management fees paid to our parent company in accordance with our management services agreement which will terminate upon the closing of the IPO. |
| (7) | Includes other costs that the CODM does not review as part of his evaluation of the operations and performance of the business. |
The Company’s segment assets are reported on the Consolidated Balance Sheets as total assets. Substantially all of the Company’s revenues and long-lived assets are attributable to operations within the United States.
| 18. | Commitments and Contingencies |
Legal Proceedings
The Company is subject to litigation, claims, investigations, and audits arising from time to time in the ordinary course of business, including various U.S. government investigations related to procurement activities, post-award audits, and reported contract costs, which could result in civil, criminal, or administrative proceedings and potential claims for fines, penalties, compensatory damages, restitution, and/or forfeitures. Although legal proceedings and
F-34
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
government investigations are inherently unpredictable and, in certain circumstances, could result in suspension or debarment from government contracts, the Company believes it has valid defenses to the matters currently pending and intends to defend them vigorously. The Company records accruals for loss contingencies when losses are probable and reasonably estimable. Based on information currently available, management is not aware of any current disputes that, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations, or cash flows.
| 19. | Subsequent Events |
The Company has evaluated subsequent events through March 16, 2026, the date the financial statements were issued.
Vestigo Aerospace, Inc.
On January 16, 2026, the Company acquired 100% of the issued and outstanding equity of Vestigo Aerospace, Inc., a business that designs and develops passive de-orbit systems, including the Spinnaker product line of dragsail technology, and related assemblies for reliable end-of-mission space vehicle and other low-earth orbit satellite disposal. The base purchase price for the acquisition is $840 cash, subject to customary working capital and other adjustments. The purchase agreement also includes up to $1,000 of contingent milestone payments and a contingent earnout of up to $15,000 based on the achievement of specified earnings targets through December 31, 2028. Because this transaction relates to conditions that arose after December 31, 2025, the Company has not recognized the effects of the transaction in the accompanying financial statements.
Consolidated Boring Inc.
On March 2, 2026, the Company acquired 100% of the issued and outstanding equity of Consolidated Boring Inc., a vertically integrated two-site advanced manufacturing platform that specializes in complex assemblies and highly-engineered components for a broad range of precision strike systems. The base purchase price for the acquisition is $425,000, subject to customary working capital and other adjustments. A portion of the purchase price was satisfied by the Company’s parent company (AA&D Holdings) through the issuance of shares of its limited partnership units with a fair value of $70,000 to the sellers. The remainder of the purchase price was paid by the Company in cash. The acquisition, including related transaction expenses, was funded with proceeds from (1) the issuance of additional equity interests by the Company’s parent company (AA&D Holdings) in the amount of $18,000 and (2) $361,100 of additional funding received from existing lenders under Amendment No. 3 to the 2022 Credit Agreement, consisting of $180,000 of incremental term loans, $150,000 of amounts drawn under the existing delayed draw term loan commitment, and $31,100 of proceeds from the revolving line of credit. Because this transaction relates to conditions that arose after December 31, 2025, the Company has not recognized the effects of the transaction in the accompanying financial statements.
Ultracor, Inc.
On March 2, 2026, the Company acquired 100% of the issued and outstanding equity in Ultracor, Inc. (formerly known as Rainwater Holdings, Inc.), a supplier of highly specialized and IP-enabled honeycomb core materials that are used in defense aviation and space platforms, including next generation tiltrotor aircraft and navigational satellites. The base purchase price for the acquisition is $6,500 cash, subject to customary working capital and other adjustments. Because this transaction relates to conditions that arose after December 31, 2025, the Company has not recognized the effects of the transaction in the accompanying financial statements.
F-35
Table of Contents
Applied Aerospace & Defense, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 15,923 | $ | 15,475 | ||||
| Accounts receivable, net |
67,140 | 71,386 | ||||||
| Contract assets |
178,632 | 140,817 | ||||||
| Inventories |
64,685 | 57,375 | ||||||
| Prepaid expenses and other current assets |
8,362 | 6,521 | ||||||
|
|
|
|
|
|||||
| Total current assets |
334,742 | 291,574 | ||||||
|
|
|
|
|
|||||
| Property, plant and equipment, net |
158,205 | 119,777 | ||||||
| Goodwill |
583,408 | 342,491 | ||||||
| Intangible assets, net |
363,502 | 199,672 | ||||||
| Other assets |
44,062 | 45,787 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 1,483,919 | $ | 999,301 | ||||
|
|
|
|
|
|||||
| Liabilities and shareholder’s equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 51,650 | $ | 37,894 | ||||
| Contract liabilities |
23,833 | 21,550 | ||||||
| Accrued expenses and other current liabilities |
26,570 | 26,342 | ||||||
| Revolving line of credit |
46,100 | — | ||||||
| Current portion of long-term debt |
10,383 | 7,068 | ||||||
| Current portion of finance lease liabilities |
1,720 | 1,628 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
160,256 | 94,482 | ||||||
| Long-term debt, net |
948,724 | 626,975 | ||||||
| Finance lease liabilities, net of current portion |
29,835 | 30,405 | ||||||
| Deferred income taxes |
54,908 | 35,184 | ||||||
| Other non-current liabilities |
56,408 | 52,791 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
1,250,131 | 839,837 | ||||||
| Shareholder’s equity: |
||||||||
| Common shares, $0.01 par value; 200 shares authorized, 158 and 149 shares issued and outstanding at March 31, 2026 and December 31, 2025 |
— | — | ||||||
| Additional paid-in capital |
312,603 | 223,147 | ||||||
| Accumulated deficit |
(78,169 | ) | (63,037 | ) | ||||
| Accumulated other comprehensive loss |
(646 | ) | (646 | ) | ||||
|
|
|
|
|
|||||
| Total shareholder’s equity |
233,788 | 159,464 | ||||||
|
|
|
|
|
|||||
| Total liabilities and shareholder’s equity |
$ | 1,483,919 | $ | 999,301 | ||||
|
|
|
|
|
|||||
The accompanying condensed notes are an integral part of these unaudited condensed consolidated financial statements.
F-36
Table of Contents
Applied Aerospace & Defense, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share data)
| Three Months Ended March 31, |
||||||||
| 2026 | 2025 | |||||||
| Revenue |
$ | 134,351 | $ | 111,024 | ||||
| Cost of goods sold |
100,772 | 80,140 | ||||||
|
|
|
|
|
|||||
| Gross profit |
33,579 | 30,884 | ||||||
| Selling, general, and administrative expenses |
28,302 | 12,367 | ||||||
| Intangible asset amortization expense |
8,110 | 6,538 | ||||||
|
|
|
|
|
|||||
| Operating (loss) income |
(2,833 | ) | 11,979 | |||||
| Interest expense, net |
17,771 | 16,720 | ||||||
|
|
|
|
|
|||||
| Loss before income taxes |
(20,604 | ) | (4,741 | ) | ||||
| Income tax (benefit) expense |
(5,472 | ) | 2,572 | |||||
|
|
|
|
|
|||||
| Net loss and comprehensive loss |
$ | (15,132 | ) | $ | (7,313 | ) | ||
|
|
|
|
|
|||||
| Net loss per share – basic and diluted |
$ | (99,553 | ) | $ | (73,130 | ) | ||
| Weighted average shares outstanding – basic and diluted |
152 | 100 | ||||||
The accompanying condensed notes are an integral part of these unaudited condensed consolidated financial statements.
F-37
Table of Contents
Applied Aerospace & Defense, Inc.
Condensed Consolidated Statements of Shareholder’s Equity
(Unaudited)
(in thousands, except share data)
| Common Shares | Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss |
Total Shareholder’s Equity |
||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||
| Balance as of December 31, 2025 |
149 | $ | — | $ | 223,147 | $ | (63,037 | ) | $ | (646 | ) | $ | 159,464 | |||||||||||
| Net loss |
(15,132 | ) | (15,132 | ) | ||||||||||||||||||||
| Share-based compensation expense |
756 | 756 | ||||||||||||||||||||||
| Capital contributions |
9 | 88,700 | 88,700 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance as of March 31, 2026 |
158 | $ | — | $ | 312,603 | $ | (78,169 | ) | $ | (646 | ) | $ | 233,788 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Common Shares | Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss |
Total Shareholder’s Equity |
||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||
| Balance as of December 31, 2024 |
101 | $ | — | $ | 212,276 | $ | (46,013 | ) | $ | (418 | ) | $ | 165,845 | |||||||||||
| Net loss |
(7,313 | ) | (7,313 | ) | ||||||||||||||||||||
| Share-based compensation expense |
121 | 121 | ||||||||||||||||||||||
| Capital contributions |
2,500 | 2,500 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance as of March 31, 2025 |
101 | $ | — | $ | 214,897 | $ | (53,326 | ) | $ | (418 | ) | $ | 161,153 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-38
Table of Contents
Applied Aerospace & Defense, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands, except share data)
| Three Months Ended March 31, |
||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (15,132 | ) | $ | (7,313 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
||||||||
| Depreciation and amortization |
12,109 | 9,723 | ||||||
| Share-based compensation expense |
756 | 802 | ||||||
| Non-cash interest expense of debt discount and issuance costs |
634 | 691 | ||||||
| Deferred income taxes |
(13,298 | ) | (637 | ) | ||||
| Net changes in operating assets and liabilities, excluding the effects of acquisitions: |
||||||||
| Accounts receivable, net |
15,119 | 3,782 | ||||||
| Contract assets |
(25,201 | ) | (13,100 | ) | ||||
| Inventories |
2,615 | (2,066 | ) | |||||
| Prepaid expenses and other current assets |
5,091 | (327 | ) | |||||
| Accounts payable |
2,335 | 4,482 | ||||||
| Contract liabilities |
(2,392 | ) | (5,404 | ) | ||||
| Accrued expenses and other current liabilities |
(55,127 | ) | 1,954 | |||||
| Operating lease right-of-use assets and liabilities |
460 | 502 | ||||||
|
|
|
|
|
|||||
| Net cash used in operating activities |
(72,031 | ) | (6,911 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(7,136 | ) | (4,910 | ) | ||||
| Payment for acquisitions, net of cash acquired |
(308,668 | ) | (10,351 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(315,804 | ) | (15,261 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of long-term debt, net of discount |
326,935 | — | ||||||
| Repayments of long-term debt |
(1,767 | ) | (1,420 | ) | ||||
| Proceeds from revolving line of credit |
46,100 | 5,000 | ||||||
| Payments on finance lease liabilities |
(478 | ) | (13 | ) | ||||
| Payments on equipment financing obligations |
(285 | ) | (347 | ) | ||||
| Payments on third-party stock issuance costs |
(922 | ) | — | |||||
| Capital contributions received |
18,700 | — | ||||||
|
|
|
|
|
|||||
| Net cash provided by financing activities |
388,283 | 3,220 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) in cash and cash equivalents |
448 | (18,952 | ) | |||||
| Cash and cash equivalents, beginning of period |
15,475 | 27,466 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents, end of period |
$ | 15,923 | $ | 8,514 | ||||
|
|
|
|
|
|||||
| Supplemental disclosures of cash flow information: |
||||||||
| Cash paid for interest |
14,882 | 16,175 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities: |
||||||||
| Operating cash flows for operating leases |
1,293 | 1,067 | ||||||
| Operating cash flows for finance leases |
582 | 603 | ||||||
| Financing cash flows for finance leases |
478 | 13 | ||||||
F-39
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
| 1. | Organization and Nature of the Business |
Applied Aerospace & Defense, Inc. (the “Company”) is a wholly owned subsidiary of AA&D Holdings, LP (“AA&D Holdings”) and specializes in providing advanced design, engineering, and vertically integrated manufacturing solutions for leading and next-generation space and defense technology companies. The Company operates various manufacturing locations throughout the United States.
Combination Transaction
On November 14, 2025, AA&D Holdings completed a merger with Rotor Topco, LP (“Rotor Topco”), pursuant to the Agreement and Plan of Merger (the “Combination”). Upon completion of the Combination, all outstanding units of Rotor Topco were automatically converted into units of AA&D Holdings and all of Rotor Topco’s existing subsidiaries became subsidiaries of the Company, resulting in the combination of the businesses previously operating as Applied Aerospace Structures Corporation (“AASC”) and PCX Aerostructures, LLC (“PCX”). The Combination was accounted for as a common control transaction as both AA&D Holdings and Rotor Topco were under the common control of Greenbriar Equity Fund V, L.P. (“Greenbriar”).
NeXolve Acquisition
On March 4, 2025, the Company completed its acquisition of NeXolve Holdings, LLC (the “NeXolve Acquisition”), bringing deployable space technology and advanced polymer expertise to the Company. Refer to Note 4, Business Combinations, for additional information about the Company’s acquisition of NeXolve.
Vestigo Acquisition
On January 16, 2026, the Company completed its acquisition of Vestigo Aerospace, Inc. (the “Vestigo Acquisition”), a business that designs and develops passive de-orbit systems, including the Spinnaker product line of dragsail technology, and related assemblies for reliable end-of-mission space vehicle and other low-earth orbit satellite disposal. Refer to Note 4, Business Combinations, for additional information about the Company’s acquisition of Vestigo.
Consolidated Boring Acquisition
On March 2, 2026, the Company completed its acquisition of Consolidated Boring Inc. (the “CBI Acquisition”). CBI is a vertically integrated two-site advanced manufacturing platform that specializes in complex assemblies and highly-engineered components for a broad range of precision strike systems. Refer to Note 4, Business Combinations, for additional information about the Company’s acquisition of CBI.
Ultracor Acquisition
On March 2, 2026, the Company completed its acquisition of Ultracor, Inc. (the “Ultracor Acquisition”), which was formerly known as Rainwater Holdings, Inc. Ultracor is a supplier of highly specialized and IP-enabled honeycomb core materials used in defense aviation and space platforms, including next generation tiltrotor aircraft and navigational satellites. Refer to Note 4, Business Combinations, for additional information about the Company’s acquisition of Ultracor.
Unless specifically noted otherwise, as used throughout these unaudited condensed consolidated financial statements, “the Company” refers to the business, operations and financial results of the Company and its wholly
F-40
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
owned subsidiaries. For additional information regarding the presentation of the accompanying financial statements, including as a result of the Combination, the NeXolve Acquisition, the Vestigo Acquisition, the CBI Acquisition, and the Ultracor Acquisition, refer to Note 2, Summary of Significant Accounting Policies—Basis of Presentation and Use of Estimates.
| 2. | Summary of Significant Accounting Policies |
Basis of Presentation and Use of Estimates
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, and cash flows. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the full year ending December 31, 2026. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2025 included elsewhere in this registration statement.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, with all significant intercompany balances and transactions eliminated in consolidation. References to Financial Accounting Standards Board (“FASB”) standards are made to the FASB Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”).
The historical periods included in the accompanying unaudited condensed consolidated financial statements have been retrospectively combined to reflect the Combination between the subsidiaries of Rotor Topco and AA&D Holdings that are consolidated by the Company, as discussed in Note 1, Organization and Nature of the Business. The assets, liabilities, equity, revenues, and expenses of the combining entities have been presented on a combined basis for all periods presented using historical carrying amounts.
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying condensed notes. Actual results could differ from those estimates.
There have been no material changes to the Company’s significant accounting policies from those disclosed in the audited consolidated financial statements for the year ended December 31, 2025.
Accounts Receivable and Allowance for Credit Losses
The Company currently generates a majority of its revenue from customers in the aerospace and defense industry. Accounts receivable represents customer obligations due under normal trade terms and is presented net of any allowance for credit losses. The Company recognizes an allowance for expected credit losses in accordance with ASC 326, Financial Instruments – Credit Losses. Accounts receivable with similar risk characteristics are evaluated together on a pooled basis to determine the amount of the allowance for credit losses based on historical loss experience, current economic conditions, and the Company’s expectations of future economic conditions and specific collectability matters. The allowance for credit losses reduces the accounts
F-41
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
receivable balance to the estimated net amount expected to be collected. When a receivable is determined to be uncollectible, the balance is written off against the allowance for current expected credit losses. Provisions for credit losses are included in Selling, general, and administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss. The allowance for credit losses for the three months ended March 31, 2026 and the year ended December 31, 2025 was immaterial.
Deferred Offering Costs
The Company capitalizes certain legal, accounting and other third-party fees that are directly attributable to the Company’s planned IPO as deferred offering costs until such IPO is consummated. After consummation of the IPO, these costs will be recorded in shareholder’s equity as a reduction of proceeds generated as a result of the IPO. In the event the IPO is not completed, such deferred offering costs will be expensed immediately as a charge to Selling, general, and administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss. As of March 31, 2026, there was $4,384 of deferred offering costs capitalized and included in Other assets on the Condensed Consolidated Balance Sheets. As of December 31, 2025, there was $869 of deferred offering costs capitalized and included in Other assets on the Condensed Consolidated Balance Sheets.
Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which simplifies the application of the current expected credit loss model for current accounts receivable and contract assets under ASC 606. The amendments provide all entities with a practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on current accounts receivable and contract assets. The Company adopted ASU 2025-05 effective January 1, 2026, and the adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements or related disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires disclosure of disaggregated information about certain income statement costs and expenses for public entities. ASU 2024-03 does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories within the notes to the financial statements. ASU 2024-03 is effective for fiscal year beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of ASU 2024-03 on its financial statement disclosures.
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Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
| 3. | Revenue |
Disaggregation of Revenue
The following table presents the Company’s revenue disaggregated by end market for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, |
||||||||
| 2026 | 2025 | |||||||
| Space and Launch Systems |
$ | 35,051 | $ | 26,331 | ||||
| Defense Aviation and Airborne Systems |
79,423 | 72,042 | ||||||
| C5ISR(1) and Precision Strike Systems |
19,877 | 12,651 | ||||||
|
|
|
|
|
|||||
| Total revenue |
$ | 134,351 | $ | 111,024 | ||||
|
|
|
|
|
|||||
| (1) | Command, Control, Communication, Computers, Cyber, Intelligence, Surveillance, and Reconnaissance |
Total revenue recognized at a point in time and over time for the three months ended March 31, 2026 and 2025 was as follows:
| Three Months Ended March 31, |
||||||||
| 2026 | 2025 | |||||||
| Revenue recognized at a point in time |
$ | 14,433 | $ | 13,016 | ||||
| Revenue recognized over time |
119,918 | 98,008 | ||||||
|
|
|
|
|
|||||
| Total revenue |
$ | 134,351 | $ | 111,024 | ||||
|
|
|
|
|
|||||
Remaining Performance Obligations
As of March 31, 2026, the aggregate amount of the transaction price for the Company’s contracts with customers that was not yet recognized as revenue was $885,336. The Company expects to recognize approximately 61% of this amount as revenue through the remainder of 2026, 35% in 2027, and 4% thereafter.
Contract Balances
During the three months ended March 31, 2026, the Company recognized $6,718 of revenue from the contract liabilities balance at December 31, 2025. During the three months ended March 31, 2025, the Company recognized $6,344 of revenue from the contract liabilities balance at December 31, 2024.
There were no significant credit or impairment losses related to contract assets during the three months ended March 31, 2026 and 2025. The Company anticipates billing its customers for the majority of the contract asset balance as of March 31, 2026 during the remainder of 2026.
| 4. | Business Combinations |
CBI Acquisition
On March 2, 2026, the Company acquired 100% of the equity interests of CBI. The total consideration transferred to the seller was $377,628, which consisted of cash consideration and the issuance of units of the
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Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
Company’s parent (AA&D Holdings) with an estimated fair value of $70,000 to the seller. As part of the acquisition, the Company issued 9.8118 shares of common stock to AA&D Holdings. To finance the acquisition and related transaction expenses, the Company received a combination of debt financing of $361,100 and equity financing of $18,000. Refer to Note 10, Long-term Debt for further information regarding the debt financing.
The determination of consideration transferred and the amounts recorded for acquired assets and assumed liabilities are preliminary and are based on the information available as of the reporting date. While all aspects of the accounting remain preliminary, the most significant judgment and estimation uncertainty pertain to the fair values of inventories, property, plant and equipment, intangible assets, goodwill, and the related effect of the transaction on income tax related accounts, including deferred tax assets and liabilities. The Company will continue to adjust the provisional estimates as additional information becomes available and final valuation and analyses are completed.
The following table summarizes the preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed in connection with the CBI Acquisition:
| Amount | ||||
| Cash and cash equivalents |
$ | 5,984 | ||
| Accounts receivable, net |
10,903 | |||
| Contract assets |
12,615 | |||
| Inventories |
9,215 | |||
| Prepaid expenses and other assets |
397 | |||
| Property, plant and equipment, net |
34,276 | |||
| Intangible assets, net |
168,100 | |||
| Other assets |
5,463 | |||
|
|
|
|||
| Total fair value of assets acquired |
246,953 | |||
|
|
|
|||
| Accounts payable |
(10,356 | ) | ||
| Contract liabilities |
(4,643 | ) | ||
| Accrued expenses and other current liabilities |
(55,190 | ) | ||
| Deferred income taxes |
(31,972 | ) | ||
| Other non-current liabilities |
(4,223 | ) | ||
|
|
|
|||
| Total fair value of liabilities assumed |
(106,384 | ) | ||
|
|
|
|||
| Total identifiable net assets |
140,569 | |||
| Goodwill |
237,059 | |||
| Fair value of consideration transferred |
$ | 377,628 | ||
|
|
|
|||
The total acquired intangible assets of $168,100 include $157,100, $9,400, and $1,600 of customer relationships, developed technology, and trade names, respectively. The remaining useful life for the customer relationships, developed technology, and trade name identifiable intangible assets recognized in connection with the CBI Acquisition are 12 years, 6 years, and 3 years, respectively.
Revenue and Net Income of CBI
The operations of CBI and its subsidiaries have been included in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss from the acquisition date of March 2, 2026. From the acquisition date through March 31, 2026, CBI revenue and net income were $12,154 and $1,181, respectively.
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Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
Pro Forma Information
The following unaudited pro forma financial information presents the combined results of operations of the Company and CBI as if the acquisition had occurred on January 1, 2025, after giving effect to certain purchase accounting adjustments. This pro forma information does not purport to be indicative of the results that would have actually been obtained if the acquisition had occurred on January 1, 2025, or that may be obtained in the future.
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Pro forma total revenue |
$ | 151,983 | $ | 132,010 | ||||
| Pro forma net (loss) income |
$ | (78,798 | ) | $ | 6,488 | |||
The pro forma information includes adjustments for:
| • | Incremental amortization and depreciation expense for both periods, reflecting the step-up to fair value of CBI’s intangible assets and property, plant, and equipment from aggregate historical carrying value. |
| • | Elimination of CBI’s historical interest expense to reflect the repayment of CBI’s debt at closing. |
| • | Additional interest expense reflecting the debt financing used to fund the acquisition. |
| • | Adjustments for tax effects including a non-recurring tax benefit related to the valuation allowance release associated with additional capacity to recognize deferred tax assets based on the additional deferred tax liabilities generated as a result of the acquisitions. |
Ultracor Acquisition
On March 2, 2026, the Company acquired 100% of the equity interests of Ultracor. The total consideration transferred to the seller was $7,154, which was paid in cash on the closing date of the acquisition.
The Ultracor Acquisition was not material to the unaudited condensed consolidated financial statements. Accordingly, the Company has not presented a separate purchase price allocation nor pro forma financial information for the acquisition. The assets acquired and liabilities assumed were recorded at their estimated fair value as of the acquisition date, with any excess purchase price allocated to goodwill. The determination of consideration transferred and fair value of assets acquired and liabilities assumed is preliminary and will be finalized during the measurement period, which will not exceed March 2, 2027. The primary areas that remain open relate to fair values of property, plant and equipment, intangible assets, and goodwill.
Vestigo Acquisition
On January 16, 2026, the Company acquired 100% of the equity interests of Vestigo. The total consideration transferred to the seller was $540, which was paid in cash on the closing date of the acquisition.
The Vestigo Acquisition was not material to the unaudited condensed consolidated financial statements. Accordingly, the Company has not presented a separate purchase price allocation nor pro forma financial information for the acquisition. The assets acquired and liabilities assumed were recorded at their estimated fair value as of the acquisition date, with any excess purchase price allocated to goodwill. The determination of consideration transferred and fair value of assets acquired and liabilities assumed is preliminary and will be finalized during the measurement period, which will not exceed January 16, 2027. The primary areas that remain open relate to the fair values of property, plant and equipment, intangible assets, and goodwill.
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Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
NeXolve Acquisition
On March 4, 2025, the Company acquired 100% of the equity interests of NeXolve. The total consideration transferred was $20,688, including $5,000 representing the acquisition-date fair value of contingent consideration and $2,500 representing the estimated fair value of shares of the Company’s parent (AA&D Holdings) issued to the sellers. The contingent consideration provides for a one-time cash payment of $5,000 upon achievement of specified earnings targets during fiscal years 2025 and 2026; if the targets are not achieved, no amounts are payable. The purchase price allocation was finalized during 2025.
On the acquisition date, the Company recognized a contingent consideration liability of $5,000. As of March 31, 2026, the contingent consideration liability is included in Other non-current liabilities on the Condensed Consolidated Balance Sheets. See Note 5, Fair Value Measurements, for information regarding the fair value measurement of the contingent consideration liability.
Acquisition Goodwill and Acquisition Costs
Goodwill was recognized in connection with the CBI, Ultracor, and Vestigo acquisitions. For each of these acquisitions, goodwill primarily relates to anticipated cost synergies, opportunities for additional growth platforms, and an expanded revenue base resulting from the integration of the acquired assets. Goodwill from the CBI, Ultracor, and Vestigo acquisitions is not deductible for income tax purposes. Goodwill was also recognized in connection with the NeXolve Acquisition completed in 2025.
The Company recorded $10,900 of acquisition related costs during the three months ended March 31, 2026. These costs are included in Selling, general, and administrative expenses on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss.
| 5. | Fair Value Measurements |
The Company measures the fair value of financial instruments using observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. The Company determines and reports the fair value of its assets and liabilities using a three-level measurement hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value. When observable market data is not available, the Company uses the best information available, which may include its own assumptions.
Level 1 – Valuations based on unadjusted quoted prices in active markets that are accessible at measurement date for identical assets.
Level 2 – Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-based valuations in which all significant inputs are observable in the market, either directly or indirectly (e.g., interest rates; yield curves).
Level 3 – Valuations using significant inputs that are unobservable in the market and inputs that reflect the Company’s own assumptions.
Contingent Consideration
The Company’s contingent consideration liability is related to the NeXolve Acquisition, as described in Note 4, Business Combinations. The contingent consideration liability is measured at fair value on a recurring basis using the income approach.
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Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
The Company classifies its contingent consideration liability as Level 3 fair value measurements based on the significant unobservable inputs used to estimate fair value. These reflect the inputs and assumptions the Company believes would be made by market participants.
The Company’s aggregate contingent consideration liability was $5,000 as of March 31, 2026 and December 31, 2025.
| 6. | Inventories |
Inventories as of March 31, 2026 and December 31, 2025 consisted of the following:
| March 31, 2026 | December 31, 2025 | |||||||
| Raw materials |
$ | 53,495 | $ | 47,987 | ||||
| Work-in-process and subassemblies |
1,214 | 333 | ||||||
| Finished goods |
9,976 | 9,055 | ||||||
|
|
|
|
|
|||||
| Inventories |
$ | 64,685 | $ | 57,375 | ||||
|
|
|
|
|
|||||
| 7. | Property, Plant and Equipment |
Property, plant and equipment, net as of March 31, 2026 and December 31, 2025 consisted of the following:
| March 31, 2026 | December 31, 2025 | |||||||
| Land and land improvements |
$ | 10,135 | $ | 10,102 | ||||
| Buildings and improvements |
48,209 | 47,914 | ||||||
| Machinery and equipment |
101,697 | 69,304 | ||||||
| Furniture and fixtures |
6,790 | 4,433 | ||||||
| Construction in progress |
8,841 | 4,005 | ||||||
| Leasehold improvements |
5,412 | 3,017 | ||||||
| Finance lease right-of-use assets |
28,741 | 29,324 | ||||||
|
|
|
|
|
|||||
| Property, plant and equipment, cost |
209,825 | 168,099 | ||||||
| Less: Accumulated depreciation |
(51,620 | ) | (48,322 | ) | ||||
|
|
|
|
|
|||||
| Property, plant and equipment, net |
$ | 158,205 | $ | 119,777 | ||||
|
|
|
|
|
|||||
Depreciation expense, excluding amortization related to finance lease right-of-use assets, was $3,521 and $2,732 for the three months ended March 31, 2026 and 2025, respectively, and is included in Cost of goods sold on the Condensed Consolidated Statements of Operations and Comprehensive Loss.
Property, plant, and equipment, net as of March 31, 2026 and December 31, 2025 includes leasehold improvements and right-of-use assets associated with finance leases.
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Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
| 8. | Goodwill and Intangible Assets |
The table below presents a summary of the carrying amount of goodwill for the three months ended March 31, 2026:
| Amount | ||||
| Balance at December 31, 2025 |
$ | 342,491 | ||
| Acquisitions |
240,917 | |||
| Impairments |
— | |||
|
|
|
|||
| Balance at March 31, 2026 |
$ | 583,408 | ||
|
|
|
|||
The gross carrying value and accumulated amortization by class of intangible assets as of March 31, 2026 and December 31, 2025 were as follows:
| March 31, 2026 | ||||||||||||||||
| Weighted Average Estimated Useful Lives |
Gross Carrying Amounts |
Accumulated Amortization |
Net Book Value |
|||||||||||||
| Finite-lived intangible assets |
||||||||||||||||
| Developed technology |
9 | $ | 57,876 | $ | (17,003 | ) | $ | 40,873 | ||||||||
| Trade names |
9 | 30,278 | (9,767 | ) | 20,511 | |||||||||||
| Acquired customer relationships |
11 | 379,200 | (77,082 | ) | 302,118 | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total intangible assets |
$ | 467,354 | $ | (103,852 | ) | $ | 363,502 | |||||||||
|
|
|
|
|
|
|
|||||||||||
| December 31, 2025 | ||||||||||||||||
| Weighted Average Estimated Useful Lives |
Gross Carrying Amounts |
Accumulated Amortization |
Net Book Value |
|||||||||||||
| Finite-lived intangible assets |
||||||||||||||||
| Developed technology |
9 | $ | 46,636 | $ | (15,450 | ) | $ | 31,186 | ||||||||
| Trade names |
10 | 28,678 | (9,093 | ) | 19,585 | |||||||||||
| Acquired customer relationships |
10 | 220,100 | (71,199 | ) | 148,901 | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total intangible assets |
$ | 295,414 | $ | (95,742 | ) | $ | 199,672 | |||||||||
|
|
|
|
|
|
|
|||||||||||
Amortization expense for intangible assets was $8,110 and $6,538 for the three months ended March 31, 2026 and 2025, respectively. This amount was recognized within Intangible asset amortization expense on the Condensed Consolidated Statements of Operations and Comprehensive Loss.
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Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
As of March 31, 2026, the estimated annual amortization for finite-lived intangible assets for the next five years is approximately:
| Year |
Amount | |||
| Remainder of 2026 |
$ | 31,258 | ||
| 2027 |
41,859 | |||
| 2028 |
41,424 | |||
| 2029 |
40,424 | |||
| 2030 |
39,403 | |||
| 2031 |
36,006 | |||
|
|
|
|||
| Thereafter |
133,128 | |||
|
|
|
|||
| Total |
$ | 363,502 | ||
|
|
|
|||
Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and asset impairments, among other factors. There were no intangible asset impairments during the three months ended March 31, 2026 and 2025.
| 9. | Accrued Expenses and Other Current Liabilities |
Accrued expenses and other current liabilities as of March 31, 2026 and December 31, 2025 consisted of the following:
| March 31, 2026 | December 31, 2025 | |||||||
| Accrued compensation and vacation pay |
$ | 12,188 | $ | 15,111 | ||||
| Current portion of operating lease liabilities |
4,230 | 2,997 | ||||||
| Other |
10,152 | 8,234 | ||||||
|
|
|
|
|
|||||
| Accrued expenses and other current liabilities |
$ | 26,570 | $ | 26,342 | ||||
|
|
|
|
|
|||||
| 10. | Long-term Debt |
Long-term debt, net as of March 31, 2026 and December 31, 2025 consisted of the following:
| March 31, 2026 | December 31, 2025 | |||||||
| Term loans |
$ | 971,676 | $ | 643,443 | ||||
|
|
|
|
|
|||||
| Total debt |
971,676 | 643,443 | ||||||
| Less: Debt discount and debt issuance costs |
(12,584 | ) | (9,400 | ) | ||||
| Less: Current maturities |
(10,368 | ) | (7,068 | ) | ||||
|
|
|
|
|
|||||
| Long-term debt, net |
$ | 948,724 | $ | 626,975 | ||||
|
|
|
|
|
|||||
The fair values of the Company’s long-term debt are estimated using quoted market prices for the same or similar instruments and current interest rates available for comparable instruments. These fair value measurements are classified as Level 2 within the fair value hierarchy. The carrying amount of the Company’s long-term debt approximates its fair value as of March 31, 2026 and December 31, 2025.
F-49
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
In addition to long-term debt, the Company had $46,100 and $0 amounts outstanding under its revolving line of credit as of March 31, 2026 and December 31, 2025, respectively. This amount is shown within Revolving line of credit on the Condensed Consolidated Balance Sheets.
2022 Credit Agreement
On March 2, 2026, in connection with the acquisition of CBI, the Company entered into a third amendment to the 2022 Credit Agreement (“Amendment No. 3”). Pursuant to Amendment No. 3, the Company obtained incremental term loans from its existing lenders for an aggregate of $180,000, drew the full $150,000 available amount under the existing delayed draw term loan commitment, increased its available revolving line of credit by $25,000, and drew $31,100 under its revolving line of credit. The terms of the incremental borrowings, including interest rate and repayment provisions, are consistent with the terms of the Company’s existing borrowings under its 2022 Credit Agreement. The amendment was accounted for as a modification under ASC 470-50. As a result of Amendment No. 3, the aggregate principal amount of term loans outstanding (including amounts drawn under delayed draw term loans) increased to $973,443 and the aggregate amount of the revolving line of credit increased to $125,000. As of March 31, 2026, the Company had $78,900 available under its revolving line of credit and $0 available under its delayed draw term loan commitment.
The 2022 Credit Agreement includes customary affirmative and negative covenants. As of March 31, 2026, the Company was in compliance with all applicable covenants under the 2022 Credit Agreement.
| 11. | Income Taxes |
The Company’s effective tax rate for the three months ended March 31, 2026 and 2025 was 26.4% and (54.6)%, respectively. For 2026, the effective tax rate differed from the 21% U.S. statutory rate primarily due to the release of the valuation allowance on a portion of the Company’s deferred tax assets, as well as the tax impact of the loss before income taxes. For 2025, the effective tax benefit rate differed from the 21% U.S. statutory rate primarily due to the recording of a valuation allowance on a portion of the Company’s deferred tax assets, partially offset by the tax impact of the loss before income taxes.
The Company is no longer subject to U.S. federal income tax examinations for years prior to 2023 based on the statute of limitations with the exception that operating loss or tax credit carryforwards generated prior to 2023 may be subject to tax audit adjustment. The Company accounts for uncertain income tax positions pursuant to the guidance in ASC 740. The Company recognizes interest and penalties related to uncertain tax positions, if any, within Income tax expense on the Condensed Consolidated Statements of Operations and Comprehensive Loss. As of March 31, 2026 and December 31, 2025, the Company’s accrued interest and penalties related to uncertain tax positions were not material.
| 12. | Net Loss Per Share |
Basic and diluted net loss per share for the three months ended March 31, 2026 and 2025 is calculated as follows:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Numerator: |
||||||||
| Net loss |
$ | (15,132 | ) | $ | (7,313 | ) | ||
| Denominator: |
||||||||
| Weighted average common shares outstanding |
152 | 100 | ||||||
|
|
|
|
|
|||||
| Net loss per share – basic and diluted |
$ | (99,553 | ) | $ | (73,130 | ) | ||
|
|
|
|
|
|||||
F-50
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
| 13. | Segment Information |
The Company operates as a single operating and reportable segment. The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer (“CEO”). The CEO evaluates segment performance, makes significant capital expenditure decisions, and decides how to allocate resources, for the Company on a consolidated basis based on adjusted EBITDA. Adjusted EBITDA means earnings before interest, taxes, depreciation and amortization, and adjusted for other items within a relevant period which are not reflective of the segment’s operating performance in the period.
The following table provides a reconciliation of the Company’s segment adjusted EBITDA to net loss for the three months ended March 31, 2026 and 2025 (unaudited):
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenue |
$ | 134,351 | $ | 111,024 | ||||
| Significant segment expenses: |
||||||||
| Cost of goods sold (adjusted) (1) |
96,823 | 76,798 | ||||||
| Selling, general, and administrative expenses (adjusted) (2) |
10,989 | 8,883 | ||||||
|
|
|
|
|
|||||
| Adjusted EBITDA |
26,539 | 25,343 | ||||||
| Income tax (benefit) expense |
(5,472 | ) | 2,572 | |||||
| Interest expense, net |
17,771 | 16,720 | ||||||
| Depreciation and amortization |
12,109 | 9,723 | ||||||
| Share-based compensation expense |
756 | 802 | ||||||
| Transaction costs (3) |
13,985 | 514 | ||||||
| Integration and restructuring costs (4) |
2,273 | 2,041 | ||||||
| Legal contingencies loss (5) |
— | 7 | ||||||
| Management fees (6) |
249 | 256 | ||||||
| Other (7) |
— | 21 | ||||||
|
|
|
|
|
|||||
| Net loss |
$ | (15,132 | ) | $ | (7,313 | ) | ||
|
|
|
|
|
|||||
| (1) | Represents Cost of goods sold adjusted to exclude depreciation and amortization of long-lived and intangible assets, share-based compensation expense, and other adjustments (including transaction costs, integration and restructuring costs, legal contingencies losses, management fees, and other costs) to the extent such items are included in Cost of goods sold. |
| (2) | Represents Selling, general, and administrative expenses adjusted to exclude depreciation and amortization of long-lived and intangible assets, share-based compensation expense, and other adjustments (including transaction costs, integration and restructuring costs, legal contingencies losses, management fees, and other costs) to the extent such items are included in Selling, general, and administrative expenses. |
| (3) | Includes transaction related costs associated with mergers, acquisitions, and costs related to the IPO. |
| (4) | Includes acquisition integration and restructuring costs, including plant consolidation and reconfiguration, reductions in force, and executive severance expense. |
| (5) | Includes losses from legal disputes and settlements from third parties. |
| (6) | Includes management fees paid to our parent company in accordance with our management services agreement which will terminate upon the closing of the IPO. |
| (7) | Includes other costs that the CODM does not review as part of his evaluation of the operations and performance of the business. |
F-51
Table of Contents
Applied Aerospace & Defense, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(amounts in thousands, except share and per share data)
The Company’s segment assets are reported on the Condensed Consolidated Balance Sheets as total assets. Substantially all of the Company’s revenues and long-lived assets are attributable to operations within the United States.
| 14. | Commitments and Contingencies |
Legal Proceedings
The Company is subject to litigation, claims, investigations, and audits arising from time to time in the ordinary course of business, including various U.S. government investigations related to procurement activities, post-award audits, and reported contract costs, which could result in civil, criminal, or administrative proceedings and potential claims for fines, penalties, compensatory damages, restitution, and/or forfeitures. Although legal proceedings and government investigations are inherently unpredictable and, in certain circumstances, could result in suspension or debarment from government contracts, the Company believes it has valid defenses to the matters currently pending and intends to defend them vigorously. The Company records accruals for loss contingencies when losses are probable and reasonably estimable. Based on information currently available, management is not aware of any current disputes that, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations, or cash flows.
| 15. | Subsequent Events |
The Company has evaluated subsequent events from the balance sheet date of March 31, 2026 through May 8, 2026, the date the financial statements were available to be issued. The Company has determined that there are no subsequent events requiring recognition or disclosure in the financial statements.
F-52
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Management
of Consolidated Boring Inc.
Opinion
We have audited the accompanying consolidated financial statements of Consolidated Boring Inc. and Subsidiaries (a Delaware corporation), which comprise the consolidated balance sheet as of December 31, 2025, and the related consolidated statements of income, equity, and cash flows for the year then ended, and the related notes to the financial statements.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Consolidated Boring Inc. and Subsidiaries as of December 31, 2025, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Consolidated Boring Inc. and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter - Change in Accounting Principle
As discussed in Note 14 to the financial statements, during 2025, Consolidated Boring Inc. and Subsidiaries elected to discontinue the private company alternatives and to apply the accounting guidance applicable to entities that have not elected such alternatives. This change has been applied retrospectively and has had a material effect on the financial statements. Our opinion is not modified with respect to that matter.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that is free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Consolidated Boring Inc. and Subsidiaries’ ability to continue as a going concern within one year after the date the consolidated financial statements are available to be issued.
F-53
Table of Contents
Independent Auditors’ Report
(Continued)
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
| • | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| • | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. |
| • | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Consolidated Boring Inc. and Subsidiaries’ internal control. Accordingly, no such opinion is expressed. |
| • | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. |
| • | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Consolidated Boring Inc. and Subsidiaries’ ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
/s/ Barnes, Dennig & Co. Ltd.
March 12, 2026
Cincinnati, Ohio
F-54
Table of Contents
CONSOLIDATED BORING INC. AND SUBSIDIARIES
December 31, 2025
| Assets |
||||
| Current: |
||||
| Cash and cash equivalents |
$ | 2,692,466 | ||
| Accounts receivable - trade (net of reserve for credit losses of $11,333) |
14,223,002 | |||
| Inventories, net |
7,954,308 | |||
| Contract assets |
9,736,972 | |||
| Income taxes receivable |
189,339 | |||
| Prepaid expenses |
571,938 | |||
|
|
|
|||
| Total current assets |
35,368,025 | |||
|
|
|
|||
| Property and equipment: |
||||
| Property and equipment |
42,788,316 | |||
| Less: accumulated depreciation |
(23,158,426 | ) | ||
|
|
|
|||
| Total property and equipment |
19,629,890 | |||
|
|
|
|||
| Other: |
||||
| Right-of-use assets, operating leases |
6,287,854 | |||
| Goodwill |
39,276,911 | |||
| Intangible assets, net |
24,759,784 | |||
|
|
|
|||
| Total other assets |
70,324,549 | |||
|
|
|
|||
| Total assets |
$ | 125,322,464 | ||
|
|
|
|||
| Liabilities |
||||
| Current: |
||||
| Line of credit |
$ | 1,000,000 | ||
| Current portion of note payable |
1,374,922 | |||
| Accounts payable - trade |
6,518,508 | |||
| Accrued liabilities |
1,189,369 | |||
| Accrued bonuses |
1,407,231 | |||
| Accrued related party management fees |
1,414,753 | |||
| Accrued purchases |
787,815 | |||
| Customer deposits |
2,927,903 | |||
| Current portion of operating lease liabilities |
1,487,350 | |||
|
|
|
|||
| Total current liabilities |
18,107,851 | |||
|
|
|
|||
| Long-term: |
||||
| Operating lease liabilities, less current portion |
4,899,022 | |||
| Note payable, less current portion |
52,383,722 | |||
|
|
|
|||
| Total long-term liabilities |
57,282,744 | |||
|
|
|
|||
| Total liabilities |
75,390,595 | |||
|
|
|
|||
| Shareholders’ Equity |
||||
| Common stock, par value of $0.01, 40,000 shares authorized and 11,226 shares issued and outstanding as of December 31, 2025 |
11 | |||
| Additional paid in capital |
57,336,564 | |||
| Accumulated deficit |
(7,404,706 | ) | ||
|
|
|
|||
| Total shareholders’ equity |
49,931,869 | |||
|
|
|
|||
| Total liabilities and shareholders’ equity |
$ | 125,322,464 | ||
|
|
|
The accompanying notes are an integral part of these financial statements
F-55
Table of Contents
CONSOLIDATED BORING INC. AND SUBSIDIARIES
Year Ended December 31, 2025
| Revenues |
$ | 105,580,166 | 100.0% | |||||
| Cost of revenues |
78,288,802 | 74.1 | ||||||
|
|
|
|
|
|||||
| Gross profit |
27,291,364 | 25.9 | ||||||
|
|
|
|
|
|||||
| Operating expenses |
||||||||
| Selling, general and administrative expenses |
13,379,069 | 12.7 | ||||||
| Related party management fees |
646,076 | 0.6 | ||||||
|
|
|
|
|
|||||
| Total operating expenses |
14,025,145 | 13.3 | ||||||
|
|
|
|
|
|||||
| Income before other items |
13,266,219 | 12.6 | ||||||
|
|
|
|
|
|||||
| Other income/(expenses) |
||||||||
| Interest expense |
(5,164,997 | ) | (4.9 | ) | ||||
| Interest income |
4,171 | — | ||||||
| Miscellaneous income |
9,869 | — | ||||||
| Other expense |
(377,259 | ) | (0.4 | ) | ||||
|
|
|
|
|
|||||
| Total other income/(expenses) |
(5,528,216 | ) | (5.3 | ) | ||||
|
|
|
|
|
|||||
| Income before income tax expense |
7,738,003 | 7.3 | ||||||
| Income tax expense |
288,134 | 0.2 | ||||||
|
|
|
|
|
|||||
| Net income |
$ | 7,449,869 | 7.1% | |||||
|
|
|
|
|
The accompanying notes are an integral part of these financial statements
F-56
Table of Contents
CONSOLIDATED BORING INC. AND SUBSIDIARIES
Consolidated Statement of Equity
Year Ended December 31, 2025
| Common Stock | Additional Paid In Capital |
Accumulated Deficit |
Total | |||||||||||||||||
| Shares | Amount | |||||||||||||||||||
| Balance, December 31, 2024, as previously reported |
11,226 | $ | 11 | $ | 57,411,846 | $ | (29,598,733 | ) | $ | 27,813,124 | ||||||||||
| Change in accounting principle revision |
— | — | — | 14,744,158 | 14,744,158 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance, December 31, 2024 (revised) |
11,226 | 11 | 57,411,846 | (14,854,575 | ) | 42,557,282 | ||||||||||||||
| Stock compensation |
— | — | 232,601 | — | 232,601 | |||||||||||||||
| Stock redemption |
— | — | (307,883 | ) | — | (307,883 | ) | |||||||||||||
| Net income |
— | — | — | 7,449,869 | 7,449,869 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance, December 31, 2025 |
11,226 | $ | 11 | $ | 57,336,564 | $ | (7,404,706 | ) | $ | 49,931,869 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-57
Table of Contents
CONSOLIDATED BORING INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Year Ended December 31, 2025
| Cash flows from operating activities: |
||||
| Net income |
$ | 7,449,869 | ||
| Adjustments to reconcile net income to net cash from operating activities: |
||||
| Depreciation and amortization |
8,161,750 | |||
| Stock compensation |
232,601 | |||
| Noncash lease expense |
20,892 | |||
| Change in assets and liabilities: |
||||
| Accounts receivable |
(10,497,267 | ) | ||
| Inventories |
(2,744,706 | ) | ||
| Contract assets |
(2,894,978 | ) | ||
| Income taxes receivable |
(189,339 | ) | ||
| Prepaid expenses |
(58,021 | ) | ||
| Accounts payable |
957,179 | |||
| Accrued liabilities |
579,069 | |||
| Accrued related party management fees |
394,815 | |||
| Customer deposits |
2,004,321 | |||
|
|
|
|||
| Net cash provided by operating activities |
3,416,185 | |||
|
|
|
|||
| Cash flows from investing activities: |
||||
| Capital expenditures |
(3,268,706 | ) | ||
|
|
|
|||
| Net cash used in investing activities |
(3,268,706 | ) | ||
|
|
|
|||
| Cash flows from financing activities: |
||||
| Advances on line of credit |
3,023,652 | |||
| Repayments on line of credit |
(2,558,096 | ) | ||
| Payments of long-term debt |
(2,149,960 | ) | ||
| Debt issuance costs |
(326,456 | ) | ||
| Stock redemption |
(307,883 | ) | ||
|
|
|
|||
| Net cash used in financing activities |
(2,318,743 | ) | ||
|
|
|
|||
| Net change in cash and cash equivalents |
(2,171,264 | ) | ||
| Cash and cash equivalents at beginning of period |
4,863,730 | |||
|
|
|
|||
| Cash and cash equivalents at end of period |
$ | 2,692,466 | ||
|
|
|
|||
| Supplementary schedule of cash flow information: |
||||
| Interest paid |
$ | 4,939,524 | ||
|
|
|
|||
| Income taxes |
$ | 431,800 | ||
|
|
|
|||
| Supplemental disclosure of non-cash transactions: |
||||
| Line of credit refinanced with long-term note payable |
$ | 7,465,556 | ||
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
F-58
Table of Contents
CONSOLIDATED BORING INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Consolidated Boring Inc., a Delaware Corporation, was incorporated on July 27, 2021, in connection with acquiring American Flowform Products, LLC and Faxon Machining, LLC. Consolidated Boring Inc. is a wholly owned subsidiary of Consolidated Boring LLC.
American Flowform Products, LLC is a leader in advanced cold metal forming of precision components for military, aerospace, oil/gas, and other applications. American Flowform Products, LLC is located in Billerica, Massachusetts and conducts business throughout the United States. American Flowform Products, LLC accounted for approximately 32% of the Company’s consolidated revenues for the year ended December 31, 2025.
Faxon Machining, LLC is a diversified machining center with expertise in deep hole drilling. Faxon Machining, LLC is located in Forest Park, Ohio and conducts business throughout the United States. Faxon Machining LLC accounted for approximately 68% of the Company’s consolidated revenues for the year ended December 31, 2025.
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of Consolidated Boring Inc. and its wholly owned subsidiaries American Flowform Products, LLC and Faxon Machining, LLC (collectively the “Company”). All significant intercompany balances and transactions have been eliminated.
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Cash and Cash Equivalents
The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. As of December 31, 2025, there were no items considered to be cash equivalents.
The Company maintains its cash in bank deposits which, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.
Receivables and Credit Policies
Accounts receivables are uncollateralized customer obligations due under normal trade terms requiring payment within 30—60 days from the invoice date. The Company does not collect finance charges for unpaid accounts receivable. Accounts receivables are stated at the amount billed to the customer, less an allowance for credit losses. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices. The Company provides an allowance for credit losses, which is based upon a review of outstanding receivables, historical collection information, existing economic conditions and individual credit evaluation and specific circumstances of the customer. The accounts receivable balance from contracts with customers was $3,725,736 as of December 31, 2024.
Inventory
Inventory is stated at the lower of cost or net realizable value, which approximates actual cost determined on a first-in, first-out method. Cost consists of direct labor, direct materials and allocable indirect and direct manufacturing overhead costs.
F-59
Table of Contents
CONSOLIDATED BORING INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and equipment are carried at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives. The straight-line method of depreciation is followed for substantially all assets for financial reporting purposes. The Company classifies property and equipment that is not yet placed in service as construction in progress. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized. The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments are capitalized.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill is reviewed for impairment annually. For the year ended December 31, 2025, the Company completed its annual goodwill impairment tests and determined that no impairment existed. Additionally, no events or circumstances occurred during the period presented that required an interim impairment test
Intangible assets
Intangible assets represent customer relationships, developed technology and trade names, which were acquired in business combinations. These intangible assets are recognized at their estimated fair values as of the acquisition dates in accordance with ASC 805, Business Combinations. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Finite-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment is recognized if the carrying amount exceeds the undiscounted cash flows expected to result from the asset’s use and eventual disposition, and the impairment loss is measured as the excess of the carrying amount over fair value.
For the year ended December 31, 2025, the Company determined that no impairment indicators were present, and no impairment losses were recorded related to intangible assets.
Revenue Recognition
The Company derives its revenues by serving as a single source design, engineering and manufacturing solution of prototype and production for customers and a wide range of industries including automotive, defense, aerospace, oil and energy, OEM’s and more. Revenues are recognized based on consideration the Company expects to be entitled to in exchange for those products. Revenues are generated from customers primarily in the United States.
The determination of the revenue recognition timing requires significant judgement as to nature of goods being manufactured and the enforceable rights in the contracts. The Company has determined that a substantial portion of its customer contracts have met the requirements set forth in ASC 606, Revenue from Contracts with Customers, to recognize revenue over time. Revenue related to performance obligations satisfied at a point in time is recognized when control transfers to customers, which is typically when the product is shipped.
For performance obligations satisfied over time the revenue is recognized based on the costs incurred to date relative to the total expected costs. This method is used because management considers total cost to be the best available measure of progress on the contracts.
F-60
Table of Contents
CONSOLIDATED BORING INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (Continued)
For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on the relative standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company forecasts its expected costs of satisfying a performance obligation and then adds an appropriate margin for that distinct good or service. Determining which performance obligations are distinct can require significant judgement.
The nature of the Company’s business gives rise to product returns for products not meeting customer specifications. The Company records a reduction in revenue and a liability for expected product returns.
In the following table, revenue is disaggregated by timing of satisfaction of performance obligations for the year ending December 31, 2025:
| Performance obligations satisfied over time |
$ | 84,464,133 | ||
| Performance obligations satisfied at a point in time |
21,116,033 | |||
|
|
|
|||
| $ | 105,580,166 | |||
|
|
|
Contract Assets and Liabilities
Contract assets include unbilled receivables resulting from revenue recognized on performance obligations satisfied over time in excess of the amounts billed to the customer. The contract assets balances were $9,736,972 and $6,841,994 as of December 31, 2025 and 2024, respectively. Contract liabilities include customer deposits in excess of revenue recognized. Contract liabilities of $2,927,903 and $923,582 are recorded as Customer Deposits on the balance sheet as of December 31, 2025 and 2024 respectively. The Company anticipates that substantially all incurred costs associated with contract assets as of December 31, 2025 will be billed and collected within one year.
Revenue recognized for the year ended December 31, 2025, that was included in the contract liability balance at the beginning of the year was $752,803.
Leases
The Company leases its facilities and determines if an arrangement is a lease at inception.
Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the leases do not provide an implicit rate, the Company uses its incremental borrowing rate to discount future payments. Lease expense is recognized on a straight-line basis over the lease term.
The Company has lease agreements with lease and non-lease components. The Company accounts for the lease and non-lease components as a single lease component. There may be variability in future lease payments as the amount of the non-lease components is typically revised from one period to the next. These variable lease payments are recognized in operating expenses in the period in which the obligation for those payments was incurred.
The Company has elected to apply the short-term lease exemption to all classes of underlying assets.
F-61
Table of Contents
CONSOLIDATED BORING INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred tax assets and liabilities for future tax consequences of events that have been previously recognized in the Company’s financial statements or tax returns. The measurement of deferred tax assets and liabilities is based on the provision of enacted tax law; the effects of future changes in tax laws or rates are not anticipated. Measurement of deferred taxes is computed using applicable current tax rates. The deferred income tax expense represents the change during the reporting period in the deferred tax assets and deferred tax liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company applies GAAP provisions of Accounting for Uncertainty in Income Taxes. These provisions clarify the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement principles for the financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return that are not certain to be realized.
The Company’s tax returns are subject to review and examination by federal, state and local authorities. The Company’s 2022 through 2025 tax returns are open to examination.
Equity-based Compensation
The preparation of the financial statements in conformity with GAAP requires the measurement of the cost of employee services received in exchange for all equity awards granted based on the fair market value of the award as of the grant date. Equity-based compensation is recorded as compensation expenses for all equity-based compensation awards granted, based on grant date fair value estimated. The grant-date fair value of equity awards is recognized as compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the award. Forfeiture of awards will be recognized as they occur.
Research and Development
Research and development costs are expensed as incurred.
Shipping and Handling
Shipping and handling costs associated with outbound freight after control of a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of sales.
Use of Estimates
Management uses estimates and assumptions in preparing the consolidated financial statements in accordance with GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses. Actual results could vary from the estimates that were used.
Subsequent Event Evaluation
In preparing its consolidated financial statements, the Company has evaluated events subsequent to the balance sheet date through March 12, 2026 which is the date the financial statements were available to be issued.
F-62
Table of Contents
CONSOLIDATED BORING INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
NOTE 2 INVENTORIES
Inventories consisted of the following as of December 31, 2025:
| Work in process |
$ | 1,401,152 | ||
| Finished goods |
250,150 | |||
| Raw materials |
6,746,811 | |||
| Obsolescence reserve |
(443,805 | ) | ||
|
|
|
|||
| $ | 7,954,308 | |||
|
|
|
NOTE 3 PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31, 2025:
| Machinery and equipment |
$ | 36,532,541 | ||
| Computer equipment |
520,874 | |||
| Tooling and fixtures |
2,897,018 | |||
| Transportation equipment |
268,020 | |||
| Leasehold improvements |
2,143,272 | |||
| Construction in process |
426,591 | |||
|
|
|
|||
| $ | 42,788,316 | |||
|
|
|
Depreciation expense related to property and equipment was $4,323,610 for the year ended December 31, 2025.
NOTE 4 INTANGIBLE ASSETS
The Company recognized intangible assets in connection with business combinations. The intangible assets are amortized on a straight-line basis over 5, 10 and 15 years. Intangible assets consists of the following as of December 31, 2025:
| Customer relationships |
$ | 29,650,000 | ||
| Developed technology |
8,250,000 | |||
| Trade names |
2,680,000 | |||
|
|
|
|||
| Total carrying values |
40,580,000 | |||
|
|
|
|||
| Customer relationships - 10-15 years |
(9,858,594 | ) | ||
| Developed technology - 10 years |
(3,616,438 | ) | ||
| Trade names - 5 years |
(2,345,184 | ) | ||
|
|
|
|||
| Total accumulated amortization |
(15,820,216 | ) | ||
|
|
|
|||
| Total intangible assets |
$ | 24,759,784 | ||
|
|
|
F-63
Table of Contents
CONSOLIDATED BORING INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
NOTE 4 INTANGIBLE ASSETS (CONTINUED)
Amortization charged to expense was $3,612,667 for the year ended December 31, 2025. Amortization for the next five years will be the following:
| 2026 |
$ | 3,411,483 | ||
| 2027 |
3,076,667 | |||
| 2028 |
3,076,667 | |||
| 2029 |
3,076,667 | |||
| 2030 |
3,076,667 | |||
| Thereafter |
9,041,633 | |||
|
|
|
|||
| $ | 24,759,784 | |||
|
|
|
NOTE 5 FINANCING ARRANGEMENT
On July 28, 2025, the Company amended its financing arrangement. The note payable requires quarterly installments of $343,730 plus interest at the secured overnight financing rate (“SOFR”) plus a margin based on the leverage ratio (7.75% as of December 31, 2025). The amended note has a final balloon payment due August 2029 for the remaining balance. In connection with the note agreement, the Company is required to comply with certain restrictive covenants, principally related to a total net leverage ratio. The note is secured by all assets of the Company and is guaranteed by the Company.
The following summarizes the note payable balance as of December 31, 2025:
| Principal balance |
$ | 54,309,355 | ||
| Less: unamortized debt issuance costs |
(550,711 | ) | ||
|
|
|
|||
| Net balance |
53,758,644 | |||
| Less: current portion of long-term debt |
(1,374,922 | ) | ||
|
|
|
|||
| Long-term portion |
$ | 52,383,722 | ||
|
|
|
Amortization of the debt issuance costs of $225,473 is reported as interest expense for the year ended December 31, 2025.
Long-term debt maturities during the next five years are as follows:
| 2026 |
$ | 1,374,922 | ||
| 2027 |
1,374,922 | |||
| 2028 |
1,374,922 | |||
| 2029 |
49,633,878 | |||
|
|
|
|||
| Total |
$ | 53,758,644 | ||
|
|
|
NOTE 6 LINE OF CREDIT
The Company has a $16,000,000 revolving line of credit with its bank with interest at the SOFR rate plus a margin based on the leverage ratio (7.75% at December 31, 2025), expiring August 2029. The line of credit is secured by the Company’s assets and includes a commitment fee based on the average unused daily revolving balance. The commitment fee in payable quarterly and was 0.25% as of December 31, 2025. The Company is required to comply with certain financial covenants principally related to its total net leverage ratio. The balance of the revolving line of credit was $1,000,000 as of December 31, 2025.
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CONSOLIDATED BORING INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
NOTE 7 LEASES
The Company leases its facilities under various operating leases expiring through August 2031 with renewal terms ranging from five to twenty years. Lease provisions require the Company to pay real estate taxes, utilities, insurance and certain other operating costs and are classified as operating leases.
The components of lease cost recognized within the consolidated statement of operations for the year ended December 31, 2025 were as follows:
| Operating lease expense |
$ | 1,581,096 | ||
| Variable lease expense |
262,378 | |||
| Short term lease expense |
28,617 |
Other information related to leases were as follows:
| Operating cash flows |
$ | 1,872,091 | ||
| Weighted average remaining lease term |
4.4 years | |||
| Weighted average incremental borrowing rate |
5.4% |
Future minimum lease payments under leases are as follows as of December 31, 2025:
| 2026 |
$ | 1,635,678 | ||
| 2027 |
1,622,002 | |||
| 2028 |
1,625,184 | |||
| 2029 |
813,364 | |||
| 2030 |
651,000 | |||
| Thereafter |
379,750 | |||
|
|
|
|||
| Total future minimum lease payments |
6,726,978 | |||
| Less imputed interest |
(340,606 | ) | ||
|
|
|
|||
| Lease liabilities |
$ | 6,386,372 | ||
|
|
|
NOTE 8 INCOME TAXES
Income tax expense for the year ended December 31, 2025:
| Currently payable: |
||||
| Federal |
$ | 282,682 | ||
| State and local |
5,452 | |||
|
|
|
|||
| Current income tax expense |
$ | 288,134 | ||
|
|
|
|||
| Deferred taxes: |
||||
| Federal |
$ | 1,148,859 | ||
| State and local |
(119,239 | ) | ||
| Valuation allowance |
(1,029,620 | ) | ||
|
|
|
|||
| Total deferred tax benefit |
— | |||
|
|
|
|||
| Total income tax expense |
$ | 288,134 | ||
|
|
|
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CONSOLIDATED BORING INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
NOTE 8 INCOME TAXES (CONTINUED)
Deferred income tax balances consisted of the following as of December 31, 2025
| Deferred tax assets: |
||||
| Accrued expenses |
$ | 215,011 | ||
| Interest expense limitations |
3,449,208 | |||
| Intangible assets |
831,850 | |||
| Net operating losses |
4,058,306 | |||
| Other |
227,078 | |||
|
|
|
|||
| Total deferred tax asset |
8,781,453 | |||
|
|
|
|||
| Deferred tax liabilities: |
||||
| Property and equipment |
(3,471,150 | ) | ||
| Goodwill |
(2,446,484 | ) | ||
| Prepaid expenses |
(87,946 | ) | ||
|
|
|
|||
| Total deferred tax liability |
(6,005,580 | ) | ||
|
|
|
|||
| Less: Valuation allowance |
(2,775,873 | ) | ||
|
|
|
|||
| Net deferred taxes |
$ | — | ||
|
|
|
As of December 31, 2025, the Company had federal net operating loss (NOL) carryforwards of approximately $18,100,000. Under the Tax Cuts and Jobs Act of 2017, federal NOLs arising in tax years beginning after December 31, 2017 may be carried forward indefinitely, but their use is limited to 80% of taxable income in any given year.
The valuation allowance increased by $1,029,620 during 2025.
A reconciliation of income taxes at the statutory rate to the Company’s effective rate is as follows for the year ending December 31, 2025:
| Tax at statutory rate - 21% |
$ | 1,624,980 | 21.0% | |||||
| State taxes, net of federal benefit |
(116,439 | ) | (1.4 | ) | ||||
| Impact of prior year true-ups |
(195,348 | ) | (2.5 | ) | ||||
| Other permanent nondeductible items |
15,572 | (0.0 | ) | |||||
| Tax credits |
(11,011 | ) | (0.1 | ) | ||||
| Change in valuation allowance |
(1,029,620 | ) | (13.3 | ) | ||||
|
|
|
|
|
|||||
| Income tax expense - effective rate |
$ | 288,134 | 3.6% | |||||
|
|
|
|
|
NOTE 9 RELATED PARTY TRANSACTIONS
The Company has a management agreement arrangement with a related party which requires monthly fees. Total management fee expense for the year ended December 31, 2025 was $646,076.
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CONSOLIDATED BORING INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
NOTE 10 EQUITY APPRECIATION RIGHTS PLAN
The Company maintains the Consolidated Boring Inc. 2021 Equity Appreciation Rights Plan (the “Plan”) providing for the issuance of equity appreciation right shares (“EAR”). The Board can issue EARs to key employees, directors, and consultants of the Company or any of its subsidiaries. Each EAR represents the right, upon exercise, to receive an amount in cash (the “Payment Amount”) equal to the excess, if any, of the fair market value of a share on the exercise date over the defined base price, subject to satisfaction of the performance condition and the terms and conditions of this Plan and the applicable incentive agreement. But an EAR shall not entitle the holder thereof to any rights in, or ownership of, common stock or other equity interest of the Company or any of its Subsidiaries. The shares vest ratably over a four-year period.
A summary of the activity under the Plan during the year ended December 31, 2025 is as follows:
| Outstanding shares at December 31, 2024 |
1,511 | |||
| Shares issued in 2025 |
8 | |||
| Shares redeemed in 2025 |
(48 | ) | ||
|
|
|
|||
| Outstanding shares at December 31, 2025 |
1,471 | |||
|
|
|
The fair value of each award is estimated on the date of grant using the lattice valuation model that uses assumptions concerning expected volatility (25%), expected term (5 years), and the expected risk-free rate of return (3.25%). The weighted average fair value of the EARs granted during 2025 was $1,124. The weighted average fair value of shares vested during 2025 and outstanding as of December 31, 2025 was $780. The EARs compensation expense for 2025 was $232,601. As of December 31, 2025, the unrecognized compensation cost related to unvested shares was $200,886.
NOTE 11 PROFIT SHARING RETIREMENT PLAN
The Company has defined contribution plans covering substantially all employees. The Company matches up to 4% of elective employee contributions. During the year ended December 31, 2025, the Company contributed $833,069.
NOTE 12 CONCENTRATIONS
American Flowform Products, LLC’s had two customers that accounted for approximately 76% of the subsidiaries total revenues for 2025. These customers accounted for 78% of the subsidiaries accounts receivable balance as of December 31, 2025.
Faxon Machining, LLC’s had three customers that accounted for approximately 80% of the subsidiaries total revenues for 2025. These customers accounted for approximately 55% of the subsidiaries accounts receivable balance as of December 31, 2025.
NOTE 13 CONTINGENCIES
The Company may become involved in various litigation arising from the ordinary course of business. At this time, no estimate can be made as to the timing or the amount of any potential claim. Accordingly, no amounts are provided for these matters in the consolidated financial statements.
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CONSOLIDATED BORING INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
NOTE 14 CHANGE IN ACCOUNTING PRINCIPLES
During 2025, the Company elected to discontinue its use of the private-company accounting alternatives under GAAP related to (1) the amortization of goodwill and (2) the accounting policy allowing certain identifiable intangible assets acquired in a business combination to be subsumed into goodwill rather than recognized separately. These alternatives were previously adopted under the guidance permitted for private companies in ASC 350-20, Intangibles—Goodwill and Other, and ASC 805, Business Combinations. As a result, goodwill is no longer amortized and is subject to annual impairment testing, or more frequently if events or circumstances indicate potential impairment. In addition, intangible assets that were previously included with goodwill are recognized separately and amortized over their estimated useful lives.
Management determined that eliminating the private-company alternatives is preferable under ASC 250, Accounting Changes and Error Corrections, because the change improves comparability with public business entities and with other companies in the Company’s industry, provides a more faithful representation of the economic value associated with acquired intangible assets, and enhances the relevance and usefulness of the Company’s financial statements in anticipation of future external reporting needs.
The change in accounting principle was applied retrospectively to all periods presented in accordance with ASC 250, Accounting Changes and Error Corrections. Retrospective application required the Company to reverse previously recognized goodwill amortization, identify and recognize intangible assets separately for prior business combinations where those assets had been subsumed into goodwill under the private-company alternative, and record amortization expense for the newly recognized intangible assets over their estimated useful lives. The cumulative effect of applying the new accounting principle to periods before January 1, 2025 resulted in an increase to retained earnings of $14,744,158.
NOTE 15 SUBSEQUENT EVENTS
Effective January 26, 2026, Consolidated Boring LLC (the “Seller”) entered into an agreement to sell its outstanding equity interests in the Company to AA&D Midco, Inc. The transaction values the Company at an enterprise purchase price of $425,000,000, before consideration of indebtedness, cash, and other customary purchase price adjustments. A portion of the purchase price was satisfied by AA&D Midco, Inc.’s parent company (AA&D Holdings, LP) through the issuance of shares of its limited partnership units with a fair value of $70,000,000 to the Seller. The remainder of the purchase price was paid by AA&D Midco, Inc. in cash.
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32,500,000 Shares
Common Stock
PROSPECTUS
, 2026
| Morgan Stanley | Jefferies | |||
| BofA Securities | RBC Capital Markets | Guggenheim Securities |
| Baird | Stifel | Wolfe | Nomura Alliance |
| Co-Manager | ||||
| Academy Securities | ||||
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
| Item 13. | Other Expenses of Issuance and Distribution. |
The following table sets forth all expenses to be paid by the registrant, other than estimated underwriting discounts and commissions, in connection with this offering. All expenses will be borne by the registrant. All amounts shown are estimates except for the SEC registration fee, the FINRA filing fee and the exchange listing fee.
| Amount to be Paid |
||||
| SEC Registration Fee |
$ | 108,391 | ||
| FINRA filing fee |
118,231 | |||
| Exchange listing fee |
325,000 | |||
| Printing expenses |
520,000 | |||
| Legal fees and expenses |
5,000,000 | |||
| Accounting fees and expenses |
3,169,000 | |||
| Transfer agent fees |
15,000 | |||
| Miscellaneous expenses |
744,378 | |||
|
|
|
|||
| Total: |
$ | 10,000,000 | ||
|
|
|
|||
| Item 14. | Indemnification of Directors and Officers. |
Section 145 of the DGCL provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement in connection with specified actions, suits and proceedings, whether civil, criminal, administrative or investigative, other than a derivative action by or in the right of the corporation, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification extends only to expenses, including attorneys’ fees, incurred in connection with the defense or settlement of such action and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation’s certificate of incorporation, bylaws, disinterested director vote, stockholder vote, agreement or otherwise.
Our amended and restated certificate of incorporation provides that a director will not be liable to us or our stockholders for monetary damages to the fullest extent permitted by the DGCL. Any amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to that amendment or repeal. In addition, if the DGCL is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a member of our Board, will be limited to the fullest extent permitted by the amended DGCL. Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify, and advance expenses to, any officer or director to the fullest extent authorized by the DGCL.
We have obtained directors’ and officers’ insurance to cover our directors, officers and some of our employees for certain liabilities. In addition, we intend to enter into indemnification agreements with our current and future directors and officers containing provisions that are in some respects broader than the specific indemnification provisions contained in the DGCL. The indemnification agreements will require us, among other
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Table of Contents
things, to indemnify our directors and officers against certain liabilities that may arise by reason of their status or service as directors or officers and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.
The proposed form of underwriting agreement to be filed as Exhibit 1.1 to this registration statement provides for indemnification to our directors and officers by the underwriters against certain liabilities.
| Item 15. | Recent Sales of Unregistered Securities. |
In October 2024, we issued 0.7195 shares of common stock to our parent entity, AA&D Holdings, LP, in exchange for equity in Ice-Bula Holdings, Inc. in connection with our acquisition of Innovative Composite Engineering LLC.
In March 2025, we issued 0.7246 shares of common stock to our parent entity, AA&D Holdings, LP, in exchange for capital stock of NeXolve Holdings, LLC in connection with our acquisition of NeXolve Holdings, LLC.
In November 2025, we issued 47.1166 shares of common stock to our parent entity, AA&D Holdings, LP, in exchange for all of the issued and outstanding common stock of Rotor Intermediate, Inc. in connection with the merger of AA&D Holdings, LP with Rotor TopCo, LP.
In March 2026, we issued an aggregate of 9.8118 shares of common stock to our parent entity, AA&D Holdings, LP, in a series of transactions in exchange for common stock of Consolidated Boring Inc. and a cash contribution of $18.0 million.
The offer and sale of the above securities were deemed to be exempt from registration under the Securities Act of 1933 in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder, as transactions by an issuer not involving any public offering.
| Item 16. | Exhibits and Financial Statement Schedules. |
See the Exhibit Index immediately preceding the signature page hereto, which is incorporated by reference as if fully set forth herein.
| Item 17. | Undertakings. |
The undersigned registrant hereby undertakes:
| 1. | Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. |
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| 2. | The undersigned registrant hereby undertakes that: |
| (A) | For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
| (B) | For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
EXHIBIT INDEX
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Table of Contents
| # | Denotes management contract or compensatory plan or arrangement. |
| * | Previously filed. |
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Table of Contents
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Stockton, California on May 26, 2026.
| Applied Aerospace & Defense, Inc. | ||
| By: | /s/ James William Ferguson, III | |
| Name: | James William Ferguson, III | |
| Title: | Chief Executive Officer | |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Name |
Title |
Date | ||
| /s/ James William Ferguson, III |
Chief Executive Officer and Director | May 26, 2026 | ||
| James William Ferguson, III | (Principal Executive Officer) | |||
| /s/ Jeff McRae |
Chief Financial Officer | May 26, 2026 | ||
| Jeff McRae | (Principal Financial Officer) | |||
| /s/ Kai Kasiguran |
Chief Accounting Officer | May 26, 2026 | ||
| Kai Kasiguran | (Principal Accounting Officer) | |||
| * |
Director | May 26, 2026 | ||
| David King | ||||
| * |
Director | May 26, 2026 | ||
| Noah Blitzer | ||||
| * |
Director | May 26, 2026 | ||
| Scott Goldstein | ||||
| * |
Director | May 26, 2026 | ||
| James Katzman | ||||
| * |
Director | May 26, 2026 | ||
| Susan Lynch | ||||
| * |
Director | May 26, 2026 | ||
| Jack Morris | ||||
| * |
Director | May 26, 2026 | ||
| Noah Roy | ||||
| *By: | /s/ James William Ferguson, III | |
| Name: James William Ferguson, III | ||
| Title: Chief Executive Officer | ||
II-5
Exhibit 1.1
[●] Shares
APPLIED AEROSPACE & DEFENSE, INC.
COMMON STOCK, PAR VALUE $0.01 PER SHARE
UNDERWRITING AGREEMENT
[●], 2026
[●], 2026
Morgan Stanley & Co. LLC
Jefferies LLC
BofA Securities, Inc.
RBC Capital Markets, LLC
c/o Morgan Stanley & Co. LLC
1585 Broadway
New York, New York 10036
c/o Jefferies LLC
520 Madison Avenue
New York, New York 10022
c/o BofA Securities, Inc.
One Bryant Park
New York, New York 10036
and
c/o RBC Capital Markets, LLC
200 Vesey Street, 8th Floor
New York, New York 10281
As representatives (the “Representatives”) of the several
Underwriters named in Schedule I hereto.
Ladies and Gentlemen:
Applied Aerospace & Defense, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to the several Underwriters named in Schedule I hereto (the “Underwriters”) [●] shares of its common stock, par value $0.01 per share (the “Firm Shares”). The Company also proposes to issue and sell to the several Underwriters not more than an additional [●] shares of its common stock, par value $0.01 per share (the “Additional Shares”) if and to the extent that Morgan Stanley & Co. LLC (“Morgan Stanley”), Jefferies LLC (“Jefferies”), BofA Securities, Inc. (“BofA”) and RBC Capital Markets, LLC (“RBC”), as representatives of the offering, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such shares of common stock granted to the Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the “Shares.” The shares of common stock, par value $0.01 per share, of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the “Common Stock.”
The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1 (File No. 333-295691), including a preliminary prospectus, relating to the Shares. The registration statement as amended to the date of this Agreement, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended (the “Securities Act”), is hereinafter referred to as the “Registration Statement”; the prospectus in the form first used to confirm sales of Shares (or in the form first made available to the Underwriters by the Company to meet requests of purchasers pursuant to Rule 173 under the Securities Act) is hereinafter referred to as the “Prospectus.” If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Securities Act (a “Rule 462 Registration Statement”), then any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462 Registration Statement.
For purposes of this Agreement, “free writing prospectus” has the meaning set forth in Rule 405 under the Securities Act, “preliminary prospectus” shall mean each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted information pursuant to Rule 430A under the Securities Act that was used after such effectiveness and prior to the execution and delivery of this Agreement, “Time of Sale Prospectus” means the preliminary prospectus contained in the Registration Statement at the time of its effectiveness together with the documents and pricing information set forth in Schedule II hereto, and “broadly available road show” means a “bona fide electronic road show” as defined in Rule 433(h)(5) under the Securities Act that has been made available without restriction to any person. As used herein, the terms “Registration Statement,” “preliminary prospectus,” “Time of Sale Prospectus” and “Prospectus” shall include the documents, if any, incorporated by reference therein as of the date hereof. The term “Time of Sale” means [●] p.m., New York City time, on [●], 2026.
Morgan Stanley has agreed to reserve a portion of the Shares to be purchased by it under this Agreement for sale to the Company’s directors, officers, employees and other parties related to the Company (collectively, “Participants”), as set forth in each of the Time of Sale Prospectus and the Prospectus under the heading “Underwriters” (the “Directed Share Program”). The Shares to be sold by Morgan Stanley and its affiliates pursuant to the Directed Share Program, at the direction of the Company, are referred to hereinafter as the “Directed Shares.” Any Directed Shares not orally confirmed for purchase by any Participant by the end of the business day on which this Agreement is executed will be offered to the public by the Underwriters as set forth in the Prospectus.
The Company hereby confirms its engagement of BofA as, and BofA hereby confirms its agreement with the Company to render services as, a “qualified independent underwriter” within the meaning of Rule 5121(f)(12) of the Financial Industry Regulatory Authority (“FINRA”) with respect to the offer and sale of the Shares.
1. Representations and Warranties of the Company. The Company represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose or pursuant to Section 8A under the Securities Act are pending before or, to the Company’s knowledge, threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, when such amendment or supplement becomes effective, will not contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, as of the date of such amendment or supplement, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (iii) the Time of Sale Prospectus does not, and at the time of each sale of the Shares in connection with the offering when the Prospectus is not yet available to prospective purchasers and at the Closing Date (as defined in Section 4), the Time of Sale Prospectus, as then amended or supplemented by the Company, if applicable, as of the date of such amendment or supplement, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, (iv) each broadly available road show, if any, does not conflict with any information contained in
3
the Time of Sale Prospectus (except to the extent deemed superseded or modified thereby) and, when considered together with the Time of Sale Prospectus, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (v) the Prospectus, as of its date, does not contain and, as amended or supplemented, if applicable, as of the date of such amendment or supplement or as of the Closing Date, will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement, the Time of Sale Prospectus or the Prospectus based upon any Underwriter Furnished Information (as defined in Section 8(b) below).
(c) The Company is not an “ineligible issuer” in connection with the offering pursuant to Rules 164, 405 and 433 under the Securities Act. Any free writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Each free writing prospectus, if any, that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or on behalf of or used or referred to by the Company complies or, if filed after the date of this Agreement, will comply as of the date of such filing, in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. Except for the free writing prospectuses, if any, identified in Schedule II hereto, and electronic road shows, if any, each furnished to the Representatives before first use, the Company has not prepared, used or referred to, and will not, without the Representatives’ prior consent, prepare, use or refer to, any free writing prospectus.
(d) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority necessary to own or lease its property and to conduct its business as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction (to the extent such concept of good standing or equivalent concept is applicable in such jurisdiction) in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the condition, financial or otherwise, or on the earnings, business or operations of the Company and its subsidiaries, taken as a whole (a “material adverse effect”).
(e) Each subsidiary of the Company has been duly incorporated, organized or formed, as applicable, is validly existing as a corporation or other business entity in good standing (to the extent such concept of good standing or equivalent concept is applicable in such jurisdiction) under the laws of the jurisdiction of its incorporation, organization or formation, as applicable, has the corporate or other business entity power and authority, as applicable, to own or lease its property and to conduct its business as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus and is duly qualified to transact business and is in good standing (to the extent such concept of good standing or equivalent concept is applicable in such jurisdiction) in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing (to the extent that such concepts or equivalent concepts are applicable in such jurisdiction) would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the issued shares of capital stock or other equity interests of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable (to the extent such concepts or equivalent concepts are applicable in such jurisdiction) and are owned directly or indirectly by the Company and free and clear of all liens, encumbrances, equities or claims.
4
(f) This Agreement and the performance by the Company of its obligations hereunder have been duly authorized by all necessary corporate action, and this Agreement has been duly executed and delivered by the Company.
(g) The authorized capital stock of the Company conforms as to legal matters, in all material respects, to the description thereof contained in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus.
(h) The shares of Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable.
(i) The Shares have been duly authorized and, when issued, delivered and paid for in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of the Shares will not be subject to any preemptive or similar rights.
(j) Neither the Company nor any of its subsidiaries is currently in violation of, and the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene (i) any provision of applicable law, (ii) the certificate of incorporation or by-laws (or similar organizational documents) of the Company or any subsidiary, (iii) any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or (iv) any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, except that in the case of clauses (i), (iii) and (iv) as would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, and no consent, approval, authorization or order of, or qualification with, any governmental body, agency or court is required for the performance by the Company of its obligations under this Agreement, except such as have been obtained or waived or as may be required by the securities or Blue Sky laws of the various states or the rules and regulations of the FINRA in connection with the offer and sale of the Shares.
(k) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus.
(l) There are no legal or governmental proceedings pending or, to the Company’s knowledge, threatened, to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject other than proceedings (i) accurately described in all material respects in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus or (ii) that would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, or on the power or ability of the Company to perform its obligations under this Agreement or to consummate the transactions contemplated by each of the Registration Statement, the Time of Sale Prospectus and the Prospectus. There are no legal or governmental proceedings that are required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus and are not so described in all material respects; and there are no statutes, regulations, contracts or other documents to which the Company is subject or by which the Company is bound that are required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus or to be filed as exhibits to the Registration Statement that are not described in all material respects or filed as required.
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(m) Each preliminary prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when filed and, at the Time of Sale and on the Closing Date, will comply, in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder.
(n) Except as permitted under Regulation M under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), neither the Company nor an affiliate of the Company has taken, directly or indirectly, any action designed to cause or result in, or which has constituted or which would reasonably be expected to constitute, the stabilization or manipulation of the price of any Shares of the Company, to facilitate the sale or resale of the Shares.
(o) The Company is not, and after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.
(p) The Company and each of its subsidiaries (i) (A) are, and to the Company’s knowledge, have been in compliance with all applicable foreign, federal, state and local laws and regulations relating to pollution, human health and safety (to the extent relating to exposure to Hazardous Materials) or the protection of the environment (including, without limitation, indoor or outdoor air, surface water, groundwater, drinking water supply, sediment, land surface, or subsurface strata), natural resources, wildlife or ecosystems including, without limitation, laws and regulations relating to the release or threatened release of, or exposure to, any chemical, substance, material or waste that is regulated or defined as hazardous, toxic or radioactive, or as a pollutant or contaminant, or words of similar meaning, in or under any law or regulation, and any petroleum or petroleum products, asbestos-containing materials, toxic mold, or per- or polyfluoroalkyl substances, (“Hazardous Materials”) (any such laws or regulations, “Environmental Laws”), (B) hold all permits, licenses, registrations, or other approvals required of them under applicable Environmental Laws to conduct their respective businesses as currently conducted, (C) are and have been in compliance with all terms and conditions of any such permit, license, registration or approval, and (D) have not received any written notice of, and are not a party to, any pending or, to the Company’s knowledge, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, notices of noncompliance or violation, notices of liability, or proceedings, in each case involving the Company and arising under any Environmental Law or any permit, license, registration or other approval required thereunder; and (ii) to the Company’s knowledge, there are no events or circumstances that would reasonably be expected to form the basis of, an order from a governmental body for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body, in each case against or affecting the Company or any of its subsidiaries, relating to releases or threatened releases of, or exposure to, Hazardous Materials or noncompliance with Environmental Laws, except in the case of any and all of the foregoing (i) and (ii), as described in the Registration Statement and the Prospectus or as would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole.
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(q) To the Company’s knowledge, there are no costs or liabilities arising under Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up; closure of facilities or properties; compliance with Environmental Laws or any permit, license, registration or other approval, required thereunder) which would, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(r) Except as described in the Registration Statement and the Prospectus, there are no proceedings that are pending, or to the Company’s knowledge, threatened against the Company or any of its subsidiaries under any Environmental Laws in which a governmental entity is also a party, other than such proceedings regarding which it is reasonably expected that no monetary sanctions of $300,000 or more will be imposed.
(s) Except as otherwise disclosed in the Registration Statement, the Time of Sale Prospectus or the Prospectus, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement.
(t) Neither the Company nor any of its subsidiaries or affiliates, nor any director, officer, or employee thereof, nor, to the Company’s knowledge, any agent or representative of the Company or of any of its subsidiaries or affiliates, has taken or will take any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment, giving or receipt of money, property, gifts or anything else of value, directly or indirectly, to any person to improperly influence official action by that person for the benefit of the Company or its subsidiaries or affiliates, or to otherwise secure any improper advantage, or to any person in violation of (i) the U.S. Foreign Corrupt Practices Act of 1977, (ii) the UK Bribery Act 2010, or (iii) any other applicable law, regulation, order, decree or directive having the force of law and relating to bribery or corruption (collectively, the “Anti-Corruption Laws”).
(u) The operations of the Company and each of its subsidiaries are and have been conducted at all times in compliance with all applicable anti-money laundering laws, rules, and regulations, including the financial recordkeeping and reporting requirements contained therein, and including the Bank Secrecy Act of 1970, applicable provisions of the USA PATRIOT Act of 2001, the Money Laundering Control Act of 1986, and the Anti-Money Laundering Act of 2020 (collectively, the “Anti-Money Laundering Laws”).
(v) (i) Neither the Company nor any of its subsidiaries, nor any director, officer, employee, agent, affiliate, or representative of the Company or any of its subsidiaries, is an individual or entity (“Person”) that is, or is owned or controlled by one or more Persons that are:
(A) the subject of any sanctions administered or enforced by the United States Government (including the U.S. Department of the Treasury’s Office of Foreign Assets Control and the U.S. Department of State), the United Nations Security Council, the European Union, His Majesty’s Treasury, or any other relevant sanctions authority (collectively, “Sanctions”) or “Export Controls” (meaning all applicable export controls implemented by the United States or other jurisdictions to which the Company or any of its subsidiaries are subject, including any export controls administered by the Bureau of Industry Security of the U.S. Department of Commerce, the U.S. Department of State, and any export control measures under any statute, executive order, directive or regulation pursuant to the authority of any of the foregoing, or any orders or licenses issued thereunder), or
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(B) located, organized or resident in a country or territory that is the subject of comprehensive territorial Sanctions (including, without limitation, the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic, or any other Covered Region of Ukraine identified pursuant to Executive Order 14065, Crimea, Cuba, Iran, and North Korea).
(ii) The Company and each of its subsidiaries (A) have not knowingly, since the more recent of April 24, 2019 or 10 years prior to the date of the Agreement, engaged in, (B) are not now knowingly engaged in, and (C) will not engage in, any dealings or transactions with any Person, or in any country or territory, that at the time of the dealing or transaction is or was, or whose government is or was, the subject of Sanctions or Export Controls.
(w) The Company will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person:
(i) to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is, or whose government is, the subject of Sanctions or Export Controls;
(ii) to fund or facilitate any money laundering or terrorist financing activities; or
(iii) in any other manner that would cause or result in a violation of any Anti-Corruption Laws, Anti-Money Laundering Laws, Sanctions, or Export Controls by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise).
(x) The Company and its subsidiaries have conducted and will conduct their businesses in compliance with the Anti-Corruption Laws, the Anti-Money Laundering Laws, Sanctions, and Export Controls, and no investigation, inquiry, action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Anti-Corruption Laws, the Anti-Money Laundering Laws, Sanctions, or Export Controls is pending or, to the knowledge of the Company, threatened; and the Company has instituted and maintained policies and procedures reasonably designed to promote compliance with applicable Anti-Corruption Laws, Anti-Money Laundering Laws, Sanctions and Export Controls.
(y) With respect to each Government Contract (as defined below) to which the Company or any of its subsidiaries is currently a party or has received final payment within three years prior to the date hereof and to each Government Bid (as defined below): (i) the Company and each of its subsidiaries has complied and is in compliance in all material respects with all material terms and conditions of each such Government Contract and Government Bid, including all applicable incorporated clauses, provisions, requirements, schedules, attachments, statutes, rules, orders, regulations and laws; (ii) the Company’s and each of its subsidiaries’ certifications and representations with respect to each such Government Contract and Government Bid were, to the knowledge of the Company, accurate in all material respects as of the time of such certification
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or representation; (iii) neither the U.S. government, nor any prime contractor, subcontractor or other person has notified the Company or any of its subsidiaries, in writing, that the Company or any of its subsidiaries has breached or violated any statute, rule, regulation, certification or representation applicable to, or clause, provision or requirement of, such Government Contract, except as would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries taken as a whole; and (v) to the knowledge of the Company, no reasonable basis exists to give rise to a material claim by a Governmental Authority (as defined below) for fraud (as such concept is defined under the state or federal laws of the United States) in connection with any such Government Contract; for the purposes of this Agreement, “Governmental Authority” means any federal, state, local or foreign court or tribunal, judicial, arbitral, legislative, executive or regulatory body (or subdivision thereof), administrative agency, self-regulatory authority, instrumentality, agency commission or other governmental authority or body; “Government Bid” means any currently pending offer made by the Company or any of its affiliates (including its subsidiaries), which, if accepted, would result in a Government Contract; “Government Contract” means any contractual arrangement for the sale of products or the provision of services or other similar arrangements between the Company or any of its subsidiaries on the one hand, and (A) the United States Government, (B) any prime contractor to the United States Government in its capacity as a prime contractor, or (C) any higher-tier subcontractor with respect to any contract described in clause (A) or clause (B) above, on the other hand. A task, purchase or delivery order under a Government Contract shall not constitute a separate Government Contract, for purposes of this definition, but shall be part of the Government Contract to which it relates.
(z) Except as otherwise disclosed in the Registration Statement, the Time of Sale Prospectus or the Prospectus, subsequent to the respective dates as of which information is given in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, (i) the Company and its subsidiaries, taken as a whole, have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction; (ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company and its subsidiaries, taken as a whole.
(aa) Neither the Company nor any of its subsidiaries is a “covered foreign person” as that term is defined in the regulations administered and enforced, together with any related public guidance issued, by the United States Treasury Department under U.S. Executive Order 14105 of August 9, 2023, or any similar law or regulation; as of the date of this Agreement, and as codified at 31 C.F.R. §850.101 et seq.
(bb) Except as otherwise disclosed in the Registration Statement, the Time of Sale Prospectus or the Prospectus, the Company and each of its subsidiaries have good and marketable title to all real property owned by them and good and marketable title to all other property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all mortgages, pledges, liens, security interests, claims, restrictions, encumbrances and defects except such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them in full force and effect and under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, and neither the Company nor any such subsidiary has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any subsidiary under any of the leases or subleases mentioned above, or materially affecting or questioning the rights of the Company or such subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease.
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(cc) Except as otherwise disclosed in the Registration Statement, the Time of Sale Prospectus or the Prospectus or as would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, (i) the Company and its subsidiaries own or have a valid license to use all patents, inventions, copyrights (including rights in software), know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), domain names, trademarks, service marks and trade names and all other intellectual property rights (including all registrations and applications for registration of, and all good will associated with, any of the foregoing) (collectively, “Intellectual Property Rights”) used or held for use in, or reasonably necessary for, the conduct of their respective businesses as now conducted by them and as proposed to be conducted in the Registration Statement, the Time of Sale Prospectus or the Prospectus (the “Company IP”); (ii) the Intellectual Property Rights owned by the Company or any of its subsidiaries and, to the Company’s knowledge, the Intellectual Property Rights licensed to the Company and its subsidiaries, are valid, subsisting and enforceable, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity, ownership or enforceability of any such Intellectual Property Rights; (iii) neither the Company nor any of its subsidiaries has received any written notice alleging any infringement, misappropriation or other violation of Intellectual Property Rights of any Person; (iv) to the Company’s knowledge, no Person is infringing, misappropriating or otherwise violating any Company IP and, during the past six (6) years, no Person has infringed, misappropriated or otherwise violated any Company IP; (v) neither the Company nor any of its subsidiaries infringes, misappropriates or otherwise violates any Intellectual Property Rights of any Person; (viii) all employees and contractors engaged in, or that may engage in, the development of Intellectual Property Rights on behalf of the Company or any of its subsidiaries of the Company have executed written agreements whereby such employees or contractors presently assign all of their right, title and interest in and to such Intellectual Property Rights to the Company or its applicable subsidiary, and to the Company’s knowledge, no such agreement has been breached or violated; and (ix) the Company and its subsidiaries take, and have taken, commercially reasonable steps necessary to maintain and protect the confidentiality of all Intellectual Property Rights of the Company and its subsidiaries the value of which to the Company or any of its subsidiaries is contingent upon maintaining the confidentiality thereof, and no such Intellectual Property Rights have been disclosed other than to employees, representatives and agents of the Company or any of its subsidiaries, all of whom are bound by written confidentiality agreements.
(dd) With respect to artificial intelligence, advanced machine learning or other similar generative models (collectively, “AI Tools”), except as would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, the Company and its subsidiaries (i) use AI Tools in compliance with all applicable license terms, consents, agreements and applicable laws, rules and regulations; (ii) to the Company’s knowledge, have not used AI Tools in a manner that adversely affects the ownership, validity, or enforceability of any Company IP or any output created using such AI Tools that the Company or any of its subsidiaries intended to own; and (iii) do not include any trade secrets or confidential or proprietary information in prompts or inputs into AI Tools.
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(ee) Except as would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, (i) neither the Company nor any of its subsidiaries use or distribute or have used or distributed any software or other materials under a “free,” “open source,” or similar licensing model (including but not limited to the MIT License, Apache License, GNU General Public License, GNU Lesser General Public License and GNU Affero General Public License) (“Open Source Software”) in any manner that requires or has required (A) the Company or any of its subsidiaries to permit reverse engineering of any software code or other technology owned by the Company or any of its subsidiaries or (B) any software code or other technology owned by the Company or any of its subsidiaries to be (1) disclosed or otherwise made available to any other person in source code form, (2) licensed for the purpose of making derivative works or (3) redistributed at no charge and (ii) none of the software developed or owned by the Company or its subsidiaries is subject to any source code escrow obligation.
(ff) (i) The Company and its subsidiaries have complied and are in compliance, each in all material respects, with all internal and external privacy policies, contractual obligations, industry standards, applicable laws, judgments and orders of any court or arbitrator or other governmental or regulatory authority, in each case, relating to the collection, use, transfer, import, export, storage, protection, disposal, disclosure or other processing by the Company or any of its subsidiaries of personal, personally identifiable, household, sensitive, confidential or regulated data or information (“Data Security Obligations”, and such data and information, “Personal Data”); (ii) neither the Company nor any of its subsidiaries has received any written notification of or complaint regarding, and neither the Company nor any of its subsidiaries is aware of any other facts that, singly or in the aggregate, would reasonably be expected to indicate a material non-compliance with the Data Security Obligation by the Company or any of its subsidiaries; (iii) there is no investigation, inquiry, action, suit or proceeding by or before any court or governmental agency, authority or body pending or to the Company’s knowledge, threatened alleging any material non-compliance with the Data Security Obligations, and the Company has not been required to notify any individual or data protection authority of any information security breach, compromise or incident involving any Personal Data.
(gg) (i) The Company and its subsidiaries’ respective information technology assets and equipment, computers, systems, networks, hardware, software, data and databases (including Personal Data and the data and information of their respective customers, employees, suppliers, vendors and any personally identifiable or confidential third-party data maintained, processed or stored by or on behalf of the Company and its subsidiaries) used in connection with the operation of the Company’s and its subsidiaries’ respective businesses (“IT Systems and Data”) are, in all material respects, adequate and operational for the business of the Company and its subsidiaries as currently conducted free and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants; (ii) the Company and each of its subsidiaries have taken all commercially reasonable measures necessary to maintain and protect the Company’s IT Systems and Data; (iii) without limiting the foregoing, the Company and its subsidiaries have used commercially reasonable efforts to establish, maintain, implement and comply with commercially reasonable information technology, information security, cyber security and data protection controls, policies and procedures, including oversight, access controls, encryption, technological and physical safeguards and business continuity/disaster recovery and security plans, consistent with industry standards and practices, and as required by Data Security Obligations that are designed to protect against and prevent any material breach, destruction, loss, unauthorized distribution, disclosure, use, access, disablement, misappropriation or modification or other compromise or misuse of or relating to any IT Systems and Data (“Breach”); and (iv) there has been no such Breach that has had a material impact on the Company’s or its subsidiaries’ respective businesses, and the Company and its subsidiaries have not been notified of, and have no knowledge of, any event or condition that would reasonably be expected to result in, any such Breach.
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(hh) Except as would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole: (i) neither the Company or its subsidiaries has had any material labor disputes in the past three years and none currently exists or is threatened in writing; (ii) neither the Company nor any of its subsidiaries has any knowledge of any existing or threatened in writing labor strike or work stoppage by the employees of the Company or any of its subsidiaries; and (iii) the Company and its subsidiaries are and have been for the past three years in compliance with all applicable laws pertaining to employment and employment practices, wages and hours, terms and conditions of employment, and immigration.
(ii) Except as would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, any “Employee Benefit Plan” (as defined under Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the Company or its subsidiaries or solely with respect to a plan subject to Title IV of ERISA their “ERISA Affiliates” (as defined below) (each, a “Plan”) is and has been operated in compliance with its terms and all applicable laws, including ERISA and the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “Code”), in all material respects; no “reportable event” (as defined under ERISA, other than with respect to which the reporting requirement has been waived by applicable regulation) has occurred or is reasonably expected to occur with respect to any Plan ; neither the Company, its subsidiaries nor any of their ERISA Affiliates has incurred or reasonably expects to incur with respect to a Plan any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any Plan, (ii) Sections 412 and 430 of the Code or (iii) Sections 302 and 303, 406, 4063 and 4064 of ERISA; each Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination or opinion letter from the Internal Revenue Service regarding such qualification, and nothing has occurred, whether by action or failure to act, that would reasonably be expected to cause the loss of qualification of such Plan; and there is no pending audit or investigation by the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any other governmental or other regulatory entity or agency with respect to any Plan that could reasonably be expected to result in liability to the Company or any of its subsidiaries. “ERISA Affiliate” means, with respect to the Company or any of its subsidiaries, any member of any group of trades or businesses described in Sections 414(b) or (c), or, solely for purposes of Section 412 of the Code, 414(m) or (o) of the Code of which the Company or such subsidiary is a member.
(jj) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as, in the reasonable judgment of the Company, are prudent and customary in the businesses in which they are engaged; neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied for; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain comparable coverage from similar insurers as may be necessary to continue its business at a cost that would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole.
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(kk) The Company and each of its subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, as currently conducted, except where the failure to obtain such certificates, authorizations and permits would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole.
(ll) The financial statements included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, together with the related schedules and notes thereto, comply as to form in all material respects with the applicable accounting requirements of the Securities Act and present fairly in all material respects the consolidated financial position of the Company and its subsidiaries as of the dates shown and its results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) applied on a consistent basis throughout the periods covered thereby except for any normal year-end adjustments in the Company’s quarterly financial statements. The other financial information included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus has been derived from the accounting records of the Company and its consolidated subsidiaries and presents fairly in all material respects the information shown thereby. The statistical, industry-related and market-related data included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate and such data is consistent with the sources from which they are derived, in each case in all material respects.
(mm) Ernst & Young LLP, who have certified certain financial statements of the Company and its subsidiaries and delivered its report with respect to the audited consolidated financial statements and schedules of the Company filed with the Commission as part of the Registration Statement and included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, is an independent registered public accounting firm with respect to the Company within the meaning of the Securities Act and the applicable rules and regulations thereunder adopted by the Commission and the Public Company Accounting Oversight Board (United States).
(nn) Barnes, Dennig & Co. Ltd., who have certified certain financial statements of Consolidated Boring Inc., a Delaware corporation (“CBI”), and its subsidiaries and delivered its report with respect to the audited consolidated financial statements and schedules of CBI filed with the Commission as part of the Registration Statement and included in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, are independent public accountants under the American Institute of Certified Public Accountants’ Code of Professional Conduct and its interpretations and rulings thereunder.
(oo) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Since the end of the Company’s most recent audited fiscal year, there has been (A) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (B) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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(pp) Other than as described in the Registration Statement, the Time of Sale Prospectus or the Prospectus, the Company has not sold, issued or distributed any shares of Common Stock during the six-month period preceding the date hereof, including any sales pursuant to Rule 144A under, or Regulation D or S of, the Securities Act, other than shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans or pursuant to outstanding options, rights or warrants.
(qq) The Company and each of its subsidiaries have timely filed all federal, state, local and foreign tax returns required to be filed by them through the date of this Agreement or have requested extensions thereof (except where the failure to file would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole) and have paid all taxes (including social security contributions or any related fines, costs, penalties or interest) required to be paid thereon (except for cases in which the failure to file or pay would not, singly or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, or, except as currently being contested in good faith and for which reserves required by U.S. GAAP have been created in the financial statements of the Company), and no tax deficiency has been determined adversely to the Company or any of its subsidiaries which, singly or in the aggregate, has had (nor does the Company nor any of its subsidiaries have any notice or knowledge of any tax deficiency which could reasonably be expected to be determined adversely to the Company or its subsidiaries and which could reasonably be expected to have) a material adverse effect on the Company and its subsidiaries, taken as a whole.
(rr) From the time of initial confidential submission of the Registration Statement to the Commission through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “Emerging Growth Company”).
(ss) The Company (i) has not alone engaged in any Testing-the-Waters Communication with any person other than Testing-the-Waters Communications with the consent of the Representatives with entities that are reasonably believed to be qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are reasonably believed to be accredited investors within the meaning of Rule 501 under the Securities Act and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act other than those listed on Schedule III hereto. “Testing-the-Waters Communication” means any communication with potential investors undertaken in reliance on Section 5(d) or Rule 163B of the Securities Act.
(tt) As of the time of each sale of the Shares in connection with the offering when the Prospectus is not yet available to prospective purchasers, none of (i) the Time of Sale Prospectus, (ii) any free writing prospectus, when considered together with the Time of Sale Prospectus, and (iii) any individual Testing-the-Waters Communication, when considered together with the Time of Sale Prospectus, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements
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therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation and warranty with respect to any statements or omissions in the Time of Sale Prospectus, any free writing prospectus or any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act based upon the Underwriter Furnished Information.
(uu) There are no debt securities or preferred stock issued by the Company or any of its subsidiaries that are rated by any “nationally recognized statistical rating organization,” as such term is defined in Section 3(a)(62) of the Exchange Act.
(vv) The Registration Statement, the Prospectus, the Time of Sale Prospectus and any preliminary prospectus comply, and any amendments or supplements thereto will comply, with any applicable laws or regulations of foreign jurisdictions in which the Prospectus, the Time of Sale Prospectus or any preliminary prospectus, as amended or supplemented, if applicable, are distributed in connection with the Directed Share Program.
(ww) No consent, approval, authorization or order of, or qualification with, any governmental body or agency, other than those obtained, is required in connection with the offering of the Directed Shares in any jurisdiction where the Directed Shares are being offered.
(xx) The Company has not offered, or caused Morgan Stanley or any Morgan Stanley Entity (as defined in Section 9) to offer, Shares to any person pursuant to the Directed Share Program with the specific intent to unlawfully influence (i) a customer or supplier of the Company to alter the customer’s or supplier’s level or type of business with the Company, or (ii) a trade journalist or publication to write or publish favorable information about the Company or its products.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the terms and conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Company the respective number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter at $[●] a share (the “Purchase Price”).
On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the Additional Shares, and the Underwriters shall have the right to purchase, severally and not jointly, up to [●] Additional Shares at the Purchase Price, provided, however, that the amount paid by the Underwriters for any Additional Shares shall be reduced by an amount per share equal to any dividends declared by the Company and payable on the Firm Shares but not payable on such Additional Shares. The Representatives may exercise this right on behalf of the Underwriters in whole or from time to time in part by giving written notice to the Company not later than 30 days after the date of this Agreement. Any exercise notice shall specify the number of Additional Shares to be purchased by the Underwriters and the date on which such shares are to be purchased. Each purchase date must be at least one business day after the written notice is given and may not be earlier than the closing date for the Firm Shares or later than ten business days after the date of such notice. Additional Shares may be purchased as provided in Section 4 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. On each day, if any, that Additional Shares are to be purchased (an “Option Closing Date”), each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as the Representatives may determine) that bears the same proportion to the total number of Additional Shares to be purchased on such Option Closing Date as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares.
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3. Terms of Public Offering. The Company is advised by the Representatives that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in the Representatives’ judgment is advisable. The Company is further advised by the Representatives that the Shares are to be offered to the public initially at $[●] a share (the “Public Offering Price”) and to certain dealers selected by the Representatives at a price that represents a concession not in excess of $[●] a share under the Public Offering Price, and that any Underwriter may allow, and such dealers may reallow, a concession, not in excess of $[●] a share, to any Underwriter or to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on [●], 2026, or at such other time on the same or such other date, not later than [●], 2026, as shall be designated in writing by the Representatives. The time and date of such payment are hereinafter referred to as the “Closing Date.”
Payment for any Additional Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the corresponding notice described in Section 2 or at such other time on the same or on such other date, in any event not later than [●], 2026, as shall be designated in writing by the Representatives.
The Firm Shares and Additional Shares shall be registered in such names and in such denominations as the Representatives shall request in writing not later than one full business day prior to the Closing Date or the applicable Option Closing Date, as the case may be. The Firm Shares and Additional Shares shall be delivered to the Representatives on the Closing Date or an Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid, against payment of the Purchase Price therefor.
5. Conditions to the Underwriters’ Obligations. The obligations of the Company to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date are subject to the condition that the Registration Statement shall have become effective not later than 4:30 p.m., New York City time, on the date hereof.
The several obligations of the Underwriters are subject to the following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date:
(i) no order suspending the effectiveness of the Registration Statement shall be in effect, and no proceeding for such purpose or pursuant to Section 8A under the Securities Act shall be pending before or threatened by the Commission; and
(ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus that, in the Representatives’ reasonable judgment, is material and adverse and that makes it, in the Representatives’ reasonable judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus.
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(b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company, to the effect set forth in Sections 5(a)(i) and 5(a)(ii) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an opinion and negative assurance letter of Kirkland & Ellis LLP, outside counsel for the Company, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.
(d) The Underwriters shall have received on the Closing Date an opinion and negative assurance letter of Davis Polk & Wardwell LLP, counsel for the Underwriters, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.
With respect to the negative assurance letters to be delivered pursuant to Sections 5(c) and 5(d) above, each of Kirkland & Ellis LLP and Davis Polk & Wardwell LLP may state that their opinions and beliefs are based upon their participation in the preparation of the Registration Statement, the Time of Sale Prospectus and the Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification, except as specified. The opinion of Kirkland & Ellis LLP described in Section 5(c) above shall be rendered to the Underwriters at the request of the Company and shall so state therein.
(e) The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from Ernst & Young LLP, independent public accountants, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information of the Company contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus; provided that the letter delivered on the date hereof shall use a “cut-off date” not earlier than two business days prior to the date hereof and the letter delivered on the Closing Date shall use a “cut-off date” not earlier than the date hereof.
(f) The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from Barnes, Dennig & Co. Ltd., independent public accountants, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information of CBI contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus; provided that the letter delivered on the date hereof shall use a “cut-off date” not earlier than two business days prior to the date hereof and the letter delivered on the Closing Date shall use a “cut-off date” not earlier than the date hereof.
(g) The Underwriters shall have received, on the date hereof and the Closing Date, a certificate, dated the respective dates of delivery thereof and addressed to the Underwriters, of the Company’s chief financial officer with respect to certain financial data contained in the Time of Sale Prospectus and the Prospectus, providing “management comfort” with respect to such information, in form and substance reasonably satisfactory to the Representatives.
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(h) The “lock-up” agreements, each substantially in the form of Exhibit A hereto, between the Representatives and certain shareholders, officers and directors of the Company relating to restrictions on sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to the Representatives on or before the date hereof (the “Lock-up Agreements”), shall be in full force and effect on the Closing Date.
(i) The Shares shall have been approved for listing on the New York Stock Exchange, subject only to official notice of issuance.
(j) The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to the Representatives on the applicable Option Closing Date of the following:
(i) a certificate, dated the Option Closing Date and signed by an executive officer of the Company, confirming that the certificate delivered on the Closing Date pursuant to Section 5(b) hereof remains true and correct as of such Option Closing Date;
(ii) an opinion and negative assurance letter of Kirkland & Ellis LLP, outside counsel for the Company, dated the Option Closing Date, relating to the Additional Shares to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 5(c) hereof;
(iii) an opinion and negative assurance letter of Davis Polk & Wardwell LLP, counsel for the Underwriters, dated the Option Closing Date, relating to the Additional Shares to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 5(d) hereof;
(iv) a letter dated the Option Closing Date, in form and substance satisfactory to the Underwriters, from Ernst & Young LLP, independent public accountants, substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 5(e) hereof; provided that the letter delivered on the Option Closing Date shall use a “cut-off date” not earlier than two business days prior to such Option Closing Date;
(v) a letter dated the Option Closing Date, in form and substance satisfactory to the Underwriters, from Barnes, Dennig & Co. Ltd., independent public accountants, substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 5(f) hereof; provided that the letter delivered on the Option Closing Date shall use a “cut-off date” not earlier than two business days prior to such Option Closing Date;
(vi) a certificate of the Company’s chief financial officer, dated the Option Closing Date, substantially in the same form and substance as the certificate furnished to the Underwriters pursuant to Section 5(g) hereof; and
(vii) such other documents as the Representatives may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares to be sold on such Option Closing Date and other matters related to the issuance of such Additional Shares.
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6. Covenants of the Company. The Company covenants with each Underwriter as follows:
(a) To furnish to the Representatives, without charge, eleven conformed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to the Representatives in New York City, without charge, prior to 10:00 a.m., New York City time, on the business day next succeeding the date of this Agreement and during the period mentioned in Sections 6(f) or 6(g) below, as many copies of the Time of Sale Prospectus, the Prospectus and any supplements and amendments thereto or to the Registration Statement as the Representatives may reasonably request.
(b) Before amending or supplementing the Registration Statement, the Time of Sale Prospectus or the Prospectus, to furnish to the Representatives a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which the Representatives reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule.
(c) To prepare and file with the Commission pursuant to Rule 424(b), as promptly as possible and in any event no later than the Closing, the Prospectus setting forth the amount of Shares covered thereby and the terms thereof not otherwise specified in the preliminary prospectus.
(d) To furnish to the Representatives a copy of each proposed free writing prospectus to be prepared by or on behalf of, used by, or referred to by the Company and not to use or refer to any proposed free writing prospectus to which the Representatives reasonably object.
(e) Not to take any action that would result in an Underwriter or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of the Underwriter that the Underwriter otherwise would not have been required to file thereunder.
(f) If the Time of Sale Prospectus is being used to solicit offers to buy the Shares at a time when the Prospectus is not yet available to prospective purchasers and any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Time of Sale Prospectus in order to make the statements therein, in the light of the circumstances, not misleading, or if any event shall occur or condition exist as a result of which the Time of Sale Prospectus conflicts with the information contained in the Registration Statement then on file, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Time of Sale Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, either amendments or supplements to the Time of Sale Prospectus so that the statements in the Time of Sale Prospectus as so amended or supplemented will not, in the light of the circumstances when the Time of Sale Prospectus is delivered to a prospective purchaser, be misleading or so that the Time of Sale Prospectus, as amended or supplemented, will no longer conflict with the Registration Statement, or so that the Time of Sale Prospectus, as amended or supplemented, will comply with applicable law.
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(g) If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses the Representatives will furnish to the Company) to which Shares may have been sold by the Representatives on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with applicable law.
(h) If required by applicable law, to endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Representatives shall reasonably request; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Shares, or taxation in any jurisdiction where it is not now so subject.
(i) To make generally available to the Company’s security holders and to the Representatives as soon as practicable an earnings statement (which need not be audited and which may be satisfied by filing with the Commission on its Electronic Data Gathering, Analysis and Retrieval System) covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the date of this Agreement which shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder (including, at the Company’s option, Rule 158 of the Securities Act).
(j) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company’s counsel and the Company’s accountants in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iii) the cost of printing or producing any Blue Sky memorandum in connection with the offer and sale of the Shares under state securities laws and all expenses in connection with the qualification of the Shares for offer and sale under state securities laws as provided in Section 6(h) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky memorandum (such fees and expenses of counsel in an aggregate amount not to exceed $5,000), (iv) all filing fees and the reasonable fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the Shares
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by FINRA (provided that the amount payable by the Company with respect to fees and disbursements of counsel for the Underwriters pursuant to subsection (iii) and this subsection (iv) shall not exceed $45,000 in the aggregate), including the fees and expenses of BofA acting as a “qualified independent underwriter” within the meaning of the aforementioned FINRA Rule 5121, (v) all fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Common Stock and all costs and expenses incident to listing the Shares on the New York Stock Exchange, (vi) the cost of printing certificates representing the Shares, (vii) the costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the offering of the Shares, including, without limitation, expenses associated with the preparation or dissemination of any electronic road show, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and one-half of the cost of any aircraft chartered with the prior approval of the Company or Greenbriar Equity Group, L.P. in connection with the road show, provided that any such chartered aircraft includes members of management of the Company, (ix) the document production charges and expenses associated with printing this Agreement, (x) all reasonable and documented fees and disbursements of counsel incurred by the Underwriters in connection with the Directed Share Program and stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters in connection with the Directed Share Program, and (xi) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this section. It is understood, however, that except as provided in this section, Section 8 entitled “Indemnity and Contribution”, Section 9 entitled “Directed Share Program Indemnification” and the last paragraph of Section 11 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make.
(k) The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Shares within the meaning of the Securities Act and (ii) completion of the Restricted Period (as defined in this Section 6).
(l) If at any time following the distribution of any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act there occurred or occurs an event or development as a result of which such Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
(m) The Company will deliver to each Underwriter (or its agent), on the date of execution of this Agreement, a properly completed and executed Certification Regarding Beneficial Owners of Legal Entity Customers, together with copies of identifying documentation, and the Company undertakes to provide such additional supporting documentation as each Underwriter may reasonably request in connection with the verification of the foregoing Certification.
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(n) The Company will use its best efforts to effect and maintain the listing of the Shares on the New York Stock Exchange.
(o) The Company will comply with all applicable securities and other laws, rules and regulations in each jurisdiction in which the Directed Shares are offered in connection with the Directed Share Program.
The Company also covenants with each Underwriter that, without the prior written consent of Morgan Stanley and Jefferies on behalf of the Underwriters, it will not, and will not publicly disclose an intention to, during the period commencing on the date hereof and ending at 4:00 p.m., New York City time, on the Trading Day (as defined below) that is the 180th day (the “180th Day”) after the date of the Prospectus or, if the 180th Day is not a Trading Day, immediately after the close of the last Trading Day immediately preceding the 180th Day (the “Restricted Period”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (2) enter into any swap, loan or other arrangement (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward or any other derivative transaction or instrument, however described or defined) that transfers to another, in whole or in part, directly or indirectly, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise or (3) file or confidentially submit any registration statement with the Commission relating to the offering of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, provided that any confidential or non-public submissions to the Commission of any registration statements under the Act may be made (including in connection with the exercise of any registration rights described in the Time of Sale Prospectus and the Prospectus), and any preparations related thereto may be made, if no public announcement of such confidential or non-public submission shall be made during the Restricted Period and no such confidential or non-public submission shall become a publicly filed registration statement during the Restricted Period. For purposes of this Agreement, a “Trading Day” is a day on which the New York Stock Exchange is open for the buying and selling of securities.
The restrictions contained in the preceding paragraph shall not apply to (A) the Shares to be sold hereunder, (B) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof as described in each of the Time of Sale Prospectus and Prospectus, (C) grants of any options, restricted stock, restricted stock units or other equity awards and the issuance of shares of Common Stock or securities convertible into or exercisable for shares of Common Stock (whether upon the exercise of stock options or otherwise) to employees, officers, directors, advisors or consultants of the Company pursuant to any employee benefit or stock-based compensation plan or agreement described in the Time of Sale Prospectus and the Prospectus, (D) the filing of a registration statement on Form S-8 to register Common Stock issuable pursuant to any employee benefit plans, qualified stock option plans, or other employee compensation plans, described in the Time of Sale Prospectus or any assumed benefit plan pursuant to an acquisition or similar strategic transaction contemplated by clause (F) below, (E) facilitating the establishment of a trading plan on behalf of a shareholder, officer or director of the Company pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of Common Stock, provided that (i) such plan does not provide for the transfer of Common Stock during the Restricted Period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made by the Company regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of Common Stock may be made under such plan during the Restricted Period, (F) the sale or issuance by the Company of shares of Common Stock or any securities convertible into, or exercisable or exchangeable for, Common
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Stock, or the entrance into an agreement to issue Common Stock or any securities convertible into, or exercisable or exchangeable for, Common Stock, in connection with any merger, joint venture, strategic alliances, commercial or other collaborative transaction or the acquisition or license of the business, property, technology or other assets of another individual or entity and the filing of a registration statement on Form S-4 or other appropriate form required by the Securities Act and any amendments thereto in connection therewith; provided that the aggregate number of shares of Common Stock or any securities convertible into, or exercisable or exchangeable for, Common Stock that the Company may issue or agree to issue pursuant to this clause (F) shall not exceed ten percent (10.0%) of the total number of shares of Common Stock outstanding immediately following the issuance of the Shares hereunder; and provided, further, that the recipients thereof provide to the Representatives an agreement substantially in the form of Exhibit A hereto if such recipient has not already delivered one, (G) the withholding of Common Stock by the Company in connection with the vesting, settlement or exercise of equity awards, including for the payment of exercise price and tax, remittance and other obligations due as a result of vesting, settlement or exercise of equity awards (in each case, whether by way of “net” or “cashless” exercise, “net settlement” or otherwise) or in connection with the conversion of convertible securities, or (H) the issuance by the Company of shares of Common Stock in connection with the Stock Split (as defined in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus).
If Morgan Stanley and Jefferies, in their sole discretion, agree to release or waive the restrictions on the transfer of Shares set forth in a Lock-up Agreement for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit B hereto through a major news service at least two business days before the effective date of the release or waiver.
7. Covenants of the Underwriters. Each Underwriter, severally and not jointly, covenants with the Company not to take any action that would result in the Company being required to file with the Commission under Rule 433(d) a free writing prospectus prepared by or on behalf of such Underwriter that otherwise would not be required to be filed by the Company thereunder, but for the action of the Underwriter.
8. Indemnity and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter, each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and each affiliate of any Underwriter within the meaning of Rule 405 under the Securities Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus, the Time of Sale Prospectus or any amendment or supplement thereto, any issuer free writing prospectus as defined in Rule 433(h) under the Securities Act, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act, any road show as defined in Rule 433(h) under the Securities Act (a “road show”), the Prospectus or any amendment or supplement thereto, or any Testing-the-Waters Communication, or arise out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any such untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein, it being understood and agreed that the only such information furnished by the Underwriters through the Representatives consists of the Underwriter Furnished Information. The Company also agrees to indemnify and hold harmless BofA and each person, if any, who controls BofA
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within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) incurred as a result of BofA’s participation as a “qualified independent underwriter” within the meaning of FINRA Rule 5121 in connection with the offer and sale of the Shares, except for any losses, claims, damages and liabilities resulting from BofA’s or such controlling person’s willful misconduct.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors and its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus, the Time of Sale Prospectus or any amendment or supplement thereto, any issuer free writing prospectus as defined in Rule 433(h) under the Securities Act, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act, any road show or the Prospectus or any amendment or supplement thereto, or arise out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, any issuer free writing prospectus, road show or the Prospectus or any amendment or supplement thereto (the “Underwriter Furnished Information”), it being understood and agreed that the only such information furnished by any Underwriter consists of the following information in the Prospectus furnished on behalf of each Underwriter: the second sentence of the fifth paragraph; the first, second, fifth and sixth sentences of the sixteenth paragraph; and the first sentence of the seventeenth paragraph; in each case, under the caption “Underwriting”.
(c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b), such person (the “indemnified party”) shall promptly notify the person against whom such indemnity may be sought (the “indemnifying party”) in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonably incurred and documented fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by Morgan Stanley and Jefferies, in the case of parties indemnified pursuant to Section 8(a), and by the Company, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall not be liable for any settlement of any
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proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding, does not include a statement as to, or an admission of fault, wrongdoing, culpability or a failure to act by or on behalf of any indemnified party. Notwithstanding anything contained herein to the contrary, if indemnity may be sought pursuant to Section 8(a) hereof in respect of such action or proceeding, then, in addition to the fees and expenses of such counsel for the indemnified parties, the indemnifying party shall be liable for the reasonable fees and expenses of not more than one counsel (in addition to any local counsel) separate from its own counsel and that of the other indemnified parties for BofA in its capacity as a “qualified independent underwriter” and all persons, if any, who control BofA within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances if, in the reasonable judgment of BofA, there may exist a conflict of interest between BofA and the other indemnified parties. Any such separate counsel for BofA and such control persons of BofA shall be designated in writing by BofA.
(d) To the extent the indemnification provided for in Section 8(a) or 8(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (d)(i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (after deducting underwriting discounts and commissions but before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters’ respective obligations to contribute pursuant to this Section 8 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint.
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(e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 8(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in Section 8(d) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this Section 8 and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter, any person controlling any Underwriter or any affiliate of any Underwriter or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares.
9. Directed Share Program Indemnification. (a) The Company agrees to indemnify and hold harmless Morgan Stanley, each person, if any, who controls Morgan Stanley within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and each affiliate of Morgan Stanley within the meaning of Rule 405 of the Securities Act (the “Morgan Stanley Entities”) from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (i) that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in any material prepared by or with the consent of the Company for distribution to Participants in connection with the Directed Share Program or arise out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) that arise out of, or are based upon, the failure of any Participant to pay for and accept delivery of Directed Shares that the Participant agreed to purchase; or (iii) related to, arising out of, or in connection with the Directed Share Program, other than losses, claims, damages or liabilities (or expenses relating thereto) that are finally judicially determined to have resulted from the bad faith or gross negligence of Morgan Stanley Entities.
(b) In case any proceeding (including any governmental investigation) shall be instituted involving any Morgan Stanley Entity in respect of which indemnity may be sought pursuant to Section (9)(a), the Morgan Stanley Entity seeking indemnity, shall promptly notify the Company in writing and the Company, upon request of the Morgan Stanley Entity, shall retain counsel reasonably satisfactory to the Morgan Stanley Entity to represent the Morgan Stanley
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Entity and any others the Company may designate in such proceeding and shall pay the reasonably incurred and documented fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Morgan Stanley Entity shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Morgan Stanley Entity unless (i) the Company shall have agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Company and the Morgan Stanley Entity and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Company shall not, in respect of the legal expenses of the Morgan Stanley Entities in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Morgan Stanley Entities. Any such separate firm for the Morgan Stanley Entities shall be designated in writing by Morgan Stanley. The Company shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Company agrees to indemnify the Morgan Stanley Entities from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time a Morgan Stanley Entity shall have requested the Company to reimburse it for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the Company agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by the Company of the aforesaid request and (ii) the Company shall not have reimbursed the Morgan Stanley Entity in accordance with such request prior to the date of such settlement. The Company shall not, without the prior written consent of Morgan Stanley, effect any settlement of any pending or threatened proceeding in respect of which any Morgan Stanley Entity is or could have been a party and indemnity could have been sought hereunder by such Morgan Stanley Entity, unless such settlement includes an unconditional release of the Morgan Stanley Entities from all liability on claims that are the subject matter of such proceeding.
(c) To the extent the indemnification provided for in Section (9)(a) is unavailable to a Morgan Stanley Entity or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then the Company in lieu of indemnifying the Morgan Stanley Entity thereunder, shall contribute to the amount paid or payable by the Morgan Stanley Entity as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Morgan Stanley Entities on the other hand from the offering of the Directed Shares or (ii) if the allocation provided by Section 9(c)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in Section 9(c)(i) above but also the relative fault of the Company on the one hand and of the Morgan Stanley Entities on the other hand in connection with any statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Morgan Stanley Entities on the other hand in connection with the offering of the Directed Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Directed Shares (after deducting underwriting discounts and commissions but before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Morgan Stanley Entities for the Directed Shares, bear to the aggregate Public Offering Price of the Directed Shares. If the loss, claim, damage or liability is caused by an untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact, the relative fault of the Company on the one hand and the Morgan Stanley Entities on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement or the omission or alleged omission relates to information supplied by the Company or by the Morgan Stanley Entities and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
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(d) The Company and the Morgan Stanley Entities agree that it would not be just or equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Morgan Stanley Entities were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 9(c). The amount paid or payable by the Morgan Stanley Entities as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by the Morgan Stanley Entities in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 9, no Morgan Stanley Entity shall be required to contribute any amount in excess of the amount by which the total price at which the Directed Shares distributed to the public were offered to the public exceeds the amount of any damages that such Morgan Stanley Entity has otherwise been required to pay. The remedies provided for in this Section 9 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.
(e) The indemnity and contribution provisions contained in this Section 9 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Morgan Stanley Entity or the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Directed Shares.
10. Termination. The Underwriters may terminate this Agreement by notice given by the Representatives to the Company, if after the execution and delivery of this Agreement and prior to or on the Closing Date or any Option Closing Date, as the case may be, (i) trading generally shall have been suspended or materially limited on, or by, as the case may be, any of the New York Stock Exchange, the NYSE American, the NASDAQ Global Select Market, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a material disruption in securities settlement, payment or clearance services in the United States shall have occurred, (iv) any moratorium on commercial banking activities shall have been declared by Federal or New York State authorities or (v) there shall have occurred any outbreak or escalation of hostilities, or any change in financial markets or any calamity or crisis that, in the Representatives’ judgment, is material and adverse and which, singly or together with any other event specified in this clause (v), makes it, in the Representatives’ judgment, impracticable or inadvisable to proceed with the offer, sale or delivery of the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus or the Prospectus.
11. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or an Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule I bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Representatives may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased
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pursuant to this Section 11 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased on such date, and arrangements satisfactory to the Representatives and the Company for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either the Representatives or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement, in the Time of Sale Prospectus, in the Prospectus or in any other documents or arrangements may be effected. If, on an Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased on such Option Closing Date, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase the Additional Shares to be sold on such Option Closing Date or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement (other than for reason of a default by the Underwriters only with respect to such defaulting Underwriters), the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the reasonably incurred and documented fees and disbursements of their counsel) reasonably incurred by such non-defaulting Underwriters in connection with this Agreement or the offering contemplated hereunder.
12. Entire Agreement.
(a) This Agreement, together with any contemporaneous written agreements and any prior written agreements (to the extent not superseded by this Agreement) that relate to the offering of the Shares, represents the entire agreement between the Company and the Underwriters with respect to the preparation of any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, the conduct of the offering, and the purchase and sale of the Shares.
(b) The Company acknowledges that in connection with the offering of the Shares: (i) the Underwriters have acted at arm’s length, are not agents of, and owe no fiduciary duties to, the Company or any other person, (ii) the Underwriters owe the Company only those duties and obligations set forth in this Agreement, any contemporaneous written agreements and prior written agreements (to the extent not superseded by this Agreement), if any, (iii) the Underwriters may have interests that differ from those of the Company, and (iv) none of the activities of the Underwriters in connection with the transactions contemplated herein constitutes a recommendation, investment advice, or solicitation of any action by the Underwriters with respect to any entity or natural person. The Company waives to the full extent permitted by applicable law any claims it may have against the Underwriters arising from an alleged breach of fiduciary duty in connection with the offering of the Shares.
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13. Recognition of the U.S. Special Resolution Regimes.
(a) In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
(b) In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
For purposes of this section a “BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k). “Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b). “Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable. “U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
14. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. The words “execution,” “signed,” “signature,” and words of like import in this Agreement or in any instruments, agreements, certificates, officers’ certificates, Company orders, legal opinions, negative assurance letters or other documents entered into or delivered pursuant to or in connection with this Agreement shall include images of manually executed signatures transmitted by facsimile or other electronic format (including, without limitation, “pdf,” “tif” or “jpg”) and electronic signatures (including, without limitation, DocuSign and AdobeSign), and this Agreement and any instruments, agreements, certificates, officers’ certificates, legal opinions, Company orders, negative assurance letters or other documents entered into or delivered pursuant to or in connection with this Agreement may be executed, attested and transmitted by any of the foregoing electronic means and formats. The use of electronic signatures and electronic records (including, without limitation, any contract or other record created, generated, sent, communicated, received, or stored by electronic means) shall be of the same legal effect, validity and enforceability as a manually executed signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act and any other applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act or the Uniform Commercial Code.
15. Applicable Law. This Agreement and any claim, controversy or dispute arising under or related to this Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.
16. Waiver of Jury Trial. Each of the parties hereto hereby waives any right to trial by jury in any suit or proceeding arising out of or relating to this Agreement.
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17. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement.
18. Notices. All communications hereunder shall be in writing and effective only upon receipt and if to the Underwriters shall be delivered, mailed or sent to Morgan Stanley in care of Morgan Stanley & Co. LLC, 1585 Broadway, New York, New York 10036, Attention: Equity Syndicate Desk, with a copy to the Legal Department; Jefferies in care of Jefferies LLC, 520 Madison Avenue, New York, New York 10022, Attention: General Counsel; BofA in care of BofA Securities, Inc., One Bryant Park, New York, New York 10036, e-mail: dg.ecm_execution_services@bofa.com, Attention: Syndicate Department, with a copy to: dg.ecm_legal@bofa.com, Attention: ECM Legal; or RBC in care of RBC Capital Markets, LLC, 200 Vesey Street, 8th Floor, New York, New York 10281, Attention: Transaction Management; and if to the Company shall be delivered, mailed, emailed or sent to Applied Aerospace & Defense, Inc., 355 Quality Circle NW, Huntsville, Alabama 35806; with a copy to Kirkland & Ellis LLP, 601 Lexington Avenue, New York, New York 10022, Attention: Ross M. Leff, Christie W.S. Mok and Aaron Z. Simons.
[Signature pages follow]
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| Very truly yours, | ||
| Applied Aerospace & Defense, Inc. | ||
| By: |
| |
| Name: | ||
| Title: | ||
[Signature Page to Underwriting Agreement]
Accepted as of the date hereof
Morgan Stanley & Co. LLC
Jefferies LLC
BofA Securities, Inc.
RBC Capital Markets, LLC
Acting severally on behalf of themselves and the
several Underwriters named in Schedule I hereto.
| By: | Morgan Stanley & Co. LLC | |
| By: |
| |
| Name: | ||
| Title: | ||
| By: | Jefferies LLC | |
| By: |
| |
| Name: Title: | ||
| By: | BofA Securities, Inc. | |
| By: |
| |
| Name: | ||
| Title: | ||
| By: | RBC Capital Markets, LLC | |
| By: |
| |
| Name: Title: | ||
[Signature Page to Underwriting Agreement]
SCHEDULE I
| Underwriter | Number of Firm Shares To Be Purchased | |
| Morgan Stanley & Co. LLC | ||
| Jefferies LLC | ||
| BofA Securities, Inc. | ||
| RBC Capital Markets, LLC | ||
| Guggenheim Securities, LLC Robert W. Baird & Co., Incorporated Stifel, Nicolaus & Company, Incorporated Nomura Securities International, Inc. WR Securities, LLC Academy Securities, Inc. |
||
| Total: | ||
SCHEDULE II
Time of Sale Prospectus
| 1. | Preliminary Prospectus issued [●] |
| 2. | [None.] |
| 3. | Pricing information: |
Firm Shares: [●]
Additional Shares: [●]
Public Offering Price: $[●]
SCHEDULE III
Testing-the-Waters Communications
| 1. | Testing-the-Waters Presentation dated March 2026 |
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
[●], 2026
Morgan Stanley & Co. LLC
Jefferies LLC
BofA Securities, Inc.
RBC Capital Markets, LLC
c/o Morgan Stanley & Co. LLC
1585 Broadway
New York, New York 10036
c/o Jefferies LLC
520 Madison Avenue
New York, New York 10022
c/o BofA Securities, Inc.
One Bryant Park
New York, New York 10036
and
c/o RBC Capital Markets, LLC
200 Vesey Street, 8th Floor
New York, New York 10281
Ladies and Gentlemen:
The undersigned understands that Morgan Stanley & Co. LLC, Jefferies LLC, BofA Securities, Inc. and RBC Capital Markets, LLC (collectively, the “Representatives”) propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) with Applied Aerospace & Defense, Inc., a Delaware corporation (the “Company”), providing for the public offering (the “Public Offering”) by the several Underwriters, including the Representatives (the “Underwriters”), of shares of common stock, par value $0.01 per share, of the Company. As used herein, the term “Common Stock” refers to shares of the Company’s common stock, $0.01 par value per share, and any shares into which such shares are reclassified, converted or exchanged.
To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of Morgan Stanley & Co. LLC and Jefferies LLC, he, she or it will not, and will not cause any direct or indirect affiliate to, and will not publicly disclose an intention to, during the period commencing on the date hereof and ending at 4:00 P.M. Eastern Time on the Trading Day (as defined below) that is the 180th day (the “180th Day”) after the date of the final prospectus relating to the Public Offering (the “Prospectus”) or, if the 180th Day is not a Trading Day, immediately after the close of the last Trading Day immediately preceding the 180th Day (the “Lock-up Period”), (1) offer, pledge, hypothecate or grant any security interest in, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, make any short sale or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock beneficially owned (as such term is used in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), by the undersigned or any other securities so owned that are convertible into or exercisable or exchangeable (directly or indirectly) for, or that represent the right to receive, shares of Common Stock, including, without limitation, the Company’s preferred stock or securities which may be issued upon exercise of stock options, restricted stock units or warrants (collectively, the “Other Securities”) or (2) enter into any swap, hedging transaction or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock or Other Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or Other Securities, in cash or otherwise (a “Swap”). For purposes of this letter agreement, a “Trading Day” is a day on which the New York Stock Exchange is open for the buying and selling of securities.
The foregoing sentence shall not apply to the transfer of shares of Common Stock or Other Securities:
(i) as a bona fide gift or to a charitable organization or educational institution or for bona fide estate planning purposes;
(ii) by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or any immediate family member of the undersigned;
(iii) to a trust, partnership, limited liability company or other entity for the direct or indirect benefit of the undersigned and/or any immediate family member of the undersigned;
(iv) by operation of law pursuant to a qualified domestic order, divorce settlement, divorce decree or separation agreement, or related court order related to the distribution of assets in connection with the dissolution of a marriage or civil union;
(v) to a corporation, partnership, limited liability company or other entity of which the undersigned or any immediate family member is the legal and beneficial owner of all of the outstanding equity securities or similar interests;
(vi) if the undersigned is a trust, to a trustor, trustee or beneficiary of the trust or to the estate of a beneficiary of such trust;
(vii) to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (i) through (vi) above;
(viii) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity, to any shareholder, current or former partners, limited partner, manager, equityholder, or member of, or owner of a similar equity interest in, the undersigned, as the case may be;
(ix) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity, (A) to another corporation, partnership, limited liability company, trust or other business entity so long as the transferee is an affiliate of the undersigned, or to any investment fund or other entity which fund or entity controls, is controlled by, manages, is managed by or is under common control with the undersigned (including, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership and, if the undersigned is a trust, to a trustor or beneficiary of the trust) or affiliates of the undersigned or (B) as part of a distribution or other transfer or distribution to general or limited partners, members or shareholders of, or other holders of equity interest in, the undersigned, or to the estate, nominee or custodian of any such general or limited partners, members, shareholders or other holders of equity interests;
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(x) that the undersigned may (A) purchase from the Underwriters in the Public Offering (if the undersigned is not an officer or director of the Company) or (B) acquire in open market transactions after the completion of the Public Offering, provided that no public disclosure or filing under the Exchange Act shall be voluntarily made reporting a reduction in beneficial ownership in connection with subsequent sales of shares of Common Stock or Other Securities acquired in the Public Offering or in such open market transactions;
(xi) in connection with the exercise, conversion, vesting or settlement of options, restricted stock, restricted stock units, warrants or other rights to purchase shares of Common Stock or Other Securities (including, in each case, by way of “net” or “cashless” exercise, “net settlement” or otherwise), including any transfer to the Company or sale in an open market transaction for the payment of exercise price or tax withholdings or remittance payments due as a result of the exercise, conversion, vesting or settlement of such options, restricted stock, restricted stock units, warrants or rights; provided that any shares of Common Stock or Other Securities received as a result of such exercise, conversion, vesting or settlement shall remain subject to the terms of this letter agreement; and provided, further, that any such options, restricted stock, restricted stock units, warrants or rights are held by the undersigned pursuant to an agreement or equity award granted under a stock incentive plan or other equity award plan, each such agreement or plan which is described in the Registration Statement;
(xii) pursuant to a bona fide third-party tender offer, merger, amalgamation, consolidation or other similar transaction that is approved by the Board of Directors of the Company and made to all holders of the Company’s capital stock after the Public Offering involving a Change of Control (as defined below) of the Company (for purposes hereof, “Change of Control” shall mean any bona fide third party tender offer, merger, amalgamation, consolidation or other similar transaction, in one transaction or a series of related transactions, the result of which is that any “person” (as defined in Section 13(d)(3) of the Exchange Act), or group of persons, other than the Company or its subsidiaries, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of 50% or more of the total voting power of the voting stock of the Company (or the surviving entity)) (including, without limitation, the entering into any lock-up, voting or similar agreement pursuant to which the undersigned may agree to transfer, sell, tender or otherwise dispose of shares of Common Stock or Other Securities or other such securities in connection with such transaction, or vote any shares of Common Stock or Other Securities or other such securities in favor of any such transaction), provided that in the event that such tender offer, merger, amalgamation, consolidation or other similar transaction is not completed, the undersigned’s shares of Common Stock and Other Securities shall remain subject to the provisions of this letter agreement;
(xiii) to the Company in connection with (A) the termination of the undersigned’s employment with the Company, (B) the undersigned’s death or disability or (C) pursuant to agreements under which the Company has the option to repurchase such shares of Common Stock or Other Securities;
(xiv) in connection with the conversion, exchange or reclassification of any Other Securities into shares of Common Stock, or any conversion, exchange or reclassification of the Common Stock, including the Stock Split (as defined in the Prospectus), provided that any such shares of Common Stock received upon such conversion, exchange or reclassification shall be subject to the provisions of this letter agreement; or
(xv) with the prior written consent of Morgan Stanley & Co. LLC and Jefferies LLC;
provided, however, that in any such case, it shall be a condition to such transfer that:
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| • | in the case of any transfer pursuant to clauses (i) through (ix) above, each transferee agrees in writing to be bound by substantially the same terms described in this letter agreement to the extent and for the duration that such terms remain in effect at the time of such transfer (as if such transferee had been an original signatory hereto); |
| • | in the case of any transfer pursuant to clauses (i) through (iii), (v) through (ix) and (xiv) above, such transfer shall not involve a disposition for value; and |
| • | in the case of any transfer pursuant to clauses (i) through (ix), (xi) and (xiii)(C) above, prior to the expiration of the Lock-up Period, it shall be a condition to such transfer that no public disclosure or filing under the Exchange Act by any party to the transfer (donor, donee, transferor or transferee) shall be made voluntarily during the Lock-up Period, and if the undersigned is required to file a report under the Exchange Act reporting a change in beneficial ownership of shares of Common Stock or Other Securities during the Lock-up Period, the undersigned shall include a statement in such report indicating the circumstances of such transfer and, in the case of a transfer pursuant to clauses (i) through (ix), that the transferee has agreed to be bound by the terms of this letter agreement. |
In addition, the undersigned agrees that, to the extent the undersigned has any demand and/or piggyback registration rights pursuant to any registration rights agreement described in the Prospectus, the undersigned may notify the Company privately during the Lock-Up Period that the undersigned is or will be exercising his, her or its registration rights under any such registration rights agreement following the expiration of the Lock-Up Period and undertake preparations related thereto during the Lock-Up Period; provided that, without the prior written consent of Morgan Stanley & Co. LLC and Jefferies LLC, the foregoing notification and/or preparations do not request, require or result in the public filing of a registration statement with the Securities and Exchange Commission or any other public announcement of such proposed registration by the undersigned, the Company or any third party during the Lock-Up Period (and no such filing, public announcement or activity shall be voluntarily made or taken by the undersigned, the Company or any third party during the Lock-Up Period). The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s shares of Common Stock and Other Securities except in compliance with the foregoing restrictions.
Furthermore, notwithstanding the restrictions imposed by this agreement, the undersigned may establish or amend a written trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act relating to the transfer of shares of Common Stock or Other Securities, provided that such plan does not provide for any transfers of shares of Common Stock or Other Securities during the Lock-up Period other than as permitted by this Agreement and any required public disclosure, announcement or filing under the Exchange Act made by the Company or any person regarding the establishment or amendment of such plan during the Lock-Up Period shall include a statement that the undersigned is not permitted to transfer, sell or otherwise dispose of securities under such plan during the Lock-Up Period in contravention of this Lock-Up Agreement, and no public announcement, report or filing under the Exchange Act, or any other public filing, report or announcement, shall be voluntarily made regarding the establishment or amendment of such plan during the Lock-Up Period. If the undersigned is an officer or director of the Company, the undersigned further agrees that the foregoing provisions shall be equally applicable to any Company-directed shares of Common Stock the undersigned may purchase or otherwise receive in the Public Offering (including pursuant to a directed share program).
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If the undersigned is an officer or director of the Company, (i) Morgan Stanley & Co. LLC and Jefferies LLC agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Common Stock, Morgan Stanley & Co. LLC and Jefferies LLC will notify the Company of the impending release or waiver, and (ii) the Company will agree or has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by Morgan Stanley & Co. LLC and Jefferies LLC hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer not for consideration or to an immediate family member as defined in FINRA Rule 5130(i)(5) and (b) the transferee has agreed in writing to be bound by the same terms described in this letter agreement that are applicable to the transferor to the extent and for the duration that such terms remain in effect at the time of the transfer.
The undersigned understands that the Company and the Underwriters are relying upon this letter agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this letter agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.
The undersigned acknowledges and agrees that the Underwriters have not provided any recommendation or investment advice nor have the Underwriters solicited any action from the undersigned with respect to the Public Offering of the shares of Common Stock and the undersigned has consulted their own legal, accounting, financial, regulatory and tax advisors to the extent deemed appropriate. The undersigned further acknowledges and agrees that, although the Underwriters may provide certain Regulation Best Interest and Form CRS disclosures or other related documentation to you in connection with the Public Offering, the Underwriters are not making a recommendation to you to enter into this letter agreement, participate in the Public Offering or sell any shares of Common Stock at the price determined in the Public Offering, and nothing set forth in such disclosures or documentation is intended to suggest that any Underwriter is making such a recommendation.
Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.
This letter agreement shall automatically terminate, and the undersigned will be released from all of his, her or its obligations hereunder, upon the earliest to occur, if any, of (a) the date that the Company advises Morgan Stanley & Co. LLC and Jefferies LLC, in writing, prior to the execution of the Underwriting Agreement, that it has determined not to proceed with the Public Offering, (b) the date that the Company withdraws the registration statement related to the Public Offering before the execution of the Underwriting Agreement, (c) if the Underwriting Agreement is executed but terminated (other than the provisions thereof that survive termination) prior to payment for and delivery of the shares of Common Stock to be sold thereunder, the date that the Underwriting Agreement is terminated, (d) the date that the Representatives advise the Company, in writing and prior to the execution of the Underwriting Agreement, that they have determined not to proceed with the Public Offering or (e) June 30, 2026 if the Public Offering of the shares of Common Stock has not been completed by such date (provided that the Company may by written notice to the undersigned prior to June 30, 2026 extend such date for a period of up to an additional three months).
This letter agreement may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com or www.echosign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
This letter agreement shall be governed by and construed in accordance with the laws of the State of New York.
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[Signature page follows]
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Very truly yours,
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EXHIBIT B
FORM OF WAIVER OF LOCK-UP
_____________, 20__
[Name and Address of
Officer or Director
Requesting Waiver]
Dear Mr./Ms. [Name]:
This letter is being delivered to Morgan Stanley & Co. LLC (“Morgan Stanley”) and Jefferies LLC (“Jefferies”) in connection with the offering by Applied Aerospace & Defense, Inc., a Delaware corporation (the “Company”) of _____ shares of common stock, $0.01 par value (the “Common Stock”), of the Company and the lock-up agreement dated ____, 2026 (the “Lock-up Agreement”), executed by you in connection with such offering, and your request for a [waiver][release] dated ____, 20__, with respect to ____ shares of Common Stock (the “Shares”).
Morgan Stanley and Jefferies hereby agree to [waive][release] the transfer restrictions set forth in the Lock-up Agreement, but only with respect to the Shares, effective _____, 20__; provided, however, that such [waiver][release] is conditioned on the Company announcing the impending [waiver][release] by press release through a major news service at least two business days before effectiveness of such [waiver][release]. This letter will serve as notice to the Company of the impending [waiver][release].
Except as expressly [waived] [released] hereby, the Lock-up Agreement shall remain in full force and effect.
Very truly yours
Morgan Stanley & Co. LLC
Jefferies LLC
Acting severally on behalf of themselves and the
several Underwriters named in Schedule I hereto.
| By: | Morgan Stanley & Co. LLC | |
| By: |
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| Name: | ||
| Title: | ||
| By: | Jefferies LLC | |
| By: |
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| Title: | ||
cc: Company
FORM OF PRESS RELEASE
Applied Aerospace & Defense, Inc.
[Date]
Applied Aerospace & Defense, Inc. (the “Company”) announced today that Morgan Stanley & Co. LLC and Jefferies LLC, the lead book-running managers in the Company’s recent public sale of _____ shares of its common stock, are [waiving][releasing] a lock-up restriction with respect to ____ shares of the Company’s common stock held by [certain officers or directors][an officer or director] of the Company. The [waiver][release] will take effect on ____, 20__ , and the shares may be sold on or after such date.
This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.
Exhibit 5.1
601 Lexington Avenue
New York, NY 10022
United States
+1 212 446 4800
www.kirkland.com
May 26, 2026
Applied Aerospace & Defense, Inc.
355 Quality Circle NW
Huntsville, Alabama 35806
Re: Registration Statement on Form S-1
We are issuing this opinion in our capacity as special legal counsel to Applied Aerospace & Defense, Inc., a Delaware corporation (the “Company”), in connection with the proposed registration by the Company under the Securities Act of 1933, as amended (the “Act”), on a Registration Statement on Form S-1 (Registration No. 333-295691) initially publicly filed with the Securities and Exchange Commission (the “Commission”) on May 8, 2026 (as such registration statement is amended or supplemented, the “Registration Statement”) of 37,375,000 shares of common stock, par value $0.01 per share (the “Common Stock”), that may be offered by the Company (the “Shares”) (including Shares issuable by the Company upon exercise of the Underwriters’ (as defined below) over-allotment option, if any).
In connection therewith, we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary for the purpose of this opinion, including (i) the corporate and organizational documents of the Company, including the form of Second Amended and Restated Certificate of Incorporation of the Company, filed as Exhibit 3.2 to the Registration Statement (the “Certificate of Incorporation”), (ii) the form of Underwriting Agreement (the “Underwriting Agreement”) proposed to be entered into by and among the Company and Morgan Stanley & Co. LLC, Jefferies LLC, BofA Securities, Inc. and RBC Capital Markets, LLC, as representatives of the several underwriters named therein (the “Underwriters”), relating to the sale by the Company to the Underwriters of the Shares, filed as Exhibit 1.1 to the Registration Statement, (iii) minutes and records of the corporate proceedings of the Company with respect to the issuance and sale of the Shares and (iv) the Registration Statement.
For purposes of this opinion, we have assumed the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies and the authenticity of the originals submitted to us as copies. We have also assumed the legal capacity of all natural persons, the genuineness of the signatures of persons signing all documents in connection with which this opinion is rendered, the authority of such persons signing on behalf of the parties thereto (other than the Company), and the due authorization, execution and delivery of all documents by the parties thereto (other than the Company). As to any facts material to the opinions expressed herein which we have not independently established or verified, we have relied upon statements and representations of officers and other representatives of the Company and others.
| Applied Aerospace & Defense, Inc. May 26, 2026 Page 2 |
Based upon and subject to the assumptions, qualifications and limitations identified in this opinion, we are of the opinion that:
When the Certificate of Incorporation is duly filed with the Secretary of State of the State of Delaware, the Shares will be duly authorized, and, when the Registration Statement becomes effective under the Act, the final Underwriting Agreement is duly executed and delivered by the parties thereto and the Shares are registered by the Company’s transfer agent and delivered against payment of the agreed consideration therefor, all in accordance with the final Underwriting Agreement, the Shares will be validly issued, fully paid and nonassessable.
Our advice on every legal issue addressed in this opinion is based exclusively on the internal law of New York and the General Corporation Law of the State of Delaware.
For purposes of rendering our opinions expressed above, we have assumed that (i) the Registration Statement remains effective during the offer and sale of the Shares and (ii) at the time of the issuance, sale and delivery of each Share (x) there will not have occurred any change in law affecting the validity, legally binding character or enforceability of such Share and (y) the issuance, sale and delivery of such Share, the terms of such Share and compliance by the Company with the terms of such Share will not violate any applicable law, any agreement or instrument then binding upon the Company or any restriction imposed by any court or governmental body having jurisdiction over the Company.
We do not find it necessary for the purposes of this opinion, and accordingly we do not purport to cover herein, the application of the securities or “Blue Sky” laws of the various states to the issuance of the Shares.
This opinion is limited to the specific issues addressed herein, and no opinion may be inferred or implied beyond that expressly stated herein. This opinion speaks only as of the date that the Registration Statement becomes effective under the Act, and we assume no obligation to revise or supplement this opinion should the present laws of the State of New York or the General Corporation Law of the State of Delaware be changed by legislative action, judicial decision or otherwise after the date hereof.
This opinion is furnished to you in connection with the filing of the Registration Statement and is not to be used, circulated, quoted or otherwise relied upon for any other purposes.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement. We also consent to the reference to our firm under the heading “Legal Matters” in the Registration Statement. In giving this consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act of the rules and regulations of the Commission.
This opinion and consent may be incorporated by reference in a subsequent registration statement on Form S-1 filed pursuant to Rule 462(b) under the Act with respect to the registration of additional securities for sale in the offering contemplated by the Registration Statement and shall cover such additional securities, if any, registered on such subsequent registration statement.
| Very truly yours, |
| /s/ Kirkland & Ellis LLP |
| Kirkland & Ellis LLP |
Exhibit 10.6
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3437 S. Airport Way Stockton, CA 95206 |
November 25, 2025
Christopher Rogers
[***]
Dear Mr. Rogers,
We are delighted to offer you the position of Chief Growth Officer for Applied Aerospace and Subsidiaries, contingent upon your successful completion of a Company paid pre-employment physical, drug screen and background check.
Key Terms of the Offer:
| • | Position Title: Chief Growth Officer |
| • | Exemption Status: Salary/Exempt |
| • | Reporting To: James “Trip” Ferguson, CEO |
| • | Estimated Start Date: December 1, 2025 |
| • | Work Location: Remote (home office in Virginia) |
| • | Work Schedule: 9/80 Schedule (every other Friday off) |
| • | Compensation: |
| • | Base rate of pay: $350,000 annualized (paid bi-weekly). |
| • | Annual Bonus: Eligible for the Leadership EBITDA bonus. Target is 65% of base compensation. |
| • | Discretionary Bonus Potential: May be eligible for a bonus, estimated at 2% of annualized base compensation, pending Company achieving financial objectives and other parameters that are considered for this discretionary bonus. |
| • | Safety Bonus: Up to $350 annually via payroll and up to 2 days paid vacation based on Company achieving safety objectives & other parameters as specified in the safety program. |
| • | Vacation: You will accrue 4.62 hours per pay period (120 hours/3 weeks per year). |
| • | Benefits: |
| • | All regular/full-time employee benefits including enrollment in the Medical, Dental, Vision, Life Insurance, Disability, and 401K plan are available to you in accordance with the attached summary titled “Non-Union Benefit Structure”. |
| • | Highlights include |
| • | up to 6% 401k match and profit sharing contribution |
| • | 100% Employer paid dental, vision, life and disability offerings |
We look forward to you accepting this position with Applied Aerospace as we anticipate your contributions will be of major benefit to the Company. Please respond with your signature below for acceptance of this position, within 2 business days.
Sincerely,
| /s/ Leandra Wilson |
/s/ Christopher Rogers | |||
| VP of HR | Employee Signature |
Applied Aerospace
Exhibit 10.7
APPLIED AEROSPACE STRUCTURES, CORP.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (“Agreement”) is made and entered into as of December 1, 2022 (the “Effective Date”) by and between Kevin Bidlack (hereinafter referred to as “Employee”) and Applied Aerospace Structures, Corp., an Illinois corporation (hereinafter referred to as the “Company”).
RECITALS
The Company and Employee previously entered into an employment agreement, dated as of May 1, 2020 (the “Previous Agreement”);
The Company desires to employ Employee as the Chief Executive Officer and the Employee desires to commit his employment with the Company as its Chief Executive Officer, on and pursuant to the terms of this Agreement; and
The Company and Employee desire for this Agreement to supersede and replace the Previous Agreement in its entirety upon the Effective Date.
In consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. TERMINATION OF PREVIOUS AGREEMENT. Each of the Company and Employee acknowledge and agree that, effective as of the date hereof, and without any further action by any of the parties, (a) the Previous Agreement shall be terminated in its entirety with no additional cost or liability to the Company (or its successors or assigns), (b) all rights, obligations and liabilities of the Employee under the Previous Agreement shall cease, (c) the Previous Agreement shall be deemed null and void and of no force or effect, provided that any salary or bonuses accrued but not yet paid by the Company to Employee pursuant to the Previous Agreement will be paid to the Employee consistent with past practice, and any accrued paid time off (“PTO”) will be carried over and continue under this Agreement.
2. EMPLOYMENT AND DUTIES.
(a) The Company agrees to employ Employee and Employee hereby accepts employment by the Company as the Chief Executive Officer, effective as of the date of this Agreement. The Employee shall perform, to the best of Employee’s ability, experience and talents, such duties as are commensurate with the position of Chief Executive Officer, or as may be assigned from time to time by the Board of Directors of GB Eagle Holdings, LP (the “Board”).
(b) During the term of his employment, Employee shall devote his entire time, attention and energies to the business of the Company. Notwithstanding the foregoing, nothing in this Agreement shall preclude Employee from devoting reasonable time for engaging in charitable or community activities or managing his personal investments, provided that such activities and actions do not, individually or together, interfere with the regular performance of
Employee’s duties and responsibilities under this Agreement or involve a conflict of interest with the Company. Except as otherwise provided herein, Employee’s conduct shall be governed by the general rules and polices applicable to employees of the Company.
3. TERM. This Agreement shall commence and is effective upon the date first referenced above and continues through December 1, 2027 (the “Initial Term”), unless terminated in accordance with the provisions of this Agreement. Thereafter, unless previously terminated or written notice not to renew is provided by either party to the other at least sixty (60) days prior to the end of the Employment Term, this Agreement and the Employment Term shall automatically renew for subsequent one-year periods (each, a “Renewal Term” and collectively, the “Employment Term”).
4. COMPENSATION.
(a) During the Employment Term, the Company shall pay Employee as base compensation (the “Base Salary”) for his services an annual salary of $450,000, payable in bi-monthly payments, less applicable withholdings. With respect to the first Renewal Term following expiration of the Initial Term (if applicable), Employee’s Base Salary shall increase by ten percent (10%) relative to Employee’s Base Salary during the Initial Term. Employee shall be entitled to the maximum PTO accrual under the Company policy, but not less than six (6) weeks, upon the signing of this Agreement and will take paid PTO each year in accordance with the Company’s policies and procedures. The Company shall provide Employee with substantially all other fringe benefits, which it makes available to other employees of the Company. The Company also agrees to pay Employee’s monthly medical contribution, as elected by Employee.
(b) During the Employment Term, Employee shall be eligible to receive an annual bonus under the Company’s senior management bonus plan, with an annual target amount equal to $300,000, based on the Company’s achievement of specified performance conditions to be determined by the Board in its sole discretion (any such bonus payable hereunder, the “Annual Bonus”).
5. INVENTIONS.
(a) The Company shall have all rights including international priority rights in all Inventions (defined as any invention, idea, design, concept, development, technique, discovery or improvement) whether or not patentable and/or subject to protection by intellectual property or patent laws, and all proposals, computer programs and writings, including any patent and copyright interests therein, which Employee authors, conceives or makes, either solely or jointly with others, during Employee’s employment with the Company, which: (i) relate to any subject matter with which Employee’s work for the Company or any of its affiliates may be concerned; (ii) relate to the business, products or services, or actual or demonstrably anticipated research or development, of the Company or the Company’s suppliers or contractors; (iii) involve the use of the time, equipment, materials or facilities of the Company or any of its affiliates; or (iv) relate or are applicable to any phase of the Company’s research and development. Further, during the Employment Term and thereafter, at the reasonable request of the Company and without expense to Employee, Employee agrees to execute all reasonable documents and to take all reasonable actions as may be necessary in order to assign all rights to or otherwise vest good title in (or as directed by) the Company, and protect or exploit such rights, to the property and proprietary rights described in this subsection.
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(b) Pursuant to California Labor Code Section 2870, the Company shall have no rights in any Inventions made or conceived by Employee which do not involve any Confidential Information (as defined below), equipment, supplies facilities or materials of the Company, any of its affiliates or the Company’s suppliers or contractors, and which are developed entirely on Employee’s own time unless: (i) the Invention relates at the time of conception or reduction to practice of the invention to the business, products or services of the Company, any of its affiliates or the Company’s suppliers or contractors; or (ii) the Invention relates to actual or demonstrably anticipated research or development projects of the Company, any of its affiliates or the Company’s suppliers or contractors: or (iii) the Invention results from any services performed by Employee for the Company, any of its affiliates or the Company’s suppliers or contractors.
(c) The term “Confidential Information” as used in this Section 5 and throughout this Agreement shall include information of any nature and in any form which at the time or times concerned is not generally known to those persons engaged in a business similar to that conducted or contemplated by the Company and which relate to any one or more of the aspects of the recent or past business(es) of the Company, any supplier or contractor of the Company, or any of its or their subsidiaries or affiliates, or any of their predecessors. Employee shall have no obligation under this Agreement to maintain in confidence any information that (i) is in the public domain at the time of disclosure, (ii) though originally Confidential Information, subsequently enters the public domain other than by breach of Employee’s obligations hereunder or by breach of another person’s or entity’s confidentiality obligations, or (iii) is shown by documentary evidence to have been known by Employee prior to disclosure to Employee by the Company. Confidential Information expressly does not include information that is not legally protectable under federal or state law or applicable regulations. Nothing stated in this Agreement is intended to limit or restrict rights under applicable law such as engaging in protected activity under the National Labor Relations Act, including discussing wages, hours, or working conditions, engaging in whistleblower activity, or discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that the Employee has reason to believe is unlawful. Pursuant to 18 U.S.C. § 1833(b), Employee will not be held criminally or civilly liable under any Federal or state trade secret law for the disclosure of a trade secret of the Company that (A) is made (1) in confidence to a Federal, state, or local government official, either directly or indirectly, or to Employee’s attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding.
6. RESTRICTIVE COVENANTS.
(a) During the Employment Term and any period in which Employee is employed by the Company or its affiliates, Employee shall not directly or indirectly: (i) solicit or otherwise call upon any of the Company’s or any of its affiliates’ Customers (as defined below), except for or on behalf of the Company or any of its affiliates; (ii) engage in any business that is a Competitor; or (iii) enter into any agreement with or solicit or cause others to solicit, the employment or engagement of any officer, salesperson, contractor, supplier, consultant or
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employee of the Company or any of its affiliates, for the purpose of causing such officer, salesperson, contractor, supplier, consultant or employee to terminate his, her or its employment with or engagement by the Company or such affiliate.
(b) Without limiting Section 6(a), during the Employment Term and any period in which Employee is employed by the Company or its affiliates, and for a period of twelve (12) months immediately after the employee’s termination of employment for whatever reason, except with the prior written consent of the Company, Employee shall not directly or indirectly: (i) solicit or induce or attempt to solicit or induce any employee of the Company to leave the Company that the Employee supervised or had contact with during the Employee’s employment with the Company; or (ii) use any of the Company’s Confidential Information (as defined in Section 5 above) and Trade Secrets (as defined in Section 8 below) to solicit or induce or attempt to solicit or induce any (A) supplier, vendor, contractor or Customer of the Company to terminate his, her or its relationship or business with the Company, or make any change adverse to the Company in such relationship or business with the Company, or (B) Potential Customer to convince or prevent such Potential Customer from either entering into a relationship or conducting business with the Company.
For purpose of this Agreement:
“Competitor” shall mean any business engaged as a business rival to the Company in the design, fabrication, manufacture, assembly or sale of: (1) products or services similar to or competitive with the Company’s products or services during the term of Employee’s employment with the Company; or (2) products or services similar to or competitive with those products or services planned or proposed to be introduced by the Company and known to the Employee at any time during the term of Employee’s employment with the Company;
“Customer(s)” shall mean a person, firm or other entity which within two (2) years prior to the date of Employee’s termination with the Company acquired products or services directly or indirectly from the Company (or from one or more of its predecessor entities); and
“Potential Customer(s)” shall mean a person, firm or other entity which the Company, within one (1) year prior to the date of Employee’s termination with the Company, directly or indirectly solicited, prepared a proposal or developed a plan, product or service for, or were preparing to solicit within one (1) year prior to the date of termination of Employee’s employment with the Company, provided Employee knew about or was involved in the Company’s solicitation or preparation to solicit.
(c) If Employee’s employment with the Company terminates other than for Cause pursuant to Section 9(b) below and Employee elects to receive severance pay pursuant to Section 9(b), and without limiting Section 6(b), the restrictions contained in Section 6(a)(ii) shall continue in full force and effect for the period that Employee receives severance pay in those states in which Company conducts business, except that within the State of California, such restrictions shall extend only to the specific counties specified on Schedule A attached to this Agreement.
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7. REMOVAL OF DOCUMENTS. No documents, files records, film, tapes or other media, correspondence, notes, customer lists, brochures, catalogues or other papers (including copies) relating to the business of the Company, any affiliate of the Company or the Company’s suppliers, contractors or customers shall be removed from the Company’s premises, except as Employee’s duties to or for the Company may require, and in such case Employee will immediately return such to the Company. Employee will not copy or duplicate any of the foregoing materials for Employee’s own use or for any purpose whatsoever unless required for the Company’s business or benefit or otherwise specifically requested to do so by the Company. Employee shall also return all Company property including Company electronic files at the end of Employee’s employment with Company or upon the Company’s earlier request. In the event that Employee’s employment with the Company terminates for any reason Employee grants consent to notification by the Company to Employee’s new employer about Employee’s rights and obligations under this Agreement. The provisions of this Section shall survive the termination of this Agreement for any reason, to the extent allowed by law.
8. TRADE SECRETS. Employee understands that during the course of his employment, he has acquired and will continue to acquire and have access to Trade Secrets (as defined below) and other Confidential Information (as defined above) of the Company, its affiliates, suppliers, contractors and customers and potential customers, whether or not reduced to writing, patented, copyrighted or trademarked, all of which is confidential in nature and of great value to the Company. Employee will not divulge any Trade Secrets or Confidential Information to any other person, firm or other entity, or use, rely on, or permit the use of any of Trade Secrets or other Confidential Information other than pursuant to this Agreement on behalf of the Company. “Trade Secrets” is to be broadly defined and includes (a) all information that has or could have commercial value or other utility in the business in which the Company or its customers are engaged or in which they contemplate engaging, and (b) all information that, if disclosed without authorization, could be detrimental to the interest of the Company or its Customers, whether or not such information is identified as Trade Secrets by the Company or its Customers. By example and without limitation, Trade Secrets includes all information on the Company’s operating techniques, processes, formulas, trade secrets, inventions, discoveries, improvements, research or development test results, specifications, data, know-how, formats, marketing plans, business plans, strategies, forecasts, unpublished financial information, budgets, projections and customer and supplier identities, characteristics and agreements. The provisions of this Section shall survive termination of this Agreement for any reason. Employee shall have no obligation under this Agreement to maintain in confidence any information that (i) is in the public domain at the time of disclosure, (ii) though originally a Trade Secret, subsequently enters the public domain other than by breach of Employee’s obligations hereunder or by breach of another person’s or entity’s confidentiality obligations, or (iii) is shown by documentary evidence to have been known by Employee prior to disclosure to Employee by the Company. Trade Secrets expressly does not include information that is not legally protectable under federal or state law or applicable regulations. Nothing stated in this Agreement is intended to limit or restrict rights under applicable law such as engaging in protected activity under the National Labor Relations Act, including discussing wages, hours, or working conditions.
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9. SEVERANCE PAY.
(a) Subject to the Company’s obligations to pay Employee severance as specified below, Employee understands and acknowledges that his employment at the Company constitutes at-will employment, which Employee understands to mean that either Employee or the Company may terminate such employment at any time, for any lawful reason whatsoever, with or without Cause (as defined below), and with or without notice. Employee further understands and agrees that neither Company’s oral or written offer of employment, Employee’s acceptance thereof, the duration of Employee’s employment or any salary increases, promotions, performance reviews or benefits Employee may receive, nor any formal or informal Company policies, constitutes a contract for continued employment, and may not be deemed or construed by either Employee or the Company to constitute such a contract.
(b) The Company has the right to terminate Employee’s employment at any time with or without Cause, upon providing Employee with written notice of such termination, in which case the Company shall promptly pay Employee any accrued but unpaid Base Salary, accrued but unused PTO, and timely pay all unpaid prior year Annual Bonus, if any. However, if the Company terminates Employee’s employment other than for Cause, as severance and in lieu of any right of Employee to be paid Base Salary, an Annual Bonus, any other payment or other benefit under this Agreement or under the Company’s other plans and benefit programs, Employee shall receive the following from the Company, subject to Employee’s execution and non-revocation of a general release of claims in a form to be provided by the Company (the “Release”), with such Release becoming effective and non-revocable within sixty (60) days of Employee’s termination date: (i) Employee’s Base Salary paid in monthly installments for twelve (12) months after the date of termination commencing on the sixtieth (60) day following such termination date, with the first installment including all amounts previously due and owed thereto; and (ii) Employee’s prorated portion (through the date of such termination) of the Annual Bonus for the year in which such termination occurred based on actual performance (as determined by the Board), and paid at the same time Annual Bonuses are paid to other senior executives of the Company. However, in no event will Employee be entitled to any other payment, bonus or severance which might otherwise be due Employee under this Agreement or under the Company’s severance pay policy, if any, applicable to other employees of the Company. For purposes of this Section, the term “Cause” shall mean, without limitation, Employee’s material breach of this Agreement, gross negligence, inability to carry out his duties under this Agreement, substantial neglect of duties, breach of fiduciary duty, material misrepresentation of a material fact or circumstance, in each case, as determined by the Board, or Employee’s conviction of a felony, fraud or dishonesty. All amounts paid to Employee under this Section 9 shall be net of all required taxes and withholdings. Should Employee breach this Agreement (including Section 5, 6 and 8), Company shall have no obligation to pay any severance whatsoever.
(c) If Employee is terminated for Cause, or if this Agreement is not renewed by the Company for Cause, the Company shall promptly pay Employee any current unpaid Base Salary, any accrued but unused PTO, and timely pay all unpaid prior year Annual Bonus, if any, based on the actual performance (as determined by the Board), and paid at the same time Annual Bonuses are paid to other senior executives of the Company. However, Employee shall not be entitled to receive any severance pay, accrued Annual Bonus for the year in which termination (or non-renewal occurs) or any other bonus, compensation or benefits which might otherwise be due Employee under the Company’s severance pay or benefit policies, if any, applicable to employees of the Company, or any other termination damages, none of which Employee is eligible for in connection with a Cause termination or Cause non-renewal.
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(d) If Employee terminates his employment with the Company or provides the Company with notice of his intention not to renew this Agreement: (i) the Company shall promptly pay Employee any current unpaid Base Salary; (ii) the Company shall promptly pay Employee any accrued but unused PTO, (iii) the Company shall timely pay Employee all prior year unpaid Annual Bonus; (iv) the Employee shall be entitled to keep all Annual Bonus amounts previously paid to him with respect to the fiscal year of the Company in the year of termination (or non-renewal) (the “Current Bonus”); (v) Employee will be eligible to receive a prorated portion (through the date of such termination) of the Annual Bonus for the year in which such termination occurs based on actual performance (as determined by the Board in its sole direction) (the “Pro-Rata Bonus”), which will be paid at the same time Annual Bonuses are paid to other senior executives of the Company, and (vi) the Employee shall not be entitled to any other salary, benefits, bonuses or compensation (other than current unpaid Base Salary, any accrued but unused PTO, the prior year Annual Bonus, the Current Bonus, and the Pro-Rata Bonus).
10. ARBITRATION AND EQUITABLE RELIEF.
(a) Any dispute or claim arising out of, in relation to, or in connection with this Agreement, or the interpretation, making, performance, breach or termination thereof, or Employee’s hiring or termination or non-renewal of any term of such employment, shall be settled by binding arbitration in Stockton, California, under the Commercial Arbitration Rules of the JAMS by one or more arbitrators appointed in accordance with said rules. Such arbitration is in lieu of any court or any trial to which Employee or the Company would be entitled to and covers all common law and statutory claims, lawsuits, disputes, and/or controversies that Employee may have against the Company or that the Company may have against Employee arising from, relating to or having any relationship or connection whatsoever with, Employee’s employment by, separation from, or other association with the Company. This arbitration agreement will include all possible claims noted above, excluding claims for workers’ compensation or unemployment compensation benefits. Nothing herein shall prevent Employee or the Company from filing a claim or charge with any federal, state or local government agency or otherwise require arbitration of a claim or charge which, by law, cannot be the subject of a compulsory arbitration agreement. The arbitration procedure specified in this Agreement shall be applicable only to judicially cognizable claims, and not to any dispute or claim that in the absence of this Agreement would not be judicially cognizable. The Company and Employee agree to waive their rights to a civil trial by a judge or a jury or other judicial resolution. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. To the fullest extent permitted by law, Employee waives any right or ability to participate in any court proceeding, including any class, collective, or multi-party action, against the Company or any of its affiliates. Employee also agrees to bring any arbitrations only on an individual basis (and not as a co-claimant with any other individual(s) against the Company or any of its affiliates), or on a putative class or collective basis.
(b) This Agreement and arbitration agreement shall be governed by the laws of the State of California. Employee understands that the arbitrator shall apply California law to the
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merits of any dispute or claim, with reference to rules of conflict of law. The Company shall pay all arbitrator fees and arbitration forum expenses for the arbitration process. Each party shall pay its own litigation costs (e.g., copying, depositions, witnesses and expert fees) and attorneys’ fees to the same extent it would in a court of law, unless the arbitrator, applying the same rules as a court in such situations and in accordance with applicable law, rules otherwise. The arbitration shall be conducted on a strictly confidential basis.
(c) Notwithstanding the foregoing, before appointment of the arbitrator and in exceptional circumstances even thereafter, the parties may apply to any court of competent jurisdiction in San Joaquin County, California for a Temporary Restraining Order, Preliminary Injunction, or other interim or conservatory relief, in aid of arbitration, as necessary, without breach of this arbitration agreement and without any abridgment of the powers of the arbitrator. Because Employee agrees that it would be impossible or inadequate to measure and calculate the Company’s damages for any breach of covenants set forth in Sections 5 through 8 of this Agreement, and such breach would result in irreparable and continuing damage to the Company, Employee agrees that the Company has, in addition to any other right or remedy available, the rights to equitable remedies described above. Employee further agrees that no bond or other security shall be required in obtaining any such equitable relief.
11. SEVERABILITY. The provisions of this Agreement shall be severable. The unenforceability or invalidity of any one or more provisions, clauses or sentences hereof shall not render any other provision, clause or sentence herein contained unenforceable or invalid. The portion of the Agreement which is not invalid or unenforceable shall be considered enforceable and binding on the parties and the invalid or unenforceable provisions(s), clause(s), or sentence(s) shall be deemed excised, modified or restricted to the extent necessary to render the same valid and enforceable, and this Agreement shall be construed as if such invalid or unenforceable provision(s), clause(s) or sentence(s) were omitted. The provisions of this Section shall survive the termination of this Agreement for any reason.
12. MISCELLANEOUS.
(a) From time to time, the Company may wish to use Employee’s name, voice, signature, photograph or likeness in its public relations or promotional activities. Employee consents to the use of such materials by the Company for such promotional purposes, including but not limited to use in advertisements, brochures, videotapes and films. In addition, Employee releases the Company from any financial obligation to Employee for such uses.
(b) The rights and benefits of the Company under this Agreement shall be transferable and assignable, in whole or in part. Employee may not assign or delegate any of Employee’s rights or obligations hereunder without first obtaining the written consent of the Company. Without limiting Section 10, Employee hereby expressly consents to the personal jurisdiction of the state and federal courts located in California for any lawsuit filed there or any judgment entered against Employee by the Company arising from or relating to this Agreement.
(c) The waiver of any breach of the terms of this Agreement shall not constitute the waiver of any other or further breach hereunder, whether or not of a like nature or kind. No waiver of any provision of this Agreement shall be valid unless in writing and signed by the person or party against whom charged.
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(d) This Agreement, including any and all exhibits attached hereto, constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior and contemporaneous agreements, if any, between the parties relating to the subject matter hereof. Employee acknowledges and agrees that Employee shall continue to remain bound by any and all obligations and restrictive covenants, including all cooperation, confidentiality, intellectual property, nonsolicitation, and nondisparagement obligations that Employee owes to the Company or its affiliates. No amendment or modification of the terms of the Agreement shall be binding upon either party unless reduced to writing and signed by Employee and a duly appointed officer of the Company.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first above written.
| “COMPANY” | “EMPLOYEE” | |||||||
| APPLIED AEROSPACE STRUCTURES, CORP. | /s/ Kevin Bidlack | |||||||
| KEVIN BIDLACK | ||||||||
| By: | GB Eagle Buyer, Inc. | |||||||
| Its: | Sole Stockholder | |||||||
| Address: |
| |||||||
| By: | /s/ Noah Blitzer |
| ||||||
| Name: | Noah Blitzer | |||||||
| Title: | Authorized Person | |||||||
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SCHEDULE A
CALIFORNIA COUNTIES
| Alameda | Marin | San Mateo | ||
| Alpine | Mariposa | Santa Barbara | ||
| Amador | Mendocino | Santa Clara | ||
| Butte | Merced | Santa Cruz | ||
| Calveras | Modoc | Shasta | ||
| Colusa | Mono | Sierra | ||
| Contra Costa | Monterey | Siskiyou | ||
| Del Norte | Napa | Solano | ||
| El Dorado | Nevada | Sonoma | ||
| Fresno | Orange | Stanislaus | ||
| Glenn | Placer | Sutter | ||
| Humboldt | Plumas | Tehama | ||
| Imperial | Riverside | Trinity | ||
| Inyo | Sacramento | Tulare | ||
| Kern | San Benito | Tuolumne | ||
| Kings | San Bernardino | Ventura | ||
| Lake | San Diego | Yolo | ||
| Lassen | San Francisco | Yuba | ||
| Los Angeles | San Joaquin | |||
| Madrea | San Luis Obispo |
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Exhibit 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of July 23, 2018 by and among PCX Aerostructures, LLC, a Delaware limited liability company (the “Company”), Jeffrey L. McRae (the “Executive”) and, solely for purposes of issuance of equity interests under Sections 3(e) and (f), PCX Holding Corp., a Delaware corporation (the “Parent”). Certain capitalized terms used in this Agreement are defined in Section 13.
RECITALS:
A. The Company is engaged in and will continue to be engaged in the business of manufacturing, assembling, testing, selling, and providing complex dynamic and structural components and assemblies for military and civilian aircraft programs (collectively, the “Business”);
B. As a result of employment with and provision of services to the Company, the Executive will become familiar with confidential information and trade secrets associated with the Business; and
C. The Company desires to employ the Executive, and the Executive desires to be so employed, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Employment.
The Company shall employ the Executive, and the Executive accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on July 23, 2018 (the “Start Date”) and ending as provided in Section 4.
Section 2. Position and Duties.
(a) During the Employment Period, the Executive shall serve as the Chief Financial Officer of the Company and each of its subsidiaries and shall have the usual and customary duties, responsibilities and authority of such position, subject to the power of the Chief Executive Officer or the Board (i) to expand or limit such duties, responsibilities and authority (provided such expanded or limited duties, responsibilities and authority are consistent with the position Chief Financial Officer) and (ii) to override the actions of the Executive. During the Employment Period, the Executive shall also serve, without additional compensation, as an officer, director or manager of the Company’s Affiliates.
(b) The Executive shall report to the Chief Executive Officer and shall devote his best efforts and substantially all of the Executive’s active business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company and its Affiliates. The Executive shall perform his duties and responsibilities to the best of the Executive’s abilities in a diligent and professional manner. During the Employment Period, the Executive shall not engage in any outside business activity (including, without limitation, any consulting or advisory services, and board positions), without the prior written approval of the Board, whether or not such activity is pursued for gain, profit or other pecuniary advantage.
(c) The foregoing restrictions shall not limit or prohibit the Executive from engaging in passive investment, community, charitable, and social activities not interfering in any material respect with the Executive’s performance and obligations hereunder.
(d) The Executive’s principal place of employment will be at the Company’s facility in Newington, CT and Executive will be required to travel periodically, including to the Company’s facility in Mansfield, TX.
Section 3. Compensation and Benefits.
(a) Base Salary. The Company agrees to pay the Executive an annualized salary (the “Base Salary”) during the Employment Period, which Base Salary shall be payable in regular installments in accordance with the Company’s general payroll practices and subject to applicable tax withholding and other deductions. The Executive’s initial annualized Base Salary shall be $360,000 and shall be increased to $380,000 on the first day of the 2019 fiscal year.
(b) Annual Bonus. With respect to each fiscal year during the Employment Period, the Executive will be eligible to earn an annual incentive bonus (the “Annual Bonus”) with a target annual bonus opportunity equal to twenty percent (20%) of his Base Salary for the 2018 fiscal year and thirty five percent (35%) of his Base Salary for each fiscal year thereafter. Payment of the Annual Bonus for any fiscal year shall made between January 1 and May 1 of the following year and shall be subject to (i) the achievement of budgeted EBITDA (as determined by the Board in its discretion) for such year and (ii) the Executive’s continued employment through the date on which such bonus is paid, except as set forth in Section 5(b).
(c) Expenses. The Company shall, in accordance with policies then in effect with respect to payments of business expenses, pay or reimburse the Executive for all reasonable out-of-pocket travel and other expenses (which, for clarity, exclude ordinary commuting expenses) incurred by the Executive during the Employment Period in performing services hereunder. All expenses shall be accounted for in such reasonable detail as the Company may require.
(d) Vacation; Benefits. During the Employment Period, the Executive shall be entitled to five (5) weeks of vacation for each calendar year (prorated for any partial year) in accordance with the Company’s policies for executives, as such policies may be amended from time to time. In addition, during the Employment Period, (i) the Executive shall be entitled to participate in all employee benefit plans from time to time for which senior executive employees of the Company are generally eligible in accordance with the normal terms of such plans and (ii) the Company shall pay the Executive a temporary living stipend of $5,000] per month unless the Executive elects to relocate to the Newington, CT area.
(e) Incentive Equity Award. The Executive shall be entitled to receive an award of restricted Class B Non-Voting Common Stock of the Parent (the “Incentive Shares”) pursuant to an Equity Participation Agreement to be entered into by and between the Executive and the Parent as soon as practicable following the Start Date, substantially in the form attached hereto as Exhibit A.
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(f) Equity Investment. In addition, the Executive shall have the right, on or prior to July 31, 2018, to purchase up to $2 million of Parent’s Series A Preferred Stock or Series B Preferred Stock, par value $0.001 per share (the “Purchased Shares”) for a purchase price equal to the fair market value of such Shares, as determined by the Board in good faith, subject to Board and stockholder approval. The issuance of the Purchased Shares shall be subject to the Executive’s execution and delivery of a joinder to the Parent’s Stockholders Agreement, a Subscription Agreement and such other documents as Parent may reasonably request in connection with such issuance.
(g) Transaction Bonus. Subject to (i) the Executive’s continued employment by the Company through the date of the Change in Control and (ii) the Executive committing to remain employed by the Company through the end of the Transition Period, the Company will pay the Executive a one-time bonus (the “Transaction Bonus”) equal to the amount, if any, that $500,000 exceeds the Incentive Share Value. The Transaction Bonus shall be paid within thirty (30) days following the date of the Change in Control. The Transaction Bonus shall be payable in cash, provided that if equity holders receive non-cash consideration (e.g. shares of stock of an acquiring corporation), then all or a portion of the Transaction Bonus may, in the Board discretion, be paid in such non-cash consideration (based on approximately the same proportion of cash vs. non-cash consideration that the equity holders receive).
Section 4. Term and Termination.
(a) General. The Executive’s employment pursuant to this Agreement shall commence on the Start Date and shall end on the third (3rd) anniversary of the Start Date, and shall be automatically extended thereafter for consecutive one (1) year terms, unless and until either party provides at least sixty (60) days’ advance written notice prior to the end of the then current Employment Period that such party declines to so extend the Employment Period. For purposes of this Agreement, the initial three (3) year term shall be referred to as the “Initial Employment Period,” and the Initial Employment Period, together with any additional extensions shall be referred to as the “Employment Period.” Notwithstanding the foregoing, the Employment Period shall terminate prior to the end of any such period (or extension of such period) upon the occurrence of any of the events set forth in clauses (b), (c) or (d) below.
(b) Termination by the Company for Cause; Resignation by the Executive Without Good Reason. The Employment Period may be terminated by the Company at any time for Cause, or by the Executive’s resignation without Good Reason. It is understood that if the Executive elects to terminate the Employment Period without Good Reason, then the Executive will provide the Company with sixty (60) days’ advance written notice.
(c) Termination by the Company Without Cause or by the Executive With Good Reason. The Executive’s employment may be terminated by the Company at any time without Cause or by the Executive with Good Reason.
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(d) Termination Due to Death or Disability. The Executive’s employment will automatically terminate upon the Executive’s death and may be terminated by the Company upon the Executive’s Disability.
(e) Termination of All Positions. As of the effective date of termination of the Executive’s employment with the Company for any reason by either party, except as otherwise agreed in writing between the parties, the Executive will resign from all officer and director he holds with the Company and any of its Affiliates (including the Parent).
Section 5. Payments Upon Termination.
(a) Termination for Cause; Resignation Without Good Reason; Death and Disability. If the Executive’s employment is (i) terminated by the Company for Cause, (ii) due to the Executive’s resignation without Good Reason, or (iii) or due to the Executive’s death or Disability, then the Executive shall be entitled to receive his earned and unpaid Base Salary, and any benefits due under any employee benefit plan of the Company in accordance with the terms of such plan, through the Termination Date, as well as any as yet unreimbursed reimbursable business expenses (the “Accrued Obligations”). For the avoidance of doubt, the Accrued Obligations shall be paid in accordance with applicable law and pursuant to the Company’s plans and standard business expense policy.
(b) Termination without Cause or Resignation With Good Reason During the Employment Period. If the Executive’s employment is terminated during the Employment Period (i) by the Company without Cause, or (ii) by the Executive with Good Reason, then the Executive shall be entitled to receive the Accrued Obligations and, so long as the Executive executes (and does not revoke) a release substantially in the form attached hereto as Exhibit B (the “Release”) within the time period set forth in Section 15, the following payments (the “Severance Payments”):
(i) continued payments of the Executive’s then monthly Base Salary during the Severance Period;
(ii) any Annual Bonus with respect to the prior year that remains unpaid as of the Termination Date which shall be paid as set forth in Section 3(b); and
(iii) if the Executive elects to continue his participation and/or that of his eligible dependents in the Company’s medical and dental insurance plans pursuant to the federal Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”), then the Company shall pay or reimburse (either the Executive or the insurer directly) a monthly amount equal to the Company’s portion of the monthly premium cost of the Executive’s and his dependents’ participation in the Company’s group medical and dental plans (“COBRA Premiums”) during the period (the “COBRA Continuation Period”) beginning on the Termination Date and ending on the earliest of: (i) the last day of the Severance Period; (ii) the last day on which the Executive is entitled to continue such participation under applicable law and plan terms; and (iii) the date on which the Executive first becomes eligible to receive substantially similar coverage from another employer or other source. The Executive is required to notify the Company immediately if he becomes eligible for coverage under another medical or dental plan. Notwithstanding the foregoing, if the Company determines that provision of such COBRA benefits set forth in the first sentence of this
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paragraph would result in the imposition of penalties or additional taxes on the Company (including, without limitation, under Section 2716 of the Public Health Service Act) or taxation of the benefits to the Executive under Section 105(h) of the Code, then the Company will, in lieu thereof, provide to the Executive during the remainder of the COBRA Continuation Period, a taxable monthly payment in an amount equal to the COBRA Premiums.
(c) No Other Benefits. Except as otherwise required by law or as specifically provided herein, all of the Executive’s rights to salary, severance, fringe benefits and bonuses hereunder (if any) accruing after the Termination Date shall cease upon the Termination Date. The Executive agrees that the payments and benefits set forth in this Section 5 represent the sole payments and benefits he shall be entitled to in connection with termination of employment with the Company and that the Executive shall not be entitled to any other severance payments or benefits under any severance policy or practice maintained by the Company or its Affiliates.
Section 6. Nondisclosure and Nonuse of Confidential Information; Return of Property.
(a) The Executive shall not, directly or indirectly, disclose or use at any time without the written consent of the Company, either during the Employment Period or thereafter, any Confidential Information (as defined below) of which the Executive is or becomes aware during the Executive’s employment or provision of services to the Company or its Affiliates, whether or not the Confidential Information is developed by the Executive, except to the extent that such disclosure or use is directly related to and required by the Executive’s performance in good faith of duties assigned to the Executive by the Company or is required to be disclosed by law, court order, or similar compulsion or is made to the Executive’s legal, tax or financial advisors (provided that any such disclosure to the Executive’s legal, tax or financial advisors shall be limited to the extent necessary to allow such advisors to perform their respective services); provided, however, that such disclosure shall be limited to the extent so required or compelled; and, provided, further, that the Executive shall give the Company written notice of a court order or similar compulsion that would require the disclosure of Confidential Information. The Executive acknowledges that the Company’s Confidential Information has been generated at great effort and expense by or on behalf of the Company and its predecessors and Affiliates. The Executive does not claim any rights to or lien on any Confidential Information. The Executive will immediately notify the Company of any unauthorized possession, use, disclosure, copying, removal or destruction, or attempt thereof, of any Confidential Information by anyone of which the Executive becomes aware and of all details thereof. The Executive shall take all reasonably appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. The Executive shall deliver to the Company on or before the Termination Date, or at any time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof regardless of the form thereof (including electronic and optical copies)) containing the Confidential Information and the Work Product (as defined below) which the Executive may then possess or have under his control and will delete any and all copies of electronic Confidential Information from his personal computer, PDA, tablet, smart phone and other similar electronic data storage devices and services.
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(b) As used in this Agreement, the term “Confidential Information” means information that is used, developed or obtained by the Company, the Parent or any of their Affiliates or predecessors in connection with the Restricted Business (as defined below), including, but not limited to, information, observations and data obtained by the Executive while employed by the Company, its Affiliates or any predecessors thereof (including those obtained prior to the date of this Agreement) concerning (i) the business or affairs of the Company (or such predecessors), (ii) products or services, (iii) fees, costs and pricing structures, (iv) designs, (v) analyses, (vi) drawings, photographs and reports, (vii) computer software, including operating systems, applications and program listings, (viii) flow charts, manuals and documentation, (ix) data bases, (x) accounting and business methods, (xi) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xii) Customers, clients and suppliers and Customer, client and supplier lists, (xiii) other copyrightable works, (xiv) all production methods, processes, technology, know-how and trade secrets, (xv) business strategies and acquisition plans, financial or other performance data and personnel lists and data, and (xvi) all similar and related information in whatever form. Confidential Information will not, however, include information that (a) is or becomes publicly available other than as a result of a direct or indirect fault of the Executive, or (b) is in the rightful possession of or rightfully known to the Executive and is obtained from third parties prior to his provision of services to the Company, as demonstrated by the Executive. Confidential Information shall not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.
(c) For purposes of clarification, the Executive shall not use any Confidential Information about the Company and/or any Customers or any person, entity or institution to whom or to which the Company sold, solicited sales, supported, marketed or promoted products or services, including, without limitation, all employees, agents or representatives, and any other persons who control, direct or influence purchasing decisions of any such Customer, person, entity or institution, including, without limitation, Confidential Information relating to the identity and special needs of any of such Customers, persons, entities or institutions, key customer contact information, pricing and other financial arrangements with any of the Customers, persons, entities or institutions, for the purpose of soliciting any such Customers, persons, entities or institutions at any time after the Termination Date.
(d) Nothing in this Agreement shall prevent Employee from (i) reporting conduct to, filing a charge with or participating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission or other governmental authority or (ii) disclosing information permitted by any whistleblowing law or regulation.
(e) The Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (1) is made (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (2) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. If the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose the trade secret to the Executive’s attorney and use the trade secret information in the court proceeding, if the Executive: (1) files any document containing the trade secret under seal; and (2) does not disclose the trade secret, except pursuant to court order.
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Section 7. Inventions and Patents.
The Executive agrees that all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) which (a) relate to the actual or anticipated business, research and development of the Company or any of its Affiliates or their respective existing or future products or services and (b) are conceived, developed or made by the Executive (whether or not during usual business hours or on the premises of the Company or any Affiliate and whether or not alone or in conjunction with any other person) while employed by the Company or any Affiliate, together with all patent applications, letters patent, trademark, trade name and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing (collectively referred to herein as the “Work Product”), belong in all instances to the Company or such Affiliate. The Executive shall promptly disclose the Work Product to the Board and, at the Company’s sole expense, perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm the ownership by the Company or its Affiliate of such Work Product (including, without limitation, the execution and delivery of assignments, consents, powers of attorney and other instruments) and, at the Company’s sole expense, to provide reasonable assistance to the Company or any of its Affiliates in connection with the prosecution of any applications for patents, trademarks, trade names, service marks or reissues thereof or in the prosecution or defense of interferences relating to any Work Product. If the Company is unable, after reasonable effort, to secure the signature of the Executive on any such papers, any executive officer of the Company shall be entitled to execute any such papers as the agent and the attorney-in-fact of the Executive, and the Executive hereby irrevocably designates and appoints each executive officer of the Company as his agent and attorney-in-fact to execute any such papers on his behalf, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Work Product, under the conditions described in this sentence.
Section 8. Restrictive Covenants.
(a) Non-Competition. In order to protect the goodwill of the Company and its Affiliates and the Company’s and its Affiliates’ interests in Confidential Information and as an inducement to the Parent to issue to the Executive equity interests pursuant to Sections 3(e) and (f) of this Agreement, the Executive agrees that during the Employment Period and for six (6) months thereafter, subject to automatic extension during the period of any violation of this Section 8 (such period, together with any such extension if applicable, the “Restricted Period”), the Executive shall not directly or indirectly own, manage, control, participate in, be employed by, consult with, render services for, or in any manner engage in or represent any business competing with the Business or with any other businesses, products or services of the Company or any of its Affiliates, as such businesses, products and/or services exist on the Termination Date (collectively, the “Restricted Business”) within any Restricted Territory. Nothing herein shall prohibit the Executive from being a passive owner of not more than two percent (2%) of the outstanding stock of any class of a corporation which is publicly traded that is engaged in the Restricted Business, so long as the Executive has no active participation in the business of such corporation.
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(b) Non-Solicitation; Non-Diversion. During the Restricted Period, the Executive shall not directly or indirectly through another person or entity:
(i) induce or attempt to induce any employee of or individual consultant to the Company or any Affiliate to leave the employ of the Company or such Affiliate, or in any way interfere with the relationship between the Company or any such Affiliate, on the one hand, and any employee or individual consultant thereof, on the other hand;
(ii) solicit for hire or hire any person who was an employee or consultant of the Company or any Affiliate until twelve (12) months after such individual’s employment or consulting relationship with the Company or any Affiliate has been terminated;
(iii) solicit, induce or attempt to solicit or induce any actual or potential Customer, supplier, licensee, contractor or other business relation of the Company or any Affiliate to cease or reduce doing business with the Company or such Affiliate, or in any way interfere or attempt to interfere with the relationship between any such any actual or potential Customer, supplier, licensee, contractor or business relation, on the one hand, and the Company or any such Affiliate, on the other hand; or
(iv) induce or attempt to induce any Customer, supplier, licensee, contractor or other business relation of the Company or any of its Affiliates to purchase services or goods sold as part of the Restricted Business from an entity or person other than the Company or any Affiliate.
(c) Reasonableness. The Executive understands and agrees that (i) the provisions of Sections 6 and 7 and this Section 8 are reasonable and necessary to preserve the legitimate business interests of the Company and its Affiliates, (ii) the Executive will be obtaining access to the Confidential Information and (iii) the Company and the Parent would not agree to the provisions hereof and to issue equity to the Executive without the covenants contained in such Sections.
(d) Notice to New Employer. The Executive shall inform any prospective or future employer of any and all restrictions contained in this Agreement and provide such employer with a copy of such restrictions (but no other terms of this Agreement), prior to the commencement of that employment.
(e) Blue Pencil. If, at the time of enforcement of Sections 6 and 7 and this Section 8, a court holds that the restrictions stated in such Sections are unreasonable under the circumstances then existing, the Executive and the Company agree that the maximum period, scope or geographical area that the court declares reasonable under such circumstances shall be substituted for the stated period, scope or area so as to protect the Company to the greatest extent possible under applicable law.
(f) Mutual Non-Disparagement. Subject to Section 6(d), in order to protect the goodwill of the Company and its Affiliates, to the fullest extent permitted by law, the Executive, both during and after the Employment Period, shall not publicly criticize, denigrate, or otherwise disparage any of the Company, its Affiliates, or each such entity’s employees, officers, directors, consultants, other service providers, equity holders, products, processes, policies, practices, standards of business conduct, or areas or techniques of research, manufacturing, or marketing. In order to protect the business reputation of the Executive, to the fullest extent permitted by law, the
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Company, both during and after the Employment Period, agrees not to publicly criticize, denigrate, or otherwise disparage the Executive. Nothing in this Agreement shall prevent the Executive or the Company from providing truthful testimony pursuant to a legally-issued subpoena. The Executive promises to provide the Company with written notice of any request to so cooperate or provide testimony within one day of being requested to do so, along with a copy of any such request, and the Company agrees to similarly provide the Executive with such notice.
Section 9. Enforcement; Tolling
(a) Because the Executive’s services are unique and because the Executive has access to the Confidential Information and Work Product, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of this Agreement by the Executive, the Company and any of its Affiliates, successors or assigns may, in addition to other rights and remedies existing in their favor at law or in equity, apply to any court of competent jurisdiction for injunctive relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). The Executive shall not claim that the Company or any of its Affiliates, successors or assigns has adequate remedies at law for a breach of any of Sections 6 through 8, as a defense against any attempt by the Company to obtain the equitable relief described in this Section 9.
(b) In the event that the enforceability of any of the terms of this Agreement shall be challenged in a court of competent jurisdiction and the Executive is not enjoined from breaching any of the restrictive covenants, then if a court of competent jurisdiction finds that the challenged restrictive covenant(s) is enforceable, the time periods set forth herein shall be deemed tolled upon the filing of the lawsuit challenging the enforceability of this Agreement until the dispute is finally resolved and all periods of appeal have expired.
Section 10. Severance Payments.
In addition to the foregoing, and not in any way in limitation thereof, or in limitation of any right or remedy otherwise available to the Company, if the Executive violates any provision of the foregoing Sections 6 through 8, any Severance Payments then or thereafter due from the Company to the Executive pursuant to Section 5 shall be terminated forthwith and the Company’s obligation to pay and the Executive’s right to receive such Severance Payments shall terminate and be of no further force or effect, in each case without limiting or affecting the Executive’s obligations (or terminating the Restricted Period) under such Sections 6 through 8, or the Company’s other rights and remedies available at law or equity.
Section 11. Representations, Warranties and Additional Covenants of the Executive.
The Executive hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by the Executive does not and shall not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Executive is a party or any judgment, order or decree to which the Executive is subject, (b) the Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, confidentiality agreement or similar agreement with any other person or entity, and (c) upon the execution and delivery of this Agreement by the Company and the
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Executive, this Agreement will be a valid and binding obligation of the Executive, enforceable in accordance with its terms. The Executive agrees that he will not improperly use or disclose confidential information or trade secrets of any prior employer or third person or bring onto the Company’s premises any confidential information or trade secrets belonging to any prior employer or third person unless the Executive has received the prior written consent of such prior employer or third party.
Section 12. Notices.
All notices, requests, demands, claims, and other communications hereunder shall be delivered in writing as follows:
If to the Company, to:
PCX Aerostructures, LLC
| Address: | [***] |
| Telephone: | [***] |
| Facsimile: | [***] |
| Attention: | Board of Directors |
with copies (which copies shall not constitute notice) to:
RFE Investment Partners
| Address: | [***] |
| Telephone: | [***] |
| Facsimile: | [***] |
| Email: | [***] |
| Attention: | [***] and [***] |
Finn Dixon & Herling LLP
| Address: | [***] |
| Telephone: | [***] |
| Facsimile: | [***] |
| Attention: | [***] and [***] |
If to the Executive, to:
Jeffrey L. McRae
| Address: | [***] |
| Telephone: | [***] |
| Email: | [***] |
or such other address as the recipient party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. Any such communication shall deemed to have been delivered and received (a) when delivered, if personally delivered, sent by telecopier or sent by overnight courier, and (b) on the fifth business day following the date posted, if sent by mail. Instructions, notices or requests of the type described in Section 13(c) may be sent by email to the Executive, provided that a copy is sent the following day by one of the above delivery methods.
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Section 13. Certain Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms shall have the following meanings:
(a) “Affiliate” means a corporation or other entity controlled by, controlling or under common control with the Company, whether directly or indirectly, and shall include the Parent and the Parent’s subsidiaries.
(b) “Board” means the Board of Directors of the Company.
(c) “Cause” means:
(i) the failure by the Executive to perform in all material respects such duties as are reasonably assigned to the Executive by the Board or the Chief Executive Officer in the course of the Executive’s performance of his duties hereunder (including via email or other instructions, but other than as a result of total or partial incapacity due to physical or mental illness);
(ii) gross negligence or willful misconduct by the Executive in the performance of his duties under this Agreement;
(iii) commission of an act of fraud against or misappropriation of material property belonging to the Company or any of its Affiliates;
(iv) a conviction of or a plea of guilty or nolo contendere by the Executive to a misdemeanor involving fraud, embezzlement, or other financial dishonesty, or to a felony;
(v) (1) the material breach by the Executive of this Agreement (other than any breach by the Executive of the provisions of Sections 6, 7 or 8), (2) any breach by the Executive of the provisions of Sections 6, 7 or 8 or (3) the material breach by the Executive of any other agreement or contract with the Company, or any of its Affiliates which the Executive has signed and which is then in effect; or
(vi) the Board’s reasonable determination that the Executive has engaged in a pattern of commissions of violations of state or federal law relating to the workplace environment (including, without limitation, laws relating to sexual harassment or age, sex or other prohibited discrimination) or a violation of any material policy of the Company (including, without limitation, the Company’s anti-harassment and/or sexual harassment policy as in effect from time to time).
The Company shall not be entitled to terminate the Executive’s employment for Cause pursuant to clauses (i), (ii), (v)(1) or (3), or (vi) unless the Board provides to the Executive written notice stating in reasonable detail the basis for termination and an opportunity of at least thirty (30) days in duration (such duration to be determined in good faith by the Company) to cure such basis for termination (unless (x) the facts and circumstances underlying such termination are not able to be cured or (y) the Company has previously delivered a notice under the same clause of this Section 13(c) with respect to the same basis for termination the facts and circumstances of which were cured; in any case (x) or (y), the Company may terminate the Executive’s employment without providing an opportunity to cure). Such written notice shall specifically state the length of the cure period, and the clause(s) above that is(are) the basis for a termination for Cause.
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(d) “Change in Control” has the meaning ascribed to such term in Parent’s 2014 Equity Incentive Plan; provided, that to the extent necessary to comply with Section 409A of the Code, Change in Control shall be limited to a “change in control event” within the meaning of Section 409A of the Code.
(e) “Customer” means any person (x) that at any time has purchased goods or received services from the Company and/or any of its Affiliates or (y) that at any time has directly or indirectly provided or referred customers to, or otherwise provided or referred business for, the Company or any Affiliates.
(f) Disability. For purposes of this Agreement, “Disability” shall mean any long-term disability or incapacity which (x) renders the Executive unable to substantially perform his duties hereunder for one hundred eighty (180) days during any 12-month period, or (y) is reasonably expected to render the Executive unable to substantially perform his duties for one hundred eighty (180) days during any 12-month period based, in the case of this clause (y) only, upon the opinion of a physician mutually agreed upon by the Company and the Executive; provided, however, that no action shall be taken hereunder that precludes the Executive from making a claim under any separate long-term disability policy maintained by the Company.
(g) “Good Reason” means:
(i) any involuntary reduction in Base Salary, except where such reduction is part of an across the board or substantially across the board compensation reduction; or
(ii) any material and adverse change to the Executive’s title.
Notwithstanding the foregoing, a termination of employment by the Executive for Good Reason shall not occur unless the Executive provides to the Company written notice stating in reasonable detail the basis for termination and an opportunity of at least thirty (30) days in duration to cure such basis for termination, and the Executive terminates his employment within ninety (90) days following the initial occurrence of the existence of such basis for termination. Such written notice shall specifically state what steps the Executive deems necessary for the Company to properly cure such circumstance(s).
(h) “Incentive Share Value” means, without duplication, an amount equal to the sum of (a) the value of the Incentive Shares as of Change in Control, as reasonably determined by the Board in good faith and (b) any amounts received by the Executive with respect to the Incentive Shares prior to the Change in Control including, without limitation, any dividend payments. For the avoidance of doubt, if any earnouts, escrows, holdbacks or other deferred or contingent payments may be payable in connection with a Change in Control, then the Board shall take into consideration the likelihood that such payments will ultimately be paid in determining the Incentive Share Value.
(i) “Parent’s Board” means the Board of Directors of the Parent.
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(j) “Restricted Territory” means (i) Hartford County in the State of Connecticut, (ii) the State of Connecticut, (iii) the New York City metropolitan area, (iv) the State of New York, (v) the State of New Jersey, (vi) every other city, state, territory or possession of the United States in which the Company or any of its Affiliates has engaged in the Restricted Business within the twelve-(12) month period preceding the Termination Date, and (vi) any country in which the Company or any of its Affiliates has engaged in the Restricted Business within the twelve (12)-month period preceding the Termination Date.
(k) “Severance Period” means the six-month period following the Termination Date.
(l) “Termination Date” means the Executive’s last day of employment under this Agreement with the Company and each of its Affiliates.
(m) “Transition Period” means the period that the buyer in the Change in Control transaction requests that the Executive remain employed by the Company.
Section 14. General Provisions.
(a) Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.
(b) Construction. The Company and the Executive have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Company and the Executive and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
(c) Complete Agreement. This Agreement (including, but not limited to, the schedules, annexes and exhibits (in their executed form) attached hereto, and, when executed, the Stockholders’ Agreement constitute the entire agreement among the parties and supersede any prior correspondence or documents evidencing negotiations between the parties, whether written or oral, and any and all understandings, agreements or representations by or among the parties, whether written or oral, that relate to the subject matter of this Agreement.
(d) Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Executive, the Parent and the Company and their respective successors, assigns, heirs, representatives and estate; provided, however, that the rights and obligations of the Executive under this Agreement shall not be assigned without the prior written consent of the Board in its sole discretion. The Company may (i) assign any or all of its respective rights and interests hereunder to one or more of its Affiliates, (ii) designate one or more of its Affiliates to perform its respective obligations hereunder (in any or all of which cases the Company nonetheless shall remain responsible for the performance of all of their obligations
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hereunder), (iii) collaterally assign any or all of its respective rights and interests hereunder to one or more lenders of the Company or its Affiliates, (iv) assign its respective rights hereunder in connection with the sale of all or substantially all of its business or assets (whether by merger, sale of stock or assets, recapitalization or otherwise), and (v) merge any of the Affiliates with or into the Company (or vice versa).
(e) Governing Law. This Agreement will be governed by and construed in accordance with the domestic laws of the State of Connecticut without giving effect to any choice of law or conflicting provision or rule (whether of the State of Connecticut or any other jurisdiction), that would cause the laws of any jurisdiction other than the State of Connecticut to be applied. The rights of the Company hereunder are enforceable by its Affiliates, who are intended third party beneficiaries hereof.
(f) Jurisdiction and Venue.
(i) The Company and the Executive hereby irrevocably and unconditionally submit, for themselves and their property, to the non-exclusive jurisdiction of any Connecticut State court or federal court located in Hartford County in the State of Connecticut and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or for recognition or enforcement of any judgment, and the Company and the Executive hereby irrevocably and unconditionally agree that all claims in respect of any such action or proceeding may be heard and determined in any such court or, to the extent permitted by law, in such federal court. The Company and the Executive irrevocably waive, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. A final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Executive shall not commence a claim or proceeding hereunder in a court other than a Connecticut State court or federal court located in Hartford County in the State of Connecticut, except if the Executive has first brought such claim or proceeding in such Connecticut State court or federal court, and such court or courts have denied jurisdiction over such claim or proceeding.
(ii) The Company and the Executive irrevocably and unconditionally waive, to the fullest extent they may legally and effectively do so, any objection that they may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court or federal court of the United States of America sitting in Hartford County in the State of Connecticut and any appellate court from any thereof.
(iii) Notwithstanding clauses (i) and (ii) above, the parties intend to and hereby confer jurisdiction to enforce the covenants contained in Sections 6 through 8 upon the courts of any jurisdiction within the geographical scope of such covenants. If the courts located in the State of Connecticut hold such covenants wholly or partially invalid or unenforceable by reason of the breadth of such scope or otherwise, such determination shall not bar or in any way affect the Company’s right to the relief provided above in the courts of one other jurisdiction (subject to such court possessing personal jurisdiction) located within the geographical scope of such covenants, as to breaches of such covenants in any jurisdiction other than Connecticut, such covenants as they relate to each other jurisdiction being, for this purpose, severable into diverse and independent covenants.
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(g) Withholding of Taxes. The Company may deduct and withhold from the compensation payable to the Executive hereunder or otherwise any and all applicable federal, state, and local income and employment withholding taxes and any other amounts required to be deducted or withheld by the Company under applicable statute or regulation.
(h) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company, the Executive and the Parent, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement or any provision hereof.
(i) Headings. The Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
(j) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Signatures of the parties hereto transmitted by facsimile, PDF or other electronic file shall be deemed to be their original signatures for all purposes and the exchange of copies of this Agreement and of signature pages by facsimile transmission, PDF or other electronic file shall constitute effective execution and delivery of this Agreement as to the parties hereto and may be used in lieu of the original Agreement for all purposes. At the request of any party hereto, all parties hereto shall execute an original of this Agreement as well as any facsimile, telecopy, PDF or other reproduction hereof.
(k) WAIVER OF JURY TRIAL. NO PARTY TO THIS AGREEMENT OR ANY ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF A PARTY SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF THIS AGREEMENT. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
Section 15. Section 409A.
(a) Separation from Service. Notwithstanding anything to the contrary in this Agreement, with respect to any amounts payable to the Executive under this Agreement in connection with a termination of the Executive’s employment that would be considered “non-qualified deferred compensation” under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), in no event shall a termination of employment be considered for purposes of the time of payment of such amounts to have occurred under this Agreement unless such termination constitutes Executive’s “separation from service” with the Company as such term is defined in Treasury Regulation Section l.409A-l(h), and any successor provision thereto (“Separation from Service”).
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(b) Section 409A Compliance: Payment Delays.
(i) Notwithstanding anything to the contrary in this Agreement, to the maximum extent permitted by applicable law, the severance payments payable to the Executive pursuant to this Agreement shall be made in reliance upon Treasury Regulation Section 1.409A-l(b)(9)(iii) (relating to separation pay plans) or Treasury Regulation Section 1.409A-l(b)(4) (relating to short-term deferrals). However, to the extent any such payments are treated as “non-qualified deferred compensation” subject to Section 409A of the Code, and if Executive is deemed at the time of his Separation from Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of any portion of the benefits to which the Executive is entitled under this Agreement is required in order to avoid a prohibited payment under Section 409A(a)(2)(B)(i) of the Code, such portion of the Executive’s termination benefits shall not be provided to the Executive prior to the earlier of (A) the expiration of the six-month period measured from the date of the Executive’s Separation from Service or (B) the date of the Executive’s death. Upon the earlier of such dates, all payments deferred pursuant to this Section 15(b)(i) shall be paid in a lump sum to the Executive (or the Executive’s estate).
(ii) The determination of whether the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of his Separation from Service shall be made by the Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder (including, without limitation, the default provisions of Treasury Regulation Section l.409A-l(i) and any successor provision thereto).
(iii) Notwithstanding anything to the contrary in this Agreement, with respect to any amounts payable to the Executive under this Agreement that would be considered “non-qualified deferred compensation” under Section 409A of the Code (including the Severance Payments) and are conditioned in the Executive’s execution of the Release described in Section 5(b), payment of such amounts will be measured from the Termination Date, but shall commence on the 60th day following the Termination Date (the “Payment Commencement Date”), provided that on or before the Payment Commencement Date, the Executive shall have executed the Release (which form shall be delivered to the Executive by the Company within forty five days following the Termination Date) and the revocation period applicable to the Release shall have expired; and provided further, that the first payment will include an amount equal to all payments that would have been made between the Termination Date and the Payment Commencement Date if such payments had commenced on the Company’s next regularly scheduled payroll date following the Termination Date.
(c) Section 409A: Separate Payments. This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under this Agreement become subject to (a) the gross income inclusion set forth within Section 409A(a)(1)(A) of the Code or (b) the interest and additional tax set forth within Section 409A(a)(1)(B) of the Code (collectively, “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. To the extent that any provision of this Agreement violates Section 409A of the Code and/or Treasury Regulations issued under Section 409A of the Code, such that amounts would be taxable to the Executive prior to payment, the Company and the Executive agree to negotiate in good faith to revise or strike such provision (and take any other action reasonably
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necessary) to preserve the intent hereof to the extent permissible under Section 409A of the Code, Treasury Regulations issued under Section 409A of the Code and applicable guidance issued by the Internal Revenue Service. For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that the Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment and shall not collectively be treated as a single payment.
(d) In-kind Benefits and Reimbursements. Notwithstanding anything to the contrary in this Agreement or in any Company policy with respect to such payments, in-kind benefits and reimbursements provided under this Agreement during any tax year of the Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of the Executive and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by the Executive and, if timely submitted, reimbursement payments shall be made to the Executive as soon as administratively practicable following such submission in accordance with the Company’s policies regarding reimbursements, but in no event later than the last day of the Executive’s taxable year following the taxable year in which the expense was incurred. This Section 15(d) shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to the Executive.
(e) No Company Liability. Notwithstanding anything herein to the contrary, in no event shall the Company or any of its Affiliates be liable to the Executive for or with respect to any taxes and, to the extent the Company timely reports (as required by applicable law) all amounts required to be included in income under Section 409A in connection with such taxes, penalties or interest, which may be imposed upon the Executive pursuant to Section 409A of the Code.
* * * *
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[Jeff McRae - Employment Agreement- Signature Page]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
| PCX AEROSTRUCTURES, LLC | ||
| By: | /s/ Jeffry D. Frisby | |
| Name: | Jeffry D. Frisby | |
| Title: | President and Chief Executive officer | |
| EXECUTIVE | ||
| /s/ Jeffrey L. McRae | ||
| Name: | Jeffrey L. McRae | |
| PCX HOLDING CORP., | ||
| solely for purposes of the issuance of equity | ||
| Interests, if any, under Sections 3(e) and (f) | ||
| By: | /s/ Jeffry D. Frisby | |
| Name: | Jeffry D. Frisby | |
| Title: | Vice President | |
Exhibit A
[Equity Participation Agreement - to be attached]
Exhibit B
Form of Release Agreement
I understand and agree completely to the “Severance Payment” terms set forth in the Employment Agreement (the “Employment Agreement”) effective as of [_______________], 2018 by and between PCX Aerostructures, LLC (together with any successors thereto, the “Company”), PCX Holding Corp. (“Parent”) and me. I understand that I am not entitled to any Severance Payments if I do not sign this Release and return it to the Company on or before [DATE TO BE INSERTED].
Section 1. General Release and Knowing Waiver of Employment-Related Claims. For and in consideration of the severance payments and any other benefits I am eligible to receive from the Company, I, on my own behalf and on behalf of my successors and assigns (collectively referred to as “Releasor”), hereby release and forever discharge the Company, Parent and their respective subsidiaries, stockholders, members, predecessors, successors, affiliates, officers, directors, agents, representatives, employees, consultants and advisors (collectively referred to as “Releasee”), from any and all claims, counterclaims, demands, debts, actions, causes of action, suits, expenses, costs, attorneys’ fees, damages, indemnities, obligations and/or liabilities of any nature whatsoever, whether known or unknown, which Releasor ever had, now has or hereafter can, shall or may have against Releasee, for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of this Release, including, but not limited to, the following:
(a) all such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or the termination of that employment;
(b) all such claims and demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay and/or any other form of compensation;
(c) any claims arising under any federal, state or local law, statute or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Americans With Disabilities Act, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Equal Pay Act, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act of 1993, and the Consolidated Omnibus Budget Reconciliation Act of 1985 and any applicable state or local statutes, including the Connecticut Fair Employment Practices Act, the retaliation provisions under the Connecticut Workers’ Compensation Act, the Connecticut Family and Medical Leave Act, and the Connecticut Free Speech Law [Note to draft: Specific state employment laws to be included at the time of termination], all as amended; and
(d) any claims for breach of contract, express or implied, including any claim for breach of any implied covenant of good faith and fair dealing, constructive discharge, discrimination, harassment, fraud, defamation, intentional tort, emotional distress and negligence.
Notwithstanding the foregoing, nothing herein releases any claim Releasor has or may have against Releasee regarding (i) my rights to vested equity or equity-based awards, which shall in all respects be governed in accordance with the terms of the applicable equity award agreements, (ii) the performance or non-performance of obligations arising under Section 5(b) of the Employment Agreement, (iii) rights to indemnification by the Company and its Affiliates under any contract, the Company’s governance documents or any applicable laws, and nothing in this Release shall prevent me from enforcing my rights to my non-forfeitable accrued benefits (within the meaning of Sections 203 and 204 of ERISA) under any Company pension plan or to receive continuation coverage pursuant to COBRA, or (iv) rights to any coverage to which I am entitled under any directors or officers or other insurance policy that is otherwise applicable to me by virtue of my service to the Company or its Affiliates).
Also, Releasor does not release any claims against Releasee that may arise after this Release has been executed by me and delivered to the Company.
Section 2. Representation by Counsel and Review Period. I have been advised to consult independent legal counsel before signing this Release, and I hereby represent that I have executed this Release after having the opportunity to consult independent counsel and after considering the terms of this Release for twenty-one (21) days [In the event of a reduction in force, insert “and after considering the terms of this Release for forty-five (45) days] (although I may choose to voluntarily execute this Release earlier). I further represent and warrant that I have read this Release carefully, that I have discussed it or have had reasonable opportunity to discuss it with my counsel, that I fully understand its terms, and that I am signing it voluntarily and of my own free will.
Section 3. Right to Revoke Release. This Release shall not become effective until the eighth day following the date on which I have executed it, provided that I have not revoked it, and I may at any time prior to that effective date revoke this Release by delivering written notice of revocation to [Insert name and contact information].
Section 4. Consideration for Release. I acknowledge that the consideration for this Release is consideration to which I would not otherwise be entitled and is in lieu of any rights or claims that I may have with respect to any other remuneration from the Company.
Section 5. Representation Concerning Filing of Legal Actions. I represent that, as of the date of this Release, I have not filed any lawsuits, charges, complaints, petitions, claims or other accusatory pleadings against the Company or any of the other Releasees in any court or with any governmental agency.
Section 6. Continuing Obligations Concerning Confidential Information and Company Property. I acknowledge and agree that I remain subject to the restrictive covenants contained in Sections 6 through 8 of the Employment Agreement, each of which survives the termination of my employment.
Section 7. Amendment of Release. This Release may not be amended or modified except by a writing signed by [_______________], on behalf of the Company, and by me.
Section 8. Governing Law. This Release shall be governed by and construed in accordance with the laws of the State of Connecticut without regard to principles of conflicts of laws thereunder.
Section 9. Neutral Interpretation. This Release shall be interpreted in a neutral manner, and not more strongly for or against any party based upon the source of the draftsmanship of the Release.
Section 10. Headings. The various headings in this Release are inserted for convenience only and are not part of the Release.
Section 11. No Admission of Liability. This Release, and performance of the acts required by it, does not constitute an admission of liability, culpability, negligence or wrongdoing on the part of anyone, and will not be construed for any purpose as an admission of liability, culpability, negligence or wrongdoing by any party and/or by any party’s current, former or future parents, subsidiaries, related entities, predecessors, successors, officers, directors, stockholders, agents, employees and assigns.
Dated: This ________ day of _______________, 20__.
WITNESSES:
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Exhibit 10.9
APPLIED AEROSPACE STRUCTURES, LLC
EMPLOYMENT AGREEMENT
This Employment Agreement (“Agreement”) is made and entered into as of May 8, 2026 (the “Effective Date”) by and between James William (“Trip”) Ferguson, III (hereinafter referred to as “Executive”) and Applied Aerospace Structures, LLC, an Illinois limited liability company (hereinafter referred to as the “Company”).
RECITALS
The Company desires to continue to employ Executive as the Chief Executive Officer and the Executive desires to continue to be so employed, on and pursuant to the terms of this Agreement.
In consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company agrees to continue to employ Executive and Executive hereby accepts continued employment by the Company as the Chief Executive Officer, effective as of the Effective Date. The Executive shall perform, to the best of Executive’s ability, experience and talents, such duties as are commensurate with the position of Chief Executive Officer, or as may be assigned from time to time by the Board of Directors of Applied Aerospace & Defense, Inc. (the “Board”).
(b) Executive shall be appointed to serve as a member of the Board as of the Effective Date, and shall serve as a member of the Board thereafter without additional compensation. During the Employment Term (as defined below), at each annual meeting of the Company’s stockholders at which Executive’s membership on the Board has expired, the Company will nominate Executive to serve as a member of the Board. Executive’s service as a member of the Board will be subject to any required stockholder approval. Upon termination of Executive’s employment with the Company for any reason, unless the Board affirmatively requests that Executive remain on the Board, Executive will be deemed to have resigned from the Board voluntarily as of the last day of employment with the Company; and at the Board’s request, Executive will execute any documents necessary to reflect such resignation.
(c) During the Employment Term, Executive shall devote Executive’s entire time, attention and energies to the business of the Company. Notwithstanding the foregoing, nothing in this Agreement shall preclude Executive from devoting reasonable time for engaging in professional, trade association, charitable or community activities, undertaking such speaking engagements as Executive may select, managing the personal investments of Executive and Executive’s family, and with the approval of the Board (which approval shall not be unreasonably withheld) serving on the boards of directors or similar governing bodies; provided that such activities and actions do not, individually or together, interfere with the regular performance of Executive’s duties and responsibilities under this Agreement or involve a conflict of interest with the Company. Except as otherwise provided herein, Executive’s conduct shall be governed by the general rules and policies applicable to employees of the Company.
(d) During the Employment Term, the Executive’s principal place of employment will continue to be in Huntsville, Alabama, provided that the Executive may be required to travel from time to time on Company business during the Employment Term.
2. TERM. This Agreement shall commence and is effective upon the Effective Date and continues through the second anniversary of the Effective Date (the “Initial Term”), unless terminated in accordance with the provisions of this Agreement. Thereafter, unless previously terminated or written notice not to renew is provided by either party to the other at least sixty (60) days prior to the end of the Initial Term, this Agreement and the Employment Term shall automatically renew for subsequent one-year periods (the period during which this Agreement is in effect is referred to as the “Employment Term”). Notwithstanding the foregoing, the Employment Term may be earlier terminated in accordance with Section 8 hereof.
3. COMPENSATION.
(a) During the Employment Term, the Company shall pay Executive as base compensation (the “Base Salary”) for Executive’s services an annual salary of $500,000, payable in periodic installments in accordance with the Company’s customary payroll practices, less applicable withholdings. The Executive’s base salary shall be reviewed at least annually by the Board, provided that the Executive’s base salary may not be decreased during the Employment Term without the Executive’s consent, other than as part of an across-the-board salary reduction that applies in the same manner to all senior executives.
(b) During the Employment Term, the Executive will be eligible to earn an annual bonus (the “Annual Bonus”) based on a target bonus opportunity of 100% of the Base Salary (the “Target Bonus”), upon the achievement of one or more performance goals established by the Board (or a committee thereof) in its sole discretion. Any Annual Bonus will be earned and paid in accordance with the annual bonus plan applicable to senior executives generally. The Annual Bonus, if any, will be paid within two and a half (2 1/2) months after the end of the applicable calendar year. Except as otherwise provided in this Agreement (i) the Annual Bonus will be subject to the terms of the Company annual bonus plan under which it is granted and (ii) in order to be eligible to receive an Annual Bonus, the Executive must be employed by the Company on the date that the Annual Bonus is paid.
(c) During the Employment Term, the Executive will be entitled to paid time off on a basis that is at least as favorable as that provided to other similarly situated executives of the Company. The Executive shall receive other paid time off in accordance with the Company’s policies for executives as such policies may exist from time to time.
(d) During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other similarly situated executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or terminate any Employee Benefit Plans at any time in its sole discretion, subject to the preceding sentence and the terms of such Employee Benefit Plan and applicable law.
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(e) The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment, and travel expenses incurred by the Executive in connection with the performance of the Executive’s duties hereunder in accordance with the Company’s expense reimbursement policies and procedures.
4. INVENTIONS.
(a) The Company shall have all rights including international priority rights in all Inventions (defined as any invention, idea, design, concept, development, technique, discovery or improvement) whether or not patentable and/or subject to protection by intellectual property or patent laws, and all proposals, computer programs and writings, including any patent and copyright interests therein, which Executive authors, conceives or makes, either solely or jointly with others, during Executive’s employment with the Company, which: (i) relate to any subject matter with which Executive’s work for the Company or any of its affiliates may be concerned; (ii) relate to the business, products or services, or actual or demonstrably anticipated research or development, of the Company or the Company’s suppliers or contractors; (iii) involve the use of the time, equipment, materials or facilities of the Company or any of its affiliates; or (iv) relate or are applicable to any phase of the Company’s research and development. Further, during the Employment Term and thereafter, at the reasonable request of the Company and without expense to Executive, Executive agrees to execute all reasonable documents and to take all reasonable actions as may be necessary in order to assign all rights to or otherwise vest good title in (or as directed by) the Company, and protect or exploit such rights, to the property and proprietary rights described in this subsection.
(b) The Company shall have no rights in any Inventions made or conceived by Executive which do not involve any Confidential Information (as defined below), equipment, supplies, facilities or materials of the Company, any of its affiliates or the Company’s suppliers or contractors, and which are developed entirely on Executive’s own time unless: (i) the Invention relates at the time of conception or reduction to practice of the invention to the business, products or services of the Company, any of its affiliates or the Company’s suppliers or contractors; or (ii) the Invention relates to actual or demonstrably anticipated research or development projects of the Company, any of its affiliates or the Company’s suppliers or contractors: or (iii) the Invention results from any services performed by Executive for the Company, any of its affiliates or the Company’s suppliers or contractors.
(c) The term “Confidential Information” as used in this Section 4 and throughout this Agreement shall include information of any nature and in any form which at the time or times concerned is not generally known to those persons engaged in a business similar to that conducted or contemplated by the Company and which relate to any one or more of the aspects of the recent or past business(es) of the Company, any supplier or contractor of the Company, or any of its or their subsidiaries or affiliates, or any of their predecessors. Executive shall have no obligation under this Agreement to maintain in confidence any information that (i) is in the public domain at the time of disclosure, (ii) though originally Confidential Information, subsequently
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enters the public domain other than by breach of Executive’s obligations hereunder or by breach of another person’s or entity’s confidentiality obligations, or (iii) is shown by documentary evidence to have been known by Executive prior to disclosure to Executive by the Company. Confidential Information expressly does not include information that is not legally protectable under federal or state law or applicable regulations.
(d) Nothing in this Agreement shall prohibit or restrict the Company, Executive or their respective attorneys from: (i) making any disclosure of relevant and necessary information or documents in any action, investigation or proceeding relating to this Agreement, or any other agreement, arrangement or relationship to which Executive may become a party that relates to the Company or its affiliates, or as required by law or legal process, including with respect to possible violations of law; (ii) participating, cooperating or testifying in any action, investigation or proceeding with, or providing information to, any governmental agency or legislative body, any self-regulatory organization, and/or pursuant to the Sarbanes-Oxley Act; (iii) making any other disclosures that are protected under the whistleblower provisions of any applicable law, rule or regulation; or (iv) seeking or accepting any U.S. Securities and Exchange Commission awards or any other protected whistleblower relief; provided that to the extent permitted by law, upon the Company’s or Executive’s receipt of any subpoena, court order or other legal process compelling the disclosure of any such information or documents, such party agrees to give prompt written notice by delivery to the other party, in order to permit such party to protect the interests in confidentiality to the fullest extent possible; and provided that such notice to the Company or Executive does not prevent compliance with the subpoena, court order other legal process, or the law. In addition, nothing in this Agreement shall prohibit or restrict Executive or the Company from initiating communications with, or responding to any inquiry from, any regulatory or supervisory authority regarding any good faith concerns about possible violations of law or regulation. Nothing in this Agreement requires Executive to obtain prior authorization from the Company, or any other person or entity before engaging in any conduct described in this paragraph, or to notify the Company that Executive has engaged in any such conduct. Nothing herein prevents Executive from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that Executive has reason to believe is unlawful. Further, nothing in this Agreement will prohibit or restrict Executive from speaking with law enforcement, the Equal Opportunity Commission, the state division of human rights, the attorney general, a local commission on human rights or an attorney retained by Executive.
5. RESTRICTIVE COVENANTS.
(a) During the Employment Term and any period in which Executive is employed by the Company or its affiliates, Executive shall not directly or indirectly: (i) solicit or otherwise call upon any of the Company’s or any of its affiliates’ Customers (as defined below), except for or on behalf of the Company or any of its affiliates; (ii) engage in any business that is a Competitor; or (iii) enter into any agreement with or solicit or cause others to solicit, the employment or engagement of any officer, salesperson, contractor, supplier, consultant or employee of the Company or any of its affiliates, for the purpose of causing such officer, salesperson, contractor, supplier, consultant or employee to terminate his, her or its employment with or engagement by the Company or such affiliate.
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(b) Without limiting Section 5(a), during the Employment Term and any period in which Executive is employed by the Company or its affiliates, and for a period of twelve (12) months immediately after the Executive’s termination of employment for whatever reason, except with the prior written consent of the Company, Executive shall not directly or indirectly: (i) solicit any employee of the Company to leave the Company that the Executive supervised or had material contact with during the Executive’s employment with the Company; or (ii) use any of the Company’s Confidential Information (as defined in Section 4 above) and Trade Secrets (as defined in Section 7 below) to solicit any (A) supplier, vendor, contractor or Customer of the Company to terminate his, her or its relationship or business with the Company, or make any change adverse to the Company in such relationship or business with the Company, or (B) Potential Customer to convince or prevent such Potential Customer from either entering into a relationship or conducting business with the Company.
For purpose of this Agreement:
“Competitor” shall mean any business engaged as a business rival to the Company in the design, fabrication, manufacture, assembly or sale of: (1) products or services similar to or competitive with the Company’s products or services during the term of Executive’s employment with the Company; or (2) products or services similar to or competitive with those products or services planned or proposed to be introduced by the Company and known to the Executive at the time of the Executive’s termination of employment with the Company;
“Customer(s)” shall mean a person, firm or other entity which within one year prior to the date of Executive’s termination with the Company acquired products or services directly or indirectly from the Company (or from one or more of its predecessor entities); and “Potential Customer(s)” shall mean a person, firm or other entity which the Company, within one (1) year prior to the date of Executive’s termination with the Company, directly or indirectly solicited, prepared a proposal or developed a plan, product or service for, or was preparing to solicit within one (1) year prior to the date of termination of Executive’s employment with the Company, provided Executive knew about or was involved in the Company’s solicitation or preparation to solicit.
6. REMOVAL OF DOCUMENTS. No documents, files records, film, tapes or other media, correspondence, notes, customer lists, brochures, catalogues or other papers (including copies) containing Confidential Information shall be removed from the Company’s premises, except as Executive’s duties to or for the Company may require, and in such case Executive will immediately return such to the Company. Executive will not copy or duplicate any of the foregoing materials for Executive’s own use or for any purpose whatsoever unless required for the Company’s business or benefit or otherwise specifically requested to do so by the Company. Executive shall also return all Company property including Company electronic files at the end of Executive’s employment with Company or upon the Company’s earlier request. The provisions of this Section shall survive the termination of this Agreement for any reason, to the extent allowed by law.
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7. TRADE SECRETS.
(a) Executive understands that during the course of Executive’s employment, Executive has acquired and will continue to acquire and have access to Trade Secrets (as defined below) and other Confidential Information (as defined above) of the Company, its affiliates, suppliers, contractors and customers and potential customers, whether or not reduced to writing, patented, copyrighted or trademarked, all of which is confidential in nature and of great value to the Company. Executive will not divulge any Trade Secrets or Confidential Information to any other person, firm or other entity, or use, rely on, or permit the use of any of Trade Secrets or other Confidential Information other than pursuant to this Agreement on behalf of the Company. “Trade Secrets” is to be broadly defined and includes (a) all information that has or could have commercial value or other utility in the business in which the Company or its customers are engaged or in which they contemplate engaging, and (b) all information that, if disclosed without authorization, could be detrimental to the interest of the Company or its Customers, whether or not such information is identified as Trade Secrets by the Company or its Customers. By example and without limitation, Trade Secrets includes all information on the Company’s operating techniques, processes, formulas, trade secrets, inventions, discoveries, improvements, research or development test results, specifications, data, know-how, formats, marketing plans, business plans, strategies, forecasts, unpublished financial information, budgets, projections and customer and supplier identities, characteristics and agreements. The provisions of this Section shall survive termination of this Agreement for any reason. Executive shall have no obligation under this Agreement to maintain in confidence any information not considered Confidential Information. Trade Secrets expressly does not include information that is not legally protectable under federal or state law or applicable regulations. Nothing stated in this Agreement is intended to limit or restrict rights under applicable law such as engaging in protected activity under the National Labor Relations Act, including discussing wages, hours, or working conditions.
(b) 18 U.S.C. § 1833(b) provides: “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that—(i) is made—(A) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.” Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b). Accordingly, the parties to this Agreement have the right to disclose in confidence trade secrets to federal, state and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. The parties also have the right to disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure.
8. TERMINATION. The Employment Term may be terminated by either the Company or the Executive at any time and for any reason or for no reason, subject to any notice requirements set forth herein. Upon termination of the Employment Term, the Executive is entitled to the compensation and benefits described in Section 9 and has no further rights to any compensation or any other benefits from the Company or any of its affiliates. The Employment Term may terminate:
(a) DEATH. Automatically upon the Executive’s death.
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(b) DISABILITY. Upon ten days’ prior written notice by the Company to the Executive of termination due to Disability. For purposes of this Agreement, “Disability” means the Executive’s inability, due to physical or mental incapacity, to perform the essential functions of the Executive’s job, with or without reasonable accommodation, for 180 days out of any 365-day period or for 120 consecutive days.
(c) CAUSE. Immediately upon written notice by the Company to the Executive of a termination for Cause. “Cause” means the Executive’s:
(i) willful misconduct or gross negligence in the performance of the Executive’s duties to the Company that has or could reasonably be expected to have a material adverse effect on the Company;
(ii) willful failure to perform the Executive’s material duties that continues after the Company’s written request of such performance or willful failure to follow the lawful directives of the Board CEO (other than as a result of death or Disability);
(iii) failure to reasonably cooperate in any audit or investigation involving the Company or its subsidiaries that continues after the Company’s written request of such cooperation;
(iv) conviction of, or pleading guilty or nolo contendere to, any crime involving moral turpitude or any felony;
(v) embezzlement, fraud, theft, malfeasance, dishonesty or misappropriation of the Company’s property; or
(vi) material breach of this Agreement or any other written agreement with the Company, or material violation of the Company’s code of conduct or other written policy as in effect from time to time.
Any determination of Cause by the Company will be made by a resolution approved by a majority of the members of the Board, provided that no such determination may be made until the Executive has been given written notice detailing the specific Cause event and a period of thirty days following receipt of such notice to cure such event (if susceptible to cure) to the reasonable satisfaction of the Board. Notwithstanding anything to the contrary contained herein, the Executive’s right to cure as set forth in the preceding sentence will not apply if there are habitual or repeated breaches by the Executive.
(d) WITHOUT CAUSE. Upon thirty days’ prior written notice by the Company to the Executive of an involuntary termination without Cause (other than for death or Disability).
(e) GOOD REASON. Upon written notice by the Executive to the Company of a termination for Good Reason. “Good Reason” means the occurrence of any of the following events during the Employment Term without the written consent of the Executive, unless such events are corrected in all material respects by the Company within thirty days following Executive’s written notification to the Company of the occurrence of any such event(s):
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(i) material reduction in Base Salary or Target Bonus other than a general reduction in Base Salary affecting all similarly situated executives;
(ii) material diminution in the Executive’s title, duties, authorities or responsibilities (provided that the foregoing shall not include actions taken on a temporary basis while the Executive is physically or mentally incapacitated);
(iii) the requirement that the Executive report to anyone other than the Board;
(iv) the removal of or the failure to elect or re-elect the Executive to the Board;
(v) a material breach by the Company of a material term of this Agreement or any other agreement with the Executive; or
(vi) relocation of the Executive’s primary work location by more than fifty miles from Executive’s then current location.
The Executive will provide the Company with a written notice detailing the specific circumstances alleged to constitute Good Reason within thirty days after the first occurrence of such circumstances and actually terminate employment within thirty days following the expiration of the Company’s thirty-day cure period described above if the applicable condition has not been cured. Otherwise, any claim of such circumstances as Good Reason will be deemed irrevocably waived by the Executive.
(f) WITHOUT GOOD REASON. Upon thirty days’ prior written notice by the Executive to the Company of the Executive’s resignation without Good Reason. In the event of a termination of the Executive’s employment by the Executive without Good Reason, the Company may, in its sole and absolute discretion, by written notice, accelerate such date of termination and/or place Executive on a leave of absence, reduce or alter Executive’s duties, and/or limit Executive’s access to or contact with clients, employees, offices, electronic systems and/or property of the Company, so long as, in the event that the Company takes any such action, the Company will continue to pay the Executive the Executive’s Base Salary, and Executive may continue to participate in the applicable employee benefit plans as an active employee to the extent permitted by and in accordance with the terms of such plans as in effect from time to time, through the end of the thirty-day notice period; provided, that in no event shall any of the aforementioned actions taken by the Company constitute Good Reason.
(g) EXPIRATION OF EMPLOYMENT TERM; NON-EXTENSION OF AGREEMENT. Upon the expiration of the Employment Term due to a non-extension of this Agreement by the Company or the Executive pursuant to the provisions of Section 2 hereof.
9. CONSEQUENCES OF TERMINATION.
(a) DEATH. In the event of a termination on account of the Executive’s death, the Executive or the Executive’s estate, as the case may be, is entitled to the following:
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(i) any accrued but unpaid Base Salary through the date of termination, payable on the pay date immediately following the date of the Executive’s termination in accordance with the Company’s regular payroll practices;
(ii) reimbursement for unreimbursed business expenses properly incurred by the Executive, payable in accordance with the Company’s expense reimbursement policy;
(iii) any accrued but unused paid time off in accordance with Company policy, payable on the pay date immediately following the date of the Executive’s termination in accordance with the Company’s regular payroll practices or on such earlier date as may be required by law;
(iv) all other payments, benefits or fringe benefits to which the Executive is entitled under the terms of any applicable compensation arrangement or benefit, equity or fringe benefit plan or program or grant, provided that in no event will the Executive be entitled to any severance or termination payments except as specifically provided in this Agreement (collectively, payments in Section 9(a)(i) through 9(a)(iv) hereof, the “Accrued Benefits”);
(v) any earned but unpaid Annual Bonus with respect to the calendar year ending on or preceding the date of termination, payable on the otherwise applicable payment date (the “Prior Year Bonus”); and
(vi) a payment equal to the product of (A) the Annual Bonus, if any, that the Executive otherwise would have earned for the calendar year that includes the date of termination had no such termination occurred, based on actual achievement of the applicable performance goals for such year and (B) a fraction, the numerator of which is the number of days the Executive was employed by the Company during the year of termination and the denominator of which is the number of days in such year (the “Pro Rata Bonus”), payable on the date the Annual Bonus for the year of termination would otherwise have been paid.
(b) DISABILITY. In the event of a termination on account of the Executive’s Disability, the Company will pay the Executive the Accrued Benefits, the Prior Year Bonus and the Pro Rata Bonus.
(c) TERMINATION FOR CAUSE OR WITHOUT GOOD REASON OR AS A RESULT OF EXECUTIVE NONRENEWAL. In the event of a termination (x) by the Company for Cause, (y) by the Executive without Good Reason, or (z) as a result of the Executive’s non-extension of the Employment Term as provided in Section 2 hereof, the Company will pay the Executive the Accrued Benefits.
(d) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON OR AS A RESULT OF COMPANY NONRENEWAL. In the event of a termination (x) by the Company other than for Cause, (y) by the Executive for Good Reason, or (z) as a result of the Company’s non-extension of the Employment Term as provided in Section 2 hereof, the Company will pay or provide to the Executive the Accrued Benefits and subject to Executive’s compliance with the obligations in Sections 4, 5, 7 and Section 10:
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(i) substantially equal installment payments payable in accordance with the Company’s regular payroll practices, but no less frequently than monthly, which are in the aggregate equal to 1.5 times the sum of the Base Salary and Target Bonus for the year that includes the date of termination; provided that to the extent that the payment of any amount constitutes “nonqualified deferred compensation” for purposes of Section 409A, any such payment scheduled to occur during the first sixty days following the termination will not be paid until the first regularly scheduled pay period following the sixtieth day following such termination and will include payment of any amount that was otherwise scheduled to be paid prior thereto;
(ii) the Prior Year Bonus;
(iii) the Pro Rata Bonus, payable on the date the Annual Bonus for the year of termination would otherwise have been paid, but in any event no later than March 15 of the calendar year following the end of the calendar year that includes the date of termination; and
(iv) subject to the Executive’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), reimbursement to the Executive for the monthly COBRA premium paid by the Executive for the Executive and the Executive’s dependents for a period of eighteen months, provided that the Company may modify the continuation coverage to the extent reasonably necessary to avoid the imposition of any excise taxes on the Company for failure to comply with the nondiscrimination requirements of Section 105(h) of the Internal Revenue Code of 1986, as amended; the Patient Protection and Affordable Care Act of 2010, as amended; and/or the Health Care and Education Reconciliation Act of 2010, as amended, and in each case, the regulations and guidance promulgated thereunder (to the extent applicable); and provided, further, that in the event that the Executive obtains other employment that offers group health benefits, such COBRA premium reimbursements will immediately cease.
Payments and benefits provided in this Agreement are in lieu of any termination or severance payments or benefits for which the Executive may be eligible under any Company policies or under the Worker Adjustment Retraining Notification Act of 1988 or any similar state statute or regulation.
(e) RESIGNATION FROM ALL OTHER POSITIONS. Upon any termination of the Employment Term, the Executive will promptly resign, and will be deemed to have automatically resigned, from all positions that the Executive holds as a member of the Board, officer, director or fiduciary of the Company or any of its affiliates. The Executive will take all actions reasonably requested by the Company to give effect to this provision.
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(f) EXCLUSIVE REMEDY. The amounts payable to the Executive following termination pursuant to Section 9 hereof will be in full and complete satisfaction of the Executive’s rights under this Agreement and any other claims that the Executive may have in respect of employment with the Company or any of its affiliates, and the Executive acknowledges that such amounts are fair and reasonable, and are the Executive’s sole and exclusive remedy, in lieu of all other remedies at law or in equity, with respect to the termination of the Employment Term or any breach of this Agreement by the Company.
(g) NO DUTY TO MITIGATE. The Executive shall not be required to mitigate the amount of any payment or benefit provided pursuant to this Agreement by seeking other employment or otherwise, and the amount of any payment or benefit provided for pursuant to this Agreement shall not be reduced by any compensation earned as a result of Executive’s other employment or otherwise.
10. RELEASE; CLAWBACK. Any and all amounts payable and benefits provided beyond the Accrued Benefits pursuant to Section 9(d) (the “Severance Benefits”) will only be payable if, within sixty days following termination, the Executive executes and delivers to the Company and does not revoke a general release of claims in favor of the Company in a form mutually satisfactory to the Company and the Executive. The first such payment of the Severance Benefits will include all amounts that otherwise would have been due prior thereto under the terms of this Agreement had such payments commenced immediately upon the effective date of the Executive’s termination of employment. Any delay in the payment of the Severance Benefits will not extend the period of time that the Severance Benefits are payable pursuant to Section 9(d). During such time that the Executive is receiving the Severance Benefits, if (A) the Company discovers grounds constituting Cause existed before the Executive’s termination or (B) the Executive breaches any of the covenants set forth in Sections 4, 5 or 7, the Executive’s right to receive the Severance Benefits will immediately cease and be forfeited, and the pre-tax value of any Severance Benefits previously paid to the Executive will be immediately repaid by the Executive.
11. ARBITRATION AND EQUITABLE RELIEF.
(a) Any dispute or claim arising out of, in relation to, or in connection with this Agreement, or the interpretation, making, performance, breach or termination thereof, or Executive’s hiring or termination or non-renewal of any term of such employment, shall be settled by binding arbitration in Delaware, under the Commercial Arbitration Rules of the JAMS by one or more arbitrators appointed in accordance with said rules. Such arbitration is in lieu of any court or any trial to which Executive or the Company would be entitled to and covers all common law and statutory claims, lawsuits, disputes, and/or controversies that Executive may have against the Company or that the Company may have against Executive arising from, relating to or having any relationship or connection whatsoever with, Executive’s employment by, separation from, or other association with the Company. This arbitration agreement will include all possible claims noted above, excluding claims for workers’ compensation or unemployment compensation benefits. Nothing herein shall prevent Executive or the Company from filing a claim or charge with any federal, state or local government agency or otherwise require arbitration of a claim or charge which, by law, cannot be the subject of a compulsory arbitration agreement. The arbitration procedure specified in this Agreement shall be applicable only to judicially cognizable claims, and
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not to any dispute or claim that in the absence of this Agreement would not be judicially cognizable. The Company and Executive agree to waive their rights to a civil trial by a judge or a jury or other judicial resolution. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. To the fullest extent permitted by law, Executive waives any right or ability to participate in any court proceeding, including any class, collective, or multi-party action, against the Company or any of its affiliates. Executive also agrees to bring any arbitrations only on an individual basis (and not as a co-claimant with any other individual(s) against the Company or any of its affiliates), or on a putative class or collective basis.
(b) This Agreement and arbitration agreement shall be governed by the laws of the State of Delaware. Executive understands that the arbitrator shall apply Delaware law to the merits of any dispute or claim, with reference to rules of conflict of law. The Company shall pay all arbitrator fees and arbitration forum expenses for the arbitration process. Each party shall pay its own litigation costs (e.g., copying, depositions, witnesses and expert fees) and attorneys’ fees to the same extent it would in a court of law, unless the arbitrator, applying the same rules as a court in such situations and in accordance with applicable law, rules otherwise. The arbitration shall be conducted on a strictly confidential basis.
(c) Notwithstanding the foregoing, before appointment of the arbitrator and in exceptional circumstances even thereafter, the parties may apply to any court of competent jurisdiction in Delaware for a Temporary Restraining Order, Preliminary Injunction, or other interim or conservatory relief, in aid of arbitration, as necessary, without breach of this arbitration agreement and without any abridgment of the powers of the arbitrator. Because Executive agrees that it would be impossible or inadequate to measure and calculate the Company’s damages for any breach of covenants set forth in Sections 4 through 7 of this Agreement, and such breach would result in irreparable and continuing damage to the Company, Executive agrees that the Company has, in addition to any other right or remedy available, the rights to equitable remedies described above. Executive further agrees that no bond or other security shall be required in obtaining any such equitable relief.
12. SEVERABILITY. The provisions of this Agreement shall be severable. The
unenforceability or invalidity of any one or more provisions, clauses or sentences hereof shall not render any other provision, clause or sentence herein contained unenforceable or invalid. The portion of the Agreement which is not invalid or unenforceable shall be considered enforceable and binding on the parties and the invalid or unenforceable provisions(s), clause(s), or sentence(s) shall be deemed excised, modified or restricted to the extent necessary to render the same valid and enforceable, and this Agreement shall be construed as if such invalid or unenforceable provision(s), clause(s) or sentence(s) were omitted. The provisions of this Section shall survive the termination of this Agreement for any reason.
13. SECTION 280G.
(a) If the Executive is a “disqualified individual” (as defined in under Section 280G (collectively with the regulations promulgated thereunder, “Section 280G”) of the Internal Revenue Code of 1986, as amended (the “Code”), and if the amount payable to the Executive hereunder, as well as any other “parachute payment” as such term is defined under Section 280G, payable to the Executive (the “Covered Payments”), exceeds the limitations of Section 280G such that an excise tax will be imposed under Section 4999 of the Code (the “Excise Tax”), then the Company will use commercially reasonable best efforts to obtain shareholder approval in accordance with the terms of Section 280G(b)(5)(B) of the Code, if available.
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(b) If the shareholder approval exception under Section 280G is not available, or if after using commercially reasonable best efforts, the Company is otherwise unable to avoid the imposition of the Excise Tax as to the Covered Payments, then, before making the Covered Payments, a calculation will be made, at the Company’s sole cost, comparing (i) the Net Benefit (as defined below) to the Executive of the Covered Payments to (ii) the Net Benefit to the Executive if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax. ”Net Benefit” will mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and the Excise Tax. Any such reduction will be made by the Company in its sole discretion consistent with the requirements of Section 409A of the Code. If two economically equivalent amounts are subject to reduction but are payable at different times, the amounts will be reduced (but not below zero) on a pro rata basis.
14. SECTION 409A. The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Code and the regulations and guidance promulgated thereunder (“Section 409A”), to the extent subject thereto, and accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in compliance therewith. Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separate and distinct payment for purposes of Section 409A. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A:
(a) Executive shall not be considered to have terminated employment with the Company for purposes of any payments under this Agreement which are subject to Section 409A until Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A;
(b) if Executive is a “specified employee,” as defined in Section 409A(a)(2)(B)(i) of the Code, as determined in good faith by Company, then, amounts which are subject to Section 409A, that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement or any other arrangement between Executive and the Company during the six (6) month period immediately following Executive’s separation from service shall instead be paid on the first business day after the date that is six (6) months following Executive’s separation from service (or, if earlier, Executive’s date of death);
(c) amounts reimbursable to Executive under this Agreement shall be paid to Executive on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in-kind benefits provided to Executive) during one year may not affect amounts reimbursable or provided in any subsequent year; and
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(d) if any severance amount payable under a plan or agreement that Executive may have a right or entitlement to as of the date of this Agreement constitutes deferred compensation under Section 409A, then the portion of the benefits payable hereunder equal to such other amount shall instead be provided in the form set forth in such other plan or agreement.
The Company makes no representation that any or all of the payments described in this Agreement will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to any such payment. Executive understands and agrees that Executive shall be solely responsible for the payment of any taxes, penalties, interest or other expenses incurred by Executive on account of non-compliance with Section 409A.
15. MISCELLANEOUS.
(a) From time to time, the Company may wish to use Executive’s name, voice, signature, photograph or likeness in its public relations or promotional activities. Executive consents to the use of such materials by the Company for such promotional purposes, including but not limited to use in advertisements, brochures, videotapes and films. In addition, Executive releases the Company from any financial obligation to Executive for such uses other than from damages to the Executive resulting from the misuse of Executive’s name, voice, signature, photograph or likeness.
(b) The rights and benefits of the Company under this Agreement shall be assignable to any affiliate of the Company as well as to any purchaser of all or substantially all of the assets or stock of the Company. Executive may not assign or delegate any of Executive’s rights or obligations hereunder without first obtaining the written consent of the Company.
(c) The waiver of any breach of the terms of this Agreement shall not constitute the waiver of any other or further breach hereunder, whether or not of a like nature or kind. No waiver of any provision of this Agreement shall be valid unless in writing and signed by the person or party against whom charged.
(d) This Agreement (as modified by Exhibit A), including any and all exhibits attached hereto, constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior and contemporaneous agreements, if any, between the parties relating to the subject matter hereof. Executive acknowledges and agrees that Executive shall continue to remain bound by any and all obligations and restrictive covenants, including all cooperation, confidentiality, intellectual property, nonsolicitation, and nondisparagement obligations that Executive owes to the Company or its affiliates. No amendment or modification of the terms of the Agreement shall be binding upon either party unless reduced to writing and signed by Executive and a duly appointed officer of the Company.
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IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first above written.
| “COMPANY” | “EXECUTIVE” | |
| APPLIED AEROSPACE STRUCTURES, LLC | JAMES WILLIAM (“TRIP”) FERGUSON, III | |
| /s/ Noah Blitzer |
/s/ James William (“Trip”) Ferguson, III | |
| By: Noah Blitzer | ||
| Title: Director | ||
[Signature Page to Employment Agreement]
EXHIBIT A
Certain Modifications to the Restrictive Covenants
Certain Modifications to the Restrictive Covenants provisions of the Agreement are hereby modified in certain states as described in this Exhibit A. Notwithstanding the foregoing provisions of the Agreement, in the event that Executive was authorized by the Company to perform the majority of services in a state set forth in this Exhibit A as of (i) Effective Date or (ii) termination of Executive’s employment with the Company, the modifications to this Agreement set forth in this Exhibit A in respect of such state shall apply (and if Executive was authorized by the Company to perform the majority of services in more than one state, the most recently authorized state shall govern). Except as set forth below, all other terms of the Agreement shall apply to Executive.
Alabama
For purposes of Section 5(b)(i), the restriction shall be limited to the solicitation of any employee of the Company that is in a position uniquely essential to the management, organization or service of the business of the Company.
California
Notwithstanding anything to the contrary in the Agreement, the Agreement will be governed by the laws of the State of California and any proceeding or arbitration will take place in the State of California.
[Exhibit A to Employment Agreement]
Exhibit 10.10
FORM OF
EMPLOYMENT AGREEMENT
This Employment Agreement (“Agreement”) is made and entered into as of [_____] (the “Effective Date”) by and between [_____] (hereinafter referred to as “Executive”) and [_____], a [_____] corporation (hereinafter referred to as the “Company”).
RECITALS
The Company (or a subsidiary of the Company) and Executive previously entered into an [employment agreement/offer letter], dated as of [_____] (the “Previous Agreement”);
The Company desires to continue to employ Executive as the [_____] and the Executive desires to continue to be so employed, on and pursuant to the terms of this Agreement, and the Company and Executive desire for this Agreement to supersede and replace the Previous Agreement in its entirety upon the Effective Date.
In consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. TERMINATION OF PREVIOUS AGREEMENT. Each of the Company and Executive acknowledge and agree that, effective as of the date hereof, and without any further action by any of the parties, (a) the Previous Agreement shall be terminated in its entirety with no additional cost or liability to the Company (or its successors or assigns), (b) all rights, obligations and liabilities of the Executive under the Previous Agreement shall cease and (c) the Previous Agreement shall be deemed null and void and of no force or effect.
2. EMPLOYMENT AND DUTIES.
(a) The Company agrees to continue to employ Executive and Executive hereby accepts continued employment by the Company as the [_____], effective as of the Effective Date. The Executive shall perform, to the best of Executive’s ability, experience and talents, such duties as are commensurate with the position of [_____], or as may be assigned from time to time by the Chief Executive Officer of the Company (the “CEO”).
(b) During the Employment Term, Executive shall devote Executive’s entire time, attention and energies to the business of the Company. Notwithstanding the foregoing, nothing in this Agreement shall preclude Executive from devoting reasonable time for engaging in professional, trade association, charitable or community activities, undertaking such speaking engagements as Executive may select, managing the personal investments of Executive and Executive’s family, and with the approval of the Board of Directors of Applied Aerospace & Defense, Inc. (the “Board”) (which approval shall not be unreasonably withheld) serving on the boards of directors or similar governing bodies; provided that such activities and actions do not, individually or together, interfere with the regular performance of Executive’s duties and responsibilities under this Agreement or involve a conflict of interest with the Company. Except as otherwise provided herein, Executive’s conduct shall be governed by the general rules and policies applicable to employees of the Company.
(c) During the Employment Term, the Executive’s principal place of employment will continue to be in [_____], provided that the Executive may be required to travel from time to time on Company business during the Employment Term.
3. TERM. This Agreement shall commence and is effective upon the Effective Date and continues through the second anniversary of the Effective Date (the “Initial Term”), unless terminated in accordance with the provisions of this Agreement. Thereafter, unless previously terminated or written notice not to renew is provided by either party to the other at least sixty (60) days prior to the end of the Initial Term, this Agreement and the Employment Term shall automatically renew for subsequent one-year periods (the period during which this Agreement is in effect is referred to as the “Employment Term”). Notwithstanding the foregoing, the Employment Term may be earlier terminated in accordance with Section 9 hereof.
4. COMPENSATION.
(a) During the Employment Term, the Company shall pay Executive as base compensation (the “Base Salary”) for Executive’s services an annual salary of $[__], payable in periodic installments in accordance with the Company’s customary payroll practices, less applicable withholdings. The Executive’s base salary shall be reviewed at least annually by the Board, provided that the Executive’s base salary may not be decreased during the Employment Term without the Executive’s consent, other than as part of an across-the-board salary reduction that applies in the same manner to all senior executives.
(b) During the Employment Term, the Executive will be eligible to earn an annual bonus (the “Annual Bonus”) based on a target bonus opportunity of [__]% of the Base Salary (the “Target Bonus”), upon the achievement of one or more performance goals established by the Board (or a committee thereof) in its sole discretion. Any Annual Bonus will be earned and paid in accordance with the annual bonus plan applicable to senior executives generally. The Annual Bonus, if any, will be paid within two and a half (2 1/2) months after the end of the applicable calendar year. Except as otherwise provided in this Agreement (i) the Annual Bonus will be subject to the terms of the Company annual bonus plan under which it is granted and (ii) in order to be eligible to receive an Annual Bonus, the Executive must be employed by the Company on the date that the Annual Bonus is paid.
(c) During the Employment Term, the Executive will be entitled to paid time off on a basis that is at least as favorable as that provided to other similarly situated executives of the Company. The Executive shall receive other paid time off in accordance with the Company’s policies for executives as such policies may exist from time to time.
(d) During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other similarly situated executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or terminate any Employee Benefit Plans at any time in its sole discretion, subject to the preceding sentence and the terms of such Employee Benefit Plan and applicable law.
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(e) The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment, and travel expenses incurred by the Executive in connection with the performance of the Executive’s duties hereunder in accordance with the Company’s expense reimbursement policies and procedures.
5. INVENTIONS.
(a) The Company shall have all rights including international priority rights in all Inventions (defined as any invention, idea, design, concept, development, technique, discovery or improvement) whether or not patentable and/or subject to protection by intellectual property or patent laws, and all proposals, computer programs and writings, including any patent and copyright interests therein, which Executive authors, conceives or makes, either solely or jointly with others, during Executive’s employment with the Company, which: (i) relate to any subject matter with which Executive’s work for the Company or any of its affiliates may be concerned; (ii) relate to the business, products or services, or actual or demonstrably anticipated research or development, of the Company or the Company’s suppliers or contractors; (iii) involve the use of the time, equipment, materials or facilities of the Company or any of its affiliates; or (iv) relate or are applicable to any phase of the Company’s research and development. Further, during the Employment Term and thereafter, at the reasonable request of the Company and without expense to Executive, Executive agrees to execute all reasonable documents and to take all reasonable actions as may be necessary in order to assign all rights to or otherwise vest good title in (or as directed by) the Company, and protect or exploit such rights, to the property and proprietary rights described in this subsection.
(b) The Company shall have no rights in any Inventions made or conceived by Executive which do not involve any Confidential Information (as defined below), equipment, supplies, facilities or materials of the Company, any of its affiliates or the Company’s suppliers or contractors, and which are developed entirely on Executive’s own time unless: (i) the Invention relates at the time of conception or reduction to practice of the invention to the business, products or services of the Company, any of its affiliates or the Company’s suppliers or contractors; or (ii) the Invention relates to actual or demonstrably anticipated research or development projects of the Company, any of its affiliates or the Company’s suppliers or contractors: or (iii) the Invention results from any services performed by Executive for the Company, any of its affiliates or the Company’s suppliers or contractors.
(c) The term “Confidential Information” as used in this Section 5 and throughout this Agreement shall include information of any nature and in any form which at the time or times concerned is not generally known to those persons engaged in a business similar to that conducted or contemplated by the Company and which relate to any one or more of the aspects of the recent or past business(es) of the Company, any supplier or contractor of the Company, or any of its or their subsidiaries or affiliates, or any of their predecessors. Executive shall have no obligation under this Agreement to maintain in confidence any information that (i) is in the public domain at the time of disclosure, (ii) though originally Confidential Information, subsequently enters the public domain other than by breach of Executive’s obligations hereunder or by breach of another person’s or entity’s confidentiality obligations, or (iii) is shown by documentary evidence to have been known by Executive prior to disclosure to Executive by the Company. Confidential Information expressly does not include information that is not legally protectable under federal or state law or applicable regulations.
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(d) Nothing in this Agreement shall prohibit or restrict the Company, Executive or their respective attorneys from: (i) making any disclosure of relevant and necessary information or documents in any action, investigation or proceeding relating to this Agreement, or any other agreement, arrangement or relationship to which Executive may become a party that relates to the Company or its affiliates, or as required by law or legal process, including with respect to possible violations of law; (ii) participating, cooperating or testifying in any action, investigation or proceeding with, or providing information to, any governmental agency or legislative body, any self-regulatory organization, and/or pursuant to the Sarbanes-Oxley Act; (iii) making any other disclosures that are protected under the whistleblower provisions of any applicable law, rule or regulation; or (iv) seeking or accepting any U.S. Securities and Exchange Commission awards or any other protected whistleblower relief; provided that to the extent permitted by law, upon the Company’s or Executive’s receipt of any subpoena, court order or other legal process compelling the disclosure of any such information or documents, such party agrees to give prompt written notice by delivery to the other party, in order to permit such party to protect the interests in confidentiality to the fullest extent possible; and provided that such notice to the Company or Executive does not prevent compliance with the subpoena, court order other legal process, or the law. In addition, nothing in this Agreement shall prohibit or restrict Executive or the Company from initiating communications with, or responding to any inquiry from, any regulatory or supervisory authority regarding any good faith concerns about possible violations of law or regulation. Nothing in this Agreement requires Executive to obtain prior authorization from the Company, or any other person or entity before engaging in any conduct described in this paragraph, or to notify the Company that Executive has engaged in any such conduct. Nothing herein prevents Executive from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that Executive has reason to believe is unlawful. Further, nothing in this Agreement will prohibit or restrict Executive from speaking with law enforcement, the Equal Opportunity Commission, the state division of human rights, the attorney general, a local commission on human rights or an attorney retained by Executive.
6. RESTRICTIVE COVENANTS.
(a) During the Employment Term and any period in which Executive is employed by the Company or its affiliates, Executive shall not directly or indirectly: (i) solicit or otherwise call upon any of the Company’s or any of its affiliates’ Customers (as defined below), except for or on behalf of the Company or any of its affiliates; (ii) engage in any business that is a Competitor; or (iii) enter into any agreement with or solicit or cause others to solicit, the employment or engagement of any officer, salesperson, contractor, supplier, consultant or employee of the Company or any of its affiliates, for the purpose of causing such officer, salesperson, contractor, supplier, consultant or employee to terminate his, her or its employment with or engagement by the Company or such affiliate.
(b) Without limiting Section 6(a), during the Employment Term and any period in which Executive is employed by the Company or its affiliates, and for a period of twelve (12) months immediately after the Executive’s termination of employment for whatever reason, except with the prior written consent of the Company, Executive shall not directly or indirectly: (i) solicit
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any employee of the Company to leave the Company that the Executive supervised or had material contact with during the Executive’s employment with the Company; or (ii) use any of the Company’s Confidential Information (as defined in Section 5 above) and Trade Secrets (as defined in Section 8 below) to solicit any (A) supplier, vendor, contractor or Customer of the Company to terminate his, her or its relationship or business with the Company, or make any change adverse to the Company in such relationship or business with the Company, or (B) Potential Customer to convince or prevent such Potential Customer from either entering into a relationship or conducting business with the Company.
For purpose of this Agreement:
“Competitor” shall mean any business engaged as a business rival to the Company in the design, fabrication, manufacture, assembly or sale of: (1) products or services similar to or competitive with the Company’s products or services during the term of Executive’s employment with the Company; or (2) products or services similar to or competitive with those products or services planned or proposed to be introduced by the Company and known to the Executive at the time of the Executive’s termination of employment with the Company;
“Customer(s)” shall mean a person, firm or other entity which within one year prior to the date of Executive’s termination with the Company acquired products or services directly or indirectly from the Company (or from one or more of its predecessor entities); and “Potential Customer(s)” shall mean a person, firm or other entity which the Company, within one (1) year prior to the date of Executive’s termination with the Company, directly or indirectly solicited, prepared a proposal or developed a plan, product or service for, or was preparing to solicit within one (1) year prior to the date of termination of Executive’s employment with the Company, provided Executive knew about or was involved in the Company’s solicitation or preparation to solicit.
7. REMOVAL OF DOCUMENTS. No documents, files records, film, tapes or other media, correspondence, notes, customer lists, brochures, catalogues or other papers (including copies) containing Confidential Information shall be removed from the Company’s premises, except as Executive’s duties to or for the Company may require, and in such case Executive will immediately return such to the Company. Executive will not copy or duplicate any of the foregoing materials for Executive’s own use or for any purpose whatsoever unless required for the Company’s business or benefit or otherwise specifically requested to do so by the Company. Executive shall also return all Company property including Company electronic files at the end of Executive’s employment with Company or upon the Company’s earlier request. The provisions of this Section shall survive the termination of this Agreement for any reason, to the extent allowed by law.
8. TRADE SECRETS.
(a) Executive understands that during the course of Executive’s employment, Executive has acquired and will continue to acquire and have access to Trade Secrets (as defined below) and other Confidential Information (as defined above) of the Company, its affiliates, suppliers, contractors and customers and potential customers, whether or not reduced to writing, patented, copyrighted or trademarked, all of which is confidential in nature and of great value to
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the Company. Executive will not divulge any Trade Secrets or Confidential Information to any other person, firm or other entity, or use, rely on, or permit the use of any of Trade Secrets or other Confidential Information other than pursuant to this Agreement on behalf of the Company. “Trade Secrets” is to be broadly defined and includes (a) all information that has or could have commercial value or other utility in the business in which the Company or its customers are engaged or in which they contemplate engaging, and (b) all information that, if disclosed without authorization, could be detrimental to the interest of the Company or its Customers, whether or not such information is identified as Trade Secrets by the Company or its Customers. By example and without limitation, Trade Secrets includes all information on the Company’s operating techniques, processes, formulas, trade secrets, inventions, discoveries, improvements, research or development test results, specifications, data, know-how, formats, marketing plans, business plans, strategies, forecasts, unpublished financial information, budgets, projections and customer and supplier identities, characteristics and agreements. The provisions of this Section shall survive termination of this Agreement for any reason. Executive shall have no obligation under this Agreement to maintain in confidence any information not considered Confidential Information. Trade Secrets expressly does not include information that is not legally protectable under federal or state law or applicable regulations. Nothing stated in this Agreement is intended to limit or restrict rights under applicable law such as engaging in protected activity under the National Labor Relations Act, including discussing wages, hours, or working conditions.
(b) 18 U.S.C. § 1833(b) provides: “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that—(i) is made—(A) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.” Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b). Accordingly, the parties to this Agreement have the right to disclose in confidence trade secrets to federal, state and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. The parties also have the right to disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure.
9. TERMINATION. The Employment Term may be terminated by either the Company or the Executive at any time and for any reason or for no reason, subject to any notice requirements set forth herein. Upon termination of the Employment Term, the Executive is entitled to the compensation and benefits described in Section 10 and has no further rights to any compensation or any other benefits from the Company or any of its affiliates. The Employment Term may terminate:
(a) DEATH. Automatically upon the Executive’s death.
(b) DISABILITY. Upon ten days’ prior written notice by the Company to the Executive of termination due to Disability. For purposes of this Agreement, “Disability” means the Executive’s inability, due to physical or mental incapacity, to perform the essential functions of the Executive’s job, with or without reasonable accommodation, for 180 days out of any 365-day period or for 120 consecutive days.
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(c) CAUSE. Immediately upon written notice by the Company to the Executive of a termination for Cause. “Cause” means the Executive’s:
(i) willful misconduct or gross negligence in the performance of the Executive’s duties to the Company that has or could reasonably be expected to have a material adverse effect on the Company;
(ii) willful failure to perform the Executive’s material duties that continues after the Company’s written request of such performance or willful failure to follow the lawful directives of the CEO (other than as a result of death or Disability);
(iii) failure to reasonably cooperate in any audit or investigation involving the Company or its subsidiaries that continues after the Company’s written request of such cooperation;
(iv) conviction of, or pleading guilty or nolo contendere to, any crime involving moral turpitude or any felony;
(v) embezzlement, fraud, theft, malfeasance, dishonesty or misappropriation of the Company’s property; or
(vi) material breach of this Agreement or any other written agreement with the Company, or material violation of the Company’s code of conduct or other written policy as in effect from time to time.
Any determination of Cause by the Company will be made by a resolution approved by a majority of the members of the Board, provided that no such determination may be made until the Executive has been given written notice detailing the specific Cause event and a period of thirty days following receipt of such notice to cure such event (if susceptible to cure) to the reasonable satisfaction of the Board. Notwithstanding anything to the contrary contained herein, the Executive’s right to cure as set forth in the preceding sentence will not apply if there are habitual or repeated breaches by the Executive.
(d) WITHOUT CAUSE. Upon thirty days’ prior written notice by the Company to the Executive of an involuntary termination without Cause (other than for death or Disability).
(e) GOOD REASON. Upon written notice by the Executive to the Company of a termination for Good Reason. “Good Reason” means the occurrence of any of the following events during the Employment Term without the written consent of the Executive, unless such events are corrected in all material respects by the Company within thirty days following Executive’s written notification to the Company of the occurrence of any such event(s):
(i) material reduction in Base Salary or Target Bonus other than a general reduction in Base Salary affecting all similarly situated executives;
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(ii) material diminution in the Executive’s title, duties, authorities or responsibilities (provided that the foregoing shall not include actions taken on a temporary basis while the Executive is physically or mentally incapacitated);
(iii) a material breach by the Company of a material term of this Agreement or any other agreement with the Executive; or
(iv) relocation of the Executive’s primary work location by more than fifty miles from Executive’s then current location.
The Executive will provide the Company with a written notice detailing the specific circumstances alleged to constitute Good Reason within thirty days after the first occurrence of such circumstances and actually terminate employment within thirty days following the expiration of the Company’s thirty-day cure period described above if the applicable condition has not been cured. Otherwise, any claim of such circumstances as Good Reason will be deemed irrevocably waived by the Executive.
(f) WITHOUT GOOD REASON. Upon thirty days’ prior written notice by the Executive to the Company of the Executive’s resignation without Good Reason. In the event of a termination of the Executive’s employment by the Executive without Good Reason, the Company may, in its sole and absolute discretion, by written notice, accelerate such date of termination and/or place Executive on a leave of absence, reduce or alter Executive’s duties, and/or limit Executive’s access to or contact with clients, employees, offices, electronic systems and/or property of the Company, so long as, in the event that the Company takes any such action, the Company will continue to pay the Executive the Executive’s Base Salary, and Executive may continue to participate in the applicable employee benefit plans as an active employee to the extent permitted by and in accordance with the terms of such plans as in effect from time to time, through the end of the thirty-day notice period; provided, that in no event shall any of the aforementioned actions taken by the Company constitute Good Reason.
(g) EXPIRATION OF EMPLOYMENT TERM; NON-EXTENSION OF AGREEMENT. Upon the expiration of the Employment Term due to a non-extension of this Agreement by the Company or the Executive pursuant to the provisions of Section 3 hereof.
10. CONSEQUENCES OF TERMINATION.
(a) DEATH. In the event of a termination on account of the Executive’s death, the Executive or the Executive’s estate, as the case may be, is entitled to the following:
(i) any accrued but unpaid Base Salary through the date of termination, payable on the pay date immediately following the date of the Executive’s termination in accordance with the Company’s regular payroll practices;
(ii) reimbursement for unreimbursed business expenses properly incurred by the Executive, payable in accordance with the Company’s expense reimbursement policy;
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(iii) any accrued but unused paid time off in accordance with Company policy, payable on the pay date immediately following the date of the Executive’s termination in accordance with the Company’s regular payroll practices or on such earlier date as may be required by law;
(iv) all other payments, benefits or fringe benefits to which the Executive is entitled under the terms of any applicable compensation arrangement or benefit, equity or fringe benefit plan or program or grant, provided that in no event will the Executive be entitled to any severance or termination payments except as specifically provided in this Agreement (collectively, payments in Section 10(a)(i) through 10(a)(iv) hereof, the “Accrued Benefits”);
(v) any earned but unpaid Annual Bonus with respect to the calendar year ending on or preceding the date of termination, payable on the otherwise applicable payment date (the “Prior Year Bonus”); and
(vi) a payment equal to the product of (A) the Annual Bonus, if any, that the Executive otherwise would have earned for the calendar year that includes the date of termination had no such termination occurred, based on actual achievement of the applicable performance goals for such year and (B) a fraction, the numerator of which is the number of days the Executive was employed by the Company during the year of termination and the denominator of which is the number of days in such year (the “Pro Rata Bonus”), payable on the date the Annual Bonus for the year of termination would otherwise have been paid.
(b) DISABILITY. In the event of a termination on account of the Executive’s Disability, the Company will pay the Executive the Accrued Benefits, the Prior Year Bonus and the Pro Rata Bonus.
(c) TERMINATION FOR CAUSE OR WITHOUT GOOD REASON OR AS A RESULT OF EXECUTIVE NONRENEWAL. In the event of a termination (x) by the Company for Cause, (y) by the Executive without Good Reason, or (z) as a result of the Executive’s non-extension of the Employment Term as provided in Section 3 hereof, the Company will pay the Executive the Accrued Benefits.
(d) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON OR AS A RESULT OF COMPANY NONRENEWAL. In the event of a termination (x) by the Company other than for Cause, (y) by the Executive for Good Reason, or (z) as a result of the Company’s non-extension of the Employment Term as provided in Section 3 hereof, the Company will pay or provide to the Executive the Accrued Benefits and subject to Executive’s compliance with the obligations in Sections 5, 6, 8 and Section 11:
(i) substantially equal installment payments payable in accordance with the Company’s regular payroll practices, but no less frequently than monthly, which are in the aggregate equal to 1.0 times the sum of the Base Salary and Target Bonus for the year that includes the date of termination; provided that to the extent that the payment of any amount constitutes “nonqualified deferred compensation” for
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purposes of Section 409A, any such payment scheduled to occur during the first sixty days following the termination will not be paid until the first regularly scheduled pay period following the sixtieth day following such termination and will include payment of any amount that was otherwise scheduled to be paid prior thereto;
(ii) the Prior Year Bonus;
(iii) the Pro Rata Bonus, payable on the date the Annual Bonus for the year of termination would otherwise have been paid, but in any event no later than March 15 of the calendar year following the end of the calendar year that includes the date of termination; and
(iv) subject to the Executive’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), reimbursement to the Executive for the monthly COBRA premium paid by the Executive for the Executive and the Executive’s dependents for a period of twelve months, provided that the Company may modify the continuation coverage to the extent reasonably necessary to avoid the imposition of any excise taxes on the Company for failure to comply with the nondiscrimination requirements of Section 105(h) of the Internal Revenue Code of 1986, as amended; the Patient Protection and Affordable Care Act of 2010, as amended; and/or the Health Care and Education Reconciliation Act of 2010, as amended, and in each case, the regulations and guidance promulgated thereunder (to the extent applicable); and provided, further, that in the event that the Executive obtains other employment that offers group health benefits, such COBRA premium reimbursements will immediately cease.
Payments and benefits provided in this Agreement are in lieu of any termination or severance payments or benefits for which the Executive may be eligible under any Company policies or under the Worker Adjustment Retraining Notification Act of 1988 or any similar state statute or regulation.
(e) RESIGNATION FROM ALL OTHER POSITIONS. Upon any termination of the Employment Term, the Executive will promptly resign, and will be deemed to have automatically resigned, from all positions that the Executive holds as a member of the Board, officer, director or fiduciary of the Company or any of its affiliates. The Executive will take all actions reasonably requested by the Company to give effect to this provision.
(f) EXCLUSIVE REMEDY. The amounts payable to the Executive following termination pursuant to Section 10 hereof will be in full and complete satisfaction of the Executive’s rights under this Agreement and any other claims that the Executive may have in respect of employment with the Company or any of its affiliates, and the Executive acknowledges that such amounts are fair and reasonable, and are the Executive’s sole and exclusive remedy, in lieu of all other remedies at law or in equity, with respect to the termination of the Employment Term or any breach of this Agreement by the Company.
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(g) NO DUTY TO MITIGATE. The Executive shall not be required to mitigate the amount of any payment or benefit provided pursuant to this Agreement by seeking other employment or otherwise, and the amount of any payment or benefit provided for pursuant to this Agreement shall not be reduced by any compensation earned as a result of Executive’s other employment or otherwise.
11. RELEASE; CLAWBACK. Any and all amounts payable and benefits provided beyond the Accrued Benefits pursuant to Section 10(d) (the “Severance Benefits”) will only be payable if, within sixty days following termination, the Executive executes and delivers to the Company and does not revoke a general release of claims in favor of the Company in a form reasonably satisfactory to the Company. The first such payment of the Severance Benefits will include all amounts that otherwise would have been due prior thereto under the terms of this Agreement had such payments commenced immediately upon the effective date of the Executive’s termination of employment. Any delay in the payment of the Severance Benefits will not extend the period of time that the Severance Benefits are payable pursuant to Section 10(d). During such time that the Executive is receiving the Severance Benefits, if (A) the Company discovers grounds constituting Cause existed before the Executive’s termination or (B) the Executive breaches any of the covenants set forth in Sections 5, 6 or 8, the Executive’s right to receive the Severance Benefits will immediately cease and be forfeited, and the pre-tax value of any Severance Benefits previously paid to the Executive will be immediately repaid by the Executive.
12. ARBITRATION AND EQUITABLE RELIEF.
(a) Any dispute or claim arising out of, in relation to, or in connection with this Agreement, or the interpretation, making, performance, breach or termination thereof, or Executive’s hiring or termination or non-renewal of any term of such employment, shall be settled by binding arbitration in [Delaware], under the Commercial Arbitration Rules of the JAMS by one or more arbitrators appointed in accordance with said rules. Such arbitration is in lieu of any court or any trial to which Executive or the Company would be entitled to and covers all common law and statutory claims, lawsuits, disputes, and/or controversies that Executive may have against the Company or that the Company may have against Executive arising from, relating to or having any relationship or connection whatsoever with, Executive’s employment by, separation from, or other association with the Company. This arbitration agreement will include all possible claims noted above, excluding claims for workers’ compensation or unemployment compensation benefits. Nothing herein shall prevent Executive or the Company from filing a claim or charge with any federal, state or local government agency or otherwise require arbitration of a claim or charge which, by law, cannot be the subject of a compulsory arbitration agreement. The arbitration procedure specified in this Agreement shall be applicable only to judicially cognizable claims, and not to any dispute or claim that in the absence of this Agreement would not be judicially cognizable. The Company and Executive agree to waive their rights to a civil trial by a judge or a jury or other judicial resolution. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. To the fullest extent permitted by law, Executive waives any right or ability to participate in any court proceeding, including any class, collective, or multi-party action, against the Company or any of its affiliates. Executive also agrees to bring any arbitrations only on an individual basis (and not as a co-claimant with any other individual(s) against the Company or any of its affiliates), or on a putative class or collective basis.
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(b) This Agreement and arbitration agreement shall be governed by the laws of the State of [Delaware]. Executive understands that the arbitrator shall apply [Delaware] law to the merits of any dispute or claim, with reference to rules of conflict of law. The Company shall pay all arbitrator fees and arbitration forum expenses for the arbitration process. Each party shall pay its own litigation costs (e.g., copying, depositions, witnesses and expert fees) and attorneys’ fees to the same extent it would in a court of law, unless the arbitrator, applying the same rules as a court in such situations and in accordance with applicable law, rules otherwise. The arbitration shall be conducted on a strictly confidential basis.
(c) Notwithstanding the foregoing, before appointment of the arbitrator and in exceptional circumstances even thereafter, the parties may apply to any court of competent jurisdiction in [Delaware] for a Temporary Restraining Order, Preliminary Injunction, or other interim or conservatory relief, in aid of arbitration, as necessary, without breach of this arbitration agreement and without any abridgment of the powers of the arbitrator. Because Executive agrees that it would be impossible or inadequate to measure and calculate the Company’s damages for any breach of covenants set forth in Sections 5 through 8 of this Agreement, and such breach would result in irreparable and continuing damage to the Company, Executive agrees that the Company has, in addition to any other right or remedy available, the rights to equitable remedies described above. Executive further agrees that no bond or other security shall be required in obtaining any such equitable relief.
13. SEVERABILITY. The provisions of this Agreement shall be severable. The unenforceability or invalidity of any one or more provisions, clauses or sentences hereof shall not render any other provision, clause or sentence herein contained unenforceable or invalid. The portion of the Agreement which is not invalid or unenforceable shall be considered enforceable and binding on the parties and the invalid or unenforceable provisions(s), clause(s), or sentence(s) shall be deemed excised, modified or restricted to the extent necessary to render the same valid and enforceable, and this Agreement shall be construed as if such invalid or unenforceable provision(s), clause(s) or sentence(s) were omitted. The provisions of this Section shall survive the termination of this Agreement for any reason.
14. SECTION 280G.
(a) If the Executive is a “disqualified individual” (as defined in under Section 280G (collectively with the regulations promulgated thereunder, “Section 280G”) of the Internal Revenue Code of 1986, as amended (the “Code”), and if the amount payable to the Executive hereunder, as well as any other “parachute payment” as such term is defined under Section 280G, payable to the Executive (the “Covered Payments”), exceeds the limitations of Section 280G such that an excise tax will be imposed under Section 4999 of the Code (the “Excise Tax”), then the Company will use commercially reasonable best efforts to obtain shareholder approval in accordance with the terms of Section 280G(b)(5)(B) of the Code, if available.
(b) If the shareholder approval exception under Section 280G is not available, or if after using commercially reasonable best efforts, the Company is otherwise unable to avoid the imposition of the Excise Tax as to the Covered Payments, then, before making the Covered Payments, a calculation will be made, at the Company’s sole cost, comparing (i) the Net Benefit (as defined below) to the Executive of the Covered Payments to (ii) the Net Benefit to the
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Executive if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax. ”Net Benefit” will mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and the Excise Tax. Any such reduction will be made by the Company in its sole discretion consistent with the requirements of Section 409A of the Code. If two economically equivalent amounts are subject to reduction but are payable at different times, the amounts will be reduced (but not below zero) on a pro rata basis.
15. SECTION 409A. The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Code and the regulations and guidance promulgated thereunder (“Section 409A”), to the extent subject thereto, and accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in compliance therewith. Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separate and distinct payment for purposes of Section 409A. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A:
(a) Executive shall not be considered to have terminated employment with the Company for purposes of any payments under this Agreement which are subject to Section 409A until Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A;
(b) if Executive is a “specified employee,” as defined in Section 409A(a)(2)(B)(i) of the Code, as determined in good faith by Company, then, amounts which are subject to Section 409A, that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement or any other arrangement between Executive and the Company during the six (6) month period immediately following Executive’s separation from service shall instead be paid on the first business day after the date that is six (6) months following Executive’s separation from service (or, if earlier, Executive’s date of death);
(c) amounts reimbursable to Executive under this Agreement shall be paid to Executive on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in-kind benefits provided to Executive) during one year may not affect amounts reimbursable or provided in any subsequent year; and
(d) if any severance amount payable under a plan or agreement that Executive may have a right or entitlement to as of the date of this Agreement constitutes deferred compensation under Section 409A, then the portion of the benefits payable hereunder equal to such other amount shall instead be provided in the form set forth in such other plan or agreement.
The Company makes no representation that any or all of the payments described in this Agreement will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to any such payment. Executive understands and agrees that Executive shall be solely responsible for the payment of any taxes, penalties, interest or other expenses incurred by Executive on account of non-compliance with Section 409A.
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16. MISCELLANEOUS.
(a) From time to time, the Company may wish to use Executive’s name, voice, signature, photograph or likeness in its public relations or promotional activities. Executive consents to the use of such materials by the Company for such promotional purposes, including but not limited to use in advertisements, brochures, videotapes and films. In addition, Executive releases the Company from any financial obligation to Executive for such uses other than from damages to the Executive resulting from the misuse of Executive’s name, voice, signature, photograph or likeness.
(b) The rights and benefits of the Company under this Agreement shall be assignable to any affiliate of the Company as well as to any purchaser of all or substantially all of the assets or stock of the Company. Executive may not assign or delegate any of Executive’s rights or obligations hereunder without first obtaining the written consent of the Company.
(c) The waiver of any breach of the terms of this Agreement shall not constitute the waiver of any other or further breach hereunder, whether or not of a like nature or kind. No waiver of any provision of this Agreement shall be valid unless in writing and signed by the person or party against whom charged.
(d) This Agreement (as modified by Exhibit A), including any and all exhibits attached hereto, constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior and contemporaneous agreements, if any, between the parties relating to the subject matter hereof. Executive acknowledges and agrees that Executive shall continue to remain bound by any and all obligations and restrictive covenants, including all cooperation, confidentiality, intellectual property, nonsolicitation, and nondisparagement obligations that Executive owes to the Company or its affiliates. No amendment or modification of the terms of the Agreement shall be binding upon either party unless reduced to writing and signed by Executive and a duly appointed officer of the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first above written.
| “COMPANY” | “EXECUTIVE” | |
| [_____] | [_____] | |
|
|
| |
| By: [_____] | ||
| Title: [_____] | ||
[Signature Page to Employment Agreement]
EXHIBIT A
Certain Modifications to the Restrictive Covenants
Certain Modifications to the Restrictive Covenants provisions of the Agreement are hereby modified in certain states as described in this Exhibit A. Notwithstanding the foregoing provisions of the Agreement, in the event that Executive was authorized by the Company to perform the majority of services in a state set forth in this Exhibit A as of (i) Effective Date or (ii) termination of Executive’s employment with the Company, the modifications to this Agreement set forth in this Exhibit A in respect of such state shall apply (and if Executive was authorized by the Company to perform the majority of services in more than one state, the most recently authorized state shall govern). Except as set forth below, all other terms of the Agreement shall apply to Executive.
Alabama
For purposes of Section 6(b)(i), the restriction shall be limited to the solicitation of any employee of the Company that is in a position uniquely essential to the management, organization or service of the business of the Company.
California
Notwithstanding anything to the contrary in the Agreement, the Agreement will be governed by the laws of the State of California and any proceeding or arbitration will take place in the State of California.
Virginia
The restrictions set forth in Section 5 shall apply during the Employment Term, for a period of five years thereafter, and to the extent the information qualifies as a trade secret under applicable law, at all times thereafter.
[Exhibit A to Employment Agreement]
Exhibit 10.12
APPLIED AEROSPACE & DEFENSE, INC.
2026 OMNIBUS INCENTIVE PLAN
FORM OF
RESTRICTED STOCK UNIT GRANT NOTICE
Pursuant to the terms and conditions of the Applied Aerospace & Defense, Inc. 2026 Omnibus Incentive Plan, as amended from time to time (the “Plan”), Applied Aerospace & Defense, Inc., a Delaware corporation (the “Company”), hereby grants to the individual listed below (“you” or the “Participant”) the number of Restricted Stock Units (the “RSUs”) set forth below. This award of RSUs (this “Award”) is subject to the terms and conditions set forth herein and in the Restricted Stock Unit Agreement attached hereto as Exhibit A (the “Agreement”), the restrictive covenants attached hereto as Exhibit B (the “Restrictive Covenants”) and the Plan, each of which is incorporated herein by reference. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.
| Type of Award: |
Restricted Stock Units | |
| Participant: |
[•] | |
| Date of Grant: |
[•] | |
| Total Number of RSUs: |
[•] | |
| Vesting Schedule: |
Subject to Sections 2 and 5 of the Agreement, the Plan and the other terms and conditions set forth herein, the RSUs shall annually vest in three equal installments on each of the first three anniversaries of the Date of Grant (each such date, a “Vesting Date”), so long as you continuously provide services to the Company or an Affiliate from the Date of Grant through such Vesting Date. | |
By signing below, you agree to be bound by the terms and conditions of the Plan, the Agreement and this Restricted Stock Unit Grant Notice (this “Grant Notice”). You acknowledge that you have reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understand all provisions of the Agreement, the Plan and this Grant Notice, and have had ample time and opportunity to obtain the advice of counsel prior to executing this Grant Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee regarding any questions or determinations arising under the Agreement, the Plan or this Grant Notice. This Grant Notice may be executed in one or more counterparts (including portable document format (.pdf) and facsimile counterparts), each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Grant Notice to be executed by an officer thereunto duly authorized, and the Participant has executed this Grant Notice, effective for all purposes as provided above.
| APPLIED AEROSPACE & DEFENSE, INC. |
Name: |
| Title: |
| PARTICIPANT |
Name: [•] |
SIGNATURE PAGE TO
RESTRICTED STOCK UNIT GRANT NOTICE
EXHIBIT A
RESTRICTED STOCK UNIT AGREEMENT
This Restricted Stock Unit Agreement (together with the Grant Notice to which this Agreement is attached and Exhibit B, this “Agreement”) is made as of the Date of Grant set forth in the Grant Notice to which this Agreement is attached by and between Applied Aerospace & Defense, Inc., a Delaware corporation (the “Company”), and [•] (the “Participant”). Capitalized terms used but not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice.
1. Award. In consideration of the Participant’s past and/or continued employment with, or service to, the Company or an Affiliate and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, effective as of the Date of Grant set forth in the Grant Notice (the “Date of Grant”), the Company hereby grants to the Participant the number of RSUs set forth in the Grant Notice on the terms and conditions set forth in the Grant Notice, this Agreement and the Plan, which is incorporated herein by reference as a part of this Agreement. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. To the extent vested, each RSU represents the right to receive one Share, subject to the terms and conditions set forth in the Grant Notice, this Agreement and the Plan. Unless and until the RSUs have become vested in the manner set forth in Section 2, the Participant will have no right to receive any Shares or other payments in respect of the RSUs. Prior to settlement of this Award, the RSUs and this Award represent an unsecured obligation of the Company, payable only from the general assets of the Company.
2. Vesting of RSUs.
(a) Except as otherwise set forth in Sections 2 and 5, the RSUs shall vest in accordance with the vesting schedule set forth in the Grant Notice. Upon the Participant’s Termination of Service prior to the vesting of all of the RSUs (but after giving effect to any accelerated vesting pursuant to Section 2(b)), any unvested RSUs (and all rights arising from such RSUs and from being a holder thereof) will terminate automatically without any further action by the Company and will be forfeited without further notice and at no cost to the Company.
(b) Notwithstanding anything in the Grant Notice, this Agreement or the Plan to the contrary, subject to Section 10, upon a Change in Control, (i) if the RSUs are not assumed by the surviving entity in connection with such Change in Control, all RSUs shall immediately become vested as of the date of such Change in Control and (ii) if the RSUs are assumed by the surviving entity in connection with such Change in Control, upon the Participant’s Termination of Service by the Company or an Affiliate without Cause during the 12-month period commencing on the date on which such Change in Control is consummated, all RSUs shall immediately become vested as of the date of such Termination of Service; provided, that such Termination of Service constitutes a “separation of service” within the meaning of Section 409A of the Code.
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(c) Except as otherwise set forth herein, upon the Participant’s Termination of Service prior to the vesting of all of the RSUs, any unvested RSUs (and all rights arising from such RSUs and from being a holder thereof) will terminate automatically without any further action by the Company and will be forfeited without further notice and at no cost to the Company.
3. Dividend Equivalent Rights. In the event that the Company declares and pays a regular cash dividend in respect of its outstanding Shares (which, for clarity, does not include any extraordinary cash dividend), and, on the record date for such dividend, the Participant holds RSUs granted pursuant to this Agreement that have not been settled, the Company shall record in a bookkeeping account an amount equal to the cash dividends the Participant would have received if the Participant was the holder of record, as of such record date, of a number of Shares equal to the number of RSUs held by the Participant that have not been settled as of such record date (the “Dividend Equivalent Rights”). The Dividend Equivalent Rights will be subject to the same terms and conditions, including with respect to vesting, forfeiture and transferability, as the underlying RSUs. All amounts, if any, payable in respect of the Dividend Equivalent Rights will be paid to the Participant in cash (or, at the discretion of the Company, in Shares) on or following, but no later than 30 days after, the date the underlying RSU vests. For purposes of clarity, if any of the RSUs are forfeited by the Participant pursuant to the terms of this Agreement, then the Participant shall also forfeit the Dividend Equivalent Rights, if any, accrued with respect to such forfeited RSUs. No interest will accrue on the Dividend Equivalent Rights between the declaration and payment of the applicable dividends and the settlement of the Dividend Equivalent Rights.
4. Settlement of RSUs. As soon as administratively practicable following the vesting of RSUs pursuant to Section 2, but in no event later than 30 days after such vesting date, the Company shall deliver to the Participant a number of Shares equal to the number of RSUs subject to this Award. All Shares issued hereunder shall be delivered either by delivering one or more certificates for such Shares to the Participant or by entering such Shares in book-entry form, as determined by the Committee in its sole discretion. The value of Shares shall not bear any interest owing to the passage of time. Neither this Section 4 nor any action taken pursuant to or in accordance with this Agreement shall be construed to create a trust or a funded or secured obligation of any kind.
5. Restrictive Covenants.
(a) The Participant acknowledges and agrees that the grant of the RSUs further aligns the Participant’s interests with the Company’s long-term business interests, and as a condition to the Company’s willingness to enter into this Agreement, the Participant agrees to abide by the terms set forth in Exhibit B, which Exhibit B is deemed to be part of this Agreement as if fully set forth herein. The Participant acknowledges and agrees that the Restrictive Covenants are reasonable and enforceable in all respects. By accepting this Award, the Participant agrees to be bound, and promises to abide, by the terms set forth in Exhibit B and expressly acknowledges and affirms that this Award would not be granted to the Participant if the Participant had not agreed to be bound by such provisions.
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(b) Notwithstanding any provision in this Agreement or the Plan to the contrary, in the event the Committee determines that the Participant has failed to abide by any of the terms set forth in Exhibit B or the provisions of any other confidentiality, non-disclosure, non-competition, non-solicitation, non-disparagement or other restrictive covenants in any other agreement by and between the Company or any Affiliate and the Participant, then, in addition to and without limiting the remedies set forth in Exhibit B:
(i) all RSUs that have not been settled as of the date of such determination (and all rights arising from such RSUs and from being a holder thereof) will terminate automatically without any further action by the Company and will be forfeited without further notice and at no cost to the Company; and
(ii) the Participant shall, within 30 days following the Participant’s receipt of a written notice from the Company, pay to the Company a cash amount equal to the Fair Market Value of any Shares previously received by the Participant pursuant to the settlement of the RSUs as of the date of receipt of such Shares.
6. Tax Matters. To the extent that the receipt, vesting or settlement of this Award results in income (including compensation income) or wages (including via Dividend Equivalent Rights) to the Participant for federal, state, local and/or foreign tax purposes, the Company shall have the authority to deduct or withhold, or require the Participant to remit to the Company, an amount sufficient to satisfy all applicable federal, state, local and foreign taxes (including the employee portion of any Federal Insurance Contributions Act obligation) required by Applicable Law to be withheld with respect to any taxable event arising in connection with this Award. In furtherance of the forgoing, the Participant may make arrangements satisfactory to the Company regarding the payment of any income tax, social insurance contribution or other applicable taxes that are required to be withheld in respect of this Award, which arrangements include (if and to the extent permitted by the Company) the delivery of cash or cash equivalents, Shares (including previously owned Shares (which are not subject to any pledge or other security interest), net settlement, a broker-assisted sale, or other cashless withholding or reduction of the amount of shares otherwise issuable or delivered pursuant to this Award), other property, or any other legal consideration the Committee deems appropriate. If such tax obligations are satisfied through net settlement or the surrender of previously owned Shares, the maximum number of Shares that may be so withheld (or surrendered) shall be the number of Shares that have an aggregate Fair Market Value on the date of withholding or surrender equal to the aggregate amount of such tax liabilities determined based on the greatest withholding rates for federal, state, local and/or foreign tax purposes, including payroll taxes, that may be utilized without creating adverse accounting treatment for the Company with respect to this Award, as determined by the Committee. Any fraction of a Share required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash to the Participant. The Participant acknowledges that there may be adverse tax consequences upon the receipt, vesting or settlement of this Award or disposition of the underlying Shares and that the Participant has been advised, and hereby is advised, to consult a tax advisor. The Participant represents that the Participant is in no manner relying on the Board, the Committee, the Company or an Affiliate or any of their respective managers, directors, officers, employees or authorized representatives (including attorneys, accountants, consultants, bankers, lenders, prospective lenders and financial representatives) for tax advice or an assessment of such tax consequences.
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7. Non-Transferability. During the lifetime of the Participant, the RSUs may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Shares underlying the RSUs have been issued, and all restrictions applicable to such Shares have lapsed. Neither the RSUs nor any interest or right therein shall be liable for the debts, contracts or engagements of the Participant or the Participant’s successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means, whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.
8. Compliance with Applicable Law. Notwithstanding any provision of this Agreement to the contrary, the issuance of Shares hereunder will be subject to compliance with all applicable requirements of Applicable Law. No Shares will be issued hereunder if such issuance would constitute a violation of any Applicable Law. In addition, Shares will not be issued hereunder unless (a) a registration statement under the Securities Act is in effect at the time of such issuance with respect to the Shares to be issued or (b) in the opinion of legal counsel to the Company, the Shares to be issued are permitted to be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary for the lawful issuance and sale of any Shares hereunder will relieve the Company of any liability in respect of the failure to issue such Shares as to which such requisite authority has not been obtained. As a condition to any issuance of Shares hereunder, the Company may require the Participant to satisfy any requirements that may be necessary or appropriate to evidence compliance with any Applicable Law and to make any representation or warranty with respect to such compliance as may be requested by the Company.
9. Rights as a Stockholder. The Participant shall have no rights as a stockholder of the Company with respect to any Shares that may become deliverable hereunder unless and until the Participant has become the holder of record of such Shares, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of any such Shares, except as otherwise specifically provided for in the Plan or this Agreement.
10. Execution of Receipts and Releases. Any issuance or transfer of Shares or other property to the Participant or the Participant’s legal representative, heir, legatee or distributee, in accordance with this Agreement shall be in full satisfaction of all claims of such Person hereunder. As a condition precedent to such payment or issuance, the Company may require the Participant or the Participant’s legal representative, heir, legatee or distributee to execute (and not revoke within any time provided to do so) a release and receipt therefor in such form as it shall determine appropriate; provided, that any review period under such release will not modify the date of settlement with respect to vested RSUs.
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11. No Right to Continued Employment, Service or Awards. Nothing in the adoption of the Plan, nor the award of the RSUs thereunder pursuant to the Grant Notice and this Agreement, shall confer upon the Participant the right to continued employment by, or a continued service relationship with, the Company or any Affiliate, or any other entity, or affect in any way the right of the Company or any such Affiliate, or any other entity to terminate such employment or other service relationship at any time. Unless otherwise provided in a written employment agreement or by Applicable Law, the Participant’s employment by the Company, or any such Affiliate, or any other entity shall be on an at-will basis, and the employment relationship may be terminated at any time by either the Participant or the Company, or any such Affiliate, or other entity for any or no reason whatsoever, with or without Cause or notice. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee or its delegate, and such determination shall be final, conclusive and binding for all purposes. The grant of the RSUs is a one-time benefit that was made at the sole discretion of the Company and does not create any contractual or other right to receive a grant of Awards or benefits in the future in lieu of Awards in the future, including any adjustment to wages, overtime, benefits or other compensation. Any future Awards will be granted at the sole discretion of the Company.
12. Legal and Equitable Remedies. The Participant acknowledges that a violation or attempted breach of any of the Participant’s covenants and agreements in this Agreement will cause such damage as will be irreparable, the exact amount of which would be difficult to ascertain and for which there will be no adequate remedy at law, and accordingly, the parties hereto agree that the Company and its Affiliates shall be entitled as a matter of right to an injunction issued by any court of competent jurisdiction, restraining the Participant or the affiliates, partners or agents of the Participant from such breach or attempted violation of such covenants and agreements, as well as to recover from the Participant any and all costs and expenses sustained or incurred by the Company or any Affiliate in obtaining such an injunction, including reasonable attorneys’ fees. The parties to this Agreement agree that no bond or other security shall be required in connection with such injunction. Any exercise by either of the parties to this Agreement of its rights pursuant to this Section 12 shall be cumulative and in addition to any other remedies to which such party may be entitled.
13. Notices. All notices and other communications under this Agreement shall be in writing and shall be delivered to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to the Company, unless otherwise designated by the Company in a written notice to the Participant (or other holder):
Applied Aerospace & Defense, Inc.
Attn: [__]
355 Quality Circle NW
Huntsville, AL 35806
If to the Participant, at the Participant’s last known address on file with the Company.
Any notice that is delivered personally or by overnight courier or telecopier in the manner provided herein shall be deemed to have been duly given to the Participant when it is mailed by the Company or, if such notice is not mailed to the Participant, upon receipt by the Participant. Any notice that is addressed and mailed in the manner herein provided shall be conclusively presumed to have been given to the party to whom it is addressed at the close of business, local time of the recipient, on the fourth day after the day it is so placed in the mail.
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14. Consent to Electronic Delivery; Electronic Signature. In lieu of receiving documents in paper format, the Participant agrees, to the fullest extent permitted by law, to accept electronic delivery of any documents that the Company may be required to deliver (including, but not limited to, prospectuses, prospectus supplements, grant or award notifications and agreements, account statements, annual and quarterly reports and all other forms of communications) in connection with this and any other Award made or offered by the Company. Electronic delivery may be via a Company electronic mail system or by reference to a location on a Company intranet to which the Participant has access, or to the Participant’s account with the Company’s equity plan administrator. The Participant hereby consents to any and all procedures the Company has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Company may be required to deliver, and agrees that the Participant’s electronic signature is the same as, and shall have the same force and effect as, the Participant’s manual signature.
15. Agreement to Furnish Information. The Participant agrees to furnish to the Company all information requested by the Company to enable it to comply with any reporting or other requirement imposed upon the Company by or under any Applicable Law.
16. Entire Agreement; Amendment. This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to the RSUs granted hereby; provided¸ however, that (a) the terms of this Agreement shall not modify and shall be subject to the terms and conditions of any employment, consulting and/or severance agreement between the Company (or an Affiliate or other entity) and the Participant in effect as of the date a determination is to be made under this Agreement; and (b) the terms of Exhibit B are in addition to and complement (and do not replace or supersede) all other agreements and obligations between the Company or any Affiliate and the Participant with respect to confidentiality, non-disclosure, non-competition, non-solicitation, non-disparagement and other restrictive covenants. Without limiting the scope of the preceding sentence, except as provided therein, all prior understandings and agreements, if any, among the parties hereto relating to the subject matter hereof are hereby null and void and of no further force and effect. The Committee may, in its sole discretion, amend this Agreement from time to time in any manner that is not inconsistent with the Plan; provided, however, that except as otherwise provided in the Plan or this Agreement, any such amendment that materially reduces the rights of the Participant shall be effective only if it is in writing and signed by both the Participant and an authorized officer of the Company.
17. Severability and Waiver. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of such provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect. Waiver by any party of any breach of this Agreement or failure to exercise any right hereunder shall not be deemed to be a waiver of any other breach or right. The failure of any party to take action by reason of such breach or to exercise any such right shall not deprive the party of the right to take action at any time while or after such breach or condition giving rise to such rights continues.
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18. Company Recoupment of Awards. The Participant’s rights with respect to this Award shall in all events be subject to (a) any right that the Company may have under any Company recoupment, clawback or similar policy or other agreement or arrangement with the Participant, and (b) any right or obligation that the Company may have regarding the clawback of “incentive-based compensation” under Section 10D of the Exchange Act and any applicable rules and regulations promulgated thereunder from time to time by the U.S. Securities and Exchange Commission or any other Applicable Law. The Participant’s acceptance of this Award will constitute the Participant’s acknowledgment of and consent to the Company’s application, implementation and enforcement of any Company recoupment, clawback or similar policy that may apply to the Participant and this Award, whether adopted before or after the Effective Date or Date of Grant (whether though clawback, cancellation, recoupment, rescission, payback, reduction or other similar action in accordance therewith) and any Applicable Law relating to clawback, cancellation, recoupment, rescission, payback or reduction of compensation or other similar action, and the Participant’s agreement that the Company may take any actions that may be necessary to effectuate any such policy or Applicable Law, without further consideration or action.
19. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN, EXCLUSIVE OF THE CONFLICT OF LAWS PROVISIONS OF DELAWARE LAW.
20. Successors and Assigns. The Company may assign any of its rights under this Agreement without the Participant’s consent. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein and in the Plan, this Agreement will be binding upon the Participant and the Participant’s beneficiaries, executors, administrators and the Person(s) to whom the RSUs may be transferred by will or the laws of descent or distribution.
21. Headings; References; Interpretation. Headings are for convenience only and are not deemed to be part of this Agreement. The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole, including Exhibit B attached hereto, and not to any particular provision of this Agreement. All references herein to Sections and Exhibit B shall, unless the context requires a different construction, be deemed to be references to the Sections and Exhibit B of this Agreement. The word “or” as used herein is not exclusive and is deemed to have the meaning “and/or.” All references to “including” shall be construed as meaning “including without limitation.” Unless the context requires otherwise, all references herein to a law, agreement, instrument or other document shall be deemed to refer to such law, agreement, instrument or other document as amended, supplemented, modified and restated from time to time to the extent permitted by the provisions thereof. All references to “dollars” or “$” in this Agreement refer to United States dollars. Whenever the context may require, the singular form of nouns and pronouns shall include the plural and vice versa. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto.
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22. Counterparts. The Grant Notice may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. Delivery of an executed counterpart of the Grant Notice by facsimile or portable document format (.pdf) attachment to electronic mail or via electronic acceptance in accordance with Section 14 shall be effective as delivery of a manually executed counterpart of the Grant Notice.
23. Section 409A. The Plan, this Agreement and the RSUs are intended to comply with or be exempt from the applicable requirements of Section 409A of the Code and shall be limited, construed, and interpreted in accordance with such intent. Notwithstanding any contrary provision in the Plan or this Agreement, any payment(s) of “nonqualified deferred compensation” (within the meaning of Section 409A of the Code) that are otherwise required to be made under the Plan or this Agreement to a “specified employee” (as defined under Section 409A of the Code) as a result of such employee’s separation from service (other than a payment that is not subject to Section 409A of the Code) shall be delayed for the first six (6) months following such separation from service (or, if earlier, until the date of death of the specified employee) and shall instead be paid (in a manner set forth in this Agreement) upon expiration of such delay period. Notwithstanding the foregoing, the Company and its Affiliates make no representations that the RSUs provided under this Agreement are exempt from or compliant with Section 409A of the Code and in no event shall the Company or any Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with Section 409A of the Code.
[Remainder of Page Intentionally Blank]
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EXHIBIT B
RESTRICTIVE COVENANTS
1. Confidentiality. In the course of Participant’s employment or service with the Company, Participant will be provided with, and will have access to, Confidential Information (as defined below). In consideration of Participant’s receipt and access to such Confidential Information, Participant shall comply with this Section 1.
(a) Both during Participant’s employment or service with any member of the Company Group (as defined below) and thereafter, except as expressly permitted by this Exhibit B, Participant shall not directly or indirectly disclose, publish, communicate, or make available any Confidential Information, or allow it to be disclosed, published, communicated, or made available, to any person or entity and shall not access or use any Confidential Information except for the benefit of the Company Group. Participant acknowledges and agrees that Participant would inevitably use and disclose Confidential Information in violation of this Section 1 if Participant were to violate any of the covenants set forth in Section 2 of this Exhibit B. Participant shall follow all Company Group policies and protocols regarding the security of all documents and other materials containing Confidential Information (regardless of the medium on which Confidential Information is stored). Except to the extent required for the performance of Participant’s duties on behalf of the Company Group, Participant shall not remove from facilities of any member of the Company Group any information, property, equipment, drawings, notes, reports, manuals, invention records, computer software, customer information, or other data or materials that relate in any way to the Confidential Information, whether paper or electronic and whether produced by Participant or obtained by the Company Group. The covenants of this Section 1(a) shall apply to all Confidential Information, whether now known or later to become known to Participant during the period that Participant is employed by or affiliated with the Company or any other member of the Company Group. For purposes of this Exhibit B, “Company Group” shall mean, collectively, the Company and its direct and indirect subsidiaries as may exist from time to time.
(b) Notwithstanding any provision of Section 1(a) of this Exhibit B to the contrary, Participant may make the following disclosures and uses of Confidential Information:
(i) disclosures to other employees, officers or directors of a member of the Company Group who have a need to know the information in connection with the businesses of the Company Group;
(ii) disclosures to customers and suppliers when, in the reasonable and good faith belief of Participant, such disclosure is in connection with Participant’s performance of Participant’s duties under any applicable employment agreement and is in the best interests of the Company Group;
(iii) disclosures and uses that are approved in writing by the Board; or
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(iv) disclosures to a person or entity that has (x) been retained by a member of the Company Group to provide services to one or more members of the Company Group and (y) agreed in writing to abide by the terms of a confidentiality agreement.
(c) Upon the Participant’s Termination of Service, and at any other time upon request of the Company, Participant shall promptly and permanently surrender and deliver to the Company all documents (including electronically stored information) and all copies thereof and all other materials of any nature containing or pertaining to all Confidential Information and any other Company Group property (including any Company Group-issued computer, mobile device or other equipment) in Participant’s possession, custody or control and Participant shall not retain any such documents or other materials or property of the Company Group. Within ten (10) days of any such request, Participant shall certify to the Company in writing that all such documents, materials and property have been returned to the Company. In the event that the Participant later discovers any Company Group property, the Participant shall promptly return such property to the Company. The Participant shall cooperate with Company representatives and allow such representatives to oversee the process of erasing and/or permanently removing any such Confidential Information or other property of the Company Group from any computer, personal digital assistant, phone, or other electronic device, or any cloud-based storage account or other electronic medium owned or controlled by the Participant.
(d) “Confidential Information” means all confidential, competitively valuable, non-public or proprietary information that is conceived, made, developed or acquired by or disclosed to Participant (whether conveyed orally, in writing or in any other form or medium), individually or in conjunction with others, during the period that Participant is employed by or otherwise affiliated with the Company or any other member of the Company Group (whether during business hours or otherwise and whether on the Company’s premises or otherwise) including: (i) technical information of any member of the Company Group, its affiliates, its investors, customers, vendors, suppliers or other third parties, including computer programs, software, databases, data, ideas, know-how, formulae, compositions, processes, discoveries, machines, inventions (whether patentable or not), designs, developmental or experimental work, techniques, improvements, work in process, research or test results, original works of authorship, training programs and procedures, diagrams, charts, business and product development plans, and similar items; (ii) information relating to any member of the Company Group’s businesses or properties, products or services (including all such information relating to corporate opportunities, operations, future plans, methods of doing business, business plans, strategies for developing business and market share, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or acquisition targets or their requirements, the identity of key contacts within customers’ organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names and marks) or pursuant to which any member of the Company Group owes a confidentiality obligation; and (iii) other valuable, confidential information and trade secrets of any member of the Company Group, its affiliates, its customers or other third parties. Moreover, all documents, videotapes, written presentations, brochures, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, e-mail, voice mail, electronic databases, maps, drawings, architectural renditions, models and all other writings or materials of any type including or embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms
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of expression are and shall be the sole and exclusive property of the Company or the other applicable member of the Company Group and be subject to the same restrictions on disclosure applicable to all Confidential Information pursuant to this Exhibit B. For purposes of this Exhibit B, Confidential Information shall not include any information that (A) is generally available to and known by the public other than as a result of a disclosure or wrongful act of Participant or any of Participant’s agents; (B) was available to Participant on a non-confidential basis before its disclosure by a member of the Company Group; (C) becomes available to Participant on a non-confidential basis from a source other than a member of the Company Group who, to the Participant’s knowledge, rightfully possesses the information and did not obtain it, either directly or indirectly, from a member of the Company Group; provided, however, that such source is not bound by a confidentiality agreement with, or other obligation with respect to confidentiality to, a member of the Company Group; or (D) is required to be disclosed by Applicable Law.
(e) Notwithstanding the foregoing, nothing in this Exhibit B shall prohibit or restrict Participant from lawfully: (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by, any governmental or regulatory agency, entity, or official(s) (collectively, “Governmental Authorities”) regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to Participant from any Governmental Authority; (iii) testifying, participating or otherwise assisting in any action or proceeding by any Governmental Authority relating to a possible violation of law; or (iv) making any other disclosures that are protected under the whistleblower provisions of any applicable law. Additionally, pursuant to the federal Defend Trade Secrets Act of 2016, the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (2) solely for the purpose of reporting or investigating a suspected violation of law; (B) is made to the Participant’s attorney in relation to a lawsuit for retaliation against the individual for reporting a suspected violation of law; or (C) is made in a complaint or other document filed in a lawsuit or proceeding, if such filing is made under seal. Nothing in this Exhibit B requires Participant to obtain prior authorization before engaging in any conduct described in this paragraph, or to notify the Company that Participant has engaged in any such conduct. Nothing herein prevents the Participant from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that the Participant has reason to believe is unlawful.
2. Non-Competition; Non-Solicitation.
(a) The Company shall provide Participant access to Confidential Information for use only during the Participant’s employment or service with any member of the Company Group, and Participant acknowledges and agrees that the Company Group will be entrusting Participant, in Participant’s unique and special capacity, with developing the goodwill of the Company Group, and in consideration of the Company providing Participant with access to Confidential Information, clients and customers and as an express incentive for the Company to grant Participant an Award under the Plan and Award Agreement, Participant has voluntarily agreed to the covenants set forth in this Section 2. Participant agrees and acknowledges that, due to the nature of the Business of the Company Group, including geographical and temporal
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restrictions on certain competitive activities, are reasonable in all respects, do not interfere with public interests, will not cause Employee undue hardship, and are material and substantial parts of this Exhibit B intended and necessary to prevent unfair competition and to protect the Company’s Confidential Information, customer and employee relationships, goodwill and legitimate business interests.
(b) During the Prohibited Period (as defined below), Participant shall not, and shall cause Participant’s affiliates not to, without the prior written approval of the Board, directly or indirectly, for Participant or on behalf of or in conjunction with any other person or entity of any nature:
(i) engage in or participate in (or prepare to engage in or participate in) the Business within the Market Area (each as defined below), which prohibition shall prevent Participant from directly or indirectly: (A) owning, investing in, controlling, managing, operating, participating in, lending Participant’s name to, contributing to, providing assistance to or being an officer or director of, any person or entity engaged in or planning to engage in the Business in the Market Area (provided, however, that Participant shall be permitted to own a passive interest of any class of securities of any corporation in competition with the Company Group that is traded on a national securities exchange (as long as Participant is not involved in the business activities of such entity)), or (B) joining, becoming an employee or consultant of, or otherwise rendering services for or being affiliated with or engaged by (whether or not for compensation), any person or entity engaged in, or planning to engage in, the Business in the Market Area in any capacity (with respect to this clause (B)) in which Participant’s customer or client relationships, duties or responsibilities are the same as or similar to the customer or client relationships, duties or responsibilities that Participant had on behalf of any member of the Company Group;
(ii) appropriate or interfere with or attempt to appropriate or interfere with any Business Opportunity (as defined below) of, or relating to, any member of the Company Group located in the Market Area;
(iii) solicit, canvass, approach, encourage, entice or induce any customer, vendor or supplier of any member of the Company Group with whom Participant had contact (including oversight responsibility) or learned Confidential Information about during Participant’s employment or service with any member of the Company Group to cease or lessen such customer’s, vendor’s or supplier’s business with any member of the Company Group or otherwise adversely affect such relationship, or attempt to do any of the foregoing; or
(iv) solicit, canvass, approach, encourage, entice or induce any employee or contractor of any member of the Company Group which the Participant had contact during the Participant’s employment or service with any member of the Company Group or who otherwise worked in the same department as the Participant, to terminate his, her or its employment or engagement with any member of the Company Group, hire or retain any such employee or contractor or otherwise adversely affect such relationship.
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Notwithstanding the foregoing, nothing herein shall prohibit Participant from being employed or engaged by any person or entity where such work (i) would not involve any level of strategic, advisory, technical, creative, or sales, or other activity similar to that which Participant provided to any Company Group or (ii) is in connection with an independent business line of such person or entity that is wholly unrelated to the Business and the Confidential Information (subject to protocols to prevent Participant from disclosing Confidential Information).
(c) Because of the difficulty of measuring economic losses to the Company Group as a result of a breach or threatened breach of the covenants set forth in Section 1 of this Exhibit B and in this Section 2, and because of the immediate, irreparable and continuing damage that would be caused to the members of the Company Group for which they would have no other adequate remedy, the Company and each other member of the Company Group shall be entitled to enforce the foregoing covenants, in the event of a breach or threatened breach of this Exhibit B. The Participant further agrees that the Company and each member of the Company Group would, by reason of such breach, or threatened breach, be entitled (a) to an injunction, a decree for specific performance, other equitable relief in a court of appropriate jurisdiction, (b) to be indemnified by Participant from any loss or harm; and (c) to recover any costs or attorneys’ fees, arising out of or in connection with any breach by Participant or enforcement action relating to Participant’s obligations under this Exhibit B and all other relief as may be proper (including money damages if appropriate), to the extent permitted by law, without the need to post any bond. Participant further consents and stipulates to the entry of such injunctive relief in such a court prohibiting Participant from breaching the terms of this Exhibit B. The aforementioned equitable relief shall not be the Company’s or any other member of the Company Group’s exclusive remedy for a breach but instead shall be in addition to all other rights and remedies available to the Company and each other member of the Company Group at law and equity. Participant further agrees that Participant will not challenge the reasonableness or enforceability of any of the covenants set forth in this Section 2, and that Participant will reimburse the Company Group for all costs (including reasonable attorneys’ fees) incurred in connection with any action to enforce any of the provisions of this Section 2 if Participant challenges the reasonableness or enforceability of any of the provisions of this Section 2. Notwithstanding anything to the contrary contained in this Exhibit B, in the event of a breach of any covenant by Participant, the duration of any restriction breached shall be extended for a period equal to any period of time that Participant was in violation of such covenant to the extent permitted by Applicable Law.
(d) The covenants in this Section 2, and each provision and portion hereof, are severable and separate, and the unenforceability of any specific covenant (or portion thereof) shall not affect the provisions of any other covenant (or portion thereof). Moreover, in the event any arbitrator or court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which such arbitrator or court deems reasonable, and this Exhibit B shall thereby be reformed.
(e) The following terms shall have the following meanings:
(i) “Business” shall mean the business and operations that are the same or similar to those performed by the Company and any other member of the Company Group for which Participant provides services or about which Participant obtains Confidential Information during the Participant’s employment or service with any member of the Company
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Group, which business and operations include, but are not limited to the design, engineering, and vertically integrated manufacturing solutions for leading and next-generation space and defense technology, including three core markets: Space and Launch Systems, Defense Aviation and Airborne Systems and C5ISR and Precision Strike Systems.
(ii) “Business Opportunity” shall mean any actual or potential commercial, investment or other business opportunity of any member of the Company Group or relating to the Business about which Participant learned Confidential Information during Participant’s employment or service with any member of the Company Group.
(iii) “Market Area” shall mean any country, state, municipality, locale, or jurisdiction in which any member of the Company Group is engaged in providing services and in which the Participant had material responsibilities or made actual contact (whether in person, virtual, or by email, text, or phone) between Participant and a customer or prospective customer with whom Participant dealt on behalf of any member of the Company Group or whose dealings with the Company or any member of the Company Group was coordinated or supervised by Participant, or who received any product or service from the Company or any member of the Company Group that resulted in payment of compensation to Participant, or about whom Participant obtained Confidential Information as a result of Employee’s employment with or service to the Company or any member of the Company Group.
(iv) “Prohibited Period” shall mean the period during which Participant is employed by, or providing services to, any member of the Company Group and continuing for a period of following the date that Participant is no longer employed by, or providing services to, any member of the Company Group.
(f) Participant undertakes and agrees that following the date that Participant is no longer employed by, or providing services to, any member of the Company Group and prior to entering into any relationship with any other party to serve as an officer, director, employee, consultant, partner, advisor, joint-venturer or in any other capacity with any other person or entity, Participant shall disclose to such other party the terms of the restrictive covenants set forth herein and hereby consents to the Company making any related disclosures.
3. Ownership of Intellectual Property.
(a) Participant agrees that the Company shall own, and Participant shall (and hereby does) assign, all right, title and interest relating to any and all inventions (whether or not patentable), discoveries, developments, improvements, innovations, works of authorship, mask works, designs, know-how, ideas, formulae, processes, techniques, data and information authored, created, contributed to, made, conceived, developed, fabricated, reduced to practice, modified or improved, in whole or in part, by Participant during the period in which Participant is or has been employed by or affiliated with the Company or any other member of the Company Group, whether or not registerable under U.S. law or the laws of other jurisdictions, that either (a) relate in any way to the Business or actual or demonstrably anticipated research or development of the Company or any member of the Company Group, or (b) were developed on any amount of the Company’s or any other member of the Company Group’s time or with the use of any member of the Company Group’s equipment, supplies, facilities or Confidential
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Information, regardless of when or where the work is prepared, to the fullest extent allowed by Applicable Law (all of the foregoing collectively referred to herein as “Company Intellectual Property”), and Participant shall promptly disclose all Company Intellectual Property to the Company in writing. To support Participant’s disclosure obligation herein, Participant shall keep and maintain adequate and current written records of all Company Intellectual Property made by Participant (solely or jointly with others) during the period in which Participant is or has been employed by or affiliated with the Company or any other member of the Company Group in such form as may be specified from time to time by the Company. These records shall be available to, and remain the sole property of, the Company at all times. For the elimination of doubt, the foregoing ownership and assignment provisions apply without limitation to patent rights, copyrights, trade secret rights, mask work rights, trademark rights, and all other intellectual and industrial property rights of any sort throughout the world.
(b) All of Participant’s works of authorship and associated copyrights created during the period in which Participant is employed by or affiliated with the Company or any other member of the Company Group and in the scope of Participant’s employment or engagement shall be deemed to be “works made for hire” within the meaning of the Copyright Act. To the extent any right, title and interest in and to Company Intellectual Property cannot be assigned by Participant to the Company, Participant shall grant, and does hereby grant, to the Company Group an exclusive, perpetual, royalty-free, transferable, irrevocable, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to make, have made, use, sell, offer for sale, import, export, reproduce, practice and otherwise commercialize such rights, title and interest.
(c) Participant recognizes that this Exhibit B will not be deemed to require assignment of any invention or intellectual property that Participant developed entirely on Participant’s own time without using the equipment, supplies, facilities, trade secrets, or Confidential Information of any member of the Company Group. In addition, this Exhibit B does not apply to any invention that qualifies fully for protection from assignment to the Company under any specifically applicable state law or regulation.
(d) To the extent allowed by law, this Section 3 applies to all rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral,” or the like, including without limitation those rights set forth in 17 U.S.C. §106A (collectively, “Moral Rights”). To the extent Participant retains any Moral Rights under Applicable Law, Participant hereby ratifies and consents to any action that may be taken with respect to such Moral Rights by or authorized by the Company or any member of the Company Group, and Participant hereby waives and agrees not to assert any Moral Rights with respect to such Moral Rights. Participant shall confirm any such ratifications, consents, waivers, and agreements from time to time as requested by the Company.
(e) Participant shall perform, during and after the period in which Participant is or has been employed by or affiliated with the Company or any other member of the Company Group, all acts deemed necessary or desirable by the Company to permit and assist each member of the Company Group, at the Company’s expense, in obtaining and enforcing the full benefits, enjoyment, rights and title throughout the world in the Company Intellectual Property and Confidential Information assigned, to be assigned, or licensed to the Company under this Exhibit
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B. Such acts may include execution of documents and assistance or cooperation (i) in the filing, prosecution, registration, and memorialization of assignment of any applicable patents, copyrights, mask work, or other applications, (ii) in the enforcement of any applicable patents, copyrights, mask work, moral rights, trade secrets, or other proprietary rights, and (iii) in other legal proceedings related to the Company Intellectual Property or Confidential Information.
(f) In the event that the Company (or, as applicable, a member of the Company Group) is unable for any reason to secure Participant’s signature to any document required to file, prosecute, register, or memorialize the assignment of any patent, copyright, mask work or other applications or to enforce any patent, copyright, mask work, moral right, trade secret or other proprietary right under any Confidential Information or Company Intellectual Property, Participant hereby irrevocably designates and appoints the Company and each of the Company’s duly authorized officers and agents as Participant’s agents and attorneys-in-fact to act for and on Participant’s behalf and instead of Participant, (i) to execute, file, prosecute, register and memorialize the assignment of any such application, (ii) to execute and file any documentation required for such enforcement, and (iii) to do all other lawfully permitted acts to further the filing, prosecution, registration, memorialization of assignment, issuance, and enforcement of patents, copyrights, mask works, moral rights, trade secrets or other rights under the Confidential Information or Company Intellectual Property, all with the same legal force and effect as if executed by Participant. For the avoidance of doubt, the provisions of this Section 3(f) apply fully to all derivative works, improvements, renewals, extensions, continuations, divisionals, continuations in part, continuing patent applications, reissues, and reexaminations of all Company Intellectual Property.
(g) In the event that Participant enters into, on behalf of any member of the Company Group, any contracts or agreements relating to any Confidential Information or Company Intellectual Property, Participant shall assign such contracts or agreements to the Company (or the applicable member of the Company Group) promptly, and in any event, prior to Participant’s Termination of Service. If the Company (or the applicable member of the Company Group) is unable for any reason to secure Participant’s signature to any document required to assign said contracts or agreements, or if Participant does not assign said contracts or agreements to the Company (or the applicable member of the Company Group) prior to Participant’s Termination of Service, Participant hereby irrevocably designates and appoints the Company (or the applicable member of the Company Group) and each of the Company’s duly authorized officers and agents as Participant’s agents and attorneys-in-fact to act for and on Participant’s behalf and instead of Participant to execute said assignments and to do all other lawfully permitted acts to further the execution of said documents.
4. Non-Disparagement. Subject to Section 1(e) above, Participant agrees that Participant will not, and will cause Participant’s affiliates to not, make, publish, or communicate any statement, comment or remark, whether written or oral, which in any way disparages or defames or could reasonably be expected to impugn the personal or professional character, reputation or integrity of the Company or any member of the Company Group or their current or former directors, officers, members, managers, partners, executives or direct or indirect owners (including equityholders), and their customers, clients, suppliers, investors and other associated third parties, or their businesses, business practices, prospects, products or services; provided, however, that nothing in this Exhibit B shall prevent Participant from engaging in concerted
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activity relative to the terms and conditions of Participant’s employment and in communications protected under the National Labor Relations Act, to the extent applicable, including the ability to file unfair labor practice charges with the National Labor Relations Board or assist others in doing so, and otherwise cooperate with any investigative process by the National Labor Relations Board.
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Exhibit 10.13
APPLIED AEROSPACE & DEFENSE, INC.
2026 OMNIBUS INCENTIVE PLAN
FORM OF
NON-EMPLOYEE DIRECTOR RESTRICTED STOCK UNIT GRANT NOTICE
Pursuant to the terms and conditions of the Applied Aerospace & Defense, Inc. 2026 Omnibus Incentive Plan, as amended from time to time (the “Plan”), Applied Aerospace & Defense, Inc., a Delaware corporation (the “Company”), hereby grants to the individual listed below (“you” or the “Participant”) the number of Restricted Stock Units (the “RSUs”) set forth below. This award of RSUs (this “Award”) is subject to the terms and conditions set forth herein and in the Restricted Stock Unit Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, each of which is incorporated herein by reference. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.
| Type of Award: | Restricted Stock Units | |
| Participant: | [•] | |
| Date of Grant: | [•] | |
| Total Number of RSUs: | [•] | |
| Vesting Schedule: | Subject to Section 2 of the Agreement, the Plan and the other terms and conditions set forth herein, 100% of the RSUs shall vest on the earlier of (i) the first anniversary of the Date of Grant and (ii) the day immediately prior to the date of the next annual meeting of the stockholders of the Company following the Date of Grant (the earlier of such dates, the “Vesting Date”), so long as you continuously provide services to the Company as a member of the Board from the Date of Grant through the Vesting Date. | |
By signing below, you agree to be bound by the terms and conditions of the Plan, the Agreement and this Non-Employee Director Restricted Stock Unit Grant Notice (this “Grant Notice”). You acknowledge that you have reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understand all provisions of the Agreement, the Plan and this Grant Notice, and have had ample time and opportunity to obtain the advice of counsel prior to executing this Grant Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee regarding any questions or determinations arising under the Agreement, the Plan or this Grant Notice. This Grant Notice may be executed in one or more counterparts (including portable document format (.pdf) and facsimile counterparts), each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Grant Notice to be executed by an officer thereunto duly authorized, and the Participant has executed this Grant Notice, effective for all purposes as provided above.
| APPLIED AEROSPACE & DEFENSE, INC. |
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| Name: |
| Title: |
| PARTICIPANT |
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| Name: [•] |
SIGNATURE PAGE TO
NON-EMPLOYEE DIRECTOR RESTRICTED STOCK UNIT GRANT NOTICE
EXHIBIT A
NON-EMPLOYEE DIRECTOR RESTRICTED STOCK UNIT AGREEMENT
This Non-Employee Director Restricted Stock Unit Agreement (together with the Grant Notice to which this Agreement is attached, this “Agreement”) is made as of the Date of Grant set forth in the Grant Notice to which this Agreement is attached by and between Applied Aerospace & Defense, Inc., a Delaware corporation (the “Company”), and [•] (the “Participant”). Capitalized terms used but not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice.
1. Award. Effective as of the Date of Grant set forth in the Grant Notice (the “Date of Grant”), the Company hereby grants to the Participant the number of RSUs set forth in the Grant Notice on the terms and conditions set forth in the Grant Notice, this Agreement and the Plan, which is incorporated herein by reference as a part of this Agreement. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. To the extent vested, each RSU represents the right to receive one Share, subject to the terms and conditions set forth in the Grant Notice, this Agreement and the Plan. Unless and until the RSUs have become vested in the manner set forth in Section 2, the Participant will have no right to receive any Shares or other payments in respect of the RSUs. Prior to settlement of this Award, the RSUs and this Award represent an unsecured obligation of the Company, payable only from the general assets of the Company.
2. Vesting of RSUs.
(a) Except as otherwise set forth in this Section 2, the RSUs shall vest in accordance with the vesting schedule set forth in the Grant Notice. Upon the Participant’s Termination of Service prior to the vesting of all of the RSUs (but after giving effect to any accelerated vesting pursuant to Section 2(b)), any unvested RSUs (and all rights arising from such RSUs and from being a holder thereof) will terminate automatically without any further action by the Company and will be forfeited without further notice and at no cost to the Company.
(b) Notwithstanding anything in the Grant Notice, this Agreement or the Plan to the contrary, the RSUs shall immediately become fully vested upon a Change in Control, so long as the Participant continuously provides services to the Company as a member of the Board from the Date of Grant through such event.
3. Dividend Equivalent Rights. In the event that the Company declares and pays a regular cash dividend in respect of its outstanding Shares (which, for clarity, does not include any extraordinary cash dividend), and, on the record date for such dividend, the Participant holds RSUs granted pursuant to this Agreement that have not been settled, the Company shall record in a bookkeeping account an amount equal to the cash dividends the Participant would have received if the Participant was the holder of record, as of such record date, of a number of Shares equal to the number of RSUs held by the Participant that have not been settled as of such record date (the “Dividend Equivalent Rights”). The Dividend Equivalent Rights will be subject to the same terms and conditions, including with respect to vesting, forfeiture and transferability, as the underlying RSUs. All amounts, if any, payable in respect of the Dividend Equivalent Rights will
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be paid to the Participant in cash (or, at the discretion of the Company, in Shares) on or following, but no later than 30 days after, the date the underlying RSU vests. For purposes of clarity, if any of the RSUs are forfeited by the Participant pursuant to the terms of this Agreement, then the Participant shall also forfeit the Dividend Equivalent Rights, if any, accrued with respect to such forfeited RSUs. No interest will accrue on the Dividend Equivalent Rights between the declaration and payment of the applicable dividends and the settlement of the Dividend Equivalent Rights.
4. Settlement of RSUs. As soon as administratively practicable following the vesting of RSUs pursuant to Section 2, but in no event later than 30 days after such vesting date, the Company shall deliver to the Participant a number of Shares equal to the number of RSUs subject to this Award. All Shares issued hereunder shall be delivered either by delivering one or more certificates for such Shares to the Participant or by entering such Shares in book-entry form, as determined by the Committee in its sole discretion. The value of Shares shall not bear any interest owing to the passage of time. Neither this Section 4 nor any action taken pursuant to or in accordance with this Agreement shall be construed to create a trust or a funded or secured obligation of any kind.
5. Tax Matters. To the extent that the receipt, vesting or settlement of this Award results in income (including compensation income) or wages (including via Dividend Equivalent Rights) to the Participant for federal, state, local and/or foreign tax purposes, the Company shall have the authority to deduct or withhold, or require the Participant to remit to the Company, an amount sufficient to satisfy all applicable federal, state, local and foreign taxes (including the employee portion of any Federal Insurance Contributions Act obligation) required by Applicable Law to be withheld with respect to any taxable event arising in connection with this Award. In furtherance of the forgoing, the Participant may make arrangements satisfactory to the Company regarding the payment of any income tax, social insurance contribution or other applicable taxes that are required to be withheld in respect of this Award, which arrangements include (if and to the extent permitted by the Company) the delivery of cash or cash equivalents, Shares (including previously owned Shares (which are not subject to any pledge or other security interest), net settlement, a broker-assisted sale, or other cashless withholding or reduction of the amount of shares otherwise issuable or delivered pursuant to this Award), other property, or any other legal consideration the Committee deems appropriate. If such tax obligations are satisfied through net settlement or the surrender of previously owned Shares, the maximum number of Shares that may be so withheld (or surrendered) shall be the number of Shares that have an aggregate Fair Market Value on the date of withholding or surrender equal to the aggregate amount of such tax liabilities determined based on the greatest withholding rates for federal, state, local and/or foreign tax purposes, including payroll taxes, that may be utilized without creating adverse accounting treatment for the Company with respect to this Award, as determined by the Committee. Any fraction of a Share required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash to the Participant. The Participant acknowledges that there may be adverse tax consequences upon the receipt, vesting or settlement of this Award or disposition of the underlying Shares and that the Participant has been advised, and hereby is advised, to consult a tax advisor. The Participant represents that the Participant is in no manner relying on the Board, the Committee, the Company or an Affiliate or any of their respective managers, directors, officers, employees or authorized representatives (including attorneys, accountants, consultants, bankers, lenders, prospective lenders and financial representatives) for tax advice or an assessment of such tax consequences.
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6. Non-Transferability. During the lifetime of the Participant, the RSUs may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Shares underlying the RSUs have been issued, and all restrictions applicable to such Shares have lapsed. Neither the RSUs nor any interest or right therein shall be liable for the debts, contracts or engagements of the Participant or the Participant’s successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means, whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.
7. Compliance with Applicable Law. Notwithstanding any provision of this Agreement to the contrary, the issuance of Shares hereunder will be subject to compliance with all applicable requirements of Applicable Law. No Shares will be issued hereunder if such issuance would constitute a violation of any Applicable Law. In addition, Shares will not be issued hereunder unless (a) a registration statement under the Securities Act is in effect at the time of such issuance with respect to the Shares to be issued or (b) in the opinion of legal counsel to the Company, the Shares to be issued are permitted to be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary for the lawful issuance and sale of any Shares hereunder will relieve the Company of any liability in respect of the failure to issue such Shares as to which such requisite authority has not been obtained. As a condition to any issuance of Shares hereunder, the Company may require the Participant to satisfy any requirements that may be necessary or appropriate to evidence compliance with any Applicable Law and to make any representation or warranty with respect to such compliance as may be requested by the Company.
8. Rights as a Stockholder. The Participant shall have no rights as a stockholder of the Company with respect to any Shares that may become deliverable hereunder unless and until the Participant has become the holder of record of such Shares, and no adjustments shall be made for dividends in cash or other property, distributions or other rights in respect of any such Shares, except as otherwise specifically provided for in the Plan or this Agreement.
9. Execution of Receipts and Releases. Any issuance or transfer of Shares or other property to the Participant or the Participant’s legal representative, heir, legatee or distributee, in accordance with this Agreement shall be in full satisfaction of all claims of such Person hereunder. As a condition precedent to such payment or issuance, the Company may require the Participant or the Participant’s legal representative, heir, legatee or distributee to execute (and not revoke within any time provided to do so) a release and receipt therefor in such form as it shall determine appropriate; provided that any review period under such release will not modify the date of settlement with respect to vested RSUs.
10. No Right to Continued Service or Awards. Nothing in the adoption of the Plan, nor the award of the RSUs thereunder pursuant to the Grant Notice and this Agreement, shall confer upon the Participant the right to a continued service relationship with, the Company or any Affiliate, or any other entity, or affect in any way the right of the Company or any such Affiliate, or any other entity to terminate such other service relationship at any time. The grant of the RSUs is a one-time benefit that was made at the sole discretion of the Company and does not create any contractual or other right to receive a grant of Awards or benefits in the future in lieu of Awards in the future. Any future Awards will be granted at the sole discretion of the Company.
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11. Notices. All notices and other communications under this Agreement shall be in writing and shall be delivered to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to the Company, unless otherwise designated by the Company in a written notice to the Participant (or other holder):
Applied Aerospace & Defense, Inc.
Attn: [__]
355 Quality Circle NW
Huntsville, AL 35806
If to the Participant, at the Participant’s last known address on file with the Company.
Any notice that is delivered personally or by overnight courier or telecopier in the manner provided herein shall be deemed to have been duly given to the Participant when it is mailed by the Company or, if such notice is not mailed to the Participant, upon receipt by the Participant. Any notice that is addressed and mailed in the manner herein provided shall be conclusively presumed to have been given to the party to whom it is addressed at the close of business, local time of the recipient, on the fourth day after the day it is so placed in the mail.
12. Consent to Electronic Delivery; Electronic Signature. In lieu of receiving documents in paper format, the Participant agrees, to the fullest extent permitted by law, to accept electronic delivery of any documents that the Company may be required to deliver (including, but not limited to, prospectuses, prospectus supplements, grant or award notifications and agreements, account statements, annual and quarterly reports and all other forms of communications) in connection with this and any other Award made or offered by the Company. Electronic delivery may be via a Company electronic mail system or by reference to a location on a Company intranet to which the Participant has access, or to the Participant’s account with the Company’s equity plan administrator. The Participant hereby consents to any and all procedures the Company has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Company may be required to deliver, and agrees that the Participant’s electronic signature is the same as, and shall have the same force and effect as, the Participant’s manual signature.
13. Agreement to Furnish Information. The Participant agrees to furnish to the Company all information requested by the Company to enable it to comply with any reporting or other requirement imposed upon the Company by or under any Applicable Law.
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14. Entire Agreement; Amendment. This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to the RSUs granted hereby. Without limiting the scope of the preceding sentence, except as provided therein, all prior understandings and agreements, if any, among the parties hereto relating to the subject matter hereof are hereby null and void and of no further force and effect. The Committee may, in its sole discretion, amend this Agreement from time to time in any manner that is not inconsistent with the Plan; provided, however, that except as otherwise provided in the Plan or this Agreement, any such amendment that materially reduces the rights of the Participant shall be effective only if it is in writing and signed by both the Participant and an authorized officer of the Company.
15. Severability and Waiver. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of such provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect. Waiver by any party of any breach of this Agreement or failure to exercise any right hereunder shall not be deemed to be a waiver of any other breach or right. The failure of any party to take action by reason of such breach or to exercise any such right shall not deprive the party of the right to take action at any time while or after such breach or condition giving rise to such rights continues.
16. Company Recoupment of Awards. The Participant’s rights with respect to this Award shall in all events be subject to (a) any right that the Company may have under any Company recoupment, clawback or similar policy or other agreement or arrangement with the Participant, and (b) any right or obligation that the Company may have regarding the clawback of “incentive-based compensation” under Section 10D of the Exchange Act and any applicable rules and regulations promulgated thereunder from time to time by the U.S. Securities and Exchange Commission or any other Applicable Law. The Participant’s acceptance of this Award will constitute the Participant’s acknowledgment of and consent to the Company’s application, implementation and enforcement of any Company recoupment, clawback or similar policy that may apply to the Participant and this Award, whether adopted before or after the Effective Date or Date of Grant (whether though clawback, cancellation, recoupment, rescission, payback, reduction or other similar action in accordance therewith) and any Applicable Law relating to clawback, cancellation, recoupment, rescission, payback or reduction of compensation or other similar action, and the Participant’s agreement that the Company may take any actions that may be necessary to effectuate any such policy or Applicable Law, without further consideration or action.
17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN, EXCLUSIVE OF THE CONFLICT OF LAWS PROVISIONS OF DELAWARE LAW.
18. Successors and Assigns. The Company may assign any of its rights under this Agreement without the Participant’s consent. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein and in the Plan, this Agreement will be binding upon the Participant and the Participant’s beneficiaries, executors, administrators and the Person(s) to whom the RSUs may be transferred by will or the laws of descent or distribution.
19. Headings; References; Interpretation. Headings are for convenience only and are not deemed to be part of this Agreement. The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole
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and not to any particular provision of this Agreement. All references herein to Sections shall, unless the context requires a different construction, be deemed to be references to the Sections of this Agreement. The word “or” as used herein is not exclusive and is deemed to have the meaning “and/or.” All references to “including” shall be construed as meaning “including without limitation.” Unless the context requires otherwise, all references herein to a law, agreement, instrument or other document shall be deemed to refer to such law, agreement, instrument or other document as amended, supplemented, modified and restated from time to time to the extent permitted by the provisions thereof. All references to “dollars” or “$” in this Agreement refer to United States dollars. Whenever the context may require, the singular form of nouns and pronouns shall include the plural and vice versa. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the parties hereto and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto.
20. Counterparts. The Grant Notice may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. Delivery of an executed counterpart of the Grant Notice by facsimile or portable document format (.pdf) attachment to electronic mail or via electronic acceptance in accordance with Section 12 shall be effective as delivery of a manually executed counterpart of the Grant Notice.
21. Section 409A. Notwithstanding anything in this Agreement, the Grant Notice or the Plan to the contrary, the RSUs granted pursuant to this Agreement are intended to be exempt from the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent. Notwithstanding the foregoing, the Company and its Affiliates make no representations that the RSUs provided under this Agreement are exempt from or compliant with Section 409A of the Code and in no event shall the Company or any Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with Section 409A of the Code.
[Remainder of Page Intentionally Blank]
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption “Experts” and to the use of our report dated March 16, 2026, in the Registration Statement (Form S-1) and related Prospectus of Applied Aerospace & Defense, Inc. dated May 26, 2026.
/s/ Ernst & Young LLP
Philadelphia, PA
May 26, 2026
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form S-1 of Applied Aerospace and Defense, Inc. of our report dated March 12, 2026, relating to the consolidated financial statements of Consolidated Boring, Inc. as of December 31, 2025 and for the year then ended, which appears in this Registration Statement.
We also consent to the reference to our firm under the caption “Experts” in this registration statement.
/s/ Barnes, Dennig & Co., Ltd.
Cincinnati, Ohio
May 26, 2026