13. Members’ Equity
Immediately after the Ashland Distribution Acquisition, TPG Accolade owned approximately 99.8% of Holdings, and the remaining approximately 0.2% was owned by management. Unregistered Series A units are sold to management of the Company under a subscription agreement, subject to certain transfer restrictions. Upon termination of employment, the Company may, in its sole discretion, elect to redeem unregistered Series A units previously sold to management. The repurchase price per unit is the fair market value of each unit, as determined by the established threshold value at the time of the redemption. Additionally, the Company may issue unregistered Series B units, which are also subject to certain restrictions, to certain officers and employees eligible to participate in the Company’s Equity Plan (see Note 11). The Series B units are profit interests designed to gain value only after Holdings has realized a certain level of returns for the holders of its Series A units and they are assigned a threshold value which is the fair value of the equity on a per-unit basis on the date of grant. Distributions will be made first to Series A unit holders until those holders have received a full return on their capital contributions to Holdings. Once Series A unit holders have received these amounts, the holders of Series B units will become eligible to receive distributions alongside the Series A unit holders in accordance with their sharing percentages after the threshold value for the respective Series B units has been realized. The Series A and B units not classified as Sponsor Units are subject to customary tag-along and drag-along rights, as well as a Company call right in the event of termination of employment.
Profits and losses are allocated among the members based upon the capital account balance of each member at the end of such taxable period equal to a hypothetical distribution that such member would receive assuming a hypothetical liquidation of the Company. Holders of Series A and B member units are not individually responsible for any liabilities of the Company and share equally in losses of the Company only to the extent of their investment.
The following table summarizes the Series A activity from March 31, 2011 (Predecessor), just prior to the Ashland Distribution Acquisition, through September 30, 2013:
|
|
|
Series A |
|
|
Balance March 31, 2011 (Predecessor) |
|
— |
|
|
Unregistered units sold to TPG Accolade (“Sponsor Units”) |
|
450,000,000 |
|
|
Unregistered units sold to management |
|
2,000,000 |
|
|
Repurchase of membership units |
|
(50,000 |
) |
|
Balance September 30, 2011 (Successor) |
|
451,950,000 |
|
|
Sponsor Units sold to TPG Accolade |
|
45,454,545 |
|
|
Unregistered units sold to management |
|
1,160,910 |
|
|
Repurchase of membership units |
|
(425,000 |
) |
|
Balance September 30, 2012 (Successor) |
|
498,140,455 |
|
|
Unregistered units sold to management |
|
190,908 |
|
|
Repurchase of membership units |
|
(170,000 |
) |
|
Balance September 30, 2013 (Successor) |
|
498,161,363 |
|
During the fiscal year ended September 30, 2013 and pursuant to various Subscription Agreements with Holdings and certain members of management subscribed to purchase 190,908 Series A Units. The Company received cash payments of $210 in connection with these subscribed purchases.
On September 7, 2012, the Company issued 45,454,545 Series A units to TPG Accolade in exchange for a $50,000 investment. The Company partially funded its equity contribution and intercompany loans to Nexeo Plaschem, its China joint venture, with this investment.
During the fiscal year ended September 30, 2012 and pursuant to various Subscription Agreements with Holdings and certain members of management subscribed to purchase 1,160,910 Series A Units. The Company received cash payments of $1,015 in connection with these subscribed purchases.
During the fiscal years ended September 30, 2013, 2012 and 2011, the Company repurchased 145,000, 425,000 and 50,000 unregistered Series A units, respectively, in connection with the termination of employment for certain members of management, for $212, $375 and $50, respectively. Additionally during the fiscal year ended September 30, 2013, the Company agreed to purchase 25,000 unregistered Series A units for approximately $30, which is included in “Accounts payable” in the consolidated balance sheet.
In accordance with the terms of Holdings’ amended and restated limited liability company agreement, the Company is required to make quarterly distributions to its members (or directly to a taxing authority on behalf of its members) in amounts equal to the estimated tax liability attributable to each member’s proportionate share of the Company’s taxable income. Such distributions are subject to the availability of funds, as determined by the Board of Directors. Holdings made tax distributions totaling $140 and $12,300 during the years ended September 30, 2013 and 2012, respectively. The Company did not make any tax distributions during the period from November 4, 2010 (inception) to September 30, 2011.