Filed Pursuant to Rule 424(b)(5)
Registration No. 333-221935
The information in this preliminary prospectus supplement and the
accompanying prospectus is not complete and may be changed. This preliminary prospectus supplement and the accompanying prospectus are not an offer to sell these securities and are not soliciting an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus Supplement dated October 1, 2020
P R O S P E C T U S S U P P L E M E N T
(To prospectus dated December 7, 2017)
$400,000,000
Central Garden & Pet Company
% Senior Notes due 2030
We are offering $400,000,000 aggregate principal amount of % Senior Notes due 2030, which we refer to as the
notes. We will pay interest on the notes
on and of
each year, beginning , 2021. The notes will mature
on , 2030. We may redeem some or all of the notes at any time on or
after , 2025, at redemption prices described in this prospectus supplement, plus accrued and unpaid interest, if any, to, but
excluding, the redemption date. We may also redeem up to 40% of the notes using the proceeds of certain equity offerings before ,
2023, at a redemption price equal to % of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior
to , 2025, we may redeem some or all of the notes at a price equal to 100% of the principal amount thereof, plus a
make-whole premium plus accrued and unpaid interest, if any, to, but excluding, the redemption date. If we sell certain of our assets and do not reinvest the proceeds or repay senior debt or experience specific kinds of changes of
control, we must offer to purchase the notes. See Description of Notes.
Certain of our existing and future domestic restricted
subsidiaries that borrow or guarantee indebtedness under our senior secured revolving credit facility (as defined below) or guarantee our other debt or debt of another guarantor will guarantee the notes. The notes will be our unsecured senior
obligations and will rank equally in right of payment to all of our existing and future senior debt, including our existing senior notes (as defined below), and senior in right of payment to all of our future subordinated debt. The note guarantees
will rank equally in right of payment with all of our subsidiary guarantors existing and future senior debt, including their guarantees of our existing senior notes, and senior in right of payment to all of our subsidiary guarantors
future subordinated debt. The notes and the note guarantees will be effectively subordinated to all of our existing and future secured debt, including obligations under our senior secured revolving credit facility, to the extent of the value of the
collateral securing such debt. In addition, the notes will be structurally subordinated to the liabilities of our non-guarantor subsidiaries. The notes will be issued only in registered form in minimum
denominations of $2,000 and integral multiples of $1,000 in excess thereof.
There is no existing public market for the notes. We do not
intend to apply for a listing of the notes on any securities exchange or for inclusion of the notes in any automated dealer quotation system.
Investing in the notes involves risks that are described in the Risk Factors section beginning on
page S-16 of this prospectus supplement and page 2 of the accompanying prospectus.
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Per Note
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Total
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Public offering price (1)
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%
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$
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Underwriting discounts and commissions
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%
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$
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Proceeds, before expenses, to us (1)
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%
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$
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(1)
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Plus accrued interest
from , 2020, if settlement occurs after that date.
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Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined
if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only through the facilities of The Depository Trust Company for the accounts of its
participants, including Euroclear Bank S.A./N.V., as operator of the Euroclear System, and Clearstream Banking, société anonyme, on or
about , 2020.
Joint Book-Running
Managers
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BofA Securities
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J.P. Morgan
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Truist Securities
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Co-Managers
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BMO Capital Markets
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KeyBanc Capital Markets
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US Bancorp
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The date of this prospectus supplement
is , 2020.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PROSPECTUS
The notes are being offered for sale only in jurisdictions where it is lawful to make such offers. The
distribution of this prospectus supplement and the accompanying prospectus and the offering of the notes in certain jurisdictions may be restricted by law. Persons outside the United States who receive this prospectus supplement and the accompanying
prospectus should inform themselves about and observe any such restrictions. This prospectus supplement and the accompanying prospectus do not constitute, and may not be used in connection with, an offer or solicitation by anyone in any jurisdiction
in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or any person to whom it is unlawful
to make such offer or solicitation. See Underwriting.
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ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is the prospectus supplement, which describes the specific terms of the notes we are offering
and certain other matters relating to us and our financial condition. The second part, the accompanying prospectus, gives more general information about securities we may offer from time to time, some of which may not apply to the notes we are
offering hereby. You should read this prospectus supplement along with the accompanying prospectus, the documents incorporated by reference herein and therein, as well as any free writing prospectus that is filed, including the term sheet for the
notes we are offering. If the description of the offering varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement. Generally, when we refer to this prospectus, we
are referring to the prospectus supplement and the accompanying prospectus combined together with all documents incorporated by reference.
You should rely only on the information contained in or incorporated by reference into this prospectus supplement and the accompanying
prospectus and any related free writing prospectus. Neither we nor the underwriters have authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it.
Neither we nor the underwriters are making an offer to sell the notes in any jurisdiction where the offer or sale is not permitted.
You
should not assume that the information contained in or incorporated by reference into this prospectus supplement, the accompanying prospectus, and any related free writing prospectus, or any other offering materials is accurate as of any date other
than the date on the front of each document, regardless of the time of delivery of this prospectus supplement, the accompanying prospectus, any related free writing prospectus or any sale of the notes. Our business, financial condition, results of
operations and prospects may have changed since those respective dates.
NON-GAAP FINANCIAL MEASURES
In this prospectus supplement, we use the non-U.S. generally accepted accounting principles
(GAAP) financial measures of EBITDA and Adjusted EBITDA. See SummarySummary Historical Consolidated Financial Data. EBITDA and Adjusted EBITDA are not GAAP metrics and have important limitations as analytical tools. You
should not consider EBITDA and Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income and net cash provided by
operating activities and are defined differently by different companies in our industries, our definition of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. For a reconciliation of EBITDA and
Adjusted EBITDA to the most directly comparable GAAP measure and a discussion of our use of EBITDA and Adjusted EBITDA in this prospectus supplement, including the reasons that we believe this information is useful to management and investors, see
SummarySummary Historical Consolidated Financial Data.
FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and any free writing prospectus, including the documents incorporated by
reference, include forward-looking statements. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, plans or intentions
relating to acquisitions, our competitive strengths and weaknesses, our business strategy and the trends we anticipate in the industries in which we operate and other information that is not historical information. When used in this prospectus
supplement, the accompanying prospectus and any free writing prospectus, including the documents incorporated by reference, the words estimates, expects, anticipates, projects, plans,
intends, believes and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, our future earnings expectations, are
based upon our current expectations and
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various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them, but we cannot assure you that our expectations,
beliefs and projections will be realized.
There are a number of risks and uncertainties that could cause our actual results to differ
materially from the forward-looking statements contained in this prospectus supplement, the accompanying prospectus and any free writing prospectus, including the documents incorporated by reference. Important factors that could cause our actual
results to differ materially from the forward-looking statements we make in this prospectus supplement, the accompanying prospectus and any free writing prospectus, including the documents incorporated by reference, are set forth in this prospectus
supplement, the accompanying prospectus and any free writing prospectus, including the documents incorporated by reference, including the factors described in the section entitled Risk Factors herein and in the documents incorporated by
reference. If any of these risks or uncertainties materializes, or if any of our underlying assumptions is incorrect, our actual results may differ significantly from the results that we express in, or imply by, any of our forward-looking
statements. We do not undertake any obligation to revise these forward-looking statements to reflect future events or circumstances, except as required by law. Presently known risk factors include, but are not limited to, the following factors:
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the impact of the COVID-19 pandemic on our business, including but not
limited to, the impact on our workforce, operations, supply chain, demand for our products and services, and our financial results and condition;
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our ability to successfully manage the challenges associated with the
COVID-19 pandemic;
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seasonality and fluctuations in our operating results and cash flow;
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fluctuations in market prices for seeds and grains and other raw materials;
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our inability to pass through cost increases in a timely manner;
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our dependence upon our key executives;
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risks associated with new product introductions, including the risk that our new products will not produce
sufficient sales to recoup our investment;
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fluctuations in energy prices, fuel and related petrochemical costs;
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declines in consumer spending during economic downturns;
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inflation, deflation and other adverse macro-economic conditions;
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supply shortages in pet birds, small animals and fish;
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adverse weather conditions;
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risks associated with our acquisition strategy;
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access to and cost of additional capital;
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dependence on a small number of customers for a significant portion of our business;
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impacts of tariffs or a trade war;
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consolidation trends in the retail industry;
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competition in our industries;
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potential goodwill or intangible asset impairment;
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continuing implementation of an enterprise resource planning information technology system;
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our inability to protect our trademarks and other proprietary rights;
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potential environmental liabilities;
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risk associated with international sourcing;
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litigation and product liability claims;
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the impact of product recalls;
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potential costs and risks associated with actual or potential cyber attacks;
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the impact of new accounting regulations and the U.S. Tax Cuts and Jobs Act (the Tax Reform Act) on
our tax rate;
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our ability to recover asset and business interruption losses caused by the recent fires at our DMC facility in
Texas;
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the voting power associated with our Class B stock; and
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potential dilution from issuance of authorized shares.
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Readers should carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the
SEC). For information about how to obtain a copy of these reports or other documents that we file with the SEC, see Where You Can Find More Information.
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MARKET, RANKING AND OTHER DATA
The data included or incorporated by reference in this prospectus supplement and the accompanying prospectus, including the documents
incorporated by reference, regarding markets and ranking, including the size of certain markets and our position and the position of our competitors and products within these markets, are based on both independent industry publications, including
Packaged Facts Lawn and Garden Consumables, 10th edition, October 2019; The Freedonia Group Landscaping Products, May 2019; 2019 National Gardening Survey; The Freedonia Group Live Goods: Plants, Trees and Shrubbery, June 2019; TechNavio Outdoor
Cushions Market in the US, October 2019; Packaged Facts U.S. Pet Market Outlook, 2019-2020, February 2019; Packaged Facts Pet Treats and Chews in the U.S., 3rd Edition, September 2019; Packaged Facts Durable Dog and Cat Petcare Products 2nd Edition,
October 2018; Packaged Facts Pet Medications in the U.S., 6th Edition July 2019; Packaged Facts Fish, Small Animal, Reptile and Bird Product: U.S. Pet Market Trends & Opportunities, February 2018; Packaged Facts Pet Food in the U.S. 14th
Edition, December 2018; American Pet Products Association (APPA) National Pet Owners Survey 2018-2019; U.S. Census Bureau; and our estimates based on managements knowledge and experience in the markets in which we operate. Our estimates have
been based on information provided by customers, suppliers, trade and business organizations and other contacts in the markets in which we operate. While we are not aware of any misstatements regarding our market and ranking data presented herein,
our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading Risk Factors in this prospectus supplement. This information may prove to be inaccurate because
of the method by which we obtained some of the data for our estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data
gathering process and other limitations and uncertainties inherent in a survey of market size. As a result, you should be aware that market, ranking and other similar data included in this prospectus supplement or incorporated by reference herein,
and estimates and beliefs based on that data, may not be reliable. Neither we nor the underwriters can guarantee the accuracy or completeness of such information contained in or incorporated by reference into this prospectus supplement.
TRADEMARKS, SERVICE MARKS AND TRADE NAMES
We own or have rights to use trademarks, service marks and trade names in connection with the operation of our business. In addition, our
names, logos and website names and addresses are or include our service marks or trademarks. Other trademarks, service marks and trade names appearing in this prospectus supplement are the property of their respective owners. Solely for convenience,
some of the trademarks, service marks and trade names referred to in this prospectus supplement and the accompanying prospectus, including the documents incorporated by reference, may be listed without the ®, or SM symbols, but the
absence of such symbol does not indicate the registration status of the trademarks, service marks or trade names, and is not intended to indicate, in any way, that we (or the respective licensor) will not assert, to the fullest extent under
applicable law, our rights or the right of the applicable licensor to these trademarks, service marks and trade names.
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SUMMARY
This summary highlights the information contained elsewhere in, or incorporated by reference into, this prospectus supplement and the
accompanying prospectus. Because this is only a summary, it does not contain all of the information that may be important to you. For a more complete understanding of this offering, we encourage you to read this entire prospectus supplement, the
accompanying prospectus and documents to which we refer you. Except as otherwise required by the context or as to otherwise noted, as used in this prospectus supplement, references to Central, the Company, we,
us, our and similar phrases are to Central Garden & Pet Company and its consolidated subsidiaries.
Our Company
Central is a leading innovator, producer and distributor of branded and private label products for the lawn & garden and pet
supplies markets in the United States. The total annual retail sales of the pet food, treats & chews, supplies and live animal industry in 2018 was estimated by Packaged Facts and the pet industry to have been approximately
$51.9 billion. We estimate the annual retail sales of the pet supplies, live animal, and treats & chews and natural pet food markets in the categories in which we participate to be approximately $27.4 billion. The total lawn and
garden consumables, decorative products, live plant and outdoor cushions and pillows industry in the United States is estimated by Packaged Facts, The Freedonia Group and TechNavio to have been approximately $23.3 billion in annual retail sales
in 2018, including fertilizer, pesticides, growing media, seeds, mulch, other consumables, decorative products, live plants and outdoor cushions and pillows. We estimate the annual retail sales of the lawn and garden consumables, decorative products
and live plant markets in the categories in which we participate to be approximately $16.3 billion.
Our pet supplies products
include products for dogs and cats, including edible bones, premium healthy edible and non-edible chews, natural dog and cat food and treats, toys, pet carriers, grooming supplies and other accessories;
products for birds, small animals and specialty pets, including food, cages and habitats, toys, chews and related accessories; animal and household health and insect control products; live fish and products for fish, reptiles and other
aquarium-based pets, including aquariums, furniture and lighting fixtures, pumps, filters, water conditioners, food and supplements, and information and knowledge resources; and products for horses and livestock. These products are sold under the
brands including Adams, Aqueon®, Avoderm®, C&S Products®, Cadet®, Farnam®, Four
Paws®, Kaytee®, K&H Pet Products®, Nylabone®, Pinnacle®, TFH,
Zilla® as well as a number of other brands including Altosid®, Comfort Zone®,
Coralife®, Interpet®, Pet Select® and Zodiac®.
Our lawn and garden supplies products include proprietary and non-proprietary grass seed; wild bird feed, bird feeders, bird houses and other birding accessories; weed, grass, and other herbicides, insecticide and pesticide products; fertilizers; and decorative outdoor
lifestyle products including pottery, as well as live plants and outdoor cushions and pillows. These products are sold under the brands AMDRO®, Arden Companies, Ironite®, Pennington®, and
Sevin®, as well as a number of other brand names including Lilly Miller®, Over-N-Out®, Smart Seed® and The
Rebels®.
Competitive Strengths
We believe we have a number of competitive strengths, which serve as the foundation of our business strategy, including the following:
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Market Leadership Positions Built on a Strong Brand Portfolio. We are one of the leaders in the U.S. pet
supplies market and in the U.S. consumer lawn and garden supplies market. We have a diversified portfolio of brands, many of which we believe are among the leading brands in their respective U.S. market categories. The majority of our brands have
been marketed and sold for more than 30 years.
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History of Innovative New Products and Customer Service. We continuously seek to introduce new products,
both as complementary extensions of existing product lines and in new product categories. Over the last two years, we have received a number of awards for innovation, customer service and marketing.
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Innovation
For
innovation in 2019, Kaytee won the Pet Age Magazine Readers Top Choice Award for its Extreme Odor Control Bedding. Kaytee also won the Pet Business Magazine Industry Recognition Award for its Premium Timothy Hay Treats. Additionally, Zilla won
second place at Global Pet Expo for the Zilla Bow Front Opening Terrarium.
In 2018, Kaytee won the Pet Business Industry award in the
small animal toys category, both Global Pet Expo and Super Zoo awards in the small animal category for new product with Premium Timothy Hay Treats, and Pet Valus Best New Product in Small Pet award; Zilla won a Global Pet and Super Zoo award
for the Reptile Spring Cave Accessory and a Super Zoo award for vertical decor; and for the second consecutive year, Aqueon won Pet Valus Best New Product award for the Neo Glow fish tank. Also in 2018, Farnams Super Mask won
EquineSeniors.coms Good-Horsekeeping award for Best Fly Mask with Ears.
Customer Service
For customer service, C&S Products has been an A+ vendor for ACE Hardware for the past 10 years and an A vendor
at Menards for over six years. In 2019, Kaytee was awarded the inaugural vendor of the year award for the total Farm/Pet category by Fleet Farm for operational excellence,
best-in-class customer service and its top-to-top partnership and collaboration in
supporting Fleet Farms initiatives.
In 2018, the Garden segment was recognized by Lowes for the third consecutive year as
its Lawn & Garden Supplier of the Year. In 2018, the Pet segment won Petcos Strategic Initiative Vendor in Companion Animal and Pet Valus awards for Highest Sales Service Level and Highest Year over Year Sales Growth in
Aquatic & Reptile.
Marketing
In 2019, Segrest won the Most Innovative Brick & Mortar Differentiator award at Global Pet Expo for its synergistic work with
Petsense and Casco as well as a number of Centrals brands to introduce live animals to their stores. In 2019 and 2018, Central won numerous Equine media awards from American Horse Publications and National Animal Supplement Councils
Visibility Awards for advertising, marketing, multimedia ads, social media campaigns, print and education of customers and the industry.
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Strong Relationships with Retailers. We have developed strong relationships with major and independent
brick & mortar and e-commerce retailers providing them broad product offerings including new product innovation, premium brands, private label programs, proprietary sales and logistics capabilities
and a high level of customer service. Major retailers value the efficiency of dealing with suppliers with national scope and strong brands. We believe our ability to meet their unique needs for packaging and point of sale displays provides us with a
competitive advantage. Independent retailers value our high level of customer service and broad array of premium branded products. We believe these strengths have assisted us in becoming one of the largest pet supplies vendors to PetSmart, PETCO and
Walmart and among the largest lawn and garden supplies vendors
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to Walmart, Home Depot and Lowes, and the club and mass merchandise channels, as well as a leading supplier to independent pet and garden supplies retailers in the United States.
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Favorable Long-Term Industry Characteristics. We believe the U.S. pet supplies market will grow over the
long term due to favorable demographic and leisure trends. The key demographics bolstering our markets are the growth rates in the number of millennials who now account for 31% of pet owners and account for the largest percentages of small animal,
reptile and saltwater fish owners. According to the 20182019 APPA National Pet Owners Survey, the number of U.S. pet owners has remained fairly consistent in recent years with 67% of all households owning a pet. In addition, many pet supplies
products (e.g., toys, pest control, grooming supplies, beds, bedding, and collars, etc.) are routinely consumed and replenished. As many as 45% of dog owners and 36% of cat owners reported purchasing treats in the past 30 days.
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We believe that gardening is one of the most popular leisure activities in the United States. According to the
National Gardening Survey, nearly three-quarters of U.S. households participated in some kind of lawn and garden activity in 2018 with participation by 18-34 year-old
households accounting for one-quarter of spending. Participation is highest amongst married households, households with children, and those persons making $100,000 or more per year. The 18-34 demographic participation percentage is projected by the U.S. Census Bureau to remain consistent for the foreseeable future. The 2019 National Gardening Survey also notes that the trends of more people
gardening in their yards, container gardening, food gardening and organic gardening are examples of wider interest in a rapidly changing industry. We view the long-term outlook for this market as staying intact and showing slow positive growth.
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Sales and Logistics Networks. We are a leading supplier to independent specialty retailers for the pet and
lawn and garden supplies markets through our sales and logistics networks. We believe our sales and logistics networks give us a significant competitive advantage over other suppliers. These networks provide us with key access to independent pet
specialty retail stores and retail lawn and garden customers that require two-step distribution facilitating:
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acquisition and maintenance of shelf placement;
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prompt product replenishment;
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customization of retailer programs;
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quick responses to changing customer and retailer preferences;
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rapid deployment and feedback for new products; and
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immediate exposure for new internally-developed and acquired brands.
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We plan to continue to utilize our team of dedicated sales people and our sales and logistics networks to expand sales of our branded
products.
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Business Strategy
Our objective is to grow revenues, profits and cash flows by enhancing our position as one of the leading companies in the U.S. pet supplies
and lawn and garden supplies industries. We seek to do so by developing new products, increasing market share, acquiring businesses and working in partnership with our customers to grow the categories in which we participate. To achieve our
objective, we plan to capitalize on our strengths and favorable industry trends by executing on the following key strategic pillars to drive our growth:
Accelerate the Growth Momentum of Our Portfolio.
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We are managing each business differentially, based on clearly articulated strategies that define the role of
each business within our portfolio. We have assessed the profitability and growth potential of each of our businesses. All businesses have a clear role in the portfolio and a strategy that is consistent with that role. Some of our businesses are
managed to optimize top-line growth, whereas others are more focused on reducing costs and maximizing operating income. We have three-year pipelines in both innovation activities and cost saving initiatives
intended to ensure we have the pieces in place to deliver the organic growth targeted for our businesses.
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We are building out our portfolio in attractive, broadly-defined Pet & Garden markets. We seek to
acquire businesses that are accretive to our growth. Our M&A model is one of our key strengths. Since 1992, we have completed over 50 acquisitions to create a company of approximately $2.4 billion in sales. In the last two years, we have
acquired four new businesses including entering into the live plant and outdoor seat cushion businesses. We are patient and disciplined value buyers, typically focused on opportunities in the garden and pet areas. However, we are open to any
business which can leverage our capabilities and allow us to add value through our low-cost manufacturing capabilities, operating synergies, or strong distribution network. We generally prefer to acquire
businesses with proven, seasoned management teams, who are committed to stay with the acquired business after closing. We have been successful in growing our acquisitions organically after acquiring them into our portfolio. We continually review our
businesses to ensure they can meet our expectations and, in some cases, have implemented strategies to reverse sub-par performance. We are also committed to exiting businesses where we cannot find a path to
profitability and have done so in the past, for example the portion of the pottery business we exited in fiscal 2019.
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Keep the
Core Healthy.
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We are building on our strong customer relationships by developing and executing winning category growth
strategies. We produce both branded products and private label products for our customers as well as distribute third party brands that give our retail partners an unparalleled breadth of selection of premium and value products. We reinvest some of
our annual cost savings in demand creation to help us drive sustainable organic growth and build share.
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To grow, we are also seeking to develop more differentiated and more defensible new products. We are doing so by
continuously striving to get a deeper understanding of our consumers, comprehending what products and features they desire and how they make their purchase decisions. We are increasing our overall investment in consumer insights and research and
development in order to achieve our innovation goals with a strong pipeline of new products.
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Build Digital Capabilities for
Competitive Advantage and a Compelling Consumer Experience.
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We are freeing up our businesses in e-commerce by ensuring we have the
right policies, products, and programs to allow all channels to compete effectively. We recognize that consumers are
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increasingly researching, if not buying products on-line, and hence we are advancing our digital capabilities. One key area is in marketing communication
where we are working to better reach consumers at key points in their path to purchase with advanced capabilities in search engine optimization, reputation management and social listening to name a few. Concurrently, we are optimizing our supply
chain for high-demand e-commerce items to ensure customer and consumer availability requirements are met at optimal cost. Finally, we are also expanding our data analytics capability to improve and accelerate
business insight. In a marketplace that is moving very quickly, fast decision-making is important to gaining a competitive advantage.
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Drive Cost Savings and Productivity Improvements to Fuel Growth.
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Optimizing our supply chain footprint is a priority as we seek to become more efficient and cost-effective.
Having the right facilities in the right locations is critical to both lowering costs and enabling our businesses to meet the growth demands of our existing and new customers, from both our legacy and acquired businesses. In addition, while we value
being a decentralized company, we believe we have significant opportunities to improve our performance by driving processes and programs to allow us to align for scale and share best practices. The initiatives, along with our systematic cost savings
programs being driven by each business unit, should enable the overall company to reduce our cost of goods sold and administrative spending by 1% to 2% annually.
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Attract, Retain and Develop Exceptional Employees.
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We have approximately 5,800 employees in over 100 locations. We believe people work at Central because they love
the categories in which we operate and that creates a passionate and effective group. We also have a strong leadership team representing a mix of successful entrepreneurs and classically trained consumer products executives. We place an emphasis on
helping our employees develop their skills and focus on succession planning to ensure we can grow sustainably year-after-year.
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Recent Developments
COVID-19 Impact
We have seen the effects COVID-19 is
having globally on human health, the economy and society at large. The impact of COVID-19 and measures to prevent its spread are affecting our business in a number of ways. Central is considered an essential
business in most jurisdictions and almost all of our employees continue to work to meet essential needs. We have been actively addressing the COVID-19 situation and its impact on our employees and business.
From the beginning, our priority has been the safety of our employees, customers and consumers. We are proud of all that our employees
have done to prioritize the health and safety of fellow team members while collaborating across the business to ensure we operate as safely and seamlessly as possible in order to provide a steady supply of product to our customers. To that end, we
mobilized a cross-functional task force focused on understanding and communicating the critical issues related to the COVID-19 pandemic to mitigate the potential impacts to our people and business. The Central
team has had a relatively small number of COVID-19 cases, and our facility maintenance of health and safety standards remains paramount.
Our teams have worked hard to do the following:
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ensure constant communication and regularly share pertinent information around health, safety and benefits;
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take extra precautions in our manufacturing facilities, distribution centers and offices with guidance from
health authorities including social distancing, staggering shifts, procuring necessary personal protection equipment, partitions, sanitation supplies and investing in regular deep cleanings of our facilities;
|
|
|
|
implement travel restrictions and work-from-home policies for employees who have the ability to work from home in
accordance with shelter-in-place orders; and
|
|
|
|
adhere to all local, state and federal requirements.
|
Central is experiencing varying impacts to our Garden and Pet businesses due to COVID-19. In March and
April, we experienced increased demand in pet consumables due to consumers stocking up on products as the COVID-19
shelter-in-place mandates were implemented. We also saw reduced consumption on other items, such as live fish and live plants, due to
in-store curtailments of foot traffic and limited access to outdoor garden departments. In May, many state and county governments began phased reopenings of their local economies. Access to outdoor garden
departments resulted in increased demand for our products in May and June. Additionally, during shelter-in-place requirement periods, pet ownership significantly
increased and sales continued to increase in May and June across our Pet segment portfolio. We also continue to see a rapid increase in demand in the e-commerce channel.
Our facilities have largely been exempt or partially exempt from government closure orders. We have experienced temporary closures of certain
facilities, though there has not been a material impact from a plant closure to date. At some of our facilities, we have experienced reduced productivity and increased employee absences, which we expect to continue during the current pandemic. All
of our manufacturing facilities and distribution centers are currently open and fully operational. We have incurred and will continue to incur additional costs including personal protective equipment and sanitation costs. The pandemic and near-term
increase in demand have created operational challenges for our distribution network and impacted our ability to meet our normal fill rate standards. Our supply chain has been impacted by the rapid increase in demand, and it is possible we will
experience increased operational and logistics costs, although these did not have a material impact on our third fiscal quarter results. We may also experience additional disruptions in our supply chain as the pandemic continues, although we cannot
reasonably estimate the potential impact or timing of those events, and we may not be able to mitigate such impact.
We believe we are
financially strong and expect to be able to maintain adequate liquidity as we manage through the current economic and health environment. As of June 27, 2020, we had approximately $500 million in cash. We also have a revolving credit
facility that provides up to a $400 million principal amount with an additional $200 million available with the consent of the lenders. In April 2020, we borrowed $200 million under our senior secured revolving credit facility to
increase financial flexibility during the early stages of the COVID-19 pandemic. In June 2020, we repaid the $200 million. As of June 27, 2020, there were no borrowings outstanding under the Credit
Facility.
We anticipate many small customers may permanently close, and we may experience collection delinquencies as customers seek to
preserve liquidity. Additionally, we have small company equity method investments, intangible assets and other long-lived assets whose value is dependent on cashflows. These investments and other assets could be impacted by the COVID-19 pandemic and, therefore, may be more susceptible to impairment. Managements assessment of possible asset impairment involves numerous assumptions that involve significant judgment. As a result of the
uncertainties associated with the COVID-19 pandemic, the shelter-in-place orders and the
post-COVID-19 economic recovery, these factors will be even more difficult to estimate. We recorded an impairment charge of $3.6 million in our third fiscal quarter and may be required to write off
certain assets that could be material in future periods.
S-6
As a result of the COVID-19 pandemic and its current
impact on society and the global economic environment, our work on developing our Vision 2025 strategy has been slowed, and we now expect to communicate that strategy in late 2020.
While the unfavorable impact of COVID-19 began to adversely affect the performance in certain portions
of our portfolio in March and April, in May and June we saw a large increase in demand in most areas of our portfolio which resulted in a 16.5% increase in organic net sales in our third fiscal quarter. A few of our businesses continue to experience
demand or profitability headwinds. These businesses include our live animal, live plant, pet bedding and aquatics businesses. The volatility in demand, changing consumer consumption patterns and uncertainty regarding the duration of shelter-in-place requirements make it difficult to predict when more normal order patterns may return. Forecasting and planning remain challenging in the current environment.
In the current uncertain environment, our employees, customers and consumers will continue to be our priority as we manage our business to deliver long-term growth.
Organizational Structure
The chart
below is a summary of our organizational structure and illustrates our long-term debt after giving effect to this offering and the application of the net proceeds therefrom as described under Use of Proceeds.
(1)
|
As of June 27, 2020, there were no borrowings outstanding and no letters of credit outstanding under our
$400 million senior secured revolving credit facility. See Description of Certain Indebtedness. Because the borrowing capacity under the senior secured revolving credit facility depends, in part, on the value of assets that
fluctuate from time to time, such amount may not reflect actual borrowing capacity. In addition, the senior secured revolving credit facility provides for additional availability up to $200 million with the consent of the lenders thereunder.
|
(2)
|
Certain of our existing and future domestic restricted subsidiaries that borrow or guarantee indebtedness under
our senior secured revolving credit facility or guarantee our other indebtedness or indebtedness of another guarantor will guarantee the notes.
|
(3)
|
For the 12 months ended June 27, 2020, our non-guarantor
subsidiaries represented approximately 8% of our net sales, less than 1% of our operating income and approximately 2% of our Adjusted EBITDA. As of
|
S-7
|
June 27, 2020, our non-guarantor subsidiaries represented approximately 6% of our total assets and had approximately $35 million of our total
liabilities, including debt, trade payables and lease obligations, but excluding intercompany liabilities.
|
Corporate Information
We were incorporated in Delaware in May 1992 as the successor to a California corporation that was incorporated in 1955. Our
executive offices are located at 1340 Treat Boulevard, Suite 600, Walnut Creek, California 94597, and our telephone number is (925) 948-4000. Our website is www.central.com. The information on, or accessible
through, our website is not incorporated by reference in this prospectus supplement.
S-8
THE OFFERING
The summary below describes the principal terms of the notes and is not intended to be complete. Some of the terms and conditions described
below are subject to important limitations and exceptions. The Description of Notes section of this prospectus supplement contains a more detailed description of the terms and conditions of the notes and the note guarantees.
Issuer
|
Central Garden & Pet Company
|
Securities Offered
|
$400.0 million aggregate principal amount of % Senior Notes due 2030.
|
Interest Rate
|
% per year.
|
Interest Payment Dates
|
and , commencing
, 2021. Interest will accrue from
, 2020.
|
Optional Redemption
|
The notes will be redeemable at our option, in whole or in part, at any time on or after , 2025, at the redemption
prices set forth in this prospectus supplement, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.
|
|
At any time prior to , 2023, we may redeem up to 40% of the original aggregate principal
amount of the notes with the proceeds of certain equity offerings at a redemption price of % of the principal amount of the notes, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.
|
|
At any time prior to , 2025, we may also redeem some or all of the notes at a price equal to
100% of the principal amount of the notes plus a make-whole premium, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption.
|
|
See Description of NotesRedemption.
|
Change of Control Offer
|
Upon the occurrence of specific kinds of changes of control, you will have the right, as holders of the notes, to cause us to repurchase some or all of your notes at 101% of their face amount, plus accrued and unpaid interest, if any, to, but
excluding, the repurchase date. See Description of NotesChange of Control.
|
Asset Sales Offer
|
If we or any of our restricted subsidiaries sell assets, under certain circumstances, we will be required to use the net proceeds to make an offer to purchase notes at an offer price in cash in an amount equal to 100% of the principal amount of
the notes, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date. See Description of NotesCertain CovenantsLimitation on Asset Sales.
|
S-9
Guarantees
|
The notes will be unconditionally guaranteed on a senior unsecured basis by each of our existing and future domestic restricted subsidiaries that borrow or guarantee indebtedness under our senior secured revolving credit facility or guarantee
our other indebtedness or indebtedness of another guarantor. If we cannot make payments on the notes when they are due, the guarantors must make them instead. Under certain circumstances, subsidiary guarantors may be released from their note
guarantees without the consent of the holders of notes. See Description of NotesGuarantees.
|
|
For the 12 months ended June 27, 2020, our non-guarantor subsidiaries:
|
|
|
|
represented approximately 8% or our net sales;
|
|
|
|
represented less than 1% of our operating income; and
|
|
|
|
represented approximately 2% of our Adjusted EBITDA.
|
|
As of June 27, 2020, our non-guarantor subsidiaries:
|
|
|
|
represented approximately 6% of our total assets; and
|
|
|
|
had approximately $35 million of our total liabilities, including debt, trade payables and lease
obligations, but excluding intercompany liabilities.
|
Ranking
|
The notes and the note guarantees will be our and the subsidiary guarantors unsecured senior obligations. Accordingly, they will:
|
|
|
|
be effectively subordinated to our and the guarantors existing and future secured debt, including
obligations under our senior secured revolving credit facility, to the extent of the value of the collateral securing such debt;
|
|
|
|
rank equally in right of payment with all our and the guarantors future senior debt, including our existing
senior notes;
|
|
|
|
rank senior in right of payment to any of our and the guarantors existing and future subordinated debt; and
|
|
|
|
be structurally subordinated to all of the existing and future liabilities (including trade payables) of our
subsidiaries that do not guarantee the notes.
|
|
As of June 27, 2020, after giving effect to this offering and the use of proceeds therefrom, we would have had $690.8 million of total indebtedness (including the notes). In addition, as of June 27,
2020, there was approximately $400.0 million of undrawn availability under our senior secured revolving credit facility, with additional availability up to $200.0 million with the consent of the lenders thereunder, all of which will rank
senior to the notes and the note guarantees.
|
S-10
|
Because the borrowing capacity under the senior secured revolving credit facility depends, in part, on the value of assets that fluctuate from time to time, the available commitment amount may not reflect actual
borrowing capacity.
|
Covenants
|
The indenture governing the notes will, among other things, limit our and the ability of our restricted subsidiaries to:
|
|
|
|
incur additional indebtedness or guarantee indebtedness;
|
|
|
|
pay dividends or make other distributions or repurchase or redeem our capital stock;
|
|
|
|
prepay, redeem or repurchase certain debt;
|
|
|
|
issue certain preferred stock or similar equity securities;
|
|
|
|
make loans and investments;
|
|
|
|
enter into transactions with affiliates;
|
|
|
|
enter into agreements restricting our subsidiaries ability to pay dividends; and
|
|
|
|
consolidate, merge or sell all or substantially all of our assets.
|
|
These covenants will be subject to a number of important exceptions and qualifications.
|
|
If the notes are assigned an investment grade rating from at least two of Fitch Ratings, Inc., S&P Global Ratings and Moodys Investors Service, Inc., subject to certain conditions, many of these covenants will
be suspended.
|
|
For more details, see Description of Notes.
|
Absence of Public Market for the Notes
|
The notes are a new issue of securities and there is currently no established trading market for the notes. The underwriters have advised us that they presently intend to make a market in the notes. However, they are not obligated to do so, and
any market making may be discontinued without notice. We do not intend to apply for a listing of the notes on any securities exchange or an automated dealer quotation system. Accordingly, there can be no assurance as to the development or liquidity
of any market for the notes.
|
S-11
Use of Proceeds
|
We intend to use the net proceeds from this offering, together with cash on hand, to redeem our outstanding 6.125% senior notes due 2023, including the payment of accrued interest and premium on such notes and related expenses. See Use of
Proceeds.
|
Risk Factors
|
Investing in the notes involves substantial risk. In evaluating an investment in the notes, prospective investors should carefully consider, along with the other information contained in, or incorporated by reference into, this prospectus
supplement and the accompanying prospectus, the specific factors set forth under Risk Factors for risks involved with an investment in the notes.
|
S-12
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table contains summary historical financial data derived from our audited consolidated financial statements as of
September 28, 2019 and September 29, 2018 and for the fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017, and summary historical financial data derived from our unaudited condensed consolidated
financial statements as of June 27, 2020 and for the nine months ended June 27, 2020 and June 29, 2019, all included in our Annual Report on Form 10-K for the fiscal year ended
September 28, 2019, and our Quarterly Report on Form 10-Q for the quarter ended June 27, 2020 incorporated by reference into this prospectus supplement. The balance sheet data derived from our
audited consolidated financial statements as of September 30, 2017 and from our unaudited condensed consolidated financial statements as of June 29, 2019 are not included or incorporated by reference into this prospectus supplement. The
unaudited financial data for the 12 months ended June 27, 2020 have been derived by adding our financial data for the fiscal year ended September 28, 2019, to the financial data for the nine months ended June 27, 2020, and subtracting
the financial data for the nine months ended June 29, 2019. This summary financial data is not necessarily indicative of the results of future operations and should be read in conjunction with Managements Discussion and Analysis of
Financial Condition and Results of Operations and our consolidated financial statements and related notes incorporated by reference into this prospectus supplement.
Our unaudited financial statements have been prepared on the same basis as our audited financial statements and, in our opinion, reflect all
adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of this data in all material respects. The results for any interim period are not necessarily indicative of the results that may be expected for a
full year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 Months
Ended
June 27,
2020
|
|
|
Nine Months Ended
|
|
|
Fiscal Year Ended
|
|
|
|
June 27,
2020
|
|
|
June 29,
2019
|
|
|
September 28,
2019
|
|
|
September 29,
2018
|
|
|
September 30,
2017
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations
Data(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,560,284
|
|
|
$
|
2,019,540
|
|
|
$
|
1,842,266
|
|
|
$
|
2,383,010
|
|
|
$
|
2,215,362
|
|
|
$
|
2,054,478
|
|
Cost of goods sold and occupancy
|
|
|
1,811,317
|
|
|
|
1,419,097
|
|
|
|
1,286,749
|
|
|
|
1,678,969
|
|
|
|
1,539,986
|
|
|
|
1,421,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
748,967
|
|
|
|
600,443
|
|
|
|
555,517
|
|
|
|
704,041
|
|
|
|
675,376
|
|
|
|
632,808
|
|
Selling, general and administrative
expenses(2)(3)
|
|
|
565,294
|
|
|
|
427,633
|
|
|
|
414,312
|
|
|
|
551,973
|
|
|
|
508,040
|
|
|
|
476,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
183,673
|
|
|
|
172,810
|
|
|
|
141,205
|
|
|
|
152,068
|
|
|
|
167,336
|
|
|
|
156,112
|
|
Interest expense
|
|
|
(43,907
|
)
|
|
|
(33,223
|
)
|
|
|
(31,930
|
)
|
|
|
(42,614
|
)
|
|
|
(39,196
|
)
|
|
|
(28,209
|
)
|
Interest income
|
|
|
6,363
|
|
|
|
3,779
|
|
|
|
6,970
|
|
|
|
9,554
|
|
|
|
3,145
|
|
|
|
147
|
|
Other (expense) income, net(4)
|
|
|
(4,460
|
)
|
|
|
(4,215
|
)
|
|
|
488
|
|
|
|
243
|
|
|
|
(3,860
|
)
|
|
|
(1,621
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and noncontrolling interest
|
|
|
141,669
|
|
|
|
139,151
|
|
|
|
116,733
|
|
|
|
119,251
|
|
|
|
127,425
|
|
|
|
126,429
|
|
Income tax expense(5)
|
|
|
31,784
|
|
|
|
31,211
|
|
|
|
26,031
|
|
|
|
26,604
|
|
|
|
3,305
|
|
|
|
46,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income including noncontrolling interest
|
|
|
109,885
|
|
|
|
107,940
|
|
|
|
90,702
|
|
|
|
92,647
|
|
|
|
124,120
|
|
|
|
79,730
|
|
Net income (loss) attributable to noncontrolling interest
|
|
|
358
|
|
|
|
853
|
|
|
|
356
|
|
|
|
(139
|
)
|
|
|
526
|
|
|
|
902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Central Garden & Pet Company
|
|
$
|
109,527
|
|
|
$
|
107,087
|
|
|
$
|
90,346
|
|
|
$
|
92,786
|
|
|
$
|
123,594
|
|
|
$
|
78,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
201,090
|
|
|
$
|
88,920
|
|
|
$
|
92,804
|
|
|
$
|
204,974
|
|
|
$
|
114,112
|
|
|
$
|
114,309
|
|
Net cash used in investing activities
|
|
|
(43,053
|
)
|
|
|
(31,797
|
)
|
|
|
(65,007
|
)
|
|
|
(76,263
|
)
|
|
|
(140,882
|
)
|
|
|
(162,842
|
)
|
Net cash (used in) provided by financing activities
|
|
|
(105,628
|
)
|
|
|
(58,989
|
)
|
|
|
(64,126
|
)
|
|
|
(110,765
|
)
|
|
|
474,783
|
|
|
|
(10,392
|
)
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(6)
|
|
$
|
236,788
|
|
|
$
|
212,408
|
|
|
$
|
178,516
|
|
|
$
|
202,896
|
|
|
$
|
214,535
|
|
|
$
|
198,831
|
|
Adjusted EBITDA(6)
|
|
|
258,614
|
|
|
|
230,016
|
|
|
|
188,285
|
|
|
|
216,883
|
|
|
|
226,137
|
|
|
|
207,896
|
|
Depreciation and amortization
|
|
|
53,115
|
|
|
|
39,598
|
|
|
|
37,311
|
|
|
|
50,828
|
|
|
|
47,199
|
|
|
|
42,719
|
|
Capital expenditures
|
|
|
37,485
|
|
|
|
26,796
|
|
|
|
20,888
|
|
|
|
31,577
|
|
|
|
37,845
|
|
|
|
44,659
|
|
S-13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 27,
2020
|
|
|
June 29,
2019
|
|
|
September 28,
2019
|
|
|
September 29,
2018
|
|
|
September 30,
2017
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
495,339
|
|
|
$
|
445,632
|
|
|
$
|
497,749
|
|
|
$
|
482,106
|
|
|
$
|
32,397
|
|
Total assets
|
|
|
2,263,969
|
|
|
|
2,064,918
|
|
|
|
2,025,020
|
|
|
|
1,907,209
|
|
|
|
1,306,906
|
|
Total long-term debt(7)
|
|
|
694,013
|
|
|
|
693,064
|
|
|
|
693,150
|
|
|
|
692,153
|
|
|
|
395,653
|
|
Inventories, net
|
|
|
425,919
|
|
|
|
464,917
|
|
|
|
466,197
|
|
|
|
427,823
|
|
|
|
382,101
|
|
(1)
|
Fiscal years 2018 and 2019 included 52 weeks. Fiscal year 2017 included 53 weeks.
|
(2)
|
During fiscal 2019, we recognized a non-cash charge of
$2.5 million related to the impairment of a certain long-lived intangible asset in our Pet Segment. This charge was included as part of selling, general and administrative expenses.
|
(3)
|
During fiscal 2019, we recorded a $3.2 million non-cash gain in
our Garden segment from the fair value remeasurement of our previously held 45% interest in Arden upon our acquisition of the remaining 55% interest.
|
(4)
|
During the third quarter of fiscal 2020, we recorded a non-cash
impairment charge for two private company investments.
|
(5)
|
Income tax expense was impacted by a fiscal 2018 tax benefit of $21.5 million from the revaluation of our
deferred tax assets and liabilities as a result of the Tax Reform Act.
|
(6)
|
EBITDA is defined by us as net income before income tax expense, net other expense, net interest
expense and depreciation and amortization (or operating income plus depreciation and amortization expense). Adjusted EBITDA is defined by us as net income before income tax expense, other (income) expense, net interest expense,
depreciation and amortization, stock-based compensation, gain on sale of plant assets, intangible asset impairment, previously held investment interest fair value remeasurement and investment impairments. We present EBITDA and Adjusted EBITDA
because we believe that EBITDA and Adjusted EBITDA are useful supplemental measures in evaluating the cash flows and performance of our business and provide greater transparency into our results of operations. EBITDA and Adjusted EBITDA are used by
our management to perform such evaluation. EBITDA and Adjusted EBITDA should not be considered in isolation or as substitutes for cash flow from operations, income from operations or other income statement measure prepared in accordance with GAAP.
|
We believe that EBITDA and Adjusted EBITDA are frequently used by investors, securities analysts and other interested
parties in their evaluation of companies, many of which present EBITDA and Adjusted EBITDA when reporting their results. Other companies may calculate EBITDA and Adjusted EBITDA differently so it may not be comparable.
(7)
|
Includes current portion of long-term debt. In December 2017, we issued $300 million aggregate principal
amount of 5.125% senior notes due February 2028.
|
S-14
The following is a reconciliation of net income to EBITDA, and EBITDA to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 Months
Ended
June 27,
2020
|
|
|
Nine Months Ended
|
|
|
Fiscal Year Ended
|
|
(in thousands)
|
|
June 27,
2020
|
|
|
June 29,
2019
|
|
|
September 28,
2019
|
|
|
September 29,
2018
|
|
|
September 30,
2017
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Central Garden & Pet Company
|
|
$
|
109,527
|
|
|
$
|
107,087
|
|
|
$
|
90,346
|
|
|
$
|
92,786
|
|
|
$
|
123,594
|
|
|
$
|
78,828
|
|
Interest expense, net
|
|
|
37,544
|
|
|
|
29,444
|
|
|
|
24,960
|
|
|
|
33,060
|
|
|
|
36,051
|
|
|
|
28,062
|
|
Other (income) expense, net
|
|
|
4,460
|
|
|
|
4,215
|
|
|
|
(488
|
)
|
|
|
(243
|
)
|
|
|
3,860
|
|
|
|
1,621
|
|
Income tax expense
|
|
|
31,784
|
|
|
|
31,211
|
|
|
|
26,031
|
|
|
|
26,604
|
|
|
|
3,305
|
|
|
|
46,699
|
|
Net income attributable to noncontrolling interest
|
|
|
358
|
|
|
|
853
|
|
|
|
356
|
|
|
|
(139
|
)
|
|
|
526
|
|
|
|
902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sum of items below operating income
|
|
|
74,146
|
|
|
|
65,723
|
|
|
|
50,859
|
|
|
|
59,282
|
|
|
|
43,742
|
|
|
|
77,284
|
|
Operating income
|
|
|
183,673
|
|
|
|
172,810
|
|
|
|
141,205
|
|
|
|
152,068
|
|
|
|
167,336
|
|
|
|
156,112
|
|
Depreciation and amortization
|
|
|
53,115
|
|
|
|
39,598
|
|
|
|
37,311
|
|
|
|
50,828
|
|
|
|
47,199
|
|
|
|
42,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
236,788
|
|
|
|
212,408
|
|
|
|
178,516
|
|
|
|
202,896
|
|
|
|
214,535
|
|
|
|
198,831
|
|
Stock-based compensation
|
|
|
18,260
|
|
|
|
14,042
|
|
|
|
10,444
|
|
|
|
14,662
|
|
|
|
11,602
|
|
|
|
11,115
|
|
Gain on sale of plant assets(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,050
|
)
|
Intangible asset impariment(b)
|
|
|
|
|
|
|
|
|
|
|
2,540
|
|
|
|
2,540
|
|
|
|
|
|
|
|
|
|
Previously held investment interest fair value remeasurement(c)
|
|
|
|
|
|
|
|
|
|
|
(3,215
|
)
|
|
|
(3,215
|
)
|
|
|
|
|
|
|
|
|
Investment impairments(d)
|
|
|
3,566
|
|
|
|
3,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
258,614
|
|
|
$
|
230,016
|
|
|
$
|
188,285
|
|
|
$
|
216,883
|
|
|
$
|
226,137
|
|
|
$
|
207,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
During fiscal 2017, we recognized a $2.0 million gain in our Garden segment from the sale of a
distribution facility.
|
|
(b)
|
During fiscal 2019, we recognized a non-cash charge of
$2.5 million related to the impairment of a certain long-lived intangible asset in our Pet Segment. This charge was included as part of selling, general and administrative expenses.
|
|
(c)
|
During fiscal 2019, we recorded a $3.2 million non-cash gain in
our Garden segment from the fair value remeasurement of our previously held 45% interest in Arden upon our acquisition of the remaining 55% interest.
|
|
(d)
|
During the third quarter of fiscal 2020, we recorded a non-cash
impairment charge for two private company investments.
|
S-15
RISK FACTORS
Our business, operations and financial condition are subject to various risks and uncertainties. Some of these are described below and
other factors are noted throughout this prospectus supplement and in the accompanying prospectus and the documents incorporated herein and therein by reference, and you should take those risks into account in evaluating us or any investment decision
involving us or in deciding whether to participate in the purchase of notes offered by this prospectus supplement. This section does not describe all risks or uncertainties applicable to us, our industry, our business, or an investment in our debt
securities and it is intended only as a summary of certain material factors. Furthermore, the COVID-19 pandemic (including federal, state and local governmental responses, broad economic impacts and market
disruptions) has heightened risks discussed in the risk factors described below or incorporated by reference into this prospectus supplement.
If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual outcomes may vary
materially from those contained in any forward-looking statement included in this prospectus supplement and the accompanying prospectus and the documents incorporated herein and therein by reference.
Risks Relating to the Notes
Our substantial
indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under the notes.
Following this offering, we will have a significant amount of indebtedness. The following table sets forth our total long-term debt, total
shareholders equity, total capitalization and ratio of total long-term debt to total capitalization as of June 27, 2020, after giving effect to this offering and the application of the net proceeds therefrom as described under Use
of Proceeds:
|
|
|
|
|
|
|
As Adjusted as of
June 27, 2020
|
|
(in millions)
|
|
(unaudited)
|
|
Total long-term debt, including current
installments
|
|
$
|
690,815
|
|
Total Central Garden & Pet Company shareholders equity
|
|
|
1,052,618
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
1,743,433
|
|
|
|
|
|
|
Ratio of total long-term debt to total capitalization
|
|
|
40
|
%
|
As of June 27, 2020, after giving effect to this offering and the use of proceeds therefrom, we would
have had $300 million of our existing senior notes outstanding and undrawn availability under our senior secured revolving credit facility of approximately $400 million, with additional availability up to $200 million with the consent
of the lenders thereunder. We also had $178.7 million of accounts payable as of June 27, 2020.
This level of indebtedness and
future borrowing needs could have material adverse consequences for our business, including:
|
|
|
make it more difficult for us to satisfy our obligations with respect to the terms of our indebtedness;
|
|
|
|
require us to dedicate a large portion of our cash flow to pay principal and interest on our indebtedness,
including the notes offered hereby, which would reduce the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other business activities;
|
|
|
|
increase our vulnerability to adverse industry conditions, including unfavorable weather conditions or commodity
price increases;
|
S-16
|
|
|
limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we
operate;
|
|
|
|
restrict us from making strategic acquisitions or exploiting business opportunities;
|
|
|
|
place us at a competitive disadvantage compared to competitors that have less debt; and
|
|
|
|
limit our ability to borrow additional funds at reasonable rates, if at all.
|
In addition, since a portion of our debt commitments bear interest at variable rates, an increase in interest rates or interest rate margins
as defined under our senior secured revolving credit facility will create higher debt service requirements, which would adversely affect our cash flow.
The terms of the indenture governing the notes allow us to increase the amount of available borrowings under our senior secured revolving
credit facility and issue and incur additional debt, including senior debt, upon satisfaction of certain conditions. If new debt is added to current debt levels, the related risks described above could increase.
Our senior secured revolving credit facility expires in 2024, at which time we may extend or refinance it. However, we cannot give any assurance that we
will be able to do so at all or on terms as favorable.
Our $400 million senior secured revolving credit facility is
scheduled to expire in 2024. We cannot assure you that we will be able to refinance this credit facility on commercially reasonable terms or at all. Our inability to refinance our indebtedness on commercially reasonable terms or at all would
materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under the notes.
The
notes will be effectively subordinated to our and our subsidiary guarantors indebtedness under our senior secured revolving credit facility and any of our other existing and future secured indebtedness, to the extent of the value of the
collateral securing such indebtedness.
The notes will not be secured by any of our or our subsidiary guarantors assets. As
a result, the notes and the note guarantees will be effectively subordinated to our and our subsidiary guarantors indebtedness under our senior secured revolving credit facility and any of our other existing and future secured indebtedness. As
of June 27, 2020, we had no borrowings outstanding under our $400 million senior secured revolving credit facility and no letters of credit outstanding. As of June 27, 2020, we had availability of approximately $400 million under
the senior secured revolving credit facility, with additional availability up to $200 million with the consent of the lenders thereunder, which borrowings would be secured and structurally senior to the notes and the note guarantees, to the
extent of the value securing such indebtedness. Because the borrowing capacity under our senior secured revolving credit facility depends, in part, on the value of assets that fluctuate from time to time, the available commitment amount may not
reflect actual borrowing capacity.
The effect of this subordination is that upon a default in payment on, or the acceleration of, any of
our secured indebtedness, or in the event of bankruptcy, insolvency, liquidation, dissolution or reorganization of our Company or the subsidiary guarantors, the proceeds from the sale of assets securing our secured indebtedness may only be available
to pay obligations on the notes after all indebtedness under the senior secured revolving credit facility and any other secured indebtedness have been paid in full. As a result, the holders of the notes may receive less, ratably, than the holders of
secured debt in the event of our or our subsidiary guarantors bankruptcy, insolvency, liquidation, dissolution or reorganization.
The notes
will be structurally subordinated to all obligations of our existing and future subsidiaries that are not and do not become guarantors of the notes.
The notes will be guaranteed by each of our existing and subsequently acquired or organized subsidiaries that guarantee our senior secured
revolving credit facility or that, in the future, guarantee our other
S-17
indebtedness or indebtedness of another guarantor. Our subsidiaries that do not guarantee the notes, including all of our non-domestic subsidiaries, will
have no obligation, contingent or otherwise, to pay amounts due under the notes or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment. The notes will be structurally subordinated to all
indebtedness and other obligations of any non-guarantor subsidiary such that in the event of insolvency, liquidation, reorganization, dissolution or other winding up of any subsidiary that is not a guarantor,
all of that subsidiarys creditors (including trade creditors) would be entitled to payment in full out of that subsidiarys assets before noteholders would be entitled to any payment.
For the 12 months ended June 27, 2020, we estimate that our non-guarantor subsidiaries
represented approximately 8% of our net sales, less than 1% of our operating income and approximately 2% of our Adjusted EBITDA, respectively. As of June 27, 2020, we estimate that our non-guarantor
subsidiaries represented approximately 6% of our total assets and had approximately $35 million of our total liabilities, including debt, trade payables and lease liabilities, but excluding intercompany liabilities.
In addition, our subsidiaries that provide, or will provide, note guarantees will be automatically released from those note guarantees upon
the occurrence of certain events. If any note guarantee is released, no holder of the notes will have a claim as a creditor against that subsidiary, and the indebtedness and other liabilities of that subsidiary will be effectively senior to the
claim of any holders of the notes. See Description of NotesGuarantees.
Our variable rate indebtedness subjects us to interest
rate risk, which could cause our debt service obligations to increase significantly.
Borrowings under our senior secured
revolving credit facility are at variable rates of interest and expose us to interest rate risk. If interest rates were to increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed
remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Assuming all loans under our senior secured revolving credit facility were fully drawn, each quarter point
change in interest rates could result in a $1 million change in annual interest expense on our indebtedness under our senior secured revolving credit facility. In the future, we may enter into interest rate swaps that involve the exchange of
floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our
interest rate risk.
We will require a significant amount of cash to service our indebtedness. Our ability to generate cash depends on many factors
beyond our control.
Our ability to make payments on and to refinance our indebtedness, including the notes, the existing senior
notes and amounts borrowed under our senior secured revolving credit facility, and to fund planned capital expenditures and expansion efforts and strategic acquisitions we may make in the future, if any, will depend on our ability to generate cash
in the future. This, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control.
We cannot assure you that our business will generate sufficient cash flow from operations in the future or that future borrowings will be
available to us under our senior secured revolving credit facility in an amount sufficient to enable us to service indebtedness, including the notes, or to fund other liquidity needs. As discussed above, we cannot assure you that we will be able to
refinance our senior secured revolving credit facility which expires in 2024.
If our cash flows and capital resources are insufficient to
fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or
S-18
dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness, including the notes. We may not be able to effect any such
alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. Our senior secured revolving credit facility and the
indenture governing the notes and the existing senior notes will restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt to be used to repay other indebtedness when it
becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.
In addition, we conduct a substantial portion of our operations through our subsidiaries, certain of which will not be guarantors of the notes
or our other indebtedness. Accordingly, repayment of our indebtedness, including the notes, is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or
otherwise. Unless they are guarantors of the notes or our other indebtedness, our subsidiaries do not have any obligation to pay amounts due on the notes or our other indebtedness or to make funds available for that purpose. Our subsidiaries may not
be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness, including the notes. Each subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual
restrictions may limit our ability to obtain cash from our subsidiaries. While the indenture governing the notes and certain of our other existing indebtedness will limit the ability of our subsidiaries to incur consensual restrictions on their
ability to pay dividends or make other intercompany payments to us, these limitations are subject to qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal
and interest payments on our indebtedness, including the notes.
The indenture governing the notes and the existing senior notes, and our senior
secured revolving credit facility contain various covenants that limit our managements discretion in the operation of our business.
The indenture governing the notes and the existing senior notes and our senior secured revolving credit facility contain various provisions
that limit our managements discretion by restricting our and our subsidiaries ability to, among other things:
|
|
|
incur additional indebtedness or guarantee indebtedness;
|
|
|
|
pay dividends or make other distributions or repurchase or redeem our capital stock;
|
|
|
|
prepay, redeem or repurchase certain debt;
|
|
|
|
issue certain preferred stock or similar equity securities;
|
|
|
|
make loans and investments;
|
|
|
|
enter into transactions with affiliates;
|
|
|
|
enter into agreements restricting our subsidiaries ability to pay dividends; and
|
|
|
|
consolidate, merge or sell all or substantially all of our assets.
|
In addition, our senior secured revolving credit facility requires us to meet certain financial ratios. Any failure to comply with the
restrictions of our senior secured revolving credit facility, the indenture governing the
S-19
notes and the existing senior notes or any other subsequent financing agreements may result in an event of default. An event of default may allow the creditors, if the agreements so provide, to
accelerate the related debt as well as any other debt to which a cross-acceleration or cross-default provision applies. In addition, the lenders may be able to terminate any commitments they had made to supply us with further funds.
We may not be able to repurchase the notes upon a change of control.
Upon the occurrence of certain specific kinds of change of control events, we will be required to offer to repurchase all outstanding notes
and the existing senior notes at 101% of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the purchase date. Additionally, under our senior secured revolving credit facility, a change of control (as defined
therein) constitutes or will constitute an event of default that permits the lenders to accelerate the maturity of borrowings under the senior secured revolving credit facility and the commitments to lend would terminate. The source of funds for any
purchase of the notes and repayment of borrowings under our senior secured revolving credit facility will be our available cash or cash generated from our subsidiaries operations or other sources, including borrowings, sales of assets or sales
of equity. We may not be able to repurchase the notes upon a change of control because we may not have sufficient financial resources to purchase all the debt securities that are tendered upon a change of control in that circumstance, we will be in
default under the indenture governing the notes and the existing senior notes. We may require additional financing from third parties to fund any such purchases, and we may be unable to obtain financing on satisfactory terms or at all. Finally, our
ability to repurchase the notes may be limited by law. In order to avoid the obligations to repurchase the notes and events of default and potential breaches of our senior secured revolving credit facility, we may have to avoid certain change of
control transactions that would otherwise be beneficial to us.
In addition, certain important corporate events, such as leveraged
recapitalizations, may not, under the indenture governing the notes and the existing senior notes, constitute a change of control that would require us to repurchase the notes, even though those corporate events could increase the level
of our indebtedness or otherwise adversely affect our capital structure, credit ratings or the value of the notes. See Description of NotesChange of Control.
The exercise by the holders of notes of their right to require us to repurchase the notes pursuant to a change of control offer could cause a
default under the agreements governing our other indebtedness, including future agreements, even if the change of control itself does not, due to the financial effect of such repurchases on us. In the event a change of control offer is required to
be made at a time when we are prohibited from purchasing notes, we could attempt to refinance the borrowings that contain such prohibitions. If we do not obtain a consent or repay those borrowings, we will remain prohibited from purchasing notes. In
that case, our failure to purchase tendered notes would constitute an event of default under the indenture governing the notes and the existing senior notes, which could, in turn, constitute a default under our other indebtedness. Finally, our
ability to pay cash to the holders of notes upon a repurchase may be limited by our then existing financial resources.
Holders of the notes may not
be able to determine when a change of control giving rise to their right to have the notes repurchased has occurred following a sale of substantially all of our assets.
One of the circumstances under which a change of control may occur is upon the sale or disposition of all or substantially all of our assets.
There is no precise established definition of the phrase substantially all under applicable law, and the interpretation of that phrase will likely depend upon particular facts and circumstances. Accordingly, the ability of a holder of
notes to require us to repurchase its notes as a result of a sale of less than all our assets to another person may be uncertain.
An active trading
market for the notes may not develop or be sustained.
The notes are new securities for which there currently is no market. We
have not listed and do not intend to list the notes on any U.S. national securities exchange or automated dealer quotation system. We cannot
S-20
assure you that any market for the notes will develop or be sustained. If an active market is not developed or sustained, the market price and liquidity of the notes may be adversely affected. In
that case, the holders of the notes may not be able to sell their notes at a particular time or at a favorable price.
Even if an active
trading market for the notes does develop, there is no guarantee that it will continue. Historically, the market for non-investment grade debt has been subject to severe disruptions that have caused
substantial volatility in the prices of securities similar to the notes. The market, if any, for the notes may experience similar disruptions, and any such disruptions may adversely affect the liquidity in that market or the prices at which you may
sell your notes. In addition, subsequent to their initial issuance, the notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar notes, our performance and other factors.
Federal and state statutes allow courts, under specific circumstances, to void the notes and/or the note guarantees, and if that occurs, you may not
receive any payments on the notes.
Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of the
notes and the incurrence of the notes guarantees. Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the notes or the note guarantees thereof could be voided as
a fraudulent transfer or conveyance if we or any of the guarantors, as applicable, (a) issued the notes or incurred the note guarantees with the intent of hindering, delaying or defrauding creditors or (b) received less than the reasonably
equivalent value or fair consideration in return for either issuing the notes or incurring the note guarantees and, in the case of (b) only, one of the following is also true at the time thereof:
|
|
|
we or any of the guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the
notes or the incurrence of the note guarantees;
|
|
|
|
the issuance of the notes or the incurrence of the note guarantees left us or any of the guarantors, as
applicable, with an unreasonably small amount of capital or assets to carry on the business;
|
|
|
|
we or any of the guarantors intended to, or believed that we or such guarantor would, incur debts beyond our or
such guarantors ability to pay as they mature; or
|
|
|
|
we or any of the guarantors were a defendant in an action for money damages, or had a judgment for money damages
docketed against us or the guarantor if, in either case, the judgment is unsatisfied after final judgment.
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As a general
matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or a valid antecedent debt is secured or satisfied. A court would likely find that a guarantor did not receive reasonably
equivalent value or fair consideration for its note guarantee to the extent the guarantor did not obtain a reasonably equivalent benefit directly or indirectly from the issuance of the notes.
We cannot be certain as to the standards a court would use to determine whether or not we or the guarantors were insolvent at the relevant
time or, regardless of the standard that a court uses, whether the notes or the note guarantees would be subordinated to our or any of our guarantors other debt. In general, however, a court would deem an entity insolvent if:
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the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value
of all of its assets;
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the present fair saleable value of its assets was less than the amount that would be required to pay its probable
liability on its existing debts, including contingent liabilities, as they become absolute and mature; or
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it could not pay its debts as they became due.
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If a court were to find that the issuance of the notes or the incurrence of a note guarantee was
a fraudulent transfer or conveyance, the court could void the payment obligations under the notes or that note guarantee, could subordinate the notes or that note guarantee to presently existing and future indebtedness of ours or of the related
guarantor or could require the holders of the notes to repay any amounts received with respect to that note guarantee. In the event of a finding that a fraudulent transfer or conveyance occurred, you may not receive any repayment on the notes.
Further, the avoidance of the notes could result in an event of default with respect to our and our subsidiaries other debt that could result in acceleration of that debt.
Finally, as a court of equity, the bankruptcy court may subordinate the claims in respect of the notes to other claims against us under the
principle of equitable subordination if the court determines that (1) the holder of the notes engaged in some type of inequitable conduct, (2) the inequitable conduct resulted in injury to our other creditors or conferred an unfair
advantage upon the holders of notes and (3) equitable subordination is not inconsistent with the provisions of the bankruptcy code.
A lowering
or withdrawal of the ratings assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital.
When issued, our debt will have a non-investment grade rating, and any rating assigned could be
lowered or withdrawn entirely by a rating agency if, in that rating agencys judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Consequently, real or anticipated changes in our credit
ratings will generally affect the market value of the notes. Credit ratings are not recommendations to purchase, hold or sell the notes. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or
marketing of the notes.
Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain
additional debt financing. If any credit rating initially assigned to the notes is subsequently lowered or withdrawn for any reason, you may not be able to resell your notes without a substantial discount.
Risks Relating to our Company
The COVID-19 pandemic has impacted how we are operating our business, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.
The outbreak of the COVID-19 virus in Wuhan, China in late 2019 and subsequent spread of
the virus throughout the world has impacted our day-to-day operations and the operations of the vast majority of our customers, suppliers, and consumers. The World
Health Organizations March 2020 declaration of the COVID-19 outbreak as a global pandemic has resulted in authorities implementing numerous measures to contain the virus, including travel bans and
restrictions, border closures, quarantines, shelter-in-place orders, and business limitations and shutdowns. COVID-19 has
adversely affected and may continue to adversely affect how we and our customers are operating our businesses and overall demand for our products.
We have experienced varying impacts to our Garden and Pet businesses due to COVID-19. In March and
April 2020, we experienced increased demand in pet consumables due to consumers stocking up on products as COVID-19
shelter-in-place mandates were implemented. We also saw reduced consumption on other items, such as live fish and live plants, due to
in-store curtailments of foot traffic and limited access to outdoor garden departments. In May 2020, state and county governments began phased reopenings of their local economies. Access to outdoor garden
departments resulted in increased demand for our products in May and June 2020. Additionally, as a result of shelter-in-place requirement periods, pet ownership
significantly increased and we saw increased sales continue in May and June 2020 across our Pet segment portfolio. We also continued to see rapid increase in demand in the e-commerce channel.
Although our facilities have largely been exempt or partially exempt from government closure orders as essential businesses, to support the
health and well-being of our employees, customers and communities, we are
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requiring a significant portion of our workforce to work remotely, and local and state governments in the United States and in the United Kingdom have imposed shelter-in-place requirements and certain travel restrictions, all of which have changed how we operate our business. For our employees who are not working remotely, we have taken several actions to ensure
their safety, including instituting workplace safety measures and ensuring the availability of personal protective equipment. While we believe that such actions will help to ensure the safety of our employees, there is no guarantee that such actions
will ultimately be successful.
We have experienced temporary closures of certain production facilities and distribution centers, though
there has not been a material impact from a plant closure to date. At some of our facilities, we have experienced reduced productivity and increased employee absences, which we expect to continue during the current pandemic. The pandemic and
near-term increase in demand for pet consumables have created operational challenges for our distribution network and impacted our ability to meet our normal fill rate standards. Our supply chain has been impacted by the rapid increase in demand and
it is possible we will experience increased operational and logistics costs. We may experience additional disruptions in our supply chain as the pandemic continues, though we cannot reasonably estimate the potential impact or timing of those events,
and we may not be able to mitigate such impact.
We anticipate many small customers may permanently close, and we may experience
collection delinquencies as customers seek to preserve liquidity. Additionally, we have small company equity method investments, intangible assets and other long-lived assets whose value is dependent on cashflows. These investments and other assets
could be impacted by the COVID-19 pandemic and, therefore, may be more susceptible to impairment. Our assessment of possible asset impairment involves numerous assumptions that involve significant judgment. As
a result of the uncertainties associated with the COVID-19 pandemic, the shelter-in-place orders and the post COVID-19 economic recovery, these factors will be even more difficult to estimate. We recorded an impairment charge of $3.6 million in our third fiscal quarter ended June 27, 2020, and may be required to
write off certain assets that could be material in future periods.
The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions and the
impact of these and other factors on our employees, independent contractors and customers and consumers. If we are not able to respond to and manage the impact of such events effectively, our business will be harmed. The COVID-19 pandemic may also have the effect of heightening many of the other risks identified elsewhere in this Risk Factors section or incorporated by reference into this prospectus supplement.
Our operating results and cash flow are susceptible to fluctuations.
We expect to continue to experience variability in our net sales, net income and cash flow on a quarterly basis. Factors that may contribute
to this variability include:
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seasonality and adverse weather conditions;
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fluctuations in prices of commodity grains and other input costs;
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shifts in demand for lawn and garden and pet products;
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changes in product mix, service levels, marketing and pricing by us and our competitors;
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the effect of acquisitions; and
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economic stability of and strength of our relationships with key retailers.
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These fluctuations could negatively impact our business and the market price of the notes.
Seeds and grains we use to produce bird feed and grass seed are commodity products subject to price volatility that has had, and could have, a negative
impact on us.
Our financial results are partially dependent upon the cost of raw materials and our ability to pass along
increases in these costs to our customers. In particular, our Pennington and Kaytee businesses are exposed to fluctuations in market prices for commodity seeds and grains used to produce bird feed. Historically, market prices for commodity seeds and
grains have fluctuated in response to a number of factors, including changes in United States government farm support programs, changes in international agricultural and trading policies and weather conditions during the growing and harvesting
seasons.
To mitigate our exposure to changes in market prices, we enter into purchase contracts for grains, bird feed and grass seed to
cover a limited portion of our purchase requirements for a selling season. Since these contracts cover only a portion of our purchase requirements, as market prices for such products increase, our cost of production increases as well. In contrast,
if market prices for such products decrease, we may end up purchasing grains and seeds pursuant to the purchase contracts at prices above market.
We took certain pricing actions in fiscal 2019 and 2018 to offset the impact of inflationary pressures. Although we have been able to
negotiate some price increases in the past with our retailers, it is possible that price increases may not fully offset rising costs in the future, resulting in margin erosion. We can provide no assurance as to the timing or extent of our ability to
implement additional price adjustments in the event of increased costs in the future, or our ability to maintain pricing with our retailers in the context of declining costs. We also cannot predict to what extent price increases may negatively
affect our sales volume. As retailers pass along price increases, consumers may shift to our lower margin bird feed, switch to competing products or reduce purchases of wild bird feed products.
Our success depends upon our retaining and recruiting key personnel.
Our performance is substantially dependent upon the continued services of Timothy P. Cofer, our Chief Executive Officer, and our senior
management team. The loss of the services of these persons could have a material adverse effect on our business. Our future performance depends on our ability to attract and retain skilled employees. We cannot assure you that we will be able to
retain our existing personnel or attract additional qualified employees in the future.
We are subject to significant risks associated with
innovation, including the risk that our new product innovations will not produce sufficient sales to recoup our investment.
We
believe that our future success will depend upon, in part, our ability to continue to improve our existing products through product innovation and to develop, market and produce new products. We cannot assure you that we will be successful in the
introduction, marketing and production of any new products or product innovations, or that we will develop and introduce in a timely manner, improvements to our existing products which satisfy customer needs or achieve market acceptance. Our failure
to develop new products or improved formulations and introduce them successfully and in a timely manner could harm our ability to grow our business and could have a material adverse effect on our business, results of operations and financial
condition. We launched a new formulation for our Comfort Zone behavioral management product that did not perform as expected. Consequently, we faced additional costs to fix the issue and lost market share.
We believe that the period of time to gain consumer acceptance of major innovations is longer in the garden industry than in many industries,
which compounds the risks generally associated with major new product innovations.
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A decline in consumers discretionary spending or a change in consumer preferences could reduce our
sales and harm our business.
Our sales ultimately depend on consumer discretionary spending, which is influenced by factors
beyond our control, including general economic conditions, the availability of discretionary income and credit, weather, consumer confidence and unemployment levels. Any material decline in the amount of consumer discretionary spending could reduce
our sales and harm our business. These economic and market conditions may also place a number of our key retail customers under financial stress, which would increase our credit risk and potential bad debt exposure.
The success of our business also depends in part on our ability to identify and respond to evolving trends in demographics and consumer
preferences. Our failure to timely identify or effectively respond to changing consumer tastes, preferences, spending patterns and lawn and garden and pet care needs could adversely affect the demand for our products and our profitability.
Inflation, deflation, economic uncertainty and other adverse macro-economic conditions may harm our business.
Our revenues and margins are dependent on various economic factors, including rates of inflation or deflation, energy costs, consumer
attitudes toward discretionary spending, currency fluctuations, and other macro-economic factors which may impact consumer spending. If we are unable to pass through rising input costs and raise the price of our products, or consumer confidence
weakens, we may experience gross margin declines.
Supply disruptions in pet birds, small animals and fish may negatively impact our sales.
The federal government and many state governments have increased restrictions on the importation of pet birds and the supply of
small animals. These restrictions have resulted in reduced availability of new pet birds and animals and thus reduced demand for pet bird and small animal food and supplies. If these restrictions become more severe, or similar restrictions become
applicable to live pet fish, our future sales of these products would likely suffer, which would negatively impact our profitability. In addition, some countries have experienced outbreaks of avian flu. While the number of cases worldwide has
declined, a significant outbreak in the United States would reduce demand for our pet and wild bird food and negatively impact our financial results.
Our Segrest subsidiary is the largest supplier of aquarium fish in the United States and also supplies pet birds and small animals. The sale
of fish, pet birds and small animals subjects us to additional risk, including risks associated with sourcing, developing captive breeding programs, health of the fish, pet birds and small animals supplied by us and future governmental regulation of
the sale of fish, pet birds and small animals.
Our lawn and garden sales are highly seasonal and subject to adverse weather.
Because our lawn and garden products are used primarily in the spring and summer, the Garden business is seasonal. In fiscal 2019,
approximately 69% of our Garden segments net sales and 58% of our total net sales occurred during our second and third fiscal quarters. Substantially all of the Garden segments operating income is generated in this period. Our working
capital needs and our borrowings generally peak in our second fiscal quarter, because we are generating lower revenues while incurring expenses in preparation for the spring selling season. If cash on hand and borrowings under our credit facility
are ever insufficient to meet our seasonal needs or if cash flow generated during the spring and summer is insufficient to repay our borrowings on a timely basis, this seasonality could have a material adverse effect on our business.
Because demand for lawn and garden products is significantly influenced by weather, particularly weekend weather during the peak gardening
season, our results of operations and cash flow could also be
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adversely affected by certain weather patterns such as unseasonably cool or warm temperatures, heavy rains, water shortages or floods.
Rising energy prices could adversely affect our operating results.
At various times in the past, energy prices have increased substantially, which resulted in increased fuel costs for our businesses and
increased raw materials costs for many of our branded products. Rising energy prices in the future could adversely affect consumer spending and demand for our products and increase our operating costs, both of which would reduce our sales and
operating income.
We depend on a few customers for a significant portion of our business.
Walmart, our largest customer, represented approximately 16% of our total company net sales in each of the fiscal years 2019, 2018 and 2017.
Home Depot, our second largest customer, represented approximately 12%, 11% and 8% of our total company net sales in fiscal 2019, 2018 and 2017, respectively. Lowes, Costco, and PetSmart are also significant customers, and together with
Walmart and Home Depot, accounted for approximately 49% of our net sales in fiscal 2019, 48% in fiscal 2018 and 44% in fiscal 2017. The market shares of many of these key retailers have increased and may continue to increase in future years.
The loss of, or significant adverse change in, our relationship with any of these key retailers could cause our net sales, operating income
and cash flow to decline. The loss of, or reduction in, orders from any significant customer, losses arising from customer disputes regarding shipments, fees, merchandise condition or related matters, or our inability to collect accounts receivable
from any major customer could reduce our operating income and cash flow.
Tariffs or a global trade war could increase the cost of our products,
which could adversely impact the competitiveness of our products and our financial results.
Since July 2018, the United States
has imposed a series of tariffs, ranging from 5% to 25%, on a variety of imports from China and subsequently implemented tariffs on additional goods imported from China. Approximately 10% of the products that we sell in the United States are
manufactured in China. If the United States continues the China tariffs, or if additional tariffs or trade restrictions are implemented by the United States or other countries in connection with a global trade war, the cost of our products
manufactured in China, or other countries, and imported into the United States or other countries could increase, which in turn could adversely affect the demand for these products and have a material adverse effect on our business and results of
operations.
We may be adversely affected by trends in the retail industry.
With the growing trend towards retail trade consolidation, we are increasingly dependent upon key retailers whose leverage is growing. Our
business may be negatively affected by changes in the policies of our key retailers, such as inventory destocking, limitations on access to shelf space, price demands and other conditions. In addition, retailers continue to more closely manage
inventory levels and make purchases on a just-in-time basis. This requires us to shorten our lead time for production in certain cases and to more closely
anticipate demand, which could in the future require the carrying of additional inventories and an increase in our working capital and related financing requirements. This shift to
just-in-time can also cause retailers to delay purchase orders, which can cause a shift in sales from quarter to quarter. Decisions to move in or out of a
market category by leading retailers, such as Walmarts decision to exit the live fish business in 2019, can also have a significant impact on our business. Additionally, some retailers are increasing their emphasis on private label products.
While we view private label as an opportunity and supply many private label products to retailers, we could lose sales in the event that key retailers replace our branded products with private label product manufactured by others.
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We sell our products through a variety of trade channels with a significant portion dependent
upon key retailers, through both traditional brick-and-mortar retail channels and e-commerce channels, including Amazon. The e-commerce channel continues to grow rapidly. To the extent that the key retailers on which we depend lose share to the e-commerce channel, we could lose sales. We plan to
make additional investments to access this channel more effectively, and there can be no assurances that any such investments will be successful. If we are not successful in developing and utilizing e-commerce
channels that consumers may prefer, we may experience lower than expected revenues.
A significant deterioration in the financial
condition of one of our major customers could have a material adverse effect on our sales, profitability and cash flow. We continually monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate. Despite
these efforts, a bankruptcy filing or liquidation by a key customer could have a material adverse effect on our business, results of operations and financial condition in the future.
Issues with products may lead to product liability, personal injury or property damage claims, recalls, withdrawals, replacements of products,
regulatory actions by governmental authorities that could divert resources, affect business operations, decrease sales, increase costs, and put us at a competitive disadvantage, any of which could have a significant adverse effect on our results of
operations and financial condition.
We have experienced, and may in the future experience, issues with products that may lead to
product liability, recalls, withdrawals, replacements of products, or regulatory actions by governmental authorities. Product recalls or other governmental regulatory action directed at product sales could result in increased governmental scrutiny,
reputational harm, reduced demand by consumers for our products, decreased willingness by retailer customers to purchase or provide marketing support for those products, unavailability or increased cost of insurance, or additional safety and testing
requirements. Such results could divert development and management resources, adversely affect our business operations, decrease sales, increase legal fees and other costs, and put us at a competitive disadvantage compared to other manufacturers not
affected by similar issues with products, any of which could have a significant adverse effect on our results of operations and financial condition.
Competition in our industries may hinder our ability to execute our business strategy, increase our profitability or maintain relationships with
existing customers.
We operate in highly competitive industries, which have experienced increased consolidation in recent years.
We compete against numerous other companies, some of which are more established in their industries and have substantially greater revenue and resources than we do. Our products compete against national and regional products and private label
products produced by various suppliers. Our largest competitors in the Pet segment are Spectrum Brands and Hartz Mountain, and our largest competitors in the Garden segment are Scotts and Spectrum Brands.
To compete effectively, among other things, we must:
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develop and grow brands with leading market positions;
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maintain or grow market share;
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maintain and expand our relationships with key retailers;
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effectively access the growing e-commerce channel;
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continually develop innovative new products that appeal to consumers;
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implement effective marketing and sales promotion programs;
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maintain strict quality standards;
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deliver products on a reliable basis at competitive prices; and
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effectively integrate acquired companies.
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Competition could lead to lower sales volumes, price reductions, reduced profits, losses, or loss of market share. Our inability to compete
effectively could have a material adverse effect on our business, results of operations and financial condition.
Our acquisition strategy involves
a number of risks.
We are regularly engaged in acquisition discussions with other companies and anticipate that one or more
potential acquisition opportunities, including those that would be material or could involve businesses with operating characteristics that differ from our existing business operations, may become available in the near future. If and when
appropriate acquisition opportunities become available, we intend to pursue them actively. Acquisitions involve a number of special risks, including:
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failure of the acquired business to achieve expected results, as well as the potential impairment of the acquired
assets if operating results decline after acquisition;
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diversion of managements attention;
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additional financing, if necessary and available, which could increase leverage and costs, dilute equity, or
both;
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the potential negative effect on our financial statements from the increase in goodwill and other intangibles;
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difficulties in integrating the operations, systems, technologies, products and personnel of acquired companies;
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initial dependence on unfamiliar supply chains or relatively small supply partners;
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the potential loss of key employees, customers, distributors, vendors and other business partners of the
companies we acquire after the acquisition;
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the high cost and expenses of identifying, negotiating and completing acquisitions; and
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risks associated with unanticipated events or liabilities.
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These risks could have a material adverse effect on our business, results of operations and financial condition.
We have faced, and expect to continue to face, intense competition for acquisition candidates, which may limit our ability to make
acquisitions and may lead to higher acquisition prices. We cannot assure you that we will be able to identify, acquire or manage profitably additional businesses or to integrate successfully any acquired businesses into our existing business without
substantial costs, delays or other operational or financial difficulties. In future acquisitions, we also could incur additional indebtedness or pay consideration in excess of fair value, which could have a material adverse effect on our business,
results of operations and financial condition.
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If our goodwill, indefinite-lived intangible assets or other long-term assets become impaired, we will be
required to record impairment charges, which may be significant.
A significant portion of our long-term assets consists of
goodwill and other intangible assets recorded as a result of past acquisitions. We do not amortize goodwill and indefinite-lived intangible assets, but rather review them for impairment on a periodic basis or whenever events or changes in
circumstances indicate that their carrying value may not be recoverable. We consider whether circumstances or conditions exist which suggest that the carrying value of our goodwill and other long-lived intangible assets might be impaired. If such
circumstances or conditions exist, further steps are required to determine whether the carrying value of each of the individual assets exceeds its fair value. If analysis indicates that an individual assets carrying value does exceed its fair
value, we would record a loss equal to the excess of the individual assets carrying value over its fair value.
The steps required
by GAAP entail significant amounts of judgment and subjectivity. Events and changes in circumstances that may indicate that there may be an impairment and that interim impairment testing is necessary include, but are not limited to: competitive
conditions; the impact of the economic environment on our customer base and on broad market conditions that drive valuation considerations by market participants; our internal expectations with regard to future revenue growth and the assumptions we
make when performing impairment reviews; a significant decrease in the market value of our assets; a significant adverse change in the extent or manner in which our assets are used; a significant adverse change in the business climate that could
affect our assets; and significant changes in the cash flows associated with an asset. As a result of such circumstances, we may be required to record a significant charge to earnings in our financial statements during the period in which any
impairment of our goodwill, indefinite-lived intangible assets or other long-term assets is determined. Any such impairment charges could have a material adverse effect on our results of operations and financial condition.
During fiscal 2019, 2018 and 2017, we performed evaluations of the fair value of our indefinite-lived trade names and trademarks. Our expected
revenues were based on our future operating plan and market growth or decline estimates for future years. As a result of one of our retail customers exiting the live fish business, factors indicating the carrying value of certain amortizable
intangible assets may not be recoverable were present during fiscal 2019. We performed impairment testing on these assets, found the carrying value was not recoverable, and accordingly, recorded an impairment charge in our Pet segment of
approximately $2.5 million as part of selling, general and administrative expenses in the consolidated statements of operations for the fiscal year ended September 28, 2019. There were no impairment losses recorded in fiscal years 2018 or
2017.
Most of our goodwill is associated with our Pet segment. In connection with our annual goodwill impairment testing performed during
fiscal 2019 and fiscal 2018, we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of its reporting units under the
two-step goodwill impairment test. We completed our qualitative assessment of potential goodwill impairment and it was determined that it was more likely than not the fair values of our reporting units were
greater than their carrying amounts, and accordingly, no further testing of goodwill was required.
We continue to implement an enterprise resource
planning information technology system.
In fiscal 2005, we began incurring costs associated with designing and implementing SAP,
a company-wide enterprise resource planning (ERP) software system with the objective of gradually migrating to the new system. This new system replaces numerous accounting and financial reporting systems, most of which were obtained in connection
with business acquisitions. To date, we have reduced the number of ERP systems from 39 to 10. Capital expenditures for our enterprise resource planning software system for fiscal 2020 and beyond will depend upon the pace of conversion for those
remaining legacy systems. If the balance of the implementation is not executed successfully, we could experience business interruptions. If we do not complete the implementation
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of the project timely and successfully, we may experience, among other things, additional costs associated with completing this project and a delay in our ability to improve existing operations,
support future growth and take advantage of new applications and technologies. All of this may also result in distraction of management, diverting their attention from our operations and strategy.
Our inability to protect our trademarks and any other proprietary rights may have a significant, negative impact on our business.
We consider our trademarks to be of significant importance in our business. Although we devote resources to the establishment and protection
of our trademarks, we cannot assure you that the actions we have taken or will take in the future will be adequate to prevent violation of our trademarks and proprietary rights by others or prevent others from seeking to block sales of our products
as an alleged violation of their trademarks and proprietary rights. There can be no assurance that future litigation will not be necessary to enforce our trademarks or proprietary rights or to defend ourselves against claimed infringement by others.
Any future litigation of this type could result in adverse determinations that could have a material adverse effect on our business, financial condition or results of operations. Our inability to use our trademarks and other proprietary rights could
also harm our business and sales through reduced demand for our products and reduced revenues.
Some of the products that we manufacture and
distribute require governmental permits and also subject us to potential environmental liabilities.
Some of the products that we
manufacture and distribute are subject to regulation by federal, state, foreign and local authorities. Environmental health and safety laws and regulations are often complex and are subject to change. Environmental health and safety laws and
regulations may affect us by restricting the manufacture, sale or use of our products or regulating their disposal. Regulatory or legislative changes may cause future increases in our operating costs or otherwise affect operations. There is no
assurance that in the future we may not be adversely affected by such laws or regulations, incur increased operating costs in complying with such regulations or not be subject to claims for personal injury, property damages or governmental
enforcement. For example, in September 2020, the Company settled an administrative claim by the Oregon Department of Environmental Quality relating to the Companys management of hazardous waste, including certain floor sweepings, at its
Portland facility. The settlement required the Company to pay penalties and hazardous waste reporting fees aggregating approximately $113,500. Also in September 2020, the Company settled an administrative claim by the United States Environmental
Protection Agency, based on the distribution of certain pesticides containing outdated labels. The settlement required payment by the Company of penalties aggregating $285,700. In addition, due to the nature of our operations and the frequently
changing nature of environmental compliance standards and technology, we cannot predict with any certainty that future material capital expenditures will not be required.
In addition to operational standards, environmental laws also impose obligations on various entities to clean up contaminated properties or to
pay for the cost of such remediation, often upon parties that did not actually cause the contamination. Accordingly, we may become liable, either contractually or by operation of law, for remediation costs even if the contaminated property is not
presently owned or operated by us, or if the contamination was caused by third parties during or prior to our ownership or operation of the property. With our extensive acquisition history, we have acquired a number of manufacturing and distribution
facilities. Given the nature of the past operations conducted by us and others at these properties, there can be no assurance that all potential instances of soil or groundwater contamination have been identified, even for those properties where an
environmental site assessment has been conducted. Future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination, may give rise to future remediation liabilities that may be
material.
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Our business is dependent upon our ability to continue to source products from China.
We outsource a significant amount of our manufacturing requirements to third party manufacturers located in China. This international sourcing
subjects us to a number of risks, including: the impact on sourcing or manufacturing public health and contamination risks in China; quality control issues; social and political disturbances and instability; export duties, import controls, tariffs,
quotas and other trade barriers; shipping and transportation problems; and fluctuations in currency values. These risks may be heightened by recent changes in the United States governments trade policies, including the imposition of tariffs on
goods imported from China. Because we rely on Chinese third party manufacturers for a significant portion of our product needs, any disruption in our relationships with these manufacturers could adversely affect our operations.
The products that we manufacture and distribute could expose us to product liability claims.
Our business exposes us to potential product liability risks in the manufacture and distribution of certain of our products. Although we
generally seek to insure against such risks, there can be no assurance that coverage will be adequate or that we will be able to maintain such insurance on acceptable terms. A successful product liability claim in excess of our insurance coverage
could have a material adverse effect on us and could prevent us from obtaining adequate product liability insurance in the future on commercially reasonable terms.
We have pending litigation which could adversely impact our operating results.
We are a party to litigation alleging that the applicator developed and used by us for certain of our branded topical flea and tick products
infringes a patent held by Nite Glow Industries, Inc. and allegations of breach of contract and misappropriation of confidential information. On June 27, 2018, a jury returned a verdict in favor of Nite Glow and awarded damages of approximately
$12.6 million. The court ruled on post-trial motions in early June 2020, reducing the judgment amount to $12.4 million and denying the plaintiffs request for attorneys fees. We have filed our notice of appeal and the plaintiffs
have cross-appealed. We intend to vigorously pursue our rights on appeal. However, the outcome of litigation is inherently uncertain. Regardless of the ultimate outcome, we could incur significant legal expenses pursuing an appeal and could
experience the diversion of time by our management team. If we are unsuccessful on appeal, our operating results could be adversely affected.
We
are subject to cyber security risks and may incur increasing costs in an effort to minimize those risks.
Our business employs
systems and websites that allow for the secure storage and transmission of proprietary or confidential information regarding our customers, employees, suppliers and others, including personal identification information. Security breaches could
expose us to a risk of loss or misuse of this information, litigation, and potential liability. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber attacks. Attacks may be targeted at
us, our customers and suppliers, or others who have entrusted us with information. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and
engage third party experts and consultants. Advances in computer capabilities, new technological discoveries, or other developments may result in the technology used by us to protect transaction or other data being breached or compromised. In
addition, data and security breaches can also occur as a result of non-technical issues, including breach by us or by persons with whom we have commercial relationships that result in the unauthorized release
of personal or confidential information. Any compromise or breach of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, and a loss of confidence in our security measures, which
could have an adverse effect on our results of operations and our reputation.
S-31
USE OF PROCEEDS
We estimate that the net proceeds from this offering will be approximately $394.2 million (after deducting discounts to the underwriters
and estimated offering fees and expenses). We intend to use the net proceeds of this offering, together with cash on hand, to redeem all of the $400.0 million aggregate principal amount of our outstanding 6.125% senior notes due 2023 (the
2023 notes). Upon the consummation of this offering, we expect to irrevocably deposit with the trustee approximately $418.4 million, equal to the funds sufficient to redeem all outstanding amounts of our 2023 notes, at a redemption
price of 101.531%, plus accrued and unpaid interest to the redemption date of approximately $12.3 million, and satisfy and discharge the related indenture.
Neither this prospectus supplement nor anything contained herein constitutes a notice of redemption under the optional redemption provisions
of the indenture governing the 2023 notes.
Certain of the underwriters and/or their affiliates may hold a portion of the 2023 notes and,
accordingly, may receive a portion of the net proceeds from this offering. See Underwriting.
S-32
CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization, both on an actual basis and as adjusted to give effect to
this offering and the use of proceeds therefrom. This table should be read in conjunction with Use of Proceeds and our consolidated financial statements, including the related notes, incorporated by reference into this prospectus
supplement.
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|
|
|
|
|
|
|
|
|
|
As of June 27,
2020
|
|
(in thousands)
|
|
Actual
|
|
|
As Adjusted
|
|
Cash and cash equivalents(1)
|
|
$
|
495,339
|
|
|
$
|
471,115
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, including current installments:
|
|
|
|
|
|
|
|
|
Senior secured revolving credit
facility(2)
|
|
$
|
|
|
|
$
|
|
|
6.125% senior notes due 2023(3)(4)
|
|
|
397,348
|
|
|
|
|
|
5.125% senior notes due 2028(3)
|
|
|
296,445
|
|
|
|
296,445
|
|
Notes offered hereby(3)
|
|
|
|
|
|
|
394,150
|
|
Other(5)
|
|
|
220
|
|
|
|
220
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt, including current installments
|
|
|
694,013
|
|
|
|
690,815
|
|
Total Central Garden & Pet Company shareholders equity
|
|
|
1,059,425
|
|
|
|
1,052,618
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
1,753,438
|
|
|
$
|
1,743,433
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excludes $13.6 million of restricted cash as of June 27, 2020, used as collateral for outstanding
letters of credit.
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(2)
|
As of June 27, 2020, there were no borrowings outstanding under our $400 million senior secured
revolving credit facility and no letters of credit outstanding thereunder. There were other letters of credit of $3.2 million outstanding as of June 27, 2020. As of June 27, 2020, we had availability of $400 million under the
senior secured revolving credit facility, with additional availability up to $200 million with the consent of the lenders thereunder. See Description of Certain Indebtedness. Because the borrowing capacity under the senior secured
revolving credit facility depends, in part, on the value of assets that fluctuate from time to time, such amount may not reflect actual borrowing capacity.
|
(3)
|
Reflects unamortized debt issuance costs.
|
(4)
|
Upon the consummation of this offering, we expect to irrevocably deposit with the trustee the funds sufficient
to redeem our 2023 notes at a redemption price of 101.531%, plus accrued and unpaid interest to the redemption date of approximately $12.3 million, and satisfy and discharge the related indenture. See Use of Proceeds.
|
(5)
|
Consists of other notes payable.
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S-33
DESCRIPTION OF CERTAIN INDEBTEDNESS
Senior Secured Asset-Based Revolving Credit Facility
On September 27, 2019, we entered into a second amended and restated credit agreement with certain of our domestic subsidiaries as
borrowers and guarantors, a syndicate of financial institutions party thereto, SunTrust Bank, as issuing bank and administrative agent, and SunTrust Robinson Humphrey, Inc., as left lead arranger and joint bookrunner, Bank of America, N.A., U.S.
Bank National Association and Wells Fargo Bank, National Association, as co-syndication agents, Bank of the West, BMO Harris Bank N.A., JPMorgan Chase Bank, N.A. and KeyBank National Association as co-documentation agents, which provides up to a $400 million principal amount senior secured asset-based revolving credit facility, with up to an additional $200 million principal amount available with the
consent of the lenders if we exercise the accordion feature set forth therein (collectively, the senior secured revolving credit facility). The senior secured revolving credit facility matures on September 27, 2024. We may borrow,
repay and reborrow amounts under the senior secured revolving credit facility until its maturity date, at which time all amounts outstanding under the senior secured revolving credit facility must be repaid in full. As of June 27, 2020, there
were no borrowings outstanding and no letters of credit outstanding under the senior secured revolving credit facility. There were other letters of credit of $3.2 million outstanding as of June 27, 2020.
The senior secured revolving credit facility is subject to a borrowing base, calculated using a formula based upon eligible receivables and
inventory, minus certain reserves and subject to restrictions. As of June 27, 2020, the borrowing base and remaining borrowing availability was $400.0 million. The senior secured revolving credit facility also allows us to add real
property to the borrowing base so long as the real property is subject to a first priority lien in favor of the administrative agent for the benefit of the lenders. Borrowings under the senior secured revolving credit facility bear interest at an
index based on LIBOR or, at our option, the Base Rate (defined as the highest of (a) the SunTrust prime rate, (b) the Federal Funds Rate plus 0.50%, (c) one-month LIBOR plus 1.00% and (d) zero
percent (0.00%)), plus, in each case, an applicable margin based on our consolidated senior leverage ratio. Such applicable margin for LIBOR-based borrowings fluctuates between 1.00%1.50%, and was 1.00% as of June 27, 2020, and such
applicable margin for Base Rate borrowings fluctuates between 0.00%0.50%, and was 0.00% as of June 27, 2020. As of June 27, 2020, the applicable interest rate related to Base Rate borrowings was 3.3%, and the applicable interest rate
related to LIBOR-based borrowings was 1.2%. All of our direct and indirect restricted domestic subsidiaries are required to be co-borrowers or guarantors under the senior secured revolving credit facility,
except for certain immaterial subsidiaries whose assets or EBITDA (together with all other immaterial subsidiaries) constitute less than 10% of our consolidated net tangible assets or 10% of our EBITDA, respectively.
We incurred approximately $1.6 million of debt issuance costs in conjunction with our senior secured revolving credit facility, which
included banking fees, legal and accounting expenses. These debt issuance costs will be amortized over the term of the senior secured revolving credit facility.
The senior secured revolving credit facility contains customary covenants, including financial covenants which require us to maintain a
minimum fixed charge coverage ratio of 1.00:1.00 upon reaching certain borrowing levels. The senior secured revolving credit facility is secured by substantially all of our assets. We were in compliance with all financial covenants under the senior
secured revolving credit facility during the quarter ended June 27, 2020.
5.125% Senior Notes Due 2028
In December 2017, we issued $300 million aggregate principal amount of 5.125% senior notes due February 2028.
The existing senior notes require semiannual interest payments on February 1 and August 1. The existing senior notes are unconditionally
guaranteed on a senior basis by each of our existing and future domestic
S-34
restricted subsidiaries which are borrowers under or guarantors of our senior secured revolving credit facility. The existing senior notes are unsecured senior obligations and are subordinated to
all of our existing and future secured debt, including our senior secured revolving credit facility, to the extent of the value of the collateral securing such indebtedness.
We may redeem some or all of the existing senior notes at any time, at our option, prior to January 1, 2023, at the principal amount plus
a make whole premium. At any time prior to January 1, 2021, we may also redeem, at our option, up to 35% of the original aggregate principal amount of the notes with the proceeds of certain equity offerings at a redemption price of
105.125% of the principal amount of the notes. We may redeem some or all of the existing senior notes, at our option, at any time on or after January 1, 2023, for 102.563%, on or after January 1, 2024, for 101.708%, on or after
January 1, 2025, for 100.854% and on or after January 1, 2026, for 100.000%, plus accrued and unpaid interest.
The holders of
the existing senior notes have the right to require us to repurchase all or a portion of the existing senior notes at a purchase price equal to 101% of the principal amount of the notes repurchased, plus accrued and unpaid interest upon the
occurrence of a change of control.
The existing senior notes contain customary high yield covenants, including covenants limiting debt
incurrence and restricted payments, subject to certain baskets and exceptions.
6.125% Senior Notes Due 2023
In November 2015, we issued $400 million aggregate principal amount of 6.125% senior notes due November 2023. We intend to use the net
proceeds from this offering, together with cash on hand, to redeem all outstanding amounts of these notes. Upon the consummation of this offering, we expect to irrevocably deposit with the trustee the funds sufficient to redeem all outstanding
amounts of our 2023 notes at a redemption price of 101.531%, plus accrued and unpaid interest to the redemption date of approximately $12.3 million, and satisfy and discharge the related indenture. See Use of Proceeds.
S-35
DESCRIPTION OF NOTES
For purposes of this section, references to the words we, us, our and the Company mean only
Central Garden & Pet Company but not any of its Subsidiaries.
The Company will issue the notes being offered hereby (the
Notes) under an existing indenture dated March 8, 2010, between itself and Wells Fargo Bank, National Association, as trustee (the Trustee), as supplemented by a supplemental indenture to be dated the Issue Date, among
the Company, the Guarantors and the Trustee (collectively, the Indenture). The following is a summary of the material provisions of the Indenture. It does not include all of the provisions of the Indenture. We urge you to read the
Indenture because it defines your rights. The terms of the Notes offered hereby include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the TIA), as in
effect on the Issue Date. A copy of the Indenture may be obtained from the Company or the underwriters. See Where You Can Find More Information.
A registered holder of a Note being offered hereby (each, a Holder) will be treated as its owner for all purposes. Only registered
Holders will have rights under the Indenture.
You can find the definitions of capitalized terms used in this section under
Certain Definitions.
Brief Description of the Notes and the Guarantees
The Notes will be:
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unsecured senior obligations of ours;
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pari passu in right of payment with all of our existing and future Senior Debt, including the Debt Facility and
the Existing Senior Notes;
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effectively subordinated to all of our existing and future Secured Debt, including the Debt Facility, to the
extent of the value of the collateral securing such Indebtedness;
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senior in right of payment with any future Subordinated Debt;
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guaranteed by certain of our Domestic Restricted Subsidiaries; and
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|
|
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structurally subordinated to all liabilities of our non-Guarantor
Subsidiaries (including Securitization Entities).
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The Guarantees will be:
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|
|
unsecured senior obligations of each Guarantor;
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|
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pari passu in right of payment with all existing and future Senior Debt of each Guarantor, including guarantees
of the Debt Facility and the Existing Senior Notes;
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effectively subordinated to all existing and future Secured Debt of each Guarantor, including guarantees of the
Debt Facility, to the extent of the value of the collateral securing such Indebtedness;
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|
|
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senior in right of payment to each Guarantors guarantee of any future Subordinated Debt of such Guarantor;
and
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S-36
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|
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structurally subordinated to all liabilities of any non-Guarantor
Subsidiary (including Securitization Entities).
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Principal, Maturity and Interest
The Company will issue an aggregate principal amount of $400 million of Notes. The Notes will mature on
, 2030. Subject to the Companys compliance with the Limitation on Incurrence of Additional Indebtedness
covenant, the Company is permitted to issue more notes of the same series as the Notes under the Indenture (the Additional Notes) and additional notes of other series; provided that if any Additional Notes are not fungible with
the Notes for U.S. federal income tax purposes, such Additional Notes will be issued as a separate series under the Indenture and will have a separate CUSIP number and ISIN from the Notes. Unless the context otherwise requires, for all purposes of
the Indenture and this Description of Notes, references to the Notes include any Additional Notes actually issued. All Additional Notes will be substantially identical to other Notes other than the issue date, the issue price, the first
interest payment date and the first date from which interest will accrue and will constitute a part of the same series. We will issue the Notes in fully registered form in minimum denominations of $2,000 and integral multiples of $1,000 in excess
thereof. The Trustee will initially act as registrar (the Registrar) and principal paying agent (together with any additional paying agent and transfer agent appointed from time to time, the Paying Agents). The Notes may be
presented for registration of transfer and exchange at the offices of the Registrar and at the offices of any Paying Agent appointed in respect of any Notes. We may change any Paying Agent and the Registrar without notice to Holders or appoint
additional or other paying and transfer agents. We will pay principal of, premium, if any, and interest on, Notes in global form registered in the name of or held by The Depository Trust Company (DTC) or its nominee in immediately
available funds to DTC or its nominee, as the case may be, as the registered Holder of such global Note.
Interest on the Notes will
accrue at the rate of % per annum (calculated on the basis of a 360-day year comprised of 12 months of 30 days). Interest on the Notes will be payable semi-annually in cash in arrears on
each and , and the first interest payment date will
be , 2021. The Company will make interest payments to the Holders at the close of business
on and immediately preceding the applicable interest
payment date (whether or not a Business Day). Interest on the Notes will accrue from the Issue Date or, if interest has already been paid, from the most recent date on which interest on the Notes was paid. If any interest payment date, the maturity
date, any redemption date, or any earlier required repurchase date of a note falls on a day that is not a Business Day, the required payment will be made on the next succeeding Business Day and no interest on such payment will accrue in respect of
the delay.
Redemption
Optional Redemption
At any time prior
to , 2025, we may redeem the Notes at our option, in whole or in part, upon not less than 15 nor more than 60 days prior
notice mailed or otherwise delivered to the registered address of each Holder in accordance with the applicable procedures of DTC, at a redemption price equal to 100% of the aggregate principal amount of Notes redeemed plus the Applicable Premium as
of, and accrued and unpaid interest, if any, to, but excluding, the redemption date (the Redemption Date), subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date.
On and after , 2025, we
may redeem the Notes at our option, in whole or in part, upon not less than 15 nor more than 60 days prior notice mailed or otherwise delivered to each Holder in accordance with the applicable procedures of DTC, at the following redemption
prices (expressed, as percentages of the principal amount thereof), plus accrued and unpaid interest, if any, to, but excluding, the Redemption Date, subject to the
S-37
rights of Holders on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the 12-month period
commencing on of the year set forth below:
|
|
|
|
|
Year
|
|
Redemption Price
|
|
2025
|
|
|
|
%
|
2026
|
|
|
|
%
|
2027
|
|
|
|
%
|
2028 and thereafter
|
|
|
100.000
|
%
|
Optional Redemption Upon Equity Offerings
Prior to , 2023, we may
at our option on one or more occasions redeem Notes in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the Notes (which includes Additional Notes, if any) originally issued, upon not less than 15 nor more than 60
days prior notice mailed or otherwise delivered to each Holder in accordance with the applicable procedures of DTC, at a redemption price (expressed, as a percentage of principal amount) of %, plus accrued and unpaid
interest, if any, to, but excluding, the Redemption Date, with the net cash proceeds from one or more Equity Offerings; provided, however, that
|
(1)
|
at least 60% of the aggregate principal amount of the Notes (which includes Additional Notes, if any)
originally issued under the Indenture remains outstanding immediately after the occurrence of each such redemption (other than Notes held, directly or indirectly, by us or any of our Affiliates); and
|
|
(2)
|
each such redemption occurs within 90 days after the date of closing of the related Equity Offering.
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Selection and Notice of Redemption
In the event that we choose to redeem less than all of the Notes, selection of the Notes of such series for redemption will be made by the
Trustee on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate and with respect to global Notes, in accordance with the applicable procedures of DTC. No Notes of a principal amount of $2,000 or less shall be
redeemed in part.
Any redemption notice may, at our discretion, be subject to one or more conditions precedent, including completion of
an Equity Offering or other corporate transaction. In such event, the related notice of redemption shall describe each such condition and, if applicable, shall state that, at the Companys discretion, the date of redemption may be delayed until
such time (including more than 60 days after the date the notice of redemption was mailed or delivered, including by electronic transmission) as any or all such conditions shall be satisfied (or waived by the Company in its sole discretion), or such
redemption may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied or waived by the date of redemption, or by the date of redemption as so delayed. The Company shall provide written
notice to the Trustee prior to the close of business two Business Days prior to the redemption date (or such shorter period as may be acceptable to the Trustee) if any such redemption has been rescinded or delayed, and upon receipt the Trustee shall
provide such notice to each Holder in the same manner in which the notice of redemption was given.
Mandatory Redemption; Offers to Purchase; Open
Market Purchases
We are not required to make any mandatory redemption or sinking fund payments with respect to the Notes. However,
under certain circumstances, we may be required to offer to purchase Notes as described under the caption Change of Control and the Limitation on Asset Sales covenant. We may at any time and from time to time purchase
Notes by means other than a redemption, whether by tender offer, open market purchases, negotiated transactions or otherwise, in accordance with the applicable securities laws, so long as such acquisition does not otherwise violate the terms of the
Indenture.
S-38
Ranking
Senior Secured Indebtedness versus Notes and Guarantees
The payment of the principal of, premium, if any, and interest on the Notes and the payment of any Guarantee will rank pari passu in
right of payment with all of our Senior Debt or the Senior Debt of the relevant Guarantor, as the case may be, including, without limitation, our obligations and those of any Guarantor under the Debt Facility and the Existing Senior Notes.
The Notes will be effectively subordinated to all of our and the Guarantors existing and future Secured Debt, to the extent of the value
of the collateral securing such Indebtedness. As of June 27, 2020, after giving effect to this offering and the use of proceeds therefrom, no Secured Debt of the Company and the Guarantors (without duplication) was outstanding.
Subject to certain conditions contained in our Debt Facility, as of June 27, 2020, we had additional availability of approximately
$400 million for borrowing under the Debt Facility, with additional availability up to $200 million with the consent of the lenders thereunder. Although the Indenture will contain limitations on the amount of additional Indebtedness that
we and the Guarantors may incur, under certain circumstances the amount of such additional Indebtedness could be substantial and such Indebtedness may be Secured Debt. See Certain CovenantsLimitation on Incurrence of Additional
Indebtedness.
Liabilities of Subsidiaries versus Notes and Guarantees
Claims of creditors of non-Guarantor Subsidiaries, including trade creditors holding Indebtedness or
guarantees issued by such non-Guarantor Subsidiaries, and claims of preferred stockholders of such non-guarantor Subsidiaries, will have priority with respect to the
assets and earnings of such non-Guarantor Subsidiaries over the claims of our creditors, including Holders. Accordingly, the Notes and each Guarantee will be effectively subordinated to creditors (including
trade creditors) and preferred stockholders, if any, of such non-Guarantor Subsidiaries. As of June 27, 2020, the Notes and related Guarantees would have been structurally subordinated in right of payment
to approximately $35 million of liabilities of our non-Guarantor Subsidiaries, including trade and other payables but excluding intercompany liabilities.
Although the Indenture will limit the incurrence of Indebtedness by our Restricted Subsidiaries, such limitation is subject to a number of
significant qualifications. Moreover, the Indenture will not impose any limitation on the incurrence by such Subsidiaries of liabilities that are not considered Indebtedness under the Indenture. See Certain CovenantsLimitation on
Incurrence of Additional Indebtedness.
Guarantees
The obligations of the Company under the Indenture will be fully and unconditionally guaranteed on a senior basis by all of our Domestic
Restricted Subsidiaries that guarantee our Debt Facility. Notwithstanding the foregoing, any Domestic Restricted Subsidiary of the Company that at any time has total assets of less than $1,000,000, as reflected on such Subsidiarys most recent
balance sheet as of the date of determination, or consolidated cash flow for the most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date of determination of less than $500,000,
will not be required to become a Guarantor unless it guarantees other Indebtedness of the Company or a Restricted Subsidiary of the Company. The obligations of each Domestic Restricted Subsidiary under its Guarantee will be limited as necessary to
prevent that Guarantee from constituting a fraudulent conveyance under applicable law. See Risk FactorsRisks Relating to the NotesFederal and state statutes allow courts, under specific circumstances, to void the notes and/or the
note guarantees, and if that occurs, you may not receive any payments on the notes. On the Issue Date, all of our Subsidiaries will be Restricted Subsidiaries, except for Tech Pac, L.L.C.
S-39
Each Guarantor that makes a payment under its Guarantee will be entitled upon payment in full of
all guaranteed obligations under the Indenture to a contribution from each other Guarantor in an amount equal to such other Guarantors pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of
such payment determined in accordance with GAAP.
If a Guarantee were rendered voidable, it could be subordinated by a court to all other
indebtedness (including, without limitation, guarantees and other contingent liabilities) of that Guarantor and, depending on the amount of such indebtedness, a Guarantors liability on its Guarantee could be reduced to zero. See Risk
FactorsRisks Relating to the NotesFederal and state statutes allow courts, under specific circumstances, to void the notes and/or the note guarantees, and if that occurs, you may not receive any payments on the notes.
Pursuant to the Indenture, a Guarantor may consolidate with, merge with or into, or transfer all or substantially all its assets to any other
Person to the extent described below under Certain CovenantsMerger, Consolidation and Sale of Assets; provided, however, that if such other Person is not the Company or a Guarantor, such Guarantors
obligations under its Guarantee must be expressly assumed by such other Person pursuant to a supplemental indenture, subject to the following paragraph.
The Guarantee of a Guarantor will be automatically and unconditionally released:
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(1)
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upon the sale, assignment, transfer, conveyance, exchange or other disposition (including by way of
consolidation, merger or otherwise) of such Guarantor;
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(2)
|
upon the sale or disposition of all or substantially all of the assets of such Guarantor;
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|
(3)
|
upon the release or discharge of such Guarantor from its guarantee, if any, and of all pledges and security, if
any, granted by such Guarantor in connection with a Debt Facility, except a release or discharge by or as a result of payment under such guarantee;
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(4)
|
upon the designation of such Guarantor as an Unrestricted Subsidiary pursuant to the terms of the Indenture; or
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(5)
|
if we exercise our Legal Defeasance option or Covenant Defeasance option as described under Legal
Defeasance and Covenant Defeasance or if our obligations under the Indenture are discharged in accordance with the terms of the Indenture as described under Satisfaction and Discharge;
|
in the case of clauses (1) and (2), other than to us or one of our Affiliates and as permitted by the Indenture and we will comply with our obligations
under the Limitation on Asset Sales covenant in respect of such disposition. In addition, such Guarantor will deliver to the Trustee an officers certificate and an Opinion of Counsel, each stating that all conditions precedent
provided for in the Indenture relating to such transactions or release have been complied with.
In the event that any released Guarantor
(in the case of clauses (3) or (4) above) thereafter borrows money or guarantees Indebtedness under a Debt Facility, such former Guarantor will again provide a Guarantee. See Certain CovenantsFuture Guarantees by Restricted
Subsidiaries.
Change of Control
If a Change of Control occurs, unless the Company has exercised its right to redeem all of the Notes as described under
Redemption, each Holder will have the right to require that we purchase all or a portion of such Holders Notes pursuant to the offer described below (the Change of Control Offer), at a purchase price equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to, but excluding, the
S-40
repurchase date (the Change of Control Payment). Within 30 days following the date upon which the Change of Control occurred, unless the Company has exercised its right to redeem all
of the Notes as described under Redemption, we must send, or otherwise deliver in accordance with the applicable procedures of DTC, a notice to the Trustee and each Holder, which notice shall govern the terms of the Change of Control
Offer. Such notice shall state, among other things, the purchase date, which must be no earlier than 15 days nor later than 60 days from the date such notice is mailed or otherwise delivered in accordance with the applicable procedures of DTC, other
than as may be required by law (the Change of Control Payment Date).
Holders electing to have their Notes purchased pursuant
to a Change of Control Offer will be required to surrender their Notes, with the form entitled Option of Holder to Elect Purchase on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day prior to the Change of Control Payment Date, or with respect to global Notes, comply with the applicable procedures of DTC.
On the Change of Control Payment Date, we will, to the extent permitted by law,
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(1)
|
accept for payment all Notes issued by us or portions thereof tendered pursuant to the Change of Control Offer;
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|
(2)
|
deposit with the Paying Agent, no later than 10:00 a.m. New York City time, an amount equal to the aggregate
Change of Control Payment in respect of all Notes or portions thereof so tendered; and
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|
(3)
|
deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an
officers certificate stating that all Notes or portions thereof have been tendered to and purchased by us.
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In the
event that we make a Change of Control Payment, the Paying Agent will promptly mail or wire transfer to each Holder the Change of Control Payment for such Notes, and the Trustee will promptly authenticate (or transfer by book entry) a new Note equal
in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $2,000 or an integral multiple of $1,000 in excess thereof.
We will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the Indenture and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. A Change of Control Offer may be made in advance of a Change of Control, and
conditioned upon the occurrence of such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making the Change of Control Offer.
If the Change of Control Payment Date is on or after a record date for an interest payment and on or before the related interest payment date,
any accrued and unpaid interest to the Change of Control Payment Date will be paid on the Change of Control Payment Date to the Person in whose name a Note is registered at the close of business on such record date, subject to applicable procedures
of DTC with respect to global Notes.
If a Change of Control Offer is made, there can be no assurance that we will have available funds
sufficient to pay the Change of Control purchase price for all the Notes that might be delivered by Holders seeking to accept the Change of Control Offer. In the event we are required to purchase outstanding Notes pursuant to a Change of Control
Offer, we expect that we would seek third party financing to the extent we do not have available funds to meet our purchase obligations. However, there can be no assurance that we would be able to obtain such financing.
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The Change of Control purchase feature of the Notes may in certain circumstances make more
difficult or discourage a sale or takeover of the Company and, thus, the removal of incumbent management. The Change of Control purchase feature is a result of negotiations between us and the underwriters. We have no present intention to engage in a
transaction involving a Change of Control, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain other transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings.
Restrictions on our ability to incur additional Indebtedness are contained in the Limitation on Incurrence of Additional Indebtedness covenant. Such restrictions can only be waived, amended or modified with the consent of the holders of
a majority in principal amount of the Notes then outstanding.
Prior to making a Change of Control Payment, and as a condition to such
payment (1) the requisite lenders or holders of Indebtedness incurred or issued under a credit facility, an indenture or other agreement that may be violated by such payment shall have consented to such Change of Control Payment being made and
waived the event of default, if any, caused by the Change of Control or (2) the Company will repay all outstanding Indebtedness incurred or issued under a credit facility, an indenture or other agreement that may be violated by a Change of
Control Payment or the Company will offer to repay all such Indebtedness, make payment to the lenders or holders of such Indebtedness that accept such offer and obtain waivers of any event of default arising under the relevant credit facility,
indenture or other agreement from the remaining lenders or holders of such Indebtedness. The Company covenants to effect such repayment or obtain such consent prior to making a Change of Control Payment, it being a default of the Change of Control
provisions of the Indenture if the Company fails to comply with such covenant. A default under the Indenture may result in a cross-default under a Debt Facility.
If Holders of not less than 90% in aggregate principal amount of the outstanding Notes validly tender and do not validly withdraw such Notes
in a Change of Control Offer and the Company, or any third party making a Change of Control Offer in lieu of the Company as described above, purchases all of the Notes validly tendered and not validly withdrawn by such Holders, the Company or such
third party will have the right, upon not less than 15 days nor more than 60 days prior notice, given not more than 15 days following such purchase pursuant to the Change of Control Offer described above, to redeem all Notes that
remain outstanding following such purchase at a price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest to, but excluding, the date of redemption.
The definition of Change of Control includes a disposition of all or substantially all of our assets to any Person. Although there
is a limited body of case law interpreting the phrase substantially all, there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to
whether a particular transaction would involve a disposition of all or substantially all of our assets. As a result, it may be unclear as to whether a Change of Control has occurred and whether a Holder may require us to make an offer to
repurchase the Notes as described above.
The provisions under the Indenture relative to our obligation to make an offer to repurchase the
Notes as a result of a Change of Control may be waived, amended or modified with the consent of the holders of a majority in principal amount of the Notes then outstanding.
We will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict
with the Change of Control provisions of the Indenture, we shall comply with the applicable securities laws and regulations and shall not be deemed to have breached our obligations under the Change of Control provisions of
the Indenture by virtue thereof.
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Certain Covenants
Covenant Suspension
During any
period of time following the Issue Date that (i) the Notes have Investment Grade Ratings from at least two of the Rating Agencies and (ii) no Default has occurred and is continuing under the Indenture (the occurrence of the events
described in the foregoing clauses (i) and (ii) being collectively referred to as a Covenant Suspension Event), we and our Restricted Subsidiaries will not be subject to the following provisions of the Indenture:
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(1)
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Limitation on Incurrence of Additional Indebtedness;
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(2)
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Limitation on Restricted Payments;
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(3)
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Limitation on Asset Sales;
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(4)
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Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries;
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(5)
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Limitation on Preferred Stock of Restricted Subsidiaries;
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(6)
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clause (2) of the first paragraph of Merger, Consolidation and Sale of Assets;
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(7)
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Limitation on Transactions with Affiliates; and
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(8)
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Future Guarantees by Restricted Subsidiaries
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(collectively, the Suspended Covenants). Upon the occurrence of a Covenant Suspension Event, the amount of Net Cash Proceeds with respect to any
applicable Asset Sale Offer Trigger Date (as defined below) shall be set at zero at such date (the Suspension Date). In addition, in the event that we and our Restricted Subsidiaries are not subject to the Suspended Covenants for any
period of time as a result of the foregoing, and on any subsequent date (the Reversion Date) two of the Rating Agencies withdraw their Investment Grade Rating or downgrade the rating assigned to the Notes below an Investment Grade Rating
or a Default or Event of Default occurs and is continuing, then we and our Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants with respect to future events. The period of time between the Suspension Date and the
Reversion Date is referred to in this description as the Suspension Period. Within 30 days of the Reversion Date, any Restricted Subsidiary that would have been required during the Suspension Period but for the Suspended Covenants by the
Future Guarantees by Restricted Subsidiaries covenant to execute a supplemental indenture will execute such supplemental indenture required by such covenant. Notwithstanding that the Suspended Covenants may be reinstated, no Default or
Event of Default will be deemed to have occurred as a result of a failure to comply with the Suspended Covenants during the Suspension Period (or upon termination of the Suspension Period or after that time based solely on events that occurred
during the Suspension Period).
On the Reversion Date, all Indebtedness incurred during the Suspension Period will be classified to have
been incurred or issued pursuant to the Limitation on Incurrence of Additional Indebtedness covenant to the extent such Indebtedness would be permitted to be incurred or issued thereunder as of the Reversion Date and after giving effect
to Indebtedness incurred or issued prior to the Suspension Period and outstanding on the Reversion Date. To the extent such Indebtedness would not be so permitted to be incurred or issued pursuant to the Limitation on Incurrence of Additional
Indebtedness covenant, such Indebtedness will be deemed to have been outstanding on the Issue Date, so that it is classified as permitted under clause (3) of the definition of Permitted Indebtedness.
Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under Limitation on
Restricted Payments will be made as though the covenant described under
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Limitation on Restricted Payments had been in effect since the Issue Date and throughout the Suspension Period. Accordingly, Restricted Payments made during the Suspension
Period will be deemed to have been made pursuant to the first paragraph of the Limitation on Restricted Payments covenant.
Promptly following the occurrence of any Suspension Date or Reversion Date, the Company will provide an officers certificate to the
Trustee regarding such occurrence. The Trustee shall have no obligation to independently determine or verify if a Suspension Date or Reversion Date has occurred or notify the Holders of any Suspension Date or Reversion Date. The Trustee may provide
a copy or such officers certificate to any Holder of the Notes upon request. There can be no assurance that the Notes will ever achieve an Investment Grade Rating.
Limitation on Incurrence of Additional Indebtedness
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively incur) any Indebtedness (other than Permitted Indebtedness); provided, however,
that the Company and any of its Restricted Subsidiaries may incur Indebtedness (including, without limitation, Acquired Indebtedness), in each case if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof,
the Companys Consolidated Fixed Charge Coverage Ratio for its most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred
would have been at least 2.0 to 1.0; provided, further, that the amount of Indebtedness that may be incurred pursuant to the foregoing by Restricted Subsidiaries that are not Guarantors shall not exceed the greater of (x) $100 million
and (y) 5.0% of the Companys Total Assets at any one time outstanding.
The Indenture will provide that the Company will not, and
will not permit any Guarantor to, directly or indirectly, incur any Indebtedness (including Acquired Indebtedness) that is subordinated or junior in right of payment to any Indebtedness of the Company or such Guarantor, as the case may be, unless
such Indebtedness is expressly subordinated in right of payment to the Notes or such Guarantors Guarantee to the extent and in the same manner as such Indebtedness is subordinated to other Indebtedness of the Company or such Guarantor, as the
case may be.
The Indenture will not treat (1) unsecured Indebtedness as subordinated or junior to the Secured Debt merely because it
is unsecured or (2) Senior Debt as subordinated or junior to any other Senior Debt merely because it has a junior priority with respect to the same collateral.
Limitation on Restricted Payments
The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly:
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(1)
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declare or pay any dividend or make any distribution on or in respect of shares of the Companys or any
Restricted Subsidiarys Capital Stock to holders of such Capital Stock (other than dividends or distributions payable in Qualified Capital Stock of the Company and dividends or distributions payable to the Company or a Restricted Subsidiary and
other than pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation));
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(2)
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purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or of any direct or
indirect parent of the Company or of a Restricted Subsidiary of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock;
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(3)
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purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company, or of any Guarantor, that is subordinate or junior in right of payment to the Notes or any Guarantee, as applicable (other than (x) any
Indebtedness permitted under clause (6) of the definition of Permitted Indebtedness and (y) the purchase, defeasance, redemption, prepayment, decrease or other acquisition or retirement of such Indebtedness purchased in
anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of such purchase, defeasance, redemption, prepayment, decrease or other acquisition or retirement); or
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(4)
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make any Investment (other than Permitted Investments)
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(each of the foregoing actions set forth in clauses (1), (2), (3) and (4) being referred to as a Restricted Payment); unless, at the time of
such Restricted Payment and immediately after giving effect thereto:
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(i)
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no Default or an Event of Default shall have occurred and be continuing;
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(ii)
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the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in the covenant
described above under the caption Limitation on Incurrence of Additional Indebtedness; and
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(iii)
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the aggregate amount of Restricted Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (other than Restricted Payments made pursuant to clauses (2), (3), (4), (5) and (8) of the following paragraph) is less than the sum of without duplication, the following:
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(A)
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50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus
100% of such loss) of the Company earned during the period (treated as one accounting period) from December 26, 2015 to the end of the Companys most recent fiscal quarter ending prior to the date of such Restricted Payment for which
internal financial statements are available; plus
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(B)
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100% of the aggregate net cash proceeds and the fair market value of property other than cash that would
constitute Marketable Securities or a Permitted Business received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date of Qualified Capital Stock of the Company (other than
Designated Preferred Stock); plus
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(C)
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the amount by which Indebtedness of the Company is reduced on the Companys balance sheet upon the
conversion or exchange subsequent to the Issue Date of any Indebtedness of the Company for Qualified Capital Stock of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion
or exchange); provided, however, that the foregoing amount shall not exceed the net cash proceeds received by the Company or any Restricted Subsidiary from the sale of such Indebtedness; plus
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(D)
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an amount equal to the sum of (I) 100% of the aggregate net proceeds (including the fair market value of
property other than cash that would constitute Marketable Securities or a Permitted Business) received by the Company or any Restricted Subsidiary since the Issue Date (A) from any sale or other disposition of any Investment (other than a
Permitted Investment) in any Person (including an Unrestricted Subsidiary) made by the Company and
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S-45
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its Restricted Subsidiaries and (B) representing the return of capital or principal (excluding dividends and distributions otherwise included in Consolidated Net Income) with respect to such
Investment, and (II) the portion (proportionate to the Companys equity interest in an Unrestricted Subsidiary) of the fair market value of the net assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated
a Restricted Subsidiary; provided, however, that, in the case of item (II), the foregoing sum shall not exceed, in the case of any Unrestricted Subsidiary, the amount of Investments (excluding Permitted Investments) previously made (and
treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary; plus
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As of June 27, 2020, the Company would have been able to make approximately $374 million of Restricted Payments pursuant to this clause (iii),
subject to the other limitations set forth in this covenant and in the covenants governing the Companys other indebtedness and limitations imposed by applicable law.
Notwithstanding the foregoing, the provisions set forth in the preceding paragraph do not prohibit:
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(1)
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the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of
declaration of such dividend or notice of such redemption if the dividend or payment of the redemption price, as the case may be, would have been permitted on the date of declaration or notice;
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(2)
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any Restricted Payment made out of the net cash proceeds of the substantially concurrent sale of, or made by
exchange for, Qualified Capital Stock of the Company (other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of
their employees and other than Designated Preferred Stock) or a substantially concurrent cash capital contribution received by the Company from its shareholders; provided, however, that the net cash proceeds from such sale or such cash
capital contribution (to the extent so used for such Restricted Payment) shall be excluded from the calculation of amounts under clause (iii)(B) of the preceding paragraph;
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(3)
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the defeasance, redemption, repurchase or other acquisition of any Indebtedness of the Company or a Guarantor
that is subordinate or junior in right of payment to the Notes or the applicable Guarantee through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of Refinancing Indebtedness
that is subordinate or junior in right of payment to the Notes or the applicable Guarantee;
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(4)
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the redemption, repurchase or other acquisition or retirement for value of any Capital Stock of the Company, in
each case in connection with the repurchase provisions of employee stock option or stock purchase agreements or other agreements to compensate management employees, or upon the death, disability, retirement, severance or termination of employment of
management employees; provided that all such redemptions or repurchases pursuant to this clause (4) shall not exceed in any fiscal year $15 million (with unused amounts in any calendar year carried over to succeeding calendar years
subject to a maximum of $25 million in any calendar year; provided that amounts in any calendar year may be increased by an amount not to exceed the net cash proceeds received by the Company or any of its Restricted Subsidiaries from the
sale of the Companys Capital Stock (other than Disqualified Capital Stock) to any member of the management or the Board of Directors of the Company or any Restricted Subsidiary);
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(5)
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repurchases of Capital Stock deemed to occur upon the exercise of stock options if such Capital Stock
represents a portion of the exercise price thereof;
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S-46
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(6)
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repurchases of Capital Stock deemed to occur upon the exercise of stock options or the vesting of restricted
stock grants to satisfy tax withholding obligations;
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(7)
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additional Restricted Payments since the Issue Date in an amount not to exceed $250 million;
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(8)
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payments of regularly scheduled or accrued dividends on Disqualified Capital Stock issued in compliance with
the Limitation on Incurrence of Additional Indebtedness covenant to the extent such dividends are included in the definition of Consolidated Interest Expense;
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(9)
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the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any
Obligations of the Company that are subordinate or junior in right of payment to the Notes (i) at a purchase price not greater than 101% of the principal amount of such Obligations in the event of a Change of Control in accordance with
provisions similar to the Change of Control covenant or (ii) at a purchase price not greater than 100% of the principal amount thereof with provisions similar to the Limitation on Asset Sales covenant; provided
that, prior to or simultaneously with such purchase, repurchase, redemption, defeasance or other acquisition or retirement, the Company has made the Change of Control Offer or Asset Sale Offer, as applicable, as provided in such covenant with
respect to the Notes and has completed the repurchase or redemption of all Notes validly tendered for payment in connection with such Change of Control Offer or Asset Sale Offer;
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(10)
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the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its equity interests on
a pro rata basis and the redemption, purchase, cancellation or other retirement of equity interests in a Restricted Subsidiary;
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(11)
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the redemption, repurchase or other acquisition or retirement of the Existing Senior Notes; and
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(12)
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any Restricted Payment; provided that, immediately after giving pro forma effect thereto (including the
application of the proceeds thereof), the Company would have had a Total Net Leverage Ratio of less than or equal to 3.50 to 1.00;
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provided, however, that at the time of and after giving effect to, any Restricted Payment permitted under clause (12), no Default shall have
occurred and be continuing or would occur as a consequence thereof.
The Board of Directors of the Company may designate any Restricted
Subsidiary of the Company to be an Unrestricted Subsidiary as specified in the definition of Unrestricted Subsidiary. For purposes of making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries
(except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant.
All of those outstanding Investments will be deemed to constitute Investments in an amount equal to the fair market value of the Investments at the time of such designation. Such designation will only be permitted if the Restricted Payment would be
permitted at the time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
For purposes of
determining compliance with this covenant, in the event that a Restricted Payment (or a portion thereof) meets the criteria of more than one of the types of Restricted Payments described above or as a Permitted Investment, the Company, in its sole
discretion, may divide and classify (or later reclassify) such Restricted Payment (or a portion thereof) in any manner in compliance with this covenant, and following such reclassification such Restricted Payment or Permitted Investment shall be
treated as having been made pursuant to only the clause or clauses of this covenant to which such Restricted Payment or Permitted Investment has been reclassified.
S-47
Limitation on Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:
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(1)
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the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by the Board of Directors of the Company);
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(2)
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at least 75% of the consideration received by the Company or the Restricted Subsidiary, as the case may be,
from such Asset Sale shall be in the form of cash or Cash Equivalents; provided that the amount of:
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(a)
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any liabilities (as shown on the Companys or such Restricted Subsidiarys most recent balance sheet)
of the Company or any such Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or the Guarantees) that are assumed by the transferee of any such assets and from which the Company and all Restricted
Subsidiaries have been validly released by all creditors in writing;
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(b)
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any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee
that are converted by the Company or such Restricted Subsidiary into cash within 180 days of the receipt thereof (to the extent of the cash received);
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(c)
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any Designated Non-cash Consideration received by the Company or any of
its Restricted Subsidiaries in such Asset Sale having an aggregate fair market value, taken together with all other Designated Non-cash Consideration received pursuant to this clause (c) that is at that
time outstanding, not to exceed the greater of (i) $75 million and (ii) 7.5% of Total Assets at the time of the receipt of such Designated Non-cash Consideration (with the fair market value of each item
of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value); and
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(d)
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any Productive Assets,
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shall, in each of clauses (a), (b), (c) and (d) above, be deemed to be cash for the purposes of this provision or for purposes of the
second paragraph of this covenant; and
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(3)
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upon the consummation of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to apply,
the Net Cash Proceeds relating to such Asset Sale within 365 days of receipt thereof:
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(a)
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to prepay any Obligations under a Debt Facility or Obligations under Senior Debt that are secured by a Lien,
which Lien is permitted by the Indenture and, in the case of any such Indebtedness under any revolving credit facility, effect a corresponding reduction in the availability under such revolving credit facility (or, if required by a Debt Facility,
effect a permanent reduction in the availability under such revolving credit facility regardless of the fact that no prepayment is required in order to do so (in which case no prepayment should be required)),
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(b)
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to prepay the Obligations under other Senior Debt and, in the case of any such Indebtedness under any revolving
credit facility, effect a corresponding reduction in the availability under such revolving credit facility; provided that to the extent the Company prepaid Obligations under Senior Debt other than the Notes, the Company shall equally and
ratably reduce
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S-48
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Obligations under the Notes as provided under Redemption, through open-market purchases (to the extent such purchases are at or above 100% of the principal amount thereof) or by
making an offer (in accordance with the procedures set forth below for an Asset Sale Offer) to all Holders to purchase their Notes at 100% of the principal amount thereof, plus the amount of accrued but unpaid interest, if any, on the amount of
Notes that would otherwise be prepaid,
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(c)
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to prepay Indebtedness of a Restricted Subsidiary that is not a Guarantor, other than Indebtedness owed to the
Company, a Guarantor or another Restricted Subsidiary,
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(d)
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to reinvest in Productive Assets (provided that this requirement shall be deemed satisfied if the
Company or such Restricted Subsidiary by the end of such 365-day period has entered into a binding agreement under which it is contractually committed to reinvest in Productive Assets and such investment is
consummated within 120 days from the date on which such binding agreement is entered into and, with respect to the amount of such investment, the reference to the 366th day after an Asset Sale in the second following sentence shall be deemed to be a
reference to the 121st day after the date on which such binding agreement is entered into (but only if such 121st day occurs later than such 366th day)), and
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(e)
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a combination of prepayment and investment permitted by the foregoing clauses (3)(a), (3)(b), (3)(c), (3)(d)
and (3)(e).
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Pending the final application of any such Net Cash Proceeds, the Company or such Restricted Subsidiary may
temporarily reduce Indebtedness under a revolving credit facility, if any, or otherwise invest such Net Cash Proceeds in Cash Equivalents. On the 366th day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or
of such Restricted Subsidiary determines by Board Resolution not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(a), (3)(b), (3)(c), (3)(d) or (3)(e) above (the Asset Sale Offer Trigger Date), such
aggregate amount of Net Cash Proceeds that have not been applied as set forth in clauses (3)(a), (3)(b), (3)(c), (3)(d) or (3)(e) above on or before such Asset Sale Offer Trigger Date (each an Asset Sale Offer Amount) shall be applied by
the Company or such Restricted Subsidiary to make an offer to purchase (the Asset Sale Offer) on a date (the Asset Sale Offer Payment Date) not less than 15 nor more than 60 days following the applicable Asset Sale Offer
Trigger Date, from all Holders and holders of any other Indebtedness of the Company or a Restricted Subsidiary ranking pari passu with the Notes requiring the making of such an offer (the Pari Passu Debt), on a pro rata basis, the
maximum amount of Notes and such other Pari Passu Debt that may be purchased with the Asset Sale Offer Amount at a price equal to 100% of their principal amount, plus accrued and unpaid interest thereon, if any, to the date of purchase (or, in
respect of such other Pari Passu Debt, such lesser price, if any, as may be provided for by the terms of such Pari Passu Debt) in accordance with the procedures (including pro rating in the event of over subscription and calculation of the principal
amount of Notes denominated in different currencies) set forth in the Indenture.
If at any time any
non-cash consideration (including any Designated Non-cash Consideration) received by the Company or any Restricted Subsidiary of the Company, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition
shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this covenant.
Notwithstanding the foregoing, if the Asset Sale Offer Amount is less than $50 million, the application of the Net Cash Proceeds
constituting such Asset Sale Offer Amount to an Asset Sale Offer may be deferred until such time as such Asset Sale Offer Amount plus the aggregate amount of all Asset Sale Offer Amounts arising subsequent to the Asset Sale Offer Trigger Date
relating to such initial Asset Sale Offer Amount from all Asset Sales by the Company and its Restricted Subsidiaries aggregates at least $50 million, at which time the Company or such Restricted Subsidiary shall apply all Net Cash Proceeds
constituting all Asset Sale Offer Amounts that have been so deferred to make an Asset Sale Offer (the first date the aggregate of all such deferred Asset Sale Offer Amounts is equal to $50 million or more shall be deemed to be an Asset Sale
Offer Trigger Date).
S-49
Each Asset Sale Offer will be mailed or sent electronically to the record Holders as shown on the
register of Holders within 30 days following the Asset Sale Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in the Indenture. Upon receiving notice of the Asset Sale Offer, Holders may elect to tender
their Notes in whole or in part in a minimum of $2,000 or in integral multiples of $1,000 in excess thereof (provided that no Note will be purchased in part if such Note would have a remaining amount of less than $2,000) in exchange for cash.
To the extent Holders properly tender Notes (and, if applicable, holders of Pari Passu Debt, tender Pari Passu Debt) in an aggregate amount exceeding the Asset Sale Offer Amount, Notes of tendering Holders and Pari Passu Debt of holders thereof will
be purchased on a pro rata basis (based on amounts tendered). To the extent that the aggregate amount of Notes and Pari Passu Debt tendered pursuant to an Asset Sale Offer is less than the Asset Sale Offer Amount, we may use any remaining Asset Sale
Offer Amount for general corporate purposes or for any other purpose not prohibited by the Indenture. Upon completion of any such Asset Sale Offer, the Asset Sale Offer Amount shall be reset at zero.
We will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with
the Limitation on Asset Sales provisions of the Indenture, we shall comply with the applicable securities laws and regulations and shall not be deemed to have breached our obligations under the Limitation on Asset Sales
provisions of the Indenture by virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary of the Company to:
|
(1)
|
pay dividends or make any other distributions on or in respect of its Capital Stock;
|
|
(2)
|
make loans or advances or pay any Indebtedness or other obligation owed to the Company or any Guarantor; or
|
|
(3)
|
sell, lease or transfer any of its property or assets to the Company or any Guarantor,
|
except, with respect to clauses (1), (2) and (3), for such encumbrances or restrictions existing under or by reason of:
|
(a)
|
applicable law, rule, regulation or order;
|
|
(b)
|
the Indenture, the Notes and the Guarantees;
|
|
(c)
|
non-assignment provisions of any contract or any lease of any
Restricted Subsidiary of the Company entered into in the ordinary course of business;
|
|
(d)
|
any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; provided that such Acquired Indebtedness was permitted by the terms of the Indenture to be incurred;
|
|
(e)
|
the Debt Facility in effect on the Issue Date or any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof; provided that any restrictions imposed pursuant to any such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing
are either (i) contained
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S-50
|
in, or not materially more restrictive than those contained in, the Debt Facility in effect prior to such amendment, modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing or (ii) ordinary and customary with respect to syndicated bank loans in the market at the time such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing are
entered into;
|
|
(f)
|
agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the
Issue Date, including the Existing Indenture;
|
|
(g)
|
restrictions on the transfer of assets subject to any Lien permitted under the Indenture imposed by the holder
of such Lien;
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(h)
|
restrictions imposed by any agreement to sell assets or Capital Stock to any Person pending the closing of such
sale which is not prohibited by the Indenture;
|
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(i)
|
any agreement or instrument governing Capital Stock of any Person that is acquired;
|
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(j)
|
any Purchase Money Note or other Indebtedness or other contractual requirements in connection with a Qualified
Securitization Transaction;
|
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(k)
|
other Indebtedness outstanding on the Issue Date or permitted to be incurred under the Indenture;
provided that any such restrictions are ordinary and customary with respect to the type of Indebtedness being incurred;
|
|
(l)
|
restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business;
|
|
(m)
|
any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (a) through (d) and (f) through (k) above; provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Companys Board of Directors (evidenced by a Board Resolution) whose judgment shall be conclusively binding, either (i) not
materially more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing or (ii) ordinary and customary with respect to such instruments or obligations at the time such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing are entered
into;
|
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(n)
|
encumbrances or restrictions contained in any instrument governing Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Capital Stock was incurred or issued in connection with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired;
|
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(o)
|
customary provisions in joint venture, asset sale, stock purchase and merger agreements and other similar
agreements; and
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(p)
|
customary provisions in leases, licenses and other agreements entered into in the ordinary course of business.
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S-51
Limitation on Preferred Stock of Restricted Subsidiaries
The Company will not permit any of its Restricted Subsidiaries to issue any Preferred Stock (other than to the Company or to a Restricted
Subsidiary of the Company) or permit any Person (other than the Company or a Restricted Subsidiary of the Company) to own any Preferred Stock of any Restricted Subsidiary of the Company.
Limitation on Liens
The Company
will not, and will not cause or permit any Restricted Subsidiary to, directly or indirectly, create, incur or suffer to exist any Lien securing Indebtedness (other than Permitted Liens) upon any of its properties or assets (including Capital Stock
of a Restricted Subsidiary), whether owned on the Issue Date or thereafter acquired, or any interest therein or any income or profits therefrom, unless:
|
(a)
|
if such Lien secures Subordinated Debt, the Notes or the Guarantees, as the case may be, are secured on a
senior priority basis with such Indebtedness for so long as such Subordinated Debt is secured by such Lien; and
|
|
(b)
|
in all other cases, the Notes or the Guarantees, as the case may be, are secured on an equal and ratable basis.
|
Any Lien created for the benefit of the Holders pursuant to the preceding sentence shall provide by its terms that such
Lien shall be automatically and unconditionally released and discharged upon the release and discharge of the Lien on such other Indebtedness and that holders of such other Indebtedness may exclusively control the disposition of property subject to
such Lien.
Merger, Consolidation and Sale of Assets
The Company will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Companys properties or
assets (determined on a consolidated basis for the Company and the Companys Restricted Subsidiaries) to any Person unless:
|
(a)
|
the Company shall be the surviving or continuing corporation; or
|
|
(b)
|
the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the
Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and of the Companys Restricted Subsidiaries substantially as an entirety (the Surviving Entity):
|
|
(x)
|
shall be a corporation organized and validly existing under the laws of the United States of America or any
State thereof or the District of Columbia; and
|
|
(y)
|
shall expressly assume, by supplemental indenture (in form and substance satisfactory to the Trustee), executed
and delivered to the Trustee, the due and punctual payment of the principal of, premium, if any, and interest on all of the Notes and the performance of every covenant of the Notes and the Indenture to be performed or observed on the part of the
Company;
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S-52
|
(2)
|
except in the case of a merger of the Company with or into a Restricted Subsidiary of the Company and except in
the case of a merger entered into solely for the purpose of reincorporating the Company in another jurisdiction, immediately after giving effect to such transaction and the assumption contemplated by clause (l)(b)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred in connection with or in respect of such transaction), the Company or such Surviving Entity, as the case may be, (A) shall be able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to the Limitation on Incurrence of Additional Indebtedness covenant or (B) the Consolidated Fixed Charge Coverage Ratio for the Company or the Surviving Entity, as the case may be, and its
Restricted Subsidiaries on a consolidated basis would be (x) equal to or greater than 1.75 to 1.00 and (y) greater than such ratio for the Company and the Restricted Subsidiaries immediately prior to such transaction;
|
|
(3)
|
except in the case of a merger of the Company with or into a Restricted Subsidiary of the Company and except in
the case of a merger entered into solely for the purpose of reincorporating the Company in another jurisdiction, immediately after giving effect to such transaction and the assumption contemplated by clause (1)(b)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing;
|
|
(4)
|
each Guarantor (unless it is the other party to the transactions described above, in which case clause
(1) of the second succeeding paragraph shall apply) shall have by supplemental indenture (in the form and substance satisfactory to the Trustee), executed and delivered to the Trustee confirmed that its Guarantee shall apply to such Surviving
Entitys obligations under the Indenture and the Notes; and
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|
(5)
|
the Company or the Surviving Entity shall have delivered to the Trustee an officers certificate and an
Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture
complies with the applicable provisions of the Indenture and that all conditions precedent in the Indenture relating to such transaction have been satisfied and an Opinion of Counsel stating that the Notes and the Indenture constitute legal, valid
and binding obligations of the Company or the Surviving Entity, as applicable, subject to customary exceptions.
|
For
purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of the Company, the
Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. However, transfer of assets between
or among the Company and its Restricted Subsidiaries will not be subject to this covenant.
The Company will not permit any Guarantor to
consolidate or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of, in a single transaction or series of related transactions, all or substantially all of its assets to any Person unless:
|
(1)
|
(except in the case of a Guarantor that has been disposed of in its entirety to another Person (other than to
the Company or an Affiliate of the Company), whether through a merger, consolidation or sale of Capital Stock or through the sale of all or substantially all of its assets (such sale constituting the disposition of such Guarantor in its entirety),
if in connection therewith the Company provides an officers certificate to the Trustee to the effect that the Company will comply with its obligations under the Limitation on Asset Sales covenant in respect of such disposition) the
resulting, surviving or transferee Person (if not a Guarantor) (the Surviving Guarantor Entity)
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S-53
|
shall be a Person organized and validly existing under the laws of the jurisdiction under which such Guarantor was organized or under the laws of the United States of America, any State thereof
or the District of Columbia, and such Person shall expressly assume, by a supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, all the obligations of such Guarantor, if any, under its
Guarantee;
|
|
(2)
|
except in the case of a merger of a Guarantor with or into the Company or another Guarantor and except in the
case of a merger entered into solely for the purpose of reincorporating a Guarantor in another jurisdiction, immediately after giving effect to such transaction and the assumption contemplated by the immediately preceding clause (1) (including,
without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred and be continuing; and
|
|
(3)
|
except in the case of a merger of a Guarantor with or into the Company or another Guarantor and except in the
case of a merger entered into solely for the purpose of reincorporating a Guarantor in another jurisdiction, the Company shall have delivered to the Trustee an officers certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture complies with the applicable provisions of the
Indenture and that all conditions precedent in the Indenture relating to such transaction have been satisfied and an Opinion of Counsel stating that the Notes and the Indenture constitute legal, valid and binding obligations of the Guarantor,
subject to customary exceptions.
|
Although there is a limited body of case law interpreting the phrase
substantially all, there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve all
or substantially all of the property or assets of a Person.
Upon any consolidation, merger, sale, assignment, transfer, lease or
other disposition of all or substantially all of the assets of the Company or a Guarantor in accordance with this covenant, the Company and a Guarantor, as the case may be, will be released from its Obligations under the Indenture and the Notes or
its Guarantee, as the case may be, and the Surviving Entity and the Surviving Guarantor Entity, as the case may be, will succeed to, and be substituted for, and may exercise every right and power of, the Company or a Guarantor, as the case may be,
under the Indenture, the Notes and the Guarantee; provided that, in the case of a lease of all or substantially all its assets, the Company will not be released from the obligation to pay the principal of and interest on the Notes, and a
Guarantor will not be released from its obligations under its Guarantee.
Limitations on Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to occur any
transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or asset or the rendering of any service) with, or for the benefit of, any of its Affiliates (an Affiliate
Transaction) involving aggregate payment or consideration in excess of $10 million, unless:
|
(1)
|
such Affiliate Transaction is on terms that are not materially less favorable to the Company or the relevant
Restricted Subsidiary than those that might reasonably have been obtained in a comparable transaction at such time on an arms-length basis from a Person that is not an Affiliate of the Company, and
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|
(2)
|
the Company delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate payments or consideration in excess of $25 million, a
|
S-54
|
Board Resolution adopted by the majority of the members of the Board of Directors of the Company or a resolution of the Audit Committee of the Board of Directors of the Company approved by a
majority of the members of the Audit Committee approving such Affiliate Transaction and set forth in an officers certificate certifying that such Affiliate Transaction complies with clause (1) above.
|
The restrictions set forth in the first paragraph of this covenant shall not apply to:
|
(1)
|
reasonable fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees
or consultants of the Company or any Restricted Subsidiary of the Company as determined in good faith by the Companys Board of Directors or a committee thereof;
|
|
(2)
|
transactions between or among the Company and any of its Restricted Subsidiaries or between or among such
Restricted Subsidiaries (other than a Securitization Entity); provided that such transactions are not otherwise prohibited by the Indenture;
|
|
(3)
|
any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated
thereby (including pursuant to any amendment thereto) or by any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in
effect on the Issue Date as determined in good faith by the Companys Board of Directors;
|
|
(4)
|
Restricted Payments or Permitted Investments permitted by the Indenture;
|
|
(5)
|
transactions effected as part of a Qualified Securitization Transaction;
|
|
(6)
|
transactions with a Person (other than an Unrestricted Subsidiary) that is an Affiliate of the Company solely
because the Company owns, directly or through a Subsidiary, Capital Stock in, or controls, such Person;
|
|
(7)
|
payments or loans to employees or consultants that are approved by a majority of the independent directors of
the Companys Board of Directors or by the Companys compensation committee;
|
|
(8)
|
sales of Qualified Capital Stock to Affiliates of the Company;
|
|
(9)
|
transactions permitted by, and complying with, the provisions of the Merger, Consolidation and Sale of
Assets covenant; and
|
|
(10)
|
transactions in which the Company or any Restricted Subsidiary, as the case may be, receives an opinion from a
nationally recognized investment banking, appraisal or accounting firm that such Affiliate Transaction is either fair, from a financial standpoint, to the Company or such Restricted Subsidiary or is on terms not materially less favorable than those
that might reasonably have been obtained in a comparable transaction at such time on an arms length basis from a Person that is not an Affiliate of the Company.
|
Future Guarantees by Restricted Subsidiaries
The Company will cause each future Domestic Restricted Subsidiary that Guarantees a Debt Facility or becomes a borrower under a Debt Facility
after the Issue Date to execute and deliver to the Trustee a Guarantee pursuant to which such Restricted Subsidiary will unconditionally guarantee, on a joint and several basis, the full and prompt payment of the principal of, premium, if any, and
interest on the Notes and all other obligations under the Indenture on a senior basis. Notwithstanding the foregoing, any Domestic Restricted Subsidiary of the
S-55
Company that at any time has total assets of less than $1,000,000, as reflected on such Subsidiarys most recent balance sheet as of the date of determination, or consolidated cash flow for
the most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date of determination of less than $500,000, will not be required to become a Guarantor unless it guarantees other
Indebtedness of the Company or a Restricted Subsidiary of the Company.
In the event any Guarantor is released and discharged in full from
all of its obligations under guarantees of such Debt Facility, then the Guarantee of such Guarantor shall be automatically and unconditionally released or discharged; provided that such Restricted Subsidiary has not incurred any Indebtedness
in reliance on its status as a Guarantor under Certain CovenantsLimitation on Incurrence of Additional Indebtedness unless such Guarantors obligations under such Indebtedness so incurred are satisfied in full and
discharged or are otherwise permitted under one of the exceptions available at the time of such release to Restricted Subsidiaries under the second paragraph of Certain CovenantsLimitation on Incurrence of Additional
Indebtedness. In addition, each Guarantee shall be released in accordance with the provisions of the Indenture described under Guarantees.
Each Guarantee will be limited to an amount not to exceed the maximum amount that can be guaranteed by that Restricted Subsidiary without
rendering the Guarantee, as it relates to such Restricted Subsidiary, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.
Reports to Holders
The Indenture
will provide that, whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company will furnish to the Holders:
|
(1)
|
all quarterly and annual financial information that would be required to be contained in a filing with the SEC
on Forms 10-Q (or any successor or comparable form) and 10-K (or any successor or comparable form) if the Company were required to file such Forms, including a
Managements Discussion and Analysis of Financial Condition and Results of Operations that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries and, with respect to the annual
information only, a report thereon by the Companys certified independent accountants; and
|
|
(2)
|
all current information that would be required to be filed with the SEC on Form
8-K (or any successor or comparable form) if the Company were required to file such reports,
|
in
each case, within the time periods specified in the SECs rules and regulations that are then applicable to the Company (or if the Company is not then subject to the reporting requirements of the Exchange Act, then the time periods for filing
applicable to a filer that is not an accelerated filer as defined in such rules and regulations).
For so long as the Notes
are outstanding, whether or not required by the rules and regulations of the SEC, the Company shall file a copy of all such information and reports (including the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities
Act) with the SEC for public availability within the time periods specified in the SECs rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors.
Each report or document required to be furnished or delivered pursuant to the Indenture shall be deemed to have been so furnished or
delivered on the date on which the Company posts such document on its website at www.central.com, or when such document is posted on the SECs website at www.sec.gov; provided that the Company shall either (i) deliver paper copies
of all such documents or (ii) provide copies of all such documents by electronic delivery to the Trustee or any Holder that requests the Company to deliver copies of all such documents until a request to cease delivering copies of all such
documents is given by the Trustee or such Holder.
S-56
Delivery of such reports, information and documents to the Trustee shall be for informational
purposes only and the Trustees receipt of such reports shall not constitute actual or constructive notice of any information contained therein or determinable from information contained therein, including our compliance with any of our
covenants under the Indenture or the Notes (as to which the Trustee shall have no duty to monitor or confirm and shall be entitled to rely exclusively on officers certificates). The Trustee shall not be obligated to monitor or confirm, on a
continuing basis or otherwise, our compliance with the covenants or with respect to any reports or other documents filed with the SEC or EDGAR or any website under the Indenture.
Limited Condition Transactions
When
calculating the availability under any basket or ratio under the Indenture or compliance with any provision of the Indenture in connection with any Limited Condition Transaction and any actions or transactions related thereto (including
acquisitions, Investments, the Incurrence or issuance of Indebtedness and the use of the proceeds thereof, the Incurrence of Liens, repayments, Restricted Payments and Asset Sales), in each case, at the option of the Company (the Companys
election to exercise such option, an LCT Election), the date of determination for availability under any such basket or ratio and whether any such action or transaction is permitted (or any requirement or condition therefor is complied
with or satisfied (including as to the absence of any Default or Event of Default)) under the Indenture shall be deemed to be the date (the LCT Test Date) the definitive agreements for such Limited Condition Transaction are entered into
(or, if applicable, the date of delivery of an irrevocable notice, declaration of a dividend or similar event) and if, after giving pro forma effect to the Limited Condition Transaction and any actions or transactions related thereto (including
acquisitions, Investments, the Incurrence or issuance of Indebtedness and the use of proceeds thereof, the Incurrence of Liens, repayments, Restricted Payments and Asset Sales) and any related pro forma adjustments, the Company or any of its
Restricted Subsidiaries would have been permitted to take such actions or consummate such transactions on the relevant LCT Test Date in compliance with such ratio, test or basket (and any related requirements and conditions), such ratio, test or
basket (and any related requirements and conditions) shall be deemed to have been complied with (or satisfied) for all purposes; provided that (a) compliance with such ratios, tests or baskets (and any related requirements and
conditions) shall not be determined or tested at any time after the applicable LCT Test Date for such Limited Condition Transaction and any actions or transactions related thereto (including acquisitions, Investments, the Incurrence or issuance of
Indebtedness and the use of proceeds thereof, the Incurrence of Liens, repayments, Restricted Payments and Asset Sales) and (b) Consolidated EBITDA for purposes of the Consolidated Fixed Charge Coverage Ratio will be calculated using an assumed
interest rate based on the indicative interest margin contained in any financing commitment documentation with respect to such Indebtedness or, if no such indicative interest margin exists, as reasonably determined by the Company in good faith.
For the avoidance of doubt, if the Company has made an LCT Election, (1) if any of the ratios, tests or baskets for which compliance was
determined or tested as of the LCT Test Date would at any time after the LCT Test Date have been exceeded or otherwise failed to have been complied with as a result of fluctuations in any such ratio, test or basket, including due to fluctuations in
Consolidated EBITDA of the Company, such baskets, tests or ratios will not be deemed to have been exceeded or failed to have been complied with as a result of such fluctuations (and no Default or Event of Default shall be deemed to have occurred due
to such failure to comply), and (2) in calculating the availability under any ratio, test or basket in connection with any action or transaction unrelated to such Limited Conditional Transaction following the relevant LCT Test Date and prior to
the earlier of the date on which such Limited Condition Transaction is consummated and the date that the definitive agreement or date for redemption, purchase or repayment specified in an irrevocable notice for such Limited Condition Transaction is
terminated, expires or passes, as applicable, without consummation of such Limited Condition Transaction, any such ratio, test or basket shall be determined or tested giving pro forma effect to such Limited Condition Transaction.
S-57
Events of Default
The following events are defined in the Indenture as Events of Default:
|
(1)
|
the failure to pay interest on any Notes when the same becomes due and payable and the default continues for a
period of 30 days;
|
|
(2)
|
the failure to pay the principal on any Notes, when such principal becomes due and payable, at maturity, upon
redemption or otherwise (including the failure to make a payment to purchase Notes tendered pursuant to a Change of Control Offer or an Asset Sale Offer on the date specified for such payment in the applicable offer to purchase);
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|
(3)
|
a default in the observance or performance of any other covenant or agreement contained in the Indenture which
default continues for a period of 60 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes
to the Company and the Trustee (except in the case of a default with respect to the Merger, Consolidation and Sale of Assets covenant, which will constitute an Event of Default with such notice requirement but without such passage of
time requirement);
|
|
(4)
|
the failure to pay at final stated maturity (giving effect to any applicable grace periods and any extensions
thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary of the Company (other than the failure by a Securitization Entity to pay Indebtedness owed to the Company or a Restricted Subsidiary of the Company), or
the acceleration of the final stated maturity of any such Indebtedness, if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final
maturity or which has been accelerated, aggregates $50 million or more at any time;
|
|
(5)
|
one or more judgments in an aggregate amount in excess of $50 million (to the extent not covered by
independent third party insurance as to which the insurer does not dispute the coverage) shall have been rendered against the Company or any of its Restricted Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60
days after such judgment or judgments become final and non-appealable;
|
|
(6)
|
except as permitted by the Indenture, any Guarantee of any Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary, shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor that is a Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, or any Person acting on behalf of such Guarantor, shall deny or disaffirm its obligations under its Guarantee; or
|
|
(7)
|
certain events of bankruptcy with respect to the Company or any of its Restricted Subsidiaries that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary.
|
If an Event of Default (other than an Event of Default specified in clause (7) above with respect to the Company) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare the principal of and accrued interest on all the Notes to be due and payable by notice in writing to the Company and the Trustee (if
given by the Holders) specifying the respective Event of Default and that it is a notice of acceleration (the Acceleration Notice), and the same shall become immediately due and payable.
S-58
If an Event of Default specified in clause (7) above occurs and is continuing with respect
to the Company, then all unpaid principal of, and premium, if any, and accrued and unpaid interest on all the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the
Trustee or any Holder.
The Indenture will provide that, at any time after a declaration of acceleration with respect to the Notes as
described in the two preceding paragraphs, the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences:
|
(1)
|
if the rescission would not conflict with any judgment or decree;
|
|
(2)
|
if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration;
|
|
(3)
|
to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of acceleration, has been paid;
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|
(4)
|
if we have paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances (including reasonable fees and expenses of its counsel and agents); and
|
|
(5)
|
in the event of the cure or waiver of an Event of Default of the type described in clause (7) of the
description above of Events of Default, the Trustee shall have received an officers certificate and an Opinion of Counsel that such Event of Default has been cured or waived.
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No such rescission shall affect any subsequent Default or impair any right consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest on any Notes.
Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture and under the TIA. Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee is under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the Holders, unless, among other things, such Holders have offered to the Trustee indemnity reasonably satisfactory to it. Subject to all provisions of the Indenture and applicable law, the
Holders of a majority in aggregate principal amount of the then outstanding Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on
the Trustee.
Under the Indenture, we will be required to provide an officers certificate to the Trustee within 45 days after any
specified officer becomes aware of any Default or Event of Default that has occurred, unless such Default or Event of Default has been cured before the end of such 45-day period, specifying what action we are
taking or propose to take with respect to such Default or Event of Default. In addition, the Indenture will require one of certain specified officers to provide a certification at least annually to the Trustee, as to such officers knowledge,
of our compliance with all conditions and covenants in the Indenture, and if we are in default under the Indenture, specifying such default and the nature and status of such default of which such officer may have knowledge.
S-59
Legal Defeasance and Covenant Defeasance
We may, at our option and at any time, elect to have our obligations discharged with respect to the outstanding Notes (Legal
Defeasance). Such Legal Defeasance means that we shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, except for:
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(1)
|
the rights of Holders to receive payments in respect of the principal of, premium, if any, and interest on the
Notes when such payments are due;
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(2)
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our obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for payments;
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(3)
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the rights, powers, trust, duties and immunities of the Trustee and our obligations in connection therewith;
and
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(4)
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the Legal Defeasance provisions of the Indenture.
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If we exercise our Legal Defeasance option, the Guarantees in effect at such time will be automatically released.
In addition, we may, at our option and at any time, elect to have our obligations released with respect to certain covenants that are
described in the Indenture (Covenant Defeasance) and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain
events (not including non-payment, bankruptcy, receivership, reorganization and insolvency events) described under Events of Default will no longer constitute an Event of Default with respect
to the Notes.
If we exercise the Covenant Defeasance option, the Guarantees in effect at such time will be automatically released.
In order to exercise either Legal Defeasance or Covenant Defeasance, we must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders, cash in U.S. dollars, non-callable U.S. government obligations, or a combination thereof in such amounts as will be sufficient, in the opinion of the Company as evidenced by an officers
certificate delivered to the Trustee (in the case of U.S. government obligations) to pay the principal amount at maturity of, premium and interest on the outstanding Notes on the stated date for payment thereof or on the applicable Redemption Date,
as the case may be; and
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(1)
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in the case of Legal Defeasance, we shall have delivered to the Trustee an Opinion of Counsel in the United
States of America reasonably acceptable to the Trustee confirming that:
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(a)
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we have received from, or there has been published by, the Internal Revenue Service a ruling or
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(b)
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since the Issue Date, there has been a change in the applicable federal income tax law,
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in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the beneficial owners (for federal income tax purposes) of
the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;
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(2)
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in the case of Covenant Defeasance, we shall have delivered to the Trustee an Opinion of Counsel in the United
States of America reasonably acceptable to the Trustee confirming that the beneficial
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owners (for federal income tax purposes) of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
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(3)
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no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a
Default or an Event of Default resulting from the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in
the period ending on the 91st day after the date of deposit;
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(4)
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such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a
default under the Indenture (other than a Default or an Event of Default resulting from the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing) or any other material agreement or instrument to which we
or any of our Subsidiaries is a party or by which we or any of our Subsidiaries is bound;
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(5)
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we shall have delivered to the Trustee an officers certificate stating that the deposit was not made by
us with the intent of preferring the Holders over any of our other creditors or with the intent of defeating, hindering, delaying or defrauding any of our other creditors or others;
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(6)
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we shall have delivered to the Trustee an officers certificate and an Opinion of Counsel, each stating
that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with;
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(7)
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we shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of the preference provisions of Section 547 of the United States Federal Bankruptcy Code; and
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(8)
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certain other customary conditions precedent are satisfied.
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Notwithstanding the foregoing, the Opinion of Counsel required by clause (1) above with respect to a Legal Defeasance need not be
delivered if all Notes not therefore delivered to the Trustee for cancellation (x) have become due and payable, or (y) will become due and payable on the maturity date within one year under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in our name, and at our expense.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange
of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes of a series when
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(a)
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all Notes of such series theretofore authenticated and delivered (except lost, stolen or destroyed Notes which
have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by us and thereafter repaid to us or discharged from such trust) have been delivered to the Trustee for
cancellation, or
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(b)
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all Notes of such series not theretofore delivered to the Trustee for cancellation have become due and payable,
pursuant to an optional redemption notice or otherwise, and we have
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irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee
for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with irrevocable instructions from us directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the
case may be; and
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(2)
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we have paid all other sums payable under the Indenture by us with respect to such series.
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The Trustee will acknowledge the satisfaction and discharge of the Indenture if we have delivered to the Trustee an
officers certificate and Opinion of Counsel stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture with respect to such series have been complied with.
Modification of the Indenture
From time
to time, we, the Guarantors and the Trustee, without the consent of the Holders, may amend or supplement the Indenture, the Guarantees or the Notes to:
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(1)
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cure any ambiguity, defect, omission, mistake or inconsistency as evidenced by an officers certificate;
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(2)
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provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of
the Indenture relating to the form of the Notes (including the related definitions) in a manner that does not materially adversely affect any Holder;
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(3)
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provide for the assumption of our or a Guarantors obligations to the Holders of the Notes by a successor
to us or a Guarantor pursuant to the Merger, Consolidation and Sale of Assets covenant;
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(4)
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make any change that would provide any additional rights or benefits to the Holders of the Notes or that does
not adversely affect the legal rights under the Indenture of any Holder of the Notes as evidenced by an officers certificate;
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(5)
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comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the
TIA;
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(6)
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provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture;
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(7)
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allow any Guarantor to execute a supplemental indenture and/or a Guarantee with respect to the Notes;
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(8)
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remove a Guarantor which, in accordance with the terms of the Indenture, ceases to be liable in respect of the
Guarantee;
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(9)
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make appropriate provision in connection with the appointment of a successor trustee; provided that the
successor trustee is otherwise qualified and eligible to act as such under the terms of the Indenture;
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(10)
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conform the text of the Indenture, the Guarantees or the Notes to any provision of this Description of
Notes to the extent that such provision in this Description of Notes was intended to be a verbatim recitation of a provision of the Indenture, the Guarantees or the Notes as evidenced by an officers certificate; or
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S-62
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(11)
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secure the Notes and the Guarantees.
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Other modifications and amendments of the Indenture may be made with the consent of the Holders of a majority in principal amount of the then outstanding
Notes issued under the Indenture, except that, without the consent of each Holder affected thereby, no amendment may:
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(1)
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reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;
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(2)
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reduce the rate of or change or have the effect of changing the time for payment of interest, including
defaulted interest, on any Notes;
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(3)
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reduce the principal of or change or have the effect of changing the fixed maturity of any Notes, or change the
date on which any Notes may be subject to redemption or reduce the redemption price therefor;
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(4)
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make any Notes payable in money other than that stated in the Notes;
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(5)
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release any Guarantor from any of its obligations under its Guarantee, except in accordance with the terms of
the Indenture or its Guarantee;
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(6)
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make any change in the provisions of the Indenture protecting the right of each Holder to receive payment of
principal of and interest on such Note on or after the due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of Notes to waive Defaults or Events of Default;
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(7)
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after our obligation to purchase Notes arises thereunder, amend, change or modify in any material respect our
obligation to make and consummate a Change of Control Offer in the event of a Change of Control or an Asset Sale Offer in the event of an Asset Sale or modify any of the provisions or definitions with respect thereto after a Change of Control or an
Asset Sale has occurred; or
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(8)
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make any change to or modify the ranking of the Notes that would adversely affect the Holders.
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It is not necessary for the consent of Holders to approve the particular form of any amendment or waiver, but it shall
be sufficient if such Holders consent approves the substance thereof. A consent to any amendment or waiver under the Indenture by any Holder given in connection with a tender of such Holders Notes will not be rendered invalid by such
tender. After an amendment or waiver under the Indenture becomes effective, the Company is required to give to the Holders a notice briefly describing such amendment or waiver. However, the failure to give such notice to all the Holders, or any
defect in the notice will not impair or affect the validity of the amendment or waiver.
For purposes of determining whether the Holders
of the requisite principal amount of Notes have taken any action under the Indenture, the principal amount of Notes shall be determined as of (i) if a record date has been set with respect to the taking of such action, such date or (ii) if
no such record date has been set, the date the taking of such action by the Holders of such requisite principal amount is certified to the Trustee by the Company.
Notices
Notices given by publication
will be deemed to be given on the first date on which publication is made, and notices given by first-class mail, postage prepaid, will be deemed given five calendar days after mailing.
S-63
Notwithstanding any other provision of the Indenture or any Note, where the Indenture or any Note provides for notice of any event (including any notice of redemption) to any Holder of an
interest in a global Note (whether by mail or otherwise), such notice shall be sufficiently given if given to DTC or any other applicable depositary for such Note (or its designee) according to the applicable procedures of DTC or such depositary.
Governing Law; Jury Trial Waiver
The Indenture will provide that it and the Notes will be governed by, and construed in accordance with, the laws of the State of New York. The
Indenture will also provide that the Company, the Guarantors and the Trustee, and each Holder, by its acceptance of Notes, will irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of, or relating to, the Indenture, the Notes, the Guarantees or any transaction contemplated thereby.
The Trustee
The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it by the Indenture, and use the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of his or her own affairs.
The Indenture and the provisions of the TIA contain
certain limitations on the rights of the Trustee, should it become a creditor of ours, to obtain payments of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. Subject to the
TIA, the Trustee is permitted to engage in other transactions; provided that if the Trustee acquires any conflicting interest as described in the TIA, it must eliminate such conflict, apply to the SEC for permission to continue or resign.
The Trustee assumes no responsibility for the accuracy or completeness of the information concerning us or our Subsidiaries or any other
party contained in the Indenture or the related documents or for any failure by us or any other party to disclose events that may have occurred and may affect the significance or accuracy of such information. The Trustee shall not be responsible for
monitoring the Companys rating status, making any request upon the Rating Agencies, or determining whether any Change of Control Offer or Asset Sale Offer event has occurred.
Wells Fargo Bank, National Association and its affiliates may provide customary commercial and investment banking and other services to us in
the ordinary course of business and receive customary fees in respect thereof.
No Personal Liability of Officers, Directors, Employees or Stockholders
No director, officer, employee, incorporator or stockholder of ours or any Guarantor or any other subsidiary of the Guarantor, as
such, will have any liability for any obligations of ours or any Guarantor (other than the Company in respect of the Notes and each Guarantor in respect of its Guarantee) under the Notes, the Indenture or any Guarantee or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. Such waiver and
release may not be effective to waive certain liabilities under U.S. federal securities laws, and it is the view of the SEC that such a waiver may be against public policy.
Certain Definitions
Set forth below is
a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms, as well as any other terms used herein for which no definition is provided.
S-64
Acquired Indebtedness means Indebtedness (i) of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time it merges or consolidates with or into the Company or any of its Subsidiaries or (ii) that is assumed in connection with the acquisition
of assets from such Person, including Indebtedness incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition, merger or consolidation. Acquired
Indebtedness shall be deemed to have been incurred, with respect to clause (i) of the preceding sentence, on the date such Person becomes or Restricted Subsidiary and, with respect to clause (ii) of the preceding sentence, on the date of
consummation of such acquisition of assets.
Affiliate means, with respect to any specified Person, any other Person
who, directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term control means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms controlling and controlled have meanings correlative of the
foregoing. Notwithstanding the foregoing, no Person (other than the Company or any Subsidiary of the Company) in whom a Securitization Entity makes an Investment in connection with a Qualified Securitization Transaction shall be deemed to be an
Affiliate of the Company or any of its Subsidiaries solely by reason of such Investment.
Applicable Premium means,
with respect to any Notes on any Redemption Date, the greater of:
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(1)
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1.0% of the principal amount of the Note; or
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(2)
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the excess, if any, of
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|
(a)
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the present value at such Redemption Date of (i) the redemption price of the Notes
at , 2025 (such redemption price being set forth in the table appearing above under RedemptionOptional Redemption), plus
(ii) all required interest payments due on such Note through , 2025 (excluding accrued but unpaid interest to the
Redemption Date), computed using a discount rate equal to the Treasury Rate, as of such Redemption Date plus 50 basis points; over
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(b)
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the principal amount of such Note.
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Calculation of the Applicable Premium shall be made by us or on our behalf by such person as we shall designate. The Trustee shall have no
duty to calculate (or verify any calculation of) the Applicable Premium.
Asset Acquisition means (a) an
Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of
the Company, or (b) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) other than in the ordinary course of business.
Asset Sale means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered
into in the ordinary course of business), assignment or other transfer for value (including, without limitation, dispositions pursuant to any consolidation or merger) by the Company or any of its Restricted Subsidiaries to any Person other than the
Company or a Restricted Subsidiary of the Company of:
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(1)
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any Capital Stock of any Restricted Subsidiary of the Company, or
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(2)
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any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the
ordinary course of business;
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S-65
provided, however, that Asset Sales or other dispositions shall not include:
|
(a)
|
a transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $25 million;
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(b)
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the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the
Company as permitted under Certain CovenantsMerger, Consolidation and Sale of Assets or any disposition that constitutes a Change of Control;
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(c)
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the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of
business, but only in connection with the compromise or collection thereof;
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(d)
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disposals or replacements of obsolete equipment in the ordinary course of business;
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(e)
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the sale, lease, conveyance, disposition or other transfer by the Company or any Restricted Subsidiary of
assets or property to one or more Restricted Subsidiaries in connection with Investments permitted under the Limitation on Restricted Payments covenant or pursuant to any Permitted Investment;
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(f)
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sales or contributions of accounts receivable, equipment and related assets (including contract rights) of the
type specified in the definition of Qualified Securitization Transaction to a Securitization Entity for the fair market value thereof, including cash in an amount at least equal to 75% of the fair market value thereof as determined in
accordance with GAAP (for the purposes of this clause (f), Purchase Money Notes shall be deemed to be cash);
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(g)
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a Restricted Payment that is permitted by the covenant described above under the title Certain
CovenantsLimitation on Restricted Payments;
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(h)
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sales, dispositions of cash or Cash Equivalents in the ordinary course of business;
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(i)
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the creation of a Permitted Lien (but not the sale or other disposition of the property subject to such
Permitted Lien); and
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(j)
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the license of patents, trademarks, copyrights and know-how to third
Persons in the ordinary course of business.
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beneficial owner has the meaning assigned to such term
in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular person (as that term is used in
Section 13(d)(3) of the Exchange Act), such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire by conversion or exercise of other securities, whether such right
is currently exercisable or is exercisable only after the passage of time. The terms beneficially owns and beneficially owned have a corresponding meaning.
Board of Directors means
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(1)
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with respect to a corporation, the board of directors of the corporation;
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(2)
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with respect to a partnership, the board of directors of the general partner of the partnership; and
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(3)
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with respect to any other Person, the board or committee of such Person serving a similar function.
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Board Resolution means, with respect to any Person, a resolution of such Person duly adopted by the
Board of Directors of such Person and in full force and effect.
S-66
Borrowing Base means, as of any date, an amount equal to:
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(1)
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85% of the face amount of all accounts receivable owned by the Company and its Subsidiaries as of the end of
the most recent fiscal quarter preceding such date, except accounts receivable that (x) have a scheduled due date more than 120 days after their original invoice date or (y) are unpaid more than 120 days past their invoice date or 60 days
past their due date; plus
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|
(2)
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the lesser of (x) 85% of the NOLV Percentage of the book value of all inventory owned by the Company and its
Subsidiaries as of the end of the most recent fiscal quarter preceding such date (other than inventory consisting of work-in-process) and (y) 80% of the book value of
all inventory owned by the Company and its Subsidiaries as of the end of the most recent fiscal quarter preceding such date (other than inventory consisting of
work-in-process); plus
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|
(3)
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the least of (x) $30,000,000, (y) 85% of the NOLV Percentage of all inventory owned by the Company and its
Subsidiaries as of the end of the most recent fiscal quarter preceding such date consisting of work-in-process and (z) 80% of the book value of all inventory owned by
the Company and its Subsidiaries as of the end of the most recent fiscal quarter preceding such date consisting of work-in-process; plus
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(4)
|
75% of the fair market value of the owned real estate of the Company and its Subsidiaries as of the end of the
most recent fiscal quarter preceding such date; plus
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(5)
|
the lesser of (i) $20,000,000 and (ii) 85% of the in-transit inventory
of the Company and its Subsidiaries, minus
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provided, however, that the maximum aggregate amount of eligible Canadian collateral that may be included in determining the Borrowing Base
shall not, as of any date of determination, exceed 25% of the aggregate amount of all accounts receivable and inventory owned by the Company and its Subsidiaries as of the end of the most recent fiscal quarter preceding such date.
Business Day means each day other than a Saturday, a Sunday or a day on which the Trustee or banking institutions are not
required to be open in the State of New York.
Capital Stock means:
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(1)
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with respect to any Person that is a corporation, any and all shares, interests, participations or other
equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock, of such Person; and
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(2)
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with respect to any Person that is not a corporation, any and all partnership or other equity interests of such
Person,
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in either case, excluding any debt securities convertible or exchangeable into such equity.
Capitalized Lease Obligations means, at the time any determination thereof is to be made, the amount of the liability in
respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP (with GAAP calculated, for purposes of this definition, as in
effect on December 31, 2018); provided that obligations of the Company or the Restricted Subsidiaries, or of a special purpose or other entity not consolidated with the Company and the Restricted Subsidiaries, either existing on the Issue Date
or created thereafter that (a) initially were not included
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on the consolidated balance sheet of the Company as capital lease obligations and were subsequently characterized as capital lease obligations or, in the case of such a special purpose or other
entity becoming consolidated with the Company and the Restricted Subsidiaries were required to be characterized as capital lease obligations upon such consideration, in either case, due to a change in accounting treatment or otherwise, or
(b) did not exist on the Issue Date and were required to be characterized as capital lease obligations but would not have been required to be treated as capital lease obligations on December 31, 2018 had they existed at that time, shall
for all purposes not be treated as Capitalized Lease Obligations or Indebtedness.
Cash Equivalents means:
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(1)
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marketable direct obligations issued by or unconditionally guaranteed by, the U.S. Government or the Government
of a Member State or issued by any agency thereof and backed by the full faith and credit of the United States of America or a Member State, in each case maturing within one year from the date of acquisition thereof;
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(2)
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marketable direct obligations issued by any state of the United States of America or any political subdivision
of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the three highest ratings obtainable from either S&P or Moodys;
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(3)
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commercial paper maturing no more than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moodys;
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(4)
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certificates of deposit or bankers acceptances maturing within one year from the date of acquisition
thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank or by a bank organized under the laws of any foreign country recognized by the
United States of America, in each case having at the date of acquisition thereof combined capital and surplus of not less than $250 million (or the foreign currency equivalent thereof);
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(5)
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repurchase obligations with a term of not more than seven days for underlying securities of the types described
in clause (1) above entered into with any bank meeting the qualifications specified in clause (4) above; and
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(6)
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investments in money market funds which invest substantially all their assets in securities of the types
described in clauses (1) through (5) above.
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Change of Control means the occurrence of one or
more of the following events:
|
(1)
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any sale, lease, exchange, assignment, conveyance or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company and its Restricted Subsidiaries, taken as a whole (other than a disposition of assets as an entirety or virtually as an entirety to a wholly-owned Restricted Subsidiary), to any
Person or group of related Persons for purposes of Sections 13(d) and 14(d) of the Exchange Act (a Group), other than to the Permitted Holders;
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(2)
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the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or
dissolution of the Company (whether or not otherwise in compliance with the provisions of the Indenture); or
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(3)
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any Person or Group (other than the Permitted Holders) shall become the beneficial owner, directly or
indirectly, of shares representing more than 50% of the total ordinary voting power represented by the issued and outstanding Capital Stock of the Company.
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Common Stock of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting or non-voting) of such Persons common stock, whether outstanding on the Issue Date or issued after the Issue Date, and
includes, without limitation, all series and classes of such common stock.
Consolidated EBITDA means, with respect to
any Person, for any period, the sum (without duplication) of such Persons:
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(1)
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Consolidated Net Income;
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(2)
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to the extent Consolidated Net Income has been reduced thereby:
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(a)
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all income tax expense of such Person and its Restricted Subsidiaries determined in accordance with GAAP;
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(b)
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Consolidated Interest Expense;
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(c)
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Consolidated Non-cash Charges less any
non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for such Person and its Restricted Subsidiaries in accordance with GAAP;
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(e)
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any expenses or charges related to any Equity Offering, Permitted Investment, acquisition, disposition,
recapitalization or the incurrence of Indebtedness permitted to be incurred by the Indenture, including a Refinancing thereof, and any amendment or modification to the terms of any such transaction;
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(f)
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any write-offs, write-downs or other non-cash charges, excluding any
such charge that represents an accrual or reserve for a cash expenditure for a future period;
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(g)
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the amount of any expense related to minority interests; and
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(h)
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the amount of any earn out payments, contingent consideration or deferred purchase price of any kind in
conjunction with acquisitions, excluding any such amount that represents an accrual or reserve for a cash expenditure for a future period; and
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(3)
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decreased by (without duplication) non-cash gains increasing
Consolidated Net Income of such Person for such period, excluding any gains that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period (other than such cash charges that have been added back to
Consolidated Net Income in calculating Consolidated EBITDA in accordance with this definition).
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Consolidated
Fixed Charge Coverage Ratio means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the Four-Quarter Period) ending prior to the date of the transaction giving
rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio for which internal financial statements are available (the Transaction Date) to Consolidated Fixed Charges of such Person for the Four-Quarter Period. In addition
to and without limitation of the foregoing, for purposes of this definition, Consolidated EBITDA and Consolidated Fixed Charges shall be calculated after giving effect on a pro forma basis for the period of such calculation
to:
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(1)
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the incurrence or repayment of any Indebtedness or the issuance of any Designated Preferred Stock of such
Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof)
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giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness or the issuance or redemption of other Preferred Stock (and the application of the proceeds
thereof), occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment or issuance or redemption, as the case may be (and
the application of the proceeds thereof), had occurred on the first day of the Four-Quarter Period;
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(2)
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any Asset Sales or other dispositions or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA attributable to the assets which are the subject of the Asset Acquisition or Asset Sale or other disposition), investments, mergers, consolidations and
disposed operations (as determined in accordance with GAAP) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or other
disposition or Asset Acquisition (including the incurrence or assumption of any such Acquired Indebtedness), investment, merger, consolidation or disposed operation occurred on the first day of the Four-Quarter Period. If such Person or any of its
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had
directly incurred or otherwise assumed such other Indebtedness that was so guaranteed; and
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(3)
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any designation of a Restricted Subsidiary as an Unrestricted Subsidiary and any designation of an Unrestricted
Subsidiary as a Restricted Subsidiary, in either case during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date.
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Furthermore, in calculating Consolidated Fixed Charges for purposes of determining the denominator (but not the numerator) of this
Consolidated Fixed Charge Coverage Ratio:
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(1)
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interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which
will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; and
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(2)
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notwithstanding clause (1) of this paragraph, interest on Indebtedness determined on a fluctuating basis,
to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements.
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For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings
relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the
Company. In addition, any such pro forma calculation may include adjustments appropriate, in the reasonable determination of the Company as set forth in an officers certificate, to reflect operating expense reductions reasonably expected to
result from any acquisition or merger within a reasonable period of time.
Notwithstanding anything to the contrary herein with respect to
any amounts incurred or transactions entered into (or consummated) in reliance on a provision of the Indenture under a restrictive covenant that does not require compliance with a financial ratio or test (including, without limitation, any
Consolidated Fixed
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Charge Coverage Ratio test, any Secured Net Leverage Ratio test and any Total Net Leverage Ratio test) (any such amounts, the Fixed Amounts) substantially concurrently with any
amounts incurred or transactions entered into (or consummated) in reliance on a provision of the Indenture that requires compliance with any such financial ratio or test (any such amounts, the Incurrence Based Amounts), it is understood
and agreed that the Fixed Amounts (and any cash proceeds thereof) shall be disregarded in the calculation of the financial ratio or test applicable to the Incurrence Based Amounts in connection with such substantially concurrent incurrence.
Consolidated Fixed Charges means, with respect to any Person for any period, the sum of, without duplication:
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(1)
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Consolidated Interest Expense; plus
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(2)
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the product of (x) the amount of all cash dividend payments on any series of Preferred Stock of non-Guarantor Subsidiaries payable to a party other than the Company or a Wholly Owned Subsidiary times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current
effective consolidated federal, state and local income tax rate of such Person, expressed as a decimal (as estimated in good faith by the chief financial officer of the Company, which estimate shall be conclusive).
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Consolidated Interest Expense means, with respect to any Person for any period, the sum of, without duplication:
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(1)
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the aggregate of all cash and non-cash interest expense (net of
interest income) with respect to all outstanding Indebtedness of such Person and its Restricted Subsidiaries, including the net costs or benefits associated with Interest Swap Obligations, for such period determined on a consolidated basis in
conformity with GAAP, but excluding (i) amortization or write-off of debt issuance costs, deferred financing or liquidity fees, commissions, fees and expenses, (ii) any expensing of bridge,
commitment and other financing fees, and (iii) commissions and discounts related to any Qualified Securitization Transaction;
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(2)
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the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during
such period;
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(3)
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the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by
such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP;
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(4)
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dividends declared and paid in cash or Disqualified Capital Stock in respect of Disqualified Capital Stock,
excluding dividends payable in Qualified Stock; and
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(5)
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interest accruing on any Indebtedness of any other Person (other than a Subsidiary) to the extent such
Indebtedness is guaranteed by (or secured by the assets of) the Company or any Restricted Subsidiary and such Indebtedness is accelerated or any payment is actually made in respect of such Guarantee.
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Consolidated Net Income means, for any period, the aggregate net income (or loss) of the Company and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom to the extent otherwise included, without duplication:
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(1)
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gains and losses from Asset Sales (without regard to the $25 million limitation set forth in the
definition thereof) and the related tax effects according to GAAP;
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(2)
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the net income (or loss) from disposed or discontinued operations or any net gains or losses on disposal of
disposed or discontinued operations, and the related tax effects according to GAAP;
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(3)
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the net income of any Restricted Subsidiary of the Company (other than a Guarantor) to the extent that the
declaration of dividends or similar distributions by that Restricted Subsidiary of the Company of that income is not at the date of determination wholly permitted without any prior governmental approval (which has not been obtained) or, directly or
indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with
respect to the payment of dividends or similar distributions has been legally waived; provided that Consolidated Net Income of the Company will be increased by the amount of dividends or other distributions or other payments actually paid in
cash (or to the extent converted into cash) to the Company or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein;
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(4)
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the net loss of any Person, other than the Company or a Restricted Subsidiary of the Company;
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(5)
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any non-cash compensation charges and deferred compensation charges
(other than any Consolidated Non-cash Charges), including any arising from existing stock options resulting from any merger or recapitalization transaction; provided, however, that Consolidated
Net Income for any period shall be reduced by any cash payments made during such period by such Person in connection with any such deferred compensation (but only to the extent that the Company incurred a
non-cash compensation or deferred compensation charge after the Issue Date relating to such deferred compensation, and such charge was excluded from Consolidated Net Income in accordance with this clause (5)),
whether or not such reduction is in accordance with GAAP;
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(6)
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all extraordinary, unusual or non-recurring charges, gains and losses
(including, without limitation, all restructuring costs, facilities relocation costs, acquisition integration costs and fees, including cash severance payments made in connection with acquisitions, and any expense or charge related to the repurchase
of Capital Stock or warrants or options to purchase Capital Stock), and the related tax effects according to GAAP;
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(7)
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inventory purchase accounting adjustments and amortization and impairment charges resulting from other purchase
accounting adjustments in connection with acquisition transactions; and
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(8)
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the net income of any Person, other than a Restricted Subsidiary of the Company, except to the extent of cash
dividends or distributions paid to the Company or a Restricted Subsidiary of the Company by such Person.
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Consolidated Non-cash Charges means, with respect to any Person, for any period,
the aggregate depreciation, depletion, amortization and other non-cash charges, impairments and expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its
Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding any such charges that require an accrual of or a reserve for cash payments for any future period).
Currency Agreement with respect to any specified Person, means any foreign exchange contract, currency swap agreement or
other similar agreement or arrangement designed to protect such specified Person against fluctuations in currency values, so long as any such agreement has been entered into in the ordinary course of business and not for purposes of speculation.
Debt Facility means the Second Amended and Restated Credit Agreement dated as of September 27, 2019, among the
Company, certain of the Companys domestic subsidiaries, as borrowers and guarantors, a
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syndicate of financial institutions party thereto, SunTrust Bank, as issuing bank and administrative agent, SunTrust Robinson Humphrey, Inc. as left lead arranger and joint bookrunner, Bank of
America, N.A., U.S. Bank National Association and Wells Fargo Bank, National Association, as co-syndication agents, and Bank of the West, BMO Harris Bank N.A., JPMorgan Chase Bank, N.A. and KeyBank National
Association as co-documentation agents, together with the related instruments, documents and agreements thereto (including, without limitation, any notes, letters of credit, guarantee agreements and security
documents), and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional
lenders or investors that extend, replace, refund, refinance, renew or defease any part of the loans, notes, letters of credit, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or
indenture that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings shall be subject to the Limitation on Incurrence of Additional Indebtedness covenant).
Default means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both
would be, an Event of Default.
Designated Non-cash Consideration means the
fair market value of any non-cash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that is designated as Designated
Non-cash Consideration pursuant to an officers certificate executed by the principal financial officer and any of the other executive officers of the Company or such Restricted Subsidiary at the time of
such Asset Sale. Any particular item of Designated Non-cash Consideration will cease to be considered to be outstanding once it has been sold for cash or Cash Equivalents.
Designated Preferred Stock means Preferred Stock that is so designated as Designated Preferred Stock (other than
Disqualified Capital Stock) pursuant to an officers certificate executed by the principal financial officer and any of the other executive officers of the Company, on the issuance date thereof, the cash proceeds of which are excluded from the
calculation set forth in clause (iii)(B) of the first paragraph of the Limitation on Restricted Payments covenant.
Disqualified Capital Stock means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event:
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(1)
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matures or is mandatorily redeemable (other than redeemable only for Capital Stock of such Person which is not
itself Disqualified Capital Stock) pursuant to a sinking fund obligation or otherwise;
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(2)
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is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Capital Stock
(excluding Capital Stock which is convertible or exchangeable solely at the option of the Company or a Restricted Subsidiary (it being understood that upon such conversion or exchange it shall be an incurrence of such Indebtedness or Disqualified
Capital Stock)); or
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(3)
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is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or
in part;
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in each case on or prior to the final maturity date of the Notes; provided, however, that any Capital Stock that would not
constitute Disqualified Capital Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock upon the occurrence of an asset sale or change of control
occurring prior to the final maturity date of the Notes shall not constitute Disqualified Capital Stock if:
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(1)
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the asset sale or change of control provisions applicable to such Capital Stock are not
more favorable to the holders of such Capital Stock than the terms applicable to the Notes and described
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under the Limitation on Asset Sales covenant and Change of Control and such purchase or redemption complies with Certain CovenantsLimitation on
Restricted Payments; and
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(2)
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any such requirement only becomes operative after compliance with such terms applicable to the Notes, including
the purchase of any Notes tendered pursuant thereto.
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The amount of any Disqualified Capital Stock that does not have a
fixed redemption, repayment or repurchase price will be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were redeemed, repaid or repurchased on any date on which the amount of such
Disqualified Capital Stock is to be determined pursuant to the Indenture; provided, however, that if such Disqualified Capital Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the
redemption, repayment or repurchase price will be the book value of such Disqualified Capital Stock as reflected in the most recent internal financial statements of such Person.
Domestic Restricted Subsidiary means any direct or indirect Restricted Subsidiary of the Company that is incorporated under
the laws of the United States of America, any State thereof or the District of Columbia.
Equity Offering means any
offering of Qualified Capital Stock of the Company, other than (1) public offerings with respect to the Companys Qualified Capital Stock registered on Form S-4 or
S-8, (2) an issuance to any Subsidiary or (3) any offering of Qualified Capital Stock issued in connection with a transaction that constitutes a Change of Control.
Exchange Act means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto.
Existing Indenture means the indenture, dated as of March 8, 2010, as supplemented by the Seventh Supplemental
Indenture Dated as of December 14, 2017 and as further supplemented from time to time, among the Company, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee, providing for the issuance of the Existing Senior
Notes.
Existing Senior Notes means the Companys outstanding $300 million 5.125% Senior Notes due 2028 and
the related guarantees issued under the Existing Indenture.
fair market value means, with respect to any asset or
property, the price which could be negotiated in an arms-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of the Company acting reasonably and in good faith.
Fitch means Fitch Ratings, Inc. or any successor to the rating agency business thereof.
GAAP means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a
significant segment of the accounting profession of the United States of America, as in effect as of the Issue Date.
Guarantee means:
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(1)
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the guarantee of the Notes by Domestic Restricted Subsidiaries of the Company in accordance with the terms of
the Indenture; and
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(2)
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the guarantee of the Notes by any Restricted Subsidiary required under the terms of the Future Guarantees
by Restricted Subsidiaries covenant.
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Guarantor means any Restricted Subsidiary that provides a Guarantee of the
Notes under the Indenture and its permitted successors and assigns; provided that upon the release or discharge of such Restricted Subsidiary from its Guarantee in accordance with the Indenture, such Restricted Subsidiary shall cease to be a
Guarantor.
Hedging Agreement means, with respect to any Person, any agreement with respect to the hedging of price
risk associated with the purchase of commodities used in the business of such Person, so long as any such agreement has been entered into in the ordinary course of business and not for purposes of speculation.
Indebtedness means with respect to any Person, at any date of determination, without duplication:
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(1)
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all Obligations of such Person for borrowed money;
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(2)
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all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;
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(3)
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all Capitalized Lease Obligations of such Person;
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(4)
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all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional
sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business);
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(5)
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all Obligations for the reimbursement of any obligor on any letter of credit, bankers acceptance or
similar credit transaction;
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(6)
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guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (1) through
(5) above and clause (8) below;
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(7)
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all Obligations of any other Person of the type referred to in clauses (1) through (6) which are secured
by any Lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset and the amount of the Obligation so secured;
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(8)
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all Obligations under Currency Agreements and Interest Swap Obligations of such Person; and
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(9)
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all Disqualified Capital Stock issued by such Person, or, with respect to any
non-Guarantor Subsidiary, any Preferred Stock, with the amount of Indebtedness represented by such Disqualified Capital Stock or Preferred Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any, if and to the extent any of the preceding items (other than letters or credit) would appear as a liability upon a balance sheet of the specified
Person prepared in accordance with GAAP.
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Notwithstanding the foregoing, the term Indebtedness will exclude:
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(a)
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in connection with the purchase by the Company or any Restricted Subsidiary of any business, post-closing
payment adjustments to which the seller may become entitled to the extent such payment is determined by a final closing balance sheet or such payment depends on the performance of such business after the closing; provided, however,
that, at the time of closing, the amount of any such payment is not determinable and, to the extent such payment thereafter becomes fixed and determined, the amount is paid within 60 days thereafter;
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(b)
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any liability for federal, state, local or other taxes;
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(c)
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workers compensation claims, self-insurance obligations, performance, surety, appeal and similar bonds
and completion guarantees provided in the ordinary course of business;
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(d)
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obligations arising from the honoring by a bank or other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within two Business Days of its Incurrence; and
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(e)
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any Indebtedness defeased or called for redemption.
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For purposes hereof, the maximum fixed repurchase price of any Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if
such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock.
For the purposes of calculating the amount of Indebtedness of a Securitization Entity outstanding as of any date, the face or notional amount of any interest in receivables or equipment that is outstanding as of such date shall be deemed to be
Indebtedness of the Securitization Entity but any such interests held by Affiliates of such Securitization Entity shall be excluded for purposes of such calculation.
Interest Swap Obligations means the obligations of any Person pursuant to any arrangement with any other Person, whereby
directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, options, caps, floors, collars and similar agreements.
Investment means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without
limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person. Investment shall exclude extensions of trade credit by the Company and its Restricted Subsidiaries in accordance with normal
trade practices of the Company or such Restricted Subsidiary, as the case may be. Except as otherwise provided herein, the amount of an Investment shall be its fair market value at the time the Investment is made and without giving effect to
subsequent changes in its fair market value.
Investment Grade Rating means a rating equal to or higher than Baa3 (or
the equivalent) by Moodys and BBB- (or the equivalent) by Fitch or S&P, or an equivalent rating by any other Rating Agency.
Issue Date means the date of the initial issuance of the Notes.
Lien means any lien, mortgage, deed of trust, pledge, security interest, charge, preference, priority or encumbrance of any
kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest); provided that in no event shall an operating lease be deemed to constitute a Lien.
Limited Condition Transaction means (1) any Investment or acquisition (whether by merger, consolidation or otherwise),
whose consummation is not conditioned on the availability of, or on obtaining, third-party financing, (2) any redemption, repurchase, defeasance, satisfaction and discharge or repayment of Indebtedness requiring irrevocable notice in advance of
such redemption, repurchase, defeasance, satisfaction and discharge or repayment and (3) any dividends or distributions on, or redemptions of, Capital Stock requiring irrevocable notice in advance thereof.
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Marketable Securities means publicly traded debt or equity securities that are
listed for trading on a national securities exchange and that were issued by a corporation whose debt securities are rated in one of the three highest rating categories by either S&P or Moodys.
Moodys means Moodys Investors Service, Inc. and any successor to its rating agency business.
Net Cash Proceeds means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including
payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of:
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(1)
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reasonable out-of-pocket
expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions and title and recording tax expenses);
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(2)
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all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a
consequence of such Asset Sale;
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(3)
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appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve, in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale;
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(4)
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all distributions and other payments required to be made to minority interest holders in Restricted
Subsidiaries as a result of such Asset Sale; and
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(5)
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all payments made on any Indebtedness which is secured by any assets subject to such Asset Sale, in accordance
with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law, be repaid out of the proceeds from
such Asset Sale.
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NOLV Percentage shall mean the fraction, expressed as a percentage, (a) the
numerator of which is the amount equal to the value that is estimated to be recoverable in an orderly liquidation of inventory that is the subject of a qualified appraisal, as determined from time to time in a qualified appraisal, net of all
liquidation costs, discounts and expenses and (b) the denominator of which is the applicable value of the inventory that is the subject of such qualified appraisal.
Obligations means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any Indebtedness.
Opinion of Counsel means a
written opinion from legal counsel who may be an employee of or counsel to the Company, or other counsel reasonably acceptable to the Trustee.
Permitted Business means any business (including stock or assets) that derives a majority of its revenues from the business
engaged in by the Company and its Restricted Subsidiaries on the Issue Date, any other business in the consumer products industry and/or activities that are reasonably similar, ancillary or related to, or a reasonable extension, development or
expansion of, the businesses in which the Company and its Restricted Subsidiaries are engaged on the Issue Date or any business in the consumer products industry.
Permitted Holders means (i) William E. Brown, (ii) the spouse or lineal descendants of William E. Brown or
(iii) any corporation, limited liability company, partnership, trust or other entity, the controlling equity interests in which are held by or for the benefit of William E. Brown and/or his spouse or lineal descendants.
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Permitted Indebtedness means, without duplication, each of the following:
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(1)
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Indebtedness under the Notes (other than any Additional Notes) and the related Guarantees;
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(2)
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Indebtedness of the Company or any of its Restricted Subsidiaries incurred pursuant to the Debt Facility in an
aggregate principal amount at any time outstanding not to exceed the greater of:
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(A)
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the aggregate amount of Indebtedness of Securitization Entities at the time outstanding in excess of
$100 million;
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(B)
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the amount of all mandatory principal payments actually made by the Company or any such Restricted Subsidiary
since the Issue Date with the Net Cash Proceeds of an Asset Sale in respect of term loans under the Debt Facility (excluding any such payments to the extent refinanced at the time of payment and any payments on the term loans as a result of this
offering); and
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(C)
|
further reduced by any repayments of revolving credit borrowings under the Debt Facility with the Net Cash
Proceeds of an Asset Sale that are accompanied by a corresponding commitment reduction thereunder; and
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(b)
|
provided that the Company has an asset-based Debt Facility, the Borrowing Base as of the date of such
incurrence;
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(3)
|
other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date (including the
Existing Notes and the related guarantees) and not described in clauses (1) and (2) above and clauses (5), (6) and (9) below;
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(4)
|
Interest Swap Obligations of the Company or any of its Restricted Subsidiaries covering Indebtedness of the
Company or any of its Restricted Subsidiaries; provided that any Indebtedness to which any such Interest Swap Obligations correspond is otherwise permitted to be incurred under the Indenture; provided, further, that such Interest Swap
Obligations are entered into, in the reasonable judgment of the Company, to protect the Company or any of its Restricted Subsidiaries from fluctuation in interest rates on its outstanding Indebtedness;
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(5)
|
Indebtedness of the Company or any Restricted Subsidiary under Hedging Agreements and Currency Agreements;
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(6)
|
the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or
among the Company and any such Restricted Subsidiaries; provided, however, that
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(a)
|
if the Company or any Guarantor is the obligor on such Indebtedness owing to a
non-Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, and
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(b)
|
(1) any subsequent issuance or transfer of Capital Stock that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary thereof and (2) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof (other than in either case by way of
granting a Lien permitted under the Indenture or in connection with the exercise of remedies by a secured creditor) shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the
case may be, that was not permitted by this clause (6);
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(7)
|
Indebtedness (including Capitalized Lease Obligations) incurred by the Company or any of its Restricted
Subsidiaries to finance the purchase, lease or improvement of property (real or personal), plant, or equipment (whether through the direct purchase of assets or the Capital Stock of any person owning such assets) in an aggregate principal amount
outstanding not to exceed the greater of (x) $125 million and (y) 5.0% of the Companys Total Assets;
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(8)
|
Refinancing Indebtedness (other than Refinancing Indebtedness with respect to Indebtedness incurred pursuant to
clauses (2), (6), (7), (10), (11), (12), (14), (15) and (16) of this definition);
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(9)
|
guarantees by the Company and its Restricted Subsidiaries of each others Indebtedness; provided
that such Indebtedness is permitted to be incurred under the Indenture;
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(10)
|
Indebtedness arising from agreements of the Company or a Restricted Subsidiary of the Company providing for
indemnification, adjustment of purchase price, earn out or other similar obligations, in each case, incurred or assumed in connection with the disposition or acquisition of any business, assets or a Restricted Subsidiary of the Company, other than
guarantees of Indebtedness incurred by any Person acquiring of all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; provided that in the case of a disposition, the maximum
assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection with such disposition;
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(11)
|
obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any
Restricted Subsidiary of the Company in the ordinary course of business;
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(12)
|
(i) the incurrence by a Securitization Entity of Indebtedness in a Qualified Securitization Transaction that is
nonrecourse to the Company or any Subsidiary of the Company (except for Standard Securitization Undertakings); and (ii) and the incurrence of Indebtedness in a Qualified Securitization Transaction;
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(13)
|
Indebtedness incurred in connection with the acquisition of a Permitted Business or as a result of the
designation of an Unrestricted Subsidiary as a Restricted Subsidiary; provided that on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof and the use of proceeds therefrom, either
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|
(a)
|
the Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated
Fixed Charge Coverage Ratio or
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(b)
|
the Consolidated Fixed Charge Coverage Ratio of the Company would be (x) equal to or greater than 1.75 to
1.00 and (y) greater than the Consolidated Fixed Charge Coverage Ratio of the Company immediately prior to the incurrence of such Indebtedness;
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(14)
|
additional Indebtedness of the Company and its Restricted Subsidiaries (which amount may, but need not, be
incurred in whole or in part under a credit facility) in an aggregate principal amount that does not exceed the greater of (x) $150 million and (y) 7.5% of the Companys Total Assets at any one time outstanding;
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(15)
|
Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar
instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five Business Days of
incurrence; and
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S-79
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(16)
|
Indebtedness of the Company or any of its Restricted Subsidiaries represented by letters of credit for the
account of the Company or such Restricted Subsidiary, as the case may be, issued in the ordinary course of business of the Company or such Restricted Subsidiary, in order to provide security for workers compensation claims or payment
obligations in connection with self-insurance or similar requirements in the ordinary course of business and other Indebtedness with respect to workers compensation claims, self-insurance obligations, performance, surety and similar bonds and
completion guarantees provided by the Company or any Restricted Subsidiary of the Company in the ordinary course of business.
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For purposes of determining compliance with the Limitation on Incurrence of Additional Indebtedness covenant, in the event that an
item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (16) above or is entitled to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions
of such covenant, we shall, in our sole discretion, divide and classify (or later redivide and reclassify) such item of Indebtedness in any manner that complies with such covenant; provided that all Indebtedness incurred under clause
(2) of the definition of Permitted Indebtedness shall be deemed incurred under clause (2) of the definition of Permitted Indebtedness and not the Consolidated Fixed Charge Coverage Ratio provisions of the covenant or clause (3) of the
definition of Permitted Indebtedness and may not later be classified. In addition, for purposes of compliance with the Limitation on Incurrence of Additional Indebtedness covenant: (1) if obligations in respect of letters of credit
are incurred pursuant to a Debt Facility and relate to other Indebtedness, then such letters of credit shall be treated as incurred pursuant to clause (2) of the definition of Permitted Indebtedness and such other Indebtedness shall not be
included and (2) except as provided above, guarantees of, or obligations in respect of letters of credit relating to, Indebtedness that is otherwise included in the determination of a particular amount of Indebtedness shall not be included.
Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Capital Stock or
Preferred Stock in the form of additional shares of the same class of Disqualified Capital Stock or Preferred Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Capital Stock or Preferred Stock for purposes
of the Limitation on Incurrence of Additional Indebtedness covenant.
For purposes of determining compliance with any U.S.
dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date
such Indebtedness was incurred, in the case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign
currency, and such refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction
shall be deemed not to have been exceeded so long as the principal amount of such Refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced. Notwithstanding any other provision of the Limitation on
Incurrence of Additional Indebtedness covenant, the maximum amount of Indebtedness that the Company may incur pursuant to such covenant shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies.
The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in
which such Refinancing Indebtedness is denominated that is in effect on the date of such refinancing.
Permitted
Investments means:
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(1)
|
Investments by the Company or any Restricted Subsidiary of the Company in any Restricted Subsidiary of the
Company (other than a Restricted Subsidiary of the Company in which an Affiliate of the Company that is not a Restricted Subsidiary of the Company holds a minority interest) (whether existing on the Issue Date or created thereafter) or any other
Person (including
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S-80
|
by means of any transfer of cash or other property) if as a result of such Investment such other Person shall become a Restricted Subsidiary of the Company (other than a Restricted Subsidiary of
the Company in which an Affiliate of the Company that is not a Restricted Subsidiary of the Company holds a minority interest) or that will merge with or consolidate into the Company or a Restricted Subsidiary of the Company and Investments in the
Company by the Company or any Restricted Subsidiary of the Company, in each case, other than a Securitization Entity;
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(2)
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Investments in cash and Cash Equivalents;
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(3)
|
loans and advances (including payroll, travel and similar advances) to employees and officers of the Company
and its Restricted Subsidiaries for bona fide business purposes incurred in the ordinary course of business or consistent with past practice or to fund such persons purchase of Capital Stock of the Company pursuant to compensatory plans
approved by the Board of Directors in good faith;
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(4)
|
Currency Agreements, Hedging Agreements and Interest Swap Obligations entered into in the ordinary course of
business and otherwise in compliance with the Indenture;
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(5)
|
Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers or in good faith settlement of delinquent obligations of such trade creditors or customers;
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(6)
|
Investments received in compromise or resolution of litigation, arbitration or other disputes with persons who
are not Affiliates;
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(7)
|
Investments made by the Company or its Restricted Subsidiaries as a result of consideration received in
connection with an Asset Sale made in compliance with the Limitation on Asset Sales covenant;
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(8)
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Investments existing on the Issue Date;
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|
(9)
|
accounts receivable or notes receivable created or acquired in the ordinary course of business;
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(10)
|
guarantees by the Company or a Restricted Subsidiary of the Company permitted to be incurred under the
Indenture;
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(11)
|
additional Investments having an aggregate fair market value, taken together with all other Investments made
pursuant to this clause (11) that are at that time outstanding, not to exceed the greater of (i) $150 million and (ii) 7.5% of the Companys Total Assets;
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(12)
|
any Investment by the Company or a Subsidiary of the Company in a Securitization Entity or any Investment by a
Securitization Entity in any other Person in connection with a Qualified Securitization Transaction; provided that any Investment in a Securitization Entity is in the form of a Purchase Money Note or an equity interest;
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(13)
|
purchases or redemptions of Indebtedness of the Company and its Restricted Subsidiaries (other than
Subordinated Indebtedness);
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(14)
|
Investments the payment for which consists exclusively of Qualified Capital Stock of the Company;
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S-81
|
(15)
|
any Investment in any Person to the extent it consists of prepaid expenses, negotiable instruments held for
collection and lease, utility and workers compensation, performance and other similar deposits made in the ordinary course of business;
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|
(17)
|
any Investment, including Investments in any joint venture; provided that, immediately after giving pro
forma effect thereto (including the application of the proceeds thereof), the Company would have had a Total Net Leverage Ratio of less than or equal to 3.50 to 1.00.
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Permitted Liens means:
|
(1)
|
Liens in favor of the Company or any Restricted Subsidiary (other than a Securitization Entity);
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|
(2)
|
Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the
Company or any of its Restricted Subsidiaries; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated
with the Company or the Restricted Subsidiary;
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(3)
|
Liens on property (including Capital Stock) existing at the time of acquisition of the property by the Company
or any of its Restricted Subsidiaries; provided that such Liens were in existence prior to the contemplation of such acquisition and do not extend to any property other than that acquired;
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(4)
|
Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business;
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(5)
|
Liens to secure Indebtedness (including Capitalized Lease Obligations) permitted by clause (7) and (13) of
the definition of Permitted Indebtedness; provided that Liens securing Indebtedness permitted to be incurred pursuant to clause (13) are solely on acquired property or the assets of the acquired entity, as the case may be;
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(6)
|
Liens existing on the Issue Date (other than Liens in favor of the lenders under the Debt Facility);
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(7)
|
Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;
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|
(8)
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Liens on (i) the assets of a Securitization Entity securing Indebtedness owing by any Securitization
Entity pursuant to any Qualified Securitization Transaction and (ii) any right, title and interest of any originator in any equipment or assets transferred or intended to be transferred by such originator pursuant to the documents entered into
in connection with a Qualified Securitization Transaction;
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|
(9)
|
(i) Liens securing Indebtedness permitted to be incurred under any Debt Facility, including any letter of
credit facility relating thereto, that was permitted by clause (2) of the definition of Permitted Indebtedness and (ii) other Liens securing Indebtedness so long as on a pro forma basis after giving effect to the incurrence of
such Indebtedness, the Secured Net Leverage Ratio (calculated assuming all the commitments relating to the revolving credit tranche of any Debt Facility have been fully drawn; provided, however, that if any such commitments are subject
to a borrowing base, the Secured Net Leverage Ratio will be calculated assuming all commitments subject to such borrowing base have been fully drawn) would not exceed 3.50 to 1.00;
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S-82
|
(10)
|
Liens upon specific items of inventory or other goods and proceeds of any Persons securing such Persons
obligations in respect of bankers acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
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|
(11)
|
carriers, warehousemens, mechanics, materialmens, repairmens or other like Liens
arising in the ordinary course of business for amounts which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto
are maintained on the books of the applicable Person in accordance with GAAP;
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(12)
|
any pledges or deposits in the ordinary course of business in connection with workers compensation,
employment and unemployment insurance and other social security legislation, other than any Lien imposed by ERISA;
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|
(13)
|
deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory
obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, or arising as a result of process payments under government contracts to the extent required or imposed by applicable laws, all to the extent incurred in
the ordinary course of business;
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(14)
|
easements, rights-of-way,
restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the real property subject thereto or materially interfere
with the ordinary conduct of the business of the applicable Person conducted and proposed to be conducted at such real property;
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(15)
|
financing statements with respect to a lessors rights in and to personal property leased to such Person
in the ordinary course of such Persons business;
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(16)
|
Liens granted by a Subsidiary in favor of a licensor under any intellectual property license agreement entered
into by such Subsidiary, as licensee, in the ordinary course of such Subsidiarys business; provided that (i) such Liens do not encumber any property other than the intellectual property licensed by such Subsidiary pursuant to the
applicable license agreement and the property manufactured or sold by such Subsidiary utilizing such intellectual property and (ii) the value of the property subject to such Liens does not, at any time, exceed $10 million;
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(17)
|
Liens securing the Notes and the Guarantees;
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(18)
|
Liens securing Refinancing Indebtedness in respect of Indebtedness secured by Liens permitted by clauses
(2) and (6) of this definition; provided that such Liens do not extend to any property other than the property which secured the Indebtedness so Refinanced;
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(19)
|
Liens securing trust funds deposited with the trustee under the Existing Indenture relating to the Existing
Senior Notes in an amount required to, and solely for the purpose of, discharging the Existing Indenture relating to the Existing Senior Notes in accordance with the terms thereof; and
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(20)
|
Liens securing Indebtedness or other Obligations of the Company or any Restricted Subsidiary of the Company
with respect to Obligations that do not exceed the greater of (x) $150 million and (y) 7.5% of the Companys Total Assets at any time outstanding.
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Person means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or
joint venture, or a governmental agency or political subdivision thereof.
S-83
Preferred Stock of any Person means any Capital Stock of such Person that has
preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation.
Productive Assets means assets (including Capital Stock) that are used or usable by the Company and its Restricted
Subsidiaries in Permitted Businesses.
Purchase Money Note means a promissory note of a Securitization Entity
evidencing a line of credit, which may be irrevocable, from the Company or any Subsidiary of the Company in connection with a Qualified Securitization Transaction to a Securitization Entity, which note shall be repaid from cash available to the
Securitization Entity other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest and principal and amounts paid in connection with the purchase of newly generated receivables.
Qualified Capital Stock means any Capital Stock that is not Disqualified Capital Stock.
Qualified Proceeds means assets that are used or useful in, or Capital Stock of any Person engaged in, a Permitted
Business; provided that the fair market value of any such assets or Capital Stock shall be determined by the Board of Directors of the Company in good faith.
Qualified Securitization Transaction means any transaction or series of transactions that may be entered into by the
Company or any of its Restricted Subsidiaries pursuant to which the Company or any of its Restricted Subsidiaries may sell, convey or otherwise transfer to:
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(1)
|
a Securitization Entity (in the case of a transfer by the Company or any of its Restricted Subsidiaries); and
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(2)
|
any other Person (in the case of a transfer by a Securitization Entity),
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or may grant a security interest in any accounts receivable or equipment (whether now existing or arising or acquired in the future) of the Company or any of
its Restricted Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable and equipment, all contracts and contract rights and all guarantees or other obligations in respect of such
accounts receivable and equipment, proceeds of such accounts receivable and equipment and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with
assets securitization transactions involving accounts receivable and equipment.
Rating Agencies means (i) each of
Fitch, Moodys and S&P or (ii) if any of Fitch, Moodys or S&P shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company
that shall be substituted for any of Fitch, Moodys or S&P, as the case may be.
Refinance means, in respect
of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part.
Refinanced and Refinancing shall have correlative meanings.
Refinancing
Indebtedness means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the
Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:
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(1)
|
the principal amount (or accreted value, if applicable) of such Refinancing Indebtedness does not exceed the
principal amount (or accreted value, if applicable) of the Indebtedness extended,
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S-84
|
refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and the amount of all Required Premiums and expenses incurred in connection therewith);
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|
(2)
|
such Refinancing Indebtedness has a final maturity date the same as or later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;
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|
(3)
|
if the Indebtedness being refinanced is subordinated in right of payment to the Notes or the Guarantees, such
Refinancing Indebtedness is subordinated in right of payment to the Notes or the Guarantees on terms at least as favorable to the Holders as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed,
replaced defeased or refunded; and
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|
(4)
|
Refinancing Indebtedness shall not include Indebtedness of a
non-Guarantor Subsidiary that refinances Indebtedness of the Company or a Guarantor.
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Restricted Subsidiary of any Person means any Subsidiary of such Person which at the time of determination is not an
Unrestricted Subsidiary.
S&P means S&P Global Ratings, a Standard & Poors Financial Services
LLC business, and any successor to its rating agency business.
Sale and Leaseback Transaction means any direct or
indirect arrangement with any Person or to which any such Person is a party providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such property.
SEC means the U.S. Securities and Exchange Commission.
Secured Debt means any Indebtedness of the Company or any of its Restricted Subsidiaries secured by a Lien.
Secured Net Leverage Ratio means, with respect to any Person as of any date of determination, the ratio of (x) the
total Secured Debt of such Person and its Restricted Subsidiaries as of the end of the most recent Four-Quarter Period for which internal financial statements are available (on a pro forma basis reflecting any incurrence of Indebtedness and
repayment of Indebtedness made on such date), less the aggregate amount of unrestricted cash and cash equivalents on such determination date, to (y) the Consolidated EBITDA of such Person for the then most recent Four-Quarter Period for which
internal financial statements are available, in each case, with such pro forma adjustments to the amount of total Secured Debt and Consolidated EBITDA as are appropriate and consistent with the pro forma adjustment provisions set forth in the
definition of Consolidated Fixed Charge Coverage Ratio.
Securities Act means the Securities Act of 1933, as amended.
S-85
Securitization Entity means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Restricted Subsidiary of the Company makes an Investment and to which the Company or any Restricted Subsidiary of the Company transfers accounts receivable or equipment and related assets) which engages in
no activities other than in connection with the financing of accounts receivable or equipment and which is designated by the Board of Directors of the Company (as provided below) as a Securitization Entity:
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(1)
|
no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which:
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|
(a)
|
is guaranteed by the Company or any Restricted Subsidiary of the Company (excluding guarantees of Obligations
(other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings);
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|
(b)
|
is recourse to or obligates the Company or any Restricted Subsidiary of the Company in any way other than
pursuant to Standard Securitization Undertakings; or
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|
(c)
|
subjects any property or asset of the Company or any Restricted Subsidiary of the Company, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings;
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|
(2)
|
with which neither the Company nor any Restricted Subsidiary of the Company has any material contract,
agreement, arrangement or understanding (except in connection with a Purchase Money Note or Qualified Securitization Transaction) other than on terms no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at
the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity other than pursuant to Standard Securitization Undertakings; and
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(3)
|
to which neither the Company nor any Restricted Subsidiary of the Company has any obligations to maintain or
preserve such entitys financial condition or cause such entity to achieve certain levels of operating results other than pursuant to Standard Securitization Undertakings.
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Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board
Resolution of the Company giving effect to such designation and an officers certificate certifying that such designation complied with foregoing conditions.
Senior Debt means the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing
of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed or allowable claim under applicable law) on any Indebtedness of the Company or any Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall be subordinate or pari passu in right of payment to the Notes or the Guarantees, as the case may be. Without limiting the generality of the foregoing, Senior Debt shall also include the principal of, premium, if
any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on,
and all other amounts owing in respect of:
|
(1)
|
all monetary obligations of every nature of the Company or any Guarantor under the Debt Facility, including,
without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof);
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|
(2)
|
all Interest Swap Obligations (and guarantees thereof); and
|
S-86
|
(3)
|
all obligations (and guarantees thereof) under Currency Agreements and Hedging Agreements, in each case whether
outstanding on the Issue Date or thereafter incurred.
|
Notwithstanding the foregoing, Senior Debt shall not
include:
|
(a)
|
any Indebtedness of the Company or a Guarantor owed to the Company or to a Subsidiary of the Company;
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|
(b)
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any Indebtedness of the Company or any Guarantor owed to, or guaranteed by the Company or any Guarantor on
behalf of, any shareholder, director, officer or employee of the Company or of any Subsidiary of the Company (including, without limitation, amounts owed for compensation) other than a shareholder who is also a lender (or an Affiliate of a lender)
under the Debt Facility;
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(c)
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any amounts payable or other liability to trade creditors (including guarantees thereof or instruments
evidencing such liabilities but excluding secured purchase money obligations);
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(d)
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Indebtedness represented by Disqualified Capital Stock;
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(e)
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any liability for Federal, state, local or other taxes owed or owing by the Company or any of the Guarantors;
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(f)
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that portion of any Indebtedness incurred in violation of the Indenture provisions set forth under
Certain CovenantsLimitation on Incurrence of Additional Indebtedness;
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(g)
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Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11,
United States Code, is without recourse to the Company or any of the Guarantors, as applicable; and
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(h)
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any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of
the Company or any of the Guarantors.
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Significant Subsidiary with respect to any Person, means any
Restricted Subsidiary of such Person that satisfies the criteria for a significant subsidiary set forth in Rule 1-02(w) of Regulation S-X under the
Securities Act.
Standard Securitization Undertakings means representations, warranties, covenants and indemnities
entered into by the Company or any subsidiary of the Company which are reasonably customary, as determined in good faith by the Board of Directors of the Company in an accounts receivable or equipment transaction.
Subordinated Indebtedness means any Indebtedness of the Company or a Restricted Subsidiary if the instrument creating or
evidencing such Indebtedness or pursuant to which such Indebtedness is outstanding expressly provides that such Indebtedness is subordinated or junior in right of payment to the Notes or the Guarantee of such Restricted Subsidiary, as the case may
be.
Subsidiary with respect to any Person, means:
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(1)
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any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be
cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person; or
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(2)
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any other Person of which at least a majority of the voting interest under ordinary circumstances is at the
time, directly or indirectly, owned by such Person.
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Total Assets means, as of any date, the total consolidated assets of the
Company and its Restricted Subsidiaries, as set forth on the Companys most recently available internal consolidated balance sheet as of such date.
Total Net Leverage Ratio means, with respect to any Person as of any date of determination, the ratio of (x) the total
Indebtedness of such Person and its Restricted Subsidiaries as of the end of the most recent Four-Quarter Period for which internal financial statements are available (on a pro forma basis reflecting any incurrence of Indebtedness and repayment of
Indebtedness made on such date), less the aggregate amount of unrestricted cash and cash equivalents on such determination date, to (y) the Consolidated EBITDA of such Person for the then most recent Four-Quarter Period for which internal
financial statements are available, in each case, with such pro forma adjustments to the amount of total Indebtedness and Consolidated EBITDA as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of
Consolidated Fixed Charge Coverage Ratio.
Treasury Rate means, at the time of computation, the yield to maturity of
United States Treasury Securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the Redemption Date or, if
such Statistical Release is no longer published, any publicly available source of similar market data) most nearly equal to the period from the Redemption Date
to , 2025; provided, however, that if the period from the Redemption Date
to , 2025, is not equal to the constant maturity of a United States Treasury Security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury Securities for which such yields are given, except that if
the period from the Redemption Date to , 2025, is less than one year, the weekly average yield on actually traded United States Treasury Securities
adjusted to a constant maturity of one year shall be used.
Unrestricted Subsidiary of any Person means:
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(1)
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any Subsidiary of such Person that at the time of determination shall be or continue to be designated an
Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below;
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(2)
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Tech Pac, L.L.C.; and
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(3)
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any Subsidiary of an Unrestricted Subsidiary.
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The Board of Directors of the Company may designate any Subsidiary (including any newly-acquired or newly-formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated or another
Unrestricted Subsidiary; provided that:
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(1)
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the Company certifies to the Trustee that such designation complies with the Limitation on Restricted
Payments covenant; and
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(2)
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each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does
not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries.
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The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if (x) immediately after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness in compliance with the Limitation on Incurrence of Additional Indebtedness
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covenant and (y) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the
Board of Directors of the Company shall be evidenced by a Board Resolution giving effect to such designation and an officers certificate certifying that such designation complied with the foregoing provisions.
Actions taken by an Unrestricted Subsidiary will not be deemed to have been taken, directly or indirectly, by the Company or any Restricted
Subsidiary.
Weighted Average Life to Maturity means, when applied to any Indebtedness at any date, the number of years
obtained by dividing:
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(1)
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the then outstanding aggregate principal amount of such Indebtedness; into
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(2)
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the sum of the total of the products obtained by multiplying;
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(a)
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the amount of each then remaining installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof; by
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(b)
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the number of years (calculated to the nearest one-twelfth) which will
elapse between such date and the making of such payment.
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Wholly Owned Subsidiary of any Person means
any Restricted Subsidiary of such Person of which all the outstanding voting securities (other than in the case of a Restricted Subsidiary that is incorporated in a jurisdiction other than a State in the United States of America or the District of
Columbia, directors qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Subsidiary of such Person.
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BOOK-ENTRY SETTLEMENT AND CLEARANCE
The Global Notes
The notes will be
issued in the form of one or more registered notes in global form, without interest coupons (the global notes). Upon issuance, each of the global notes will be deposited with the trustee as custodian for The Depository Trust Company
(DTC) and registered in the name of Cede & Co., as nominee of DTC or such other name as may be requested by an authorized representative of DTC.
Ownership of beneficial interests in each global note will be limited to persons who have accounts with DTC (DTC participants) or
persons who hold interests through DTC participants. We expect that under procedures established by DTC:
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upon deposit of each global note with DTCs custodian, DTC will credit portions of the principal amount of
the global note to the accounts of the DTC participants designated by the underwriters; and
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ownership of beneficial interests in each global note will be shown on, and transfer of ownership of those
interests will be effected only through, records maintained by DTC (with respect to interests of DTC participants) and the records of DTC participants (with respect to other owners of beneficial interests in the global note).
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Beneficial interests in the global notes may not be exchanged for notes in physical, certificated form except in the limited circumstances
described below.
Book-Entry Procedures for the Global Notes
All interests in the global notes will be subject to the operations and procedures of DTC, Euroclear Bank S.A./ N.V., as operator of the
Euroclear System (Euroclear), and Clearstream Banking S.A. (Clearstream). We provide the following summaries of those operations and procedures solely for the convenience of investors. The operations and procedures of each
settlement system are controlled by that settlement system and may be changed at any time. Neither we nor the underwriters are responsible for those operations or procedures.
DTC has advised us that it is:
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a limited purpose trust company organized under the New York Banking Law;
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a banking organization within the meaning of the New York Banking Law;
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a member of the Federal Reserve System;
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a clearing corporation within the meaning of the New York Uniform Commercial Code; and
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a clearing agency registered under Section 17A of the Securities Exchange Act of 1934, as
amended (the Exchange Act).
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DTC was created to hold securities for its participants and to facilitate the
clearance and settlement of securities transactions between its participants through electronic book-entry changes to the accounts of its participants. DTCs participants include securities brokers and dealers, including the underwriters; banks
and trust companies; clearing corporations and other organizations. Indirect access to DTCs system is also available to others such as banks, brokers, dealers and trust companies; these indirect participants clear through or maintain a
custodial relationship with a DTC participant, either directly or indirectly. Investors who are not DTC participants may beneficially own securities held by or on behalf of DTC only through DTC participants or indirect participants in DTC.
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So long as DTCs nominee is the registered owner of a global note, that nominee will be
considered the sole owner or holder of the notes represented by that global note for all purposes under the indenture governing the notes. Except as provided below, owners of beneficial interests in a global note:
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will not be entitled to have notes represented by the global note registered in their names;
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will not receive or be entitled to receive physical, certificated notes; and
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will not be considered the owners or holders of the notes under the indenture governing the notes for any
purpose, including with respect to the giving of any direction, instruction or approval to the trustee under the indenture.
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As a result, each investor who owns a beneficial interest in a global note must rely on the procedures of DTC to exercise any rights of a
holder of notes under the indenture governing the notes (and, if the investor is not a participant or an indirect participant in DTC, on the procedures of the DTC participant through which the investor owns its interest).
Payments of principal, premium (if any) and interest with respect to the notes represented by a global note will be made by the trustee to
DTCs nominee as the registered holder of the global note. Neither we nor the trustee will have any responsibility or liability for the payment of amounts to owners of beneficial interests in a global note, for any aspect of the records
relating to or payments made on account of those interests by DTC, or for maintaining, supervising or reviewing any records of DTC relating to those interests.
Payments by participants and indirect participants in DTC to the owners of beneficial interests in a global note will be governed by standing
instructions and customary industry practice and will be the responsibility of those participants or indirect participants and DTC.
Transfers between participants in DTC will be effected under DTCs procedures and will be settled in
same-day funds. Transfers between participants in Euroclear or Clearstream will be effected in the ordinary way under the rules and operating procedures of those systems.
Cross-market transfers between DTC participants, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be
effected within DTC through the DTC participants that are acting as depositaries for Euroclear and Clearstream. To deliver or receive an interest in a global note held in a Euroclear or Clearstream account, an investor must send transfer
instructions to Euroclear or Clearstream, as the case may be, under the rules and procedures of that system and within the established deadlines of that system. If the transaction meets its settlement requirements, Euroclear or Clearstream, as the
case may be, will send instructions to its DTC depositary to take action to effect final settlement by delivering or receiving interests in the relevant global notes in DTC, and making or receiving payment under normal procedures for same-day funds settlement applicable to DTC. Euroclear and Clearstream participants may not deliver instructions directly to the DTC depositaries that are acting for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or Clearstream participant that purchases an interest in a global note
from a DTC participant will be credited on the business day for Euroclear or Clearstream immediately following the DTC settlement date. Cash received in Euroclear or Clearstream from the sale of an interest in a global note to a DTC participant will
be received with value on the DTC settlement date but will be available in the relevant Euroclear or Clearstream cash account as of the business day for Euroclear or Clearstream following the DTC settlement date.
DTC, Euroclear and Clearstream have agreed to the above procedures to facilitate transfers of interests in the global notes among participants
in those settlement systems. However, the settlement systems are not obligated to perform these procedures and may discontinue or change these procedures at any time. Neither we nor the trustee will have any responsibility for the performance by
DTC, Euroclear or Clearstream or their participants or indirect participants of their obligations under the rules and procedures governing their operations.
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Certificated Notes
Notes in physical, certificated form will be issued and delivered to each person that DTC identifies as a beneficial owner of the related
notes only if:
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DTC notifies us at any time that it is unwilling or unable to continue as depositary for the global notes and a
successor depositary is not appointed within 90 days;
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DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days;
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we, at our option, notify the trustee that we elect to cause the issuance of certificated notes and any
participant requests a certificated note in accordance with DTC procedures; or
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certain other events provided in the indenture that will govern the notes should occur.
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In all cases, certificated notes delivered in exchange for any global note or beneficial interests in global notes will be registered in the
names, and issued in any approved denominations, requested by or on behalf of the depository (in accordance with its customary procedures). In connection with any proposed exchange of a certificated note for a global note, we or DTC shall be
required to provide or cause to be provided to the trustee all information necessary to allow the trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal
Revenue Code Section 6045. The trustee may rely on information provided to it and shall have no responsibility to verify or ensure the accuracy of such information.
Same Day Settlement and Payment
We, or
any paying agent on our behalf, will make payments in respect of the notes represented by the global notes (including principal, premium, if any, and interest) by wire transfer of immediately available funds to the accounts specified by the holder
of the global note. We will make all payments of principal, interest and premium, if any, with respect to certificated notes by wire transfer of immediately available funds to the accounts specified by the holders of the certificated notes or, if no
such account is specified, by mailing a check to each such holders registered address. The notes represented by the global notes are expected to trade in DTCs Same-Day Funds Settlement System, and
any permitted secondary market trading activity in such notes will, therefore, be required by DTC to be settled in immediately available funds. We expect that secondary trading in any certificated notes will also settle in immediately available
funds.
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CERTAIN ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with the purchase of the notes by (i) employee benefit plans
within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (ERISA) that are subject to Title I of ERISA, (ii) plans, individual retirement accounts and other arrangements that are
subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the Code) or provisions under any other federal, state, local, non-U.S. or other laws or regulations that are similar
to such provisions of ERISA or the Code (collectively, Similar Laws), and (iii) entities whose underlying assets are considered to include plan assets of any of the foregoing described in clauses (i) and (ii) (each
of the foregoing described in clauses (i), (ii) and (iii) referred to herein as a Plan).
General Fiduciary Matters
ERISA and the Code impose certain duties on persons who are fiduciaries of a Plan subject to Title I of ERISA or Section 4975 of the Code
(a Covered Plan) and prohibit certain transactions involving the assets of a Covered Plan and its fiduciaries or other interested parties. Under ERISA and the Code, any person who exercises any discretionary authority or control over the
administration of such a Covered Plan or the management or disposition of the assets of such a Covered Plan, or who renders investment advice for a fee or other compensation to such a Covered Plan, is generally considered to be a fiduciary of the
Covered Plan.
In considering an investment in the notes of a portion of the assets of any Plan, a fiduciary should determine whether the
investment is in accordance with the documents and instruments governing the Plan and the applicable provisions of ERISA, the Code or any Similar Law relating to a fiduciarys duties to the Plan including, without limitation, the prudence,
diversification, delegation of control and prohibited transaction provisions of ERISA, Section 4975 of the Code and any other applicable Similar Laws.
Prohibited Transaction Issues
Section 406 of ERISA and Section 4975 of the Code prohibit Covered Plans from engaging in specified transactions involving plan
assets with persons or entities who are parties in interest, within the meaning of ERISA, or disqualified persons, within the meaning of Section 4975 of the Code, unless an exemption is available. A party in interest or
disqualified person who engaged in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and/or the Code. In addition, the fiduciary of the Covered
Plan that engaged in such a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and the Code. The acquisition and/or holding of notes by a Covered Plan with respect to
which the issuer, an underwriter or any of the guarantors is considered a party in interest or a disqualified person may constitute or result in a direct or indirect prohibited transaction under Section 406 of ERISA and/or Section 4975 of
the Code, unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption.
In this regard, the U.S. Department of Labor has issued prohibited transaction class exemptions, or PTCEs, that may provide
exemptive relief for direct or indirect prohibited transactions resulting from the sale, purchase or holding of the notes. These class exemptions include, without limitation, PTCE 84-14 respecting transactions
determined by qualified professional asset managers, PTCE 90-1 respecting insurance company pooled separate accounts, PTCE 91-38 respecting bank collective
investment funds, PTCE 95-60 respecting life insurance company general accounts, and PTCE 96-23 respecting transactions determined by
in-house asset managers. Each of the above-noted exemptions contains conditions and limitations on its application. Fiduciaries of Covered Plans considering acquiring and/or holding the notes in
reliance on these or any other exemption should carefully review the exemption to assure it is applicable. There can be no assurance that all of the conditions of any such exemptions will be satisfied.
Because of the foregoing, the notes should not be purchased or held by any person investing plan assets of any Plan, unless such
purchase and holding will not constitute a non-exempt prohibited transaction under ERISA and Section 4975 of the Code or similar violation of any applicable Similar Laws.
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Representation
Accordingly, by acceptance of a note each purchaser and subsequent transferee will be deemed to have represented and warranted that either
(i) no portion of the assets used by such purchaser or transferee to acquire or hold the notes (or any interest therein) constitutes assets of any Plan or (ii) the acquisition and holding of the notes (or any interest therein) by such
purchaser or transferee will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a similar violation under any applicable Similar Laws.
In addition, in connection with the initial offer and sale under this prospectus supplement each Plan purchasing such notes on behalf of the
Plan (the Independent Plan Fiduciary) will be deemed to represent and warrant by such purchase of the notes (or interest therein) that the decision to purchase the notes (or interest therein) has been made by the Plan and the Independent
Plan Fiduciary and in making such decision the Plan and Independent Plan Fiduciary represent and warrant that neither the Underwriter, the Company nor their respective affiliates (the Relevant Parties) have provided advice as to the
prudence or that such purchase would not violate any fiduciary obligations of the Plan or the Independent Fiduciary, in each case, with respect to the purchase of the notes by the Plan.
The foregoing discussion is general in nature and is not intended to be all-inclusive nor should it be
construed as legal advice. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions or other violations of ERISA, the Code or
Similar Law with respect to a Plan, it is particularly important that fiduciaries, or other persons considering purchasing the notes (and holding the notes) on behalf of, or with the assets of, any Plan, consult with their counsel regarding
(i) the potential applicability of ERISA, Section 4975 of the Code and any Similar Laws to such investment, (ii) whether the purchase and holding of the notes by a Plan would be in compliance with ERISA, the Code or Similar Law, as
applicable, and (iii) whether an exemption would be applicable to the purchase and holding of the notes.
Purchasers of the notes
have the exclusive responsibility for ensuring that their purchase and holding of the notes complies with the fiduciary responsibility rules of ERISA and does not violate the prohibited transaction rules of ERISA, Section 4975 of the Code or
applicable Similar Laws. The provision of this prospectus supplement and the sale of any notes to a Plan is in no respect a representation by the issuer, a guarantor or an underwriter, or any of their respective affiliates or representatives that
such an investment meets all legal requirements with respect to such investments by Plans generally or any particular Plan, or that such investment is appropriate for Plans generally or any particular Plan.
S-94
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material U.S. federal income tax consequences related to the purchase, ownership and disposition of
the notes by holders who purchase notes for cash pursuant to this offering at their issue price (i.e., the first price at which a substantial amount of the notes is sold for cash to investors (excluding sales to underwriters or persons
acting in a similar capacity)) and hold the notes as a capital asset, as defined in Section 1221 of the Internal Revenue Code of 1986, as amended (the Code) (generally, property held for investment). This discussion is
based upon the Code, regulations of the Treasury Department (Treasury regulations), Internal Revenue Service (IRS) rulings and pronouncements, and judicial decisions now in effect, all of which are subject to change (possibly
on a retroactive basis). We have not sought, and will not seek, any rulings from the IRS regarding the matters discussed below. The discussion below is not binding on the IRS or the courts. There can be no assurance that the IRS or any court will
not take positions concerning the tax consequences of the purchase, ownership or disposition of the notes which are different from those discussed below.
This discussion is a summary for general information only and does not consider all aspects of U.S. federal income taxation that may be
relevant to the purchase, ownership and disposition of the notes. It does not describe any tax consequences arising out of the tax laws of any state, local or foreign jurisdiction, any estate or gift tax consequences, or the U.S. federal income tax
consequences to investors subject to special treatment under the U.S. federal income tax laws, such as:
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dealers in securities or foreign currency;
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banks or other financial institutions;
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regulated investment companies;
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real estate investment trusts;
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traders in securities that have elected the
mark-to-market method of accounting for their securities;
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persons that hold notes as part of a straddle, a hedge or a conversion
transaction or other risk reduction transaction;
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persons subject to the alternative minimum tax;
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persons required to accelerate the recognition of any item of gross income with respect to the notes as a result
of such income being recognized on an applicable financial statement;
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U.S. holders (defined below) that have a functional currency other than the U.S. dollar;
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U.S. holders who hold notes through a non-U.S. broker or other non-U.S. intermediary;
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pass-through entities (e.g., partnerships and entities or arrangements treated as partnerships for U.S. federal
income tax purposes) or investors who hold the notes through pass-through entities;
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S-95
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passive foreign investment companies; and
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controlled foreign corporations.
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If any entity or arrangement that is treated as a partnership for U.S. federal income tax purposes is a beneficial owner of notes, the U.S.
federal income tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership that is considering purchasing notes, you should consult
with your tax advisor.
Effect of Certain Contingencies
In certain circumstances (see the discussion of Redemption and Change of Control under Description
of Notes), we may pay amounts on the notes that are in excess of the stated interest and principal of the notes. Certain debt instruments that provide for one or more contingent payments are subject to Treasury regulations governing contingent
payment debt instruments. A payment is not treated as a contingent payment under these Treasury regulations if, as of the issue date of the debt instrument, the contingencies giving rise to such payment, separately and in the aggregate, are
considered remote or incidental. We intend to take the position that the possibility that any such excess payment will be made is remote and/or incidental so that such possibility will not cause the notes to be treated as
contingent payment debt instruments. Our determination that these contingencies are remote and/or incidental is binding on you unless you disclose your contrary position to the IRS in the manner that is required by applicable Treasury regulations.
Our determination is not, however, binding on the IRS. It is possible that the IRS might take a different position from that described above, in which case the timing, character and amount of taxable income in respect of the notes may be materially
and adversely different from that described in this section. The remainder of this discussion assumes that the notes are not contingent payment debt instruments.
U.S. Holders
As used in this
discussion, a U.S. holder is a beneficial owner of notes that, for U.S. federal income tax purposes, is:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or
organized in or under the laws of the United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust, if (i) a United States court is able to exercise primary supervision over administration of the
trust and one or more United States persons (as defined under the Code) have the authority to control all substantial decisions of the trust or (ii) the trust has a valid election in effect under applicable Treasury regulations to be treated as
a United States person.
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Taxation of Interest
Interest on the notes generally will be taxable to you as ordinary income:
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when it accrues, if you use the accrual method of accounting for U.S. federal income tax purposes; or
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when you receive it, if you use the cash method of accounting for U.S. federal income tax purposes.
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Sale or Other Disposition of Notes
Upon the sale, exchange, redemption, retirement or other taxable disposition of a note, you generally will recognize gain or loss equal to the
difference, if any, between:
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the amount of cash proceeds and the fair market value of any property received on such disposition (less any
amount attributable to accrued and unpaid stated interest, which generally will be taxable as ordinary income to the extent not previously included in gross income); and
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your adjusted tax basis in the note.
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Your adjusted tax basis in a note generally will equal the cost of the note to you. Your gain or loss that is recognized on the sale or other
disposition of the note generally will be capital gain or loss. This capital gain or loss generally will be long-term capital gain or loss if, at the time of the sale or other disposition, you have held the note for more than one year. The
deductibility of capital losses is subject to limitations.
Additional Tax on Net Investment Income
An additional 3.8% tax is imposed on net investment income of certain U.S. citizens and resident aliens, and on the undistributed
net investment income of certain estates and trusts. Among other items, net investment income generally includes gross income from interest and net gain from the disposition of property, such as the notes, less certain
deductions. Prospective holders should consult their tax advisors with respect to this additional tax on net investment income.
Information
Reporting and Backup Withholding
Information reporting generally will apply to payments of interest on, or the proceeds of a sale
or other disposition (including a retirement or redemption) of, notes held by you, unless you are an exempt recipient, such as a corporation. Backup withholding generally will apply to such payments unless you provide us or the appropriate
intermediary (or other payor) with a correct taxpayer identification number, and comply with certain certification procedures, or you otherwise establish an exemption from backup withholding. Backup withholding is not an additional tax. Any amount
withheld under the backup withholding rules is allowable as a credit against your U.S. federal income tax liability, if any, and a refund may be obtained if the amount withheld exceeds your actual U.S. federal income tax liability, provided you
timely provide the required information to the IRS.
Non-U.S. Holders
You are a non-U.S. holder for purposes of this discussion if you are a beneficial owner of notes and
you are, for U.S. federal income tax purposes, an individual, corporation, estate or trust that is not a U.S. holder.
U.S. Federal Income Tax and
Withholding Tax on Interest Payments on the Notes
Subject to the discussion of backup withholding and FATCA below, you generally
will not be subject to U.S. federal income tax or withholding tax on payments of interest on a note, provided that:
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an actual or constructive owner of 10% or more of the total combined voting power of all classes of our voting
stock within the meaning of the Code and applicable Treasury regulations;
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a controlled foreign corporation related (directly or indirectly) to us; or
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a bank receiving interest as described in Section 881(c)(3)(A) of the Code;
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such interest payments are not effectively connected with the conduct by you of a trade or business within the
United States; and
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you provide an appropriate and properly completed IRS Form W-8BEN, W-8BEN-E or W-8EXP (or appropriate substitute or successor form), signed under penalties of perjury, which provides your name and
address and certifies that you are not a United States person (as defined under the Code), to:
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the applicable withholding agent; or
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a securities clearing organization, bank or other financial institution that holds customers securities in
the ordinary course of its trade or business and that holds your notes on your behalf and that certifies to the applicable withholding agent, under penalties of perjury, that it, or the bank or financial institution between it and you, has received
from you your appropriate and properly completely IRS Form W-8BEN, W-8BEN-E or W-8EXP (or
appropriate substitute or successor form) and provides the applicable withholding agent with a copy of such form.
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Special rules may apply to non-U.S. holders who hold notes through qualified
intermediaries within the meaning of U.S. federal income tax laws. Additionally, special certification rules apply to foreign partnerships, estates, and trusts, and in certain circumstances, certifications as to the foreign status of partners,
trust owners, or beneficiaries may have to be provided to the applicable withholding agent.
Payments of interest on a note that are
effectively connected with your conduct of a trade or business in the United States and, if you are entitled to benefits under an applicable income tax treaty, that are attributable to a permanent establishment or a fixed base maintained by you in
the United States, generally will be subject to U.S. federal income tax on a net basis at the regular graduated rates and in the manner applicable to payments to a U.S. holder. If you are a corporate non-U.S.
holder, you also may be subject to a branch profits tax at a rate of 30% (or such lower rate as may be available under an applicable income tax treaty) on your effectively connected earnings and profits attributable to such interest. If interest is
effectively connected income, payments of such interest will not be subject to U.S. withholding tax so long as you provide the applicable withholding agent with a properly completed IRS Form W-8ECI (or other
applicable form), signed under penalties of perjury, on or before the date of the payment of such interest.
A non-U.S. holder that does not qualify for an exemption from U.S. federal income tax or withholding tax under the preceding paragraphs generally will be subject to withholding of U.S. federal income tax at the rate
of 30% (or such lower rate as may be available under an applicable income tax treaty) on payments of interest on a note. In order to claim an exemption from or a reduction of the 30% U.S. federal withholding tax under an applicable income tax
treaty, you generally must provide the applicable withholding agent with an appropriate and properly completed IRS Form W-8BEN or
W-8BEN-E (or appropriate substitute or successor form) on or before the date of the payments of such interest.
NON-U.S. HOLDERS SHOULD CONSULT WITH THEIR TAX ADVISORS ABOUT ANY APPLICABLE INCOME TAX TREATIES,
WHICH MAY PROVIDE FOR AN EXEMPTION FROM OR A REDUCTION OF U.S. FEDERAL INCOME TAX OR WITHHOLDING TAX, EXEMPTION FROM OR REDUCTION OF THE BRANCH PROFITS TAX, OR OTHER RULES DIFFERENT FROM THOSE DESCRIBED ABOVE.
Sale or Other Disposition of Notes
Subject to the discussion of backup withholding and FATCA below, any gain realized by you on the sale, exchange, redemption, retirement or
other disposition of a note generally will not be subject to U.S. federal income tax or withholding tax, unless:
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such gain is effectively connected with your conduct of a trade or business in the United States; or
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S-98
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you are an individual who is present in the United States for 183 days or more in the taxable year of the sale or
other disposition and certain other conditions are satisfied.
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If the first bullet point applies, you generally will be
subject to U.S. federal income tax with respect to such gain in the same manner as U.S. holders, as described above, unless an applicable income tax treaty provides otherwise. In addition, if you are a corporation, you also may be subject to the
branch profits tax described above on your effectively connected earnings and profits attributable to such gain. If the second bullet point applies, you generally will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as may
be available under an applicable income tax treaty) on the amount by which your capital gains from U.S. sources exceed certain capital losses allocable to U.S. sources.
Information Reporting and Backup Withholding
Payments to you of interest on a note, and amounts withheld from such payments, if any, generally will be required to be reported to the IRS
and to you. Backup withholding generally will not apply to payments of interest on a note if you duly provide certification as to your foreign status, or you otherwise establish an exemption, provided that the applicable withholding agent does not
have actual knowledge or reason to know that you are a United States person (as defined under the Code).
Payment of the gross proceeds
from a sale or other disposition (including a retirement or redemption) of a note by you effected by the U.S. office of a U.S. or non-U.S. broker generally will be subject to information reporting requirements
and backup withholding unless you properly certify, under penalties of perjury, as to your foreign status and certain other conditions are met, or you otherwise establish an exemption. Payment of the gross proceeds from a sale or other disposition
of a note by you outside the United States effected by a non-U.S. office of a non-U.S. broker generally will not be subject to information reporting and backup
withholding. However, payment of the gross proceeds from a sale or other disposition of a note by you generally will be subject to information reporting, but not backup withholding, if such sale or other disposition is effected by a non-U.S. office of a broker that is a United States person (as defined under the Code) or a foreign person with specified connections to the United States, unless you properly certify, under penalties of perjury, as
to your foreign status and certain other conditions are met, or you otherwise establish an exemption.
Backup withholding is not an
additional tax. Any amount withheld under the backup withholding rules is allowable as a credit against your U.S. federal income tax liability, if any, and a refund may be obtained if the amount withheld exceeds your actual U.S. federal income tax
liability, provided you timely provide the required information to the IRS.
Withholding on Payments to Certain Foreign Entities
Sections 1471 through 1474 of the Code and the Treasury regulations and administrative guidance issued thereunder (referred to as
FATCA) impose a 30% withholding tax on payments of interest on the notes and on the gross proceeds from the sale or other disposition of the notes (however, the IRS has issued proposed regulations, on which taxpayers may rely pending the
issuance of final regulations, that exclude gross proceeds from the sale or other disposition of the notes from the application of the withholding tax imposed under FATCA), if paid to a foreign financial institution or a non-financial foreign entity (each as defined in the Code) (including, in some cases, when such foreign financial institution or non-financial foreign entity is
acting as an intermediary), unless: (i) in the case of a foreign financial institution, such institution enters into an agreement with the U.S. government to withhold on certain payments, and to collect and provide to the U.S. tax authorities
substantial information regarding 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); (ii) in the case of a non-financial foreign entity, such entity certifies that it does not have any substantial United States owners (as defined in the Code) or provides the withholding agent with a certification identifying
its direct and indirect substantial United States owners (generally by providing an IRS Form
S-99
W-8BEN-E); or (iii) the foreign financial institution or non-financial
foreign entity otherwise qualifies for an exemption from these rules and provides appropriate documentation (such as an IRS Form W-8BEN-E). Foreign financial
institutions located in jurisdictions that have an intergovernmental agreement with the United States with respect to these rules may be subject to different rules. Under certain circumstances, a beneficial owner of notes might be eligible for
refunds or credits of such taxes.
Under the applicable Treasury regulations, FATCA withholding generally will apply to all U.S.-source
withholdable payments without regard to whether the beneficial owner of the payment would otherwise be entitled to an exemption from imposition of withholding tax pursuant to an applicable income tax treaty with the United States or U.S.
domestic law. We will not pay additional amounts to holders of the notes in respect of any amounts withheld under FATCA.
Prospective
investors should consult their own tax advisors with respect to the tax consequences to them of the FATCA rules.
THE PRECEDING
DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR REGARDING THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR NOTES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
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UNDERWRITING
BofA Securities, Inc. is acting as representative of each of the underwriters named below. Subject to the terms and conditions set forth in a
firm commitment underwriting agreement among us, the guarantors and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the principal amount of notes
set forth opposite its name below.
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Underwriter
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Principal
Amount of Notes
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BofA Securities, Inc.
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$
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J.P. Morgan Securities LLC
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Truist Securities, Inc.
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BMO Capital Markets Corp.
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KeyBanc Capital Markets Inc.
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U.S. Bancorp Investments, Inc.
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Total
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$
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400,000,000
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Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed,
severally and not jointly, to purchase all of the notes sold under the underwriting agreement if any of these notes are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting
underwriters may be increased or the underwriting agreement may be terminated.
We have agreed to indemnify the underwriters and their
controlling persons against certain liabilities in connection with this offering, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.
The underwriters are offering the notes, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal
matters by their counsel, including the validity of the notes, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers certificates and legal opinions. The underwriters reserve the
right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Commissions and Discounts
The representative has advised us that the underwriters propose initially to offer the notes to the public at the public offering price set
forth on the cover page of this prospectus supplement and to certain dealers at such price less a concession not in excess of % of the principal amount of the notes. After the initial offering, the
public offering price, concession or any other term of the offering may be changed.
The following table shows the underwriting discounts
and commissions that we are to pay to the underwriters in connection with this offering (expressed as a percentage of the principal amount of the notes).
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Paid by us
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Per Note
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%
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Total
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$
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The expenses of the offering, not including the underwriting discounts and commissions, are estimated at
$ and are payable by us.
New Issue of Notes
The notes are a new issue of securities with no established trading market. We do not intend to apply for listing of the notes on any national
securities exchange or for inclusion of the notes on any automated dealer
S-101
quotation system. We have been advised by the underwriters that they presently intend to make a market in the notes after completion of the offering. However, they are under no obligation to do
so and may discontinue any market-making activities at any time without any notice. We cannot assure the liquidity of the trading market for the notes or that an active public market for the notes will develop. If an active public trading market for
the notes does not develop, the market price and liquidity of the notes may be adversely affected. If the notes are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for
similar securities, our operating performance and financial condition, general economic conditions and other factors.
No Sales of Similar Securities
We have agreed that we will not, for a period of 45 days after the date of this prospectus supplement, without first obtaining the
prior written consent of BofA Securities, Inc., directly or indirectly, issue, sell, offer to contract or grant any option to sell, pledge, transfer or otherwise dispose of, any debt securities or securities exchangeable for or convertible into debt
securities, except for the notes sold to the underwriters pursuant to the underwriting agreement.
Settlement
We expect that delivery of the notes will be made to investors on or about
, 2020, which will be the business day following the
date of this prospectus supplement (such settlement being referred to as T+ ). Pursuant to Rule 15c6-1 of the Exchange Act, trades in the secondary market generally are
required to settle in two business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes prior to the delivery of the notes hereunder will be required, by virtue of the fact that the
notes initially will settle in T+ , to specify an alternative settlement arrangement at the time of any such trade to prevent a failed settlement. Purchasers of the notes who wish to trade the notes prior to their date of
delivery hereunder should consult their advisors.
Short Positions
In connection with the offering, the underwriters may purchase and sell the notes in the open market. These transactions may include short
sales and purchases on the open market to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater principal amount of notes than they are required to purchase in the offering. The underwriters must close
out any short position by purchasing notes in the open market. A short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the notes in the open market after pricing that could
adversely affect investors who purchase in the offering.
Similar to other purchase transactions, the underwriters purchases to
cover the syndicate short sales may have the effect of raising or maintaining the market price of the notes or preventing or retarding a decline in the market price of the notes. As a result, the price of the notes may be higher than the price that
might otherwise exist in the open market.
Neither we nor any of the underwriters make any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may have on the price of the notes. In addition, neither we nor any of the underwriters make any representation that the representative will engage in these transactions or
that these transactions, once commenced, will not be discontinued without notice.
Other Relationships
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include
securities trading, commercial and investment banking, financial advisory,
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investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have engaged in, and may
in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates, for which they received or will receive customary fees and expenses.
Specifically, certain of the underwriters and/or their affiliates serve various roles in our credit facilities, including as agents or lenders
under our senior secured revolving credit facility. In addition, certain of the underwriters and/or their affiliates may hold a portion of the 2023 notes and may receive a portion of net proceeds from this offering. See Use of Proceeds.
In the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments
and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve
securities and/or instruments of ours or our affiliates. If the underwriters or their affiliates have a lending relationship with us, certain of those underwriters or their affiliates routinely hedge and certain other of those underwriters or their
affiliates may hedge their credit exposure to us consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase
of credit default swaps or the creation of short positions in our securities, including potentially the notes offered hereby. Any such short positions could adversely affect future trading prices of the notes offered hereby. The underwriters and
their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short
positions in such securities and instruments.
Notices to Prospective Investors in the European Economic Area and United Kingdom
The notes are not intended to be offered, sold or otherwise made available to, and should not be offered, sold or otherwise made available to,
any retail investor in the European Economic Area (EEA) or in the United Kingdom (UK). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of
Article 4(1) of Directive 2014/65/EU (as amended, MiFID II); (ii) a customer within the meaning of Directive (EU) 2016/97, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of
MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (as amended, the Prospectus Regulation). Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the
PRIIPs Regulation) for offering or selling the notes or otherwise making them available to retail investors in the EEA or in the UK has been prepared, and therefore offering or selling the notes or otherwise making them available to any
retail investor in the EEA or in the UK may be unlawful under the PRIIPs Regulation.
This prospectus supplement and the accompanying
prospectus have been prepared on the basis that any offer of notes in any Member State of the EEA or in the UK will be made pursuant to an exemption under the Prospectus Regulation from the requirement to publish a prospectus for offers of notes.
This prospectus supplement and the accompanying prospectus are not a prospectus for the purposes of the Prospectus Regulation.
The above
selling restriction is in addition to any other selling restriction set out below.
References to Regulations or Directives include, in
relation to the UK, those Regulations or Directives as they form part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 or have been implemented in UK domestic law, as appropriate.
Notice to Prospective Investors in the United Kingdom
Each underwriter has represented, warranted and agreed that:
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(A)
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it has only communicated or caused to be communicated and will only communicate or cause to be communicated any
invitation or inducement to engage in investment activity (within the meaning
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of section 21 of the Financial Services and Markets Act 2000 (the FSMA)) received by it in connection with the issue or sale of any notes in circumstances in which section 21(1) of
the FSMA does not apply to the Company or the guarantors; and
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(B)
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it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it
in relation to any notes in, from or otherwise involving the UK.
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Notice to Prospective Investors in Switzerland
This document is not intended to constitute an offer or solicitation to purchase or invest in the notes described herein. The notes may not be
publicly offered, sold or advertised, directly or indirectly, in, into or from Switzerland and will not be listed on the SIX Swiss Exchange or on any other exchange or regulated trading facility in Switzerland. Neither this prospectus supplement and
the accompanying prospectus nor any other offering or marketing material relating to the notes constitutes a prospectus as such term is understood pursuant to article 652a or article 1156 of the Swiss Code of Obligations, and neither this prospectus
supplement and the accompanying prospectus nor any other offering or marketing material relating to the notes may be publicly distributed or otherwise made publicly available in Switzerland.
Notice to Prospective Investors in the Dubai International Financial Centre
This document relates to an Exempt Offer in accordance with the Markets Rules 2012 of the Dubai Financial Services Authority
(DFSA). This document is intended for distribution only to persons of a type specified in the Markets Rules 2012 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 supplement nor taken steps to verify the information set forth herein and has no responsibility for this document. The securities to which this
document relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this document you
should consult an authorized financial advisor.
Notice to Prospective Investors in Canada
The notes may be sold 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 notes 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 supplement and the accompanying 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 purchasers province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchasers province or territory for
particulars 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.
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LEGAL MATTERS
Certain legal matters with respect to the issuance of the notes will be passed upon for us by Orrick, Herrington & Sutcliffe LLP, San
Francisco, California. Certain legal matters with respect to the issuance of guarantees will be passed upon for (i) All-Glass Aquarium Co., Inc. and Kaytee Products, Incorporated by Godfrey &
Kahn, S.C., Milwaukee, Wisconsin; (ii) C&S Products Co., Inc. by Faegre Drinker Biddle & Reath LLP, Des Moines, Iowa; (iii) Arden Companies, LLC by Honigman LLP, Detroit, Michigan; (iv) Gro Tec, Inc., Gulfstream
Home & Garden, Inc. and Pets International, Ltd. by Taylor English Duma LLP, Atlanta, Georgia; (v) Farnam Companies, Inc., IMS Southern, LLC, IMS Trading, LLC, Midwest Tropicals LLC and Quality Pets, LLC by Snell & Wilmer
L.L.P., Salt Lake City, Utah; and (vi) Aquatica Tropicals, Inc., B2E Biotech, LLC, B2E Corporation, B2E Manufacturing, LLC, B2E Microbials, LLC, Blue Springs Hatchery, Inc., Florida Tropical Distributors International, Inc., Four Paws Products,
Ltd., FourStar Microbial Products LLC, Hydro-Organics Wholesale, K&H Manufacturing, LLC, Matson, LLC, New England Pottery, LLC, NEXGEN Turf Research, LLC, Pennington Seed, Inc., Segrest Farms, Inc., Segrest, Inc., Sun Pet, Ltd., T.F.H.
Publications, Inc. and Wellmark International by Orrick, Herrington & Sutcliffe LLP, San Francisco, California. The validity of the notes will be passed upon for the underwriters by Simpson Thacher & Bartlett LLP, New York, New
York.
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INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The consolidated financial statements incorporated in this prospectus supplement and the accompanying prospectus by reference from Central
Garden & Pet Companys Annual Report on Form 10-K and the effectiveness of Central Garden & Pet Companys internal control over financial reporting have been audited by
Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is incorporated herein by reference. Such consolidated financial statements have been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act, and in accordance therewith we are required to file periodic reports,
proxy statements and other information with the SEC. Our SEC filings are available to you, free of charge, on the SECs website at www.sec.gov. Information about us, including our SEC filings, is also available at our website at
www.central.com. The references to www.central.com in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein or therein are inactive textual references only, and the information found on, or
accessible through, our website is not incorporated by reference into, and should not be considered part of, this prospectus supplement, the accompanying prospectus or the documents incorporated by reference herein or therein. Investors should not
rely on any such information in deciding whether to invest in our securities.
Our common stock and
non-voting common stock are traded on the NASDAQ Stock Market under the symbols CENT and CENTA, respectively.
This prospectus supplement omits certain information that is contained in the registration statement on file with the SEC, of which this
prospectus supplement is a part. For further information with respect to us, reference is made to the registration statement, including the exhibits incorporated therein by reference or filed therewith. Statements herein contained concerning the
provisions of any document are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an exhibit or incorporated by reference to the registration statement.
S-107
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We are incorporating by reference into this prospectus supplement certain information we file with the SEC under the Exchange Act until all of
the notes have been sold. This means that we are disclosing important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus supplement, and information that we file
later with the SEC will automatically update and supersede information in this prospectus supplement. The documents listed below, and any future filings we make with the SEC under the Exchange Act prior to the termination of this offering, are being
incorporated herein by reference:
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(a)
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our Annual Report on Form
10-K for the fiscal year ended September 28, 2019, filed with the SEC on November
27, 2019 (including certain portions of the Managements Discussion and Analysis from the Form 10-K for the fiscal year ended September 29, 2018);
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(b)
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the portions of our Definitive Proxy Statement on Schedule
14A that are incorporated by reference into our Annual Report on Form
10-K for the fiscal year ended September 28, 2019, filed with the SEC on December 20, 2019;
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(c)
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our Quarterly Reports on Form 10-Q for the fiscal quarters ended December
28, 2019, March
28, 2020, and June 27, 2020, filed with the SEC on February 6, 2020, May 7, 2020, and
August 6, 2020, respectively; and
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(d)
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our Current Reports on Form 8-K filed on October
3, 2019, October
4, 2019, January
15, 2020, February
7, 2020, February
13, 2020 and August 17, 2020.
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All of such documents are on file with the SEC. In addition, all documents filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act, subsequent to the date of this prospectus supplement are incorporated by reference in this prospectus supplement, other than any portion of any such filing that is furnished under the applicable SEC rules, and are a part hereof
from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus supplement to the extent that
a statement contained herein or in any subsequently filed document that is also incorporated by reference herein modifies or replaces such statement. Any statements so modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus supplement.
Any information incorporated by reference herein is available to you without charge
by writing or telephoning us at the following address:
Central Garden & Pet Company
1340 Treat Blvd., Suite 600
Walnut
Creek, CA 94597
Attention: Investor Relations
Telephone:
1-925-948-4000
You should rely only on the information provided in this document or incorporated in this document by reference. We have not authorized anyone
to provide you with different information. You should not assume that the information in this document, including any information incorporated herein by reference, is accurate as of any date other than that on the front of the document. Any
statement incorporated herein shall be deemed to be modified or superseded for purposes of this prospectus supplement to the extent that a statement contained herein modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement.
S-108
PROSPECTUS
Debt Securities
Subsidiary Guarantees of Debt Securities
Common Stock
Class A Common Stock
Preferred Stock
Warrants
We will provide more specific terms of the securities listed above in supplements to this prospectus or in one or more documents incorporated
by reference into this prospectus. The prospectus supplements and documents incorporated by reference into this prospectus may also add, update or change information contained in this prospectus. You should read this prospectus, including any
documents incorporated by reference into this prospectus, the applicable prospectus supplement and any free writing prospectus relating to the specific issue of securities carefully before you invest.
We may offer these securities from time to time in amounts, at prices and on other terms to be determined at the time of offering. In
addition, certain selling securityholders to be identified in a prospectus supplement may offer and sell these securities from time to time, in amounts, at prices and on terms that will be determined at the time these securities are offered. We will
not receive any proceeds from the sales of these securities held by the selling securityholders.
Our subsidiaries may guarantee any debt
securities that we may offer pursuant to this prospectus and a prospectus supplement.
Our common
stock and Class A common stock trade on the Nasdaq Stock Market under the symbols CENT and CENTA, respectively. On December 6, 2017, the last reported sales price of our common stock and Class A common stock
was $41.16 and $39.95, respectively. We will provide information in the prospectus supplement for the trading market, if any, for any other securities or debt securities we may offer.
Investing in our securities involves risks. You should carefully consider the risk factors set forth in the applicable supplement to this
prospectus, any related free writing prospectus and any documents that are incorporated by reference into this prospectus before investing in any securities that may be offered. See
Risk Factors on page 2.
Neither the
Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or the accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is December 7, 2017
TABLE OF CONTENTS
You should rely only on the information contained or incorporated by reference in this prospectus. We have not
authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. You should assume that the information contained or incorporated by
reference in this prospectus and in any prospectus supplement or in any free writing prospectus is accurate as of the dates of those documents. Our business, financial condition, results of operations and prospects may have changed since those
dates. We are not making an offer to sell the securities offered by this prospectus in any jurisdiction where the offer or sale is not permitted.
i
CENTRAL GARDEN & PET COMPANY
Central Garden & Pet Company is a leading innovator, marketer and producer of quality branded products and distributor of third-party
products in the pet and lawn and garden supplies industries in the United States.
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Our pet supplies products include products for dogs and cats, including edible bones, premium healthy edible and
non-edible chews, super premium dog and cat food and treats, toys, pet carriers, grooming supplies and other accessories; products for birds, small animals and specialty pets, including food, cages and habitats, toys, chews and related accessories;
animal and household health and insect control products; live fish and products for fish, reptiles and other aquarium-based pets, including aquariums, furniture and lighting fixtures, pumps, filters, water conditioners, food and supplements, and
information and knowledge resources; and products for horses and livestock. These products are sold under the brands including Adams,
Aqueon®, Avoderm®, Bio Spot Active Care, Cadet®, Farnam®, Four Paws®,
Kaytee®, K&H Pet Products®, Nylabone®, Pinnacle®, TFH, Zilla® as well as a number of other brands including Altosid®, Comfort Zone®, Coralife®,
Interpet®, Kent Marine®, Pet Select®, Super Pet®, and Zodiac®.
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Our lawn and garden supplies products include proprietary and non-proprietary grass seed; wild bird feed, bird
feeders, bird houses and other birding accessories; weed, grass, ant and other herbicide, insecticide and pesticide products; and decorative outdoor lifestyle products including pottery, trellises and other wood products. These products are sold
under the brands AMDRO®, Ironite®, Pennington®, and Sevin®, as well as a number of other brand names including Lilly Miller®, Over-N-Out®,
Smart Seed® and The Rebels®.
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We were incorporated in Delaware in May 1992 and are the successor to a California corporation that was incorporated in 1955. Our executive
offices are located at 1340 Treat Boulevard, Suite 600, Walnut Creek, California 94597, and our telephone number is (925) 948-4000. Our website is www.central.com. The information on, or accessible through, our website is not incorporated by
reference in this prospectus.
ABOUT THIS PROSPECTUS
This prospectus is part of an automatic shelf registration statement that we filed with the Securities and Exchange Commission, or SEC, using
the SECs shelf registration process. Under this shelf registration process, we or any selling securityholders may sell any of the securities described in this prospectus in one or more offerings. This prospectus provides you with a general
description of the securities we may sell. Each time we or any selling securityholders sell securities under this prospectus, we will provide you with a prospectus supplement that will contain specific information about the terms of that offering
and of the securities being offered and information regarding the selling securityholders, if any. The prospectus supplement or free writing prospectus may also add, update or change information contained in this prospectus. If so, the prospectus
supplement should be read as superseding this prospectus. You should read this prospectus, the applicable prospectus supplement, any free writing prospectus and the additional information described below under the headings Where You Can Find
More Information and Certain Documents Incorporated by Reference.
In this prospectus we use the terms
Central, we, us, our, and our company and similar phrases to refer to Central Garden & Pet Company, a Delaware corporation, and its consolidated subsidiaries.
References to securities include any security that we might sell under this prospectus or any prospectus supplement.
This prospectus contains summaries of certain provisions contained in some of the documents described herein. Please refer to the actual
documents for complete information. All of the summaries are qualified in their entirety by the actual documents. You may obtain copies of those documents as described below under Where You Can Find More Information and Certain
Documents Incorporated by Reference.
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RISK FACTORS
Investing in the securities to be offered pursuant to this prospectus may involve a high degree of risk. These risks will be set forth or
incorporated by reference in a prospectus supplement relating to the securities to be offered by that prospectus supplement. You should carefully consider the important factors set forth or incorporated by reference under the heading Risk
Factors in the applicable supplement to this prospectus before investing in any securities that may be offered.
FORWARD-LOOKING STATEMENTS
Some statements and disclosures in this prospectus, any accompanying prospectus supplement and any
free writing prospectus, including the documents incorporated by reference, are forward-looking statements. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues
or performance, projected cost savings, capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, our business strategy and the trends we anticipate in the industries and markets
in which we operate and other information that is not historical information. When used in this prospectus, any accompanying prospectus supplement and any free writing prospectus, including the documents incorporated by reference, the words
estimates, expects, anticipates, projects, plans, intends, believes and variations of such words or similar expressions are intended to identify forward-looking
statements. All forward-looking statements, including, without limitation, our examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in
good faith, and we believe there is a reasonable basis for them, but we cannot assure you that our expectations, beliefs and projections will be realized.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements
contained in this prospectus, any accompanying prospectus supplement and any free writing prospectus, including the documents incorporated by reference. Important factors that could cause our actual results to differ materially from the
forward-looking statements we make in this prospectus, any accompanying prospectus supplement and any free writing prospectus, including the documents incorporated by reference, are set forth in this prospectus, any accompanying prospectus
supplement and any free writing prospectus, including the documents incorporated by reference, including the factors described in the sections titled Item 1ARisk Factors in our Annual Report on Form 10-K for the fiscal year
ended September 24, 2016 and in our Quarterly Reports on Form 10-Q for the periods ended December 24, 2016, March 25, 2017 and June 24, 2017. If any of these risks or uncertainties materializes, or if any of our underlying
assumptions is incorrect, our actual results may differ significantly from the results that we express in, or imply by, any of our forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect
future events or circumstances, except as required by law. Presently known risk factors include, but are not limited to, the following factors:
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seasonality and fluctuations in our operating results and cash flow;
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fluctuations in market prices for seeds and grains and other raw materials;
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our inability to pass through cost increases in a timely manner;
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our dependence upon key executives;
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risks associated with new product introductions, including the risk that our new products will not produce
sufficient sales to recoup our investment;
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fluctuations in energy prices, fuel and related petrochemical costs;
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declines in consumer spending during economic downturns;
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inflation, deflation and other adverse macro-economic conditions;
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supply shortages in pet birds, small animals and fish;
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adverse weather conditions;
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risks associated with our acquisition strategy;
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access to and cost of additional capital;
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dependence on a small number of customers for a significant portion of our business;
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consolidation trends in the retail industry;
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competition in our industries;
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potential goodwill or intangible asset impairment;
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continuing implementation of an enterprise resource planning information technology system;
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our ability to protect our trademarks and other proprietary rights;
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potential environmental liabilities;
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risk associated with international sourcing;
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litigation and product liability claims;
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the impact of product recalls;
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potential costs and risks associated with actual or anticipated cyber attacks;
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the impact of the corporate tax reform being considered by the U.S. Congress and the Trump administration;
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the voting power associated with our Class B stock; and
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potential dilution from issuance of authorized shares.
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Readers should carefully review the reports and documents we file from time to time with the SEC, particularly our annual reports on Form
10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. For information about how to obtain a copy of these reports or other documents that we file with the SEC, see Where You Can Find More Information.
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RATIO OF EARNINGS TO FIXED CHARGES
The table below sets forth our ratio of earnings to fixed charges for each of the periods indicated:
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Fiscal Year Ended
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September 28, 2013(1)
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September 27, 2014
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September 26, 2015
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September 24, 2016
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September 30, 2017
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1.3x
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2.3x
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2.6x
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5.4x
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(1)
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For the fiscal year ended September 28, 2013, earnings were insufficient to cover fixed charges by
approximately $3.2 million, and the ratio for that fiscal year is not considered meaningful.
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For the purpose of
computing the ratio of earnings to fixed charges, earnings consist of income (loss) before income taxes and noncontrolling interest and after eliminating undistributed earnings of equity method investees and before fixed charges. Fixed charges
consist of interest expense incurred, the portion of rental expense under operating leases deemed by management to be representative of the interest factor and amortization of deferred financing costs.
For the periods indicated above, we had no outstanding shares of preferred stock with required dividend payments. Therefore, the ratios of
earnings to fixed charges and preferred stock dividends are identical to the ratios presented in the table above.
USE OF PROCEEDS
Unless indicated otherwise in the applicable prospectus supplement, we expect to use the net proceeds from the sale of our securities for
general corporate purposes including, but not limited to, acquisitions, repayment or refinancing of indebtedness, working capital or capital expenditures. Additional information on the use of net proceeds from the sale of securities offered by this
prospectus may be set forth in the prospectus supplement relating to such offering. In the case of a sale by a selling securityholder, we will not receive any of the proceeds from such sale.
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DESCRIPTION OF SECURITIES
Overview
We may offer from time to time
under this prospectus various series of debt securities, which may be senior or subordinated, which may include subsidiary guarantees of debt securities, shares of our common stock, Class A common stock and preferred stock, and warrants to
purchase any of such securities at prices and on terms to be determined by market conditions at the time of offering. In addition, certain selling securityholders to be identified in a prospectus supplement may offer and sell shares of Class A
common stock and shares of common stock from time to time, in amounts, at prices and on terms that will be determined at the time these securities are offered.
This prospectus provides you with a general description of the securities we or any selling securityholder may offer. Each time we or any
selling securityholder sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement to be attached to the front of this prospectus will describe the
specific amounts, prices and other important terms of the securities that we or any selling securityholder offer. The prospectus supplement may also add to or change information contained in this prospectus. If so, the prospectus supplement should
be read as superseding this prospectus. You should read both this prospectus and any prospectus supplement and any related free writing prospectus together with additional information described under the headings Where You Can Find More
Information and Certain Documents Incorporated by Reference. For more details on the terms of the securities, you should also read the exhibits filed with our registration statement, of which this prospectus is a part.
This prospectus may not be used to offer or sell any securities unless accompanied by a prospectus supplement.
DESCRIPTION OF DEBT SECURITIES
General
We may issue debt securities
from time to time in one or more distinct series, including senior debt securities and subordinated debt securities. This section summarizes the material terms of our senior and subordinated debt securities that are common to all series of such debt
securities. Most of the financial and other terms of any series of debt securities that we offer will be described in the prospectus supplement to be attached to the front of this prospectus. The senior debt securities, including any senior
subordinated securities, will be issued under an indenture dated as of March 8, 2010, between us and Wells Fargo Bank, National Association, as trustee. The subordinated debt securities, other than senior subordinated securities, will be issued
under an indenture between us and a bank or trust company which will be identified in a prospectus supplement, as trustee. The indentures for the senior and subordinated debt securities will be, subject to and governed by the Trust Indenture Act of
1939, as amended, or the Trust Indenture Act.
Senior and Subordinated Debt Securities
This section is a summary of the material terms of the indentures for the senior and subordinated debt securities and does not describe every
aspect of the debt securities that may be issued under these indentures. We urge you to read the indentures for the senior and subordinated debt securities, because they, and not this description, define your rights as a holder of these debt
securities. Some of the definitions are repeated in this section, but for the rest you will need to read the indentures for the senior and subordinated debt securities. We have filed the forms of the indentures for the senior and subordinated debt
securities as exhibits to a registration statement that we have filed with the SEC, of which this prospectus is a part. See Where You Can Find More Information and Certain Documents Incorporated by Reference, for information
on how to obtain copies of the indentures.
We can issue an unlimited amount of debt securities under the indentures for the senior and
subordinated debt securities. However, certain of our existing or future debt agreements may limit the amount of senior and
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subordinated debt securities we may issue. We can issue senior and subordinated debt securities from time to time and in one or more series as determined by us. In addition, we can issue senior
and subordinated debt securities of any series with terms different from the terms of senior and subordinated debt securities of any other series and the terms of particular senior and subordinated debt securities within any series may differ from
each other, all without the consent of the holders of previously issued series of senior and subordinated debt securities. The senior and subordinated debt securities will be unsecured obligations of our company.
Because we may issue both senior debt securities and subordinated debt securities, our references in this section to the debt securities are
to each of the senior and subordinated debt securities and our references to the indenture are to each of the indentures for the senior and subordinated debt securities, unless the context requires otherwise. In this section, we refer to these
senior and subordinated debt securities collectively as the debt securities and we refer to the indentures for the senior and subordinated debt securities collectively as the indentures.
The applicable prospectus supplement for a series of debt securities we issue will describe, among other things, the following terms of the
offered debt securities:
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The title of the debt securities and whether the debt securities will be senior debt securities or subordinated
debt securities.
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The aggregate principal amount of the debt securities, the percentage of their principal amount at which the debt
securities will be issued and the date or dates when the principal of the debt securities will be payable or how those dates will be determined.
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The interest rate or rates, which may be fixed or variable, that the debt securities will bear, if any, and how
the rate or rates will be determined.
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The date or dates from which any interest will accrue or how the date or dates will be determined, the date or
dates on which any interest will be payable, any regular record dates for these payments or how these dates will be determined and the basis on which any interest will be calculated, if other than on the basis of a 360-day year of twelve 30-day
months.
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The place or places of payment, transfer, conversion and exchange of the debt securities and where notices or
demands to or upon us in respect of the debt securities may be served.
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Provisions relating to subsidiary guarantees, if any.
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Any optional redemption provisions.
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Any sinking fund or other provisions that would obligate us to repurchase or redeem the debt securities.
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Whether the amount of payments of principal of, or premium, if any, or interest on the debt securities will be
determined with reference to an index, formula or other method, which could be based on one or more commodities, equity indices or other indices, and how these amounts will be determined.
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Any changes or additions to the events of default under the applicable indenture or our covenants, including
additions of any restrictive covenants, with respect to the debt securities.
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If not the principal amount of the debt securities, the portion of the principal amount that will be payable upon
acceleration of the maturity of the debt securities or how that portion will be determined.
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Any changes or additions to the provisions concerning legal defeasance and covenant defeasance contained in the
indentures that will be applicable to the debt securities.
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Any provisions granting special rights to the holders of the debt securities upon the occurrence of specified
events.
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If other than the trustee, the name of any paying agent, security registrar and transfer agent for the debt
securities.
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If the debt securities are not to be issued in book-entry form only and held by the Depository Trust Company, or
DTC, as depositary, the form of such debt securities, including whether such debt securities are to be issuable in permanent or temporary global form, as registered securities, bearer securities or both, any restrictions on the offer, sale or
delivery of bearer securities and the terms, if any, upon which bearer securities of the series may be exchanged for registered securities of the series and vice versa, if permitted by applicable law and regulations.
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If other than U.S. dollars, the currency or currencies of such debt securities.
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The person to whom any interest in a debt security will be payable, if other than the registered holder at the
close of business on the regular record date.
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The denomination or denominations that the debt securities will be issued, if other than denominations of $2,000
or any integral multiples of $1,000 in excess thereof in the case of the registered securities and $5,000 or any integral multiples in the case of the bearer securities.
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Whether such debt securities will be convertible into or exchangeable for any other securities and, if so, the
terms and conditions upon which such debt securities will be so convertible or exchangeable.
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A discussion of federal income tax, accounting and other special considerations, procedures and limitations with
respect to the debt securities.
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Whether and under what circumstances we will pay additional amounts to holders in respect of any tax assessment
or government charge and, if so, whether we will have the option to redeem the debt securities rather than pay such additional amounts.
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The subordination, if any, of the debt securities of the series pursuant to the indentures and any changes or
additions to the provisions of the indentures relating to subordination.
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Any other terms of the debt securities that are consistent with the provisions of the indentures.
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For purposes of this prospectus, any reference to the payment of principal of, any premium on, or any interest on, debt
securities will include additional amounts if required by the terms of such debt securities.
The indentures do not limit the amount of
debt securities that we are authorized to issue from time to time. The indentures also provide that there may be more than one trustee thereunder, each for one or more series of debt securities. At a time when two or more trustees are acting under
the applicable indenture, each with respect to only certain series, the term debt securities means the series of debt securities for which each respective trustee is acting. If there is more than one trustee under the applicable
indenture, the powers and trust obligations of each trustee will apply only to the debt securities for which it is trustee. If two or more trustees are acting under the applicable indenture, then the debt securities for which each trustee is acting
would be treated as if issued under separate indentures.
We may issue debt securities with terms different from those of debt securities
that may already have been issued. Without the consent of the holders thereof, we may reopen a previous issue of a series of debt securities and issue additional debt securities of that series unless the reopening was restricted when that series was
created.
There is no requirement that we issue debt securities in the future under any indenture, and we may use other indentures or
documentation, containing different provisions in connection with future issues of other debt securities.
We may issue the debt
securities as original issue discount securities, which are debt securities, including any zero-coupon debt securities, that are issued and sold at a discount from their stated principal amount and provide that, upon acceleration of their maturity,
an amount less than their principal amount will become due and payable. We will describe the U.S. federal income tax consequences and other considerations applicable to original issue discount securities in any prospectus supplement relating to
them.
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Conversion and Exchange
If any debt securities are convertible into or exchangeable for other securities, the prospectus supplement will explain the terms and
conditions of such conversion or exchange, including:
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the conversion price or exchange ratio, or the calculation method for such price or ratio;
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the conversion or exchange period, or how such period will be determined;
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if conversion or exchange will be mandatory or at our option or at the option of the holder;
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any requirements with respect to the reservation of shares of securities for purposes of conversion;
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provisions for adjustment of the conversion price or the exchange ratio; and
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provisions affecting conversion or exchange in the event of the redemption of the debt securities.
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Such terms may also include provisions under which the number or amount of other securities to be received by the
holders of such debt securities upon conversion or exchange would be calculated according to the market price of such other securities as of a time stated in the prospectus supplement.
Form, Exchange and Transfer
The debt securities will be issued:
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as registered securities; or
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if so provided in the prospectus supplement, as bearer securities (unless otherwise stated in the prospectus
supplement, with interest coupons attached); or
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in global form, see Legal Ownership of SecuritiesGlobal Securities; or
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in denominations that are even multiples of $2,000 or any integral multiple of $1,000 in excess thereof, in the
case of registered securities, and in even multiples of $5,000, in the case of bearer securities, unless otherwise specified in the applicable prospectus supplement.
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You may have your registered securities divided into registered securities of smaller denominations or combined into registered securities of
larger denominations, as long as the aggregate principal amount is not changed. This is called an exchange.
You may exchange
or transfer registered securities of a series at the office of the trustee described in the debt securities. The trustee maintains the list of registered holders and acts as our securities registrar for registering debt securities in the names of
holders and transferring debt securities. However, we may appoint another trustee to act as our securities registrar or we may act as our own securities registrar. If we designate additional securities registrars, they will be named in the
prospectus supplement. We may cancel the designation of any particular securities registrar. We may also approve a change in the office through which any securities registrar acts. If provided in the prospectus supplement, you may exchange your
bearer securities for registered securities of the same series so long as the total principal amount is not changed. Unless otherwise specified in the prospectus supplement, bearer securities will not be issued in exchange for registered securities.
You will not be required to pay a service charge to transfer or exchange debt securities, but you may in certain circumstances be
required to pay for any tax or other governmental charge associated with the exchange or transfer. The transfer or exchange will only be made if the transfer agent is satisfied with your proof of ownership and/or transfer documentation.
If the debt securities are redeemable and we redeem less than all of the debt securities of a particular series, we may block the transfer or
exchange of debt securities for 15 days before the day we mail the notice of redemption or publish such notice (in the case of bearer securities) and ending on the day of that mailing or publication in order to freeze the list of holders to prepare
the mailing. At our option, we may mail or publish
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such notice of redemption through an electronic medium. We may also refuse to register transfers or exchanges of debt securities selected for redemption, except that we will continue to permit
transfers and exchanges of the unredeemed portion of any debt security being partially redeemed.
Paying and Paying Agents
If you are a holder of registered securities, we will pay interest to you if you are a direct holder in the list of registered
holders at the close of business on a particular day in advance of each due date for interest, even if you no longer own the security on the interest due date. That particular time and day, usually about two weeks in advance of the interest due
date, is called the Regular Record Date and is stated in the prospectus supplement. Holders buying and selling debt securities must work out between them how to compensate for the fact that we will pay all the interest for an interest
period to the one who is the registered holder on the Regular Record Date. The most common manner is to adjust the sales price of the debt securities to prorate interest fairly between buyer and seller. This prorated interest amount is called
accrued interest.
With respect to registered securities, we will pay interest, principal and any other money due on the debt
securities at the place and time described in the debt securities. You must make arrangements to have your payments picked up at or wired from that place. We may also choose to pay interest by mailing checks or making wire transfers.
Street name and other indirect holders should consult their banks or brokers for information on how they will receive payments.
If bearer securities are issued, unless otherwise provided in the prospectus supplement, we will maintain an office or agency outside the
United States for the payment of all amounts due on the bearer securities. If debt securities are listed on the Luxembourg Stock Exchange or any other stock exchange located outside the United States, we will maintain an office or agency for such
debt securities in any city located outside the United States required by such stock exchange. The initial locations of such offices and agencies will be specified in the prospectus supplement. Unless otherwise provided in the prospectus supplement,
payment of interest on any bearer securities on or before maturity will be made only against surrender of coupons for such interest installments as they mature. Unless otherwise provided in the prospectus supplement, no payment with respect to any
bearer security will be made at any office or agency of our company in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States. Notwithstanding the
foregoing, payments of principal, premium and interest, if any, on bearer securities payable in U.S. dollars may be made, at the office of our paying agent described in a prospectus supplement, but only if payment of the full amount in U.S. dollars
at all offices or agencies outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions.
Regardless of who acts as the paying agent, all money paid by us to a paying agent that remains unclaimed at the end of two years after the
amount is due to registered holders will be repaid to us. After that two-year period, you may look only to us for payment and not to the trustee, any other paying agent or anyone else.
We may also arrange for additional payment offices, and may cancel or change these offices, including our use of the trustees corporate
trust office. We may also choose to act as our own paying agent. We must notify you of changes in identities of the paying agents for any particular series of debt securities.
Notices
With
respect to registered securities, Central and the trustee will send notices regarding the debt securities only to registered holders, using their addresses as listed in the list of registered holders. With respect to bearer securities, Central and
the trustee will give notice by publication in a newspaper of general circulation in the City of New York or in such other cities that may be specified in a prospectus supplement. At our option, we may send or publish notices through an electronic
medium as specified in the applicable prospectus supplement, including in accordance with the applicable procedures of DTC.
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Events of Default
You will have special rights if an event of default occurs in respect of the debt securities of your series and is not cured, as described
later in this subsection.
The term event of default in respect of the debt securities of your series means any of the
following:
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We do not pay the principal of, or any premium on, a debt security of such series on its due date.
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We do not pay interest on a debt security of such series within 30 days of its due date whether at maturity, upon
redemption or upon acceleration.
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We do not deposit any sinking fund payment in respect of debt securities of such series on its due date.
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We remain in breach of a covenant in respect of debt securities of such series for 60 days after we receive a
written notice of default stating we are in breach and requiring that we remedy the breach. The notice must be sent by either the trustee or holders of not less than 25% of the outstanding principal amount of debt securities of such series.
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We file for bankruptcy or certain other events in bankruptcy, insolvency or reorganization occur.
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Any other event of default in respect of debt securities of such series described in the prospectus supplement
occurs.
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The events of default described above may be added to or modified as described in the applicable prospectus
supplement. An event of default for a particular series of debt securities does not necessarily constitute an event of default for any other series of debt securities issued under an indenture. The trustee may withhold notice to the holders of debt
securities of any default (except in the payment of principal or interest) if it considers such withholding of notice to be in the best interests of the holders.
Remedies if an Event of Default Occurs. If an event of default has occurred and has not been cured with respect to one or more series
of debt securities, the trustee or the holders of not less than 25% in outstanding principal amount of the debt securities of the affected series may declare the entire principal amount of all the debt securities of that series to be due and
immediately payable plus accrued and unpaid interest (Only a portion of the principal is payable if the securities were issued at a discount). This is called a declaration of acceleration of maturity. If an event of default occurs because of certain
events in bankruptcy, insolvency or reorganization, the principal amount of all the debt securities of that series plus accrued and unpaid interest will be automatically accelerated without any action by the trustee or any holder. If there are
certain events of default on senior debt, then there are special rules and terms affecting the payments of principal, premiums, and interest on subordinated debt securities. A declaration of acceleration of maturity may be cancelled by the holders
of at least a majority in principal amount of the debt securities of the affected series if (1) we have paid or deposited with the trustee a sum sufficient in cash to pay all principal, interest and additional amounts, if any, which have become
due other than by the declaration of acceleration of maturity, (2) all existing events of default, other than the nonpayment of principal of or premium or interest, if any, on the debt securities of such series which have become due solely
because of the acceleration, have been cured or waived and (3) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction.
If we do not pay the principal of, or any premium on, a debt security of your series on its due date or we do not pay interest on your series
when due (and have not paid interest for 30 days), we will pay to the Trustee (when requested) the whole amount of principal, premium (if any), and interest with additional interest on any overdue principal, premium, and interest and other fees
related to the Trustees collections efforts. If we do not comply with the Trustees request, the Trustee may sue us and collect on these amounts.
Except in cases of default, where the trustee has some special duties, the trustee is not required to take any action under the indentures at
the request of the holders unless the holders offer the trustee reasonable protection from expenses and liability, called an indemnity. If reasonable indemnity is provided, the holders of a majority
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in principal amount of the outstanding debt securities of the relevant series may direct the time, method and place of conducting any lawsuit or other formal legal action seeking any remedy
available to the trustee. The trustee may refuse to follow those directions in certain circumstances. No delay or omission in exercising any right or remedy accruing upon any event of default will be treated as a waiver of such right, remedy or
event of default.
Before you are allowed to bypass the trustee and bring your own lawsuit or other formal legal action or take other
steps to enforce your rights or protect your interests relating to the debt securities, the following must occur:
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You must give the trustee written notice that an event of default has occurred and remains uncured.
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The holders of not less than 25% in principal amount of all outstanding debt securities of the relevant series
must make a written request that the trustee take action because of the default and must offer reasonable indemnity to the trustee against the cost and other liabilities of taking that action.
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The trustee must not have taken action for 60 days after receipt of the above notice and offer of indemnity.
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The holders of a majority in principal amount of the debt securities must not have given the trustee a direction
inconsistent with the above notice during the 60-day period.
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However, notwithstanding the conditions described above,
you are entitled at any time to sue for the payment of money due on your debt securities (including, but not limited to, principal, premium, interest, or any additional amounts) after the due date.
Holders of a majority in principal amount of the debt securities of the affected series may waive (on behalf of all holders) any past defaults
other than (1) the payment of principal, any premium or interest or (2) in respect of a covenant or other provision that cannot be modified or amended without the consent of each holder.
Street name and other indirect holders should consult their banks or brokers for information on how to give notice or direction or
to make a request of the trustee and to make or cancel a declaration of acceleration.
Each year, we will furnish to the trustee a written
statement of certain of our officers certifying that to their knowledge we are in compliance with the indentures and the debt securities, or else specifying any default.
Merger or Consolidation
Under the terms of the indentures, we are generally permitted to consolidate or merge with another entity. We are also permitted to sell all or
substantially all of our assets to another entity. However, we may not take any of these actions unless all the following conditions are met:
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either we will be the surviving corporation or, if we merge out of existence or sell assets, the entity into
which we merge or to which we sell assets must agree to be legally responsible for the debt securities;
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immediately after the merger or transfer of assets, no default on the debt securities can exist. A default for
this purpose includes any event that would be an event of default if the requirements for giving a default notice or of having the default exist for a specific period of time were disregarded;
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we must deliver certain certificates and documents to the trustee; and
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we must satisfy any other requirements specified in the prospectus supplement.
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Modification or Waiver
There are three types of changes we can make to the indentures and the debt securities.
Changes Requiring Approval of Each Holder. First, there are changes that cannot be made to your debt securities without the approval of
each holder. Following is a list of those types of changes:
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changing the stated maturity of the principal of or interest on a debt security;
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reducing any amounts due on a debt security or payable upon acceleration of the maturity of a security following
a default;
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adversely affecting any right of repayment at the holders option;
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changing the place (except as otherwise described in this prospectus) or currency of payment on a debt security;
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impairing your right to sue for payment or to convert or exchange a security;
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in the case of subordinated debt securities, modifying the subordination provisions in a manner that is adverse
to holders of the subordinated debt securities;
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in the case of senior debt securities, modifying the securities to subordinate the securities to other
indebtedness;
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reducing the percentage of holders of debt securities whose consent is needed to modify or amend the indentures;
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reducing the percentage of holders of debt securities whose consent is needed to waive compliance with certain
provisions of the indentures or to waive certain defaults;
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reducing the requirements for quorum or voting with respect to the debt securities;
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modifying any other aspect of the provisions of the indentures dealing with modification and waiver except to
increase the voting requirements;
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changing our obligations to pay additional amounts which are required to be paid to holders with respect to taxes
imposed on such holders in certain circumstances; and
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other provisions specified in the prospectus supplement.
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Changes Requiring a Majority Vote. The second type of change to the indentures and the outstanding debt securities is the kind that
requires a vote in favor by holders of outstanding debt securities owning a majority of the principal amount of the particular series affected. Separate votes will be needed for each series even if they are affected in the same way. Most changes
fall into this category, except for clarifying changes and certain other changes that would not adversely affect holders of the outstanding debt securities in any material respect. The same vote would be required for us to obtain a waiver of all or
part of certain covenants in the applicable indenture, or a waiver of a past default. However, we cannot obtain a waiver of a payment default or any other aspect of the indentures or the outstanding debt securities listed in the first category
described previously under Senior and Subordinated Debt SecuritiesModification or WaiverChanges Requiring Approval of Each Holder unless we obtain your individual consent to the waiver.
Changes Not Requiring Approval. The third type of change does not require any vote by holders of outstanding debt securities. This type
is limited to clarifications; curing ambiguities, defects or inconsistencies and certain other changes that would not adversely affect holders of the outstanding debt securities in any material respect. Qualifying or maintaining the qualification of
the indentures under the Trust Indenture Act does not require any vote by holders of debt securities.
Further Details Concerning
Voting. When taking a vote, we will use the following rules to decide how much principal amount to attribute to a debt security:
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for original issue discount securities, we will use the principal amount that would be due and payable on the
voting date if the maturity of the debt securities were accelerated to that date because of a default; and
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for debt securities whose principal amount is not known (for example, because it is based on an index), we will
use a special rule for that debt security described in the prospectus supplement.
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Debt securities will not be considered outstanding, and therefore not eligible to vote, if we
have deposited or set aside in trust for you money for their payment or redemption. Debt securities will also not be eligible to vote if they have been fully defeased as described below under Senior and Subordinated Debt
SecuritiesDefeasanceFull Defeasance.
We will generally be entitled to set any day as a record date for the purpose of
determining the holders of outstanding indenture securities that are entitled to vote or take other action under the indentures.
We are
not required to set a record date. If we set a record date for a vote or other action to be taken by holders of a particular series, that vote or action may be taken only by persons who are holders of outstanding securities of that series on the
record date and must be taken within 180 days following the record date or another period that we may specify. We may shorten or lengthen this period from time to time.
Street name and other indirect holders should consult their banks or brokers for information on how approval may be granted or
denied if we seek to change the indentures or the debt securities or request a waiver.
Satisfaction and Discharge
The indentures will cease to be of further effect, and we will be deemed to have satisfied and discharged the indentures with respect to a
particular series of debt securities, when
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all debt securities of that series have been delivered to the trustee for cancellation; or
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all debt securities of that series not previously delivered to the trustee for cancellation have become due and
payable or will become due and payable at their stated maturity or on a redemption date within one year; we deposit with the trustee, in trust, funds sufficient to pay the entire indebtedness on the debt securities of that series that had not been
previously delivered for cancellation, for the principal and interest to the date of the deposit (for debt securities that have become due and payable) or to the stated maturity or the redemption date, as the case may be (for debt securities that
have not become due and payable); and
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(2)
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the following conditions have been satisfied:
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we have paid or caused to be paid all other sums payable under the indentures in respect of that series; and
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we have delivered to the trustee an officers certificate and opinion of counsel, each stating that all
these conditions have been complied with.
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Defeasance
The following discussion of full defeasance and covenant defeasance will be applicable to your series of debt securities only if we choose to
have them apply to that series. If we choose to do so, we will state that in the applicable prospectus supplement and describe any changes to these provisions.
Full Defeasance. If there is a change in federal tax law, as described below, we can legally release ourselves from any payment or
other obligations on the debt securities, called full defeasance, if we put in place the following other arrangements for you to be repaid:
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We must deposit in trust for your benefit and the benefit of all other registered holders of the debt securities
a combination of money and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the debt securities on their various due dates including, possibly, their
earliest redemption date.
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Under current federal tax law, the deposit and our legal release from the debt securities would likely be treated
as though you surrendered your debt securities in exchange for your share of the cash and notes or bonds deposited in trust. In that event, you could recognize income, gain or loss on the debt securities you surrendered. In order for us to effect a
full defeasance we must deliver to the trustee a legal opinion confirming that you will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance and that you will not be taxed on the debt securities any
differently than if we did not make the deposit and just repaid the debt securities ourselves.
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We must comply with any additional provisions set forth in the prospectus supplement.
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If we accomplish a full defeasance as described above, you would have to rely solely on the trust deposit for repayment on the debt
securities. You could not look to us for repayment in the unlikely event of any shortfall. Conversely, the trust deposit would most likely be protected from claims of our lenders and other creditors if we ever become bankrupt or insolvent. You would
also be released from any applicable subordination provisions on the subordinated debt securities described below under Senior and Subordinated Debt SecuritiesSubordination.
Covenant Defeasance. Under current federal tax law, we can make the same type of deposit described above and be released from the
restrictive covenants in the debt securities, if any. This is called covenant defeasance. In that event, you would lose the protection of those restrictive covenants but would gain the protection of having money and securities set aside
in trust to repay the debt securities, and you would be released from any applicable subordination provisions on the subordinated debt securities described below under Senior and Subordinated Debt SecuritiesSubordination. In
order to achieve covenant defeasance, we must do the following:
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We must deposit in trust for your benefit and the benefit of all other registered holders of the debt securities
a combination of money and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the debt securities on their various due dates.
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We must deliver to the trustee a legal opinion confirming that you will not recognize income, gain or loss for
federal income tax purposes as a result of the covenant defeasance and that you will not be taxed on the debt securities any differently than if such covenant defeasance had not occurred.
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We must comply with any additional provisions set forth in the prospectus supplement.
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If we accomplish covenant defeasance, the following provisions of the indentures and the debt securities would no longer apply unless
otherwise specified:
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our promises regarding conduct of our business and other matters and any other covenants applicable to the series
of debt securities that will be described in the prospectus supplement; and
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the definition of an event of default as a breach of such covenants that may be specified in the prospectus
supplement.
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If we accomplish covenant defeasance, you can still look to us for repayment of the debt securities if
there were a shortfall in the trust deposit. In fact, if one of the remaining events of default occurs (such as our bankruptcy) and the debt securities become immediately due and payable, there may be such a shortfall. Depending on the event causing
the default, of course, you may not be able to obtain payment of the shortfall.
In order to exercise either full defeasance or covenant
defeasance, we must comply with certain conditions, and no event or condition can exist that would prevent us from making payments of principal, premium, and interest, if any, on the debt securities of such series on the date the irrevocable deposit
is made or at any time during the period ending on the 91st day after the deposit date.
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Ranking
Unless provided otherwise in the applicable prospectus supplement, the debt securities are not secured by any of our property or assets.
Accordingly, your ownership of debt securities means you are one of our unsecured creditors. The senior debt securities are not subordinated to any of our other debt obligations and, therefore, they rank equally with all our other unsecured and
unsubordinated indebtedness. The subordinated debt securities will rank junior to our Senior Indebtedness (as such term is defined in the subordinated indenture) and equally with all our other unsecured and subordinated debt. See Senior
and Subordinated Debt SecuritiesSubordination.
Subordination
Unless the prospectus supplement provides otherwise, the following provisions will apply to the subordinated debt securities:
The payment of principal, any premium and interest on the subordinated debt securities is subordinated in right of payment to the prior payment
in full of all of our senior indebtedness. This means that in certain circumstances where we may not be making payments on all of our debt obligations as they become due, the holders of all of our senior indebtedness will be entitled to receive
payment in full of all amounts that are due or will become due on the senior indebtedness before you and the other holders of subordinated debt securities will be entitled to receive any payment or distribution (other than in the form of
subordinated securities) on the subordinated debt securities. These circumstances may include the following:
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We make a payment or distribute assets to creditors upon any liquidation, dissolution, winding up or
reorganization of our company, or as part of an assignment or marshalling of our assets for the benefit of our creditors.
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We file for bankruptcy or certain other events in bankruptcy, insolvency or similar proceedings occur.
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The maturity of the subordinated debt securities is accelerated. For example, the entire principal amount of a
series of subordinated debt securities may be declared to be due and payable and immediately payable or may be automatically accelerated due to an event of default as described under Senior and Subordinated Debt SecuritiesEvents of
Default.
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In addition, in general, we will not be permitted to make payments of principal, any premium or interest
on the subordinated debt securities if we default in our obligation to make payments on our senior indebtedness and do not cure such default. We are also prohibited from making payments on subordinated debt securities if an event of default (other
than a payment default) that permits the holders of senior indebtedness to accelerate the maturity of the senior indebtedness occurs and Central and the trustee have received a notice of such event of default. However, unless the senior indebtedness
has been accelerated because of that event of default, this payment blockage notice cannot last more than 179 days.
These subordination
provisions mean that if we are insolvent, a holder of senior indebtedness is likely to ultimately receive out of our assets more than a holder of the same amount of our subordinated debt securities, and a creditor of our company that is owed a
specific amount but who owns neither our senior indebtedness nor our subordinated debt securities may ultimately receive less than a holder of the same amount of senior indebtedness and more than a holder of subordinated debt securities.
The subordinated indenture does not limit the amount of senior indebtedness we are permitted to have, and we may in the future incur
additional senior indebtedness.
If this prospectus is being delivered in connection with a series of subordinated securities, the
accompanying prospectus supplement or the information incorporated by reference will set forth the approximate amount of senior indebtedness outstanding as of a recent date.
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Guarantees
A series of debt securities may be guaranteed by some of our subsidiaries, if those guarantees are provided for in the supplemental indenture
relating to that series of debt securities. If guarantees are issued in connection with any debt securities, the terms of those guarantees and the names of our subsidiaries which are providing the guarantees will be identified in the applicable
prospectus supplement.
The Trustee
Wells Fargo Bank, National Association, is the trustee under the indenture governing the senior debt securities, including senior subordinated
securities. The initial trustee under the indenture under which the subordinate debt securities, other than senior subordinated securities, will be issued will be identified in a prospectus supplement. Under each indenture, the trustee will also be
the initial paying agent and registrar for the debt securities.
The indentures provide that, except during the continuance of an event of
default under the indentures, the trustee under the indentures will perform only such duties as are specifically set forth in the indentures. Under the indentures, the holders of a majority in outstanding principal amount of the debt securities will
have the right to direct the time, method and place of conducting any proceeding or exercising any remedy available to the trustee under the indentures, subject to certain exceptions. If an event of default has occurred and is continuing, the
trustee under the indentures will exercise such rights and powers vested in it under the indentures and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such
persons own affairs.
The indentures and provisions of the Trust Indenture Act, incorporated by reference in the indentures contain
limitations on the rights of the trustee under such indentures, should it become a creditor of our company, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or
otherwise. The trustee under the indentures is permitted to engage in other transactions. However, if the trustee under the indentures acquires any prohibited conflicting interest, it must eliminate the conflict or resign.
The trustee may resign or be removed with respect to one or more series of debt securities and a successor trustee may be appointed to act
with respect to such series. In the event that two or more persons are acting as trustee with respect to different series of debt securities under the indentures, each such trustee shall be a trustee of a trust separate and apart from the trust
administered by any other such trustee and any action described herein to be taken by the trustee may then be taken by each such trustee with respect to, and only with respect to, the one or more series of debt securities for which it is
trustee.
In the event that an entity is the trustee under both the senior indenture and the subordinated indenture, and a conflict of
interest arises as a result, the trustee must resign as trustee under (1) either of the indentures or (2), if this does not eliminate the conflict of interest, both the indentures.
Legal Ownership of Securities
Holders of Securities
Book-Entry Holders. We will issue debt securities in book-entry form only, unless we specify otherwise in the applicable prospectus
supplement. If securities are issued in book-entry form, this means the securities will be represented by one or more global securities registered in the name of a financial institution that holds them as depositary on behalf of other financial
institutions that participate in the depositarys book-entry system. These participating institutions, in turn, hold beneficial interests in the securities on behalf of themselves or their customers.
We will only recognize the person in whose name a security is registered as the holder of that security. Consequently, for securities issued
in global form, we will recognize only the depositary as the holder of the securities and all payments on the securities will be made to the depositary. The depositary passes along the
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payments it receives to its participants, which in turn pass the payments along to their customers who are the beneficial owners. The depositary and its participants do so under agreements they
have made with one another or with their customers; they are not obligated to do so under the terms of the securities.
As a result,
investors in securities issued in book-entry form will not own securities directly. Instead, they will own beneficial interests in a global security, through a bank, broker or other financial institution that participates in the depositarys
book-entry system or holds an interest through a participant. As long as the securities are issued in global form, investors will be indirect holders, and not holders, of the securities.
Street Name Holders. In the future, we may terminate a global security or issue securities initially in non-global form. In these
cases, investors may choose to hold their securities in their own names or in street name. Securities held by an investor in street name would be registered in the name of a bank, broker or other financial institution that the investor
chooses, and the investor would hold only a beneficial interest in those securities through an account he or she maintains at that institution.
For securities held in street name, we will recognize only the intermediary banks, brokers and other financial institutions in whose names the
securities are registered as the holders of those securities and all payments on those securities will be made to them. These institutions pass along the payments they receive to their customers who are the beneficial owners, but only because they
agree to do so in their customer agreements or because they are legally required to do so. Investors who hold securities in street name will be indirect holders, not holders, of those securities.
Legal Holders. We, and any third parties employed by us or acting on your behalf, such as trustees, depositories and transfer agents,
are obligated only to the legal holders of the securities. We do not have obligations to investors who hold beneficial interests in global securities, in street name or by any other indirect means. This will be the case whether an investor chooses
to be an indirect holder of a security or has no choice because we are issuing the securities only in global form.
For example,
once we make a payment or give a notice to the legal holder, we have no further responsibility for the payment or notice even if that legal holder is required, under agreements with depositary participants or customers or by law, to pass it along to
the indirect holders but does not do so. Similarly, if we want to obtain the approval of the holders for any purpose (for example, to amend an indenture or to relieve ourselves of the consequences of a default or of our obligation to comply with a
particular provision of the indenture), we would seek the approval only from the legal holders, and not the indirect holders, of the securities. Whether and how the legal holders contact the indirect holders is up to the legal holders.
When we refer to you, we mean those who invest in the securities being offered by this prospectus, whether they are the legal holders or only
indirect holders of those securities. When we refer to your securities, we mean the securities in which you hold a direct or indirect interest.
Special Considerations for Indirect Holders. If you hold securities through a bank, broker or other financial institution, either in
book-entry form or in street name, you should check with your own institution to find out:
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how it handles securities payments and notices;
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whether it imposes fees or charges;
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how it would handle a request for the holders consent, if ever required;
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whether and how you can instruct it to send you securities registered in your own name so you can be a legal
holder, if that is permitted in the future;
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how it would exercise rights under the securities if there were a default or other event triggering the need for
holders to act to protect their interests; and
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if the securities are in book-entry form, how the depositarys rules and procedures will affect these
matters.
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Global Securities
A global security represents one or any other number of individual securities. Generally, all securities represented by the same global
securities will have the same terms. We may, however, issue a global security that represents multiple securities that have different terms and are issued at different times. We call this kind of global security a master global security.
Each security issued in book-entry form will be represented by a global security that we deposit with and register in the name of a financial
institution that we select or its nominee. The financial institution that is selected for this purpose is called the depositary. Unless we specify otherwise in the applicable prospectus supplement, The Depository Trust Company, New York, New York,
known as the DTC, will be the depositary for all securities issued in book-entry form.
A global security may not be transferred to or
registered in the name of anyone other than the depositary or its nominee, unless special termination situations arise or as otherwise described in the prospectus supplement. We describe those situations below under Special Situations
When a Global Security Will Be Terminated. As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner and holder of all securities represented by a global security, and investors will be permitted to
own only beneficial interests in a global security. Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in turn has an account with the depositary or with another institution that does.
Thus, an investor whose security is represented by a global security will not be a holder of the security, but only an indirect holder of a beneficial interest in the global security.
Special Considerations for Global Securities. As an indirect holder, an investors rights relating to a global security will be
governed by the account rules of the investors financial institution and of the depositary, as well as general laws relating to securities transfers. We do not recognize this type of investor as a holder of securities and instead will deal
only with the depositary that holds the global security.
If securities are issued only in the form of a global security, an
investor should be aware of the following:
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An investor cannot cause the securities to be registered in his or her name and cannot obtain physical
certificates for his or her interest in the securities, except in the special situations we describe below.
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An investor will be an indirect holder and must look to his or her own bank or broker for payments on the
securities and protection of his or her legal rights relating to the securities, as we describe under Legal Ownership of SecuritiesHolders of Securities above.
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An investor may not be able to sell interests in the securities to some insurance companies and to other
institutions that are required by law to own their securities in non-book-entry form.
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An investor may not be able to pledge his or her interest in a global security in circumstances where
certificates representing the securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective.
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The depositarys policies, which may change from time to time, will govern payments, transfers, exchanges
and other matters relating to an investors interest in a global security. Neither we nor any third parties employed by us or acting on your behalf, such as trustees and transfer agents, have any responsibility for any aspect of the
depositarys actions or for its records of ownership interests in a global security. Central and the trustee do not supervise the depositary in any way.
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The DTC requires that those who purchase and sell interests in a global security within its book-entry system use
immediately available funds, and your broker or bank may require you to do so as well.
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Financial institutions that participate in the depositarys book-entry system, and through which an investor
holds its interest in a global security, may also have their own policies affecting payments, notices and other matters relating to the security. There may be more than one financial intermediary in the chain of ownership for an investor. We do not
monitor and are not responsible for the actions of any of those intermediaries.
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Special Situations When a Global Security Will Be Terminated. In a few special situations
described below, a global security will be terminated and interests in it will be exchanged for certificates in non-global form representing the securities it represented. After that exchange, the choice of whether to hold the securities directly or
in street name will be up to the investor. Investors must consult their own banks or brokers to find out how to have their interests in a global security transferred on termination to their own names, so that they will be holders. We have described
the rights of holders and street name investors above under Legal Ownership of SecuritiesHolders of Securities.
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The special situations for termination of a global security are as follows:
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if the depositary notifies us that it is unwilling, unable or no longer qualified to continue as depositary for
that global security and we do not appoint another institution to act as depositary within a specified time period;
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if we elect to terminate that global security; or
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if an event of default has occurred with regard to securities represented by that global security and it has not
been cured or waived.
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The prospectus supplement may also list additional situations for terminating a global security
that would apply to a particular series of securities covered by the prospectus supplement. If a global security is terminated, only the depositary is responsible for deciding the names of the institutions in whose names the securities represented
by the global security will be registered and, therefore, who will be the holders of those securities.
Governing Law
The indentures for the senior and subordinated debt securities will be governed by and construed in accordance with the laws of the State of
New York.
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DESCRIPTION OF CAPITAL STOCK
As of the date of this prospectus, our authorized capital stock consists of 80,000,000 shares of common stock, 100,000,000 shares of
Class A common stock, 3,000,000 shares of Class B stock and 1,000,000 shares of preferred stock. At November 17, 2017, there were 12,160,023 shares of common stock, 38,035,517 shares of Class A common stock and 1,652,262 shares of
Class B stock, and there were approximately 95 holders of record of our common stock, 315 holders of record of our Class A common stock, and five holders of record of our Class B stock. No shares of preferred stock or options to purchase
preferred stock are currently outstanding.
The following description of our capital stock does not purport to be complete and is subject
to and is qualified in its entirety by the description of our capital stock contained in our amended and restated certificate of incorporation, a copy of which is filed as an exhibit to the registration statement of which this prospectus is a part.
We recommend you review the exhibit for a detailed description of the provisions that we summarize below.
Common Stock, Class A Common Stock and
Class B Stock
Voting, Dividend and Other Rights. The voting powers, preferences and relative rights of the common stock,
Class A common stock, and the Class B stock are identical in all respects, except that (i) the holders of common stock are entitled to one vote per share, the holders of Class B stock are entitled to the lesser of ten votes per share or
49% of the total votes cast, and the holders of Class A common stock generally have no voting rights unless otherwise required by Delaware law, as described below; (ii) stock dividends on common stock may be paid only in shares of common
stock and stock dividends on Class B stock may be paid only in shares of Class B stock and (iii) shares of Class B stock have certain conversion rights and are subject to certain restrictions on ownership and transfer described below under
Conversion Rights and Restrictions on Transfer of Class B Stock. Except as described above, issuances of additional shares of Class B stock and modifications of the terms of the Class B stock require the approval of a majority of
the holders of the common stock and Class B stock, voting as separate classes. Our amended and restated certificate of incorporation provides that the number of authorized shares of Class A common stock may be increased or decreased (but not
below the number of outstanding shares of Class A common stock then outstanding) by the affirmative vote of the holders of a majority of the votes entitled to be cast by the holders of the common stock and Class B stock, voting together as a
single class, without a vote by any holders of Class A common stock. Under the Delaware General Corporation Law, any amendments to the certificate of incorporation altering or changing the powers, preferences, or special rights of the shares of
any class so as to adversely affect them, including the Class A common stock, requires the separate approval of the class so affected, as well as the approval of all classes entitled to vote thereon, voting together, and these voting rights are
specifically included in our amended and restated certificate of incorporation. Our amended and restated certificate of incorporation cannot be modified, revised or amended without the affirmative vote of the majority of outstanding shares of common
stock and Class B stock, voting separately as a class. Except as described above or as required by law, holders of common stock and Class B stock vote together on all matters presented to the stockholders for their vote or approval, including the
election of directors. The stockholders are not entitled to vote cumulatively for the election of directors.
Each share of common
stock, Class A common stock and Class B stock is entitled to receive dividends if, as and when declared by our board of directors out of funds legally available therefor. The common stock, Class A common stock and Class B stock share
equally, on a share-for-share basis, in any cash dividends declared by our board of directors.
Stockholders have no preemptive or other
rights to subscribe for additional shares. Subject to any rights of holders of any preferred stock, all holders of common stock, Class A common stock and Class B stock, regardless of class, are entitled to share equally on a share-for-share
basis in any assets available for distribution to stockholders on liquidation, dissolution or winding up of our company. No common stock, Class A common stock or Class B stock is subject to redemption or a sinking fund.
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Conversion Rights and Restrictions on Transfer of Class B Stock. Neither the common stock
nor the Class A common stock has any conversion rights. However, at the option of the holder, each share of Class B stock is convertible at any time and from time to time into one share of common stock. If at any time the holders of a majority
of outstanding shares of Class B stock vote to convert the outstanding shares of Class B stock to common stock, then all outstanding shares of Class B stock shall be deemed automatically converted into shares of common stock.
Our amended and restated certificate of incorporation provides that any holder of shares of Class B stock desiring to transfer such shares to
a person other than a Permitted Transferee (as defined below) must present such shares to us for conversion into an equal number of shares of common stock upon such transfer. Thereafter, such shares of common stock may be freely transferred to
persons other than Permitted Transferees, subject to applicable securities law.
Shares of Class B stock may not be transferred except
generally to family members, certain trusts, heirs and devisees (collectively, Permitted Transferees and each, a Permitted Transferee). Upon any sale or transfer of ownership or voting rights to a transferee other than a
Permitted Transferee or to the extent an entity no longer remains a Permitted Transferee, such shares of Class B stock will automatically convert into equal number of shares of common stock. Accordingly, no trading market is expected to develop in
the Class B stock and the Class B stock will not be listed or traded on any exchange or in any market.
Effects of Disproportionate
Voting Rights. The disproportionate voting rights of the common stock, Class A common stock and Class B stock could have an adverse effect on the market price of the common stock and of the Class A common stock. Such disproportionate
voting rights may make us a less attractive target for a takeover than we otherwise might be, or render more difficult or discourage a merger proposal, a tender offer or a proxy contest, even if such actions were favored by our stockholders other
than the holders of the Class B stock. Accordingly, such disproportionate voting rights may deprive holders of common stock of an opportunity to sell their shares at a premium over prevailing market prices, since takeover bids frequently involve
purchases of stock directly from shareholders at such a premium price.
The common stock and Class A common stock issued by
this prospectus will, when issued, be fully paid and nonassessable and will not have, or be subject to, any preemptive or similar rights.
Our common stock and Class A common stock are listed on the Nasdaq Stock Market under the symbols CENT and CENTA,
respectively. The transfer agent and registrar for our common stock is ComputerShare Trust Company, N.A., 250 Royall Street, Canton, MA 02021. Their phone number is (877) 261-9290.
Preferred Stock
Under our amended and
restated certificate of incorporation, we may issue up to 1,000,000 shares of preferred stock. We currently have no outstanding shares of preferred stock.
Our board of directors has the authority, without further action by the stockholders, to issue up to the maximum authorized number of shares
of preferred stock in one or more series. The board of directors also has the authority to designate the rights, preferences, privileges and restrictions of each such series, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series. The rights, preferences, privileges and restrictions of each series will be fixed by the certificate of designation relating to
that series. Any or all of the rights of the preferred stock may be greater than the rights of the common stock or the Class A common stock.
The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company without further
action by the stockholders. The issuance of preferred stock with voting and conversion rights may also adversely affect the voting power of the holders of common stock. In certain circumstances, an issuance of preferred stock could have the effect
of decreasing the market price of the common stock.
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Whenever preferred stock is to be sold pursuant to this prospectus, we will file a prospectus
supplement relating to that sale which will specify:
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the number of shares in the series of preferred stock;
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the designation for the series of preferred stock by number, letter or title that shall distinguish the series
from any other series of preferred stock;
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the dividend rate, if any, and whether dividends on that series of preferred stock will be cumulative,
noncumulative or partially cumulative;
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the voting rights of that series of preferred stock, if any;
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any conversion provisions applicable to that series of preferred stock;
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any redemption or sinking fund provisions applicable to that series of preferred stock;
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the liquidation preference per share of that series of preferred stock, if any; and
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the terms of any other preferences or rights, if any, applicable to that series of preferred stock.
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Certain Effects of Authorized but Unissued Stock
We have shares of common stock, Class A common stock and preferred stock available for future issuance without stockholder approval. These
additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital, facilitate corporate acquisitions or payable as a dividend on the capital stock.
The existence of unissued and unreserved common stock, Class A common stock and preferred stock may enable our board of directors to
issue shares to persons friendly to current management or to issue preferred stock with terms that could render more difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, thereby
protecting the continuity of our management. In addition, the issuance of preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon
liquidation.
Delaware Law and Certain Provisions of Our Amended and Restated Certificate of Incorporation and Bylaws
Provisions of Delaware law and our amended and restated certificate of incorporation and bylaws could make the acquisition of our company and
the removal of incumbent officers and directors more difficult. These provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of our company
to negotiate with us first. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company outweigh the disadvantages of
discouraging such proposals because, among other things, negotiation of such proposals could result in an improvement of their terms.
We
are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, the statute prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested
stockholder for a period of three years after the date that the person became an interested stockholder unless, subject to certain exceptions, the business combination or the transaction in which the person became an interested stockholder is
approved in a prescribed manner. Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the stockholder. Generally, an interested stockholder is a
person who, together with affiliates and associates, owns, or within three years prior, did own 15% or more of the corporations voting stock. These provisions may have the effect of delaying, deferring or preventing a change in control of our
company without further action by the stockholders.
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Our bylaws provide that stockholder action can be taken at an annual or special meeting of
stockholders or by written consent. Our bylaws also provide that special meetings of stockholders can be called by the board of directors, the chairman of the board, if any, the president or at the request of stockholders holding not less than 10%
of the total voting power. The business permitted to be conducted at any special meeting of stockholders is limited to the purposes stated in the notice of such meeting. Our bylaws set forth an advance notice procedure with regard to the nomination,
other than by or at the direction of the board of directors, of candidates for election as directors and with regard to business to be brought before a meeting of stockholders.
DESCRIPTION OF THE WARRANTS
We may issue warrants, including warrants to purchase common stock, Class A common stock, preferred stock, debt securities, or any
combination of the foregoing. Warrants may be issued independently or together with any securities and may be attached to or separate from the securities. The warrants will be issued under warrant agreements to be entered into between us and a
warrant agent as detailed in the prospectus supplement relating to warrants being offered. The warrant agent will act solely as our agent in connection with the warrants and will not have any obligation or relationship of agency or trust for or with
any holders or beneficial owners of warrants. A copy of the warrant agreement will be filed with the SEC in connection with any offering of warrants.
The applicable prospectus supplement will describe the following terms, where applicable, of the warrants in respect of which this prospectus
is being delivered:
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the title of the warrants;
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the aggregate number of the warrants;
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the price or prices at which the warrants will be issued;
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the currencies in which the price or prices of the warrants may be payable;
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the designation, amount and terms of the offered securities purchasable upon exercise of the warrants;
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the designation and terms of the other offered securities, if any, with which the warrants are issued and the
number of the warrants issued with each security;
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if applicable, the date on and after which the warrants and the offered securities purchasable upon exercise of
the warrants will be separately transferable;
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the price or prices at which and currency or currencies in which the offered securities purchasable upon exercise
of the warrants may be purchased;
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the date on which the right to exercise the warrants shall commence and the date on which the right shall expire;
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the minimum or maximum amount of the warrants which may be exercised at any one time;
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information with respect to book-entry procedures, if any;
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a discussion of any federal income tax considerations; and
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any other material terms of the warrants, including terms, procedures, and limitations relating to the exchange
and exercise of the warrants.
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SELLING SECURITYHOLDERS
To the extent this prospectus is used by any selling securityholder to resell Class A common stock, common stock or other securities,
information with respect to the selling securityholder and the plan of distribution will be contained in a supplement to this prospectus, in a post-effective amendment or in filings we make with the SEC under the Exchange Act that are incorporated
by reference.
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PLAN OF DISTRIBUTION
We may sell the securities:
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through underwriters or dealers;
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in at the market offerings, within the meaning of Rule 415(a)(4) under the Securities Act of 1933, as
amended, or Securities Act, to or through a market maker or into an existing trading market, on an exchange or otherwise;
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directly to purchasers;
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through any combination of these methods; or
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through any other permitted method.
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We will describe in a prospectus supplement, the particular terms of the offering of the securities, including the following:
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the names of any underwriters;
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the purchase price and the proceeds we will receive from the sale;
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any underwriting discounts and other items constituting underwriters compensation;
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any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers;
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any securities exchanges on which the securities of the series may be listed; and
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any other information we think is important.
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If we use underwriters in the sale, such underwriters will acquire the securities for their own account. The underwriters may resell the
securities in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale.
The securities may be either offered to the public through underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. The underwriters may change from time to time any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers.
In connection with an underwritten offering, we would execute an underwriting agreement with an underwriter or underwriters. Unless otherwise
indicated in the revised prospectus or applicable prospectus supplement, such underwriting agreement would provide that the obligations of the underwriter or underwriters are subject to certain conditions precedent, and that the underwriter or
underwriters with respect to a sale of the covered securities will be obligated to purchase all of the covered securities, if any such securities are purchased. We may grant to the underwriter or underwriters an option to purchase additional
securities at the public offering price, less any underwriting discount, as may be set forth in the revised prospectus or applicable prospectus supplement. If we grant any such option, the terms of that option will be set forth in the revised
prospectus or applicable prospectus supplement. The underwriting agreement may provide for indemnification by us of the underwriters or their controlling persons against any liability arising under the Securities Act, a brief description of which
will be set forth in the revised prospectus or applicable prospectus supplement.
We may sell offered securities through agents designated
by us. Any agent involved in the offer or sale of the securities for which this prospectus is delivered will be named, and any commission payable by us to that agent will be set forth, in the prospectus supplement. Unless indicated in the prospectus
supplement, the agents have agreed to use their reasonable best efforts to solicit purchases for the period of their appointment.
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We also may sell offered securities directly. In this case, no underwriters or agents would be
involved. We may change the price of the securities offered from time to time. If we fix a price or price of our securities, the prices may be market prices prevailing at the time of any sale, prices related to market prices, or negotiated prices.
Underwriters, dealers and agents that participate in the distribution of the offered securities may be underwriters as defined in the
Securities Act and any discounts or commissions received by them from us and any profit on the resale of the offered securities by them may be treated as underwriting discounts and commissions under the Securities Act. We will identify any
underwriters or agents, and describe their compensation, in a prospectus supplement.
We may have agreements with the underwriters,
dealers and agents to indemnify them against certain civil liabilities, including liabilities under the Securities Act, or to contribute with respect to payments which the underwriters, dealers or agents may be required to make. Underwriters,
dealers and agents may engage in transactions with, or perform services for, us or our subsidiaries in the ordinary course of their businesses.
We may authorize agents or underwriters to solicit offers by certain types of institutions to purchase securities from us at the public
offering price set forth in the prospectus supplement pursuant to delayed delivery contracts. These contracts will provide for payment and delivery on a specified date in the future. The conditions to these contracts and the commission payable for
solicitation of such contracts will be set forth in the applicable prospectus supplement.
In order to facilitate the offering of the
securities, any underwriters or agents, as the case may be, involved in the offering of such securities may engage in transactions that stabilize, maintain or otherwise affect the price of such securities or any other securities the prices of which
may be used to determine payments on such securities. Specifically, the underwriters or agents, as the case may be, may overallot in connection with the offering, creating a short position in such securities for their own account. In addition, to
cover overallotments or to stabilize the price of such securities or any such other securities, the underwriters or agents, as the case may be, may bid for, and purchase, such securities or any such other securities in the open market. Finally, in
any offering of such securities through a syndicate of underwriters, the underwriting syndicate may reclaim selling concessions allotted to an underwriter or a dealer for distributing such securities in the offering if the syndicate repurchases
previously distributed securities in transactions to cover syndicate short positions, in stabilization transaction or otherwise. Any of these activities may stabilize or maintain the market price of the securities above independent market levels.
The underwriters or agents, as the case may be, are not required to engage in these activities, and may end any of these activities at any time.
Other than the common stock and the Class A common stock, the securities issued hereunder may be new issues of securities with no
established trading market. Any underwriters or agents to or through whom such securities are sold for public offering and sale may make a market in such securities, but such underwriters or agents will not be obligated to do so and may discontinue
any market making at any time without notice. No assurance can be given as to the liquidity of the trading market for any such securities.
Sales by
Selling Securityholders
Selling securityholders may use this prospectus in connection with the resale of the securities. The
applicable prospectus supplement will identify the selling securityholders and the terms of the securities. Selling securityholders may be deemed to be underwriters in connection with the securities they resell and any profits on the sales may be
deemed to be underwriting discounts and commissions under the Securities Act. The selling securityholders will receive all the proceeds from the sale of the securities. We will not receive any proceeds from sales by selling securityholders.
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VALIDITY OF THE SECURITIES
The validity of the securities issued under this registration statement will be passed upon for us by Orrick, Herrington & Sutcliffe
LLP, San Francisco, California. If the securities are being distributed in an underwritten offering, certain legal matters will be passed upon for the underwriters by counsel identified in the related prospectus supplement.
EXPERTS
The financial statements incorporated in this prospectus supplement and the accompanying prospectus by reference from the Companys
Annual Report on Form 10-K and the effectiveness of Central Garden & Pet Companys internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in
their report, which is incorporated herein by reference. Such financial statements have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read and copy any material we file
with the SEC at the SECs public reference room at:
U.S. Securities & Exchange Commission
100 F Street, NE
Washington, DC
20549
You can also obtain copies of these materials from the public reference room at the SEC at prescribed rates. You can obtain
information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. Our SEC filings are available on the Internet at the SECs website at http://www.sec.gov, which contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC.
You may also obtain information about us at our Internet
website at http://www.central.com. However, the information on, or accessible through, our website is not part of this prospectus.
CERTAIN DOCUMENTS INCORPORATED BY REFERENCE
In this document, we incorporate by reference the information we file
with the SEC, which means that we can disclose important information to you by referring to that information. The information incorporated by reference is considered to be a part of this prospectus, and later filed information with the SEC will
update and supersede this information. Notwithstanding this statement, however, you may rely on information that has been filed at the time you made your investment decision. We incorporate by reference the documents listed below:
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our Annual Report on Form 10-K
for the fiscal year ended September 30, 2017;
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(b)
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the description of our capital stock in our registration statement on Form 8-A (File No. 000-20242) filed
March 31, 1993, as amended by the Fourth Amended and Restated Certificate of Incorporation, attached as Exhibit 3.1 to our Annual Report on Form 10-K for the fiscal year ended September 30, 2006 (File No. 000-20242); and
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(c)
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the description of our Class
A Common Stock in our registration statement on Form 8-A (File No. 001-33268) filed January 24, 2007.
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We also incorporate by reference all future filings we make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, that are filed (excluding, however, information we furnish to the SEC) by us after the date of this prospectus and prior to the termination of any offering under this
registration statement.
You may request a copy of all information that has been incorporated by reference into this prospectus, at no
cost, by writing or telephoning us at the following address or phone number:
Central Garden & Pet Company
1340 Treat Blvd., Suite 600
Walnut Creek, CA 94597
Attention: Investor Relations
Telephone: 1-925-948-4000
You
should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized any other person to provide you with different or additional information. If anyone provides you with different or additional
information, you should not rely on it. You should assume that the information contained or incorporated by reference in this prospectus and in any prospectus supplement or in any free writing prospectus is accurate as of the dates of those
documents. Our business, financial condition, results of operations and prospects may have changed since those dates. We are not making an offer to sell the securities offered by this prospectus in any jurisdiction where the offer or sale is not
permitted.
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$400,000,000
Central Garden & Pet Company
% Senior Notes due 2030
PROSPECTUS SUPPLEMENT
BofA Securities
J.P. Morgan
Truist Securities
BMO
Capital Markets
KeyBanc Capital Markets
US Bancorp
, 2020
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