e424b3
Filed
Pursuant to Rule 424(b)(3)
Registration No. 333-170614
PROSPECTUS
BURGER KING CORPORATION
Offer to Exchange
$800,000,000
97/8% Senior
Notes due 2018
for
$800,000,000
97/8% Senior
Notes due 2018, that have been registered under the Securities
Act of 1933
Burger King Corporation (BKC), a wholly-owned
subsidiary of Burger King Holdings, Inc. (Holdings),
is offering to exchange all of your outstanding unregistered
$800,000,000
97/8% Senior
Notes due 2018, which we refer to as the Original Notes, for
registered $800,000,000
97/8% Senior
Notes due 2018, which we refer to as the Exchange Notes.
Material
Terms of the Exchange Offer:
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The exchange offer will expire at 12:00 midnight, New York City
time, on January 26, 2011, unless extended.
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Upon expiration of the exchange offer, all Original Notes that
are validly tendered and not withdrawn will be exchanged for an
equal principal amount of the Exchange Notes.
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You may withdraw tendered Original Notes at any time prior to
the expiration of the exchange offer.
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The exchange offer is not subject to any minimum tender
condition, but is subject to customary conditions.
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The exchange of the Exchange Notes for the Original Notes will
not be a taxable exchange for U.S. Federal income tax
purposes.
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We are offering the exchange pursuant to a registration rights
agreement that we entered into in connection with the issuance
of the Original Notes.
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Material
Terms of the Exchange Notes:
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The terms of the Exchange Notes and the guarantees thereof are
substantially identical to the terms of the Original Notes and
the guarantees thereof, except that the transfer restrictions,
registration rights and additional interest provisions relating
to the Original Notes will not apply to the Exchange Notes.
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The Exchange Notes will be guaranteed, jointly and severally, on
a senior unsecured basis by Holdings and BK Acquisition, Inc.,
BK CDE, Inc., Burger King Interamerica, LLC, Burger King Sweden
Inc., Distron Transportation Systems, Inc., Moxies, Inc.,
The Melodie Corporation, TPC Number Four, Inc. and TQW Company.
In addition, the Exchange Notes will be guaranteed by all of our
future direct and indirect subsidiaries that borrow under or
guarantee any obligation under the New Credit Facilities (as
defined below) or that guarantee our indebtedness or
indebtedness of another guarantor.
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There is no existing public market for the Original Notes or the
Exchange Notes. We do not intend to list the Exchange Notes on
any securities exchange or quotation system.
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See the
Section entitled Risk Factors that begins on
page 10 for a discussion of the risks that
you should consider prior to tendering your Original Notes in
the exchange offer.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
Exchange Notes to be distributed in the exchange offer or passed
upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is December 27, 2010.
TABLE OF
CONTENTS
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You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with
any information or represent anything about us, our financial
results or this offering that is not contained in this
prospectus. If given or made, any such other information or
representation should not be relied upon as having been
authorized by us. We are not making an offer to exchange
Original Notes in any state where the offer is not permitted.
The information in this prospectus is current only as of the
date on its cover, and may change after that date. The
information in any document incorporated by reference in this
prospectus is current only as of the date of any such document.
For any time after the cover date of this prospectus, we do not
represent that our affairs are the same as described or that the
information in this prospectus is correctnor do we imply
those things by delivering this prospectus or issuing Exchange
Notes to you.
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the exchange offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
Exchange Notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act
of 1933, as amended (the Securities Act). This
prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales
of Exchange Notes received in exchange for the Original Notes
where such Original Notes were acquired by such broker-dealer as
a result of market-making activities or other trading
activities. The Company has agreed that, starting on the
expiration date of the exchange offer and ending on the close of
business one year after the expiration date, it will make this
prospectus available to any broker-dealer for use in connection
with any such resale. See Plan of Distribution.
This prospectus incorporates important business and financial
information about us that is not included in or delivered with
this document. This information is available without charge to
holders upon written or oral request to Burger King Holdings,
Inc., 5505 Blue Lagoon Drive, Miami, Florida 33126,
Attention: Investor Relations Department, Telephone:
(305) 378-3000.
In order to obtain timely delivery of such documents, holders of
Original Notes must request this information no later than five
business days prior to the expiration date of the exchange offer
for the Original Notes.
Unless otherwise indicated or the context otherwise requires,
when used in this prospectus, the terms Company,
us, we and our refer to
Burger King Corporation and its consolidated subsidiaries and
Holdings refers to our parent, Burger King Holdings,
Inc.
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Prospectus
Summary
This prospectus summary should be read in conjunction with,
and is qualified in its entirety by, the more detailed
information appearing elsewhere in, and incorporated by
reference in, this prospectus.
Overview
We are the worlds second largest fast food hamburger
restaurant (FFHR) chain as measured by the total
number of restaurants and system-wide sales. We operate in the
FFHR category of the quick service restaurant segment, the
largest segment of the United States restaurant industry. As of
September 30, 2010, we owned or franchised a total of
12,206 restaurants in 76 countries and U.S. territories, of
which 1,348 restaurants were Company restaurants and 10,858
restaurants were owned by our franchisees. Of these restaurants,
7,264 or 60% were located in the United States and 4,942 or 40%
were located in our international markets, where we believe
there is a significant opportunity to open new restaurants. For
the fiscal quarter ended September 30, 2010, our revenues
and EBITDA were $600.0 million and $116.4 million,
respectively. See Selected Financial Data for a
reconciliation of net income to EBITDA.
We believe that the Burger
King®
and
Whopper®
brands are two of the worlds most recognized consumer
brands and we were recognized in Interbrands top 100
Best Global Brands in 2009. These brands, together
with our signature flame-broiled products, the iconic Have it
Your
Way®
brand promise, and more recently-introduced marketing
campaigns, such as those involving The King, are
strategic assets.
Our business operates in three reportable segments: (1) the
U.S. and Canada; (2) Europe, the Middle East, Africa
and Asia Pacific, or EMEA/APAC; and (3) Latin America. We
generate revenues from three sources: (1) retail sales at
Company restaurants; (2) franchise revenues, consisting of
royalties based on a percentage of sales reported by franchise
restaurants and franchise fees paid by franchisees; and
(3) property income from restaurants that we lease or
sublease to franchisees.
Approximately 90% of our current restaurants are franchised, but
we expect the percentage of franchise restaurants to increase
significantly as we implement our portfolio management strategy
of refranchising up to half of our Company restaurants within
the next three to five years. The current 90/10 ratio of
franchise restaurants to Company restaurants applies on a
worldwide basis, but may not reflect the ratio of franchise
restaurants to Company restaurants in any specific market or
region. We believe that a restaurant ownership mix that is
heavily weighted to franchise restaurants is beneficial to us
because the capital required to grow and maintain our system is
funded primarily by franchisees while giving us a base of
Company restaurants to demonstrate credibility with franchisees
in launching new initiatives. However, our franchise dominated
business model also presents a number of drawbacks and risks,
such as our limited control over franchisees and limited ability
to facilitate changes in restaurant ownership. In addition, our
operating results are closely tied to the success of our
franchisees, and we are dependent on franchisees to open new
restaurants as part of our growth strategy.
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The
Merger
On October 19, 2010, pursuant to the terms of the Agreement
and Plan of Merger dated as of September 2, 2010, Holdings
merged with and into Blue Acquisition Sub, Inc. (Merger
Sub), a wholly owned subsidiary of Burger King Worldwide
Holdings, Inc. (formerly known as Blue Acquisition Holding
Corporation), with Holdings continuing as the surviving
corporation (the Merger). In connection with the
Merger, on October 19, 2010, BKC, as borrower, entered into
a Credit Agreement dated as of October 19, 2010 with
JPMorgan Chase Bank, N.A., as administrative agent, Barclays
Capital, as syndication agent, and the lenders party thereto
from time to time (the New Credit Agreement). The
New Credit Agreement provides for (i) two term loans in an
aggregate principal amount of $1,510.0 million and
250.0 million under a new term loan facility (the
New Term Loan Facility) and (ii) a new senior
revolving credit facility for up to $150 million of
revolving extensions of credit outstanding at any time
(including revolving loans, swingline loans and letters of
credit) (the New Revolving Credit Facility, and
together with the New Term Loan Facility, the New Credit
Facilities). The Merger, the issuance of the Original
Notes and the entering into the New Credit Facilities are
collectively referred to as the Transactions. As a
result of the Transactions, Holdings became a wholly-owned
subsidiary of Burger King Worldwide Holdings, Inc.
(Parent), a Delaware corporation and a wholly-owned
subsidiary of 3G Special Situations Fund II, L.P.
(3G).
Principal
Executive Offices
The principal executive office of BKC is located at 5505 Blue
Lagoon Drive, Miami, Florida 33126 and the telephone number is
(305) 378-3000.
BKC is a Florida corporation formed in 1954. Our corporate
website is www.bk.com. The information contained on our website
is not part of this prospectus.
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Summary
of the Exchange Offer
This summary is not a complete description of the Exchange
Offer. For a more detailed description of the Exchange Offer,
see The Exchange Offer in this prospectus.
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Offering of the Original Notes |
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On October 19, 2010, BKC issued in a private placement
$800.0 million of unsecured
97/8% Senior
Notes due 2018, which we refer to as the Original Notes. The
Original Notes are guaranteed, jointly and severally, on a
senior unsecured basis by Holdings and BK Acquisition, Inc., BK
CDE, Inc., Burger King Interamerica, LLC, Burger King Sweden
Inc., Distron Transportation Systems, Inc., Moxies, Inc.,
The Melodie Corporation, TPC Number Four, Inc. and TQW Company
(collectively with Holdings, the Guarantors). In
addition, the Original Notes will be guaranteed by all of our
future direct and indirect subsidiaries that borrow under or
guarantee any obligation under the New Credit Facilities or that
guarantee our indebtedness or indebtedness of another guarantor. |
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Registration Rights Agreement |
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Pursuant to the registration rights agreement among BKC, the
Guarantors and the several initial purchasers, entered into in
connection with the issuance of the Original Notes, BKC agreed
to offer to exchange the Original Notes for up to
$800.0 million in aggregate principal amount of
97/8% Senior
Notes due 2018 that have been registered under the Securities
Act, which we refer to as the Exchange Notes. |
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The Exchange Offer |
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BKC is offering to exchange the Exchange Notes for the same
aggregate principal amount of the Original Notes (the
Exchange Offer). |
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The Original Notes may be tendered only in denominations of
$2,000 and integral multiples of $1,000 in excess of $2,000. We
will exchange the Exchange Notes for all of the Original Notes
that are validly tendered and not withdrawn prior to the
expiration of the Exchange Offer. |
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The Exchange Notes will evidence the same debt as the Original
Notes and will be issued under and entitled to the benefits of
the same Indenture that governs the Original Notes (the
Indenture). Because we have registered the Exchange
Notes, the Exchange Notes will not be subject to transfer
restrictions, and holders of Original Notes that have tendered
and had their Original Notes accepted in the Exchange Offer will
not have any further registration rights nor the related special
interest provisions. |
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Conditions to the Exchange Offer |
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The Exchange Offer is subject to customary conditions. The
Exchange Offer is not conditioned upon any minimum principal
amount of the Original Notes being tendered. |
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Procedures For Tendering Original Notes
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If your Original Notes are held in book-entry form and are
registered in the name of a broker, dealer, commercial bank,
trust company or other nominee, we urge you to contact that
person promptly if you wish to tender your Original Notes
pursuant to the Exchange Offer. In such case, you must request
the participant of The Depository Trust Company, or DTC, to
electronically transmit, on your behalf, an acceptance through
DTCs Automated Tender Offer Program. |
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If you wish to tender your Original Notes for Exchange Notes and
you hold your Original Notes in certificated form, you must: |
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complete and sign the enclosed letter of transmittal
by following the related instructions, and
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send the letter of transmittal, as directed in the
instructions, together with any other required documents, to the
exchange agent either (1) with the Original Notes to be
tendered, or (2) in compliance with the specified
procedures for guaranteed delivery of the Original Notes.
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Please do not send your letter of transmittal or certificates
representing your Original Notes to us. Those documents should
be sent only to the exchange agent. Questions regarding how to
tender and requests for information should be directed to the
exchange agent. See The Exchange Offer Exchange
Agent. |
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If You Fail to Exchange Your Original Notes
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If you do not exchange your Original Notes for the Exchange
Notes in the Exchange Offer, you will continue to be subject to
the restrictions on transfer provided in the Original Notes and
Indenture governing those notes. In general, you may not offer
or sell your Original Notes unless such offer or sale is
registered under the federal securities laws or are sold in a
transaction exempt from or not subject to the registration
requirements of the federal securities laws and applicable state
securities laws. |
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Withdrawal Rights |
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You may withdraw the tender of your Original Notes at any time
before 12:00 midnight, New York City time, on the expiration
date of the Exchange Offer. You must follow the withdrawal
procedures as described under the heading The Exchange
Offer Withdrawal of Tenders. |
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Expiration Date |
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The Exchange Offer will expire at 12:00 midnight, New York City
time, on January 26, 2011, unless we decide to extend the
expiration date. |
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Issuance of Exchange Notes |
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We will issue Exchange Notes in exchange for the Original Notes
tendered and accepted in the Exchange Offer promptly following
the expiration date (unless amended as described in this
prospectus). |
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Resale of Exchange Notes |
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Except as provided below, we believe that the Exchange Notes may
be offered for resale, resold and otherwise transferred by you
without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that: |
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the Exchange Notes are being acquired in the
ordinary course of business,
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you are not participating, do not intend to
participate, and have no arrangement or understanding with any
person to participate in the distribution of the Exchange Notes
issued to you in the Exchange Offer,
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you are not an affiliate of BKC or any of the
Guarantors,
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you are not a broker-dealer tendering Original Notes
acquired directly from us for your account, and
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you are not prohibited by law or any policy of the
Securities and Exchange Commission, or the SEC, from
participating in the Exchange Offer.
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Our belief is based on interpretations by the staff of the SEC,
as set forth in no-action letters issued to third parties that
are not related to us. The SEC has not considered the Exchange
Offer in the context of a no-action letter. We cannot assure you
that the SEC would make similar determinations with respect to
the Exchange Offer. If any of these conditions are not
satisfied, or if our belief is not accurate, and you transfer
any Exchange Notes issued to you in the Exchange Offer without
delivering a resale prospectus meeting the requirements of the
Securities Act or without an exemption from registration of your
Exchange Notes from those requirements, you may incur liability
under the Securities Act. We will not assume, nor will we
indemnify you against, any such liability. |
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Each broker-dealer that receives Exchange Notes for its own
account in exchange for Original Notes, where the Original Notes
were acquired by such broker-dealer as a result of market-making
or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such
Exchange Notes. See Plan of Distribution. |
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U.S. Federal Income Tax Consequences
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The exchange of Original Notes for the Exchange Notes pursuant
to the Exchange Offer will not be a taxable event for U.S.
federal income tax purposes. |
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Use of Proceeds |
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We will not receive any proceeds from the issuance of the
Exchange Notes for the Original Notes pursuant to the Exchange
Offer. We will pay all of our expenses incident to the Exchange
Offer. |
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Accounting Treatment |
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The Exchange Notes will be recorded at the same carrying value
as the Original Notes, and we will not recognize any gain or
loss from the Exchange Offer for accounting purposes. |
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Appraisal Rights |
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Holders of the Original Notes do not have any appraisal or
dissenters rights in connection with the Exchange Offer. |
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Exchange Agent |
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Wilmington Trust FSB is serving as exchange agent in
connection with the Exchange Offer (the Exchange
Agent). |
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Summary
of the Exchange Notes
This summary is not a complete description of the Exchange
Notes. For a more detailed description of the Exchange Notes,
see Description of Notes in this prospectus.
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Issuer |
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Burger King Corporation, a Florida corporation. |
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Securities |
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$800.0 million in aggregate principal amount of
97/8% Senior
Notes due 2018. |
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Maturity |
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October 15, 2018. |
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Interest |
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97/8%
per year. Interest will accrue from October 19, 2010. |
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Interest payment dates |
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Each October 15 and April 15, commencing April 15,
2011. |
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Optional redemption |
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The Exchange Notes will be redeemable at our option, in whole or
in part, at any time on or after October 15, 2014, at the
redemption prices set forth in this prospectus, together with
accrued and unpaid interest, if any, to the date of redemption. |
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At any time prior to October 15, 2013, we may redeem up to
35% of the original principal amount of the Exchange Notes with
the proceeds of certain equity offerings at a redemption price
of 100% of the principal amount of the Exchange Notes, together
with accrued and unpaid interest, if any, to the date of
redemption. |
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At any time prior to October 15, 2014, we may also redeem
some or all of the Exchange Notes at a price equal to 100% of
the principal amount of the Exchange Notes, plus accrued and
unpaid interest, plus a make-whole premium. |
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Mandatory offers to purchase |
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The occurrence of a change of control will require us to offer
to purchase from you all or a portion of your Exchange Notes at
a price equal to 101% of their principal amount, together with
accrued and unpaid interest, if any, to the date of purchase. |
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Certain asset dispositions will also require us to use the
proceeds from those asset dispositions to make an offer to
purchase the Exchange Notes at 100% of their principal amount,
together with accrued and unpaid interest, if any, to the date
of purchase if such proceeds are not otherwise used within a
specified period to repay indebtedness (with a corresponding
reduction in commitment, if applicable) or to invest in capital
assets related to our business or capital stock of a restricted
subsidiary (as defined under the heading Description of
Notes). |
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Guarantees |
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The Exchange Notes will be guaranteed, jointly and severally, on
a senior unsecured basis by the Guarantors. In addition, the
Exchange Notes will be guaranteed by all of our future direct
and indirect subsidiaries that borrow under or guarantee any
obligation under the New Credit Facilities or that guarantee our
indebtedness or indebtedness of another guarantor. Under certain
circumstances, subsidiary guarantors may be released from their
guarantees without the consent of the holders of notes. See
Description of NotesGuarantees. |
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For the quarter ended September 30, 2010, our non-guarantor
subsidiaries: |
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represented approximately 35% of our net
revenues;
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represented approximately 21% of operating
income, excluding unallocated corporate general and
administrative expenses of approximately $39.3 million and
net intercompany revenue of $0.3 million; and
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represented approximately 23% of our Adjusted
EBITDA, excluding unallocated corporate general and
administrative expenses of approximately $39.3 million and
net intercompany revenue of $0.3 million.
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As of September 30, 2010, our non-guarantor subsidiaries: |
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represented 28% of our total assets; and
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had $198.9 million of total liabilities,
including debt and trade payables but excluding intercompany
liabilities.
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Ranking |
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The Exchange Notes and the subsidiary guarantees will be our and
the Guarantors senior unsecured obligations and: |
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will rank equally in right of payment with
all of our and the Guarantors existing and future senior
indebtedness;
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will rank senior in right of payment to all
of our and the Guarantors existing and future subordinated
indebtedness;
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will be effectively subordinated to any of
our and the Guarantors existing and future secured debt,
to the extent of the value of the assets securing such debt; and
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will be structurally subordinated to all of
the existing and future liabilities (including trade payables)
of each of our subsidiaries that do not guarantee the Exchange
Notes.
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As of September 30, 2010, on a pro forma basis after giving
effect to the Transactions, we and the Guarantors would have had
approximately $1,850.8 million of senior secured
indebtedness, consisting of secured indebtedness under our New
Term Loan Facility and approximately $70.2 million of
indebtedness under capital leases to which the Exchange Notes
would have been effectively subordinated. As of
September 30, 2010, on a pro forma basis after giving
effect to the Transactions: |
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we would have had an additional
$150.0 million of borrowing capacity under our New
Revolving Credit Facility (less $38.0 million of our
available commitments to support letters of credit) to which the
Exchange Notes would have been effectively subordinated if
borrowed;
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we would have had the option to raise
incremental term loans or increase the revolving credit facility
commitments up to an additional $450.0 million, under
certain circumstances, to which the Exchange Notes would be
effectively subordinated if borrowed; and
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our non-guarantor subsidiaries would have had
$198.9 million of total liabilities (including trade
payables), all of which would have been structurally senior to
the Exchange Notes.
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Covenants |
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We will issue the Exchange Notes under the Indenture with
Wilmington Trust FSB, as trustee. The Indenture, among
other things, limits our ability and the ability of our
restricted subsidiaries to: |
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incur additional indebtedness and guarantee
indebtedness;
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pay dividends or make other distributions in
respect of, or repurchase or redeem, capital stock;
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prepay, redeem or repurchase certain debt;
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make loans and investments;
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sell or otherwise dispose of assets;
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incur liens;
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enter into transactions with affiliates;
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alter the businesses we conduct;
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enter into agreements restricting our
subsidiaries ability to pay dividends; and
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consolidate, merge or sell all or
substantially all of our assets.
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These covenants are subject to a number of important exceptions
and qualifications. For more details, see Description of
Notes. |
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Certain of these covenants will cease to apply to the Exchange
Notes at all times when the Exchange Notes have investment grade
ratings from both Moodys Investor Service, Inc. and
Standard & Poors. For more details, see
Description of Notes. |
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Activities of Holdings |
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The Indenture requires the activities of Holdings to be
restricted. See Description of NotesCertain
covenantsLimitation on activities of Holdings. |
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Listing |
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We do not intend to list the Exchange Notes on any securities
exchange. |
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Book Entry Depository |
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The Depositary Trust Company. |
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Trustee, Registrar and Transfer Agent |
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Wilmington Trust FSB. |
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Governing Law |
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State of New York. |
Risk
Factors
Investing in the Exchange Notes involves risks. Potential
investors are urged to read and consider the risk factors
relating to an investment in the Exchange Notes as set forth
under Risk Factors in this prospectus and those
described in the Annual Report on
Form 10-K
of Holdings for the fiscal year ended June 30, 2010 and the
Quarterly Report on
Form 10-Q
of Holdings for the quarter ended September 30, 2010
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filed with the SEC and incorporated by reference in this
prospectus as well as other information we include or
incorporate by reference in this prospectus.
Ratio of
Earnings To Fixed Charges
Holdings had earnings to fixed charges of $3.3 million for
the fiscal year ended June 30, 2010, $3.2 million for
the fiscal year ended June 30, 2009, $3.3 million for
the fiscal year ended June 30, 2008, $2.7 million for
the fiscal year ended June 30, 2007, $1.6 million for
the fiscal year ended June 30, 2006 and $3.5 million
for the three months ended September 30, 2010. There were
no preferred shares outstanding, and therefore no preference
dividends paid, for the fiscal years ended June 30, 2010,
2009, 2008, 2007 and 2006.
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Risk
Factors
You should carefully consider the following risks relating to
the Exchange Offer and the Exchange Notes, together with the
risks and uncertainties discussed under Forward-Looking
Statements and the other information included or
incorporated by reference in this prospectus, including the
information under the heading Risk Factors in the
Annual Report on
Form 10-K
for the fiscal year ended June 30, 2010 of Holdings and the
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2010 of Holdings,
before deciding whether to participate in the Exchange Offer.
Additional risks and uncertainties not currently known to us, or
that we currently do not deem material also may materially
impair our financial condition, results of operations or
liquidity. In this Risk Factors section, the term
notes refers to both the Original Notes and the
Exchange Notes.
Risks
Related to the Exchange Offer
If you
fail to follow the procedures of the Exchange Offer, your
Original Notes will not be accepted for exchange.
We will not accept your Original Notes for exchange if you do
not follow the procedures of the Exchange Offer. We will issue
the Exchange Notes as part of the Exchange Offer only after
timely receipt of your Original Notes, a properly completed and
duly executed letter of transmittal and all other required
documents or if you comply with the guaranteed delivery
procedures for tendering your Original Notes. Therefore, if you
want to tender your Original Notes, please allow sufficient time
to ensure timely delivery. If we do not receive your Original
Notes, letter of transmittal and all other required documents by
the expiration date of the Exchange Offer, or you do not
otherwise comply with the guaranteed delivery procedures for
tendering your Original Notes, we will not accept your Original
Notes for exchange. We are under no duty to give notification of
defects or irregularities with respect to the tenders of
Original Notes for exchange. If there are defects or
irregularities with respect to your tender of Original Notes, we
will not accept your Original Notes for exchange unless we
decide in our sole discretion to waive such defects or
irregularities.
If you
fail to exchange your Original Notes, they will continue to be
restricted securities and may become more
illiquid.
Original Notes that you do not tender or we do not accept will,
following the Exchange Offer, continue to be restricted
securities, and you may not offer to sell them except pursuant
to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities law. We will
issue Exchange Notes in exchange for the Original Notes pursuant
to the Exchange Offer only following the satisfaction of the
procedures and conditions set forth in The Exchange
Offer Procedures for Tendering. These
procedures and conditions include timely receipt by the Exchange
Agent of such Original Notes (or a confirmation of book-entry
transfer) and of a properly completed and duly executed letter
of transmittal (or an agents message from DTC).
Because we anticipate that most holders of Original Notes will
elect to exchange their Original Notes, we expect that the
liquidity of the market for any Original Notes remaining after
the completion of the Exchange Offer will be substantially
limited. Any Original Notes tendered and exchanged in the
Exchange Offer will reduce the aggregate principal amount of the
Original Notes outstanding. Following the Exchange Offer, if you
do not tender your Original Notes you will generally not have
any further registration rights, subject to limited exceptions,
and your Original Notes will continue to be subject to certain
transfer restrictions. Accordingly, the liquidity of the market
for the Original Notes could be adversely affected.
10
Your
ability to transfer the Exchange Notes may be limited by the
absence of an active trading market and an active trading market
may not develop for the Exchange Notes.
The Exchange Notes will be a new issue of securities for which
there is no established trading market. We expect the Exchange
Notes to be eligible for trading by qualified
institutional buyers, as defined under Rule 144A, but
we do not intend to list the Exchange Notes on any national
securities exchange or include the Exchange Notes in any
automated quotation system. The initial purchasers of the
Original Notes have advised us that they intend to make a market
in the Exchange Notes as permitted by applicable laws and
regulations. However, the initial purchasers are not obligated
to make a market in the Exchange Notes, and, if commenced, they
may discontinue their market-making activities at any time
without notice.
Therefore, an active market for the Exchange Notes may not
develop or be maintained, which would adversely affect the
market price and liquidity of the Exchange Notes. In that case,
the holders of the Exchange Notes may not be able to sell their
Exchange Notes at a particular time or at a favorable price.
Even if an active trading market for the Exchange 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 Exchange
Notes. The market, if any, for the Exchange 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 Exchange Notes.
Risks
Related to the Notes
Our
substantial indebtedness could adversely affect our financial
condition and prevent us from fulfilling our obligations under
the notes.
We have and will continue to have, a significant amount of
indebtedness. As of September 30, 2010, after giving effect
to the Transactions, we would have had total indebtedness of
$2,722.4 million (excluding $20.8 million of original
issue discount on the New Credit Facilities), including the
Original Notes, and we would have had commitments under the New
Revolving Credit Facility available to us of $150.0 million
(not giving effect to approximately $38.0 million of
letters of credit which we utilized upon consummation of the
Transactions).
Subject to the limits contained in the New Credit Agreement, the
Indenture and our other debt instruments, we may be able to
incur substantial additional debt from time to time to finance
working capital, capital expenditures, investments or
acquisitions, or for other purposes. If we do so, the risks
related to our high level of debt could intensify. Specifically,
our high level of debt could have important consequences to the
holders of the notes, including:
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making it more difficult for us to satisfy our obligations with
respect to the notes and our other debt;
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limiting our ability to obtain additional financing to fund
future working capital, capital expenditures, acquisitions or
other general corporate requirements;
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requiring a substantial portion of our cash flows to be
dedicated to debt service payments instead of other purposes,
thereby reducing the amount of cash flows available for working
capital, capital expenditures, acquisitions and other general
corporate purposes;
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increasing our vulnerability to adverse changes in general
economic, industry and competitive conditions;
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exposing us to the risk of increased interest rates as certain
of our borrowings, including borrowings under the New Credit
Facilities, are at variable rates of interest;
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limiting our flexibility in planning for and reacting to changes
in the industry in which we compete;
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placing us at a disadvantage compared to other, less leveraged
competitors; and
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increasing our cost of borrowing.
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In addition, the Indenture and the New Credit Agreement contain
restrictive covenants that will limit our ability to engage in
activities that may be in our long-term best interest. Our
failure to comply with those covenants could result in an event
of default which, if not cured or waived, could result in the
acceleration of substantially all of our debt.
We may
not be able to generate sufficient cash to service all of our
indebtedness, including the notes, and may be forced to take
other actions to satisfy our obligations under our indebtedness,
which may not be successful.
Our ability to make scheduled payments on or refinance our debt
obligations, including the notes, depends on our financial
condition and operating performance, which are subject to
prevailing economic, industry and competitive conditions and to
certain financial, business, legislative, regulatory and other
factors beyond our control. We may be unable to maintain a level
of cash flows from operating activities sufficient to permit us
to pay the principal, premium, if any, and interest on our
indebtedness, including the notes.
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 to 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 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. The New Credit Agreement and the
Indenture restrict our ability to dispose of assets and use the
proceeds from those dispositions and may also restrict our
ability to raise debt or equity capital 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 are not 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 and the agreements governing certain of our
other existing indebtedness 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.
Our
inability to generate sufficient cash flows to satisfy our debt
obligations, or 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.
If we cannot make scheduled payments on our debt, we will be in
default and holders of the notes could declare all outstanding
principal and interest to be due and payable, the lenders under
the New Credit
12
Facilities could terminate their commitments to loan money, our
secured lenders could foreclose against the assets securing
their borrowings and we could be forced into bankruptcy or
liquidation. All of these events could result in your losing
your entire investment in the notes.
Despite
our current level of indebtedness, we and our subsidiaries may
still be able to incur substantially more debt. This could
further exacerbate the risks to our financial condition
described above and prevent us from fulfilling our obligations
under the notes.
We and our subsidiaries may be able to incur significant
additional indebtedness in the future. Although the Indenture
and the New Credit Agreement contain restrictions on the
incurrence of additional indebtedness, these restrictions are
subject to a number of qualifications and exceptions, and the
additional indebtedness incurred in compliance with these
restrictions could be substantial. If we incur any additional
indebtedness that ranks equally with the notes, subject to
collateral arrangements, the holders of that debt will be
entitled to share ratably with you in any proceeds distributed
in connection with any insolvency, liquidation, reorganization,
dissolution or other winding up of our company. This may have
the effect of reducing the amount of proceeds paid to you. These
restrictions also will not prevent us from incurring obligations
that do not constitute indebtedness. In addition, as of
September 30, 2010, on a pro forma basis after giving
effect to the Transactions, our New Revolving Credit Facility
would have provided for unused commitments of
$150.0 million (not giving effect to approximately
$38.0 million of outstanding letters of credit), which
could increase by $450.0 million, subject to certain
conditions. All of those borrowings would be secured
indebtedness. If new debt is added to our current debt levels,
the related risks that we and the guarantors now face could
intensify. See Description of certain indebtedness
and Description of Notes.
The
terms of the New Credit Agreement and the Indenture restrict our
current and future operations, particularly our ability to
respond to changes or to take certain actions.
The Indenture governing the notes and the New Credit Agreement
contain a number of restrictive covenants that impose
significant operating and financial restrictions on us and may
limit our ability to engage in acts that may be in our best
interest, including restrictions on our ability to:
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incur additional indebtedness and guarantee indebtedness;
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pay dividends or make other distributions in respect of, or
repurchase or redeem, capital stock;
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prepay, redeem or repurchase certain debt;
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make loans and investments;
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sell or otherwise dispose of assets;
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incur liens;
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enter into transactions with affiliates;
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alter the businesses we conduct;
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enter into agreements restricting our subsidiaries ability
to pay dividends; and
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consolidate, merge or sell all or substantially all of our
assets.
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The covenants in the Indenture are subject to important
exceptions and qualifications, which are described under
Description of Notes. Certain of these covenants
will cease to apply to the notes at all times when the notes
have investment grade ratings from both Moodys Investor
Service, Inc. and Standard & Poors.
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In addition, the restrictive covenants in the New Credit
Agreement require us to maintain specified financial ratios. Our
ability to meet those financial ratios can be affected by events
beyond our control.
A breach of the covenants under the Indenture or under the New
Credit Agreement could result in an event of default under the
applicable indebtedness. Such a default may allow the creditors
to accelerate the related debt and may result in the
acceleration of any other debt to which a cross-acceleration or
cross-default provision applies. In addition, an event of
default under the New Credit Agreement would permit the lenders
under our New Credit Facilities to terminate all commitments to
extend further credit under the facilities. Furthermore, if we
were unable to repay the amounts due and payable under our New
Credit Facilities, those lenders could proceed against the
collateral granted to them to secure that indebtedness. In the
event our lenders or noteholders accelerate the repayment of our
borrowings, we and our subsidiaries may not have sufficient
assets to repay that indebtedness.
The restrictions contained in the Indenture could adversely
affect our ability to:
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finance our operations;
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make needed capital expenditures;
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make strategic acquisitions or investments or enter into joint
ventures;
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withstand a future downturn in our business, the industry or the
economy in general;
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engage in business activities, including future opportunities,
that may be in our interest; and
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plan for or react to market conditions or otherwise execute our
business strategies.
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These restrictions may affect our ability to grow in accordance
with our plans.
Our
variable rate indebtedness subjects us to interest rate risk,
which could cause our debt service obligations to increase
significantly.
Borrowings under our New Credit Facilities are at variable rates
of interest and expose us to interest rate risk. If interest
rates increase, our debt service obligations on the variable
rate indebtedness will 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 revolving loans are fully
drawn, each quarter point change in interest rates would result
in a $5.0 million change in annual interest expense on our
indebtedness under our New Credit Facilities. Following the
Transactions, we entered into two deferred premium interest rate
caps to hedge interest rate risk under the New Credit
Facilities. However, we may not be able to fully mitigate our
interest rate risk.
The
notes are effectively subordinated to our and our
guarantors indebtedness under the New Credit Facilities
and any other future secured indebtedness of us and the
guarantors to the extent of the value of the assets securing
that indebtedness.
The notes are not secured by any of our or our guarantors
assets. As a result, the notes and the guarantees are
effectively subordinated to our and our guarantors
indebtedness under the New Credit Facilities with respect to the
assets that secure that indebtedness. As of September 30,
2010, on a pro forma basis after giving effect to the
Transactions, our New Revolving Credit Facility could have
provided for unused commitments of $150.0 million (not
giving effect to $38.0 million of outstanding letters of
credit). In addition, we may incur additional secured debt in
the future. 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
guarantors of the New Credit Facilities or of that other secured
debt, the proceeds from the
14
sale of assets securing our secured indebtedness will be
available to pay obligations on the notes only after all
indebtedness under the New Credit Facilities and that other
secured debt has 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 guarantors bankruptcy,
insolvency, liquidation, dissolution or reorganization.
The
notes are structurally subordinated to all obligations of our
existing and future subsidiaries that are not and do not become
guarantors of the notes.
The notes are guaranteed by Holdings and by each of our existing
and subsequently acquired or organized subsidiaries that borrow
under or guarantee the New Credit Facilities or that, in the
future, guarantee our 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 are 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 and preferred stockholders, if any) would be
entitled to payment in full out of that subsidiarys assets
before we would be entitled to any payment.
In
addition, the Indenture, subject to some limitations, permits
these subsidiaries to incur additional indebtedness and does not
contain any limitation on the amount of other liabilities, such
as trade payables, that may be incurred by these
subsidiaries.
For the quarter ended September 30, 2010, our non-guarantor
subsidiaries represented 35% of our net revenues, and 21% and
23% of our operating income and our Adjusted EBITDA,
respectively, in each case excluding unallocated general and
administrative expenses of $39.3 million and net
intercompany revenue of $0.3 million. As of
September 30, 2010, our non-guarantor subsidiaries
represented 28% of our total assets and had $198.9 million
of total liabilities, including debt and trade payables but
excluding intercompany liabilities.
In addition, our subsidiaries that provide, or will provide,
guarantees of the notes will be automatically released from
those guarantees upon the occurrence of certain events,
including the following:
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the designation of that subsidiary guarantor as an unrestricted
subsidiary;
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the release or discharge of any guarantee or indebtedness that
resulted in the creation of the guarantee of the notes by such
subsidiary guarantor; or
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the sale or other disposition, including the sale of
substantially all the assets, of that subsidiary guarantor.
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If any subsidiary guarantee is released, no holder of the notes
will have a claim as a creditor against that subsidiary, and the
indebtedness and other liabilities, including trade payables and
preferred stock, if any, whether secured or unsecured, of that
subsidiary will be effectively senior to the claim of any
holders of the notes. See Description of
NotesGuarantees.
We may
not be able to repurchase the notes upon a change of
control.
Upon the occurrence of specific kinds of change of control
events, we are required to offer to repurchase all outstanding
notes at 101% of their principal amount, plus accrued and unpaid
interest to the purchase date. Additionally, under the New
Credit Facilities, a change of control (as defined therein)
constitutes an event of default that permits the lenders to
accelerate the maturity of borrowings under the respective
agreements and terminate their commitments to lend. The source
of funds for any purchase of the notes and repayment of
borrowings under our New Credit Facilities would be our
available cash or cash generated from our subsidiaries
operations or other sources, including borrowings, sales of
assets or sales of
15
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 of the debt securities that are
tendered upon a change of control and repay our other
indebtedness that will become due. 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. Further, 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 the New
Credit Agreement, we may have to avoid certain change of control
transactions that would otherwise be beneficial to us.
In addition, some important corporate events, such as leveraged
recapitalizations, may not, under the Indenture, 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, financial
condition or the value of the notes. See Description of
NotesChange of control.
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.
The definition of change of control in the Indenture includes a
phrase relating to the sale of all or substantially
all of our assets. There is no precise established
definition of the phrase substantially all under
applicable law. 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.
Federal
and state fraudulent transfer laws may permit a court to void
the notes and/or the 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
guarantees of the notes. 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
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 guarantees with the
intent of hindering, delaying or defrauding creditors or
(b) received less than reasonably equivalent value or fair
consideration in return for either issuing the notes or
incurring the guarantees and, in the case of (b) only, one
of the following is also true at the time thereof:
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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 guarantees;
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the issuance of the notes or the incurrence of the guarantees
left us or any of the guarantors, as applicable, with an
unreasonably small amount of capital or assets to carry on the
business;
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we or any of the guarantors intended to, or believed that we or
such guarantor would, incur debts beyond our or the
guarantors ability to pay as they mature; or
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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 subsidiary guarantor
did not receive reasonably equivalent value or fair
consideration for its 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
16
notes or the 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 guarantee was a fraudulent transfer or
conveyance, the court could void the payment obligations under
the notes or that guarantee, could subordinate the notes or that
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
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 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.
The Original Notes have, and the Exchange Notes 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 downgrade by either Standard &
Poors or Moodys would increase the interest rate on
our New Credit Facilities, decrease our earnings and may result
in higher borrowing costs.
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 at a favorable price or at all.
Many
of the covenants in the Indenture will not apply during any
period in which the notes are rated investment grade by both
Moodys and Standard & Poors.
Many of the covenants in the Indenture will not apply to us
during any period in which the notes are rated investment grade
by both Moodys and Standard & Poors,
provided at such time no default or event of default has
occurred and is continuing. These covenants will restrict, among
other things, our ability to pay distributions, incur debt and
to enter into certain other transactions. There can be no
assurance that the notes will ever be rated investment grade, or
that if they are rated investment grade, that the notes will
maintain these ratings. However, suspension of these covenants
would allow us to engage in certain transactions that would not
be permitted while these covenants were in force. To the extent
the covenants are subsequently reinstated, any such actions
taken while the covenants were suspended would not result in an
event of default under the Indenture. See Description of
NotesCertain covenantsEffectiveness of
covenants.
17
Special
Note Regarding Forward-Looking Statements
This prospectus and the documents that are incorporated by
reference into this prospectus contain forward-looking
statements. These statements concern expectations,
beliefs, projections, future plans and strategies, anticipated
events or trends and similar expressions concerning matters that
are not historical facts. Specifically, this prospectus and the
documents incorporated by reference into this prospectus contain
forward-looking statements regarding:
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our expectation that our percentage of franchise restaurants
will increase significantly as we implement our portfolio
management strategy of refranchising up to half of our Company
restaurants within the next three to five years;
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our intent to focus on sales growth and profitability;
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our ability to drive sales growth by enhancing the guest
experience and expanding competitive hours of operation;
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our intent to expand our international platform and accelerate
new restaurant development;
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our expectation that there is a significant opportunity to open
new restaurants in international markets;
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our beliefs and expectations regarding system-wide average
restaurant sales;
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our expectations about our financial fundamentals and the
benefits of our highly-franchised business model;
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our beliefs and expectations regarding our newly developed
restaurant designs, including their ability to convey our vision
of the Burger King brand and reinforce the message that
Burger King delivers superior products and a positive
guest experience;
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our beliefs and expectations regarding our ability to develop
innovative products that support both ends of our barbell menu
strategy and our expectation that our barbell menu strategy will
grow our market share and improve our operating margins;
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our expectations regarding opportunities to enhance restaurant
profitability and effectively manage margin pressures;
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our intention to continue to employ innovative and creative
marketing strategies to increase our restaurant traffic and
comparable sales;
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our intention to focus on our restaurant reimaging program;
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our ability to use proactive portfolio management to drive
growth and optimize our restaurant portfolio;
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our belief and expectation regarding our ability to fund our
U.S. and Canada restaurant reimaging program and to
conclude the program within the next two to three years, our
exploration of initiatives to reduce the initial investment
expense, time and uncertainty of new builds;
|
|
|
|
our ability to manage fluctuations in foreign currency exchange
and interest rates;
|
18
|
|
|
|
|
our estimates regarding our liquidity, capital expenditures and
sources of both, and our ability to fund future operations and
obligations;
|
|
|
|
our expectations regarding increasing net restaurant count;
|
|
|
|
our estimates regarding the fulfillment of certain volume
purchase commitments;
|
|
|
|
our expectations regarding the impact of accounting
pronouncements;
|
|
|
|
our intention to renew hedging contracts;
|
|
|
|
our expectation regarding the Original Notes, the Exchange Notes
and the Exchange Offer; and
|
|
|
|
our expectations regarding unrecognized tax benefits.
|
These forward-looking statements reflect our current views about
future events and are subject to risks, uncertainties and
assumptions. We wish to caution readers that certain important
factors may have affected and could in the future affect our
actual results and could cause actual results to differ
significantly from those expressed in any forward-looking
statement. The most important factors that could prevent us from
achieving our goals, and cause the assumptions underlying
forward-looking statements and the actual results to differ
materially from those expressed in or implied by those
forward-looking statements include, but are not limited to, the
following:
|
|
|
|
|
global economic or other business conditions that may affect the
desire or ability of our customers to purchase our products such
as inflationary pressures, high unemployment levels, increases
in gas prices, declines in median income growth, consumer
confidence and consumer discretionary spending and changes in
consumer perceptions of dietary health and food safety, and the
impact of negative sales and traffic on our business, including
the risk that we will be required to incur non-cash impairment
or other charges that reduce our earnings;
|
|
|
|
risks related to our substantial indebtedness, which could
adversely affect our financial condition and prevent us from
fulfilling our obligations under our New Credit Facilities and
Notes;
|
|
|
|
risks arising from the significant and rapid fluctuations in
interest rates and in the currency exchange markets and the
decisions and positions that we take to hedge such volatility;
|
|
|
|
risks related to adverse weather conditions and other
uncontrollable events, and the impact of such events on our
operating results;
|
|
|
|
our ability to compete domestically and internationally in an
intensely competitive industry;
|
|
|
|
our ability to successfully implement our domestic and
international growth strategy and risks related to our
international operations;
|
|
|
|
risk related to the concentration of our restaurants in limited
geographic areas, such as Germany, where we have experienced and
may continue to experience declining sales and operating profits;
|
|
|
|
our ability to manage changing labor conditions and costs in the
U.S. and internationally, including future mandated health
care costs, if we or our franchisees choose not to pass, or
cannot pass, these increased costs on to our guests;
|
|
|
|
our ability and the ability of our franchisees to manage cost
increases;
|
19
|
|
|
|
|
our relationship with, and the success of, our franchisees and
risks related to our restaurant ownership mix;
|
|
|
|
the effectiveness of our marketing and advertising programs and
franchisee support of these programs;
|
|
|
|
risks related to the financial strength of our franchisees,
which could result in, among other things, restaurant closures,
delayed or reduced payments to us of royalties and rents, and an
inability to obtain financing to fund development, restaurant
remodels or equipment initiatives on acceptable terms or at all;
|
|
|
|
risks related to food safety, including food borne illness and
food tampering, and the safety of toys and other promotional
items available in our restaurants;
|
|
|
|
risks arising from the interruption or delay in the availability
of our food or other supplies, including those that would arise
from the loss of any of our major distributors, particularly in
those international markets where we have a single distributor;
|
|
|
|
our ability to successfully execute our reimaging program in the
U.S. and Canada and our portfolio management strategy to
increase sales and profitability;
|
|
|
|
our ability to implement our growth strategy and strategic
initiatives given restrictions imposed by our New Credit
Facilities;
|
|
|
|
risks related to the ability of counterparties to our New Credit
Facilities, interest rate caps and foreign currency forward
contracts to fulfill their commitments
and/or
obligations;
|
|
|
|
risks related to interruptions or security breaches of our
computer systems and risks related to the lack of integration of
our worldwide technology systems;
|
|
|
|
our ability to continue to extend our hours of operation to
capture a larger share of both the breakfast and late night
dayparts;
|
|
|
|
risks related to changes in the mix of earnings in countries
with different statutory tax rates, changes in the valuation of
deferred tax assets and liabilities and continued losses in
certain international Company restaurant markets that could
trigger a valuation allowance or negatively impact our ability
to utilize foreign tax credits to offset our U.S. income
taxes;
|
|
|
|
risks related to the reasonableness of our tax estimates,
including sales, excise, GST, VAT and other taxes;
|
|
|
|
adverse legal judgments, settlements or pressure tactics; and
|
|
|
|
adverse legislation or regulation.
|
20
Use of
Proceeds
The Exchange Offer is intended to satisfy our obligations under
the registration rights agreement entered into in connection
with the issuance of the Original Notes. We will not receive any
cash proceeds from the issuance of the Exchange Notes in the
Exchange Offer.
In consideration for issuing the Exchange Notes as contemplated
by this prospectus, we will receive the Original Notes in like
principal amount. The Original Notes surrendered and exchanged
for the Exchange Notes will be retired and canceled and cannot
be reissued.
21
Selected
Financial Data
The selected historical consolidated financial and other data of
Holdings for the fiscal years ended June 30, 2010, 2009 and
2008 and as of June 30, 2010 and 2009, have been derived
from Holdings audited financial statements incorporated by
reference in this prospectus. The historical consolidated
financial and other data of Holdings for the fiscal years ended
June 30, 2007 and 2006 and as of June 30, 2008, 2007
and 2006 have been derived from Holdings audited financial
statements that are not incorporated by reference in this
prospectus. The selected historical consolidated financial
information of Holdings for the three months ended
September 30, 2010 and 2009 and as of September 30,
2010 and 2009 are derived from Holdings unaudited
consolidated financial statements incorporated by reference in
this prospectus. The information set forth below is not
necessarily indicative or predictive of results of future
operations and should be read in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated
financial statements and related notes thereto contained in
Holdings Annual Report on
Form 10-K
for the fiscal year ended June 30, 2010, Holdings
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2010 and Holdings
Current Reports on
Form 8-K
filed with the SEC on November 12, 2010, which are
incorporated by reference in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
|
|
|
|
For the Fiscal Years Ended June 30,
|
|
|
ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
(audited)
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
(In millions, except per share data)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company restaurant revenues
|
|
$
|
1,839.3
|
|
|
$
|
1,880.5
|
|
|
$
|
1,795.9
|
|
|
$
|
1,658.0
|
|
|
$
|
1,515.6
|
|
|
$
|
429.8
|
|
|
$
|
469.1
|
|
Franchise revenues
|
|
|
549.2
|
|
|
|
543.4
|
|
|
|
537.2
|
|
|
|
459.5
|
|
|
|
419.8
|
|
|
|
141.6
|
|
|
|
138.7
|
|
Property revenues
|
|
|
113.7
|
|
|
|
113.5
|
|
|
|
121.6
|
|
|
|
116.2
|
|
|
|
112.4
|
|
|
|
28.6
|
|
|
|
29.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
2,502.2
|
|
|
|
2,537.4
|
|
|
|
2,454.7
|
|
|
|
2,233.7
|
|
|
|
2,047.8
|
|
|
|
600.0
|
|
|
|
636.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company restaurant expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food, paper and product costs
|
|
|
585.0
|
|
|
|
603.7
|
|
|
|
564.3
|
|
|
|
499.3
|
|
|
|
469.5
|
|
|
|
135.8
|
|
|
|
148.8
|
|
Payroll and employee benefits
|
|
|
568.7
|
|
|
|
582.2
|
|
|
|
534.7
|
|
|
|
492.1
|
|
|
|
446.3
|
|
|
|
128.9
|
|
|
|
144.8
|
|
Occupancy and other operating costs
|
|
|
461.1
|
|
|
|
457.8
|
|
|
|
439.0
|
|
|
|
418.0
|
|
|
|
380.1
|
|
|
|
106.6
|
|
|
|
114.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company restaurant expenses
|
|
|
1,614.8
|
|
|
|
1,643.7
|
|
|
|
1,538.0
|
|
|
|
1,409.4
|
|
|
|
1,295.9
|
|
|
|
371.3
|
|
|
|
408.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
495.8
|
|
|
|
494.3
|
|
|
|
501.0
|
|
|
|
473.5
|
|
|
|
487.9
|
|
|
|
127.8
|
|
|
|
129.9
|
|
Property expenses
|
|
|
59.4
|
|
|
|
58.1
|
|
|
|
62.1
|
|
|
|
60.6
|
|
|
|
57.4
|
|
|
|
15.5
|
|
|
|
14.7
|
|
Fees paid to affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38.9
|
|
|
|
|
|
|
|
|
|
Other operating (income) expenses, net
|
|
|
(0.7
|
)
|
|
|
1.9
|
|
|
|
(0.6
|
)
|
|
|
(4.4
|
)
|
|
|
(3.6
|
)
|
|
|
(5.4
|
)
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
2,169.3
|
|
|
|
2,198.0
|
|
|
|
2,100.5
|
|
|
|
1,939.1
|
|
|
|
1,876.5
|
|
|
|
509.2
|
|
|
|
553.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
332.9
|
|
|
|
339.4
|
|
|
|
354.2
|
|
|
|
294.6
|
|
|
|
171.3
|
|
|
|
90.8
|
|
|
|
83.0
|
|
Interest expense, net
|
|
|
48.6
|
|
|
|
54.6
|
|
|
|
61.2
|
|
|
|
67.0
|
|
|
|
72.0
|
|
|
|
12.3
|
|
|
|
12.5
|
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8
|
|
|
|
17.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
284.3
|
|
|
|
284.8
|
|
|
|
293.0
|
|
|
|
226.8
|
|
|
|
81.5
|
|
|
|
78.5
|
|
|
|
70.5
|
|
Income tax expense
|
|
|
97.5
|
|
|
|
84.7
|
|
|
|
103.4
|
|
|
|
78.7
|
|
|
|
54.4
|
|
|
|
15.1
|
|
|
|
23.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
186.8
|
|
|
$
|
200.1
|
|
|
$
|
189.6
|
|
|
$
|
148.1
|
|
|
$
|
27.1
|
|
|
$
|
63.4
|
|
|
$
|
46.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic
|
|
$
|
1.38
|
|
|
$
|
1.48
|
|
|
$
|
1.40
|
|
|
$
|
1.11
|
|
|
$
|
0.24
|
|
|
$
|
0.47
|
|
|
$
|
0.35
|
|
Earnings per share diluted
|
|
$
|
1.36
|
|
|
$
|
1.46
|
|
|
$
|
1.38
|
|
|
$
|
1.08
|
|
|
$
|
0.24
|
|
|
$
|
0.46
|
|
|
$
|
0.34
|
|
Weighted average shares outstanding- basic
|
|
|
135.4
|
|
|
|
134.8
|
|
|
|
135.1
|
|
|
|
133.9
|
|
|
|
110.3
|
|
|
|
136.1
|
|
|
|
135.0
|
|
Weighted average shares outstanding- diluted
|
|
|
137.2
|
|
|
|
136.8
|
|
|
|
137.6
|
|
|
|
136.8
|
|
|
|
114.7
|
|
|
|
137.9
|
|
|
|
136.8
|
|
Cash dividends per common share
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.13
|
|
|
$
|
3.42
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
|
|
|
|
For the Fiscal Years Ended June 30,
|
|
|
ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
(audited)
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
310.4
|
|
|
$
|
310.8
|
|
|
$
|
243.4
|
|
|
$
|
110.4
|
|
|
$
|
67.0
|
|
|
$
|
82.1
|
|
|
$
|
48.0
|
|
Net cash used for investing activities
|
|
|
(134.9
|
)
|
|
|
(242.0
|
)
|
|
|
(199.3
|
)
|
|
|
(77.4
|
)
|
|
|
(66.7
|
)
|
|
|
(1.2
|
)
|
|
|
(28.8
|
)
|
Net cash used for financing activities
|
|
|
(96.9
|
)
|
|
|
(105.5
|
)
|
|
|
(62.0
|
)
|
|
|
(126.9
|
)
|
|
|
(172.6
|
)
|
|
|
(29.4
|
)
|
|
|
(11.9
|
)
|
Capital expenditures
|
|
|
150.3
|
|
|
|
204.0
|
|
|
|
178.2
|
|
|
|
87.3
|
|
|
|
85.1
|
|
|
|
14.0
|
|
|
|
31.2
|
|
EBITDA(1)
|
|
$
|
444.6
|
|
|
$
|
437.5
|
|
|
$
|
449.8
|
|
|
$
|
383.4
|
|
|
$
|
259.2
|
|
|
$
|
116.4
|
|
|
$
|
108.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
|
As of September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2010
|
|
|
2009
|
|
|
|
(In millions)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
187.6
|
|
|
$
|
121.7
|
|
|
$
|
166.0
|
|
|
$
|
169.5
|
|
|
$
|
258.8
|
|
|
$
|
247.9
|
|
|
$
|
132.5
|
|
Total assets
|
|
$
|
2,747.2
|
|
|
$
|
2,707.1
|
|
|
$
|
2,686.5
|
|
|
$
|
2,516.8
|
|
|
$
|
2,551.5
|
|
|
$
|
2,825.4
|
|
|
$
|
2,727.6
|
|
Total debt and capital lease obligations
|
|
$
|
826.3
|
|
|
$
|
888.9
|
|
|
$
|
947.4
|
|
|
$
|
942.5
|
|
|
$
|
1,064.5
|
|
|
$
|
803.4
|
|
|
$
|
889.8
|
|
Total liabilities
|
|
$
|
1,618.8
|
|
|
$
|
1,732.3
|
|
|
$
|
1,842.0
|
|
|
$
|
1,800.9
|
|
|
$
|
1,984.7
|
|
|
$
|
1,627.2
|
|
|
$
|
1,708.7
|
|
Total stockholders equity
|
|
$
|
1,128.4
|
|
|
$
|
974.8
|
|
|
$
|
844.5
|
|
|
$
|
715.9
|
|
|
$
|
566.8
|
|
|
$
|
1,198.2
|
|
|
$
|
1,018.9
|
|
(1) EBITDA
is defined as earnings (net income) before interest, taxes,
depreciation and amortization, and is used by management to
measure operating performance of the business. We also use
EBITDA as a measure to calculate certain incentive based
compensation and certain financial covenants related to our
credit facility and as a factor in our tangible and intangible
asset impairment test. Management believes EBITDA is a useful
measure of operating performance. The following table is a
reconciliation of our net income to EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
|
|
|
|
For the Fiscal Years Ended June 30,
|
|
|
Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
186.8
|
|
|
$
|
200.1
|
|
|
$
|
189.6
|
|
|
$
|
148.1
|
|
|
$
|
27.1
|
|
|
$
|
63.4
|
|
|
$
|
46.6
|
|
Interest expense, net
|
|
|
48.6
|
|
|
|
54.6
|
|
|
|
61.2
|
|
|
|
67.0
|
|
|
|
72.0
|
|
|
|
12.3
|
|
|
|
12.5
|
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8
|
|
|
|
17.8
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
97.5
|
|
|
|
84.7
|
|
|
|
103.4
|
|
|
|
78.7
|
|
|
|
54.4
|
|
|
|
15.1
|
|
|
|
23.9
|
|
Depreciation and amortization
|
|
|
111.7
|
|
|
|
98.1
|
|
|
|
95.6
|
|
|
|
88.8
|
|
|
|
87.9
|
|
|
|
25.6
|
|
|
|
25.1
|
|
EBITDA
|
|
$
|
444.6
|
|
|
$
|
437.5
|
|
|
$
|
449.8
|
|
|
$
|
383.4
|
|
|
$
|
259.2
|
|
|
$
|
116.4
|
|
|
$
|
108.1
|
|
23
The following unaudited pro forma condensed consolidated
financial information has been derived by the application of pro
forma adjustments related to the Transactions to our historical
consolidated financial statements incorporated by reference in
this prospectus. The unaudited pro forma condensed consolidated
balance sheet data as of September 30, 2010 gives effect to
the Transactions as if they had occurred on that date. The
unaudited pro forma condensed consolidated statements of income
for the three months ended September 30, 2010 and fiscal
year ended June 30, 2010 give effect to the Transactions as
if they had occurred on July 1, 2009.
The unaudited pro forma adjustments are based upon available
information and certain assumptions that we believe are
reasonable under the circumstances. The unaudited pro forma
condensed consolidated financial information is presented for
information purposes only and does not purport to represent what
our actual consolidated results of operations or consolidated
financial condition would have been had the Transactions
actually occurred on the dates indicated, nor do they purport to
project our future consolidated results of operations or
consolidated financial condition for any future period or as of
any future date. The unaudited pro forma condensed consolidated
financial information should be read in conjunction with the
information included under the headings Prospectus
Summary, Selected Financial Data, and our
historical consolidated financial statements and related notes
incorporated by reference in this prospectus. All pro forma
adjustments and their underlying assumptions are described more
fully in the notes to our unaudited pro forma condensed
consolidated financial information.
The Merger is being accounted for as a business combination
using the acquisition method of accounting and, accordingly,
will result in the recognition of assets acquired and
liabilities assumed at fair value. However, as of the date of
this prospectus, we have not performed the valuation studies
necessary to estimate the fair values of the assets we acquired
and the liabilities we assumed necessary to reflect the
allocation of purchase price to the fair value of such amounts.
For the purpose of computing the pro forma adjustments, we have
assumed the write-off of our existing finite-lived intangible
assets and liabilities associated with prior acquisitions as the
fair value of these assets and liabilities will be re-estimated
as part of the Merger. The excess of the consideration
transferred over the net assets acquired has been presented as
an adjustment of indefinite-lived intangible assets (the
Burger King brand and goodwill). We have not estimated
the fair value of assets acquired and liabilities assumed,
including, but not limited to: property and equipment, net
investment in property leased to franchisees, capital leases,
other miscellaneous liabilities, deferred gift card revenue, and
favorable and unfavorable leases and other finite-lived
intangible assets and liabilities, except with respect to the
Burger King brand for which we performed a valuation in
connection with our impairment review during the fourth quarter
of fiscal year 2010. A final determination of these fair values
will reflect appraisals prepared by independent third parties
and will be based on the actual tangible and identifiable
intangible assets and liabilities that existed as of the Merger
date. The actual allocation of the consideration transferred
will differ from the allocation assumed in these unaudited pro
forma condensed consolidated financial statements and will also
result in material adjustments to the unaudited pro forma
condensed consolidated financial information, including but not
limited to: property revenue; occupancy and other operating
costs; selling, general and administrative expenses; property
expenses; and income tax expense. The pro forma condensed
consolidated statements of income do not reflect such expenses
and such expenses may be significant.
24
BURGER
KING HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 2010
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
Financing
|
|
|
Accounting
|
|
|
|
|
|
|
Historical
|
|
|
Adjustments
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
247.9
|
|
|
$
|
(63.4
|
) (1)
|
|
$
|
-
|
|
|
$
|
184.5
|
|
Trade and notes receivable, net
|
|
|
142.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
142.0
|
|
Prepaids and other current assets, net
|
|
|
60.7
|
|
|
|
23.6
|
(3)
|
|
|
-
|
|
|
|
84.3
|
|
Deferred income taxes, net
|
|
|
43.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
493.7
|
|
|
|
(39.8
|
)
|
|
|
-
|
|
|
|
453.9
|
|
Property and equipment, net
|
|
|
995.7
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
995.7
|
|
Intangible assets, net
|
|
|
1,048.0
|
|
|
|
-
|
|
|
|
1,331.0
|
(2)
|
|
|
2,379.0
|
|
Goodwill
|
|
|
31.3
|
|
|
|
-
|
|
|
|
1,086.9
|
(2)
|
|
|
1,118.2
|
|
Net investment in property leased to franchisees
|
|
|
140.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
140.6
|
|
Other assets, net
|
|
|
116.1
|
|
|
|
53.4
|
(4)
|
|
|
(6.7
|
) (2)
|
|
|
162.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,825.4
|
|
|
$
|
13.6
|
|
|
$
|
2,411.2
|
|
|
$
|
5,250.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and drafts payable
|
|
$
|
94.7
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
94.7
|
|
Accrued advertising
|
|
|
79.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
79.6
|
|
Other accrued liabilities
|
|
|
230.4
|
|
|
|
(46.0
|
) (5)
|
|
|
(23.6
|
) (2)
|
|
|
160.8
|
|
Current portion of long term debt and capital leases
|
|
|
71.6
|
|
|
|
(50.6
|
) (6)
|
|
|
-
|
|
|
|
21.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
476.3
|
|
|
|
(96.6
|
)
|
|
|
(23.6
|
)
|
|
|
356.1
|
|
Term debt, net of current portion
|
|
|
667.4
|
|
|
|
1,948.8
|
(6)
|
|
|
-
|
|
|
|
2,616.2
|
|
Capital leases, net of current portion
|
|
|
64.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
64.4
|
|
Other liabilities, net
|
|
|
325.1
|
|
|
|
(10.3
|
) (7)
|
|
|
(123.5
|
) (2)
|
|
|
191.3
|
|
Deferred income taxes, net
|
|
|
94.0
|
|
|
|
3.7
|
(8)
|
|
|
434.0
|
(2)
|
|
|
531.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,627.2
|
|
|
|
1,845.6
|
|
|
|
286.9
|
|
|
|
3,759.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,198.2
|
|
|
|
292.3
|
(9)
|
|
|
-
|
|
|
|
1,490.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
2,825.4
|
|
|
$
|
2,137.9
|
|
|
$
|
286.9
|
|
|
$
|
5,250.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed
balance sheet.
25
Notes to
unaudited pro forma condensed consolidated balance
sheet
|
|
(1) |
The unaudited pro forma condensed consolidated balance sheet
gives effect to the following pro forma adjustments related to
the Merger and reflects the related issuance of debt, payment of
merger consideration and the repayment of certain debt. The
following table summarizes sources and uses of funds for the
Merger assuming the closing occurred as of September 30,
2010. Actual amounts may differ (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources
|
|
Amount
|
|
Uses
|
|
Amount
|
|
|
Cash and cash
equivalents (a)
|
|
$
|
63.4
|
|
|
Purchase of
equity (e)
|
|
$
|
3,366.3
|
|
New Credit
Facilities (b):
|
|
|
|
|
|
Repayment of existing credit
facility (f)
|
|
|
732.0
|
|
New Term Loan Facility
|
|
|
1,850.8
|
|
|
Fees and
expenses (g)
|
|
|
155.3
|
|
New Revolving Credit
Facility (c)
|
|
|
-
|
|
|
Settlement of interest rate
swaps (h)
|
|
|
23.7
|
|
Original Notes
|
|
|
800.0
|
|
|
|
|
|
|
|
Equity
investment (d)
|
|
|
1,563.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sources
|
|
$
|
4,277.3
|
|
|
Total uses
|
|
$
|
4,277.3
|
|
|
|
|
|
|
(a)
|
Cash and cash equivalents used to fund the Transactions as of
September 30, 2010.
|
|
|
|
|
(b)
|
The New Credit Facilities consists of (i) the
$1,510.0 million tranche and the 250.0 million
tranche of a New Term Loan Facility with a six-year maturity and
(ii) the $150.0 million New Revolving Credit Facility
with a five-year maturity.
|
|
|
|
|
(c)
|
No amounts were drawn under the New Revolving Credit Facility
although we did utilize approximately $38.0 million of our
available commitments to support letters of credit immediately
following the consummation of the Transactions.
|
|
|
|
|
(d)
|
Represents cash invested by Parent in the common stock of Merger
Sub, from amounts invested in the common stock of Parent by 3G
in connection with the closing of the Transactions.
|
|
|
|
|
(e)
|
Represents cash paid, based on a $24.00 tender offer price, for
136,505,958 outstanding shares, totaling $3,276.1 million,
settlement of outstanding stock options, restricted shares and
performance-based restricted shares totaling $89.7 million,
and payment accrued dividend equivalents totaling
$0.5 million.
|
|
|
|
|
(f)
|
Repayment of the existing credit facility assumes use of the
Companys cash and cash equivalents in the amount of
$63.4 million. Total repayment of existing credit facility
also includes accrued letters of credit fees and commitment fees
of $0.2 million.
|
|
|
|
|
(g)
|
Represents estimated fees and expenses associated with the
Transactions, including financial advisory fees, commissions,
commitment fees and discounts related to the New Credit
Facilities, the initial purchasers discounts related to
the notes, compensation arrangements with certain key executives
and other transactional fees and expenses, including legal,
accounting and other professional fees.
|
|
|
|
|
(h)
|
Represents the settlement of interest rate swap liability as of
September 30, 2010.
|
|
|
(2) |
The Merger is being accounted for as a business combination in
accordance with Financial Accounting Standards Board Accounting
Standards Codification (ASC) 805, Business Combinations,
(formerly SFAS 141(R)).
|
We have not estimated the fair value of assets acquired and
liabilities assumed, including, but not limited to: property and
equipment, net investment in property leased to franchisees,
capital leases, other miscellaneous liabilities, deferred gift
card revenue, and favorable and unfavorable leases and other
finite-lived intangible assets and liabilities, except with
respect to the Burger King brand. For purposes of
computing the pro forma adjustments, we have assumed the
write-off of our existing finite-lived intangible asset and
liabilities associated with prior acquisitions as the fair value
of these assets and liabilities will be re-estimated as part of
the Merger. In conjunction with our annual impairment testing of
indefinite-lived intangible assets as of April 1, 2010, the
fair value of the Burger King brand was estimated at
approximately $2,379.0 million and such fair value is being
used as an estimate of fair value as of September 30, 2010
for purposes of preparing these unaudited pro forma condensed
consolidated financial statements. We have assumed the
historical amount as of September 30, 2010 of our pension
and post-retirement liabilities of $109.8 million
approximates fair value for purposes of preparing these pro
forma condensed consolidated financial statements.
A final determination of these fair values will reflect
appraisals prepared by independent third-parties and will be
based on the actual tangible and identifiable intangible assets
and liabilities that existed as of the Merger date. The actual
allocation of the consideration transferred will differ from the
26
allocation assumed in these unaudited pro forma condensed
consolidated financial statements and may be materially
different.
The following table sets forth the preliminary allocation of
consideration (in millions):
|
|
|
|
|
|
|
|
|
|
Cash
paid (a)
|
|
|
|
|
|
$
|
3,322.5
|
|
Less: Book value of net assets acquired
|
|
|
|
|
|
|
(1,198.2
|
)
|
|
|
|
|
|
|
|
|
|
Excess of cash paid over book value of net assets acquired
|
|
|
|
|
|
$
|
2,124.3
|
|
|
|
|
|
|
|
|
|
|
Acquisition accounting adjustment to:
|
|
|
|
|
|
|
|
|
Intangible assets:
|
|
|
|
|
|
$
|
1,331.0
|
|
Write-off of franchise agreements & reacquired
franchise
rights (b)
|
|
|
(115.7
|
)
|
|
|
|
|
Write-off of favorable
leases (c)
|
|
|
(34.1
|
)
|
|
|
|
|
Fair value of Burger King
brand (d)
|
|
|
1,480.8
|
|
|
|
|
|
Other
assets (e)
|
|
|
|
|
|
|
(6.7
|
)
|
Other accrued
liabilities (f)
|
|
|
|
|
|
|
23.6
|
|
Other liabilities,
net (c)
|
|
|
|
|
|
|
123.5
|
|
Deferred tax assets and
liabilities (g)
|
|
|
|
|
|
|
(434.0
|
)
|
Allocation to
goodwill (h)
|
|
|
|
|
|
|
1,086.9
|
|
|
|
|
|
|
|
|
|
|
Total allocation
|
|
|
|
|
|
$
|
2,124.3
|
|
|
|
|
|
|
(a)
|
Represents cash paid, based on a $24.00 tender offer price, for
136,505,958 outstanding shares, totaling $3,276.1 million
and settlement of outstanding stock options, restricted shares
and performance-based restricted shares totaling
$46.4 million.
|
|
|
|
|
(b)
|
Represents write-off of previously acquired franchise agreements
and reacquired franchise rights. At the Merger date, our
franchise agreements will be recorded at fair value.
|
|
|
|
|
(c)
|
Represents write-off of previously acquired leases whose terms
were favorable or unfavorable compared to market terms at the
dates of previous acquisitions. At the Merger date, the terms of
such leases will be compared to the market terms of comparable
leases to determine if a favorable or unfavorable lease
intangible asset or liability is required to be recorded.
|
|
|
|
|
(d)
|
Represents the adjustment to reflect the estimated fair value of
the Burger King brand. In conjunction with our fiscal
year 2010 annual impairment testing of indefinite-lived
intangible assets as of April 1, 2010, the fair value of
the Burger King brand was estimated at approximately
$2,379.0 million. We have assumed that this value
approximates the fair value of the Burger King brand as
of September 30, 2010 for the purposes of preparing these
pro forma condensed consolidated financial statements. A final
determination of fair value will be made as of the Merger date
and may differ materially from the amount assumed in these pro
forma condensed consolidated financial statements.
|
|
|
|
|
(e)
|
Represents write-off of accrued rent receivable historically
recorded by the Company. As a lessor, the Company recognizes
rental income on a straight-line basis over the lease terms of
its leases in accordance with the provisions of ASC 840,
Leases. The accumulated difference between rent
recognized and the amount received in the consolidated statement
of income on the straight-line basis is not recognized under
acquisition accounting. However, rent received after the Merger
date will give rise to accrued rent receivable to the extent
that rent received is less than the amount recognized on a
straight-line basis as determined from the Merger date.
|
|
|
|
|
(f)
|
Represents write-off of accrued rent payable recorded by the
Company. As a lessee, the Company recognizes rental expense on a
straight-line basis over the terms of its operating leases in
accordance with the provisions of ASC 840, Leases.
The accumulated difference between rent recognized and the
amount paid in the consolidated statement of income on the
straight-line basis is not recognized under acquisition
accounting. However, rent payments subsequent to the Merger will
give rise to accrued rent payable to the extent that rent paid
is less than the rent expense recognized on a straight-line
basis as determined from the Merger date.
|
|
|
|
|
(g)
|
Represents the impact to deferred income taxes as a result of
pro forma adjustment to finite-lived intangible assets,
indefinite-lived intangible assets, other assets, and other
accrued liabilities.
|
|
|
|
|
(h)
|
Represents the preliminary excess of consideration transferred
over the fair values of assets acquired and liabilities assumed
as a result of the Merger.
|
|
|
(3) |
Represents current portion of deferred financing costs
associated with New Credit Facilities and Senior Notes of
$10.6 million in the aggregate, deferred payroll related to
agreements with key executives of $5.5 million, and escrow
for compensation arrangements with certain key executives of
$7.5 million.
|
27
|
|
(4) |
Represents pro forma adjustments to other assets, net relating
to deferred financings costs and deferred tax assets (in
millions):
|
|
|
|
|
|
|
Deferred financing costs associated with New Credit Facilities
and Original Notes - non-current
|
|
$
|
58.6
|
|
Write-off of deferred financing costs related to existing credit
facility
|
|
|
(2.5
|
)
|
Deferred compensation - long term portion
|
|
|
7.6
|
|
Deferred tax
asset (a)
|
|
|
(10.3
|
)
|
|
|
|
|
|
|
|
$
|
53.4
|
|
|
|
|
|
|
(a)
|
Represents the impact to deferred income taxes, net as a result
of pro forma deduction related to the settlement of outstanding
options, restricted stock and performance-based restricted stock
awards.
|
|
|
(5) |
Represents pro forma adjustments to other accrued liabilities
relating to accrued dividend equivalents, accrued fees, income
taxes payable, severance accrual and settlement of interest rate
swap liability (in millions):
|
|
|
|
|
|
|
Payment of current portion of cumulative accrued dividend
equivalents on restricted stock awards outstanding
|
|
$
|
(0.3
|
)
|
Write-off of accrued letters of credit fees and commitment fees
related to payoff of existing credit facility
|
|
|
(0.2
|
)
|
Income taxes
payable (a)
|
|
|
(32.5
|
)
|
Severance accrual
|
|
|
0.6
|
|
Settlement of interest rate swap liability - current portion
|
|
|
(13.6
|
)
|
|
|
|
|
|
|
|
$
|
(46.0
|
)
|
|
|
|
|
|
(a)
|
Represents the impact to income taxes payable as a result of pro
forma deduction related to the settlement of outstanding
options, restricted stock and performance-based restricted stock
awards.
|
|
|
(6) |
Represents pro forma adjustments relating to additional
indebtedness incurred in connection with the Transactions and
repayment of all amounts outstanding under our existing credit
facility (in millions):
|
|
|
|
|
|
|
Payoff of the existing credit facility - current
portion (a)
|
|
$
|
(65.6
|
)
|
Borrowings under the New Credit Facilities - current portion
|
|
|
18.5
|
|
Original issue discount on New Term Loan Facility - current
portion
|
|
|
(3.5
|
)
|
|
|
|
|
|
Total adjustment to current portion of long term debt and
capital leases
|
|
$
|
(50.6
|
)
|
|
|
|
|
|
|
|
|
|
|
Payoff of the existing credit facility - long-term
portion (a)
|
|
$
|
(666.2
|
)
|
Borrowings under the New Credit Facilities - long-term
portion
|
|
|
1,832.3
|
|
Original Notes
|
|
|
800.0
|
|
Original issue discount on New Term Loan Facility -
long-term portion
|
|
|
(17.3
|
)
|
|
|
|
|
|
Total issuance of new debt
|
|
$
|
1,948.8
|
|
|
|
|
|
|
(a)
|
Excludes $5.8 million of the current portion of capital
leases, $64.4 million of the long-term portion of capital
leases and related accrued interest that is not being paid off
in connection with the Merger.
|
The adjustments are based on balances as of September 30,
2010. Any changes at the closing date of the Transactions to the
amounts owed on our existing credit facility and the revolving
portion of our existing credit facility and the liability under
our interest rate swap agreements from the respective amounts at
September 30, 2010 may or may not be material. No
adjustments have been made to the unaudited pro forma financial
statements for any changes in these balances subsequent to
September 30, 2010.
|
|
(7) |
Represents pro forma adjustments to other liabilities, net
relating to interest rate swaps liability and accrued dividend
equivalents (in millions):
|
|
|
|
|
|
|
Settlement of interest rate swap liability - long term
portion
|
|
$
|
(10.1
|
)
|
Non-current portion of cumulative accrued dividend equivalents
on restricted stock awards outstanding
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
$
|
(10.3
|
)
|
|
28
|
|
(8) |
Represents the impact to deferred tax liability of
$3.7 million as a result of pro forma deduction related to
the settlement of outstanding options, restricted stock and
performance-based restricted stock awards.
|
|
|
(9) |
The pro forma adjustment to stockholders equity represents
the elimination of our historical stockholders equity,
equity contributions from 3G, and adjustments for certain
expenses related to the Transactions that are not reflected in
the unaudited pro forma condensed consolidated statement of
income as follows (in millions):
|
|
|
|
|
|
|
Cash investments by 3G
|
|
$
|
1,563.1
|
|
Less: historical stockholders equity
|
|
|
(1,198.2
|
)
|
|
|
|
|
|
|
|
|
364.9
|
|
Expenses recognized in connection with the Transactions not
reflected in the pro forma condensed consolidated statements of
income:
|
|
|
|
|
Merger-related transaction
costs (a)
|
|
|
(55.4
|
)
|
Tax benefit associated with the
Transactions (b)
|
|
|
-
|
|
Write-off unamortized deferred financing costs on existing
credit
facility (c)
|
|
|
(2.5
|
)
|
Compensation expense related to the settlement of outstanding
options, restricted stock and performance-based restricted stock
awards (d)
|
|
|
(33.2
|
)
|
Excess tax benefit associated with settlement of outstanding
options, restricted stock, and performance-based restricted
stock (e)
|
|
|
18.5
|
|
|
|
|
|
|
Pro forma adjustment to stockholders equity
|
|
$
|
292.3
|
|
|
|
|
|
|
(a)
|
Represents a portion of the estimated fees and expenses
associated with the Transactions, including financial advisory
fees, legal, accounting, other professional fees, compensation
arrangement with certain key executive and commitment fees
associated with the bridge loan available at the closing of the
Transactions. No bridge loan was required at the closing of the
transaction. These fees were expensed immediately concurrent
with the closing of the Transactions.
|
|
|
|
|
(b)
|
Assumes that merger related transactions costs are not
considered deductible for income tax purposes.
|
|
|
|
|
(c)
|
Represents adjustment to write-off of the unamortized deferred
financing costs as a result of repayment of existing credit
facility.
|
|
|
|
|
(d)
|
Represents settlement of outstanding options, restricted stock
and performance-based restricted stock awards at the closing of
the Transactions.
|
|
|
|
|
(e)
|
The net impact of the adjustment to deferred income tax asset of
$10.3 million (refer to note (4)), income taxes payable of
$32.5 million (refer to note (5)) and deferred tax
liability of $3.7 million (refer to note (8)), which total
$18.5 million, represents excess tax benefits which have
been recorded as a pro forma adjustment to stockholders
equity.
|
29
BURGER
KING HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated
Statement of Income
For the three months ended September 30, 2010
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Adjustments
|
|
|
(a)
|
|
|
Pro Forma
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company restaurant revenues
|
|
$
|
429.8
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
429.8
|
|
Franchise revenues
|
|
|
141.6
|
|
|
|
-
|
|
|
|
|
|
|
|
141.6
|
|
Property revenues
|
|
|
28.6
|
|
|
|
-
|
|
|
|
|
|
|
|
28.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
600.0
|
|
|
|
-
|
|
|
|
|
|
|
|
600.0
|
|
Company restaurant expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food, paper and product costs
|
|
|
135.8
|
|
|
|
-
|
|
|
|
|
|
|
|
135.8
|
|
Payroll and employee benefits
|
|
|
128.9
|
|
|
|
-
|
|
|
|
|
|
|
|
128.9
|
|
Occupancy and other operating costs
|
|
|
106.6
|
|
|
|
2.1
|
|
|
|
(b
|
)
|
|
|
108.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company restaurant expenses
|
|
|
371.3
|
|
|
|
2.1
|
|
|
|
|
|
|
|
373.4
|
|
Selling, general and administrative expenses
|
|
|
127.8
|
|
|
|
(6.6
|
)
|
|
|
(c
|
)
|
|
|
121.2
|
|
Property expenses
|
|
|
15.5
|
|
|
|
1.1
|
|
|
|
(b
|
)
|
|
|
16.6
|
|
Other operating (income) expenses, net
|
|
|
(5.4
|
)
|
|
|
37.4
|
|
|
|
(b
|
)(d)
|
|
|
32.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
509.2
|
|
|
|
34.0
|
|
|
|
|
|
|
|
543.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
90.8
|
|
|
|
(34.0
|
)
|
|
|
|
|
|
|
56.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
12.5
|
|
|
|
43.4
|
|
|
|
(e
|
)
|
|
|
55.9
|
|
Interest income
|
|
|
(0.2
|
)
|
|
|
-
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense, net
|
|
|
12.3
|
|
|
|
43.4
|
|
|
|
|
|
|
|
55.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
78.5
|
|
|
|
(77.4
|
)
|
|
|
|
|
|
|
1.1
|
|
Income tax expense
|
|
|
15.1
|
|
|
|
(29.4
|
)
|
|
|
(f
|
)
|
|
|
(14.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
63.4
|
|
|
$
|
(48.0
|
)
|
|
|
|
|
|
$
|
15.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed
consolidated statement of income.
30
BURGER
KING HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated
Statement of Income
For the fiscal year ended June 30, 2010
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Adjustments
|
|
|
(a)
|
|
|
Pro Forma
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company restaurant revenues
|
|
$
|
1,839.3
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
1,839.3
|
|
Franchise revenues
|
|
|
549.2
|
|
|
|
-
|
|
|
|
|
|
|
|
549.2
|
|
Property revenues
|
|
|
113.7
|
|
|
|
-
|
|
|
|
|
|
|
|
113.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
2,502.2
|
|
|
|
-
|
|
|
|
|
|
|
|
2,502.2
|
|
Company restaurant expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food, paper and product costs
|
|
|
585.0
|
|
|
|
-
|
|
|
|
|
|
|
|
585.0
|
|
Payroll and employee benefits
|
|
|
568.7
|
|
|
|
-
|
|
|
|
|
|
|
|
568.7
|
|
Occupancy and other operating costs
|
|
|
461.1
|
|
|
|
10.4
|
|
|
|
(b
|
)
|
|
|
471.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company restaurant expenses
|
|
|
1,614.8
|
|
|
|
10.4
|
|
|
|
|
|
|
|
1,625.2
|
|
Selling, general and administrative expenses
|
|
|
495.8
|
|
|
|
(23.1
|
)
|
|
|
(c
|
)
|
|
|
472.7
|
|
Property expenses
|
|
|
59.4
|
|
|
|
4.6
|
|
|
|
(b
|
)
|
|
|
64.0
|
|
Other operating (income) expenses, net
|
|
|
(0.7
|
)
|
|
|
(38.5
|
)
|
|
|
(b
|
)(d)
|
|
|
(39.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
2,169.3
|
|
|
|
(46.6
|
)
|
|
|
|
|
|
|
2,122.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
332.9
|
|
|
|
46.6
|
|
|
|
|
|
|
|
379.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
49.6
|
|
|
|
175.0
|
|
|
|
(e
|
)
|
|
|
224.6
|
|
Interest income
|
|
|
(1.0
|
)
|
|
|
-
|
|
|
|
|
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense, net
|
|
|
48.6
|
|
|
|
175.0
|
|
|
|
|
|
|
|
223.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
284.3
|
|
|
|
(128.4
|
)
|
|
|
|
|
|
|
155.9
|
|
Income tax expense
|
|
|
97.5
|
|
|
|
(49.9
|
)
|
|
|
(f
|
)
|
|
|
47.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
186.8
|
|
|
$
|
(78.5
|
)
|
|
|
|
|
|
$
|
108.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed
consolidated statement of income.
31
Notes to
Unaudited Pro Forma Condensed Consolidated Statement of
Income
|
|
(a) |
The Merger is being accounted for as a business combination
using the acquisition method of accounting and, accordingly,
will result in the recognition of assets acquired and
liabilities assumed at fair value. We have not estimated the
fair value of assets acquired and liabilities assumed,
including, but not limited to: property and equipment, net
investment in property leased to franchisees, capital leases,
other miscellaneous liabilities, deferred gift card revenue of
gift cards, and favorable and unfavorable leases and other
finite-lived intangible assets and liabilities, except with
respect to the Burger King brand. For purposes of
computing the pro forma adjustments, we have assumed the
write-off of existing finite-lived intangible assets. The actual
adjustments to historical amounts recorded of assets and
liabilities to their respective fair values as of the Merger
date may also result in material adjustments to the unaudited
pro forma condensed consolidated financial information,
including but not limited to: property revenues; occupancy and
other operating costs; selling, general and administrative
expenses; property expenses; and income tax expense. The pro
forma condensed consolidated statement of income does not
reflect such expenses and such expenses may be significant.
|
As a direct result of the Transactions, the Company expects to
incur certain material, nonrecurring charges in the amount of an
estimated $55.4 million during the 12 months
succeeding the Merger date. These charges include financial
advisory fees, legal, accounting, other professional fees,
compensation related to arrangements with certain key
executives, and commitment fees associated with the bridge loan
available at the closing of the Transactions. Due to the absence
of a continuing impact on our operations, these charges have
been excluded from the pro forma adjustments reflected here.
|
|
(b) |
The pro forma adjustments to historical amortization of existing
favorable and unfavorable lease intangible assets and
liabilities (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Fiscal Year Ended
|
|
|
|
September 30, 2010
|
|
|
June 30, 2010
|
|
|
|
|
Historical amortization in occupancy and other operating
costs (i)
|
|
$
|
2.1
|
|
|
$
|
10.4
|
|
Historical amortization in property
expenses (i)
|
|
|
1.1
|
|
|
|
4.6
|
|
Release of favorable and unfavorable
leases (ii)
|
|
|
2.9
|
|
|
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6.1
|
|
|
$
|
20.8
|
|
|
|
|
|
|
(i)
|
The total pro forma depreciation and amortization of
$27.2 million for the three months ended September 30,
2010 includes the historical amount of $25.6 million for
the three months ended September 30, 2010 plus the
historical amortization in occupancy and other operating costs
of $2.1 million and the historical amortization in property
expenses of $1.1 million offset by the historical
amortization of franchise agreements and reacquired franchise
rights of $1.6 million for the three months ended
September 30, 2010 included in (c) below.
|
|
|
|
|
|
The total pro forma depreciation and amortization of
$120.6 million for the fiscal year ended June 30, 2010
includes the historical amount of $111.7 million for the
fiscal year ended June 30, 2010 plus the historical
amortization in occupancy and other operating costs of
$10.4 million and the historical amortization in property
expenses of $4.6 million offset by the historical
amortization of franchise agreements and reacquired franchise
rights of $6.1 million for the fiscal year ended
June 30, 2010 included in (c) below.
|
|
|
|
|
(ii)
|
Release of favorable and unfavorable leases related to the
assignment of such leases in conjunction with the refranchising
of company-owned restaurants.
|
We have not estimated the fair value of favorable and
unfavorable leases intangible assets and liabilities as of
September 30, 2010 and we have assumed the write-off of our
existing finite-lived intangible assets and liabilities
associated with prior acquisitions (which includes favorable and
unfavorable leases); therefore, the unaudited pro forma
statement of income does not reflect any amortization relating
to intangible assets and liabilities in the form of favorable
and unfavorable leases.
|
|
(c) |
The pro forma adjustments to selling, general and administrative
expenses reflect the elimination of stock-based compensation
expense of $5.0 million for three months ended
September 30, 2010 and
|
32
$17.0 million the fiscal year ended June 30, 2010.
This adjustment also reflects the elimination of historical
amortization of franchise agreements and reacquired franchise
rights of $1.6 million for the three months ended
September 30, 2010 and $6.1 million the fiscal year
ended June 30, 2010. We have not estimated the fair value
of franchise agreements as of September 30, 2010;
therefore, the unaudited pro forma condensed consolidated
statement of income does not reflect any amortization related to
franchise agreements rights.
|
|
(d)
|
The pro forma adjustment to operating (income) expense, net also
includes a foreign currency transaction loss of
$34.5 million for the three months ended September 30,
2010 and a foreign currency transaction gain of
$44.3 million for the fiscal year ended June 30, 2010
resulting from the re-measurement of 250.0 million
tranche of New Term Loan Facility and the related original issue
discount.
|
|
(e)
|
The pro forma adjustment to interest expense for new debt
incurred consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Fiscal Year Ended
|
|
|
|
September 30, 2010
|
|
|
June 30, 2010
|
|
|
|
|
Interest on New Term Loan Facility borrowings of approximately
$1,850.8 million principal amount and $800 million
principal amount of Original Notes at an estimated blended
interest rate of
7.4% (i)(ii)
|
|
$
|
48.9
|
|
|
$
|
197.2
|
|
Amortization of $69.2 million of debt issuance costs
arising from the New Credit Facilities and Original Notes and of
$20.8 million of original issue discount on New Credit
Facilities
(iii)
|
|
|
3.5
|
|
|
|
14.0
|
|
Commitment fees related to unused portion of New Revolving
Credit Facility and draws on letters of credit
|
|
|
0.7
|
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|
Total interest expense on the new debt
|
|
$
|
53.1
|
|
|
$
|
213.9
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Historical interest expense on existing credit facility
|
|
$
|
4.0
|
|
|
$
|
15.0
|
|
Historical amortization of deferred financing fees
|
|
|
0.5
|
|
|
|
2.1
|
|
Historical commitment fees related to unused portion of existing
revolver
|
|
|
0.2
|
|
|
|
0.6
|
|
Cancellation of interest rate swap agreements in a liability
position offset by gain associated with previously terminated
interest rate swaps
|
|
|
5.0
|
|
|
|
21.2
|
|
|
|
|
|
|
|
|
|
|
Total historical interest expense on existing credit facility
|
|
$
|
9.7
|
|
|
$
|
38.9
|
|
|
|
|
|
|
|
|
|
|
Total pro forma adjustment of interest expense
|
|
$
|
43.4
|
|
|
$
|
175.0
|
|
|
|
|
|
|
(i)
|
A 0.125% change in the assumed interest rate of the New Term
Loan Facility would change aggregate pro forma interest expense
by $0.6 million for three months ended September 30,
2010 and $2.3 million for the fiscal year ended
June 30, 2010.
|
|
|
(ii)
|
Interest expense on 250.0 million tranche of New Term
Loan Facility translated using the average rate during the
periods presented and impacted by the changes in currency
exchange rates.
|
|
|
(iii)
|
Straight-line amortization of debt issuance costs over the
estimated weighted average maturities of the New Term Loan
Facility and Original Notes and straight-line amortization of
original issue discount over the maturity of the New Credit
Facilities.
|
The estimated interest expense rate set forth above is solely
for illustrative purposes and reflects assumptions with respects
to the debt financing for the Transactions.
|
|
(f) |
The pro forma adjustment to income tax expense reflects the tax
effect of the pro forma adjustments, using a blended tax rate of
38.0% for the three months ended September 30, 2010 and
38.8% for the fiscal year ended June 30, 2010.
|
33
The
Exchange Offer
Purpose
of the Exchange Offer
In connection with the issuance of the Original Notes, we
entered into a registration rights agreement with the initial
purchasers, under which we agreed to file with the SEC and to
use our reasonable best efforts to cause to become effective an
exchange offer registration statement under the Securities Act
and to consummate the Exchange Offer.
We are making the Exchange Offer in reliance on the position of
the SEC as set forth in certain no-action letters. However, we
have not sought our own no-action letter. Based upon these
interpretations by the SEC, we believe that a holder of Exchange
Notes who exchanges Original Notes for Exchange Notes in the
Exchange Offer generally may offer the Exchange Notes for
resale, sell the Exchange Notes and otherwise transfer the
Exchange Notes without further registration under the Securities
Act and without delivery of a prospectus that satisfies the
requirements of Section 10 of the Securities Act. This does
not apply, however, to a holder who is our affiliate
within the meaning of Rule 405 of the Securities Act. We
also believe that a holder may offer, sell or transfer the
Exchange Notes only if the holder acknowledges that the holder
is acquiring the Exchange Notes in the ordinary course of its
business and is not participating, does not intend to
participate and has no arrangement or understanding with any
person to participate in a distribution of the Exchange Notes.
Any holder of the Original Notes using the Exchange Offer to
participate in a distribution of Exchange Notes cannot rely on
the no-action letters referred to above. Any broker-dealer who
holds Original Notes acquired for its own account as a result of
market-making activities or other trading activities and who
receives Exchange Notes in exchange for such Original Notes
pursuant to the Exchange Offer may be a statutory underwriter
and must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange
Notes. See Plan of Distribution.
Each broker-dealer that receives Exchange Notes for its own
account in exchange for Original Notes, where such Original
Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes. See Plan of
Distribution.
Except as described above, this prospectus may not be used for
an offer to resell, resale or other transfer of Exchange Notes.
The Exchange Offer is not being made to, nor will we accept
tenders for exchange from, holders of Original Notes in any
jurisdiction in which the Exchange Offer or the acceptance of
the Exchange Offer would not be in compliance with the
securities or blue sky laws of such jurisdiction.
Terms of
the Exchanges
Upon the terms and subject to the conditions of the Exchange
Offer, we will accept any and all Original Notes validly
tendered prior to 12:00 midnight, New York City time, on the
expiration date for the Exchange Offer. Promptly after the
expiration date (unless extended as described in this
prospectus), we will issue an aggregate principal amount of up
to $800,000,000 of Exchange Notes for a like principal amount of
outstanding Original Notes tendered and accepted in connection
with the Exchange Offer.
The Exchange Notes issued in connection with the Exchange Offer
will be delivered promptly after the expiration date. Holders
may tender some or all of their Original Notes in connection
with the Exchange Offer, but only in principal amounts of $2,000
or in integral multiples of $1,000 in excess thereof.
34
The terms of the Exchange Notes will be identical in all
material respects to the terms of the Original Notes, except
that the Exchange Notes will have been registered under the
Securities Act and will be issued free from any covenant
regarding registration, including the payment of special
interest upon a failure to complete the Exchange Offer by a
certain date. The Exchange Notes will evidence the same debt as
the Original Notes and will be issued under the same Indenture
and be entitled to the same benefits under that Indenture as the
Original Notes being exchanged. As of the date of this
prospectus, $800,000,000 in aggregate principal amount of the
Original Notes are outstanding.
In connection with the issuance of the Original Notes, we
arranged for the Original Notes purchased by qualified
institutional buyers and those sold in reliance on
Regulation S under the Securities Act to be issued and
transferable in book-entry form through the facilities of DTC,
acting as depositary. Except as described under Book-Entry
Settlement and Clearance, Exchange Notes will be
issued in the form of a global note registered in the name of
DTC or its nominee and each beneficial owners interest in
it will be transferable in book-entry form through DTC. See
Book-Entry Settlement and Clearance.
Holders of Original Notes do not have any appraisal or
dissenters rights in connection with the Exchange Offer.
Original Notes that are not tendered for exchange or are
tendered but not accepted in connection with the Exchange Offer
will remain outstanding and be entitled to the benefits of the
Indenture, but certain registration and other rights under the
registration rights agreement will terminate and holders of the
Original Notes will generally not be entitled to any
registration rights under the registration rights agreement. See
Consequences of Failures to Properly Tender
Original Notes in the Exchange Offer.
We shall be considered to have accepted validly tendered
Original Notes if and when we have given oral (to be followed by
prompt written notice) or written notice to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders
for the purposes of receiving the Exchange Notes from us.
If any tendered Original Notes are not accepted for exchange
because of an invalid tender, the occurrence of certain other
events described in this prospectus or otherwise, we will return
the Original Notes, without expense, to the tendering holder
promptly after the expiration date for the Exchange Offer.
Holders who tender Original Notes will not be required to pay
brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes on exchange of
Original Notes in connection with the Exchange Offer. We will
pay all charges and expenses, other than certain applicable
taxes described below, in connection with the Exchange Offer.
See Fees and Expenses.
Expiration
Date; Extensions; Amendments
The expiration date for the Exchange Offer is 12:00 midnight,
New York City time, on January 26, 2011, unless extended by
us in our sole discretion, in which case the term
expiration date shall mean the latest date and time
to which the Exchange Offer is extended.
We reserve the right, in our sole discretion:
|
|
|
|
|
subject to applicable law, to delay accepting any Original
Notes, to extend the Exchange Offer or to terminate the Exchange
Offer if, in our reasonable judgment, any of the conditions
described below shall not have been satisfied, by giving oral
(to be followed by prompt written notice) or written notice of
the delay, extension or termination to the Exchange
Agent; or
|
|
|
|
to amend the terms of the Exchange Offer in any manner.
|
If we amend the Exchange Offer in a manner that we consider
material, we will disclose such
35
amendment by means of a prospectus supplement, and we will
extend the Exchange Offer for a period of five to ten business
days, as required by law.
If we determine to extend, amend or terminate the Exchange
Offer, we will publicly announce this determination by making a
timely release through an appropriate news agency prior to
9:00am., New York City time, on the next business day after the
scheduled expiration date.
During any extension, all Original Notes previously tendered
will remain subject to the Exchange Offer and may be accepted
for exchange by us only upon expiration of the Exchange Offer,
unless validly withdrawn. If we terminate the Exchange Offer, we
will promptly return any Original Notes deposited, pursuant to
the Exchange Offer as required by
Rule 14e-1(c).
Interest
on the Exchange Notes
The Exchange Notes will bear interest at the rate of
97/8%
per annum from the most recent date to which interest on the
Original Notes has been paid. Interest will be payable
semi-annually on October 15 and April 15 of each year,
commencing April 15, 2011.
Conditions
to the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer, or
any extension of the Exchange Offer, we will not be required to
accept for exchange, or to exchange any Exchange Notes for any
of the Original Notes and we may terminate the Exchange Offer
or, at our option, modify, extend or otherwise amend the
Exchange Offer, if any of the following conditions exist on or
prior to the expiration date:
|
|
|
|
|
any action or event shall have occurred or been threatened, any
action shall have been taken, or any statute, rule, regulation,
judgment, order, stay, decree or injunction shall have been
issued, promulgated, enacted, entered, enforced or deemed to be
applicable to the Exchange Offer or the exchange of Original
Notes for the Exchange Notes under the Exchange Offer by or
before any court or governmental regulatory or administrative
agency, authority, instrumentality or tribunal, including,
without limitation, taxing authorities, that either:
|
(a) challenges the making of the Exchange Offer or the
exchange of Original Notes for Exchange Notes under the Exchange
Offer or might, directly or indirectly, be expected to prohibit,
prevent, restrict or delay consummation of, or might otherwise
adversely affect in any material manner, the Exchange Offer or
the exchange of Original Notes for the Exchange Notes under the
Exchange Offer; or
(b) in our reasonable judgment, could materially adversely
affect our (or our subsidiaries) or Holdings
business, condition (financial or otherwise), income,
operations, properties, assets, liabilities or prospects or
materially impair the contemplated benefits to us of the
Exchange Offer or the exchange of Original Notes for the
Exchange Notes under the Exchange Offer;
|
|
|
|
|
anything has occurred or may occur that would or might, in our
reasonable judgment, be expected to prohibit, prevent, restrict
or delay the Exchange Offer or impair our ability to realize the
anticipated benefits of the Exchange Offer;
|
|
|
|
there shall have occurred (a) any general suspension of or
limitation on trading in securities in the United States
securities or financial markets, whether or not mandatory,
(b) any material adverse change in the prices of the
Original Notes that are the subject of the Exchange Offer,
(c) a material impairment in the general trading market for
debt securities, (d) a declaration of a banking
|
36
|
|
|
|
|
moratorium or any suspension of payments in respect of banks by
federal or state authorities in the United States, whether or
not mandatory, (e) a commencement of a war, armed
hostilities, a terrorist act or other national or international
calamity directly or indirectly relating to the United States,
(f) any limitation, whether or not mandatory, by any
governmental authority on, or other event having a reasonable
likelihood of affecting, the extension of credit by banks or
other lending institutions in the United States, (g) any
material adverse change in the securities or financial markets
in the United States generally or (h) in the case of any of
the foregoing existing at the time of the commencement of the
Exchange Offer, a material acceleration or worsening
thereof; and
|
|
|
|
|
|
the Trustee with respect to the Indenture for the Original Notes
that are the subject of the Exchange Offer and the Exchange
Notes to be issued in the Exchange Offer shall have been
directed by any holders of Original Notes to object in any
respect to, or take any action that could, in our reasonable
judgment, adversely affect the consummation of the Exchange
Offer or the exchange of Original Notes for the Exchange Notes
under the Exchange Offer, or the Trustee shall have taken any
action that challenges the validity or effectiveness of the
procedures used by us in making the Exchange Offer or the
exchange of Original Notes for the Exchange Notes under the
Exchange Offer.
|
The foregoing conditions are for our sole benefit and may be
waived by us, in whole or in part, in our absolute discretion.
Any determination made by us concerning an event, development or
circumstance described or referred to above will be conclusive
and binding.
If any of the foregoing conditions are not satisfied, we may, at
any time on or prior to the expiration date:
|
|
|
|
|
terminate the Exchange Offer and promptly return all tendered
Original Notes to the respective tendering holders;
|
|
|
|
modify, extend or otherwise amend the Exchange Offer and retain
all tendered Original Notes until the expiration date, as
extended, subject, however, to the withdrawal rights of
holders; or
|
|
|
|
waive the unsatisfied conditions with respect to the Exchange
Offer and accept all Original Notes tendered and not previously
validly withdrawn, subject to any requirement to extend the
period of time during which the Exchange Offer is open.
|
Effect of
Tender
Any tender by a holder, and our subsequent acceptance of that
tender, of Original Notes will constitute a binding agreement
between that holder and us upon the terms and subject to the
conditions of the Exchange Offer described in this prospectus
and in the letter of transmittal. The participation in the
Exchange Offer by a tendering holder of Original Notes will
constitute the agreement by that holder to deliver good and
marketable title to the tendered Original Notes, free and clear
of any and all liens, restrictions, charges, pledges, security
interests, encumbrances or rights of any kind of third parties.
Absence
of Dissenters Rights
Holders of the Original Notes do not have any appraisal or
dissenters rights in connection with the Exchange Offer.
Procedures
for Tendering
If you wish to participate in the Exchange Offer and your
Original Notes are held by a custodial entity such as a bank,
broker, dealer, trust company or other nominee, you must
instruct that custodial entity to
37
tender your Original Notes on your behalf pursuant to the
procedures of that custodial entity. Please ensure you contact
your custodial entity as soon as possible to give them
sufficient time to meet your requested deadline.
To participate in the Exchange Offer, you must either:
|
|
|
|
|
complete, sign and date a letter of transmittal, or a facsimile
thereof, in accordance with the instructions in the letter of
transmittal, including guaranteeing the signatures to the letter
of transmittal, if required, and mail or otherwise deliver the
letter of transmittal or a facsimile thereof, together with the
certificates representing your Original Notes specified in the
letter of transmittal, to the Exchange Agent at the address
listed in the letter of transmittal, for receipt at or prior to
12:00 midnight, New York City time, on the expiration
date; or
|
|
|
|
comply with the Automated Tender Offer Program
(ATOP) procedures for book-entry transfer described
below at or prior to 12:00 midnight, New York City time, on the
expiration date.
|
The Exchange Agent and DTC have confirmed that the Exchange
Offer is eligible for ATOP with respect to book-entry notes held
through DTC. The letter of transmittal, or a facsimile thereof,
with any required signature guarantees, or, in the case of
book-entry transfer, an agents message in lieu of the
letter of transmittal, and any other required documents, must be
transmitted to and received by the Exchange Agent on or prior to
the expiration date at its address set forth below under the
caption Exchange Agent. Original Notes will not be
deemed to have been tendered until the letter of transmittal and
signature guarantees, if any, or agents message, is
received by the Exchange Agent.
Holders of Original Notes whose certificates for Original Notes
are not lost but are not immediately available or who cannot
deliver their certificates and all other documents required by
the letter of transmittal to the Exchange Agent at prior to
12:00 midnight, New York City time, on the expiration date, or
who cannot complete the procedures for book-entry transfer at or
prior to 12:00 midnight, New York City time, on the expiration
date, may tender their Original Notes according to the
guaranteed delivery procedures set forth in
Guaranteed Delivery Procedures below.
The tender by a holder of Original Notes will constitute an
agreement between us and the holder in accordance with the terms
and subject to the conditions set forth in this prospectus and
in the letter of transmittal.
The method of delivery of Original Notes, the letter of
transmittal and all other required documents to the Exchange
Agent is at the election and risk of the holders. Instead of
delivery by mail, we recommend that holders use an overnight or
hand delivery service, properly insured. In all cases,
sufficient time should be allowed to assure delivery to and
receipt by the Exchange Agent on or prior to the expiration
date. Do not send the letter of transmittal or any Original
Notes to anyone other than the Exchange Agent.
If you are tendering your Original Notes in exchange for the
Exchange Notes and anticipate delivering your letter of
transmittal and other documents other than through DTC, we urge
you to contact promptly a bank, broker or other intermediary
that has the capability to hold notes custodially through DTC to
arrange for receipt of any Original Notes to be delivered
pursuant to the Exchange Offer and to obtain the information
necessary to provide the required DTC participant with account
information in the letter of transmittal.
If you are a beneficial owner which holds Original Notes through
Euroclear (as defined herein) or Clearstream (as defined herein)
and wish to tender your Original Notes, you must instruct
Euroclear or Clearstream, as the case may be, to block the
account in respect of the tendered Original Notes in accordance
38
with the procedures established by Euroclear or Clearstream. You
are encouraged to contact Euroclear and Clearstream directly to
ascertain their procedure for tendering Original Notes.
Book-Entry
Delivery Procedures for Tendering Original Notes Held with
DTC
If you wish to tender Original Notes held on your behalf by a
nominee with DTC, you must:
|
|
|
|
|
inform your nominee of your interest in tendering your Original
Notes pursuant to the Exchange Offer; and
|
|
|
|
instruct your nominee to tender all Original Notes you wish to
be tendered in the Exchange Offer into the Exchange Agents
account at DTC at or prior to 12:00 midnight, New York City
time, on the expiration date.
|
Any financial institution that is a nominee in DTC, including
Euroclear and Clearstream, must tender Original Notes by
effecting a book-entry transfer of Original Notes to be tendered
in the Exchange Offer into the account of the Exchange Agent at
DTC by electronically transmitting its acceptance of the
Exchange Offer through the ATOP procedures for transfer. DTC
will then verify the acceptance, execute a book-entry delivery
to the Exchange Agents account at DTC and send an
agents message to the Exchange Agent. An
agents message is a message, transmitted by
DTC to, and received by, the Exchange Agent and forming part of
a book-entry confirmation, which states that DTC has received an
express acknowledgement from an organization that participates
in DTC (a participant), tendering Original Notes
that the participant has received and agrees to be bound by the
terms of the letter of transmittal and that we may enforce the
agreement against the participant. A letter of transmittal need
not accompany tenders effected through ATOP.
Proper
Execution and Delivery of the Letter of Transmittal
Signatures on a letter of transmittal or notice of withdrawal
described under Withdrawal of Tenders, as the
case may be, must be guaranteed by an eligible guarantor
institution unless the Original Notes tendered pursuant to the
letter of transmittal are tendered for the account of an
eligible guarantor institution. An eligible guarantor
institution is one of the following firms or other
entities identified in
Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended (the
Exchange Act) (as the terms are used in
Rule 17Ad-15):
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a bank;
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a broker, dealer, municipal securities dealer, municipal
securities broker, government securities dealer or government
securities broker;
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a credit union;
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a national securities exchange, registered securities
association or clearing agency; or
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a savings institution that is a participant in a Securities
Transfer Association recognized program.
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If signatures on a letter of transmittal or notice of withdrawal
are required to be guaranteed, that guarantee must be made by an
eligible institution.
If the letter of transmittal is signed by the holders of
Original Notes tendered thereby, the signatures must correspond
with the names as written on the face of the Original Notes
without any change whatsoever. If any of the Original Notes
tendered thereby are held by two or more holders, each holder
must sign the letter of transmittal. If any of the Original
Notes tendered thereby are registered in different names on
different
39
Original Notes, it will be necessary to complete, sign and
submit as many separate letters of transmittal, and any
accompanying documents, as there are different registrations of
certificates.
If Original Notes that are not tendered for exchange pursuant to
the Exchange Offer are to be returned to a person other than the
tendering holder, certificates for those Original Notes must be
endorsed or accompanied by an appropriate instrument of
transfer, signed exactly as the name of the registered owner
appears on the certificates, with the signatures on the
certificates or instruments of transfer guaranteed by an
eligible guarantor institution.
If the letter of transmittal is signed by a person other than
the holder of any Original Notes listed in the letter of
transmittal, those Original Notes must be properly endorsed or
accompanied by a properly completed bond power, signed by the
holder exactly as the holders name appears on those
Original Notes. If the letter of transmittal or any Original
Notes, bond powers or other instruments of transfer are signed
by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in
a fiduciary or representative capacity, those persons should so
indicate when signing, and, unless waived by us, evidence
satisfactory to us of their authority to so act must be
submitted with the letter of transmittal.
No alternative, conditional, irregular or contingent tenders
will be accepted. By executing the letter of transmittal, or
facsimile thereof, the tendering holders of Original Notes waive
any right to receive any notice of the acceptance for exchange
of their Original Notes. Tendering holders should indicate in
the applicable box in the letter of transmittal the name and
address to which payments
and/or
substitute certificates evidencing Original Notes for amounts
not tendered or not exchanged are to be issued or sent, if
different from the name and address of the person signing the
letter of transmittal. If those instructions are not given,
Original Notes not tendered or exchanged will be returned to the
tendering holder.
All questions as to the validity, form, eligibility, including
time of receipt, and acceptance and withdrawal of tendered
Original Notes will be determined by us in our absolute
discretion, which determination will be final and binding. We
reserve the absolute right to reject any and all tendered
Original Notes determined by us not to be in proper form or not
to be tendered properly or any tendered Original Notes our
acceptance of which would, in the opinion of our counsel, be
unlawful. We also reserve the right to waive, in our absolute
discretion, any defects, irregularities or conditions of tender
as to particular Original Notes, whether or not waived in the
case of other Original Notes. Our interpretation of the terms
and conditions of the Exchange Offer, including the terms and
instructions in the letter of transmittal, will be final and
binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Original Notes must
be cured within the time we determine. Neither we, the Exchange
Agent nor any other person will be under any duty to notify
holders of defects or irregularities with respect to tenders of
Original Notes, nor shall any such party incur any liability for
failure to give that notification. Tenders of Original Notes
will not be deemed to have been made until any defects or
irregularities therein have been cured or waived.
Any holder whose Original Notes have been mutilated, lost,
stolen or destroyed will be responsible for obtaining
replacement securities or for arranging for indemnification with
the trustee of the Original Notes. Holders may contact the
Exchange Agent for assistance with these matters.
In addition, we reserve the right, as set forth above under the
caption Conditions to the Exchange Offer, to
terminate the Exchange Offer. By tendering, each holder
represents and acknowledges to us, among other things, that:
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it has full power and authority to tender, sell, assign and
transfer the Original Notes it is tendering and that we will
acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not
subject to any adverse claim when the same are accepted by us;
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the Exchange Notes acquired in connection with the Exchange
Offer are being obtained in the ordinary course of business of
the person receiving the Exchange Notes;
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at the time of commencement of the Exchange Offer it had no
arrangement with any person to participate in a distribution of
such Exchange Notes;
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it is not an affiliate (as defined in Rule 405
under the Securities Act) of BKC or any of the
Guarantors; and
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if the holder is a broker-dealer, that it is not engaged in, and
does not intend to engage in, a distribution of the Exchange
Notes, and that it will receive Exchange Notes for its own
account in exchange for Original Notes that were acquired by
such broker-dealer as a result of market-making activities or
other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes. See Plan of
Distribution.
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Guaranteed
Delivery Procedures
If your certificates for Original Notes are not lost but are not
immediately available or you cannot deliver your certificates
and any other required documents to the Exchange Agent at or
prior to 12:00 midnight, New York City time, on the expiration
date, or you cannot complete the procedures for book-entry
transfer at or prior to 12:00 midnight, New York City time, on
the expiration date, you may nevertheless effect a tender of
your Original Notes if:
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the tender is made through an eligible institution;
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prior to the expiration date of the Exchange Offer, the Exchange
Agent receives by facsimile transmission, mail or hand delivery
from such eligible institution a validly completed and duly
executed notice of guaranteed delivery, substantially in the
form provided with this prospectus, or an agents message
with respect to guaranteed delivery which:
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¡
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sets forth your name and address and the amount of your Original
Notes tendered;
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¡
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states that the tender is being made thereby; and
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¡
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guarantees that within three trading days after the date of
execution of the notice of guaranteed delivery, the certificates
for all physically tendered Original Notes, in proper form for
transfer, or a book-entry confirmation, as the case may be, and
any other documents required by the letter of transmittal will
be deposited by the eligible institution with the Exchange
Agent; and
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the certificates for all physically tendered Original Notes, in
proper form for transfer, or a book-entry confirmation, as the
case may be, and all other documents required by the letter of
transmittal are received by the Exchange Agent within three
trading days after the date of execution of the notice of
guaranteed delivery.
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Withdrawal
of Tenders
Tenders of Original Notes in the Exchange Offer may be validly
withdrawn at any time prior to 12:00 midnight, New York City
time, on the expiration date.
For a withdrawal of a tender to be effective, a written or
facsimile transmission notice of withdrawal
41
must be received by the Exchange Agent prior to 12:00 midnight,
New York City time, on the expiration date at its address set
forth below under the caption Exchange Agent. The
withdrawal notice must:
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(1)
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specify the name of the tendering holder of Original Notes;
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(2)
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bear a description of the Original Notes to be withdrawn;
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(3) specify, in the case of Original Notes tendered
by delivery of certificates for those Original Notes, the
certificate numbers shown on the particular certificates
evidencing those Original Notes;
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(4)
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specify the aggregate principal amount represented by those
Original Notes;
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(5) specify, in the case of Original Notes tendered
by delivery of certificates for those Original Notes, the name
of the registered holder, if different from that of the
tendering holder, or specify, in the case of Original Notes
tendered by book-entry transfer, the name and number of the
account at DTC to be credited with the withdrawn Original
Notes; and
(6) be signed by the holder of those Original Notes
in the same manner as the original signature on the letter of
transmittal, including any required signature guarantees, or be
accompanied by evidence satisfactory to us that the person
withdrawing the tender has succeeded to the beneficial ownership
of those Original Notes.
The signature on any notice of withdrawal must be guaranteed by
an eligible guarantor institution, unless the Original Notes
have been tendered for the account of an eligible guarantor
institution.
If Original Notes have been tendered pursuant to the procedure
for book-entry transfer described in Book-Entry
Delivery Procedures for Tendering Original Notes Held with
DTC, any notice of withdrawal must comply with the
applicable procedures of DTC. All questions as to the validity,
form and eligibility and time of receipt of such notice will be
determined by BKC, whose determination shall be final and
binding on all parties. Any Original Notes so properly withdrawn
will be deemed not to have been validly tendered for exchange
for purposes of the Exchange Offer and no Exchange Notes will be
issued with respect thereto unless the Original Notes so
withdrawn are validly retendered. Any Original Notes that have
been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to
such holder (or, in the case of Original Notes tendered by
book-entry transfer into the Exchange Agents account at
DTC pursuant to the book-entry transfer procedures described in
Book-Entry Delivery Procedures for Tendering
Original Notes Held with DTC, such Original Notes will be
credited to an account maintained with DTC for the Original
Notes) as soon as practicable after withdrawal, rejection of the
tender or termination of the Exchange Offer. Properly withdrawn
Original Notes may be retendered by following the procedures
described above at any time at or prior to 12:00 midnight, New
York City time, on the expiration date.
Exchange
Agent
Wilmington Trust FSB has been appointed as Exchange Agent
in connection with the Exchange Offer. Questions and requests
for assistance, as well as requests for additional copies of
this prospectus or of the letter of transmittal, should be
directed to the Exchange Agent at its offices at Wilmington
Trust FSB,
c/o Wilmington
Trust Company, Corporate Capital Markets, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware
19890-1626.
The Exchange Agents telephone number is
(302) 636-6181
and facsimile number is
(302) 636-4139.
Fees and
Expenses
We will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange
42
Offer. We will pay certain other expenses to be incurred in
connection with the Exchange Offer, including the fees and
expenses of the Exchange Agent and certain accountant and legal
fees.
Holders who tender their Original Notes for exchange will not be
obligated to pay transfer taxes. If, however:
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Exchange Notes are to be delivered to, or issued in the name of,
any person other than the registered holder of the Original
Notes tendered;
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tendered Original Notes are registered in the name of any person
other than the person signing the letter of transmittal; or
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a transfer tax is imposed for any reason other than the exchange
of Original Notes in connection with the Exchange Offer;
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then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by
the tendering holder. If satisfactory evidence of payment of
such taxes or exemption from them is not submitted with the
letter of transmittal, the amount of such transfer taxes will be
billed directly to the tendering holder.
Accounting
Treatment
The Exchange Notes will be recorded at the same carrying value
as the Original Notes as reflected in our accounting records on
the date of the exchange. Accordingly, we will not recognize any
gain or loss for accounting purposes upon the completion of the
Exchange Offer.
Consequences
of Failures to Properly Tender Original Notes in the Exchange
Offer
Issuance of the Exchange Notes in exchange for the Original
Notes under the Exchange Offer will be made only after timely
receipt by the Exchange Agent of a properly completed and duly
executed letter of transmittal (or an agents message from
DTC) and the certificate(s) representing such Original Notes (or
confirmation of book-entry transfer), and all other required
documents. Therefore, holders of the Original Notes desiring to
tender such Original Notes in exchange for Exchange Notes should
allow sufficient time to ensure timely delivery. We are under no
duty to give notification of defects or irregularities of
tenders of Original Notes for exchange. Original Notes that are
not tendered or that are tendered but not accepted by us will,
following completion of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof under
the Securities Act, and, upon completion of the Exchange Offer,
certain registration rights under the registration rights
agreement will terminate.
In the event the Exchange Offer is completed, we generally will
not be required to register the remaining Original Notes,
subject to limited exceptions. Remaining Original Notes will
continue to be subject to the following restrictions on transfer:
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the remaining Original Notes may be resold only if registered
pursuant to the Securities Act, if any exemption from
registration is available, or if neither such registration nor
such exemption is required by law; and
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the remaining Original Notes will bear a legend restricting
transfer in the absence of registration or an exemption.
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We do not currently anticipate that we will register the
remaining Original Notes under the Securities Act. To the extent
that Original Notes are tendered and accepted in connection with
the Exchange Offer, any
43
trading market for remaining Original Notes could be adversely
affected. See Risk FactorsRisks Relating to the
Exchange Offer If you fail to exchange your Original
Notes, they will continue to be restricted securities and may
become more illiquid.
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Description
of Notes
General
Certain terms used in this description are defined under the
subheading Certain definitions below. In this
description, (i) the terms we,
our and us each refer to BKC
and its consolidated Subsidiaries; (ii) the term
Issuer refers only to BKC and not to any of
its Subsidiaries; (iii) Holdings refers
only to Burger King Holdings, Inc. and not to any of its
Subsidiaries and (iv) the Notes refers
to both the Original Notes and the Exchange Notes.
On October 19, 2010, the Issuer issued $800.0 million
in aggregate principal amount
97/8% Senior
Notes due 2018 under an indenture dated the Issue Date (the
Indenture) among the Issuer, the Guarantors
and Wilmington Trust, FSB, as trustee (the
Trustee). The Original Notes were issued in a
private transaction that is not subject to the registration
requirements of the Securities Act. Except as set forth herein,
the terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the
Trust Indenture Act.
The following description is only a summary of the material
provisions of the Indenture, does not purport to be complete and
is qualified in its entirety by reference to the provisions
thereof, including the definitions therein of certain terms used
below. We urge you to read the Indenture because it, and not
this description, defines your rights as a Holder of the Notes.
You may request copies of the Indenture at our address set forth
under the heading Prospectus Summary.
Brief
description of notes
The Notes are:
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general unsecured senior obligations of the Issuer;
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pari passu in right of payment with all existing and
future Senior Indebtedness (including the New Credit Facilities)
of the Issuer;
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effectively subordinated to all Secured Indebtedness of the
Issuer (including the New Credit Facilities) to the extent of
the value of the assets securing such Indebtedness;
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senior in right of payment to any future Subordinated
Indebtedness (as defined with respect to the Notes);
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initially guaranteed on a senior unsecured basis by Holdings and
each Restricted Subsidiary that guarantees the New Credit
Facilities; and
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structurally subordinated to all Indebtedness and other
liabilities, including preferred stock, of Non-Guarantor
Subsidiaries.
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Guarantees
The Guarantors, as primary obligors and not merely as sureties,
jointly and severally, irrevocably, fully and unconditionally
guarantee, on an unsecured senior basis, the performance and
full and punctual payment when due, whether at maturity, by
acceleration or otherwise, of all obligations of the Issuer
under the Indenture and the Notes, whether for payment of
principal of, premium, if any, or interest on the Notes,
expenses, indemnification or otherwise, on the terms set forth
in the Indenture by executing the Indenture.
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Holdings and the Restricted Subsidiaries (other than as detailed
below) initially guaranteed the Notes. Each of the Guarantees of
the Notes is a general unsecured obligation of each Guarantor
and is pari passu in right of payment with all existing
and future Senior Indebtedness of each such entity, is
effectively subordinated to all Secured Indebtedness of each
such entity to the extent of the value of the assets securing
such Indebtedness and is senior in right of payment to all
existing and future Subordinated Indebtedness of each such
entity.
Not all of the Issuers Subsidiaries guarantee the Notes.
The Notes are structurally subordinated to Indebtedness and
other liabilities of Non-Guarantor Subsidiaries. In the event of
a bankruptcy, liquidation or reorganization of any of these
Non-Guarantor Subsidiaries, the Non-Guarantor Subsidiaries will
pay the holders of their debt and their trade creditors before
they will be able to distribute any of their assets to the
Issuer.
As more fully described below under Certain
covenantsLimitation on guarantees of indebtedness by
restricted subsidiaries, the Indenture requires that each
of the Issuers Wholly-Owned Restricted Subsidiaries that
guarantees the obligations under the New Credit Facilities or
any other Indebtedness of the Issuer, shall also be a Guarantor
of the Notes.
The obligations of each Guarantor under its Guarantee are
limited as necessary to prevent such Guarantee from constituting
a fraudulent conveyance under applicable law.
Any 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.
The Indenture provides that each Guarantor may consolidate with
or merge with or into or sell its assets to the Issuer or
another Guarantor without limitation, or with other Persons upon
the terms and conditions set forth in the Indenture. See
Certain CovenantsMerger, Consolidation or Sale of
All or Substantially All Assets.
If a Guarantee were rendered voidable, it could be subordinated
by a court to all other indebtedness (including guarantees and
other contingent liabilities) of the Guarantor, and, depending
on the amount of such indebtedness, a Guarantors liability
on its Guarantee could be reduced to zero. See Risk
factorsRisks related to the notesFederal and state
fraudulent transfer laws may permit a court to void the notes
and/or the
guarantees, and if that occurs, you may not receive any payments
on the notes. A Guarantee by a Guarantor shall provide by
its terms that it shall be automatically and unconditionally
released and discharged upon:
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(1) (a)
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in the case of a Subsidiary Guarantor, any sale, exchange,
disposition or transfer (by merger or otherwise) of (x) the
Capital Stock of such Subsidiary Guarantor, after which the
applicable Subsidiary Guarantor is no longer a Restricted
Subsidiary, or (y) all or substantially all the assets of
such Subsidiary Guarantor, which sale, exchange, disposition or
transfer in each case is made in compliance with the applicable
provisions of the Indenture;
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(b)
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the release or discharge of the guarantee by such Guarantor of
the New Credit Facilities or the guarantee which resulted in the
creation of such Guarantee, except a discharge or release by or
as a result of payment under such guarantee;
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(c)
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the proper designation of any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary in compliance with the
applicable provisions of the Indenture; or
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(d)
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the Issuer exercising its legal defeasance option or covenant
defeasance option as described under Legal defeasance and
covenant defeasance or the Issuers obligations under
the Indenture being discharged in accordance with the terms of
the Indenture; and
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(2)
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such Guarantor delivering 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 transaction have been complied with.
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Ranking
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 to all Senior Indebtedness of the
Issuer or the relevant Guarantor, as the case may be, including
the obligations of the Issuer and such Guarantor under the New
Credit Facilities.
The Notes are effectively subordinated in right of payment to
all of the Issuers and each Guarantors existing and
future Secured Indebtedness to the extent of the value of the
assets securing such Indebtedness. As of September 30,
2010, on a pro forma basis, after giving effect to the
consummation of the Transactions, the Issuer would have had
$1,850.8 million (excluding OID under the New Term
Facility) of outstanding Secured Indebtedness, consisting
entirely of Secured Indebtedness under the New Credit Facilities
(after giving effect to outstanding letters of credit for
approximately $38.0 million) and $70.2 million of capital
lease obligations, and the ability to borrow up to
$450.0 million of additional secured Indebtedness.
Although the Indenture contains limitations on the amount of
additional Indebtedness that the Issuer and the Subsidiary
Guarantors may incur, under certain circumstances the amount of
such Indebtedness could be substantial and, in any case, such
Indebtedness may be Senior Indebtedness. See Certain
covenantsLimitation on incurrence of indebtedness and
issuance of disqualified stock and preferred stock.
Paying
agent and registrar for the notes
The Issuer will maintain one or more paying agents for the
Notes. The initial paying agent for the Notes will be the
Trustee. The Issuer will also maintain a registrar with respect
to the Notes. The initial registrar will be the Trustee. The
registrar will maintain a register reflecting ownership of the
Notes outstanding from time to time and will make payments on
and facilitate transfers of Notes on behalf of the Issuer.
The Issuer may change the paying agents or the registrars
without prior notice to the Holders. The Issuer or any of its
Subsidiaries may act as a paying agent or registrar.
Transfer
and exchange
A Holder may transfer or exchange Notes in accordance with the
Indenture. The registrar and the Trustee may require a Holder to
furnish appropriate endorsements and transfer documents in
connection with a transfer of Notes. Holders will be required to
pay all taxes due on transfer. The Issuer is not required to
transfer or exchange any Note selected for redemption or
tendered (and not withdrawn) for repurchase in connection with a
Change of Control Offer, an Asset Sale Offer or other tender
offer. Also, the Issuer is not required to transfer or exchange
any Note for a period of 15 days before a selection of
Notes to be redeemed.
Principal,
maturity and interest
The Issuer issued $800.0 million in aggregate principal
amount of Original Notes on October 19,
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2010. The Notes will mature on October 15, 2018. Subject to
compliance with the covenant described below under
Certain covenantsLimitation on incurrence of
indebtedness and issuance of disqualified stock and preferred
stock, the Issuer may issue additional Notes from time to
time after this offering under the Indenture
(Additional Notes). The Original Notes
offered by the Issuer and any Additional Notes subsequently
issued under the Indenture will be treated as a single class for
all purposes under the Indenture, including waivers, amendments,
redemptions and offers to purchase. Unless the context requires
otherwise, references to Notes for all purposes of
the Indenture and this Description of Notes include
any Additional Notes that are actually issued.
Interest on the Notes accrues at the rate of
97/8%
per annum and will be payable semi-annually in arrears on each
April 15 and October 15, commencing on April 15, 2011,
to the Holders of record of the Notes on the immediately
preceding April 1 and October 1. Interest on the Notes will
accrue from the most recent date to which interest has been paid
with respect to such Notes, or if no interest has been paid with
respect to such Notes, from the date of original issuance
thereof. Interest on the Notes will be computed on the basis of
a 360-day
year comprised of twelve
30-day
months.
Principal of, premium, if any, and interest on the Notes will be
payable at the office or agency of the Issuer maintained for
such purpose or, at the option of the Issuer, payment of
interest may be made by check mailed to the Holders of the Notes
at their respective addresses set forth in the register of
Holders; provided that all payments of principal,
premium, if any, and interest with respect to the Notes
represented by one or more global notes registered in the name
of or held by DTC or its nominee will be made by wire transfer
of immediately available funds to the accounts specified by the
Holder or Holders thereof. Until otherwise designated by the
Issuer, the Issuers office or agency will be the office of
the Trustee maintained for such purpose.
Mandatory
redemption; offers to purchase; open market purchases
The Issuer is not required to make any mandatory redemption or
sinking fund payments with respect to the Notes. However, under
certain circumstances, the Issuer may be required to offer to
purchase Notes as described under the caption
Repurchase at the option of holders. We may at
any time and from time to time purchase Notes in the open market
or otherwise.
Optional
redemption
Except as set forth below, the Issuer will not be entitled to
redeem Notes at its option prior to October 15, 2014.
At any time prior to October 15, 2014, the Issuer may
redeem all or a part of the Notes, upon notice as described
under the heading Repurchase at the option of
holders Selection and notice, at a redemption
price equal to 100% of the principal amount of the Notes
redeemed plus the Applicable Premium as of, and accrued and
unpaid interest to, but excluding the date of redemption (the
Redemption Date), subject to the rights
of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date.
On and after October 15, 2014, the Issuer may redeem the
Notes, in whole or in part, upon notice as described under the
heading Repurchase at the option of
holders Selection and notice, at the redemption
prices (expressed as percentages of principal amount of the
Notes to be redeemed) set forth below, plus accrued and unpaid
interest thereon, but excluding the applicable
Redemption Date, subject to the right of
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Holders of record on the relevant record date to receive
interest due on the relevant interest payment date, if redeemed
during the twelve-month period beginning on October 15 of each
of the years indicated below:
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Year
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Percentage
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2014
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104.938
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%
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2015
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102.469
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%
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2016 and thereafter
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100.000
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%
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In addition, until October 15, 2013, the Issuer may, at its
option, upon notice as described under the heading
Repurchase at the option of holdersSelection and
notice, on one or more occasions redeem up to 35% of the
aggregate principal amount of Notes issued under the Indenture
at a redemption price equal to 109.875% of the aggregate
principal amount thereof, plus accrued and unpaid interest
thereon, but excluding the applicable Redemption Date,
subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment
date, with the net cash proceeds of one or more Equity
Offerings; provided that (a) at least 50% of the sum
of the aggregate principal amount of Notes originally issued
under the Indenture on the Issue Date and any Additional Notes
of the relevant series that are issued under the Indenture after
the Issue Date remains outstanding immediately after the
occurrence of each such redemption and (b) that each such
redemption occurs within 90 days of the date of closing of
each such Equity Offering. Any redemption or notice of any
redemption may, at the Issuers discretion, be subject to
one or more conditions precedent, including, but not limited to,
completion of an Equity Offering, other offering or other
corporate transaction or event. Notice of any redemption in
respect of an Equity Offering may be given prior to the
completion thereof.
The Trustee shall select the Notes to be redeemed in the manner
described under Repurchase at the option of
holdersSelection and notice.
Repurchase
at the option of holders
Change
of control
The Notes provide that if a Change of Control occurs, unless the
Issuer has previously or concurrently mailed a redemption notice
with respect to all the outstanding Notes as described under
Optional redemption, the Issuer will make an offer
to purchase all of the Notes pursuant to the offer described
below (the Change of Control Offer) at a
price in cash (the Change of Control Payment)
equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest to the date of purchase, subject to
the right of Holders of record of the Notes on the relevant
record date to receive interest due on the relevant interest
payment date. Within 30 days following any Change of
Control, the Issuer will send notice of such Change of Control
Offer by first-class mail, with a copy to the Trustee, to each
Holder of Notes to the address of such Holder appearing in the
security register or otherwise in accordance with the procedures
of DTC, with the following information:
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(1)
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that a Change of Control Offer is being made pursuant to the
covenant entitled Change of Control, and that all
Notes properly tendered pursuant to such Change of Control Offer
will be accepted for payment by the Issuer;
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(2)
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the purchase price and the purchase date, which will be no
earlier than 30 days nor later than 60 days from the
date such notice is mailed (the Change of Control
Payment Date);
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(3)
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that any Note not properly tendered will remain outstanding and
continue to accrue interest;
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(4)
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that unless the Issuer defaults in the payment of the Change of
Control Payment, all Notes
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49
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accepted for payment pursuant to the Change of Control Offer
will cease to accrue interest on the Change of Control Payment
Date;
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(5)
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that Holders electing to have any Notes purchased pursuant to a
Change of Control Offer will be required to surrender such
Notes, with the form entitled Option of Holder to Elect
Purchase on the reverse of such Notes completed, to the
paying agent specified in the notice at the address specified in
the notice prior to the close of business on the third Business
Day preceding the Change of Control Payment Date;
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(6)
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that Holders will be entitled to withdraw their tendered Notes
and their election to require the Issuer to purchase such Notes,
provided that the paying agent receives, not later than
the expiration time of the Change of Control Offer, a telegram,
telex, facsimile transmission or letter setting forth the name
of the Holder of the Notes, the principal amount of Notes
tendered for purchase, and a statement that such Holder is
withdrawing its tendered Notes and its election to have such
Notes purchased;
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(7)
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that if the Issuer is redeeming less than all of the Notes, the
Holders of the remaining Notes will be issued new Notes and such
new Notes will be equal in principal amount to the unpurchased
portion of the Notes surrendered. The unpurchased portion of the
Notes must be equal to $2,000 or an integral multiple of $1,000
in excess thereof;
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(8)
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if such notice is delivered prior to the occurrence of a Change
of Control, stating that the Change of Control Offer is
conditional on the occurrence of such Change of Control; and
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(9)
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the other instructions, as determined by us, consistent with the
covenant described hereunder, that a Holder must follow.
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The Issuer 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 or regulations
are applicable in connection with the repurchase by the Issuer
of Notes pursuant to a Change of Control Offer. To the extent
that the provisions of any securities laws or regulations
conflict with the provisions of the Indenture, the Issuer will
comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described
in the Indenture by virtue thereof.
On the Change of Control Payment Date, the Issuer will, to the
extent permitted by law,
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(1)
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accept for payment all Notes issued by it or portions thereof
properly tendered pursuant to the Change of Control Offer;
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(2)
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deposit with the paying agent 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)
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deliver, or cause to be delivered, to the Trustee for
cancellation the Notes so accepted together with an
Officers Certificate to the Trustee stating that such
Notes or portions thereof have been tendered to and purchased by
the Issuer.
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The New Credit Facilities prohibit or limit, and future credit
agreements or other agreements to which the Issuer becomes a
party may prohibit or limit, the Issuer from purchasing any
Notes as a result of a Change of Control. In the event a Change
of Control occurs at a time when the Issuer is prohibited from
purchasing the Notes, the Issuer could seek the consent of its
lenders to permit the purchase of the Notes or could attempt to
refinance the borrowings that contain such prohibition. If the
Issuer does not obtain such consent or repay
50
such borrowings, the Issuer will remain prohibited from
purchasing the Notes. In such case, the Issuers failure to
purchase tendered Notes after any applicable notice and lapse of
time would constitute an Event of Default under the Indenture.
The New Credit Facilities, and future credit agreements or other
agreements relating to Senior Indebtedness to which the Issuer
becomes a party may, provide that certain change of control
events with respect to the Issuer would constitute a default
thereunder (including a Change of Control under the Indenture).
If we experience a change of control that triggers a default
under our New Credit Facilities, we could seek a waiver of such
default or seek to refinance our New Credit Facilities. In the
event we do not obtain such a waiver or refinance the New Credit
Facilities, such default could result in amounts outstanding
under our New Credit Facilities being declared due and payable.
Our ability to pay cash to the Holders of Notes following the
occurrence of a Change of Control may be limited by our
then-existing financial resources. Therefore, sufficient funds
may not be available when necessary to make any required
repurchases. See Risk factorsRisks related to the
notesWe may not be able to repurchase the notes upon a
change of control.
The Change of Control purchase feature of the Notes may in
certain circumstances make more difficult or discourage a sale
or takeover of us and, thus, the removal of incumbent
management. The Change of Control purchase feature is a result
of negotiations between the Initial Purchasers and us. 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 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 covenants
described under Certain covenantsLimitation on
incurrence of indebtedness and issuance of disqualified stock
and preferred stock and Certain
covenantsLiens. Such restrictions in the Indenture
can be waived only with the consent of the Holders of a majority
in principal amount of the Notes then outstanding. Except for
the limitations contained in such covenants, however, the
Indenture will not contain any covenants or provisions that may
afford Holders of the Notes protection in the event of a highly
leveraged transaction.
We will not be required to make a Change of Control Offer
following 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 requirements set forth in the Indenture
applicable to a Change of Control Offer made by us and purchases
all Notes validly tendered and not withdrawn under such Change
of Control Offer. Notwithstanding anything to the contrary
herein, a Change of Control Offer may be made in advance of a
Change of Control, conditional upon such Change of Control, if a
definitive agreement is in place for the Change of Control at
the time of making of the Change of Control Offer.
The definition of Change of Control includes a
disposition of all or substantially all of the assets of the
Issuer and its Subsidiaries or Holdings and its Subsidiaries, in
each case taken as a whole, to any Person other than a direct or
indirect parent entity or a Permitted Holder. 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 the assets of the
Issuer. As a result, it may be unclear as to whether a Change of
Control has occurred and whether a Holder of Notes may require
the Issuer to make an offer to repurchase the Notes as described
above.
The provisions under the Indenture relating to the Issuers
obligation to make an offer to repurchase
51
the Notes as a result of a Change of Control may be waived or
modified with the written consent of the Holders of a majority
in principal amount of the Notes.
Asset
sales
The Indenture provides that the Issuer 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 Issuer or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least
equal to the fair market value (as determined in Good Faith by
the Issuer) of the assets sold or otherwise disposed of; and
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(2)
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except in the case of a Permitted Asset Swap, at least 75% of
the consideration therefor received by the Issuer or such
Restricted Subsidiary, as the case may be, is 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 Issuers or such
Restricted Subsidiarys most recent balance sheet or in the
footnotes thereto, or if incurred or accrued subsequent to the
date of such balance sheet, such liabilities that would have
been shown on the Issuer or such Restricted Subsidiarys
balance sheet or in the footnotes thereto if such incurrence or
accrual had taken place on or prior to the date of such balance
sheet, as determined in Good Faith by the Issuer) of the Issuer
or such Restricted Subsidiary, other than liabilities that are
by their terms subordinated to the Notes, that are assumed by
the transferee of any such assets and for which the Issuer and
all of its Restricted Subsidiaries have been validly released by
all creditors in writing,
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(b)
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any securities or other obligations received by the Issuer or
such Restricted Subsidiary from such transferee that are
converted by the Issuer or such Restricted Subsidiary into cash
or Cash Equivalents (to the extent of the cash or Cash
Equivalents received) within 180 days following the closing
of such Asset Sale, and
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(c)
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any Designated Non-cash Consideration received by the Issuer or
such Restricted Subsidiary 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
1.0% 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,
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shall be deemed to be Cash Equivalents for purposes of this
provision and for no other purpose.
Within 450 days after the receipt of any Net Proceeds of
any Asset Sale, the Issuer or such Restricted Subsidiary, at its
option, may apply the Net Proceeds from such Asset Sale,
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(a)
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Obligations under the New Credit Facilities, and to
correspondingly reduce commitments with respect thereto;
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(b)
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Obligations under Indebtedness (other than Subordinated
Indebtedness) that is secured by a Lien, which Lien is permitted
by the Indenture, and to correspondingly reduce commitments with
respect thereto;
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52
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(c)
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Obligations under other Indebtedness (other than Subordinated
Indebtedness) (and to correspondingly reduce commitments with
respect thereto); provided that, to the extent the Issuer
reduces Obligations under such Indebtedness, the Issuer shall
equally and ratably reduce Obligations under the Notes as
provided under Optional 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; or
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(d)
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Indebtedness of a Non-Guarantor Subsidiary, other than
Indebtedness owed to the Issuer or another Restricted Subsidiary
(and correspondingly reduce commitments with respect thereto);
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(2)
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to make (a) an Investment in any one or more businesses,
provided that such Investment in any business is in the
form of the acquisition of Capital Stock and results in the
Issuer or another of its Restricted Subsidiaries, as the case
may be, owning an amount of the Capital Stock of such business
such that it constitutes a Restricted Subsidiary,
(b) capital expenditures or (c) acquisitions of other
assets (other than working capital assets), in the case of each
of (a), (b) and (c), used or useful in a Similar
Business; or
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(3)
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to make an Investment in (a) any one or more businesses,
provided that such Investment in any business is in the
form of the acquisition of Capital Stock and results in the
Issuer or another of its Restricted Subsidiaries, as the case
may be, owning an amount of the Capital Stock of such business
such that it constitutes a Restricted Subsidiary,
(b) properties (other than working capital assets) or
(c) acquisitions of other assets (other than working
capital assets) that, in the case of each of (a), (b) and
(c), replace the businesses, properties
and/or
assets that are the subject of such Asset Sale;
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provided that, in the case of clauses (2) and
(3) above, a binding commitment shall be treated as a
permitted application of the Net Proceeds from the date of such
commitment so long as the Issuer or such other Restricted
Subsidiary enters into such commitment with the good faith
expectation that such Net Proceeds will be applied to satisfy
such commitment within 180 days of such commitment (an
Acceptable Commitment) and, in the event any
Acceptable Commitment is later cancelled or terminated for any
reason before the Net Proceeds are applied in connection
therewith, the Issuer or such Restricted Subsidiary enters into
another Acceptable Commitment (a Second
Commitment) within 180 days of such cancellation
or termination; provided further that if any Second
Commitment is later cancelled or terminated for any reason
before such Net Proceeds are applied, then such Net Proceeds
shall constitute Excess Proceeds.
Any Net Proceeds from the Asset Sale that are not invested or
applied as provided and within the time period set forth in the
first sentence of the preceding paragraph will be deemed to
constitute Excess Proceeds. When the aggregate
amount of Excess Proceeds exceeds $40.0 million, the Issuer
shall make an offer to all Holders of the Notes and, if required
by the terms of any Indebtedness that is pari passu with
the Notes (Pari Passu Indebtedness), to the
holders of such Pari Passu Indebtedness (an Asset Sale
Offer), to purchase the maximum aggregate principal
amount of the Notes and such Pari Passu Indebtedness that is
equal to $2,000 or an integral multiple of $1,000 in excess
thereof that may be purchased out of the Excess Proceeds at an
offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest to the date
fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. The Issuer will commence
an Asset Sale Offer with respect to Excess Proceeds within ten
Business Days after the date that Excess Proceeds exceed
$40.0 million by mailing the notice required pursuant to
the terms of the Indenture, with a copy to the Trustee or
otherwise in accordance with the
53
procedures of DTC. The Issuer may satisfy the foregoing
obligations with respect to such Net Proceeds from an Asset Sale
by making an Asset Sale Offer with respect to such Net Proceeds
prior to the expiration of the Application Period.
To the extent that the aggregate amount of Notes and such Pari
Passu Indebtedness tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Issuer may use any remaining
Excess Proceeds for general corporate purposes, subject to
compliance with other covenants contained in the Indenture. If
the aggregate principal amount of Notes or the Pari Passu
Indebtedness surrendered by such holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes
and the Issuer or agent for such Pari Passu Indebtedness shall
select such Pari Passu Indebtedness to be purchased on a pro
rata basis based on the accreted value or principal amount of
the Notes or such Pari Passu Indebtedness tendered. Upon
completion of any such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
Pending the final application of any Net Proceeds pursuant to
this covenant, the holder of such Net Proceeds may apply such
Net Proceeds temporarily to reduce Indebtedness outstanding
under a revolving credit facility or otherwise use such Net
Proceeds in any manner not prohibited by the Indenture.
The Issuer 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 or regulations
are applicable in connection with the repurchase of the Notes
pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with
the provisions of the Indenture, the Issuer will comply with the
applicable securities laws and regulations and shall not be
deemed to have breached its obligations described in the
Indenture by virtue thereof.
The New Credit Facilities prohibit or limit, and future credit
agreements or other agreements to which the Issuer becomes a
party may prohibit or limit, the Issuer from purchasing any
Notes pursuant to this Asset Sale covenant. In the event the
Issuer is prohibited from purchasing the Notes, the Issuer could
seek the consent of its lenders to the purchase of the Notes or
could attempt to refinance the borrowings that contain such
prohibition. If the Issuer does not obtain such consent or repay
such borrowings, it will remain prohibited from purchasing the
Notes. In such case, the Issuers failure to purchase
tendered Notes would constitute an Event of Default under the
Indenture.
Selection
and notice
If the Issuer is redeeming less than all of the Notes issued by
it at any time, the Trustee will select the Notes to be redeemed
(a) if the Notes are listed on any national securities
exchange, in compliance with the requirements of the principal
national securities exchange on which the Notes are listed,
(b) on a pro rata basis (to the extent practicable) or
(c) by lot or such other similar method in accordance with
the procedures of DTC. No Notes of $2,000 or less can be
redeemed in part.
Notices of purchase or redemption shall be mailed by first-class
mail, postage prepaid, at least 30 but not more than
60 days before the purchase or redemption date to each
Holder of record of Notes at such Holders registered
address or otherwise delivered in accordance with the procedures
of DTC, except that redemption notices may be mailed more than
60 days prior to a redemption date if the notice is issued
in connection with a defeasance of the Notes or a satisfaction
and discharge of the Indenture. If any Note is to be purchased
or redeemed in part only, any notice of purchase or redemption
that relates to such Note shall state the portion of the
principal amount thereof that has been or is to be purchased or
redeemed.
54
The Issuer will issue a new Note in a principal amount equal to
the unredeemed portion of the original Note in the name of the
Holder upon cancellation of the original Note. Notes called for
redemption, including Notes called for Special Mandatory
Redemption, become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on Notes or
portions thereof called for redemption.
Certain
covenants
Set forth below are summaries of certain covenants that are
contained in the Indenture.
Effectiveness
of covenants
Following the first day:
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(1)
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the Notes have an Investment Grade Rating from both of the
Ratings Agencies; and
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(2)
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no Default has occurred and is continuing under the Indenture;
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the Issuer and its Restricted Subsidiaries are not subject to
the provisions of the Indenture summarized under the following
headings (collectively, the Suspended
Covenants):
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Repurchase at the option of holders,
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Limitation on restricted payments,
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Limitation on indebtedness,
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Clause (4) of the first paragraph of Merger,
consolidation or sale of all or substantially all assets,
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Transactions with Affiliates, and
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Dividend and other payment restrictions affecting
restricted subsidiaries.
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If at any time the Notes credit rating is downgraded from
an Investment Grade Rating by any Rating Agency or if a Default
or Event of Default occurs and is continuing, then the Suspended
Covenants will thereafter be reinstated as if such covenants had
never been suspended (the Reinstatement Date)
and be applicable pursuant to the terms of the Indenture
(including in connection with performing any calculation or
assessment to determine compliance with the terms of the
Indenture), unless and until the Notes subsequently attain an
Investment Grade Rating and no Default or Event of Default is in
existence (in which event the Suspended Covenants shall no
longer be in effect for such time that the notes maintain an
Investment Grade Rating and no Default or Event of Default is in
existence); provided, however, that no Default, Event of
Default or breach of any kind shall be deemed to exist under the
Indenture, the Registration Rights Agreement, the Notes or the
Guarantees with respect to the Suspended Covenants based on, and
none of Holdings the Issuer or any of its Subsidiaries shall
bear any liability for, any actions taken or events occurring
during the Suspension Period (as defined below), or any actions
taken at any time pursuant to any contractual obligation arising
prior to the Reinstatement Date, regardless of whether such
actions or events would have been permitted if the applicable
Suspended Covenants remained in effect during such period. The
period of time between the date of suspension of the covenants
and the Reinstatement Date is referred to as the
Suspension Period.
On the Reinstatement Date, all Indebtedness Incurred during the
Suspension Period will be classified
55
to have been Incurred pursuant to the first paragraph of
Limitation on indebtedness or one of the
clauses set forth in the second paragraph of
Limitation on indebtedness (to the extent such
Indebtedness would be permitted to be Incurred thereunder as of
the Reinstatement Date and after giving effect to Indebtedness
Incurred prior to the Suspension Period and outstanding on the
Reinstatement Date). To the extent such Indebtedness would not
be so permitted to be Incurred pursuant to the first or second
paragraph of Limitation on indebtedness, 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 second paragraph of Limitation on
indebtedness. Calculations made after the Reinstatement
Date of the amount available to be made as Restricted Payments
under Limitation on restricted payments will
be made as though the covenants described under
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 reduce the amount available to be made as
Restricted Payments under the first paragraph of
Limitation on restricted payments.
During any period when the Suspended Covenants are suspended,
the board of directors of the Issuer may not designate any of
the Issuers Subsidiaries as Unrestricted Subsidiaries
pursuant to the Indenture.
There can be no assurance that the Notes will ever achieve or
maintain Investment Grade Ratings.
Limitation
on restricted payments
The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(I) declare or pay any dividend or make any payment or
distribution on account of the Issuers, or any of its
Restricted Subsidiaries, Equity Interests, including any
dividend or distribution payable in connection with any merger
or consolidation other than:
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(a)
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dividends or distributions by the Issuer payable solely in
Equity Interests (other than Disqualified Stock) of the Issuer;
or
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(b)
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dividends or distributions by a Restricted Subsidiary to the
Issuer or any other Restricted Subsidiary (and if such
Restricted Subsidiary is not a Wholly-Owned Subsidiary, to its
other holders of common stock on a pro rata basis) so long as,
in the case of any dividend or distribution payable on or in
respect of any class or series of securities issued by a
Restricted Subsidiary other than a Wholly-Owned Subsidiary, the
Issuer or a Restricted Subsidiary receives at least its pro rata
share of such dividend or distribution in accordance with its
Equity Interests in such class or series of securities;
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(II) purchase, redeem, defease or otherwise acquire or
retire for value any Equity Interests of the Issuer or any
direct or indirect parent of the Issuer, including in connection
with any merger or consolidation involving the Issuer;
(III) make any principal payment on, or redeem, repurchase,
defease or otherwise acquire or retire for value, in each case,
prior to any scheduled repayment, sinking fund payment or
maturity, any Subordinated Indebtedness, other than:
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(a)
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Indebtedness permitted under clauses (7) and (8) of
the second paragraph of the covenant described under
Limitation on incurrence of indebtedness and
issuance of disqualified stock and preferred stock; or
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(b)
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the purchase, repurchase or other acquisition of Subordinated
Indebtedness purchased in anticipation of satisfying a sinking
fund obligation, principal installment or final maturity, in
each case due within one year of the date of purchase,
repurchase or acquisition; or (IV) make any Restricted
Investment
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(all such payments and other actions set forth in clauses
(I) through (IV) above being collectively referred to
as Restricted Payments), unless, at the time of such
Restricted Payment:
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(1)
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no Default shall have occurred and be continuing or would occur
as a consequence thereof;
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(2)
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immediately after giving effect to such transaction on a pro
forma basis, the Issuer could incur $1.00 of additional
Indebtedness under the provisions of the first paragraph of the
covenant described under Limitation on incurrence of
indebtedness and issuance of disqualified stock and preferred
stock; and
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(3)
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such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Issuer and its
Restricted Subsidiaries after the Issue Date (including
Restricted Payments permitted by clauses (1), (9) and
(14) of the next succeeding paragraph, but excluding all
other Restricted Payments permitted by the next succeeding
paragraph), is less than the sum of (without duplication):
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(a)
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50% of the Consolidated Net Income of the Issuer for the period
(taken as one accounting period) commencing October 1, 2010
to the end of the Issuers most recently ended fiscal
quarter for which internal financial statements are available at
the time of such Restricted Payment, or, in the case such
Consolidated Net Income for such period is a deficit, minus 100%
of such deficit; plus
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(b)
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100% of the aggregate net cash proceeds and the fair market
value, as determined in Good Faith by the Issuer, of marketable
securities or other property received by the Issuer since
immediately after the Issue Date (other than net cash proceeds
to the extent such net cash proceeds have been used to incur
Indebtedness, Disqualified Stock or Preferred Stock pursuant to
clause (12)(a) of the second paragraph of Limitation
on incurrence of indebtedness and issuance of disqualified stock
and preferred stock) from the issue or sale of:
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(i)(A) Equity Interests of the Issuer, including Treasury
Capital Stock (as defined below), but excluding cash proceeds
and the fair market value, as determined in Good Faith by the
Issuer, of marketable securities or other property received from
the sale of:
(x) Equity Interests to members of management, members of the
board of managers or directors or consultants of the Issuer, any
direct or indirect parent company of the Issuer and the
Issuers Subsidiaries after the Issue Date to the extent
such amounts have been applied to Restricted Payments made in
accordance with clause (4) of the next succeeding
paragraph; and
(y) Designated Preferred Stock; and
(B) to the extent such net cash proceeds are actually
contributed to the Issuer, Equity Interests of the Issuers
direct or indirect parent companies (excluding contributions of
the proceeds from the sale of Designated Preferred Stock of such
companies or contributions to the extent such amounts have been
applied to
57
Restricted Payments made in accordance with clause (4) of
the next succeeding paragraph); or
(ii) debt securities of the Issuer that have been converted into
or exchanged for such Equity Interests of the Issuer or any
direct or indirect parent of the Issuer;
provided, however, that in addition to clauses
(x) and (y) referred to above, this clause
(b) shall not include the proceeds from (V) Refunding
Capital Stock (as defined below), (X) Equity Interests or
convertible debt securities of the Issuer sold to a Restricted
Subsidiary, as the case may be, (Y) Disqualified Stock or
debt securities that have been converted into Disqualified
Stock, (Z) Excluded Contributions; plus
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(c)
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100% of the aggregate amount of cash and the fair market value,
as determined in Good Faith by the Issuer, of marketable
securities or other property contributed to the capital of the
Issuer following the Issue Date (other than net cash proceeds to
the extent such net cash proceeds (i) have been used to
incur Indebtedness or issue Disqualified Stock or Preferred
Stock pursuant to clause (12)(a) of the second paragraph of
Limitation on incurrence of indebtedness and
issuance of disqualified stock and preferred stock,
(ii) are contributed by a Restricted Subsidiary or
(iii) constitute Excluded Contributions); plus
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(d)
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100% of the aggregate amount received in cash and the fair
market value, as determined in Good Faith by the Issuer, of
marketable securities or other property received by means of:
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(i) the sale or other disposition (other than to the Issuer or a
Restricted Subsidiary) of Restricted Investments made by the
Issuer or its Restricted Subsidiaries and repurchases and
redemptions of such Restricted Investments from the Issuer or
its Restricted Subsidiaries and repayments of loans or advances,
and releases of guarantees, which constitute Restricted
Investments by the Issuer or its Restricted Subsidiaries, in
each case after the Issue Date; or
(ii) the sale (other than to the Issuer or a Restricted
Subsidiary) of the stock of an Unrestricted Subsidiary or a
distribution from an Unrestricted Subsidiary (other than in each
case to the extent of the amount of the Investment in such
Unrestricted Subsidiary made by the Issuer or a Restricted
Subsidiary pursuant to clauses (7) or (11) of the next
succeeding paragraph or to the extent of the amount of the
Investment that constituted a Permitted Investment) or a
dividend from an Unrestricted Subsidiary after the Issue Date;
plus
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(e)
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in the case of the redesignation of an Unrestricted Subsidiary
as a Restricted Subsidiary or the merger or consolidation of an
Unrestricted Subsidiary into the Issuer or a Restricted
Subsidiary or the transfer of all or substantially all of the
assets of an Unrestricted Subsidiary to the Issuer or a
Restricted Subsidiary after the Issue Date, the fair market
value of the Investment in such Unrestricted Subsidiary (or the
assets transferred), as determined in Good Faith by the Issuer
or, if such fair market value exceeds $50.0 million, in
writing by an Independent Financial Advisor, at the time of the
redesignation of such Unrestricted Subsidiary as a Restricted
Subsidiary or at the time of such merger or consolidation or
transfer of assets (after taking into consideration any
Indebtedness associated with the Unrestricted Subsidiary so
designated or merged or consolidated or Indebtedness associated
with the assets so transferred), other than to the extent of the
amount of the Investment in such Unrestricted Subsidiary made by
the Issuer or a Restricted Subsidiary pursuant to clauses
(7) or (11) of the next succeeding paragraph or to the
extent of the amount of the Investment that constituted a
Permitted Investment.
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58
The foregoing provisions will not prohibit:
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(1)
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the payment of any dividend or distribution within 60 days
after the date of declaration thereof, if at the date of
declaration such payment would have complied with the provisions
of the Indenture or the redemption, repurchase or retirement of
Indebtedness if, at the date of any irrevocable redemption
notice such payment would have complied with the provisions of
the Indenture;
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(2)
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(a) the redemption, repurchase, retirement or other
acquisition of any Equity Interests (Treasury Capital
Stock) or Subordinated Indebtedness of the Issuer or any
Equity Interests of any direct or indirect parent company of the
Issuer, in exchange for, or out of the proceeds of, the
substantially concurrent sale or issuance (other than to a
Restricted Subsidiary) of, Equity Interests of the Issuer or any
direct or indirect parent company of the Issuer to the extent
contributed to the Issuer (in each case, other than any
Disqualified Stock) (Refunding Capital Stock),
(b) the declaration and payment of dividends on Treasury
Capital Stock out of the proceeds of the substantially
concurrent sale or issuance (other than to a Subsidiary of the
Issuer or to an employee stock ownership plan or any trust
established by the Issuer or any of its Subsidiaries) of
Refunding Capital Stock, and (c) if immediately prior to
the retirement of Treasury Capital Stock, the declaration and
payment of dividends thereon was permitted under clause
(6) of this paragraph, the declaration and payment of
dividends on the Refunding Capital Stock (other than Refunding
Capital Stock the proceeds of which were used to redeem,
repurchase, retire or otherwise acquire any Equity Interests of
any direct or indirect parent company of the Issuer) in an
aggregate amount per year no greater than the aggregate amount
of dividends per annum that were declarable and payable on such
treasury Capital Stock immediately prior to such retirement;
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(3)
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the redemption, repurchase, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness of the Issuer
or a Subsidiary Guarantor made by exchange for, or out of the
proceeds of, the substantially concurrent sale of, new
Indebtedness of the Issuer or such Subsidiary Guarantor, as the
case may be, which is incurred in compliance with
Limitation on incurrence of indebtedness and
issuance of disqualified stock and preferred stock so long
as:
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(a)
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the principal amount (or accreted value, if applicable) of such
new Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus any accrued and unpaid
interest on, the Subordinated Indebtedness being so redeemed,
repurchased, defeased, exchanged, acquired or retired for value,
plus the amount of any premium (including any tender premiums),
defeasance costs and any fees and expenses incurred in
connection with such redemption, repurchase, defeasance,
exchange, acquisition or retirement and the issuance of such new
Indebtedness;
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(b)
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such new Indebtedness is subordinated to the Notes or the
applicable Guarantee at least to the same extent as such
Subordinated Indebtedness so repurchased, defeased, exchanged,
redeemed, acquired or retired for value;
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(c)
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such new Indebtedness has a final scheduled maturity date equal
to or later than the earlier of the final scheduled maturity
date of the Subordinated Indebtedness being so redeemed,
repurchased, defeased, exchanged, acquired or retired, or the
maturity date of the Notes; and
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(d)
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such new Indebtedness has a Weighted Average Life to Maturity
equal to or greater than the remaining Weighted Average Life to
Maturity of the Subordinated Indebtedness being so redeemed,
repurchased, defeased, exchanged, acquired or retired;
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(4)
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a Restricted Payment to pay for the repurchase, retirement or
other acquisition or retirement for
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59
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value of Equity Interests (other than Disqualified Stock) of the
Issuer or any of its direct or indirect parent companies held by
any future, present or former employee, member of the board of
directors or consultant of the Issuer, any of its Subsidiaries
or any of its direct or indirect parent companies (permitted
transferees, assigns, estates or heirs of such employee,
director or consultant), pursuant to any management equity plan
or stock option plan or any other management or employee benefit
plan or agreement, including any Equity Interests rolled over by
management of the Issuer in the Transactions; provided,
however, that the aggregate Restricted Payments made under
this clause (4) do not exceed in any calendar year
$25.0 million (with unused amounts in any calendar year
being carried over to succeeding calendar years subject to a
maximum (without giving effect to the following proviso) of
$50.0 million in any calendar year); provided
further that such amount in any calendar year may be
increased by an amount not to exceed:
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(a)
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the cash proceeds from the sale of Equity Interests (other than
Disqualified Stock) of the Issuer and, to the extent contributed
to the Issuer, Equity Interests of any of the Issuers
direct or indirect parent companies, in each case to any
employee, member of the board of directors or consultant of the
Issuer, any of its Subsidiaries or any of its direct or indirect
parent companies that occurs after the Issue Date, to the extent
the cash proceeds from the sale of such Equity Interests have
not otherwise been applied to the payment of Restricted Payments
by virtue of clause (3) of the first paragraph of this
covenant; plus
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(b)
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the cash proceeds of key man life insurance policies received by
the Issuer or its Restricted Subsidiaries after the Issue Date;
less
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(c)
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the amount of any Restricted Payments previously made with the
cash proceeds described in clauses (a) and (b) of this
clause (4);
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and provided further that cancellation of Indebtedness
owing to the Issuer or any Restricted Subsidiary from any
employee, member of the board of directors or consultant of the
Issuer, any of the Issuers direct or indirect parent
companies or any of the Issuers Restricted Subsidiaries in
connection with a repurchase of Equity Interests of the Issuer
or any of its direct or indirect parent companies will not be
deemed to constitute a Restricted Payment for purposes of this
covenant or any other provision of the Indenture;
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(5)
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the declaration and payment of dividends to holders of any class
or series of Disqualified Stock of the Issuer or any of its
Restricted Subsidiaries issued in accordance with the covenant
described under Limitation on incurrence of
indebtedness and issuance of disqualified stock and preferred
stock to the extent such dividends are included in the
definition of Fixed Charges;
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(6) (a)
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the declaration and payment of dividends and distributions to
holders of any class or series of Designated Preferred Stock
(other than Disqualified Stock) issued by the Issuer after the
Issue Date; provided that the amount of dividends paid
pursuant to this clause (a) shall not exceed the aggregate
amount of cash actually received by the Issuer from the sale of
such Designated Preferred Stock;
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(b)
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the declaration and payment of dividends and distributions to a
direct or indirect parent company of the Issuer, the proceeds of
which will be used to fund the payment of dividends to holders
of any class or series of Designated Preferred Stock (other than
Disqualified Stock) of such parent company issued after the
Issue Date; provided that the amount of dividends paid
pursuant to this clause (b) shall not exceed the aggregate
amount of cash actually contributed to the Issuer from the sale
of such Designated Preferred Stock; or
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(c)
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the declaration and payment of dividends and distributions on
Refunding Capital Stock that is Preferred Stock in excess of the
dividends declarable and payable thereon pursuant to clause
(2) of this paragraph;
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provided, however, in the case of each of (a),
(b) and (c) of this clause (6), that for the most
recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the
date of issuance of such Designated Preferred Stock, after
giving effect to such issuance or declaration on a pro
forma basis, the Issuer and its Restricted Subsidiaries on a
consolidated basis would have had a Fixed Charge Coverage Ratio
of at least 2.00 to 1.00;
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(7)
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Investments in Unrestricted Subsidiaries taken together with all
other Investments made pursuant to this clause (7) that are
at the time outstanding, without giving effect to the sale of an
Unrestricted Subsidiary to the extent the proceeds of such sale
do not consist of cash or marketable securities, not to exceed
the greater of (x) $50.0 million and (y) 1.0% of
Total Assets;
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(8)
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repurchases of Equity Interests deemed to occur upon exercise of
stock options or warrants if such Equity Interests represent a
portion of the exercise price of such options or warrants;
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(9)
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the declaration and payment of dividends and distributions on
the Issuers common stock (or the payment of dividends to
any direct or indirect parent entity of the Issuer to fund a
payment of dividends on such entitys common stock),
following the consummation of the first public offering of the
Issuers common stock or the common stock of any of its
direct or indirect parent companies after the Issue Date, of up
to 6% per annum of the net cash proceeds received by or
contributed to the Issuer in or from any such public offering,
other than public offerings with respect to the Issuers
common stock registered on
Form S-4
or
Form S-8
and other than any public sale constituting an Excluded
Contribution;
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(10)
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Restricted Payments that are made with Excluded Contributions;
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(11)
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other Restricted Payments in an aggregate amount, taken together
with all other Restricted Payments made pursuant to this clause
(11), that are at the time outstanding (without giving effect to
the sale of an Investment to the extent the proceeds of such
sale do not consist of, or have not been subsequently sold or
transferred for, cash or marketable securities) not to exceed
$75.0 million at the time made;
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(12)
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distributions or payments of Securitization Fees, sales
contributions and other transfers of Securitization Assets and
purchases of Securitization Assets pursuant to a Securitization
Repurchase Obligation, in each case in connection with a
Qualified Securitization Financing;
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(13)
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any Restricted Payment used to fund the Transactions and the
fees and expenses related thereto or used to fund amounts owed
to Affiliates (including as a result of the cancellation or
vesting of outstanding options and other equity-based awards, in
connection therewith) in each case, as described herein and to
the extent permitted by the covenant described under
Transactions with affiliates; provided
that payments to Affiliates due to the termination of agreements
with the Sponsor described under Certain relationships and
related party transactions or similar agreements shall be
permitted by this clause (13) only to the extent such
termination is attributable to an underwritten registered public
offering of common stock of the Issuer or any direct or indirect
parent of the Issuer or to a Change of Control;
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(14)
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the repurchase, redemption or other acquisition or retirement
for value of any Preferred Stock or Subordinated Indebtedness
pursuant to in accordance with the provisions similar to those
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61
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described under the captions Repurchase at the option of
holdersChange of control and Repurchase at the
option of holdersAsset sales; provided that
all Notes tendered by Holders in connection with a Change of
Control Offer or Asset Sale Offer, as applicable, have been
repurchased, redeemed or acquired for value;
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(15)
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the declaration and payment of dividends by the Issuer to, or
the making of loans to, any direct or indirect parent company in
amounts required for any direct or indirect parent companies to
pay, in each case without duplication,
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(a)
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franchise taxes and other fees, taxes and expenses required to
maintain their corporate existence;
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(b)
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foreign, federal, state and local income taxes, to the extent
such income taxes are attributable to the income of the Issuer
and its Restricted Subsidiaries and, to the extent of the amount
actually received from its Unrestricted Subsidiaries, in amounts
required to pay such taxes to the extent attributable to the
income of such Unrestricted Subsidiaries; provided that
in each case the amount of such payments in any fiscal year does
not exceed the amount that the Issuer and its Restricted
Subsidiaries would be required to pay in respect of foreign,
federal, state and local taxes for such fiscal year were the
Issuer, its Restricted Subsidiaries and its Unrestricted
Subsidiaries (to the extent described above) to pay such taxes
separately from any such parent entity;
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(c)
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customary salary, bonus and other benefits payable to officers
and employees of any direct or indirect parent company of the
Issuer to the extent such salaries, bonuses and other benefits
are attributable to the ownership or operation of the Issuer and
its Restricted Subsidiaries;
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(d)
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general corporate operating and overhead costs and expenses of
any direct or indirect parent company of the Issuer to the
extent such costs and expenses are attributable to the ownership
or operation of the Issuer and its Restricted Subsidiaries;
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(e)
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amounts required for any direct or indirect parent company of
the Issuer to pay fees and expenses incurred by any direct or
indirect parent company of the Issuer related to (i) the
maintenance of such parent entity of its corporate or other
entity existence and performance of its obligations under the
Indenture and the Registration Rights Agreement and similar
obligations under the New Credit Facilities to the extent such
obligations are permitted by the covenant described under
Limitation on activities of Holdings and
(ii) any unsuccessful equity or debt offering of such
parent company; and
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(f)
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taxes with respect to income of any direct or indirect parent
company of the Issuer derived from funding made available to the
Issuer and its Restricted Subsidiaries by such direct or
indirect parent company;
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(16)
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the distribution, by dividend or otherwise, of shares of Capital
Stock of, or Indebtedness owed to the Issuer or a Restricted
Subsidiary by, Unrestricted Subsidiaries (other than
Unrestricted Subsidiaries, the primary assets of which are cash
and/or Cash
Equivalents); and
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(17)
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cash payments in lieu of the issuance of fractional shares or
interests in connection with the exercise of warrants, options
or other rights or securities convertible into or exchangeable
for Capital Stock of the Issuer or any direct or indirect parent
company of the Issuer; provided that any such cash
payment shall not be for the purpose of evading the limitation
of this covenant;
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62
provided, however, that at the time of, and after giving
effect to, any Restricted Payment permitted under clauses (7),
(9), (11) and (16), no Default shall have occurred and be
continuing or would occur as a consequence thereof.
The amount of all Restricted Payments (other than cash) will be
the fair market value (as determined in Good Faith by the
Issuer) on the date of such Restricted Payment of the assets or
securities proposed to be paid, transferred or issued by the
Issuer or such Restricted Subsidiary, as the case may be,
pursuant to such Restricted Payment.
As of the Issue Date, all of the Issuers Subsidiaries were
Restricted Subsidiaries. The Issuer will not permit any
Unrestricted Subsidiary to become a Restricted Subsidiary except
pursuant to the last sentence of the definition of
Unrestricted Subsidiary. For purposes of designating
any Restricted Subsidiary as an Unrestricted Subsidiary, all
outstanding Investments by the Issuer and its Restricted
Subsidiaries (except to the extent repaid) in the Subsidiary so
designated will be deemed to be Investments in an amount
determined as set forth in the last sentence of the definition
of Investment. Such designation will be
permitted only if a Restricted Payment in such amount would be
permitted at such time, whether pursuant to this covenant or
pursuant to the definition of Permitted
Investments, and if such Subsidiary otherwise meets
the definition of an Unrestricted Subsidiary. Unrestricted
Subsidiaries will not be subject to any of the restrictive
covenants set forth in the Indenture.
Limitation
on incurrence of indebtedness and issuance of disqualified stock
and preferred stock
The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise (collectively,
incur and collectively, an
incurrence) with respect to any Indebtedness
(including Acquired Indebtedness) and the Issuer will not issue
any shares of Disqualified Stock and will not permit any
Restricted Subsidiary to issue any shares of Disqualified Stock
or Preferred Stock; provided, however, that the Issuer
may incur Indebtedness (including Acquired Indebtedness) or
issue shares of Disqualified Stock, and any of its Restricted
Subsidiaries may incur Indebtedness (including Acquired
Indebtedness), issue shares of Disqualified Stock and issue
shares of Preferred Stock, if the Fixed Charge Coverage Ratio on
a consolidated basis for the Issuer and its Restricted
Subsidiaries most recently ended four fiscal quarters for
which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock or Preferred Stock is issued
would have been at least 2.00 to 1.00, determined on a pro
forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had
been incurred, or the Disqualified Stock or Preferred Stock had
been issued, as the case may be, and the application of proceeds
therefrom had occurred at the beginning of such four-quarter
period; provided, further, that Non-Guarantor
Subsidiaries may not incur Indebtedness or Disqualified Stock or
Preferred Stock if, after giving pro forma effect to such
incurrence or issuance (including a pro forma application
of the net proceeds therefrom), more than an aggregate of
$100.0 million of Indebtedness or Disqualified Stock or
Preferred Stock of Non- Guarantor Subsidiaries would be
outstanding pursuant to this paragraph at such time.
The foregoing limitations will not apply to:
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(1)
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the incurrence of Indebtedness under Credit Facilities by the
Issuer or any of the Subsidiary Guarantors and the issuance and
creation of letters of credit and bankers acceptances
thereunder (with letters of credit and bankers acceptances
being deemed to have a principal amount equal to the face amount
thereof), up to an aggregate principal amount of
$2,000.0 million outstanding at any one time;
provided that the Issuer or any of the Subsidiary
Guarantors may incur Indebtedness under Credit Facilities up to
an aggregate principal amount of $2,450.0 million if the
Consolidated Secured Debt Ratio would be no greater than 4.00 to
1.00 at the time of incurrence;
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63
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(2)
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the incurrence by the Issuer and any Subsidiary Guarantor of
Indebtedness represented by the Notes (including any Guarantee)
(other than any Additional Notes) and any Guarantee thereof;
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(3)
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Indebtedness of the Issuer and its Restricted Subsidiaries in
existence on the Issue Date (other than Indebtedness described
in clauses (1) and (2));
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(4)
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Indebtedness (including Capitalized Lease Obligations) incurred,
or Disqualified Stock and Preferred Stock issued by the Issuer
or any of its Restricted Subsidiaries, to finance the purchase,
lease or improvement of property (real or personal) or equipment
that is used or useful in a Similar Business, whether through
the direct purchase of assets or the Capital Stock of any Person
owning such assets; provided that the aggregate amount of
Indebtedness, Disqualified Stock and Preferred Stock incurred
pursuant to this clause (4), when aggregated with the
outstanding amount of Indebtedness, Disqualified Stock and
Preferred Stock under clause (13) incurred to refinance
Indebtedness, Disqualified Stock and Preferred Stock initially
incurred in reliance on this clause (4), does not exceed the
greater of (x) $150.0 million and (y) 3.0% of the
Issuers Total Assets at any one time outstanding;
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(5)
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Indebtedness incurred by the Issuer or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect
to letters of credit issued in the ordinary course of business,
including, without limitation, letters of credit in respect of
workers compensation claims, health, disability or other
employee benefits or property, casualty or liability insurance
or self insurance, or other Indebtedness with respect to
reimbursement type obligations regarding workers
compensation claims; provided, however, that upon the
drawing of such letters of credit or the incurrence of such
Indebtedness, such obligations are reimbursed within
30 days following such drawing or incurrence;
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(6)
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Indebtedness arising from agreements of the Issuer or its
Restricted Subsidiaries providing for indemnification,
adjustment of purchase price or similar obligations, in each
case, incurred or assumed in connection with the acquisition or
disposition of any business, assets or a Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or a Subsidiary for the
purpose of financing such acquisition; provided, however,
that
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(a)
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such Indebtedness is not reflected on the balance sheet of the
Issuer, or any of its Restricted Subsidiaries prepared in
accordance with GAAP (contingent obligations referred to in a
footnote to financial statements and not otherwise reflected on
the balance sheet will not be deemed to be reflected on such
balance sheet for purposes of this clause (6)(a)); and
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(b)
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with respect to a disposition, the maximum assumable liability
in respect of all such Indebtedness shall at no time exceed the
gross proceeds including non-cash proceeds (the fair market
value of such non-cash proceeds being measured at the time
received and without giving effect to any subsequent changes in
value) actually received by the Issuer and its Restricted
Subsidiaries in connection with such disposition;
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(7)
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Indebtedness of the Issuer to a Restricted Subsidiary;
provided that any such Indebtedness owing to a
Non-Guarantor Subsidiary is expressly subordinated in right of
payment to the Notes; provided, further, that any
subsequent issuance or transfer of any Capital Stock or any
other event which results in any Restricted Subsidiary ceasing
to be a Restricted Subsidiary or any other subsequent transfer
of any such Indebtedness (except to the Issuer or another
Restricted Subsidiary) shall be deemed, in each case, to be an
incurrence of such Indebtedness not permitted by this clause;
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(8)
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Indebtedness of a Restricted Subsidiary owing to the Issuer or
another Restricted Subsidiary; provided that if a
Subsidiary Guarantor incurs such Indebtedness owing to a
Restricted Subsidiary that is not a Subsidiary Guarantor, such
Indebtedness is expressly subordinated in right of payment to
the Guarantee of the Notes of such Subsidiary Guarantor;
provided further that any subsequent issuance or transfer
of any Capital Stock or any other event which results in any
such Restricted Subsidiary ceasing to be a Restricted Subsidiary
or any subsequent transfer of any such Indebtedness (except to
the Issuer or another Restricted Subsidiary) shall be deemed, in
each case, to be an incurrence of such Indebtedness not
permitted by this clause;
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(9)
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shares of Preferred Stock of a Restricted Subsidiary issued to
the Issuer or another Restricted Subsidiary; provided
that any subsequent issuance or transfer of any Capital Stock or
any other event which results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any other subsequent
transfer of any such shares of Preferred Stock (except to the
Issuer or another of its Restricted Subsidiaries) shall be
deemed in each case to be an issuance of such shares of
Preferred Stock not permitted by this clause;
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(10)
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Hedging Obligations (excluding Hedging Obligations entered into
for speculative purposes) for the purpose of limiting interest
rate risk, exchange rate risk or commodity pricing risk;
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(11)
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obligations in respect of performance, bid, appeal and surety
bonds and performance and completion guarantees or obligations
in respect of letters of credit related thereto provided by the
Issuer or any of its Restricted Subsidiaries in the ordinary
course of business;
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(12)
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(a) Indebtedness or Disqualified Stock of the Issuer
and Indebtedness, Disqualified Stock or Preferred Stock of the
Issuer or any Restricted Subsidiary equal to 100.0% of the net
cash proceeds received by the Issuer since immediately after the
Issue Date from the issue or sale of Equity Interests of the
Issuer or cash contributed to the capital of the Issuer (in each
case, other than Excluded Contributions or proceeds of
Disqualified Stock or Designated Preferred Stock or sales of
Equity Interests to the Issuer or any of its Subsidiaries or
amounts applied to make a Restricted Payment in accordance with
clause (2) of the second paragraph of Certain
covenantsLimitation on restricted payments) as
determined in accordance with clauses (3)(b) and (3)(c) of the
first paragraph of Limitation on Restricted
Payments to the extent such net cash proceeds or cash have
not been applied pursuant to such clauses to make Restricted
Payments or to make other Investments, payments or exchanges
pursuant to the second paragraph of Limitation on
Restricted Payments or to make Permitted Investments
(other than Permitted Investments specified in clauses
(1) and (3) of the definition thereof) (together with
amounts applied under clause (13) to refinance Indebtedness
or Disqualified Stock initially incurred in reliance on this
clause 12(a)) and (b) Indebtedness or Disqualified
Stock of the Issuer and Indebtedness, Disqualified Stock or
Preferred Stock of any Restricted Subsidiary not otherwise
permitted hereunder in an aggregate principal amount or
liquidation preference, which when aggregated with the principal
amount and liquidation preference of all other Indebtedness,
Disqualified Stock and Preferred Stock then outstanding and
incurred pursuant to this clause 12(b), does not at any one
time outstanding exceed $150.0 million;
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(13)
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the incurrence or issuance by the Issuer of Indebtedness or
Disqualified Stock or the incurrence or issuance by a Restricted
Subsidiary of Indebtedness, Disqualified Stock or Preferred
Stock which serves to refund or refinance any Indebtedness
incurred or Disqualified Stock or Preferred Stock issued as
permitted under the first paragraph of this covenant and clauses
(2), (3), (4) and (12)(a) above, this clause (13) and
clause (14) below or any Indebtedness incurred or
Disqualified Stock or Preferred Stock issued to so refund or
refinance such Indebtedness, Disqualified Stock or Preferred
Stock including additional Indebtedness incurred or Disqualified
Stock or Preferred
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Stock issued to pay premiums (including tender premiums),
defeasance costs and fees in connection therewith (the
Refinancing Indebtedness) prior to its
respective maturity; provided, however, that such
Refinancing Indebtedness:
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(a)
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has a Weighted Average Life to Maturity at the time such
Refinancing Indebtedness is incurred which is not less than the
remaining Weighted Average Life to Maturity of the Indebtedness,
Disqualified Stock or Preferred Stock being refunded or
refinanced,
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(b)
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to the extent such Refinancing Indebtedness refinances
(i) Indebtedness subordinated or pari passu to the
Notes or any Guarantee thereof, such Refinancing Indebtedness is
subordinated or pari passu to the Notes or the Guarantee
at least to the same extent as the Indebtedness being refinanced
or refunded or (ii) Disqualified Stock or Preferred Stock,
such Refinancing Indebtedness must be Disqualified Stock or
Preferred Stock, respectively,
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(i) Indebtedness, Disqualified Stock or Preferred Stock of a
Non-Guarantor Subsidiary that refinances Indebtedness,
Disqualified Stock or Preferred Stock of the Issuer;
(ii) Indebtedness, Disqualified Stock or Preferred Stock of a
Non-Guarantor Subsidiary that refinances Indebtedness,
Disqualified Stock or Preferred Stock of a Subsidiary Guarantor;
or
(iii) Indebtedness, Disqualified Stock or Preferred Stock of the
Issuer or a Restricted Subsidiary that refinances Indebtedness,
Disqualified Stock or Preferred Stock of an Unrestricted
Subsidiary;
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(d)
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shall not be in a principal amount in excess of the principal
amount of, premium, if any, accrued interest on and related fees
and expenses (including tender premiums) of, the Indebtedness
being refunded or refinanced, or
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(e)
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shall not have a Stated Maturity date prior to the earlier of
the Stated Maturity of the Indebtedness being so refunded or
refinanced or the Stated Maturity of the Notes;
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and provided further that subclauses (a) and
(e) of this clause (13) will not apply to any
refunding or refinancing of any Indebtedness outstanding under
the New Credit Facilities;
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(14)
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Indebtedness, Disqualified Stock or Preferred Stock of
(x) the Issuer or a Restricted Subsidiary incurred or
issued to finance an acquisition or (y) Persons that are
acquired by the Issuer or any Restricted Subsidiary or merged
into or consolidated with the Issuer or a Restricted Subsidiary
in accordance with the terms of the Indenture; provided
that after giving effect to such acquisition, merger or
consolidation, either
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(a)
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the Issuer would be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first sentence of this covenant, or
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(b)
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the Fixed Charge Coverage Ratio of the Issuer and the Restricted
Subsidiaries is greater than immediately prior to such
acquisition, merger or consolidation;
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(15)
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Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft
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or similar instrument drawn against insufficient funds in the
ordinary course of business; provided that such
Indebtedness is extinguished within five Business Days of its
incurrence;
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(16)
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Indebtedness of the Issuer or any of its Restricted Subsidiaries
supported by a letter of credit issued pursuant to the New
Credit Facilities, in a principal amount not in excess of the
stated amount of such letter of credit;
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(17) (a)
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any guarantee by the Issuer or a Subsidiary Guarantor of
Indebtedness or other obligations of any Restricted Subsidiary
so long as the incurrence of such Indebtedness is permitted
under the terms of the Indenture; provided that if such
Indebtedness is by its express terms subordinated in right of
payment to the Guarantee of such Restricted Subsidiary, any such
guarantee of the Issuer or such Subsidiary Guarantor with
respect to such Indebtedness shall be subordinated in right of
payment to the Notes or such Subsidiary Guarantors
Guarantee with respect to the Notes substantially to the same
extent as such Indebtedness is subordinated to the Guarantee of
such Restricted Subsidiary, as applicable;
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(b)
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any guarantee by a Subsidiary Guarantor of Indebtedness of the
Issuer provided that such guarantee is incurred in
accordance with the covenant described below under
Limitation on Guarantees of Indebtedness by
Restricted Subsidiaries; provided that if such
Indebtedness is by its express terms subordinated in right of
payment to the Notes, any such guarantee of such Subsidiary
Guarantor with respect to such Indebtedness shall be
subordinated in right of payment to the Notes or such Subsidiary
Guarantors Guarantee with respect to the Notes
substantially to the same extent as such Indebtedness is
subordinated to the Notes, as applicable or
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(c)
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any guarantee by a Non-Guarantor Subsidiary of Indebtedness of
another Non- Guarantor Subsidiary incurred in accordance with
the terms of the Indenture;
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(18)
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Indebtedness of Foreign Subsidiaries of the Issuer incurred not
to exceed $75.0 million at any one time outstanding;
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(19)
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Indebtedness of the Issuer or any of its Restricted Subsidiaries
consisting of (i) the financing of insurance premiums or
(ii) take-or-pay
obligations contained in supply arrangements, in each case
incurred in the ordinary course of business;
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(20)
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Indebtedness consisting of Indebtedness issued by the Issuer or
any of its Restricted Subsidiaries to current or former
officers, members of the board of directors and employees and
consultants thereof, their respective estates, spouses or former
spouses, in each case to finance, either directly or through
promissory notes issued to such persons, the purchase or
redemption of Equity Interests of the Issuer or any direct or
indirect parent company of the Issuer to the extent described in
clause (4) of the second paragraph under the caption
Limitation on restricted payments; and
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(21)
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Guarantees of or the assumption of up to $300.0 million at
any time outstanding of Indebtedness of Franchisees, suppliers,
distributors or licensees of the Issuer and its Restricted
Subsidiaries, in each case to the extent such guarantee or
assumption constitutes a Permitted Investment.
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For purposes of determining compliance with this covenant:
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(1)
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in the event that an item of Indebtedness, Disqualified Stock or
Preferred Stock (or any portion thereof) meets the criteria of
more than one of the categories of permitted Indebtedness,
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Disqualified Stock or Preferred Stock described in clauses
(1) through (20) above or is entitled to be incurred
pursuant to the first paragraph of this covenant, the Issuer, in
its sole discretion, will classify or reclassify such item of
Indebtedness, Disqualified Stock or Preferred Stock (or any
portion thereof) and will only be required to include the amount
and type of such Indebtedness, Disqualified Stock or Preferred
Stock in one of the above clauses or the first paragraph of this
covenant. Additionally, all or any portion of any item of
Indebtedness may later be classified as having been incurred
pursuant to any category of permitted Indebtedness described in
clauses (1) through (20) above or pursuant to the
first paragraph of this covenant so long as such Indebtedness is
permitted to be incurred pursuant to such provision at the time
of reclassification. Notwithstanding the foregoing, all
Indebtedness outstanding under the New Credit Facilities on the
Issue Date will be treated as incurred on the Issue Date under
clause (1) of the preceding paragraph and may not later be
reclassified; and
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(2)
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at the time of incurrence, the Issuer will be entitled to divide
and classify an item of Indebtedness in more than one of the
types of Indebtedness described in the first and second
paragraphs above.
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Accrual of interest or dividends, the accretion of accreted
value, the accretion or amortization of original issue discount
and the payment of interest or dividends in the form of
additional Indebtedness, Disqualified Stock or Preferred Stock
will not be deemed to be an incurrence of Indebtedness,
Disqualified Stock or Preferred Stock for purposes of this
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 debt, or first committed, in the case of revolving
credit debt; 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.
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 respective Indebtedness is denominated that is in effect on
the date of such refinancing.
The Indenture provides that the Issuer will not, and will not
permit any Subsidiary 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 Issuer or such Subsidiary Guarantor, as the case may be,
unless such Indebtedness is expressly subordinated in right of
payment to the Notes or such Subsidiary Guarantors
Guarantee to the extent and in the same manner as such
Indebtedness is subordinated to other Indebtedness of the Issuer
or such Subsidiary Guarantor, as the case may be.
The Indenture will not treat (1) unsecured Indebtedness as
subordinated or junior to Secured Indebtedness merely because it
is unsecured or (2) Senior Indebtedness as subordinated or
junior to any other Senior Indebtedness merely because it has a
junior priority with respect to the same collateral or is
secured by different collateral.
Liens
The Issuer will not, and will not permit any Subsidiary
Guarantor to, directly or indirectly, create,
68
incur, assume or suffer to exist any Lien (except Permitted
Liens) (each, an Initial Lien) that secures
obligations under any Indebtedness or any related guarantee, on
any asset or property of the Issuer or any Subsidiary Guarantor,
or any income or profits therefrom, unless:
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(1)
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in the case of Liens securing Subordinated Indebtedness, the
Notes and related Guarantees are secured by a Lien on such
property, assets or proceeds that is senior in priority to such
Liens; or
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(2)
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in all other cases, the Notes or the Guarantees are equally and
ratably secured, except that the foregoing shall not apply to
Liens securing the Notes and the related Guarantees.
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Any Lien created for the benefit of the Holders of the Notes
pursuant to the preceding paragraph shall provide by its terms
that such Lien shall be automatically and unconditionally
released and discharged upon the release and discharge of the
Initial Lien that gave rise to the obligation to so secure the
Notes and Guarantees.
Merger,
consolidation or sale of all or substantially all
assets
The Issuer may not consolidate or merge with or into or wind up
into (whether or not the Issuer is the surviving corporation),
or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets, in one or
more related transactions, to any Person unless:
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(1)
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the Issuer is the surviving Person or the Person formed by or
surviving any such consolidation or merger (if other than the
Issuer) or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made is a Person
organized or existing under the laws of the jurisdiction of
organization of the Issuer or the laws of the United States, any
state thereof, the District of Columbia or any territory thereof
(such Person, as the case may be, being herein called the
Successor Company); provided that in
the case where the surviving Person is not a corporation, a
co-obligor of the Notes is a corporation;
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(2)
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the Successor Company, if other than the Issuer, expressly
assumes all the obligations of the Issuer under the Indenture
and the Notes pursuant to supplemental indentures or other
documents or instruments in form reasonably satisfactory to the
Trustee;
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(3)
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immediately after such transaction, no Default exists;
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(4)
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immediately after giving pro forma effect to such
transaction and any related financing transactions, as if such
transactions had occurred at the beginning of the applicable
four quarter period,
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(a)
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the Successor Company or the Issuer would be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first sentence of
the covenant described under Limitation on
incurrence of indebtedness and issuance of disqualified stock
and preferred stock, or
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(b)
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the Fixed Charge Coverage Ratio for the Successor Company and
its Restricted Subsidiaries would be greater than the Fixed
Charge Coverage Ratio for the Issuer and its Restricted
Subsidiaries immediately prior to such transaction;
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(5)
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each Guarantor, unless it is the other party to the transactions
described above, in which case clause (b) of the second
succeeding paragraph shall apply, shall have by supplemental
indenture
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confirmed that its Guarantee shall apply to such Persons
obligations under the Indenture, the Notes and the Registration
Rights Agreement; and
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(6)
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the Issuer shall have delivered to the Trustee an Officers
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental
indentures, if any, comply with the Indenture.
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The Successor Company will succeed to, and be substituted for,
the Issuer, as the case may be, under the Indenture, the
Registration Rights Agreement, the Guarantees and the Notes, as
applicable. Notwithstanding the foregoing clauses (3) and
(4),
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(1)
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any Non-Guarantor Subsidiary may consolidate with or merge into
or transfer all or part of its properties and assets to the
Issuer or another Restricted Subsidiary,
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(2)
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the Issuer or any Subsidiary Guarantor may consolidate with,
merge into or transfer all or part of its properties and assets
to the Issuer or a Subsidiary Guarantor, as applicable, and
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(3)
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the Issuer may consolidate or merge with an Affiliate of the
Issuer, as the case may be, solely for the purpose of
reincorporating the Issuer in any state of the United States,
the District of Columbia or any territory thereof.
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In addition, Holdings will not, nor will the Issuer permit any
Subsidiary Guarantor to, consolidate or merge with or into or
wind up into (whether or not Holdings, the Issuer or such
Subsidiary Guarantor is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets, in one or more
related transactions, to any Person unless:
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(1) (a)
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such Guarantor is the surviving corporation or the Person formed
by or surviving any such consolidation or merger (if other than
such Guarantor) or to which such sale, assignment, transfer,
lease, conveyance or other disposition will have been made is a
Person organized or existing under the laws of the jurisdiction
of organization of such Guarantor, or the laws of the United
States, any state thereof, the District of Columbia or any
territory thereof (such Guarantor or such Person, as the case
may be, being herein called the Successor
Person);
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(b)
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the Successor Person, if other than such Guarantor, expressly
assumes all the obligations of such Guarantor under the
Indenture and such Guarantors related Guarantee pursuant
to supplemental indentures or other documents or instruments in
form reasonably satisfactory to the Trustee;
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(c)
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immediately after such transaction, no Default exists; and
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(d)
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the Issuer shall have delivered to the Trustee an Officers
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental
indentures, if any, comply with the Indenture; or
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(2)
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the transaction is made in compliance with the covenant
described under Repurchase at the option of
holdersAsset sales.
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Subject to certain limitations described in the Indenture, the
Successor Person will succeed to, and be substituted for, such
Guarantor under the Indenture, such Guarantors Guarantee
and the Registration Rights Agreement. Notwithstanding the
foregoing, any Subsidiary Guarantor may (i) merge into or
with or wind up into or transfer all or part of its properties
and assets to a Subsidiary Guarantor or the Issuer or
(ii) merge
70
with an Affiliate of the Issuer solely for the purpose of
reincorporating or reorganizing the Guarantor in the United
States, any state thereof, the District of Columbia or any
territory thereof. Holdings may merge with an Affiliate of the
Issuer solely for the purpose of reincorporating or reorganizing
Holdings in the United States, any state thereof, the District
of Columbia or any territory thereof. Notwithstanding the
foregoing, any Restricted Subsidiary may liquidate or dissolve
if the Issuer determines in good faith that such liquidation or
dissolution is in the best interests of the Issuer and is not
materially disadvantageous to the Holders.
For purposes of this covenant, the sale, lease, conveyance,
assignment, transfer or other disposition of all or
substantially all of the properties and assets of one or more
Subsidiaries of the Issuer, which properties and assets, if held
by the Issuer instead of such Subsidiaries, would constitute all
or substantially all of the properties and assets of the Issuer
on a consolidated basis, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the
Issuer.
The predecessor company will be released from its obligations
under the Indenture and the Successor Company will succeed to,
and be substituted for, and may exercise every right and power
of, the Issuer under the Indenture, but, in the case of a lease
of all or substantially all its assets, the predecessor will not
be released from the obligation to pay the principal of and
interest on the Notes.
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.
Transactions
with Affiliates
The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or
amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate
of the Issuer (each of the foregoing, an Affiliate
Transaction) involving aggregate payments or
consideration in excess of $7.5 million, unless:
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(1)
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such Affiliate Transaction is on terms that are not materially
less favorable to the Issuer or its relevant Restricted
Subsidiary than those that would have been obtained in a
comparable transaction by the Issuer or such Restricted
Subsidiary with an unrelated Person on an arms-length
basis; and
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(2)
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the Issuer delivers to the Trustee with respect to any Affiliate
Transaction or series of related Affiliate Transactions
involving aggregate payments or consideration in excess of
$25.0 million, a resolution adopted by the majority of the
board of directors of the Issuer approving such Affiliate
Transaction and set forth in an Officers Certificate
certifying that such Affiliate Transaction complies with clause
(1) above.
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The foregoing provisions will not apply to the following:
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(1)
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transactions between or among the Issuer or any of its
Restricted Subsidiaries;
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(2)
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Restricted Payments permitted by the provisions of the Indenture
described above under the covenant Limitation on
restricted payments and the definition of
Permitted Investments;
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(3)
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the payment of management, consulting, monitoring, transaction
and advisory fees and related expenses to the Sponsor pursuant
to the Sponsor Management Agreement and the termination
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fees pursuant to the Sponsor Management Agreement, in each case
as in effect on the Issue Date or any amendment thereto (so long
as any such amendment is not materially disadvantageous, in the
good faith judgment of the board of directors of the Issuer, to
the Holders when taken as a whole as compared to the Sponsor
Management Agreement in effect on the Issue Date;
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(4)
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the payment of reasonable and customary fees and compensation
paid to, and indemnities and reimbursements provided for the
benefit of, former, current or future officers, directors,
employees or consultants of the Issuer, any of its direct or
indirect parent companies or any of its Restricted Subsidiaries,
as determined in Good Faith by the Issuer;
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(5)
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transactions in which the Issuer or any of its Restricted
Subsidiaries, as the case may be, delivers to the Trustee a
letter from an Independent Financial Advisor stating that such
transaction is fair to the Issuer or such Restricted Subsidiary
from a financial point of view or stating that the terms are not
materially less favorable to the Issuer or its relevant
Restricted Subsidiary than those that would have been obtained
in a comparable transaction by the Issuer or such Restricted
Subsidiary with an unrelated Person on an arms-length
basis;
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(6)
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any agreement or arrangement as in effect as of the Issue Date
(other than the Sponsor Management Agreement, but including,
without limitation, each of the other agreements entered into in
connection with the Transactions), or any amendment thereto (so
long as any such amendment is not materially disadvantageous to
the Holders when taken as a whole as compared to the applicable
agreement as in effect on the Issue Date);
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(7)
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the existence of, or the performance by the Issuer or any of its
Restricted Subsidiaries of its obligations under the terms of,
any stockholders agreement (including any registration
rights agreement or purchase agreement related thereto) to which
it is a party as of the Issue Date and any similar agreements
which it may enter into thereafter; provided, however,
that the existence of, or the performance by the Issuer or any
of its Restricted Subsidiaries of obligations under any future
amendment to any such existing agreement or under any similar
agreement entered into after the Issue Date shall only be
permitted by this clause (7) to the extent that the terms
of any such existing agreement, together with all amendments
thereto, taken as a whole, are not otherwise disadvantageous in
any material respect to the Holders when taken as a whole as
compared to the original agreement in effect on the Issue Date;
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(8)
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the Transactions and the payment of all fees and expenses
related to the Transactions, in each case as contemplated herein;
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(9)
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transactions with customers, clients, suppliers, or purchasers
or sellers of goods or services, in each case in the ordinary
course of business and otherwise in compliance with the terms of
the Indenture which are fair to the Issuer and its Restricted
Subsidiaries, in the reasonable determination of the board of
directors of the Issuer or the senior management thereof, or are
on terms at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party;
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(10)
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if otherwise permitted under the Indenture, the issuance or
transfer of Equity Interests (other than Disqualified Stock) to
Affiliates of the Issuer and the granting of registration and
other customary rights in connection therewith or any
contribution to the capital of direct or indirect parent
companies, the Issuer or any Restricted Subsidiary;
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(11)
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any customary transaction with a Securitization Subsidiary
effected as part of a Qualified Securitization Financing;
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(12)
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payments by the Issuer or any of its Restricted Subsidiaries to
the Sponsor made for any financial advisory, financing,
underwriting or placement services or in respect of other
investment banking activities, including, without limitation, in
connection with acquisitions or divestitures which payments are
approved by a majority of the board of directors of the Issuer
or a majority of the disinterested members of the board of
directors of the Issuer in good faith;
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(13)
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payments or loans (or cancellation of loans) to employees or
consultants of the Issuer, any of its direct or indirect parent
companies or any of its Restricted Subsidiaries and employment
agreements, stock option plans, restricted stock plans, bonus
programs and other similar arrangements with such employees or
consultants which, in each case, are approved in Good Faith by
the Issuer and in accordance with applicable law;
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(14)
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investments in securities of the Issuer or any of its Restricted
Subsidiaries so long as (i) the investment is being offered
generally to other investors on the same or more favorable terms
and (ii) the investment constitutes less than 5% of the
proposed or outstanding issue amount of such class of
securities; and
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(15)
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transactions with a Person (other than an Unrestricted
Subsidiary of the Issuer) that is an Affiliate of the Issuer
solely because the Issuer or a Restricted Subsidiary of the
Issuer owns an equity interest in or otherwise controls such
Person.
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Dividend
and other payment restrictions affecting Restricted
Subsidiaries
The Issuer will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual
encumbrance or consensual restriction on the ability of any such
Restricted Subsidiary to:
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(1) (a)
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pay dividends or make any other distributions to the Issuer or
any of its Restricted Subsidiaries on its Capital Stock or with
respect to any other interest or participation in, or measured
by, its profits, or
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(b)
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pay any Indebtedness owed to the Issuer or any of its Restricted
Subsidiaries;
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(2)
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make loans or advances to the Issuer or any of its Restricted
Subsidiaries; or
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(3)
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sell, lease or transfer any of its properties or assets to the
Issuer or any of its Restricted Subsidiaries,
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except (in each case) for such encumbrances or restrictions
existing under or by reason of:
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(a)
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contractual encumbrances or restrictions in effect on the Issue
Date, including pursuant to the New Credit Facilities and the
related documentation and related Hedging Obligations and Cash
Management Obligations;
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(b)
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the Indenture, the Notes and the Guarantees (including any
exchange notes and related guarantees);
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(c)
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purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature
discussed in clause (3) above on the property so acquired;
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(d)
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applicable law or any applicable rule, regulation or order;
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(e)
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any agreement or other instrument of a Person acquired by the
Issuer or any Restricted Subsidiary in existence at the time of
such acquisition (or at the time it merges with or into the
Issuer or any Restricted Subsidiary or assumed in connection
with the acquisition of assets from such Person (but, in each
case, not created in contemplation thereof)), which encumbrance
or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person and
its Subsidiaries, or the property or assets of the Person and
its Subsidiaries, so acquired;
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(f)
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contracts for the sale of assets, including customary
restrictions with respect to a Subsidiary of the Issuer pursuant
to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or
assets of such Subsidiary;
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(g)
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Secured Indebtedness otherwise permitted to be incurred pursuant
to the covenants described under Limitation on
incurrence of indebtedness and issuance of disqualified stock
and preferred stock and Liens that limit
the right of the debtor to dispose of the assets securing such
Indebtedness;
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(h)
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restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business;
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(i)
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other Indebtedness, Disqualified Stock or Preferred Stock of
Foreign Subsidiaries permitted to be incurred or issued
subsequent to the Issue Date pursuant to the provisions of the
covenant described under Limitation on incurrence of
indebtedness and issuance of disqualified stock and preferred
stock that impose restrictions solely on the Foreign
Subsidiaries party thereto or their Subsidiaries;
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(j)
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customary provisions in joint venture agreements or arrangements
and other similar agreements relating solely to such joint
venture; provided that with respect to any joint venture
agreement relating to a Restricted Subsidiary, such provisions
will not materially affect the Issuers ability to make
anticipated principal or interest payments on the Notes (as
determined in Good Faith by the Issuer);
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(k)
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customary provisions contained in leases, subleases, licenses,
sublicenses or other agreements, in each case, entered into in
the ordinary course of business;
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(l)
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any agreement or instrument (A) relating to any
Indebtedness or preferred stock of a Restricted Subsidiary
permitted to be incurred subsequent to the Issue Date pursuant
to the covenant described under Certain
covenantsLimitation on incurrence of indebtedness and
issuance of disqualified stock and preferred stock if the
encumbrances and restrictions are not materially more
disadvantageous to the Holders than is customary in comparable
financings (as determined in good faith by the Issuer) and
(B) either (x) the Issuer determines that such
encumbrance or restriction will not adversely affect the
Issuers ability to make principal and interest payments on
the Notes as and when they come due or (y) such
encumbrances and restrictions apply only during the continuance
of a default in respect of a payment or financial maintenance
covenant relating to such Indebtedness;
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(m)
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any encumbrances or restrictions of the type referred to in
clauses (1), (2) and (3) above 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 (l) above; provided that such
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are,
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74
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in the good faith judgment of the Issuer, no more restrictive in
any material respect with respect to such encumbrance and other
restrictions taken as a whole than those prior to such
amendment, modification, restatement, renewal, increase,
supplement, refunding, replacement or refinancing; and
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(n)
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restrictions created in connection with any Qualified
Securitization Financing that, in the good faith determination
of the Issuer, are necessary or advisable to effect such
Securitization Facility.
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Limitation
on guarantees of indebtedness by Restricted
Subsidiaries
The Issuer will not permit any of its Wholly-Owned Subsidiaries
that are Restricted Subsidiaries (and non-Wholly-Owned
Subsidiaries if such non-Wholly-Owned Subsidiaries guarantee
other capital markets debt securities of the Issuer or any
Restricted Subsidiary or guarantee all or a portion of the New
Credit Facilities), other than a Subsidiary Guarantor, to
guarantee the payment of any Indebtedness of the Issuer or any
other Subsidiary Guarantor unless:
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(1)
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such Restricted Subsidiary within 30 days executes and
delivers a supplemental indenture to the Indenture and joinder
or supplement to the Registration Rights Agreement providing for
a senior Guarantee by such Restricted Subsidiary, except that
with respect to a guarantee of Indebtedness of the Issuer or any
Subsidiary Guarantor, if such Indebtedness is by its express
terms subordinated in right of payment to the Notes or such
Subsidiary Guarantors Guarantee, any such guarantee by
such Restricted Subsidiary with respect to such Indebtedness
shall be subordinated in right of payment to such Guarantee
substantially to the same extent as such Indebtedness is
subordinated to the Notes or such Subsidiary Guarantors
Guarantee; provided that
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(a)
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if such Indebtedness is by its express terms subordinated in
right of payment to the Notes or such Subsidiary
Guarantors Guarantee, any such guarantee by such
Restricted Subsidiary with respect to such Indebtedness shall be
subordinated in right of payment to such Guarantee with respect
to the Notes substantially to the same extent as such
Indebtedness is subordinated to the Notes or such Subsidiary
Guarantors Guarantee of the Notes; and
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(b)
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if the Notes or such Subsidiary Guarantors Guarantee are
subordinated in right of payment to such Indebtedness, the
Guarantee under the supplemental indenture shall be subordinated
to such Restricted Subsidiarys guarantee with respect to
such Indebtedness substantially to the same extent as the Notes
or the Subsidiary Guarantors Guarantee are subordinated to
such Indebtedness; and
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(2)
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such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights
of reimbursement, indemnity or subrogation or any other rights
against the Issuer or any other Restricted Subsidiary as a
result of any payment by such Restricted Subsidiary under its
Guarantee until payment in full of Obligations under the
Indenture; and
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(3)
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such Restricted Subsidiary shall deliver to the Trustee an
Opinion of Counsel to the effect that:
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(a)
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such Guarantee has been duly executed and authorized; and
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(b)
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such Guarantee constitutes a valid, binding and enforceable
obligation of such Restricted Subsidiary, except insofar as
enforcement thereof may be limited by bankruptcy, insolvency or
similar laws (including, without limitation, all laws relating
to fraudulent transfers) and except insofar as enforcement
thereof is subject to general principals of equity;
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75
provided that this covenant shall not be applicable to
any guarantee of any Restricted Subsidiary that existed at the
time such Person became a Restricted Subsidiary and was not
incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary.
The Issuer may elect, in its sole discretion, to cause any
Subsidiary that is not otherwise required to be a Subsidiary
Guarantor to become a Guarantor, in which case, such Subsidiary
shall only be required to comply with the
30-day
period described above.
Reports
and other information
Notwithstanding that the Issuer may not be subject to the
reporting requirements of Section 13 or 15(d) of the
Exchange Act or otherwise report on an annual and quarterly
basis on forms provided for such annual and quarterly reporting
pursuant to rules and regulations promulgated by the SEC, the
Indenture requires the Issuer to file with the SEC within
15 days after the dates set forth below:
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(1)
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within 90 days after the end of each fiscal year
(120 days for the fiscal year ending December 31, 2010
but only in the event that BKC changes its fiscal year end to
December 31 for such fiscal year), all financial information
that would be required to be contained in an annual report on
Form 10-K,
or any successor or comparable form, filed with the SEC,
including a Managements discussion and analysis of
financial condition and results of operations and a report
on the annual financial statements by the Issuers
independent registered public accounting firm;
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(2)
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within 45 days after the end of each of the first three
fiscal quarters of each fiscal year (75 days for the fiscal
quarters ending September 30, 2010 and December 31,
2010), all financial information that would be required to be
contained in a quarterly report on
Form 10-Q,
or any successor or comparable form, filed with the SEC;
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(3)
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all current reports that would be required to be filed with the
SEC on
Form 8-K
if the Issuer were required to filed such reports; and
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(4)
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any other information, documents and other reports which the
Issuer would be required to file with the SEC if it were subject
to Section 13 or 15(d) of the Exchange Act;
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in each case, in a manner that complies in all material respects
with the requirements specified in such form. Notwithstanding
the foregoing, the Issuer shall not be so obligated to file such
reports with the SEC if the SEC does not permit such filing, so
long as the Issuer makes available such information to
prospective purchasers of Notes, in addition to providing such
information to the Trustee and the Holders of the Notes, in each
case, at the Issuers expense and by the applicable date
the Issuer would be required to file such information pursuant
to the immediately preceding sentence. To the extent any such
information is not so filed or furnished, as applicable, within
the time periods specified above and such information is
subsequently filed or furnished, as applicable, the Issuer will
be deemed to have satisfied its obligations with respect thereto
at such time and any Default with respect thereto shall be
deemed to have been cured; provided that such cure shall
not otherwise affect the rights of the Holders under
Events of Default and Remedies if Holders of at
least 25% in principal amount of the then total outstanding
Notes have declared the principal, premium, if any, interest and
any other monetary obligations on all the then outstanding Notes
to be due and payable immediately and such declaration shall not
have been rescinded or cancelled prior to such cure.
In addition, to the extent not satisfied by the foregoing, the
Issuer will agree that, for so long as any Notes are
outstanding, it will furnish to Holders and to securities
analysts and prospective investors, upon their request, the
information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act.
76
Substantially concurrently with the furnishing or making such
information available to the Trustee pursuant to the immediately
preceding paragraph, the Issuer shall also post copies of such
information required by the immediately preceding paragraph on a
website (which may be nonpublic and may be maintained by the
Issuer or a third party) to which access will be given to
Holders, prospective investors in the Notes (which prospective
investors shall be limited to qualified institutional
buyers within the meaning of Rule 144A of the
Securities Act or
non-U.S.
persons (as defined in Regulation S under the Securities
Act) that certify their status as such to the reasonable
satisfaction of the Issuer), and securities analysts and market
making financial institutions that are reasonably satisfactory
to the Issuer. The Issuer shall hold quarterly conference calls
that are publicly accessible after the Issuers financial
statements for the prior fiscal period have been made available,
provided that such conference calls shall be held no
later than 5 Business Days after the date that such financial
statements are required to be made available. No fewer than
three Business Days prior to the date of the conference call
required to be held in accordance with the preceding sentence
the Issuer shall issue a press release to the appropriate U.S.
wire services announcing the time and the date of such
conference call and directing the beneficial owners of, and
prospective investors in, the Notes and securities analysts to
contact an individual at the Issuer (for whom contact
information shall be provided in such press release) to obtain
information on how to access such conference call.
The Issuer will be deemed to have satisfied the requirements of
this section if Holdings files and provides reports, documents
and information of the types otherwise so required, in each case
within the applicable time periods, and the Issuer is not
required to file such reports, documents and information
separately under the applicable rules and regulations of the SEC
(after giving effect to any exemptive relief) because of the
filings by Holdings; provided that such financial
statements are accompanied by consolidating financial
information for Holdings, the Issuer, the Subsidiary Guarantors
and the Non-Guarantor Subsidiaries in the manner prescribed by
the SEC to the extent such financial information would be
required by the SEC.
In the event that any direct or indirect parent company of the
Issuer becomes a guarantor of the Notes, the Indenture will
permit the Issuer to satisfy its obligations in this covenant
with respect to financial information relating to the Issuer by
furnishing financial information relating to such parent;
provided that the same is accompanied by consolidating
information that explains in reasonable detail the differences
between the information relating to such parent, on the one
hand, and the information relating to the Issuer and its
Restricted Subsidiaries on a standalone basis, on the other hand.
Notwithstanding the foregoing, such requirements shall be deemed
satisfied prior to the commencement of the exchange offer or the
effectiveness of the shelf registration statement by the filing
with the SEC of any registration statement or other filing, and
any amendments thereto, with such financial information that
satisfies
Regulation S-X
of the Securities Act.
Payments
for consent
Neither the Issuer nor any of its Restricted Subsidiaries shall,
directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any Holder for or as an
inducement to any consent, waiver or amendment of any of the
terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid and is paid to all Holders
that are qualified institutional buyers within the
meaning of Rule 144A of the Securities Act, who, upon
request, confirm that they are qualified institutional
buyers, consent, waive or agree to amend in the time frame
set forth in the solicitation documents relating to such
consent, waiver or amendment.
Limitation
on activities of Holdings
Holdings shall not conduct, transact or otherwise engage, or
commit to conduct, transact or otherwise engage, in any business
or operations other than (a) its direct ownership of all of
the Equity Interests in, and
77
its management of, the Issuer, (b) the Transactions and the
other transactions contemplated by the Merger Agreement and the
other agreements contemplated thereby, (c) performance of
its obligations under the New Credit Facilities, the Indenture,
the Registration Rights Agreement and the other agreements
contemplated thereby (collectively, the Transaction
Documents) and other activities to the extent
permitted by and in compliance with the Transaction Documents,
(d) the provision of administrative, legal, accounting, tax
and management services to, or on behalf of, any of its
Subsidiaries, (e) the entry into, and exercise of rights
and performance of obligations in respect of (A) any other
agreement to which it is a party on the Issue Date; in each case
as amended, supplemented waived or otherwise modified from time
to time, and any refinancings, refundings, renewals or
extensions thereof in accordance with such Transaction
Documents, (B) contracts and agreements with officers,
directors and employees of Holdings or any of its Subsidiaries
relating to their employment or directorships,
(C) insurance policies and related contracts and
agreements, and (D) equity subscription agreements,
registration rights agreements, voting and other stockholder
agreements, engagement letters, underwriting agreements and
other agreements in respect of its equity securities or any
offering, issuance or sale thereof, (f) the offering,
issuance, sale and repurchase or redemption of, and dividends or
distributions on its equity securities, (g) the filing of
registration statements, and compliance with applicable
reporting and other obligations, under federal, state or other
securities laws, (h) the listing of its equity securities
and compliance with applicable reporting and other obligations
in connection therewith, (i) the retention of (and the
entry into, and exercise of rights and performance of
obligations in respect of, contracts and agreements with)
transfer agents, private placement agents and underwriters with
respect to equity securities and, counsel, accountants and other
advisors and consultants, (j) the performance of
obligations under and compliance with its certificate of
incorporation and by-laws, or any applicable law, ordinance,
regulation, rule, order, judgment, decree or permit, including,
without limitation, as a result of or in connection with the
activities of its Subsidiaries, (k) the incurrence and
payment of its operating and business expenses and any taxes for
which it may be liable, (l) the incurrence, repayment and
redemption of Indebtedness and (m) other activities
incidental or related to the foregoing.
Events of
default and remedies
The Indenture provides that each of the following is an Event of
Default:
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(1)
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default in payment when due and payable, upon redemption,
acceleration or otherwise, of principal of, or premium, if any,
on the Notes;
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(2)
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default for 30 days or more in the payment when due of
interest on or with respect to the Notes;
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(3)
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failure by the Issuer or any Guarantor for 60 days after
receipt of written notice given by the Trustee or the Holders of
not less than 25% in principal amount of the outstanding Notes
to comply with any of its obligations, covenants or agreements
(other than a default referred to in clauses (1) and
(2) above) contained in the Indenture or the Notes;
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(4)
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default under any mortgage, indenture or instrument under which
there is issued or by which there is secured or evidenced any
Indebtedness for money borrowed by the Issuer or any of its
Restricted Subsidiaries or the payment of which is guaranteed by
the Issuer or any of its Restricted Subsidiaries, other than
Indebtedness owed to the Issuer or a Restricted Subsidiary,
whether such Indebtedness or guarantee now exists or is created
after the issuance of the Notes, if both:
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(a)
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such default either results from the failure to pay any
principal of such Indebtedness at its stated final maturity
(after giving effect to any applicable grace periods) or relates
to an obligation other than the obligation to pay principal of
any such Indebtedness at its stated
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78
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final maturity and results in the holder or holders of such
Indebtedness causing such Indebtedness to become due prior to
its stated maturity; and
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(b)
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the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for
failure to pay principal at stated final maturity (after giving
effect to any applicable grace periods), or the maturity of
which has been so accelerated, aggregate $50.0 million or
more at any one time outstanding;
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(5)
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failure by the Issuer or any Significant Subsidiary (or group of
Restricted Subsidiaries that together (determined as of the most
recent consolidated financial statements of the Issuer for a
fiscal period end provided as required under Reports
and other information) would constitute a Significant
Subsidiary), to pay final judgments aggregating in excess of
$50.0 million other than any judgments covered by
indemnities provided by, or insurance policies issued by,
reputable and creditworthy companies, which final judgments
remain unpaid, undischarged and unstayed for a period of more
than 60 days after such judgment becomes final, and in the
event such judgment is covered by insurance, an enforcement
proceeding has been commenced by any creditor upon such judgment
or decree which is not promptly stayed;
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(6)
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certain events of bankruptcy or insolvency with respect to the
Issuer or any Significant Subsidiary (or group of Restricted
Subsidiaries that together (determined as of the most recent
consolidated financial statements of the Issuer for a fiscal
period end provided as required under Reports and
other information) would constitute a Significant
Subsidiary); or
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(7)
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the Guarantee of Holdings or the Guarantee of any Significant
Subsidiary (or group of Subsidiaries that together (determined
as of the most recent consolidated financial statements of the
Issuer for a fiscal period end provided as required under
Reports and other information) would
constitute a Significant Subsidiary) shall for any reason cease
to be in full force and effect or be declared null and void or
any responsible officer of Holdings or of any Subsidiary
Guarantor that is a Significant Subsidiary (or the responsible
officers of any group of Restricted Subsidiaries that, taken
together (determined as of the most recent consolidated
financial statements of the Issuer for a fiscal period end
provided as required under Reports and other
information) would constitute a Significant Subsidiary),
as the case may be, denies that it has any further liability
under its or their Guarantee(s) or gives notice to such effect,
other than by reason of the termination of the Indenture or the
release of any such Guarantee in accordance with the Indenture.
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If any Event of Default (other than of a type specified in
clause (6) above) occurs and is continuing under the
Indenture, the Trustee or the Holders of at least 25% in
principal amount of the then total outstanding Notes may declare
the principal, premium, if any, interest and any other monetary
obligations on all the then outstanding Notes to be due and
payable immediately.
Upon the effectiveness of such declaration, such principal and
interest will be due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising under
clause (6) of the first paragraph of this section, all
outstanding Notes will become due and payable without further
action or notice. The Indenture provides that the Trustee may
withhold from the Holders notice of any continuing Default,
except a Default relating to the payment of principal, premium,
if any, or interest, if it determines that withholding notice is
in their interest. In addition, the Trustee shall have no
obligation to accelerate the Notes if in the best judgment of
the Trustee acceleration is not in the best interest of the
Holders of the Notes. The Indenture provides that the Holders of
a majority in aggregate principal amount of the then outstanding
Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive any existing Default and its consequences
under the Indenture (except a continuing Default in the payment
of interest on, premium, if any,
79
or the principal of any Note held by a non-consenting Holder)
and rescind any acceleration and its consequences with respect
to the Notes, provided such rescission would not conflict with
any judgment of a court of competent jurisdiction. In the event
of any Event of Default specified in clause (4) above, such
Event of Default and all consequences thereof (excluding any
resulting payment default, other than as a result of
acceleration of the Notes) shall be annulled, waived and
rescinded, automatically and without any action by the Trustee
or the Holders, if within 30 days after such Event of
Default arose:
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(1)
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the Indebtedness or guarantee that is the basis for such Event
of Default has been discharged; or
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(2)
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Holders thereof have rescinded or waived the acceleration,
notice or action (as the case may be) giving rise to such Event
of Default; or
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(3)
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the default that is the basis for such Event of Default has been
cured.
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Subject to the provisions of the Indenture relating to the
duties of the Trustee thereunder, in case an Event of Default
occurs and is continuing, the Trustee will be under no
obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders of
the Notes unless the Holders have offered to the Trustee
indemnity or security satisfactory to the Trustee against any
loss, liability or expense. Except to enforce the right to
receive payment of principal, premium (if any) or interest when
due, no Holder of a Note may pursue any remedy with respect to
the Indenture or the Notes unless:
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(1)
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such Holder has previously given the Trustee notice that an
Event of Default is continuing;
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(2)
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Holders of at least 25% in principal amount of the total
outstanding Notes have requested the Trustee to pursue the
remedy;
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(3)
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Holders of the Notes have offered and, if requested, provide to
the Trustee indemnity or security reasonably satisfactory to the
Trustee against any loss, liability or expense;
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(4)
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the Trustee has not complied with such request within
60 days after the receipt thereof and the offer of security
or indemnity; and
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(5)
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Holders of a majority in principal amount of the total
outstanding Notes have not given the Trustee a direction
inconsistent with such request within such
60-day
period. Subject to certain restrictions, under the Indenture the
Holders of a majority in principal amount of the total
outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available
to the Trustee or of exercising any trust or power conferred on
the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the
Trustee determines is unduly prejudicial to the rights of any
other Holder of a Note or that would involve the Trustee in
personal liability. The Indenture provides that the Issuer is
required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuer is
required, within 10 Business Days, after becoming aware of any
Default, to deliver to the Trustee a statement specifying such
Default.
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No
personal liability of directors, officers, employees and
stockholders
No director, officer, employee, incorporator or stockholder of
the Issuer or any Guarantor or any of their parent companies
shall have any liability for any obligations of the Issuer or
the Guarantors under the Notes, the Guarantees or the Indenture
or for any claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder by accepting Notes
waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive
80
liabilities under the federal securities laws and it is the view
of the SEC that such a waiver is against public policy.
Legal
defeasance and covenant defeasance
The obligations of the Issuer and the Guarantors under the
Indenture will terminate (other than certain obligations) and
will be released upon payment in full of all of the Notes. The
Issuer may, at its option and at any time, elect to have all of
its obligations discharged with respect to the Notes and have
each Guarantors obligation discharged with respect to its
Guarantee (Legal Defeasance) and cure all
then existing Events of Default except for:
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(1)
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the rights of Holders of Notes to receive payments in respect of
the principal of, premium, if any, and interest on the Notes
when such payments are due solely out of the trust created
pursuant to the Indenture;
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(2)
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the Issuers obligations with respect to Notes concerning
issuing temporary Notes, registration of such Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office
or agency for payment and money for security payments held in
trust;
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(3)
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the rights, powers, trusts, duties and immunities of the
Trustee, and the Issuers 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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In addition, the Issuer may, at its option and at any time,
elect to have its obligations and those of each Guarantor
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 with respect to the Notes. In the event
Covenant Defeasance occurs, certain events (not including
bankruptcy, receivership, rehabilitation and insolvency events
pertaining to the Issuer) described under Events of
Default and Remedies will no longer constitute an Event of
Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance with respect to the Notes:
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(1)
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the Issuer must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in U.S.
dollars, Government Securities, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to
pay the principal of, premium, if any, and interest due on the
Notes on the stated maturity date or on the redemption date, as
the case may be, of such principal, premium, if any, or interest
on such Notes and the Issuer must specify whether such Notes are
being defeased to maturity or to a particular redemption date;
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(2)
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in the case of Legal Defeasance, the Issuer shall have delivered
to the Trustee an Opinion of Counsel reasonably acceptable to
the Trustee confirming that, subject to customary assumptions
and exclusions,
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(a)
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the Issuer has received from, or there has been published by,
the United States Internal Revenue Service a ruling, or
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(b)
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since the issuance of the Notes, there has been a change in the
applicable U.S. 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, subject to customary
assumptions and exclusions, the Holders of the Notes will not
recognize income, gain or loss for U.S. federal income tax
purposes, as applicable, as a result of such Legal Defeasance
and will be subject to U.S. 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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(3)
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in the case of Covenant Defeasance, the Issuer shall have
delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, the Holders of the Notes will not
recognize income, gain or loss for U.S. federal income tax
purposes as a result of such Covenant Defeasance and will be
subject to such 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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(4)
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no Default (other than that resulting from borrowing funds to be
applied to make such deposit and any similar and simultaneous
deposit relating to other Indebtedness, and, in each case the
granting of Liens in connection therewith) shall have occurred
and be continuing on the date of such deposit;
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(5)
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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 New
Credit Facilities or any other material agreement or instrument
(other than the Indenture) to which the Issuer or any Guarantor
is a party or by which, the Issuer or any Guarantor is bound
(other than that resulting from borrowing funds to be applied to
make such deposit and any similar and simultaneous deposit
relating to other Indebtedness and, in each case, the granting
of Liens in connection therewith);
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(6)
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the Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that, as of the date of such opinion and
subject to customary assumptions and exclusions following the
deposit, the trust funds will not be subject to the effect of
Section 547 of Title 11 of the United States Code;
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(7)
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the Issuer shall have delivered to the Trustee an Officers
Certificate stating that the deposit was not made by the Issuer
with the intent of defeating, hindering, delaying or defrauding
any creditors of the Issuer or any Guarantor or others; and
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(8)
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the Issuer shall have delivered to the Trustee an Officers
Certificate and an Opinion of Counsel (which Opinion of Counsel
may be subject to customary assumptions and exclusions) each
stating that all conditions precedent provided for or relating
to the Legal Defeasance or the Covenant Defeasance, as the case
may be, have been complied with.
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Satisfaction
and discharge
The Indenture will be discharged and will cease to be of further
effect as to all Notes, when either:
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(1)
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all Notes 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, have been delivered to the Trustee for cancellation; or
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(2) (a)
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all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable by reason of the making
of a notice of redemption or otherwise, will become due and
payable within one year or are to be called for redemption
within one year under
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arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Issuer and the Issuer or any Guarantor have
irrevocably deposited or caused to be deposited with the Trustee
as trust funds in trust solely for the benefit of the Holders of
the Notes, cash in U.S. dollars, Government Securities, or a
combination thereof, in such amounts as will be sufficient
without consideration of any reinvestment of interest to pay and
discharge the entire indebtedness on the Notes not theretofore
delivered to the Trustee for cancellation for principal,
premium, if any, and accrued interest to the date of maturity or
redemption;
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(b)
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no Default (other than that resulting from borrowing funds to be
applied to make such deposit and any similar and simultaneous
deposit relating to other Indebtedness and, in each case, the
granting of Liens in connection therewith) with respect to the
Indenture or the Notes shall have occurred and be continuing on
the date of such deposit or shall occur as a result of such
deposit and such deposit will not result in a breach or
violation of, or constitute a default under, the New Credit
Facilities or any other material agreement or instrument (other
than the Indenture) to which the Issuer or any Guarantor is a
party or by which the Issuer or any Guarantor is bound (other
than that resulting from borrowing funds to be applied to make
such deposit and any similar and simultaneous deposit relating
to other Indebtedness and, in each case, the granting of Liens
in connection therewith);
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(c)
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the Issuer has paid or caused to be paid all sums payable by it
under the Indenture; and
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(d)
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the Issuer has delivered irrevocable instructions to the Trustee
to apply the deposited money toward the payment of the Notes at
maturity or the redemption date, as the case may be.
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In addition, the Issuer must deliver an Officers
Certificate and an Opinion of Counsel to the Trustee stating
that all conditions precedent to satisfaction and discharge have
been satisfied.
Amendment,
supplement and waiver
Except as provided in the next two succeeding paragraphs, the
Indenture, any Guarantee and the Notes may be amended or
supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding,
including consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes, and any existing
Default or compliance with any provision of the Indenture or the
Notes issued thereunder may be waived with the consent of the
Holders of a majority in principal amount of the then
outstanding Notes, other than Notes beneficially owned by the
Issuer or its Affiliates (including consents obtained in
connection with a purchase of or tender offer or exchange offer
for the Notes).
The Indenture provides that, without the consent of each
affected Holder of Notes, an amendment or waiver may not, with
respect to any Notes held by a non-consenting Holder:
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(1)
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reduce the principal amount of such Notes whose Holders must
consent to an amendment, supplement or waiver;
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(2)
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reduce the principal of or change the fixed final maturity of
any such Note or alter or waive the provisions with respect to
the redemption of such Notes (other than provisions relating to
the covenants described above under the caption Repurchase
at the Option of Holders);
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(3)
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reduce the rate of or change the time for payment of interest on
any Note;
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(4)
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waive a Default in the payment of principal of or premium, if
any, or interest on the Notes, except
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a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and
a waiver of the payment default that resulted from such
acceleration, or in respect of a covenant or provision contained
in the Indenture or any Guarantee which cannot be amended or
modified without the consent of all Holders;
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(5)
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make any Note payable in money other than that stated therein;
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(6)
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make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders to receive
payments of principal of or premium, if any, or interest on the
Notes;
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(7)
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make any change in these amendment and waiver provisions;
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(8)
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impair the right of any Holder to receive payment of principal
of, or interest on such Holders Notes on or after the due
dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holders Notes;
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(9)
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make any change to or modify the ranking of the Notes that would
adversely affect the Holders; or
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(10)
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except as expressly permitted by the Indenture, modify the
Guarantees of any Significant Subsidiary (or group of Restricted
Subsidiaries that together (determined as of the most recent
consolidated financial statements of the Issuer for a fiscal
period end provided as required under Reports and
other information) would constitute a Significant
Subsidiary), in any manner adverse to the Holders of the Notes.
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Notwithstanding the foregoing, the Issuer, any Guarantor (with
respect to a Guarantee or the Indenture to which it is a party)
and the Trustee may amend or supplement the Indenture and any
Guarantee or Notes without the consent of any Holder:
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(1)
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to cure any ambiguity, omission, mistake, defect or
inconsistency;
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(2)
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to provide for uncertificated Notes of such series in addition
to or in place of certificated Notes;
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(3)
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to comply with the covenant relating to mergers, consolidations
and sales of assets;
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(4)
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to provide for the assumption of the Issuers or any
Guarantors obligations to the Holders in a transaction
that complies with the Indenture;
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(5)
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to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the
legal rights under the Indenture of any such Holder;
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(6)
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to add covenants for the benefit of the Holders or to surrender
any right or power conferred upon the Issuer or any Guarantor;
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(7)
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to comply with requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the
Trust Indenture Act;
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(8)
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to evidence and provide for the acceptance and appointment under
the Indenture of a successor Trustee thereunder pursuant to the
requirements thereof;
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(9)
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to provide for the issuance of exchange notes or private
exchange notes, which are identical to exchange notes except
that they are not freely transferable;
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(10)
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to add a Guarantor under the Indenture;
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(11)
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to conform the text of the Indenture, 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, Guarantee or Notes; or
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(12)
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to make any amendment to the provisions of the Indenture
relating to the transfer and legending of Notes as permitted by
the Indenture, including, without limitation to facilitate the
issuance and administration of the Notes; provided,
however, that (i) compliance with the Indenture as so
amended would not result in Notes being transferred in violation
of the Securities Act or any applicable securities law and
(ii) such amendment does not materially and adversely
affect the rights of Holders to transfer Notes.
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The consent of the Holders is not necessary under the Indenture
to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the
proposed amendment.
Notices
Notices given by publication will be deemed 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.
Concerning
the Trustee
The Indenture contains certain limitations on the rights of the
Trustee thereunder, should it become a creditor of the Issuer,
to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as
security or otherwise. The Trustee is permitted to engage in
other transactions; however, if it acquires any conflicting
interest it must eliminate such conflict within 90 days,
apply to the SEC for permission to continue or resign.
The Indenture provides that the Holders of a majority in
principal amount of the outstanding Notes will have the right to
direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event
of Default shall occur (which shall not be cured), the Trustee
will be required, in the exercise of its power, to use the
degree of care of a prudent person in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under
no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of the Notes, unless such
Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
Governing
Law
The Indenture, the Notes and any Guarantee will be governed by
and construed in accordance with the laws of the State of New
York.
Certain
Definitions
Set forth below are certain defined terms used in the Indenture.
For purposes of the Indenture, unless otherwise specifically
indicated, the term consolidated with respect to any
Person refers to such Person on a
85
consolidated basis in accordance with GAAP, but excluding from
such consolidation any Unrestricted Subsidiary as if such
Unrestricted Subsidiary were not an Affiliate of such Person.
Acquired Indebtedness means, with respect to
any specified Person,
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(1)
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Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Restricted Subsidiary
of such specified Person, including Indebtedness incurred in
connection with, or in contemplation of; such other Person
merging with or into or becoming a Restricted Subsidiary of,
such specified Person, and
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(2)
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Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
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Acquisition means the transactions
contemplated by the Merger Agreement.
Affiliate of any specified Person means any
other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified
Person. For purposes of this definition,
control (including, with correlative
meanings, the terms controlling, controlled
by and under common control with),
as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or
otherwise.
Applicable Premium means, with respect to any
Note on any Redemption Date, the greater of:
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(1)
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1.0% of the principal amount of such Note; and
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(2)
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the excess, if any, of (a) the present value at such
Redemption Date of (i) the redemption price of such
Note at October 15, 2014 (such redemption price being set
forth in the table appearing above under the caption
Optional redemption), plus (ii) all required
interest payments due on such Note through October 15, 2014
(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 (b) the principal amount of such Note.
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Asset Sale means:
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(1)
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the sale, conveyance, transfer or other disposition, whether in
a single transaction or a series of related transactions, of
property or assets (including by way of a Sale and Lease- Back
Transaction) of the Issuer (other than Equity Interests of the
Issuer) or any of its Restricted Subsidiaries (each referred to
in this definition as a disposition); or
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(2)
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the issuance or sale of Equity Interests of any Restricted
Subsidiary (other than Preferred Stock of Restricted
Subsidiaries issued in compliance with the covenant described
under Limitation on incurrence of indebtedness and
issuance of disqualified stock and preferred stock or
directors qualifying shares and shares issued to foreign
nationals as required under applicable law), whether in a single
transaction or a series of related transactions;
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in each case, other than:
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(a)
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any disposition of Cash Equivalents or Investment Grade
Securities or obsolete or worn out equipment in the ordinary
course of business or any disposition of inventory or goods (or
other assets) held for sale or no longer used in the ordinary
course of business of the Issuer and its Restricted Subsidiaries
(it being understood that the sale of inventory or goods (or
other assets other than real property interests) in bulk in
connection with the closing of any number of retail
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locations in the ordinary course of business shall be considered
a sale in the ordinary course of business);
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(b)
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the disposition of all or substantially all of the assets of the
Issuer in a manner permitted pursuant to the provisions
described above under Certain covenantsMerger,
consolidation or sale of all or substantially all assets
or any disposition that constitutes a Change of Control pursuant
to the Indenture;
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(c)
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the making of any Restricted Payment that is permitted to be
made, and is made, under the covenant described above under
Certain covenantsLimitation on restricted
payments and the making of any Permitted Investments;
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(d)
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any disposition of assets or issuance or sale of Equity
Interests of any Restricted Subsidiary in any transaction or
series of transactions with an aggregate fair market value of
less than $5.0 million;
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(e)
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any disposition of property or assets or issuance of securities
by a Restricted Subsidiary of the Issuer to the Issuer or by the
Issuer or a Restricted Subsidiary of the Issuer to another
Restricted Subsidiary of the Issuer;
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(f)
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to the extent allowable under Section 1031 of the Internal
Revenue Code of 1986, any exchange of like property (excluding
any boot thereon) for use in a Similar Business;
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(g)
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the lease, assignment,
sub-lease,
license or sublicense of any real or personal property in the
ordinary course of business;
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(h)
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any issuance or sale of Equity Interests in, or Indebtedness or
other securities of, an Unrestricted Subsidiary;
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(i)
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foreclosures, condemnation or any similar action on assets;
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(j)
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any disposition of Securitization Assets, or participations
therein, in connection with any Qualified Securitization
Financing, or the disposition of an account receivable in
connection with the collection or compromise thereof in the
ordinary course of business;
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(k)
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the granting of a Lien that is permitted under the covenant
described above under Certain covenantsLiens;
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(l)
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the sale or issuance by a Restricted Subsidiary of Preferred
Stock or Disqualified Stock that is permitted by the covenant
described under the caption Certain
covenantsLimitation on Incurrence of Indebtedness and
Issuance of Disqualified Stock and Preferred Stock;
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(m)
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any financing transaction with respect to property constructed,
acquired, replaced, repaired or improved (including any
reconstruction, refurbishment, renovation
and/or
development of real property) by the Issuer or any Restricted
Subsidiary after the Issue Date, including Sale and Lease-Back
Transactions and asset securitizations, permitted by the
Indenture;
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(n)
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any surrender or waiver of contractual rights or the settlement,
release or surrender of contractual rights or other litigation
claims in the ordinary course of business; and
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(o)
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sales, transfers, leases or other dispositions of restaurants
and related assets (other than the Core
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Marks (except to the extent licensed for the operation of such
restaurants and related assets)) to Franchisees, including
through the sale of Equity Interests of Persons owning such
assets; provided that the aggregate fair market value of
all owned real property sold, transferred or otherwise disposed
of to Franchisees shall not exceed $50.0 million pursuant
to this clause.
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Asset Sale Offer has the meaning set forth in
the fourth paragraph under Repurchase at the option of
holdersAsset sales.
Bankruptcy Code means Title 11 of the
United States Code, as amended.
Bankruptcy Law means the Bankruptcy Code and
any similar federal, state or foreign law for the relief of
debtors.
Business Day means each day which is not a
Legal Holiday.
Capital Stock means:
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(1)
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in the case of a corporation, corporate stock;
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(2)
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in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents
(however designated) of capital stock;
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(3)
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in the case of a partnership or limited liability company,
partnership or membership interests (whether general or
limited); and
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(4)
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any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
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Capitalized Lease Obligation 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.
Cash Equivalents means:
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(1)
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United States dollars;
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(2) (a)
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euro, or any national currency of any participating member state
of the EMU; or
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(b)
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any other foreign currency held by the Issuer and the Restricted
Subsidiaries in the ordinary course of business;
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(3)
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securities issued or directly and fully and unconditionally
guaranteed or insured by the U.S. government or any agency or
instrumentality thereof the securities of which are
unconditionally guaranteed as a full faith and credit obligation
of such government with maturities of 24 months or less
from the date of acquisition;
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(4)
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certificates of deposit, time deposits and eurodollar time
deposits with maturities of one year or less from the date of
acquisition, bankers acceptances with maturities not
exceeding one year and overnight bank deposits, in each case
with any commercial bank having capital and surplus of not less
than $500.0 million in the case of U.S. banks and
$100.0 million (or the U.S. dollar
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equivalent as of the date of determination) in the case of
non-U.S.
banks, and in each case in a currency permitted under clause
(1) or (2) above;
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(5)
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repurchase obligations for underlying securities of the types
described in clauses (3) and (4) entered into with any
financial institution meeting the qualifications specified in
clause (4) above, and in each case in a currency permitted
under clause (1) or (2) above;
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(6)
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commercial paper rated at least
P-2 by
Moodys or at least
A-2 by
S&P and in each case maturing within 24 months after
the date of creation thereof, and in each case in a currency
permitted under clause (1) or (2) above;
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(7)
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marketable short-term money market and similar securities having
a rating of at least
P-2 or
A-2 from
either Moodys or S&P, respectively (or, if at any
time neither Moodys nor S&P shall be rating such
obligations, an equivalent rating from another Rating Agency)
and in each case maturing within 24 months after the date
of creation thereof and in a currency permitted under clause
(1) or (2) above;
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(8)
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investment funds investing 95% of their assets in securities of
the types described in clauses (1) through (7) above;
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(9)
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readily marketable direct obligations issued by any state,
commonwealth or territory of the United States or any political
subdivision or taxing authority thereof having an Investment
Grade Rating from either Moodys or S&P with
maturities of 24 months or less from the date of
acquisition;
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(10)
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Indebtedness or Preferred Stock issued by Persons with a rating
of A or higher from S&P or A2 or
higher from Moodys with maturities of 24 months or
less from the date of acquisition and in each case in a currency
permitted under clause (1) or (2) above;
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(11)
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Investments with average maturities of 12 months or less
from the date of acquisition in money market funds rated AAA-
(or the equivalent thereof) or better by S&P or Aaa3 (or
the equivalent thereof) or better by Moodys and in each
case in a currency permitted under clause (1) or
(2) above; and
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(12)
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credit card receivables and debit card receivables so long as
such are considered cash equivalents under GAAP and are so
reflected on the Issuers balance sheet.
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Notwithstanding the foregoing, Cash Equivalents shall include
amounts denominated in currencies other than those set forth in
clauses (1) and (2) above, provided that such
amounts are converted into any currency listed in clauses
(1) and (2) as promptly as practicable and in any
event within ten Business Days following the receipt of such
amounts.
Cash Management Services means any or the
following to the extent not constituting a line of credit (other
than an overnight overdraft facility that is not in default):
ACH transactions, treasury
and/or cash
management services, including, without limitation, controlled
disbursement services, overdraft facilities, foreign exchange
facilities, deposit and other accounts and merchant services.
Change of Control means the occurrence of any
of the following:
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(1)
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the sale, lease or transfer, in one or a series of related
transactions (other than by way of merger or consolidation), of
all or substantially all of the assets of the Issuer and its
Subsidiaries or
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Holdings, taken as a whole, to any Person other than to
(i) one or more Permitted Holders or (ii) any
Subsidiary Guarantor; or
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(2)
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the Issuer becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act,
proxy, vote, written notice or otherwise) the acquisition by any
Person or group (within the meaning of Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act, or any successor
provision), including any group acting for the purpose of
acquiring, holding or disposing of securities (within the
meaning of
Rule 13d-5(b)(1)
under the Exchange Act), other than one or more Permitted
Holders, in a single transaction or in a related series of
transactions, by way of merger, consolidation or other business
combination or purchase of beneficial ownership (within the
meaning of
Rule 13d-3
under the Exchange Act, or any successor provision) of 50% or
more of the total voting power of the Voting Stock of the Issuer
or any of its direct or indirect parent companies holding
directly or indirectly 100% of the total voting power of the
Voting Stock of the Issuer; or
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(3)
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the Issuer ceases to be a Wholly-Owned Subsidiary of Holdings
(except in a transaction consummated in accordance with the
covenant described under the heading Certain
covenantsMerger, consolidation or sale of all or
substantially all assets).
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Code means the Internal Revenue Code of 1986,
as amended, or any successor thereto.
Consolidated Depreciation and Amortization
Expense means, with respect to any Person for any
period, the total amount of depreciation and amortization
expense, including the amortization of deferred financing fees
of such Person and its Restricted Subsidiaries for such period
on a consolidated basis and otherwise determined in accordance
with GAAP.
Consolidated Interest Expense means, with
respect to any Person for any period, without duplication, the
sum of:
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(1)
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consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, to the extent such expense was
deducted (and not added back) in computing Consolidated Net
Income (including (a) amortization of original issue
discount resulting from the issuance of Indebtedness at less
than par, (b) all commissions, discounts and other fees and
charges owed with respect to letters of credit or bankers
acceptances, (c) non-cash interest payments (but excluding
any non-cash interest expense attributable to the movement in
the mark to market valuation of Hedging Obligations or other
derivative instruments pursuant to GAAP), (d) the interest
component of Capitalized Lease Obligations, and (e) net
payments, if any, pursuant to interest rate Hedging Obligations
with respect to Indebtedness, and excluding (x) penalties
and interest related to taxes, (w) amortization of deferred
financing fees, debt issuance costs, discounted liabilities,
commissions, fees and expenses, (y) any expensing of
bridge, commitment and other financing fees and
(z) commissions, discounts, yield and other fees and
charges (including any interest expense) related to any
Securitization Facility); plus
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(2)
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consolidated capitalized interest of such Person and its
Restricted Subsidiaries for such period, whether paid or
accrued; less
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(3)
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interest income for such period.
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For purposes of this definition, interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate
reasonably determined by such Person to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with
GAAP.
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Consolidated Net Income means, with respect
to any Person for any period, the aggregate of the Net Income,
of such Person and its Restricted Subsidiaries for such period,
on a consolidated basis, and otherwise determined in accordance
with GAAP; provided, however, that, without duplication,
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(1)
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any net after-tax effect of extraordinary, non-recurring or
unusual gains or losses, costs, charges or expenses (less all
fees and expenses relating thereto) (including any such amounts
relating to the Transactions to the extent incurred on or prior
to the date that is the one year anniversary of the Issue Date),
severance, relocation costs and curtailments or modifications to
pension and post-retirement employee benefit plans shall be
excluded,
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(2)
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the Net Income for such period shall not include the cumulative
effect of a change in accounting principles during such period,
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(3)
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any net after-tax effect of income (loss) from disposed,
abandoned or discontinued operations and any net after-tax gains
or losses on disposal of disposed, abandoned or discontinued
operations shall be excluded,
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(4)
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any net after-tax effect of gains or losses (less all fees and
expenses relating thereto) attributable to asset dispositions
(including sales or other dispositions of assets under a
Securitization Facility) other than in the ordinary course of
business, as determined in Good Faith by the Issuer, shall be
excluded,
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(5)
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the Net Income for such period of any Person that is not a
Subsidiary, or is an Unrestricted Subsidiary, or that is
accounted for by the equity method of accounting, shall be
excluded; provided that Consolidated Net Income of the
Issuer shall be increased by the amount of dividends or
distributions or other payments that are actually paid in cash
or Cash Equivalents (or to the extent converted into cash or
Cash Equivalents) to the referent Person or a Restricted
Subsidiary thereof in respect of such period (without
duplication for purposes of this covenant described under
Certain covenantsLimitation on restricted
payments of any amounts included under clause (3)(d)(i) of
the first paragraph of such covenant),
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(6)
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solely for the purpose of determining the amount available for
Restricted Payments under clause (3)(a) of the first paragraph
of Certain covenantsLimitation on restricted
payments, the Net Income for such period of any Restricted
Subsidiary (other than any Subsidiary Guarantor) shall be
excluded to the extent the declaration or payment of dividends
or similar distributions by that Restricted Subsidiary of its
Net Income is not at the date of determination permitted without
any prior governmental approval (which has not been obtained)
or, directly or indirectly, is otherwise restricted 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
Issuer 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 Issuer or a Restricted
Subsidiary thereof in respect of such period, to the extent not
already included therein,
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(7)
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effects of adjustments (including the effects of such
adjustments pushed down to the Issuer and its Restricted
Subsidiaries) in such Persons consolidated financial
statements, including adjustments to the inventory, property and
equipment, software and other intangible assets (including
favorable and unfavorable leases and contracts), deferred
revenue and debt line items in such Persons consolidated
financial statements pursuant to GAAP resulting from the
application of purchase
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accounting in relation to the Transactions or any consummated
acquisition or the amortization or write-off or write-down of
any amounts thereof, net of taxes, shall be excluded,
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(8)
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any after-tax effect of income (loss) from the early
extinguishment or cancellation of Indebtedness or Hedging
Obligations or other derivative instruments shall be excluded,
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(9)
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any impairment charge, asset write-off or write-down, in each
case, pursuant to GAAP and the amortization of intangibles and
other assets (including alcoholic beverage licenses) arising
pursuant to GAAP shall be excluded,
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(10)
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any (i) non-cash compensation charge or expense recorded
from grants of stock appreciation or similar rights, stock
options, restricted stock or other rights and (ii) income
(loss) attributable to deferred compensation plans or trusts
shall be excluded,
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(11)
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any fees and expenses incurred during such period, or any
amortization thereof for such period, in connection with any
acquisition, Investment, Asset Sale, issuance or repayment of
Indebtedness, issuance of Equity Interests, refinancing
transaction or amendment or modification of any debt instrument
(in each case, including any such transaction consummated prior
to the Issue Date and any such transaction undertaken but not
completed) and any charges or non-recurring costs incurred
during such period as a result of any such transaction shall be
excluded,
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(12)
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accruals and reserves that are established within twelve months
after the Issue Date that are so required to be established as a
result of the Transactions in accordance with GAAP, shall be
excluded,
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(13)
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any net unrealized gain or loss resulting from currency
translation gains or losses related to currency remeasurements
of Indebtedness (including any unrealized net loss or gain
resulting from hedge agreements for currency exchange risk), and
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(14)
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any net unrealized gains and losses resulting from Hedging
Obligations or embedded derivatives that require similar
accounting treatment and the application of Accounting Standards
Codification Topic 815 and related pronouncements shall be
excluded.
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In addition, to the extent not already included in the Net
Income of such Person and its Restricted Subsidiaries,
notwithstanding anything to the contrary in the foregoing,
Consolidated Net Income shall include the amount of proceeds
received from business interruption insurance and reimbursements
of any expenses and charges that are covered by indemnification
or other reimbursement provisions in connection with any
Permitted Investment or any sale, conveyance, transfer or other
disposition of assets permitted under the Indenture.
Notwithstanding the foregoing, for the purpose of the covenant
described under Certain CovenantsLimitation on
restricted payments only (other than clause (3)(d) thereof
of the first paragraph), there shall be excluded from
Consolidated Net Income any income arising from any sale or
other disposition of Restricted Investments made by the Issuer
and its Restricted Subsidiaries, any repurchases and redemptions
of Restricted Investments from the Issuer and its Restricted
Subsidiaries, any repayments of loans and advances which
constitute Restricted Investments by the Issuer or any of its
Restricted Subsidiaries, any sale of the stock of an
Unrestricted Subsidiary or any distribution or dividend from an
Unrestricted Subsidiary, in each case only to the extent such
amounts increase the amount of Restricted Payments permitted
under such covenant pursuant to clause (3)(d) thereof.
Consolidated Secured Debt Ratio means, as of
any date of determination, the ratio of
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(1) Consolidated Total Indebtedness of the Issuer and its
Restricted Subsidiaries that is secured by Liens as of the end
of the most recent fiscal period for which internal financial
statements are available immediately preceding the date on which
such event for which such calculation is being made shall occur
to (2) the Issuers EBITDA for the most recently ended
four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which
such event for which such calculation is being made shall occur,
in each case with such pro forma adjustments to
Consolidated Total Indebtedness and EBITDA as are appropriate
and consistent with the pro forma adjustment provisions
set forth in the definition of Fixed Charge Coverage Ratio.
Consolidated Total Indebtedness means, as at
any date of determination, an amount equal to the sum of
(1) the aggregate amount of all outstanding Indebtedness of
the Issuer and its Restricted Subsidiaries on a consolidated
basis consisting of Indebtedness for borrowed money, Obligations
in respect of Capitalized Lease Obligations and debt obligations
evidenced by promissory notes and similar instruments (and
including, for the avoidance of doubt, all obligations relating
to Qualified Securitization Financings) and (2) the
aggregate amount of all outstanding Disqualified Stock of the
Issuer and all Disqualified Stock and Preferred Stock of its
Restricted Subsidiaries on a consolidated basis, with the amount
of such Disqualified Stock and Preferred Stock equal to the
greater of their respective voluntary or involuntary liquidation
preferences and maximum fixed repurchase prices, in each case
determined on a consolidated basis in accordance with GAAP;
provided that Indebtedness of the Issuer and its
Restricted Subsidiaries under any revolving credit facility or
line of credit as at any date of determination shall be
determined using the Average Quarterly Balance of such
Indebtedness for the most recently ended four fiscal quarters
for which internal financial statements are available as of such
date of determination (the Reference Period).
For purposes hereof, (a) the maximum fixed repurchase
price of any Disqualified Stock or Preferred Stock that
does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Stock or
Preferred Stock as if such Disqualified Stock or Preferred Stock
were purchased on any date on which Consolidated Total
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 Stock or Preferred Stock,
such fair market value shall be determined reasonably and in
Good Faith by the Issuer, (b) Average Quarterly
Balance means, with respect to any Indebtedness
incurred by the Issuer or its Restricted Subsidiaries under a
revolving facility or line of credit, the quotient of
(x) the sum of each Individual Quarterly Balance for each
fiscal quarter ended on or prior to such date of determination
and included in the Reference Period divided by (y) 4, and
(c) Individual Quarterly Balance means,
with respect to any Indebtedness incurred by the Issuer or its
Restricted Subsidiaries under a revolving credit facility or
line of credit during any fiscal quarter of the Issuer, the
quotient of (x) the sum of the aggregate outstanding
principal amount of all such Indebtedness at the end of each day
of such quarter divided by (y) the number of days in such
fiscal quarter.
Contingent Obligations means, with respect to
any Person, any obligation of such Person guaranteeing any
leases, dividends or other obligations that do not constitute
Indebtedness (primary obligations) of any
other Person (the primary obligor) in any
manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not
contingent,
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(1)
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to purchase any such primary obligation or any property
constituting direct or indirect security therefor,
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(2)
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to advance or supply funds
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(a)
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for the purchase or payment of any such primary obligation, or
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(b)
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to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of
the primary obligor, or
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(3)
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to purchase property, securities or services primarily for the
purpose of assuring the owner of any
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such primary obligation of the ability of the primary obligor to
make payment of such primary obligation against loss in respect
thereof.
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Core Marks has the meaning set forth in the
New Credit Facilities.
Credit Facilities means, with respect to the
Issuer or any of its Restricted Subsidiaries, one or more debt
facilities, including the New Credit Facilities, or other
financing arrangements (including, without limitation,
commercial paper facilities or indentures) providing for
revolving credit loans, term loans, letters of credit or other
indebtedness, including any notes, mortgages, guarantees,
collateral documents, instruments and agreements executed in
connection therewith, and any amendments, supplements,
modifications, extensions, renewals, restatements or refunding
thereof and any indentures or credit facilities or commercial
paper facilities that replace, refund or refinance any part of
the loans, notes, other credit facilities or commitments
thereunder, including any such replacement, refunding or
refinancing facility or indenture that increases the amount
permitted to be borrowed thereunder or alters the maturity
thereof (provided that such increase in borrowings is
permitted under Certain covenantsLimitation on
incurrence of indebtedness and issuance of disqualified stock
and preferred stock) or adds Restricted Subsidiaries as
additional borrowers or guarantors thereunder and whether by the
same or any other agent, lender or investor or group of lenders
or investors.
Default means any event that is, or with the
passage of time or the giving of notice or both would be, an
Event of Default; provided that any Default that results
solely from the taking of an action that would have been
permitted but for the continuation of a previous Default will be
deemed to be cured if such previous Default is cured prior to
becoming an Event of Default.
Designated Non-cash Consideration means the
fair market value of non-cash consideration received by the
Issuer or a Restricted Subsidiary in connection with an Asset
Sale that is so designated as Designated Non-cash Consideration
pursuant to an Officers Certificate, setting forth the
basis of such valuation, executed by the principal financial
officer of the Issuer, less the amount of cash or Cash
Equivalents received in connection with a subsequent sale of or
collection on such Designated Non-cash Consideration.
Designated Preferred Stock means Preferred
Stock of the Issuer or any parent company thereof (in each case
other than Disqualified Stock) that is issued for cash (other
than to a Restricted Subsidiary or an employee stock ownership
plan or trust established by the Issuer or any of its
Subsidiaries) and is so designated as Designated Preferred
Stock, pursuant to an Officers Certificate executed by the
principal financial officer of the Issuer or the applicable
parent company thereof, as the case may be, on the issuance date
thereof, the cash proceeds of which are excluded from the
calculation set forth in clause (3) of the first paragraph
of the Certain covenantsLimitation on restricted
payments covenant.
Disqualified Stock means, with respect to any
Person, any Capital Stock of such Person which, by its terms, or
by the terms of any security into which it is convertible or for
which it is putable or exchangeable, or upon the happening of
any event, matures or is mandatorily redeemable (other than
solely as a result of a change of control or asset sale)
pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof (other than
solely as a result of a change of control or asset sale), in
whole or in part, in each case prior to the date 91 days
after the earlier of the maturity date of the Notes or the date
the Notes are no longer outstanding; provided, however,
that if such Capital Stock is issued to any plan for the benefit
of employees of the Issuer or its Subsidiaries or by any such
plan to such employees, such Capital Stock shall not constitute
Disqualified Stock solely because it may be required to be
repurchased by the Issuer or its Subsidiaries in order to
satisfy applicable statutory or regulatory obligations.
EBITDA means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such
period
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(1)
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increased (without duplication) by:
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(a)
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provision for taxes based on income or profits or capital,
including, without limitation, state, franchise and similar
taxes and foreign withholding taxes of such Person paid or
accrued during such period deducted (and not added back) in
computing Consolidated Net Income; plus
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(b)
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Fixed Charges of such Person for such period (including
(x) net losses on Hedging Obligations or other derivative
instruments entered into for the purpose of hedging interest
rate risk and (y) costs of surety bonds in connection with
financing activities, plus amounts excluded from the definition
of Consolidated Interest Expense pursuant to
clauses 1(x) through 1(z) thereof, to the extent the same
were deducted (and not added back) in calculating such
Consolidated Net Income; plus
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(c)
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Consolidated Depreciation and Amortization Expense of such
Person for such period to the extent the same were deducted (and
not added back) in computing Consolidated Net Income; plus
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(d)
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any expenses or charges (other than depreciation or amortization
expense) 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) (whether or not successful),
including
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(i) such fees, expenses or charges related to the offering
of the Notes and the New Credit Facilities and any
Securitization Fees, and
(ii) any amendment or other modification of the Notes, the
New Credit Facilities and any Securitization Fees, in each case,
deducted (and not added back) in computing Consolidated Net
Income; plus
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(e)
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the amount of any restructuring charge or reserve, integration
cost or other business optimization expense or cost associated
with establishing new facilities that is certified by the chief
financial officer of the Issuer and deducted (and not added
back) in such period in computing Consolidated Net Income,
including any one-time costs incurred in connection with
acquisitions after the Issue Date and costs related to the
closure
and/or
consolidation of facilities; provided that the aggregate
amount of all charges, expenses, costs and losses added back
under this clause (e) in any period of four consecutive
fiscal quarters shall not exceed (x) 15% of EBITDA for any
period of four consecutive fiscal quarters completed on or prior
to the first anniversary of the Issue Date or (y) 10% of
EBITDA for any period of four consecutive fiscal quarters
completed thereafter; provided, further, that the cap
under this clause (y) for any period of four consecutive
fiscal quarters completed on or prior to the second anniversary
of the Issue Date shall be increased up to 15% of EBITDA, but
only to the extent the aggregate amount added back under this
clause (e) for the corresponding period of four consecutive
fiscal quarters of the previous fiscal year was less than 15% of
Consolidated EBITDA; plus
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(f)
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any other non-cash charges, expenses or losses reducing
Consolidated Net Income for such period (including any
impairment charges or the impact of purchase accounting),
excluding any such charge that represents an accrual or reserve
for a cash expenditure for a future period; plus
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(g)
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the amount of management, monitoring, consulting and advisory
fees (including termination fees) and related indemnities and
expenses paid or accrued in such period to the Sponsor to the
extent otherwise permitted under Certain
covenantsTransactions with affiliates; plus
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(h)
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the amount of run-rate cost savings projected by the
Issuer in good faith and certified by the chief financial
officer of the Issuer to be realized as a result of specified
actions either taken or initiated prior to or during such period
(calculated on a pro forma basis as though such cost
savings had been realized on the first day of such period), net
of the amount of actual benefits realized or expected to be
realized prior to or during such period from such actions;
provided that (A) the chief financial officer of the
Issuer shall have certified that (x) such cost savings are
reasonably identifiable, reasonably attributable to the actions
specified and reasonably anticipated to result from such actions
and (y) such actions have been taken or initiated and the
benefits resulting therefrom are anticipated by the Issuer to be
realized within 12 months, (B) no cost savings shall
be added pursuant to this clause (h) to the extent
duplicative of any expenses or charges relating to such cost
savings that are included in clause (e) above with respect
to such period or duplicative of any pro forma
adjustments made pursuant to the definition of Fixed
Charge Coverage Ratio and (C) the aggregate
amount of cost savings added pursuant to this clause
(h) shall not exceed 10% of EBITDA for any period of four
consecutive fiscal quarters; plus
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(i)
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the amount of loss on sale of Securitization Assets and related
assets to the Securitization Subsidiary in connection with a
Qualified Securitization Financing; plus
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(j)
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any costs or expense incurred by the Issuer or a Restricted
Subsidiary pursuant to any management equity plan or stock
option plan or any other management or employee benefit plan or
agreement or any stock subscription or shareholder agreement, to
the extent that such cost or expenses are funded with cash
proceeds contributed to the capital of the Issuer or net cash
proceeds of an issuance of Equity Interest of the Issuer (other
than Disqualified Stock) solely to the extent that such net cash
proceeds are excluded from the calculation set forth in clause
(3) of the first paragraph under Certain
covenantsLimitation on restricted payments; plus
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(k)
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cash receipts (or any netting arrangements resulting in reduced
cash expenditures) not representing EBITDA or Net Income in any
period to the extent non-cash gains relating to such income were
deducted in the calculation of EBITDA pursuant to clause
(2) below for any previous period and not added back; plus
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(l)
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any net loss included in the consolidated financial statements
due to the application of Financial Accounting Standards
No. 160 Non-controlling Interests in Consolidated
Financial Statements (FAS 160); plus
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(m)
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rent expense as determined in accordance with GAAP not actually
paid in cash during such period (net of rent expense paid in
cash during such period over and above rent expense as
determined in accordance with GAAP); plus
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(n)
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realized foreign exchange losses resulting from the impact of
foreign currency changes on the valuation of assets or
liabilities on the balance sheet of the Issuer and its
Restricted Subsidiaries;
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(o)
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net realized losses from Hedging Obligations or embedded
derivatives that require similar accounting treatment and the
application of Accounting Standard Codification Topic 815 and
related pronouncements;
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(2)
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decreased (without duplication) by: (a) non-cash gains
increasing Consolidated Net Income of such Person for such
period, excluding any non-cash gains to the extent they
represent the reversal of an accrual or reserve for a potential
cash item that reduced EBITDA in any prior period and any
non-cash gains with respect to cash actually received in a prior
period so long as such cash did not increase EBITDA in such
prior period; plus (b) realized foreign exchange income or
gains resulting from the impact of foreign currency changes on
the valuation of assets or liabilities on the balance sheet of
the Issuer and its Restricted Subsidiaries; plus (c) any
net realized income or gains from Hedging Obligations or
embedded derivatives that require similar accounting treatment
and the application of Accounting Standard Codification Topic
815 and related pronouncements, plus (d) any net income
included in the consolidated financial statements due to the
application of FAS 160, plus (e) rent expense actually
paid in cash during such period (net of rent expense paid in
cash during such period in an amount equal to rent expense
determined in accordance with GAAP) and
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(3)
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increased or decreased by (without duplication), as applicable,
any adjustments resulting from the application of Accounting
Standards Codification Topic 460 or any comparable regulation.
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EMU means economic and monetary union as
contemplated in the Treaty on European Union.
Equity Interests means Capital Stock and all
warrants, options or other rights to acquire Capital Stock, but
excluding any debt security that is convertible into, or
exchangeable for, Capital Stock.
Equity Offering means any public or private
sale of common stock or Preferred Stock of the Issuer or any of
its direct or indirect parent companies (excluding Disqualified
Stock), other than:
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(1)
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public offerings with respect to the Issuers or any direct
or indirect parent companys common stock registered on
Form S-4
or
Form S-8;
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(2)
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issuances to any Subsidiary of the Issuer; and
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(3)
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any such public or private sale that constitutes an Excluded
Contribution.
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euro means the single currency of participating
member states of the EMU.
Event of Default has the meaning set forth
under Events of default and remedies.
Excess Proceeds has the meaning set forth in
the fourth paragraph under Repurchase at the option of
holdersAsset sales.
Exchange Act means the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the
SEC promulgated thereunder,
Excluded Contribution means net cash
proceeds, marketable securities or Qualified Proceeds received
by the Issuer from
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(1)
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contributions to its common equity capital, and
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97
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(2)
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the sale (other than to a Subsidiary of the Issuer or to any
management equity plan or stock option plan or any other
management or employee benefit plan or agreement of the Issuer)
of Capital Stock (other than Disqualified Stock and Designated
Preferred Stock) of the Issuer, in each case designated as
Excluded Contributions pursuant to an Officers Certificate
executed by the principal financial officer of the Issuer on the
date such capital contributions are made or the date such Equity
Interests are sold, as the case may be, which are excluded from
the calculation set forth in clause (3) of the first
paragraph under Certain covenantsLimitation on
restricted payment.
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Fixed Charge Coverage Ratio means, with
respect to any Person for any period, the ratio of EBITDA of
such Person for such period to the Fixed Charges of such Person
for such period. In the event that the Issuer or any Restricted
Subsidiary incurs, assumes, guarantees, redeems, retires or
extinguishes any Indebtedness (other than Indebtedness incurred
under any revolving credit facility unless such indebtedness has
been permanently repaid and has not been replaced) or issues or
redeems Disqualified Stock or Preferred Stock subsequent to the
commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to or simultaneously with
the event for which the calculation of the Fixed Charge Coverage
Ratio is made (the Fixed Charge Coverage Ratio
Calculation Date), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, guarantee, redemption, retirement or
extinguishment of Indebtedness, or such issuance or redemption
of Disqualified Stock or Preferred Stock, as if the same had
occurred at the beginning of the applicable four-quarter period.
For purposes of making the computation referred to above,
Investments, acquisitions, dispositions, mergers, consolidations
and discontinued operations (as determined in accordance with
GAAP) that have been made by the Issuer or any of its Restricted
Subsidiaries during the four-quarter reference period or
subsequent to such reference period and on or prior to or
simultaneously with the Fixed Charge Coverage Ratio Calculation
Date shall be calculated on a pro forma basis assuming
that all such Investments, acquisitions, dispositions, mergers,
consolidations and discontinued operations (and the change in
any associated fixed charge obligations and the change in EBITDA
resulting therefrom) had occurred on the first day of the
four-quarter reference period. If since the beginning of such
period any Person that subsequently became a Restricted
Subsidiary or was merged with or into the Issuer or any of its
Restricted Subsidiaries since the beginning of such period shall
have made any Investment, acquisition, disposition, merger,
consolidation or discontinued operations that would have
required adjustment pursuant to this definition, then the Fixed
Charge Coverage Ratio shall be calculated giving pro
forma effect thereto for such period as if such Investment,
acquisition, disposition, merger, consolidation or discontinued
operations had occurred at the beginning of the applicable
four-quarter period.
For purposes of this definition, whenever pro forma
effect is to be given to a transaction, the pro forma
calculations shall be (x) made in good faith by a
responsible financial or accounting officer of the Issuer (and
may include, for the avoidance of doubt, cost savings and
operating expense reductions resulting from such Investment,
acquisition, merger or consolidation (including the
Transactions) or discontinued operations which is being given
pro forma effect that have been or are expected to be
realized or (y) determined in accordance with
Regulation S-X.
If any Indebtedness bears a floating rate of interest and is
being given pro forma effect, the interest on such
Indebtedness shall be calculated as if the rate in effect on the
Fixed Charge Coverage Ratio Calculation Date had been the
applicable rate for the entire period (taking into account any
Hedging Obligations applicable to such Indebtedness). Interest
on a Capitalized Lease Obligation shall be deemed to accrue at
an interest rate reasonably determined by a responsible
financial or accounting officer of the Issuer to be the rate of
interest implicit in such Capitalized Lease Obligation in
accordance with GAAP. For purposes of making the computation
referred to above, interest on any Indebtedness under a
revolving credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such
Indebtedness during the applicable period except as set forth in
the first paragraph of this definition. Interest on Indebtedness
that may optionally be determined at an interest rate
98
based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rate, shall be deemed to have
been based upon the rate actually chosen, or, if none, then
based upon such optional rate chosen as the Issuer may designate.
Fixed Charges means, with respect to any
Person for any period, the sum, of:
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(1)
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Consolidated Interest Expense of such Person for such period;
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(2)
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all cash dividends or other distributions paid (excluding items
eliminated in consolidation) on any series of Preferred Stock
during such period; and
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(3)
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all cash dividends or other distributions paid (excluding items
eliminated in consolidation) on any series of Disqualified Stock
during such period.
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Foreign Subsidiary means, with respect to any
Person, any Restricted Subsidiary of such Person that is not
organized or existing under the laws of the United States, any
state thereof, the District of Columbia, or any territory
thereof and any Restricted Subsidiary of such Foreign Subsidiary.
GAAP means generally accepted accounting
principles in the United States which are in effect on the Issue
Date.
Good Faith by the Issuer means the decision
in good faith by a responsible financial officer of the Issuer;
provided that (a) if such decision involves a
determination of fair market value in excess of
$7.5 million, the decision is made in good faith by the
Senior Management of the Issuer and (b) if such decision
involves a determination of fair market value in excess of
$25.0 million, the decision is made in good faith by the
board of directors of the Issuer.
Government Securities means securities that
are:
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(1)
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direct obligations of the United States of America for the
timely payment of which its full faith and credit is pledged; or
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(2)
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obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America
the timely payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America,
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which, in either case, are not callable or redeemable at the
option of the issuers thereof, and shall also include a
depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act), as custodian with
respect to any such Government Securities or a specific payment
of principal of or interest on any such Government Securities
held by such custodian for the account of the holder of such
depository receipt; provided that (except as required by
law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the
Government Securities or the specific payment of principal of or
interest on the Government Securities evidenced by such
depository receipt.
guarantee means a guarantee (other than by
endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner
(including letters of credit and reimbursement agreements in
respect thereof), of all or any part of any Indebtedness or
other obligations.
Guarantee means the guarantee by any
Guarantor of the Issuers Obligations under the Indenture
and the Notes.
99
Guarantor means Holdings and each Subsidiary
Guarantor.
Hedging Obligations means, with respect to
any Person, the obligations of such Person under any interest
rate swap agreement, interest rate cap agreement, interest rate
collar agreement, commodity swap agreement, commodity cap
agreement, commodity collar agreement, foreign exchange
contract, currency swap agreement or similar agreement providing
for the transfer or mitigation of interest rate, commodity price
or currency risks either generally or under specific
contingencies.
Holder means the Person in whose name a Note
is registered on the registrars books.
Indebtedness means, with respect to any
Person, without duplication:
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(1)
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any indebtedness (including principal and premium) of such
Person, whether or not contingent:
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(a)
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in respect of borrowed money;
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(b)
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evidenced by bonds, notes, debentures or similar instruments or
letters of credit or bankers acceptances (or, without
duplication, reimbursement agreements in respect thereof);
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(c)
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representing the balance deferred and unpaid of the purchase
price of any property (including Capitalized Lease Obligations),
except (i) any such balance that constitutes an obligation
in respect of a commercial letter of credit, a trade payable or
similar obligation to a trade creditor, in each case accrued in
the ordinary course of business (and with respect to commercial
letters of credit repaid in a timely manner) and (ii) any
earn-out obligations until such obligation becomes a liability
on the balance sheet of such Person in accordance with GAAP and
is not paid after becoming due and payable; or
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(d)
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representing any Hedging Obligations;
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if and to the extent that any of the foregoing Indebtedness
(other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet (excluding the
footnotes thereto) of such Person prepared in accordance with
GAAP;
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(2)
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to the extent not otherwise included, any obligation by such
Person to be liable for, or to pay, as obligor, guarantor or
otherwise, on the obligations of the type referred to in clause
(1) of a third Person (whether or not such items would
appear upon the balance sheet of such obligor or guarantor),
other than by endorsement of negotiable instruments for
collection in the ordinary course of business; and
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(3)
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to the extent not otherwise included, the obligations of the
type referred to in clause (1) of a third Person secured by
a Lien on any asset owned by such first Person, whether or not
such Indebtedness is assumed by such first Person;
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provided, however, that notwithstanding the foregoing,
Indebtedness shall be deemed not to include Contingent
Obligations incurred in the ordinary course of business. For the
avoidance of doubt, Indebtedness does not include Cash
Management Services.
Independent Financial Advisor means an
accounting, appraisal, investment banking firm or consultant to
Persons engaged in Similar Businesses of nationally recognized
standing that is, in the good faith judgment of the Issuer,
qualified to perform the task for which it has been engaged.
Initial Purchasers means the initial
purchasers of the Original Notes.
Investment Grade Rating means a rating equal
to or higher than Baa3 (or the equivalent) by
100
Moodys and BBB- (or the equivalent) by S&P, or, in
either case, an equivalent rating by any other Rating Agency.
Investment Grade Securities means:
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(1)
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securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality
thereof (other than Cash Equivalents);
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(2)
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debt securities or debt instruments with an Investment Grade
Rating, but excluding any debt securities or instruments
constituting loans or advances among the Issuer and its
Subsidiaries;
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(3)
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investments in any fund that invests exclusively in investments
of the type described in clauses (1) and (2) which
fund may also hold immaterial amounts of cash pending investment
or distribution; and
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(4)
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corresponding instruments in countries other than the United
States customarily utilized for high quality investments.
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Investments means, with respect to any
Person, all investments by such Person in other Persons
(including Affiliates) in the form of loans (including
guarantees), advances or capital contributions (excluding
accounts receivable, credit card and debit card receivables,
trade credit, advances to customers, commission, travel and
similar advances to officers and employees, in each case made in
the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests
or other securities issued by any other Person and investments
that are required by GAAP to be classified on the balance sheet
(excluding the footnotes) of the Issuer in the same manner as
the other investments included in this definition to the extent
such transactions involve the transfer of cash or other
property. For purposes of the definition of
Unrestricted Subsidiary and the covenant
described under Certain CovenantsLimitation on
Restricted Payments:
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(1)
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Investments shall include the portion
(proportionate to the Issuers equity interest in such
Subsidiary) of the fair market value of the net assets of a
Subsidiary of the Issuer at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Issuer shall be deemed to continue to have a
permanent Investment in an Unrestricted Subsidiary
in an amount (if positive) equal to:
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(a)
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the Issuers Investment in such Subsidiary at
the time of such redesignation; less
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(b)
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the portion (proportionate to the Issuers equity interest
in such Subsidiary) of the fair market value of the net assets
of such Subsidiary at the time of such redesignation; and
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(2)
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any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such
transfer, in each case as determined in Good Faith by the Issuer.
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Issue Date means October 19, 2010.
Issuer has the meaning set forth in the first
paragraph under General and its permitted successors.
Legal Holiday means a Saturday, a Sunday or a
day on which commercial banking institutions are not required to
be open in the State of New York.
101
Lien means, with respect to any asset, any
mortgage, lien (statutory or otherwise), pledge, hypothecation,
charge, security interest, preference, priority or encumbrance
of any kind in respect of such asset, whether or not filed,
recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction;
provided that in no event shall an operating lease be
deemed to constitute a Lien.
Merger Agreement means the Agreement and Plan
of Merger, dated as of September 2, 2010, among Holdings,
Parent and Merger Sub.
Moodys means Moodys Investors
Service, Inc. and any successor to its rating agency business.
Net Income means, with respect to any Person,
the net income (loss) of such Person, determined in accordance
with GAAP and before any reduction in respect of Preferred Stock
dividends.
Net Proceeds means the aggregate cash
proceeds received by the Issuer or any of its Restricted
Subsidiaries in respect of any Asset Sale, including any cash
received upon the sale or other disposition of any Designated
Non-cash Consideration received in any Asset Sale, net of the
direct costs relating to such Asset Sale and the sale or
disposition of such Designated Noncash Consideration, including
legal, accounting and investment banking fees, and brokerage and
sales commissions, any relocation expenses incurred as a result
thereof; taxes paid or payable as a result thereof (after taking
into account any available tax credits or deductions and any tax
sharing arrangements), amounts required to be applied to the
repayment of principal, premium, if any, and interest on Senior
Indebtedness secured by a Lien on the assets disposed of
required (other than required by clause (1) of the second
paragraph of Repurchase at the option of
holdersAsset sales) to be paid as a result of such
transaction and any deduction of appropriate amounts to be
provided by the Issuer or any of its Restricted Subsidiaries as
a reserve in accordance with GAAP against any liabilities
associated with the asset disposed of in such transaction and
retained by the Issuer or any of its Restricted Subsidiaries
after such sale or other disposition thereof, including pension
and other post-employment benefit liabilities and liabilities
related to environmental matters or against any indemnification
obligations associated with such transaction.
New Credit Facilities means the Credit
Facility under the Credit Agreement by and among Merger Sub,
Holdings, the Issuer, the lenders party thereto in their
capacities as lenders thereunder and J.P. Morgan Securities LLC,
as Administrative Agent, including any guarantees, collateral
documents, instruments and agreements executed in connection
therewith, and any amendments, supplements, modifications,
extensions, 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 replace, refund or refinance any part of the
loans, notes, 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 is permitted under Certain
covenantsLimitation on incurrence of indebtedness and
issuance of disqualified stock and preferred stock above).
Non-Guarantor Subsidiary means any Restricted
Subsidiary that is not a Subsidiary Guarantor.
Obligations means any principal, interest
(including any interest accruing subsequent to the filing of a
petition in bankruptcy, reorganization or similar proceeding at
the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under
applicable state, federal or foreign law), premium, penalties,
fees, indemnifications, reimbursements (including reimbursement
obligations with respect to letters of credit and bankers
acceptances), damages and other liabilities, and guarantees of
payment
102
of such principal, interest, penalties, fees, indemnifications,
reimbursements, damages and other liabilities, payable under the
documentation governing any Indebtedness.
Officer means the Chairman of the Board, the
Chief Executive Officer, the President, any Executive Vice
President, Senior Vice President or Vice President, the
Treasurer or the Secretary of the Issuer or any other Person, as
the case may be.
Officers Certificate means a
certificate signed on behalf of the Issuer by an Officer of the
Issuer or on behalf of any other Person, as the case may be, who
must be the principal executive officer, the principal financial
officer, the treasurer or the principal accounting officer of
the Issuer or such other Person, that meets the requirements set
forth in the Indenture.
Opinion of Counsel means a written opinion
from legal counsel who is acceptable to the Trustee and that
meets the requirements set forth in the indenture. The counsel
may be an employee of or counsel to the Issuer or the Trustee.
Permitted Asset Swap means the concurrent
purchase and sale or exchange of Related Business Assets or a
combination of Related Business Assets and cash or Cash
Equivalents between the Issuer or any of its Restricted
Subsidiaries and another Person; provided that any cash
or Cash Equivalent received must be applied in accordance with
the Repurchase at the option of holdersAsset
sales covenant.
Permitted Holders means the Sponsor and
members of management of the Issuer (or its direct parent) who
are holders of Equity Interests of the Issuer (or any of its
direct or indirect parent companies) on the Issue Date and any
group (within the meaning of Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act or any successor
provision) of which any of the foregoing are members;
provided that, in the case of such group and without
giving effect to the existence of such group or any other group,
the Sponsor and members of management, collectively, have
beneficial ownership of more than 50% of the total voting power
of the Voting Stock of the Issuer or any of its direct or
indirect parent companies held by such group. Any Person or
group whose acquisition of beneficial ownership constitutes a
Change of Control in respect of which a Change of Control Offer
is made in accordance with the requirements of the Indenture
will thereafter, together with its Affiliates, constitute an
additional Permitted Holder.
Permitted Investments means:
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(1)
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any Investment in the Issuer or any of its Restricted
Subsidiaries;
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(2)
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any Investment in cash and Cash Equivalents or Investment Grade
Securities;
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(3)
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any Investment by the Issuer or any of its Restricted
Subsidiaries in a Person that is engaged in a Similar Business
if as a result of such Investment:
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(a)
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such Person becomes a Restricted Subsidiary; or
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(b)
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such Person, in one transaction or a series of related
transactions, is merged or consolidated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Issuer or a Restricted Subsidiary, and, in
each case, any Investment held by such Person; provided
that such Investment was not acquired by such Person in
contemplation of such acquisition, merger, consolidation or
transfer;
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(4)
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any Investment in securities or other assets not constituting
cash, Cash Equivalents or Investment Grade Securities and
received in connection with an Asset Sale made pursuant to the
provisions
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103
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of Repurchase at the option of holdersAsset
sales or any other disposition of assets not constituting
an Asset Sale;
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(5)
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any Investment existing on the Issue Date and any extension,
modification, replacement or renewal of any such Investments
existing on the Issue Date, but only to the extent not involving
additional advances, contributions or other Investments of cash
or other assets or other increases thereof other than as a
result of the accrual or accretion of interest or original issue
discount or the issuance of
pay-in-kind
securities, in each case, pursuant to the terms of such
Investment as in effect on the Issue Date (or as subsequently
amended or otherwise modified in a manner not disadvantageous to
the Holders of the Notes in any material respect);
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(6)
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any Investment acquired by the Issuer or any of its Restricted
Subsidiaries:
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(a)
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in exchange for any other Investment or accounts receivable held
by the Issuer or any such Restricted Subsidiary in connection
with or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or
accounts receivable; or
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(b)
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as a result of a foreclosure by the Issuer or any of its
Restricted Subsidiaries with respect to any secured Investment
or other transfer of title with respect to any secured
Investment in default;
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(7)
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Hedging Obligations permitted under clause (10) of the
second paragraph of the covenant described in Certain
covenantsLimitation on incurrence of indebtedness and
issuance of disqualified stock and preferred stock;
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(8)
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any Investment in a Similar Business having an aggregate fair
market value, taken together with all other Investments made
pursuant to this clause (8) that are at that time
outstanding, not to exceed the greater of
(x) $50.0 million and (y) 1.0% of Total Assets at
the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving
effect to subsequent changes in value);
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(9)
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Investments the payment for which consists of Equity Interests
(exclusive of Disqualified Stock) of the Issuer, or any of its
direct or indirect parent companies; provided, however,
that such Equity Interests will not increase the amount
available for Restricted Payments under clause (3) of the
first paragraph under the covenant described in Certain
covenantsLimitation on restricted payments;
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(10)
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guarantees of Indebtedness permitted under the covenant
described in Certain covenantsLimitation on
incurrence of indebtedness and issuance of disqualified stock
and preferred stock;
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(11)
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any transaction to the extent it constitutes an Investment that
is permitted and made in accordance with the provisions of the
second paragraph of the covenant described under Certain
covenantsTransactions with affiliates (except
transactions described in clauses (2), (5), (9), (11) and
(15) of such paragraph);
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(12)
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Investments consisting of purchases and acquisitions of
inventory, supplies, material or equipment;
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(13)
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additional Investments having an aggregate fair market value,
taken together with all other Investments made pursuant to this
clause (13) that are at that time outstanding (without
giving effect to the sale of an Unrestricted Subsidiary to the
extent the proceeds of such sale do not
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104
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consist of cash or marketable securities), not to exceed the
greater of (x) $75.0 million and (y) 1.5% of
Total Assets at the time of such Investment (with the fair
market value of each Investment being measured at the time made
and without giving effect to subsequent changes in value);
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(14)
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Investments relating to a Securitization Subsidiary that, in the
good faith determination of the Issuer are necessary or
advisable to effect any Qualified Securitization Financing;
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(15)
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advances to, or guarantees of Indebtedness of, officers,
directors and employees not in excess of $20.0 million
outstanding at any one time, in the aggregate;
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(16)
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loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other
similar expenses, in each case incurred in the ordinary course
of business or consistent with past practices or to fund such
Persons purchase of Equity Interests of the Issuer or any
direct or indirect parent company thereof;
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(17)
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Investments consisting of licensing of intellectual property
pursuant to joint marketing arrangements with other Persons;
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(18)
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Investments consisting of (i) Guarantees of or the
assumption of Indebtedness (to the extent permitted by clause
(21) of the second paragraph under Certain
covenantsLimitations on incurrence of indebtedness and
issuance of disqualified stock and preferred stock) of, or
(ii) loans made to, or the acquisition of loans made to or
Equity Interests in, Franchisees, suppliers, distributors or
licensees of the Issuer and its Restricted Subsidiaries in an
aggregate amount not exceeding $300.0 million (in each case
determined at the time made and not reduced by any subsequent
write-downs or write-offs and net of returns of capital or
principal in respect of such Investments); and
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(19)
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contributions to a rabbi trust for the benefit of
employees within the meaning of Revenue Procedure
92-64 or
other grantor trust subject to the claims of creditors in the
case of a bankruptcy of the Issuer.
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Permitted Liens means, with respect to any
Person:
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(1)
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pledges or deposits by such Person under workmens
compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness)
or leases to which such Person is a party, or deposits to secure
public or statutory obligations of such Person or deposits of
cash or U.S. government bonds to secure surety or appeal bonds
to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in
each case incurred in the ordinary course of business;
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(2)
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Liens imposed by law, such as carriers,
warehousemens, materialmens, repairmens and
mechanics Liens, in each case for sums not yet overdue for
a period of more than 30 days or being contested in good
faith by appropriate proceedings or other Liens arising out of
judgments or awards against such Person with respect to which
such Person shall then be proceeding with an appeal or other
proceedings for review if adequate reserves with respect thereto
are maintained on the books of such Person in accordance with
GAAP;
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(3)
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Liens for taxes, assessments or other governmental charges not
yet overdue for a period of more than 30 days or which are
being contested in good faith by appropriate proceedings
diligently
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105
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conducted, if adequate reserves with respect thereto are
maintained on the books of such Person in accordance with GAAP,
or for property taxes on property that the Issuer or one of its
Subsidiaries has determined to abandon if the sole recourse for
such tax, assessment, charge, levy or claims is to such property;
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(4)
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Liens in favor of issuers of performance, surety, bid,
indemnity, warranty, release, appeal or similar bonds or with
respect to other regulatory requirements or letters of credit or
bankers acceptances issued, and completion guarantees
provided for, in each case pursuant to the request of and for
the account of such Person in the ordinary course of its
business;
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(5)
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minor survey exceptions, minor encumbrances, ground leases,
easements or reservations of, or rights of others for, licenses,
rights-of-way,
servitudes, sewers, electric lines, drains, telegraph and
telephone and cable television lines, gas and oil pipelines and
other similar purposes, or zoning, building codes or other
restrictions (including, without limitation, minor defects or
irregularities in title and similar encumbrances) as to the use
of real properties or Liens incidental, to the conduct of the
business of such Person or to the ownership of its properties
which were not incurred in connection with Indebtedness and
which do not in the aggregate materially impair their use in the
operation of the business of such Person;
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(6)
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Liens securing Indebtedness permitted to be incurred pursuant to
clause (4) or (18) of the second paragraph under
Certain covenantsLimitation on incurrence of
indebtedness and issuance of disqualified stock and preferred
stock;; provided that Liens securing Indebtedness
permitted to be incurred pursuant to clause (18) extend
only to the assets of Foreign Subsidiaries;
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(7)
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Liens existing on the Issue Date (with the exception of Liens
securing the New Credit Facilities, on the Issue Date, which
will be deemed incurred pursuant to clause (33) of this
definition);
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(8)
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Liens on property or shares of stock of a Person at the time
such Person becomes a Subsidiary; provided, however, such
Liens are not created or incurred in connection with, or in
contemplation of, such other Person becoming such a Subsidiary;
provided, further, however, that such Liens may not
extend to any other property owned by the Issuer or any of its
Restricted Subsidiaries;
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(9)
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Liens on property at the time the Issuer or a Restricted
Subsidiary acquired the property, including any acquisition by
means of a merger or consolidation with or into the Issuer or
any of its Restricted Subsidiaries; provided, however,
that such Liens are not created or incurred in connection with,
or in contemplation of, such acquisition, merger or
consolidation; provided, further, however, that the Liens
may not extend to any other property owned by the Issuer or any
of its Restricted Subsidiaries;
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(10)
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Liens securing Indebtedness or other obligations of a Restricted
Subsidiary owing to the Issuer or another Restricted Subsidiary
permitted to be incurred in accordance with the covenant
described under Certain covenantsLimitation on
incurrence of indebtedness and issuance of disqualified stock
and preferred stock;
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(11)
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Liens securing Hedging Obligations and Cash Management Services
so long as related Indebtedness is, and is permitted to be under
the Indenture, secured by a Lien on the same property securing
such Hedging Obligations;
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(12)
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Liens on specific items of inventory or other goods and proceeds
of any Person 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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106
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(13)
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leases, subleases, licenses or sublicenses granted to others in
the ordinary course of business which do not materially
interfere with the ordinary conduct of the business of the
Issuer or any of its Restricted Subsidiaries and do not secure
any Indebtedness;
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(14)
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Liens arising from Uniform Commercial Code financing statement
filings regarding operating leases or consignments entered into
by the Issuer and its Restricted Subsidiaries in the ordinary
course of business;
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(15)
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Liens in favor of the Issuer or any Subsidiary Guarantor;
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(16)
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Liens on equipment of the Issuer or any of its Restricted
Subsidiaries granted in the ordinary course of business to the
Issuers clients;
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(17)
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Liens on Securitization Assets and related assets incurred in
connection with a Qualified Securitization Financing;
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(18)
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Liens to secure any refinancing, refunding, extension, renewal
or replacement (or successive refinancing, refunding,
extensions, renewals or replacements) as a whole, or in part, of
any Indebtedness secured by any Lien referred to in the
foregoing clauses (7), (8) and (9); provided,
however, that (a) such new Lien shall be limited to all
or part of the same property that secured the original Lien
(plus improvements on such property), and (b) the
Indebtedness secured by such Lien at such time is not increased
to any amount greater than the sum of (i) the outstanding
principal amount or, if greater, committed amount of the
Indebtedness described under clauses (7), (8) and
(9) at the time the original Lien became a Permitted Lien
under the Indenture, and (ii) an amount necessary to pay
any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement;
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(19)
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deposits made or other security provided to secure liabilities
to insurance carriers under insurance or self-insurance
arrangements in the ordinary course of business;
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(20)
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other Liens securing obligations incurred in the ordinary course
of business which obligations do not exceed $50.0 million
at any one time outstanding;
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(21)
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Liens securing judgments for the payment of money not
constituting an Event of Default under clause (5) under the
caption Events of default and remedies so long as
such Liens are adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the review of
such judgment have not been finally terminated or the period
within which such proceedings may be initiated has not expired;
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(22)
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Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection
with the importation of goods in the ordinary course of business;
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(23)
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Liens (i) of a collection bank arising under
Section 4-210
of the Uniform Commercial Code on items in the course of
collection, (ii) attaching to commodity trading accounts or
other commodity brokerage accounts incurred in the ordinary
course of business, and (iii) in favor of banking
institutions arising as a matter of law encumbering deposits
(including the right of set-off) and which are within the
general parameters customary in the banking industry;
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(24)
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Liens deemed to exist in connection with Investments in
repurchase agreements permitted under Certain
covenantsLimitation on incurrence of indebtedness and
issuance of disqualified stock
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107
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and preferred stock; provided that such Liens do
not extend to any assets other than those that are the subject
of such repurchase agreement;
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(25)
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Liens encumbering reasonable customary initial deposits and
margin deposits and similar Liens attaching to commodity trading
accounts or other brokerage accounts incurred in the ordinary
course of business and not for speculative purposes;
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(26)
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Liens that are contractual rights of set-off (i) relating
to the establishment of depository relations with banks not
given in connection with the issuance of Indebtedness,
(ii) relating to pooled deposit or sweep accounts of the
Issuer or any of its Restricted Subsidiaries to permit
satisfaction of overdraft or similar obligations incurred in the
ordinary course of business of the Issuer and its Restricted
Subsidiaries or (iii) relating to purchase orders and other
agreements entered into with customers of the Issuer or any of
its Restricted Subsidiaries in the ordinary course of business;
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(27)
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Liens solely on any cash earnest money deposits made by the
Issuer or any of its Restricted Subsidiaries in connection with
any letter of intent or purchase agreement permitted under the
Indenture;
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(28)
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the rights reserved or vested in any Person by the terms of any
lease, license, franchise, grant or permit held by the Issuer or
any of its Restricted Subsidiaries or by a statutory provision,
to terminate any such lease, license, franchise, grant or
permit, or to require annual or periodic payments as a condition
to the continuance thereof;
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(29)
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restrictive covenants affecting the use to which real property
may be put; provided, however, that the covenants are
complied with;
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(30)
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security given to a public utility or any municipality or
governmental authority when required by such utility or
authority in connection with the operations of that Person in
the ordinary course of business;
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(31)
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zoning by-laws and other land use restrictions, including,
without limitation, site plan agreements, development agreements
and contract zoning agreements;
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(32)
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Liens arising out of conditional sale, title retention,
consignment or similar arrangements for sale of goods entered
into by the Issuer or any Restricted Subsidiary in the ordinary
course of business; and
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(33)
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Liens securing Indebtedness permitted to be incurred under
Credit Facilities, including any letter of credit facility
relating thereto, that was permitted by the terms of the
Indenture to be incurred pursuant to clause (1) of the
second paragraph under Certain covenantsLimitation
on incurrence of indebtedness and issuance of disqualified stock
and preferred stock; and
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(34)
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Liens incurred to secure Obligations in respect of any
Indebtedness permitted to be incurred pursuant to the covenant
described under Certain covenantsLimitation on
incurrence of indebtedness and issuance of disqualified stock
and preferred stock; provided that, with respect to
Liens securing Obligations permitted under this clause (34), at
the time of incurrence and after giving pro forma
thereto, the Consolidated Secured Debt Ratio would be no greater
than 3.5 to 1.0.
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For purposes of this definition, the term
Indebtedness shall be deemed to include interest on
such Indebtedness.
108
Person means any individual, corporation,
limited liability company, partnership, joint venture,
association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision
thereof or any other entity.
Preferred Stock means any Equity Interest
with preferential rights of payment of dividends or upon
liquidation, dissolution, or winding up.
Qualified Proceeds means assets that are used
or useful in, or Capital Stock of any Person engaged in, a
Similar Business; provided that the fair market value of
any such assets or Capital Stock shall be determined in Good
Faith by the Issuer.
Qualified Securitization Financing means any
Securitization Facility of a Securitization Subsidiary that
meets the following conditions: (i) the board of managers
or directors of the Issuer shall have determined in good faith
that such Qualified Securitization Financing (including
financing terms, covenants, termination events and other
provisions) is in the aggregate economically fair and reasonable
to the Issuer and its Restricted Subsidiaries, (ii) all
sales of Securitization Assets and related assets by the Issuer
or any Restricted Subsidiary to the Securitization Subsidiary or
any other Person are made at fair market value (as determined in
Good Faith by the Issuer), (iii) the financing terms,
covenants, termination events and other provisions thereof shall
be market terms (as determined in good faith by the Issuer) and
may include Standard Securitization Undertakings and
(iv) the Obligations under such Securitization Facility are
non-recourse (except for customary representations, warranties,
covenants and indemnities made in connection with such
facilities) to the Issuer or any of its Restricted Subsidiaries
(other than a Securitization Subsidiary). The grant of a
security interest in any Securitization Assets of the Issuer or
any of its Restricted Subsidiaries (other than a Securitization
Subsidiary) to secure Indebtedness under the New Credit
Facilities shall not be deemed a Qualified Securitization
Financing.
Rating Agencies means Moodys and
S&P or if Moodys or S&P or both 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 Issuer which shall be substituted for
Moodys or S&P or both, as the case may be.
Registration Rights Agreement means
(i) the Registration Rights Agreement related to the Notes
dated as of the Issue Date, among the Issuer, the Guarantors and
the Initial Purchasers, as amended or supplemented, and
(ii) any other registration rights agreement entered into
in connection with the issuance of Additional Notes in a private
offering by the Issuer after the Issue Date.
Related Business Assets means assets (other
than cash or Cash Equivalents) used or useful in a Similar
Business, provided that any assets received by the Issuer
or a Restricted Subsidiary in exchange for assets transferred by
the Issuer or a Restricted Subsidiary shall not be deemed to be
Related Business Assets if they consist of securities of a
Person, unless upon receipt of the securities of such Person,
such Person would become a Restricted Subsidiary.
Restricted Investment means an Investment
other than a Permitted Investment.
Restricted Subsidiary means, at any time, any
direct or indirect Subsidiary of the Issuer (including any
Foreign Subsidiary) that is not then an Unrestricted Subsidiary;
provided, however, that upon the occurrence of an
Unrestricted Subsidiary ceasing to be an Unrestricted
Subsidiary, such Subsidiary shall be included in the definition
of Restricted Subsidiary.
S&P means Standard &
Poors, a division of The McGraw-Hill Companies, Inc., and
any successor to its rating agency business.
109
Sale and Lease-Back Transaction means any
arrangement providing for the leasing by the Issuer or any of
its Restricted Subsidiaries of any real or tangible personal
property, which property has been or is to be sold or
transferred by the Issuer or such Restricted Subsidiary to a
third Person in contemplation of such leasing.
SEC means the U.S. Securities and Exchange
Commission.
Secured Indebtedness means any Indebtedness
of the Issuer or any of its Restricted Subsidiaries secured by a
Lien.
Securitization Asset means any accounts
receivable, real estate asset, mortgage receivables or related
assets, in each case subject to a Securitization Facility.
Securitization Facility means any of one or
more securitization financing facilities as amended,
supplemented, modified, extended, renewed, restated or refunded
from time to time, pursuant to which the Issuer or any of its
Restricted Subsidiaries sells its Securitization Assets to
either (a) a Person that is not a Restricted Subsidiary or
(b) a Securitization Subsidiary that in turn sells
Securitization Assets to a Person that is not a Restricted
Subsidiary.
Securitization Fees means distributions or
payments made directly or by means of discounts with respect to
any Securitization Asset or participation interest therein
issued or sold in connection with, and other fees paid to a
Person that is not a Restricted Subsidiary in connection with,
any Qualified Securitization Financing.
Securitization Repurchase Obligation means
any obligation of a seller of Securitization Assets in a
Qualified Securitization Financing to repurchase Securitization
Assets arising as a result of a breach of a representation,
warranty or covenant or otherwise, including, without
limitation, as a result of a receivable or portion thereof
becoming subject to any asserted defense, dispute, off set or
counterclaim of any kind as a result of any action taken by, any
failure to take action by or any other event relating to the
seller.
Securitization Subsidiary means any
Subsidiary in each case formed for the purpose of and that
solely engages in one or more Qualified Securitization
Financings and other activities reasonably related thereto.
Securities Act means the Securities Act of
1933, as amended, and the rules and regulations of the SEC
promulgated thereunder.
Senior Indebtedness means:
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(1)
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all Indebtedness of the Issuer or any Subsidiary Guarantor
outstanding under the New Credit Facilities or Notes and related
Guarantees (including interest accruing on or after the filing
of any petition in bankruptcy or similar proceeding or for
reorganization of the Issuer or any Guarantor (at the rate
provided for in the documentation with respect thereto,
regardless of whether or not a claim for post-filing interest is
allowed in such proceedings)), and any and all other fees,
expense reimbursement obligations, indemnification amounts,
penalties, and other amounts (whether existing on the Issue Date
or thereafter created or incurred) and all obligations of the
Issuer or any Subsidiary Guarantor to reimburse any bank or
other Person in respect of amounts paid under letters of credit,
acceptances or other similar instruments;
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(2)
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all Hedging Obligations (and guarantees thereof) owing to a
Lender (as defined in the New Credit Facilities) or any
Affiliate of such Lender (or any Person that was a Lender or an
Affiliate of
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110
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such Lender at the time the applicable agreement giving rise to
such Hedging Obligation was entered into), provided that
such Hedging Obligations are permitted to be incurred under the
terms of the Indenture;
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(3)
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any other Indebtedness of the Issuer or any Subsidiary Guarantor
permitted to be incurred under the terms of the Indenture,
unless the instrument under which such Indebtedness is incurred
expressly provides that it is subordinated in right of payment
to the Notes or any related Guarantee; and
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(4)
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all Obligations with respect to the items listed in the
preceding clause (1), (2) and (3);
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provided, however, that Senior Indebtedness shall not
include:
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(a)
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any obligation of such Person to the Issuer or any of its
Subsidiaries;
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(b)
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any liability for federal, state, local or other taxes owed or
owing by such Person;
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(c)
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any accounts payable or other liability to trade creditors
arising in the ordinary course of business;
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(d)
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any Indebtedness or other Obligation of such Person which is
subordinate or junior in any respect to any other Indebtedness
or other Obligation of such person; or
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(e)
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that portion of any Indebtedness which at the time of incurrence
is incurred in violation of the Indenture.
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Senior Management means the Chief Executive
Officer and the Chief Financial Officer of the Issuer.
Significant Subsidiary means any Restricted
Subsidiary that would be a significant
subsidiary as defined in Article 1,
Rule 1-02
of
Regulation S-X,
promulgated pursuant to the Securities Act, as such regulation
is in effect on the Issue Date.
Similar Business means any business conducted
or proposed to be conducted by the Issuer and its Restricted
Subsidiaries on the Issue Date or any business that is similar,
reasonably related, incidental or ancillary thereto.
Sponsor means 3G Capital, and each of its
Affiliates but not including, however, any portfolio companies
of any of the foregoing.
Sponsor Management Agreement means the
management agreement between certain of the management companies
associated with the Sponsor and the Issuer.
Standard Securitization Undertakings means
representations, warranties, covenants and indemnities entered
into by the Issuer or any Subsidiary of the Issuer which the
Issuer has determined in good faith to be customary in a
Securitization Financing, including, without limitation, those
relating to the servicing of the assets of a Securitization
Subsidiary, it being understood that any Securitization
Repurchase Obligation shall be deemed to be a Standard
Securitization Undertaking.
Subordinated Indebtedness means, with respect
to the Notes,
111
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(1)
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any Indebtedness of the Issuer which is by its terms
subordinated in right of payment to the Notes, and
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(2)
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any Indebtedness of any Subsidiary Guarantor which is by its
terms subordinated in right of payment to the Guarantee of such
entity of the Notes.
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Subsidiary means, with respect to any Person:
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(1)
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any corporation, association, or other business entity (other
than a partnership, joint venture, limited liability company or
similar entity) of which more than 50% of the total voting power
of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time of
determination owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that
Person or a combination thereof or is consolidated under GAAP
with such Person at such time; and
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(2)
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any partnership, joint venture, limited liability company or
similar entity of which
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(x) more than 50% of the capital accounts, distribution
rights, total equity and voting interests or general or limited
partnership interests, as applicable, are owned or controlled,
directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person or a combination thereof
whether in the form of membership, general, special or limited
partnership or otherwise, and
(y) such Person or any Restricted Subsidiary of such Person
is a controlling general partner or otherwise controls such
entity.
Subsidiary Guarantor means each Restricted
Subsidiary of the Issuer that provides a Guarantee of the Notes.
Total Assets means, as of any date, the total
consolidated assets of the Issuer and its Restricted
Subsidiaries on a consolidated basis, as shown on the most
recent consolidated balance sheet of the Issuer and its
Restricted Subsidiaries, determined on a pro forma basis
in a manner consistent with the pro forma basis contained
in the definition of Fixed Charge Coverage Ratio.
Transaction Expenses means any fees or
expenses incurred or paid by the Issuer or any Restricted
Subsidiary in connection with the Transactions, including
payments to officers, employees and members of the board of
managers or directors as change of control payments, severance
payments, special or retention bonuses and charges for
repurchase or rollover of, or modifications to, stock options,
restricted stock and deferred compensation.
Transactions means the transactions
contemplated by the Merger Agreement, the issuance of the Notes
and borrowings under the New Credit Facilities as in effect on
the Issue Date.
Treasury Rate means, as of any
Redemption Date, the yield to maturity as of such
Redemption Date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent
Federal Reserve Statistical Release H.15 (519) that 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 October 15, 2014; provided,
however, that if the period from the Redemption Date to
October 15, 2014 is less
112
than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant
maturity of one year will be used.
Trust Indenture Act means the
Trust Indenture Act of 1939, as amended (15 U.S.C.
§§ 77aaa-777bbbb).
Unrestricted Subsidiary means:
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(1)
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any Subsidiary of the Issuer which at the time of determination
is an Unrestricted Subsidiary (as designated by the Issuer, as
provided below); and
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(2)
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any Subsidiary of an Unrestricted Subsidiary.
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The Issuer may designate any Subsidiary of the Issuer (including
any existing Subsidiary and any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Equity Interests
or Indebtedness of, or owns or holds any Lien on, any property
of, the Issuer or any Subsidiary of the Issuer (other than
solely any Subsidiary of the Subsidiary to be so designated);
provided that
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(1)
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any Unrestricted Subsidiary must be an entity of which the
Equity Interests entitled to cast at least a majority of the
votes that may be cast by all Equity Interests having ordinary
voting power for the election of directors or Persons performing
a similar function are owned, directly or indirectly, by the
Issuer;
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(2)
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such designation complies with the covenants described under
Certain CovenantsLimitation on Restricted
Payments; and
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(3)
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each of:
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(a)
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the Subsidiary to be so designated; and
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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 Issuer or any Restricted Subsidiary.
The Issuer may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that, immediately after
giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing and the Issuer or
the relevant Restricted Subsidiary would be able to incur such
Indebtedness pursuant to the covenant described under
Certain covenantsLimitation on incurrence of
indebtedness and issuance of disqualified and preferred
stock, on a pro forma basis taking into account
such designation.
Any such designation by the Issuer shall be notified by the
Issuer to the Trustee by promptly filing with the Trustee a copy
of the resolution of the board of directors of the Issuer or any
committee thereof giving effect to such designation and an
Officers Certificate certifying that such designation
complied with the foregoing provisions.
Voting Stock of any Person as of any date
means the Capital Stock of such Person that is at the time
entitled to vote in the election of the board of directors of
such Person.
113
Weighted Average Life to Maturity means, when
applied to any Indebtedness, Disqualified Stock or Preferred
Stock, as the case may be, at any date, the quotient obtained by
dividing:
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(1)
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the sum of the products of the number of years from the date of
determination to the date of each successive scheduled principal
payment of such Indebtedness or redemption or similar payment
with respect to such Disqualified Stock or Preferred Stock
multiplied by the amount of such payment; by
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(2)
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the sum of all such payments.
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Wholly-Owned Subsidiary of any Person means a
Subsidiary of such Person, 100% of the outstanding Equity
Interests of which (other than directors qualifying
shares) shall at the time be owned by such Person or by one or
more Wholly-Owned Subsidiaries of such Person.
114
Book-Entry
Settlement and Clearance
The
Global Notes
The Exchange Notes will be issued in the form of a registered
note in global form without interest coupons, which we refer to
as the global note.
Upon issuance, the global note will be deposited with the
trustee as custodian for The Depository Trust Company, or
DTC, and registered in the name of Cede & Co., as
nominee of DTC. Ownership of beneficial interests in the global
note will be limited to persons who have accounts with DTC, or
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 the 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
initial purchasers; and
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ownership of beneficial interests in the 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 temporary Regulation S global
note will initially be credited within DTC to Euroclear Bank
S.A./N.V. and Clearstream Banking, société anonyme, on
behalf of the owners of these interests. During the Distribution
Compliance Period described below, beneficial interests in the
temporary Regulation S global note may be:
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held only through Euroclear or Clearstream; and
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transferred only to
non-U.S.
persons under Regulation S, qualified institutional buyers
under Rule 144A or institutional accredited investors.
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After the Distribution Compliance Period ends, beneficial
interests in temporary Regulation S global note may be
exchanged for beneficial interests in the permanent
Regulation S global note of the same series upon
certification that those interests are owned either by
non-U.S.
persons or by U.S. persons who purchased those interests
pursuant to an exemption from, or in transactions not subject
to, the registration requirements of the Securities Act.
Investors may hold their interests in the permanent
Regulation S global note directly through Euroclear or
Clearstream, if they are participants in those systems, or
indirectly through organizations that are participants in those
systems. After the Distribution Compliance Period ends,
investors may also hold their interests in the permanent
Regulation S global note through organizations other than
Euroclear or Clearstream that are DTC participants. Each of
Euroclear and Clearstream will appoint a DTC participant to act
as its depositary for the interests in the Regulation S
global note that are held within DTC for the account of each
settlement system on behalf of its participants.
Beneficial interests in the global note may not be exchanged for
notes in physical, certificated form except in the limited
circumstances described below.
The global note and beneficial interests in the global note will
be subject to restrictions on transfer as described under
Transfer Restrictions.
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Exchanges
Among the Global Note
The Distribution Compliance Period will end 40 days after
October 19, 2010.
Beneficial interests in one global note of a series may
generally be exchanged for interests in another global note of
the same series. Depending on whether the transfer is being made
during or after the Distribution Compliance Period, and to which
global note the transfer is being made, the trustee may require
the seller to provide certain written certifications in the form
provided in the Indenture. In addition, in the case of a
transfer of interests to an institutional accredited investor,
the trustee may require the buyer to deliver a representation
letter in the form provided in the Indenture that states, among
other things, that the buyer is not acquiring notes with a view
to distributing them in violation of the Securities Act.
A beneficial interest in a global note that is transferred to a
person who takes delivery through another global note will, upon
transfer, become subject to any transfer restrictions and other
procedures applicable to beneficial interests in the other
global note.
Book-Entry
Procedures for the Global Notes
All interests in the global note will be subject to the
operations and procedures of DTC, Euroclear and Clearstream. We
provide the following summaries of those operations and
procedures solely for the convenience of investors. The
information in this section concerning DTC, Euroclear and
Clearstream and their book-entry systems has been obtained from
sources that we believe to be reliable, but neither we nor the
initial purchasers take any responsibility for or make any
representation or warranty with respect to the accuracy of this
information. DTC, Euroclear and Clearstream are under no
obligation to follow the procedures described herein to
facilitate the transfer of interest in global notes among
participants and account holders of DTC, Euroclear and
Clearstream, and such procedures may be discontinued or modified
at any time. Neither BKC, the Guarantors, the trustee nor any
paying agent will have any responsibility for the performance of
DTC, Euroclear and Clearstream or their respective participants
or indirect participants of their respective obligations under
the rules and procedures governing their operations.
DTC has advised us that it is:
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a limited purpose trust company organized under the laws of the
State of New York;
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a banking organization within the meaning of the New
York State 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
Uniform Commercial Code; and
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a clearing agency registered under Section 17A
of 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 initial purchasers; 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. Except as provided below under
Certificated Notes, 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 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 (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, 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
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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.
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; or
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certain other events provided in the indenture should occur.
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118
Registration
Rights
On October 19, 2010, in connection with the issuance of the
Original Notes, Merger Sub entered into a registration rights
agreement with the initial purchasers. Concurrently with the
consummation of the Merger, BKC entered into a joinder agreement
to the registration rights agreement with Holdings and the other
guarantors of the Original Notes pursuant to which BKC assumed
all rights and obligations of Merger Sub under the registration
rights agreement and Holdings and the other guarantors became
bound by the terms of the registration rights agreement. Upon
consummation of the Exchange Offer, our obligations under the
registration rights agreement, including our obligation to pay
additional interest, will be terminated, subject to limited
exceptions.
In the registration rights agreement, BKC and the guarantors
agreed for the benefit of the holders of the notes to
(1) file a registration statement on an appropriate
registration form with respect to a registered offer to exchange
the Original Notes for Exchange Notes guaranteed by the
guarantors, with terms substantially identical in all material
respects to the Original Notes (except that the Exchange Notes
will not contain terms with respect to transfer restrictions or
any increase in annual interest rate) and (2) use our
reasonable best efforts to cause the registration statement to
be declared effective under the Securities Act. When the SEC
declares the exchange offer registration statement effective, we
will offer the Exchange Notes (and the related note guarantees)
in return for the Original Notes. The Exchange Offer will remain
open for at least 20 business days (or longer if required by
applicable law) after the date we mail notice of the Exchange
Offer to the holders of Original Notes. For each Original Note
surrendered to us under the Exchange Offer, the holders of such
Original Note will receive an Exchange Note of equal principal
amount. Interest on each Exchange Note will accrue (1) from
the last interest payment date on which interest was paid on the
Original Note surrendered in exchange therefor or (2) if no
interest has been paid on the Original Note, from
October 19, 2010. A holder of Original Notes that
participates in the Exchange Offer will be required to make
certain representations to us (as described in the registration
rights agreement). We and the guarantors will use our reasonable
best efforts to complete the Exchange Offer not later than
60 days after the exchange offer registration statement
becomes effective. Under existing interpretations of the SEC
contained in several no-action letters to third parties, the
Exchange Notes (and the related note guarantees) will generally
be freely transferable after the Exchange Offer without further
registration under the Securities Act, except that any
broker-dealer that participates in the exchange must deliver a
prospectus meeting the requirements of the Securities Act when
it resells the Exchange Notes.
We will agree to make available, during the period required by
the Securities Act, a prospectus meeting the requirements of the
Securities Act for use by participating broker-dealers and other
persons, if any, with similar prospectus delivery requirements
for use in connection with any resale of Exchange Notes.
Original Notes not tendered in the Exchange Offer will bear
interest at the rate of
97/8%
per year and be subject to all the terms and conditions
specified in the Indenture, including transfer restrictions, but
will generally not retain any rights under the registration
rights agreement (including with respect to increases in annual
interest rate described below) after the consummation of the
Exchange Offer.
In the event that we and the guarantors determine that a
registered exchange offer is not available or may not be
completed because it would violate any applicable law or
applicable interpretations of the staff of the SEC, if for any
reason, the Exchange Offer is not for any other reason completed
within 365 days of October 19, 2010, or, in certain
circumstances, any initial purchaser so requests in connection
with any offer or sale of Original Notes, we and the guarantors
will use our reasonable best efforts to cause to become
effective a shelf registration statement relating to resales of
the Original Notes and to keep that shelf registration statement
effective until the date that the Original Notes cease to be
registrable securities (as defined in the
registration rights agreement), or such shorter period that will
terminate when all Original Notes covered by the shelf
registration statement have been sold pursuant to the shelf
registration statement. We and the guarantors will, in the event
of such a shelf registration, provide to each participating
holder of Original
119
Notes copies of a prospectus, notify each participating holder
of Original Notes when the shelf registration statement has
become effective and take certain other actions to permit
resales of the Original Notes. A holder of Original Notes that
sells Original Notes under the shelf registration statement
generally will be required to make certain representations to us
(as described in the registration rights agreement), to be named
as a selling security holder in the related prospectus and to
deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in
connection with those sales and will be bound by the provisions
of the registration rights agreement that are applicable to such
a holder of Original Notes (including certain indemnification
obligations). Holders of Original Notes will also be required to
suspend their use of the prospectus included in the shelf
registration statement under specified circumstances upon
receipt of notice from us.
Under applicable interpretations of the staff of the SEC, our
affiliates will not be permitted to exchange their Original
Notes for Exchange Notes in the Exchange Offer.
If (1) we have not exchanged Exchange Notes for all
Original Notes validly tendered in accordance with the terms of
the exchange offer or (2) if applicable, a shelf
registration statement covering resales of the Original Notes
has been declared effective and such shelf registration
statement ceases to be effective or the prospectus contained
therein ceases to be usable at any time during the required
effectiveness period, and such failure to remain effective or be
usable exists for more than 60 days (whether or not
consecutive) in any
12-month
period (the 60th such day, the Trigger Date), then
additional interest shall accrue on the principal amount of the
Original Notes that are registrable securities at a
rate of 0.25% per annum (which rate will be increased by an
additional 0.25% per annum for each subsequent
90-day
period that such additional interest continues to accrue,
provided that the rate at which such additional interest accrues
may in no event exceed 1.00% per annum) commencing on
(a) the 366th day following the issuance of the notes, in
the case of (1) above, or (b) the Trigger Date, in the
case of (2) above, until the Exchange Offer is completed or
the shelf registration statement is declared effective or the
prospectus again becomes usable, as applicable, or such Original
Notes cease to be registrable securities. In the
case of a shelf registration statement required to be filed
pursuant to a request by an initial purchaser, the increase in
interest rate described above begins to apply on the 90th day
following such request, if the shelf registration statement has
not yet become effective.
Any amounts of additional interest due will be payable in cash
on the same original interest payment dates as interest on the
Original Notes is payable. The Exchange Notes will be accepted
for clearance through DTC.
This summary of the provisions of the registration rights
agreement does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions
of the registration rights agreement, copies of which are
available from us upon request.
120
Material
United States Federal Income Tax Consequences
The following discussion is a summary of certain material U.S.
federal income tax consequences of the Exchange Offer to holders
of Original Notes, but is not a complete analysis of all
potential tax effects. The summary below is based upon the
Internal Revenue Code of 1986, as amended (the
Code), regulations of the Treasury Department,
administrative rulings and pronouncements of the Internal
Revenue Service and judicial decisions, all of which are subject
to change, possibly with retroactive effect. This summary does
not address all of the U.S. federal income tax consequences that
may be applicable to particular holders, including dealers in
securities, financial institutions, insurance companies and
tax-exempt organizations. In addition, this summary does not
consider the effect of any foreign, state, local, gift, estate
or other tax laws that may be applicable to a particular holder.
This summary applies only to a holder that holds such Original
Notes as a capital asset within the meaning of Section 1221
of the Code.
An exchange of Original Notes for the Exchange Notes pursuant to
the Exchange Offer will not be treated as a taxable exchange or
other taxable event for U.S. federal income tax purposes.
Accordingly, there will be no U.S. Federal income tax
consequences to holders who exchange their Original Notes for
the Exchange Notes in connection with the Exchange Offer and any
such holder will have the same adjusted tax basis and holding
period in the Exchange Notes as it had in the Original Notes
immediately before the exchange.
The foregoing discussion of certain U.S. federal income tax
considerations does not consider the facts and circumstances of
any particular holders situation or status. Accordingly,
each holder of Original Notes considering the Exchange Offer
should consult its own tax advisor regarding the tax
consequences of the Exchange Offer to it, including those under
state, foreign and other tax laws.
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Plan of
Distribution
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
Exchange Notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in
exchange for Original Notes where such Original Notes were
acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of up to
180 days after consummation of the Exchange Offer, we will
make this prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale. In
addition, until March 28, 2011, all dealers effecting
transactions in the Exchange Notes may be required to deliver a
prospectus.
We will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other persons. Exchange Notes received
by broker-dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions
or concessions from any such broker-dealer
and/or the
purchasers of any such Exchange Notes. Any broker-dealer that
resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Notes may
be deemed to be an underwriter within the meaning of
the Securities Act and any profit of any such resale of Exchange
Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that by
acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the
Securities Act.
We have agreed to pay all expenses incident to the Exchange
Offer, excluding underwriting discounts and commissions,
brokerage commissions and transfer taxes, if any, related to the
sale or disposition of notes by a holder, and will indemnify the
holders of the Original Notes, including any broker-dealers,
against certain liabilities, including liabilities under the
Securities Act in connection with the Exchange Offer.
Each broker-dealer further acknowledges and agrees that, upon
receipt of notice from us of the happening of any event which
makes any statement in the prospectus untrue in any material
respect or which requires the making of any changes in the
prospectus to make the statements in the prospectus not
misleading, which notice we agree to deliver promptly to such
broker-dealer, such broker-dealer will suspend use of the
prospectus until we have notified such broker-dealer that
delivery of the prospectus may resume and have furnished copies
of any amendment or supplement to the prospectus to the
broker-dealer.
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Legal
Matters
Certain legal matters relating to the validity of the Exchange
Notes will be passed upon for us by Holland & Knight
LLP, Miami, Florida.
Experts
The consolidated financial statements of Holdings and
subsidiaries as of June 30, 2010 and 2009, and for each of
the years in the three-year period ended June 30, 2010,
have been incorporated by reference herein in reliance upon the
report of KPMG LLP, independent registered public accounting
firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
Where You
Can Find More Information; Incorporation By Reference
Holdings files annual, quarterly and current reports, proxy
statements and other information with the SEC. Holdings
SEC filings are available over the Internet at the SECs
web site at
http://www.sec.gov.
You may also read and copy any document Holdings files at the
SECs Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for information on the operation of the Public Reference Room.
We incorporate by reference into this prospectus the following
documents filed by Holdings with the SEC, other than information
furnished pursuant to Item 2.02 or Item 7.01 of
Form 8-K,
each of which should be considered an important part of this
prospectus:
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(i)
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Annual Report on
Form 10-K
for the fiscal year ended June 30, 2010;
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(ii)
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Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2010;
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(iii)
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Current Reports on
Form 8-K
filed with the SEC on August 25, 2010, September 2,
2010, September 3, 2010, September 16, 2010,
October 21, 2010, October 28, 2010, November 10,
2010, November 12, 2010, December 8, 2010 and
December 9, 2010;
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(iv)
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Any filings (other than those listed in (i)
(iii) above) Holdings makes with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of the initial registration statement and prior
to effectiveness of the registration statement; and
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(v)
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Any future filings Holdings makes with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
until this offering is complete or terminated.
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You may request a copy of each of Holdings filings at no
cost, by writing or telephoning Holdings at the following
address or telephone number:
Burger King
Holdings, Inc.
5505 Blue Lagoon Drive
Miami, Florida 33126
Phone:
(305) 378-3000
Exhibits to a document will not be provided unless they are
specifically incorporated by reference in that document.
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Holdings maintains an internet website at
http://www.bk.com,
which contains information relating to Holdings and its
business. The information contained on Holdings website is
not part of this prospectus.
You should rely only on the information contained in and
incorporated by reference into this prospectus. We have not
authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not
making an offer to exchange the Original Notes in any
jurisdiction where the exchange is not permitted. You should not
assume that the information in this prospectus or incorporated
by reference into this prospectus is accurate as of any date
other than the date on the front of the respective document. Our
business, financial condition, results of operations and
prospects may have changed since that date.
The information in this prospectus may not contain all of the
information that may be important to you. You should read the
entire prospectus, as well as the documents incorporated by
reference into this prospectus, before making an investment
decision.
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BURGER KING
CORPORATION
Offer to Exchange
$800,000,000
97/8%
Senior Notes due 2018
for
$800,000,000
97/8%
Senior Notes due 2018, that have been registered under the
Securities Act of 1933
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
Exchange Notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in
exchange for Original Notes where such Original Notes were
acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of up to
180 days after consummation of this Exchange Offer, we will
make this prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale. In
addition, until March 28, 2011, all dealers effecting
transactions in the Exchange Notes may be required to deliver a
prospectus.