Risk Factors
An investment in the notes involves a high degree of risk. You should carefully consider the risks and uncertainties
relating to the notes and the collateral described below, as well as risk factors included in our
Annual Report on 10-K for the year ended December 31, 2018, as well as
the other information included or incorporated by reference in this prospectus supplement and the accompanying prospectus, before making an investment in the notes. The risks described below and
incorporated by reference herein are not the only ones facing our Company. In the event any of such risks actually occurs, our business, financial condition and results of operations could be
materially adversely affected. The value of the notes could decline due to any of these risks, and you may lose all or part of your investment in the notes. The risks described below or incorporated
by reference herein are those that we currently believe may materially affect us. Additional risks not presently known to us, or that we currently consider immaterial, may also materially adversely
affect us. For purposes of this section, the phrase "material adverse effect" is meant to refer to a material adverse effect on our financial condition, results of operations and/or the value of the
notes.
This prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein also contain forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below or
incorporated by reference herein and described elsewhere in this prospectus supplement and the accompanying prospectus. See "Special Note Regarding Forward-Looking Statements."
Risks relating to the notes
We have a substantial amount of indebtedness, which could adversely affect our financial position and your
investment in the notes, and prevent us from fulfilling our obligations under the notes.
We have a substantial amount of indebtedness.
As
of September 30, 2019, after giving effect to the issuance of notes and the use of net proceeds therefrom described in "Use of Proceeds", we and our guarantor subsidiaries
would have had total debt, other than our finance lease obligations, of approximately $ billion, consisting of (1)
$ million of notes offered hereby,
(2) $3.375 billion of secured indebtedness under our existing notes and (3) $ million outstanding under our senior secured credit facility (excluding
$162 million borrowed by Zulily under the $400 million tranche of the senior secured credit facility for which QVC and Zulily are jointly and severally liable but that we do not expect
to repay on behalf of Zulily), in each case, secured by a first priority perfected lien on all shares of our capital stock, and an additional $ billion of unused capacity
under
our senior secured credit facility, all of which would rank pari passu with and share equally in the collateral securing the notes. In addition, we and
our guarantor subsidiaries had $18 million of finance lease obligations secured by collateral that does not secure the notes, all of which will be effectively senior to the notes offered
hereby. See "Capitalization."
As
of September 30, 2019, our non-guarantor subsidiaries had $739 million of obligations consisting predominantly of trade payables, operating lease liabilities and certain
other liabilities and no indebtedness for borrowed money, all of which would be structurally senior to the notes in right of payment.
We
may incur significant additional indebtedness in the future. If we incur any additional indebtedness that ranks equally with the notes and the guarantees, the holders of that
indebtedness will be entitled to share ratably with the notes offered hereby and the related guarantees in any proceeds distributed in connection with any insolvency, liquidation, reorganization,
dissolution or other winding-up of us. This may have the effect of reducing the amount of any proceeds paid to you. If new indebtedness is added to our current debt levels, the related risks that we
now face could intensify.
S-10
Table of Contents
Our level of indebtedness could limit our flexibility in responding to current market conditions, adversely
affect our financial position, prevent us from meeting our obligations under our debt instruments, including the notes, or otherwise restrict our business activities.
The existence of and limitations on the availability of our debt could have important consequences. The existence of debt could, among other
things:
-
-
require a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness;
-
-
limit our ability to use cash flow or obtain additional financing for future working capital, capital expenditures or other general corporate
purposes, which reduces the funds available to us for operations and any future business opportunities;
-
-
increase our vulnerability to general economic and industry conditions; or
-
-
expose us to the risk of increased interest rates because certain of our borrowings, including borrowings under our credit facility, are at
variable interest rates.
Limitations
imposed as a part of the debt, such as the availability of credit and the existence of restrictive covenants may, among other
things:
-
-
make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on the notes and our
other indebtedness;
-
-
restrict us from making strategic acquisitions or cause us to make non-strategic divestitures;
-
-
limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes on
satisfactory terms or at all;
-
-
limit our flexibility to plan for, or react to, changes in our business and industry;
-
-
place us at a competitive disadvantage compared to our less leveraged competitors; and
-
-
limit our ability to respond to business opportunities.
We may not be able to generate sufficient cash to service our debt obligations, including our obligations
under the notes.
Our ability to make payments on our indebtedness, including the notes, will depend on our financial and operating performance, which is subject
to prevailing economic and competitive conditions and to certain financial, business 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 our senior secured credit facility, our existing notes and the notes.
We may need to refinance certain existing indebtedness prior to the maturity of the notes.
Our senior secured credit facility matures on December 31, 2023. See "Description of Other IndebtednessSenior Secured Credit
Facility." Certain of our existing notes mature on July 2, 2022, March 15, 2023, April 1, 2024, February 15, 2025, August 15, 2034, March 15, 2043 and
September 13, 2067, which dates are earlier than the maturity of the notes offered hereby. See "Description of Other Indebtedness." Although we expect to refinance or otherwise repay this
indebtedness, we may not be able to refinance this indebtedness on commercially reasonable terms or at all. The financial terms or covenants of any new credit facility, notes or other indebtedness may
not be as favorable as those under our senior secured credit facility and our existing notes. Our ability to complete a refinancing of our senior secured credit facility and our existing notes prior
to their respective maturities will depend on our financial and operating performance, as well as a number of conditions beyond our control. For
S-11
Table of Contents
example,
if disruptions in the financial markets were to exist at the time that we intended to refinance this indebtedness, we might be restricted in our ability to access the financial markets. If we
are unable to refinance our indebtedness, our alternatives would include negotiating an extension of the maturities of our senior secured credit facility and our existing notes with the lenders and
seeking or raising new equity capital. If we were unsuccessful, the lenders under our senior secured credit facility and the holders of our existing notes could demand repayment of the indebtedness
owed to them on the relevant maturity date. As a result, our ability to pay the principal of and interest on the notes would be adversely affected.
Despite our current level of indebtedness, we may still incur substantially more indebtedness. This could
exacerbate the risks associated with our existing indebtedness.
We and our subsidiaries may incur substantial additional indebtedness in the future. Our senior secured credit facility and the terms of the
indentures for the notes and our existing notes limit, but do not prohibit, us or our subsidiaries from incurring additional indebtedness. Also, our subsidiaries could incur additional indebtedness
that is structurally senior to the notes or we and our subsidiaries could incur indebtedness secured by a lien on assets that do not constitute collateral, including assets of ours and our
subsidiaries, and the holders of such indebtedness will have the right to be paid first from the proceeds of such assets. If we incur any additional indebtedness that ranks equally with the notes and
the guarantees, the holders of that indebtedness will be entitled to share ratably with the holders of the notes and the guarantees in any proceeds distributed in connection with our insolvency,
liquidation, reorganization or dissolution. This may have the effect of reducing the amount of proceeds paid to the note holders. In addition, note holder rights to the collateral would be diluted by
any increase in the indebtedness secured by this collateral. If new indebtedness is added to our current debt levels, the related risks that we and our subsidiaries now face could intensify.
The notes constitute obligations of us and our material domestic subsidiaries and will not be obligations of
Qurate Retail, its other affiliates or of our non-guarantor subsidiaries. In addition, the notes will be structurally subordinated in right of payment to all obligations of any of our current and
future subsidiaries that do not guarantee the notes. If the guarantees are deemed unenforceable, the remaining assets of such guarantors may not be sufficient to make any payments on the notes.
The notes will be guaranteed by each of our material domestic subsidiaries but will not receive a guarantee or other credit support from Qurate
Retail or any of its other affiliates, except that our sole stockholder, which is an indirect wholly owned subsidiary of Qurate Retail, is pledging its shares of our capital stock to secure the notes.
In
addition, the notes will not be guaranteed by certain immaterial domestic subsidiaries or by any of our foreign subsidiaries. The notes and guarantees will therefore be structurally
subordinated to all of the liabilities of our current and future subsidiaries that do not guarantee the notes. For the year ended December 31, 2018, net revenue for our non-guarantor
subsidiaries was $2.96 billion, which was 26.3% of our consolidated net revenue, and operating income for our non-guarantor subsidiaries was $288 million, which was 19.0% of our
consolidated operating income. For the nine months ended September 30, 2019, net revenue for our non-guarantor subsidiaries was $2.10 billion, which was 28.0% of our consolidated net
revenue, and operating income for our non-guarantor subsidiaries was $187 million, which was 18.3% of our consolidated operating income. As of September 30, 2019, our non-guarantor
subsidiaries had $2.72 billion of assets, which was 18.6% of our consolidated assets. As of September 30, 2019, our non-guarantor subsidiaries had $739 million of obligations
consisting predominantly of trade payables, operating lease liabilities and certain other liabilities and no indebtedness for borrowed money, all of which would be structurally senior to the notes in
right of payment.
S-12
Table of Contents
Although
the guarantees will provide the holders of the notes with a direct claim as a creditor against the assets of the subsidiary guarantors, the guarantees may not be enforceable as
described in more detail below. If the guarantees by the subsidiary guarantors are not enforceable, the notes would be effectively subordinated to all liabilities of the subsidiary guarantors,
including trade payables. As a result of being effectively subordinated to the liabilities of a subsidiary, if there was a dissolution, bankruptcy, liquidation or reorganization of such subsidiary,
the holders of the notes would not receive any amounts with respect to the notes until after the payment in full of the claims of creditors of such subsidiary.
Our ability to meet our obligations under our debt, in part, depends on the earnings and cash flows of our
subsidiaries and the ability of our subsidiaries to pay dividends or advance or repay funds to us.
We conduct a significant portion of our business operations through our subsidiaries. In servicing payments to be made on the notes, we will
rely, in part, on cash flows from these subsidiaries, mainly dividend payments and other distributions. The ability of these subsidiaries to make dividend payments to us will be affected by, among
other factors, the obligations of these entities to their creditors, requirements of corporate and other law, and restrictions contained in agreements entered into by or relating to these entities. In
addition, our foreign subsidiaries may be subject to currency controls, repatriation restrictions, withholding obligations on payments to us and other limits.
Covenants in our debt agreements restrict our business in many ways.
Our senior secured credit facility and the indentures governing the notes and our existing notes contain various covenants that limit our
ability and/or our restricted subsidiaries' ability to, among other things:
-
-
incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;
-
-
pay dividends or make distributions or redeem or repurchase capital stock;
-
-
prepay, redeem or repurchase debt;
-
-
make loans, investments and capital expenditures;
-
-
enter into agreements that restrict distributions from our subsidiaries;
-
-
sell assets and capital stock of our subsidiaries;
-
-
enter into sale and leaseback transactions;
-
-
enter into certain transactions with affiliates;
-
-
consolidate or merge with or into, or sell substantially all of our assets to, another person; and
-
-
designate our subsidiaries as unrestricted subsidiaries.
These
covenants are subject to important exceptions and qualifications as described under "Description of Notes." In addition, our senior secured credit facility contains restrictive
covenants and requires us to maintain a specified leverage ratio. Our ability to meet this leverage ratio can be affected by events beyond our control, and we may be unable to meet those tests. A
breach of any of these covenants could result in a default under our senior secured credit facility, which in turn could result in a default under the indentures governing the notes and our existing
notes. Upon the occurrence of an event of default under our senior secured credit facility, the lenders could elect to declare all amounts outstanding under our senior secured credit facility to be
immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure
that indebtedness. Our senior secured credit
S-13
Table of Contents
facility,
our existing notes and certain future indebtedness are secured by a first priority perfected lien in all shares of our capital stock. If the lenders and counterparties under our senior
secured credit facility, our existing notes and certain future indebtedness accelerate the repayment of obligations, we may not have sufficient assets to repay such obligations, including the notes.
See "Description of Other Indebtedness." Our borrowings under our senior secured credit facility are, and are expected to continue to be, 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 also increase even though the amount borrowed remains the same, and our net income would decrease.
Many of the covenants in the indenture will cease to apply if such notes are rated investment grade by both
Moody's and Standard & Poor's.
Many of the covenants in the indenture governing the notes will no longer apply to the notes if such notes are rated investment grade by both
Moody's and Standard & Poor's at a time that no 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. Termination of these covenants would allow us to engage in certain transactions that are not permitted while these covenants are in force. There can be no
assurance that the notes will be rated investment grade by both Moody's and Standard & Poor's, or that the notes will maintain such ratings. Even if the notes subsequently fail to be rated
investment grade, the terminated covenants would not be reinstated. See "Description of NotesCertain CovenantsFall-away event."
An adverse rating of the notes may cause their value to decline.
If a rating agency rates the notes, it may assign a rating that is lower than expected. Ratings agencies also may lower ratings on the notes in
the future. If rating agencies assign a lower-than-expected rating or reduce, or indicate that they may reduce, their ratings or outlook in the future, the value of the notes could significantly
decline.
If we default on our obligations to pay our indebtedness, we may not be able to make payments on the notes.
Any default under the agreements governing our indebtedness, including a default under our senior secured credit facility, that is not waived by
the required lenders thereunder, and the remedies sought by the holders of such indebtedness, could prevent us from paying principal, premium, if any, and interest on the notes and substantially
decrease the market value of the notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any,
and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness (including
covenants in our senior secured credit facility and the indentures governing the notes and our existing notes), we could be in default under the terms of the agreements governing such indebtedness,
including our senior secured credit facility and the indentures governing the notes and our existing notes. In the event of such default, the holders of such indebtedness could elect to declare all
the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under our senior secured credit facility could elect to institute foreclosure proceedings
against our capital stock, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may need to obtain waivers from the required lenders under our senior
secured credit facility to avoid being in default. If we breach our covenants under our senior secured credit facility and seek a waiver, we may not be able to obtain a waiver from the required
lenders. If we could not obtain a waiver, we would be in default under our senior secured credit facility, which would result in a default under the indenture, the lenders could exercise their rights,
as described above, and we could be forced into bankruptcy or liquidation.
S-14
Table of Contents
We may not be able to purchase the notes upon a change of control or an offer to repurchase the notes as
required by the indenture.
Upon the occurrence of specific types of change of control events, we will be required to offer to repurchase all of the notes, as well as the
existing notes, at a price equal to 101% of the aggregate principal amount of the notes repurchased, plus accrued and unpaid interest, up to, but not including, the date of repurchase. We may not have
sufficient funds available to repurchase all of the notes tendered pursuant to any such offer and any other debt, including the existing notes, that would become payable upon a change of control. Any
failure to purchase the notes would be a default under the indenture, which would trigger a default under our senior secured credit facility. In that event, we would need to cure or refinance our
senior secured credit facility before making an offer to purchase.
Additionally,
a change of control (as defined in our senior secured credit facility) would also constitute a default under our senior secured credit facility. Upon any such default, the
lenders may declare any outstanding obligations under our senior secured credit facility immediately due and payable. If such debt repayment were accelerated, we may not have sufficient funds to
repurchase the notes and repay the debt. There can be no assurance that we would be able to refinance our indebtedness or, if a refinancing were to occur, that the refinancing would be on terms
favorable to us.
Courts
interpreting change of control provisions under New York law (which governs the indenture) have not provided clear and consistent meanings of such change of control provisions. In
addition, the Delaware Court of Chancery has questioned whether a change of control provision contained in an indenture could be unenforceable on public policy grounds. Therefore, no assurances can be
given as to how a court would interpret or even if a court would enforce the change of control provisions in our indenture as written for the benefit of the holders.
In
addition, if a change of control occurs, we may not be able to borrow under our senior secured credit facility which could adversely affect our financial situation and our ability to
conduct our business.
A court could cancel the notes or the guarantees under fraudulent conveyance laws or certain other
circumstances.
Our issuance of the notes and the issuance of the guarantees by certain of our subsidiaries may be subject to review under federal or state
fraudulent transfer or conveyance or similar laws. If we or such guarantor becomes a debtor in a case under the U.S. bankruptcy code or encounter other financial difficulty, under federal or state
laws governing fraudulent transfer or conveyance,
renewable transactions or preferential payments, a court in the relevant jurisdiction might avoid or cancel the guarantees and/or the liens created by the security interests. The court might do so if
it found that, when the guarantor entered into its guarantee or, in some states, when payments become due thereunder, (a) it received less than reasonably equivalent value or fair consideration
for such guarantee and (b) either (i) was or was rendered insolvent, (ii) was left with inadequate capital to conduct its business, (iii) believed or should have believed
that it would incur debts beyond its ability to pay, or (iv) was a defendant in an action for money damages or had a judgment for money damages docketed against us or such guarantor, if, in
either case, after final judgment, the judgment was unsatisfied. The court might also avoid such guarantee, without regard to the above factors, if it found that the guarantor entered into its
guarantee with actual or deemed intent to hinder, delay or defraud our creditors.
Similarly,
if we become a debtor in a case under the U.S. bankruptcy code or encounter other financial difficulty, a court might cancel our obligations under the notes, if it found that
when we issued the notes (or in some jurisdictions, when payments become due under the notes), factors (a) and (b) above applied to us, or if it found that we issued the notes with
actual intent to hinder, delay or defraud our creditors.
S-15
Table of Contents
A
court would likely find that a guarantor did not receive reasonably equivalent value or fair consideration for its guarantee unless it benefited directly or indirectly from the
issuance of the notes. If a court avoided such guarantee, holders of the notes would no longer have a claim against such subsidiary. In addition, the court might direct holders of the notes to repay
any amounts already received from such subsidiary. If the court were to avoid any guarantee, we cannot assure you that funds would be available to pay the notes from another subsidiary or from any
other source. Further, the voidance 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 such debt.
The
indenture states that the maximum liability of each guarantor under its guarantee shall in no event exceed the amount that can be guaranteed by such guarantor under applicable
federal and state laws relating to the insolvency of debtors (after giving effect to rights of contribution established in connection with the guarantees). This limitation may not protect the
guarantees from a fraudulent transfer or conveyance attack or, if it does, the guarantees may not be in amounts sufficient, if necessary, to pay obligations under the notes when due.
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 an antecedent debt is secured or satisfied.
A debtor will generally not be considered to have received value in connection with a debt offering if the debtor uses the proceeds of that offering to make a dividend payment or otherwise retires or
redeems equity securities issued by the debtor. We cannot be certain as to the standards a court would use to determine whether
or not we or the guarantors were solvent at the relevant time or, regardless of the standard that a court uses, that the issuance of the guarantees would not be further subordinated to our or any of
our guarantors' other debt. Generally, however, an entity would be considered insolvent if, at the time it incurred indebtedness:
-
-
the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all its assets;
-
-
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
-
-
it could not pay its debts as they become due.
There could be circumstances in which certain guarantees are released automatically, without your consent or
the consent of the trustee.
There could be circumstances, other than repayment or discharge of the notes, where certain guarantees will be released automatically, without
your consent or the consent of the trustee. For example, a guarantor will be released from its guarantee in the event of dissolution of such guarantor, if such guarantor is designated as an
unrestricted subsidiary or otherwise ceases to be a restricted subsidiary, in each case in accordance with the provisions of the indenture governing the notes, or upon the release or discharge of the
guarantee by such guarantor of the senior secured credit facility. See "Description of NotesNote Guarantees."
No established trading market exists for the notes. If an active trading market does not develop for the
notes, you may not be able to resell them.
Prior to this offering, there was no public market for the notes and we cannot assure you that an active trading market will develop for the
notes. Although we intend to apply for listing of the notes on the NYSE, we cannot make any assurances as to the development or sustainability of an active trading market or your ability to resell
your notes at their fair market value or at all. Future trading prices of
S-16
Table of Contents
the
notes will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities.
The book-entry registration system of the notes may limit the exercise of rights by the beneficial owners of
the notes.
Because transfers of interests in the global notes representing the notes may be effected only through book entries at the DTC and its direct
and indirect participants (including Clearstream and Euroclear), the liquidity of any secondary market in the notes may be reduced to the extent that some investors are unwilling to hold notes in
book-entry form in the name of a DTC direct or indirect participant. The ability to pledge interests in the global notes may be limited due to the lack of a physical certificate. In addition,
beneficial owners of interests in global notes may, in certain cases, experience delay in the receipt of payments of principal and interest, since the payments will generally be forwarded by the
paying agent to DTC, which will then forward payment to its direct and indirect participants, which (if they are not themselves the beneficial owners) will then forward payments to the beneficial
owners of the global notes. In the event of the insolvency of DTC or any of its direct and indirect participants in whose name interests in the global notes are recorded, the ability of beneficial
owners to obtain timely or ultimate payment of principal and interest on global notes may be negatively affected.
A
holder of beneficial interests in the global notes will not have a direct right under the notes to act upon any solicitations that we may request. Instead, holders will be permitted to
act only to the extent they receive appropriate proxies to do so from DTC or, if applicable, DTC's direct or indirect participants. Similarly, if we default on our obligations under the notes, holders
of beneficial interests in the global notes will be restricted to acting through DTC, or, if applicable, DTC's direct or indirect
participants. We cannot assure holders that the procedures of DTC or DTC's nominees or direct or indirect participants will be adequate to allow them to exercise their rights under the notes in a
timely manner.
Our ability to pay dividends or make other restricted payments to Qurate Retail is subject to limited
restrictions.
Although the notes contain limitations on Restricted Payments (as defined under "Description of Notes"), those limitations are subject to a
number of important exceptions and qualifications (see "Description of NotesCertain CovenantsLimitations on Restricted Payments"). In particular, there are no restrictions
under our indentures on our ability to pay dividends or make other restricted payments if we are not in default on the notes and our Consolidated Leverage Ratio (as defined under "Description of
Notes") is no greater than 3.50 to 1.0. As a result, Qurate Retail will, in many instances, be permitted to rely on our cash flow for servicing Qurate Retail's debt and for other purposes, including
payments of dividends on Qurate Retail's capital stock, if declared, or to fund acquisitions or other operational requirements of Qurate Retail and its subsidiaries. These events may deplete our
equity or require us to borrow under our senior secured credit facility, increasing our leverage and decreasing our liquidity. We may make and have made in the past significant distributions to Qurate
Retail, such as the distribution to Qurate Retail made in connection with the recapitalization of Qurate Retail's common stock into shares of the corresponding series of two tracking stocks, QVC Group
common stock and Liberty Ventures common stock. In addition, subsequent to December 31, 2018 and prior to September 30, 2019, we had declared and paid dividends in cash to Qurate Retail
in the amount of $698 million. These dividends were funded with draws from our revolving credit facility or from cash generated from operations. In the ordinary course of business we have made
and may make additional distributions to Qurate Retail. See "Prospectus Supplement SummaryThe CompanyQurate Retail Relationship."
S-17
Table of Contents
Risks relating to the collateral
The collateral is limited to a pledge of the capital stock of QVC, and the holders of the notes will have
only an unsecured claim against our assets and the guarantors' assets.
The notes will be secured on a pari passu basis by a first priority perfected lien and security
interest on all shares of our capital stock, which collateral also secures our existing secured indebtedness and may secure certain future indebtedness (the "Collateral"). Although there are certain
circumstances under which additional assets of QVC or our subsidiaries may be pledged to secure the notes offered hereby, there can be no assurance that this will occur. If any such assets were to
become subject to a lien for the benefit of the holders of the notes, such a lien would be shared with the lenders under our senior secured credit facility and the holders of the existing notes, as
well as the holders of certain other indebtedness we may incur in the future. You should not assume that collateral to secure the notes and the guarantees consisting of our assets or the assets of any
of the subsidiary guarantors will ever be provided or that, if provided, it would not subsequently be released and/or avoided. See "Description of Other Indebtedness" and "Description of
NotesSecurity."
Unless
any such security interest is provided, holders of the notes will have only an unsecured claim against our and the guarantors' assets ranking equally in right of payment with all
of our other unsecured unsubordinated indebtedness and other obligations, including trade payables.
Note holder rights to receive proceeds from the sale of collateral securing the notes will be pari passu with
the claims of lenders and counterparties under our existing secured indebtedness and certain future indebtedness. There may not be sufficient collateral to pay all or any portion of the notes, our
senior secured credit facility, our existing notes and certain future indebtedness.
Note holders will receive distributions from any foreclosure proceeds of any Collateral on a pro rata basis with the lenders under our existing
secured indebtedness and certain future indebtedness. No appraisal of the value of the Collateral has been made in connection with this offering or otherwise, and the fair market value of the
Collateral is subject to fluctuations based on factors that include, among others, general economic conditions and the availability of suitable buyers for the Collateral. By its nature, the Collateral
may be illiquid and may have no readily ascertainable market value, and could be impaired in the future as a result of changing economic conditions, competition or other future trends. In the event of
a foreclosure, liquidation, bankruptcy or similar proceeding, we cannot assure you that the proceeds from any sale or liquidation of the Collateral will be sufficient to pay our obligations under the
notes, our existing secured indebtedness and certain future indebtedness. Also, we cannot assure you that the fair market value of the Collateral securing the notes, our existing secured indebtedness
and certain future indebtedness would be sufficient to pay any amounts due under such obligations following their acceleration. If the proceeds of any sale of the Collateral are not sufficient to
repay all amounts due on the notes, the holders of the notes (to the extent not repaid from the proceeds of the sale of the Collateral) would have only an unsecured claim against our and the
guarantors' assets and, in the context of a bankruptcy case by or against us, will mean that you may not be entitled to receive interest payments or reasonable fees, costs or charges due under the
notes, and may be required to repay any such amounts already received by you. Any such
unsecured claim will rank equally in right of payment with all of our other unsecured unsubordinated indebtedness and other obligations, including trade payables.
To
the extent that liens securing obligations under our existing notes and senior secured credit facility and other liens permitted under the indenture and other rights, encumber any of
the Collateral securing the notes, those parties have or may exercise rights and remedies with respect to the Collateral that could adversely affect the value of the collateral and the ability of the
collateral agent, the trustee under the indenture or the holders of the notes to realize or foreclose on the Collateral.
S-18
Table of Contents
In
addition, the indenture governing the notes and the indenture governing the existing notes and the senior secured credit facility permit us, subject to compliance with certain
financial tests, to issue additional secured debt, including debt secured equally and ratably by the same assets pledged for the benefit of the holders of the notes. This would reduce amounts payable
to holders of the notes from the proceeds of any sale of the Collateral.
Holders of notes will not control decisions regarding collateral.
Although our existing notes, our senior secured credit facility, the notes offered hereby and certain future indebtedness will be secured on a pari
passu basis by the Collateral, holders of the notes will not be able to exercise any control over decisions regarding the Collateral. The security
agreement governing the Collateral provides, among other things, that (a) the collateral agent, taking instruction from the lenders under our senior secured credit facility, controls
substantially all matters related to the Collateral; and (b) the holders of such indebtedness may foreclose on or take other actions with respect to such Collateral with which holders of the
notes may disagree or that may be contrary to the interests of holders of the notes, in each case, regardless of the amount of the obligations under our senior secured credit facility relative to the
obligations under the notes.
Any future pledge of collateral might be avoidable in bankruptcy.
Any future pledge of collateral in favor of the trustee, including pursuant to security documents delivered after the date of the indenture
governing the notes, might be avoidable by
the pledgor (as debtor in possession) or by its trustee in bankruptcy if certain events or circumstances exist or occur, including if the pledgor is insolvent at the time of the pledge, the pledge
permits the holders of the notes to receive a greater recovery than if the pledge had not been given and a bankruptcy proceeding in respect of the pledgor is commenced within 90 days following
the pledge, or, in certain circumstances, a longer period.
S-19
Table of Contents
Description of Notes
As used below in this "Description of Notes" section, the "Issuer" means QVC, Inc., a
Delaware corporation, and its successors, but not any of its subsidiaries. The Issuer will issue the senior secured notes due November 26, 2068 (the
"Notes") described in this prospectus supplement under a Base Indenture, dated as of September 13, 2018 (the "Base
Indenture"), among the Issuer, the Guarantors and U.S. Bank National Association, as trustee (the "Trustee") and a Supplemental
Indenture, to be dated as of , 2019 (the "Supplemental Indenture," and the Base Indenture, as supplemented by the Supplemental Indenture,
the "Indenture"). The terms of the Notes include those set forth in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act.
The
following is a summary of the material terms and provisions of the Indenture, the Notes and the Note Guarantees, as well as the Parent Pledge Agreement (as defined below). The
following summary does not purport to be a complete description of these documents and is subject to the detailed
provisions of, and qualified in its entirety by reference to, the Indenture and the Parent Pledge Agreement. You may obtain a copy of the Indenture and the Parent Pledge Agreement from the Issuer at
its address set forth elsewhere in this prospectus supplement. You can find definitions of certain terms used in this description under "Certain Definitions."
Principal, Maturity and Interest
The Notes will mature on November 26, 2068. The Notes will bear interest at the rate shown on the cover page of this prospectus
supplement, payable on March 15, June 15, September 15 and December 15 of each year, commencing on December 15, 2019 to Holders of record at the close of business on
March 1, June 1, September 1 or December 1, as the case may be, immediately preceding the relevant interest payment date. Interest on the Notes will be computed on the
basis of a 360-day year of twelve 30-day months.
The
Notes will be issued in registered form, without coupons, and denominations of $25 and in integral multiples thereof.
The
Notes will initially be issued in an aggregate principal amount equal to $ (or $ if the underwriters' over-allotment option is exercised in full). The
Issuer may issue additional Notes having identical terms and conditions to the Notes being offered in this offering, except for issue date, issue price and first interest payment date, in an unlimited
aggregate principal amount (the "Additional Notes"), subject to compliance with the covenant described under "Certain
CovenantsLimitations on Incurrence of Indebtedness." Any Additional Notes will be part of the same issue as the Notes being issued in this offering and will be treated as one class with
the Notes being offered in this offering, including for purposes of voting, redemptions and offers to purchase. Any Additional Notes will be secured equally and ratably by the Collateral with the
Notes, the Existing Notes, the obligations under the Credit Agreement, the obligations under any Specified Swap Agreements, the obligations under any Specified Cash Management Services Agreements and
the obligations under certain other parity indebtedness permitted to be incurred under the Indenture. See "Security." For purposes of this "Description of Notes" section, except for the
covenant described under "Certain CovenantsLimitations on Incurrence of Indebtedness," references to the Notes include Additional Notes, if any.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to the Issuer at least ten Business Days prior to the applicable payment date, the Issuer will
make all payments on such Holder's Notes by wire transfer of immediately available funds to the account specified in those instructions. Otherwise, payments on the Notes will be made at the office or
agency of the paying agent (the "Paying Agent") and registrar (the
S-27
Table of Contents
"Registrar") for the Notes within the City and State of New York unless the Issuer elects to make interest payments by check mailed to the Holders at
their addresses set forth in the register of Holders.
Ranking
The Notes offered hereby will be general senior obligations of the Issuer. The Notes will rank senior in right of payment to all existing and
future obligations of the Issuer that are, by their terms, expressly subordinated in right of payment to the Notes and pari passu in right of payment
with all existing and future senior obligations of the Issuer that are not so subordinated. Each Note Guarantee (as defined below) will be a general senior obligation of the applicable Guarantor and
will rank senior in right of payment to all existing and future obligations of such Guarantor that are, by their terms, expressly subordinated in right of payment to such Note Guarantee and pari passu
in right of payment with all existing and future senior obligations of such Guarantor that are not so subordinated.
See "Note Guarantees."
The
Notes will be secured, equally and ratably with all existing obligations of the Issuer and the Guarantors under the Credit Agreement and the Existing Notes. The sole collateral is a
first-priority security interest on all shares of the capital stock of the Issuer. The security interest is subject to a number of important limitations and qualifications. See
"Security."
The
Collateral (as defined below) as of the Issue Date will be limited to a pledge by the Issuer's direct parent, Qurate Retail Group, Inc. (the "Parent
Pledgor"), of all of the shares of our capital stock (the "Issuer Stock Collateral"), and will not include a lien on any of the
Issuer's assets or assets of any of
its subsidiaries. The Parent Pledgor will not be subject to the Indenture or to any of the restrictive covenants in the Indenture. After the Issue Date, if any of the Credit Agreement, the Existing
Notes or any Permitted Parity Indebtedness were to benefit from a lien on any assets of the Issuer or any of its Restricted Subsidiaries then, subject to the provisions in "Certain
CovenantsLimitations on Liens," the Notes would also be secured, subject, as to priority and otherwise, to certain exceptions and subject to Permitted Liens, by a lien on any such assets
(together with the Issuer Stock Collateral, the "Collateral"). The Credit Agreement does not provide for any circumstances in which a security interest
in any assets of the Issuer or any of its subsidiaries must be pledged for the benefit of the lenders under the Credit Agreement. The Existing Notes also do not require any present or future security
interest in any assets of the Issuer or any of its subsidiaries. It is unlikely that the holders of the Notes will ever have the benefit of a lien on any Collateral consisting of assets of the Issuer
or any of its subsidiaries.
As
of September 30, 2019, after giving effect to this offering and the use of net proceeds therefrom described in "Use of Proceeds", there was approximately $3.375 billion
aggregate principal amount of indebtedness outstanding under the Existing Notes, $ million outstanding under the Credit Agreement (excluding $162 million borrowed by
Zulily, LLC under the $400 million tranche of the Credit Agreement for which QVC and Zulily are jointly and severally liable but that we do not expect to repay on behalf of Zulily) and
$ billion of availability under the Credit Agreement, all of which ranks (or will rank, if drawn) equally with the Notes in right of payment and would share ratably in the
proceeds of the assets securing the Notes. See "Capitalization." Although the Indenture will contain limitations on the amount of additional Indebtedness and secured Indebtedness that the Issuer and
the Restricted Subsidiaries may incur, under certain circumstances, the amount of such Indebtedness could be substantial. See "Certain CovenantsLimitations on Incurrence of
Indebtedness" and "Limitations on Liens." As long as the Collateral includes no asset of the Issuer, the Notes, the Existing Notes, the Credit Agreement, any Specified Swap Agreements and
any Specified Cash Management Services Agreements rank equally with all unsubordinated unsecured indebtedness and other obligations of the Issuer. See "Security."
S-28
Table of Contents
The
Notes and each Note Guarantee will be effectively subordinated to any obligations secured by Permitted Liens (other than any Permitted Parity Indebtedness), to the extent of the
value of the assets of the Issuer and the relevant Guarantor that are subject to such Permitted Liens. As of September 30, 2019, after giving effect to this offering and the application of
proceeds therefrom, the Issuer and the Guarantors had approximately $18 million of senior indebtedness outstanding (other than under the Credit Agreement, the Notes and the Existing Notes),
which consisted of finance lease obligations, all of which ranks equally in right of payment with the Notes offered hereby but is effectively senior to the Notes with respect to the assets securing
such debt.
Not
all of our Subsidiaries will guarantee the Notes. Our Non-Material Domestic Subsidiaries, Unrestricted Subsidiaries and Foreign Subsidiaries will not be Guarantors. As a result, the
Notes and each Note Guarantee will be structurally subordinated to all existing and future obligations, including
Indebtedness, of these Subsidiaries. Claims of creditors of these Subsidiaries, including trade creditors, will generally have priority as to the assets of these Subsidiaries over the claims of the
Issuer and the Guarantors and the holders of Indebtedness of the Issuer and the Guarantors, including the Notes and the Note Guarantees. In the event of a bankruptcy, liquidation or reorganization of
any of these non-guarantor Subsidiaries, these non-guarantor Subsidiaries will pay the holders of their debts and their trade creditors before they will be able to distribute any of their assets to
us. For the year ended December 31, 2018, net revenue for our non-guarantor Subsidiaries was $2.96 billion, which was 26.3% of our consolidated net revenue, and operating income for our
non-guarantor Subsidiaries was $288 million, which was 19.0% of our consolidated operating income. For the nine months ended September 30, 2019, net revenue for our non-guarantor
Subsidiaries was $2.10 billion, which was 28.0% of our consolidated net revenue, and operating income for our non-guarantor Subsidiaries was $187 million, which was 18.3% of our
consolidated operating income. As of September 30, 2019, our non-guarantor Subsidiaries had $2.72 billion of assets, which was 18.6% of our consolidated assets. As of
September 30, 2019, our non-guarantor Subsidiaries had $739 million of obligations (consisting predominantly of trade payables, operating lease liabilities, certain other liabilities and
no indebtedness for borrowed money), all of which would be structurally senior to the Notes.
Note Guarantees
The Issuer's obligations under the Notes and the Indenture will be jointly and severally guaranteed (the "Note
Guarantees") by each Material Domestic Subsidiary, any Subsidiary that guarantees the obligations under the Credit Agreement or any Permitted Parity Indebtedness and any other
Restricted Subsidiary that the Issuer shall otherwise cause to become a Guarantor pursuant to the terms of the Indenture. Our Non-Material Domestic Subsidiaries, Unrestricted Subsidiaries and Foreign
Subsidiaries will not be Guarantors, and therefore the Notes and the related Note Guarantees will be structurally subordinated to all existing and future obligations of these Subsidiaries. The
guarantees of the Existing Notes by the Guarantors are referred to herein as the "Existing Note Guarantees." See "Ranking."
As
of the Issue Date, all of our Subsidiaries except QVC France SAS will be Restricted Subsidiaries. However, under the circumstances described below under "Certain
CovenantsLimitations on Designation of Unrestricted Subsidiaries," the Issuer will be permitted to designate any of its Subsidiaries, other than any Subsidiary that continues to guarantee
the obligations under the Credit Agreement or Permitted Parity Indebtedness permitted to be incurred under the Indenture, as "Unrestricted Subsidiaries." The effect of designating a Subsidiary as an
"Unrestricted Subsidiary" will be that:
-
-
an Unrestricted Subsidiary will not be subject to many of the restrictive covenants in the Indenture;
-
-
a Subsidiary that is a Guarantor and that is designated an Unrestricted Subsidiary will be released from its Note Guarantee and its obligations
under the Indenture; and
S-29
Table of Contents
-
-
the assets, income, cash flow and other financial results of an Unrestricted Subsidiary will not be consolidated with those of the Issuer for
purposes of calculating compliance with the restrictive covenants contained in the Indenture.
The
obligations of each Guarantor under its Note Guarantee will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such
Guarantor (including, without limitation, any guarantees under the Credit Agreement and the Existing Note Guarantees) and after giving effect to any collections from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such other Guarantor under its Note Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such
Guarantor under its Note Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Guarantor that makes a payment for distribution under its Note
Guarantee is entitled to a contribution from each other Guarantor in a pro rata amount based on adjusted net assets of each Guarantor.
A
Guarantor will be released from its obligations under its Note Guarantee and its obligations under the Indenture:
-
(1)
-
in
the event of dissolution of such Guarantor;
-
(2)
-
if
such Guarantor is designated as an Unrestricted Subsidiary or otherwise ceases to be a Restricted Subsidiary, in each case in accordance with the provisions of
the Indenture, upon effectiveness of such designation or when it first ceases to be a Restricted Subsidiary, respectively; or
-
(3)
-
upon
the release or discharge of the guarantee by such Guarantor of the Credit Agreement or such other indebtedness that resulted in the creation of such Note
Guarantee, except a discharge or release by or as a result of payment under such other guarantee.
See
"Certain CovenantsLimitations on Designation of Unrestricted Subsidiaries."
Security
On the Issue Date, the Collateral securing the Notes will be limited to the Issuer Stock Collateral. The security interest in the Collateral
will be shared equally and ratably among the Notes (including Additional Notes, if any), the Existing Notes, the Credit Agreement, any Specified Swap Agreements, any Specified Cash Management Services
Agreements and any other Indebtedness permitted by the Indenture that in the future is secured by the Collateral. See "Certain CovenantsLimitations on Incurrence of
Indebtedness" and "Limitations on Liens." Any Collateral in addition to the Issuer Stock Collateral will be subject to the provisions of the applicable Security Documents. It is unlikely
that the holders of the Notes will ever have the benefit of a lien on any Collateral consisting of assets of the Issuer or any of its Restricted Subsidiaries.
The Issuer Stock Collateral is pledged pursuant to a pledge agreement between the Parent Pledgor and the Collateral Agent for the benefit of the
Secured Parties under the Credit Agreement and the holders of the Existing Notes. The Collateral Agent will enter into an amended and restated pledge agreement (the "Parent
Pledge Agreement") concurrently with the issuance of the Notes on the Issue Date to add the holders of the Notes as Secured Parties. This security interest will
secure the payment and performance when due of all of the obligations of the Issuer under the Notes, the Indenture and the Parent Pledge Agreement. This security interest will also continue to secure
the obligations under the Existing Notes and the Credit Agreement on an equal and ratable basis, and may in the future
S-30
Table of Contents
secure
other Indebtedness permitted to be incurred under the Indenture on an equal and ratable basis. See "Ranking."
The
Collateral Agent will determine the time and method by which the security interest in the Issuer Stock Collateral will be enforced and will have the sole and exclusive right to
manage, perform and enforce the terms of the Parent Pledge Agreement and to exercise and enforce all privileges, rights and remedies thereunder, including to take or retake control or possession of
the Issuer Stock Collateral and hold, prepare for sale, marshall, process, sell, lease, dispose of or liquidate the Issuer Stock Collateral, including, without limitation, following the occurrence of
an Event of Default under the Indenture. Prior to the repayment in full in cash of all obligations under the Credit Agreement, neither the Trustee nor the Holders of the Notes will be entitled to
exercise or be entitled to participate in providing instructions in respect of remedies and enforcement to the Collateral Agent, including the right to enforce the actions pursuant to the Parent
Pledge Agreement, request any action, institute proceedings, give any instructions or notices, make any election, make collections, sell or otherwise foreclose on any portion of the Issuer Stock
Collateral or receive any payment (except for the right to receive payments as expressly set forth under the Parent Pledge Agreement).
Under
the Parent Pledge Agreement, the Collateral Agent's obligations to the Trustee and the Holders of Notes (collectively, the "Indenture Secured
Parties") are limited to holding the Issuer Stock Collateral for the ratable benefit of the Indenture Secured Parties, enforcing the rights of the Indenture Secured Parties (in
their capacity as such) with respect to the Issuer Stock Collateral, and distributing to the Secured Parties any proceeds received from the sale, collection or realization of the Issuer Stock
Collateral.
In
addition, none of the Collateral Agent, any lender or agent under the Credit Agreement, any provider of hedges under Specified Swap Agreements or any provider of services under
Specified Cash Management Services Agreements will be liable to the Trustee or the Holders of Notes for any actions with respect to the creation, perfection or continuation of the security interests
on the Issuer Stock Collateral, actions with respect to the occurrence of a default or an event of default, actions with respect to the foreclosure upon, sale, release, or depreciation of, or failure
to realize upon, of the Issuer Stock Collateral, actions with respect to the collection of any claim for all or any part of the obligations under the Notes from any debtor, guarantor or any other
party or the valuation, use or protection of the Issuer Stock Collateral.
Subject
to the terms of the Parent Pledge Agreement, the Parent Pledgor will have the right to remain in possession and retain exclusive control of the Issuer Stock Collateral and to
collect, invest and dispose of any income therefrom. Unless an event of default has occurred with respect to any obligations secured by the Parent Pledge Agreement and the Collateral Agent has given
notice of its intent to exercise rights against the Issuer Stock Collateral, the Parent Pledgor will have the right to receive dividends paid in respect of the shares constituting the Issuer Stock
Collateral and to exercise all voting rights with respect to the shares constituting Issuer Stock Collateral.
The fair market value of the Collateral is subject to fluctuations based on factors that include, among others, the condition of the retail
industry, the ability to sell the Collateral in an orderly sale, general economic conditions, the availability of buyers and similar factors. The amount to be received upon a sale of the Collateral
will also be dependent on numerous factors, including, but not limited to, the actual fair market value of the Collateral at such time and the timing and the manner of the sale. By its nature, the
Collateral may be illiquid and may have no readily ascertainable market value. Accordingly, there can be no assurance that the Collateral can be sold in a short period of time or in an orderly manner.
In addition, in the event of a bankruptcy, the ability of the Holders to realize upon any of the Collateral may be subject to certain bankruptcy law limitations as described below.
S-31
Table of Contents
The right of the Collateral Agent to repossess and dispose of the Collateral upon the occurrence of an Event of Default may be significantly
impaired by any Bankruptcy Law in the event that a bankruptcy case were to be commenced by or against the Parent Pledgor, the Issuer or any Guarantor prior to the Collateral Agent's having repossessed
and disposed of the Collateral. Upon the commencement of a case for relief under the U.S. bankruptcy code, a secured creditor such as the Collateral Agent is prohibited from repossessing its security
from a debtor in a bankruptcy case, or from disposing of security without bankruptcy court approval.
If
any Secured Party is required in any insolvency or liquidation proceeding or otherwise to turn over or otherwise pay any amount to the estate of the Issuer or any Guarantor (or any
trustee, receiver or similar person therefor) because the payment of such amount was declared to be fraudulent or preferential in any respect or for any other reason, any such amount (a
"Recovery"), whether received as proceeds of security, enforcement of any right of setoff or otherwise, then as among the parties to the applicable
Security Document, the obligations owing to such party shall be deemed to be reinstated to the extent of such Recovery and to be outstanding as if such payment had not occurred, and such Secured Party
shall be entitled to a reinstatement of obligations with respect to all such recovered amounts and shall have all rights as a Secured Party under the Security Documents with respect thereto.
In
view of the broad equitable powers of a U.S. bankruptcy court, it is impossible to predict how long payments under the Notes could be delayed following commencement of a bankruptcy
case, whether or when the Collateral Agent could repossess or dispose of the Collateral, the value of the Collateral at any time during a bankruptcy case or whether or to what extent Holders of the
Notes would be compensated for any delay in payment or loss of value of the Collateral. The U.S. bankruptcy code permits only the payment and/or accrual of post-petition interest, costs and attorneys'
fees to a secured creditor during a debtor's bankruptcy case to the extent the value of such creditor's interest in the Collateral owned by such debtor is determined by the bankruptcy court to exceed
the aggregate outstanding principal amount of the obligations secured by the Collateral.
Furthermore,
in the event a domestic or foreign bankruptcy court determines that the value of the Collateral is not sufficient to repay all amounts due on the Notes, the Holders of the
Notes would hold secured claims only to the extent of the value of the Collateral to which the Holders of the Notes are entitled, and unsecured claims with respect to such shortfall.
The Parent Pledgor will be entitled to the release of the Issuer Stock Collateral from the Liens securing the Notes and the Note Guarantees
under any one or more of the following circumstances:
-
(1)
-
concurrently
with any release of the Issuer Stock Collateral under the Credit Agreement and the Existing Notes; or
-
(2)
-
as
described under "Amendment, Supplement and Waiver."
The
Liens on the Issuer Stock Collateral will also be released upon (i) payment in full of the principal of, together with accrued and unpaid interest, on the Notes and all other
Obligations under the Indenture, the Note Guarantees and the Parent Pledge Agreement that are due and payable at or prior to the time such principal, together with accrued and unpaid interest, are
paid or (ii) a legal defeasance or covenant defeasance under the Indenture as described below under "Legal Defeasance and Covenant Defeasance" or a discharge of the Indenture as
described below under "Satisfaction and Discharge."
S-32
Table of Contents
Any
certificate or opinion required by Section 314(d) of the Trust Indenture Act in connection with obtaining the release of the Issuer Stock Collateral may be made by an Officer
of the Issuer, except in cases where Section 314(d) requires that such certificate or opinion be made by an independent engineer, appraiser or other expert.
Notwithstanding
anything to the contrary in this "Description of Notes" section, the Issuer and its Subsidiaries will not be required to comply with all or any portion of
Section 314(d) of the Trust Indenture Act if they determine in good faith, based on the advice of counsel, that under the terms of that section and/or any interpretation or guidance as to the
meaning thereof of the SEC and its staff, including "no action" letters or exemptive orders, all or the relevant portion of Section 314(d) of the Trust Indenture Act is inapplicable to the
released Issuer Stock Collateral.
Mandatory Redemption
The Issuer will not be required to redeem the Notes prior to maturity. However, we may at any time and from time to time purchase Notes in the
open market or otherwise as described under "Change of Control" and "Optional Redemption."
Optional Redemption
The Issuer may redeem some or all of the notes at any time on or after November 26, 2024, at a redemption price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date as described herein. Prior to November 26, 2024, the Notes are redeemable at the Issuer's
election, in whole or in part at any time upon not less than 30 nor more than 60 days' notice at a redemption price equal to the greater of:
-
-
100% of the aggregate principal amount of the Notes to be redeemed, or
-
-
as determined by an Independent Investment Banker, the sum of the present values of (i) the remaining scheduled payments of principal
and (ii) interest on the Notes to be redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the redemption date on a quarterly basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus basis points,
plus,
in either of the above cases, accrued and unpaid interest to the date of redemption of the Notes to be redeemed.
"Adjusted Treasury Rate" means, with respect to any redemption date:
-
-
the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published
statistical release designated "H.15" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded
United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or after the Remaining Life (as defined below), yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and
the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month); or
-
-
if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the
rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such redemption date.
S-33
Table of Contents
The Adjusted Treasury Rate shall be calculated on the third Business Day preceding the redemption date. Any weekly average yields calculated by interpolation will
be rounded to the nearest 1/100th of 1%, with any figure of 1/200th of 1% or above being rounded upward.
"Comparable Treasury Issue" means the United States Treasury security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of such securities ("Remaining Life").
"Comparable Treasury Price" means (1) the average of four Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest Reference Treasury Dealer Quotations, or (2) if the Independent Investment Banker obtains fewer than four such Reference Treasury Dealer Quotations, the average
of all such quotations.
"Independent Investment Banker" means one of the Reference Treasury Dealers appointed by us.
"Reference Treasury Dealer" means any primary U.S. Government securities dealer in New York City selected by us.
"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as
determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the
Independent Investment Banker at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date.
Unless
the Issuer defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the Notes or portion thereof called for redemption.
In the event that less than all of the Notes are to be redeemed at any time pursuant to an optional redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that no Notes of a principal amount of $25 or less shall be redeemed in part.
Notice
of redemption will be mailed by first-class mail at least 30 but not more than 60 days before the date of redemption to each Holder of Notes to be redeemed at its
registered address, 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 satisfaction and discharge of the
Indenture. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount of the Note to be redeemed. A new Note in a
principal amount equal to the unredeemed portion of the Note will be issued in the name of the Holder of the Note upon cancellation of the original Note. On and after the date of redemption, interest
will cease to accrue on Notes or portions thereof called for redemption so long as the Issuer has deposited with the Paying Agent for the Notes funds in satisfaction of the redemption price (including
accrued and unpaid interest on the Notes to be redeemed) pursuant to the Indenture.
Notice
of any redemption of Notes may, at the Issuer's discretion, be subject to one or more conditions precedent. If such redemption is subject to satisfaction of one or more conditions
precedent, such
notice of redemption shall describe each such condition and, if applicable, shall state that, in the Issuer's discretion, the redemption date may be delayed until such time as any or all of such
conditions shall be satisfied (or waived by the Issuer in its sole discretion), or such redemption may not occur and
S-34
Table of Contents
such
notice may be rescinded in the event that any or all such conditions shall not have been satisfied (or waived by the Issuer in its sole discretion) by the redemption date as stated in such
notice, or by the redemption date as so delayed.
Change of Control
If a Change of Control Triggering Event (as defined below) occurs with respect to the Notes, unless the Issuer has exercised its right to redeem
the Notes as described above, the Issuer will be required to make an offer to repurchase all or, at the Holder's option, any part (equal to $25 or any integral multiple of $25 in excess thereof) of
each Holder's Notes pursuant to a Change of Control Offer (as defined below).
In
the Change of Control Offer, the Issuer will be required to offer payment in cash equal to 101% of the aggregate principal amount of Notes to be purchased plus accrued and unpaid
interest, if any, on the Notes repurchased, to, but not including, the date of purchase (the "Change of Control Payment").
Within
30 days following any Change of Control Triggering Event with respect to the Notes, the Issuer will be required to mail a notice to Holders of Notes, with a copy to the
Trustee, describing the transaction or transactions that constitute the Change of Control Triggering Event and offering to repurchase the Notes (a "Change of Control
Offer") on the date specified in the notice, which date will be no earlier than 30 and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice.
On
the Change of Control Payment Date, the Issuer will be required, to the extent lawful, to:
-
-
accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;
-
-
deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered;
and
-
-
deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer's Certificate stating the aggregate
principal amount of Notes or portions of Notes being purchased.
The
Paying Agent will be required to promptly pay, to each Holder who properly tendered Notes, the purchase price for such Notes, and the Trustee will be required to promptly
authenticate and mail (or cause to be transferred by book entry) to each such Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each
new Note will be in a principal amount of $25 or an integral multiple of $25 in excess thereof.
The
Issuer will not be required to make a Change of Control Offer upon a Change of Control Triggering Event if a third party makes such an offer in the manner, at the times and otherwise
in compliance with the requirements for an offer made by us and such third party purchases all Notes properly tendered and not withdrawn under its offer. In the event that such third party terminates
or defaults its offer, the Issuer will be required to make a Change of Control Offer treating the date of such termination or default as though it were the date of the Change of Control Triggering
Event.
The
Issuer shall comply with the requirements of applicable securities laws and regulations in connection with the purchase 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 contained in the Indenture, the Issuer shall comply with the applicable securities laws and regulations and shall
not be deemed to have breached its obligations regarding the Change of Control Offer by virtue of this compliance.
S-35
Table of Contents
For
purposes of the repurchase provisions of the Notes, the following terms will be applicable:
-
(i)
-
"Below Investment Grade Rating Event" means the Notes are rated below an Investment Grade Rating by each of the
Rating Agencies on any date during the period commencing 60 days prior to the date of the first public notice of an arrangement that could result in a Change of Control and ending at the end of
the 60-day period following public notice of the occurrence of the Change of Control (which 60-day period shall be extended so long as the rating of the Notes is under publicly announced consideration
for possible downgrade by any of the Rating Agencies); provided that a Below Investment Grade Rating Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have
occurred in respect of a particular Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for purposes of the definition of "Change of Control Triggering Event"
hereunder) if the Rating Agencies making the reduction in rating to which this definition would otherwise apply do not announce or publicly confirm or inform the Holders of Notes in writing at their
request that the reduction was the result, in whole or in part, of any event or circumstance comprising or arising as a result of, or in respect of, the applicable Change of Control (whether or not
the applicable Change of Control shall have occurred at the time of the Below Investment Grade Rating Event);
-
(ii)
-
"Change of Control Triggering Event" means the occurrence of both a Change of Control and a Below Investment Grade
Rating Event occurring in respect of that Change of Control;
-
(iii)
-
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) if by Moody's and
BBB (or the equivalent) if by Standard & Poor's;
-
(iv)
-
"Moody's" means Moody's Investors Service, Inc. and any successor to its rating agency business;
-
(v)
-
"Rating Agencies" means (1) each of Moody's and Standard & Poor's; and (2) if any of Moody's or
Standard & Poor's ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of our control, a "nationally recognized statistical rating
organization" as such term is defined for purposes of Section 3(a)(62) of the Exchange Act, that the Issuer selects (as certified by an Officer of ours) as a replacement agency for Moody's or
Standard & Poor's, or both of them, as the case may be; and
-
(vi)
-
"Standard & Poor's" means Standard & Poor's Financial Services, LLC and any successor to its
rating agency business.
Certain Covenants
The Indenture will contain, among others, the following covenants:
The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, incur any Indebtedness; provided that the
Issuer or any Restricted Subsidiary may incur additional Indebtedness, in each case, if, after giving effect to such incurrence and
the application of the proceeds therefrom, the Consolidated Interest Coverage Ratio would be at least 2.00 to 1.00 (the "Coverage Ratio Exception").
Notwithstanding
the above, each of the following shall be permitted (the "Permitted Indebtedness"):
-
(1)
-
Indebtedness
of the Issuer and any Guarantor under the Credit Facilities (including the Notes issued on the Issue Date and Existing Notes) in an aggregate amount at
any time outstanding not to exceed $5,000,000,000;
S-36
Table of Contents
-
(2)
-
the
Note Guarantees and the Existing Note Guarantees;
-
(3)
-
Indebtedness
of the Issuer and the Restricted Subsidiaries to the extent outstanding on the Issue Date (other than Indebtedness referred to in clause (1),
(2) or (4));
-
(4)
-
(x)
Indebtedness of the Issuer or any Restricted Subsidiary owed to any other Restricted Subsidiary or the Issuer and (y) guarantees by any Restricted
Subsidiary or the Issuer of any Indebtedness of the Issuer or any other Restricted Subsidiary; provided, however, that upon any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or such Indebtedness being owed to any Person other than the
Issuer or a Restricted Subsidiary, as applicable, the Issuer or such Restricted Subsidiary, as applicable, shall be deemed to have incurred Indebtedness not permitted by this clause (4);
-
(5)
-
Indebtedness
in respect of bid, performance or surety bonds issued for the account of the Issuer or any Restricted Subsidiary in the ordinary course of business,
including guarantees or obligations of the Issuer or any Restricted Subsidiary with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for an
obligation for money borrowed);
-
(6)
-
Purchase
Money Indebtedness incurred by the Issuer or any Restricted Subsidiary, and Refinancing Indebtedness thereof, in an aggregate amount not to exceed at any
time outstanding $100.0 million;
-
(7)
-
Indebtedness
arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that
such Indebtedness is extinguished within five Business Days of incurrence;
-
(8)
-
Indebtedness
arising in connection with endorsement of instruments for deposit in the ordinary course of business;
-
(9)
-
Refinancing
Indebtedness with respect to Indebtedness incurred pursuant to the Coverage Ratio Exception or clause (2) or (3) above or this
clause (9);
-
(10)
-
indemnification,
adjustment of purchase price, earnout or similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition
of any business or assets of the Issuer or any Restricted Subsidiary or Equity Interests of a Restricted Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Equity Interests for the purpose of financing or in contemplation of any such acquisition; provided that
(a) any amount of such obligations included on the face of the balance sheet of the Issuer or any Restricted Subsidiary shall not be permitted under this clause (10) and (b) in
the case of a disposition, the maximum aggregate liability in respect of all such obligations outstanding under this clause (10) shall at no time exceed the gross proceeds actually received by
the Issuer and the Restricted Subsidiaries in connection with such disposition;
-
(11)
-
Indebtedness
of Subsidiaries that are not Guarantors if, after giving effect to such incurrence and the application of the proceeds thereof, the aggregate principal
amount of such indebtedness does not exceed $425.0 million (less the amount of any Indebtedness secured by a Lien permitted under clause (23) of the definition of "Permitted Liens" which
Indebtedness is not incurred pursuant to this clause (11)); and
-
(12)
-
Indebtedness
of the Issuer or any Restricted Subsidiary in an aggregate amount not to exceed $250.0 million at any time outstanding.
S-37
Table of Contents
For
purposes of determining compliance with this covenant, Indebtedness under Existing Notes to the extent outstanding on the Issue Date may be deemed incurred pursuant to the Coverage
Ratio Exception, and in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (12) above
or is entitled to be incurred pursuant to the Coverage Ratio Exception, the Issuer shall, in its sole discretion, classify such item of Indebtedness and may divide and classify such Indebtedness in
more than one of the types of Indebtedness described and may later reclassify any item of Indebtedness described in clauses (1) through (12) above
(provided that at the time of reclassification it meets the criteria in such category or categories), except that Indebtedness outstanding under the
Credit Agreement and the Notes issued on the Issue Date shall be deemed to have been incurred under clause (1) above. In addition, for purposes of determining any particular amount of
Indebtedness under this covenant, guarantees, Liens or letter of credit obligations supporting Indebtedness otherwise included in the determination of such particular
amount shall not be included so long as incurred by a Person that could have incurred such Indebtedness.
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 or
first incurred (whichever yields the lower U.S. dollar equivalent), 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 Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment unless at the time of
such Restricted Payment:
-
(1)
-
no
Default shall have occurred and be continuing or shall occur as a consequence thereof; and
-
(2)
-
after
giving effect to such incurrence and the application of proceeds therefrom the Consolidated Leverage Test would be satisfied.
The
foregoing provisions will not prohibit:
-
(1)
-
the
payment by the Issuer or any Restricted Subsidiary of any dividend within 60 days after the date of declaration thereof, if on the date of declaration the
payment would have complied with the provisions of the Indenture;
-
(2)
-
the
redemption of any Equity Interests of the Issuer or any Restricted Subsidiary in exchange for, or out of the proceeds of the substantially concurrent issuance
and sale of, Qualified Equity Interests (provided that any transfers of the Equity Interests of the Issuer will be subject to the provisions of the Parent Pledge Agreement);
-
(3)
-
the
redemption of Subordinated Indebtedness of the Issuer or any Restricted Subsidiary (a) in exchange for, or out of the proceeds of the substantially
concurrent issuance and sale of, Qualified Equity Interests (provided that any transfers of the Equity Interests of the Issuer will be subject to the provisions of the Parent Pledge Agreement),
(b) in exchange for, or out of the proceeds of the substantially concurrent incurrence of, Refinancing Indebtedness permitted to be incurred under "Limitations on Incurrence of
Indebtedness" and the other terms of the Indenture or (c) upon a Change of Control or in connection with a sale of assets
S-38
Table of Contents
provided that in the case of any Restricted Payment pursuant to clause (3), (8) or (10) above, no Default shall have occurred and
be continuing or occur as a consequence thereof.
For
purposes of this covenant, if a particular Restricted Payment involves a non-cash payment, including a distribution of assets, then such Restricted Payment shall be deemed to be an
amount equal to the cash portion of such Restricted Payment, if any, plus an amount equal to the Fair Market Value of the non-cash portion of such Restricted Payment.
The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to:
-
(a)
-
pay
dividends or make any other distributions on or in respect of its Equity Interests held by the Issuer or any Restricted Subsidiary;
-
(b)
-
make
loans or advances or pay any Indebtedness or other obligation owed to the Issuer or any other Restricted Subsidiary; or
-
(c)
-
transfer
any of its assets to the Issuer or any other Restricted Subsidiary;
except
for:
-
(1)
-
encumbrances
or restrictions existing under or by reason of applicable law, regulation or order;
S-39
Table of Contents
-
(2)
-
encumbrances
or restrictions existing under the Indenture, the Notes, the Note Guarantees and the Security Documents;
-
(3)
-
non-assignment
provisions of any contract or any lease entered into in the ordinary course of business;
-
(4)
-
encumbrances
or restrictions existing under agreements existing on the Issue Date (including, without limitation, the Credit Agreement, the Existing Notes
Indentures, the Existing Notes and the Existing Note Guarantees) as in effect on that date;
-
(5)
-
restrictions
relating to any Lien permitted under the Indenture imposed by the holder of such Lien that limit the right of the relevant obligor to transfer assets
that are subject to such Lien;
-
(6)
-
restrictions
imposed under any agreement to sell assets permitted under the Indenture to any Person pending the closing of such sale;
-
(7)
-
encumbrances
or restrictions imposed under any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired and encumbrances or restrictions imposed under any agreement of any Person that becomes
a Restricted Subsidiary; provided that such encumbrances or restrictions are not created in contemplation of or in connection with such Person becoming a Restricted Subsidiary;
-
(8)
-
any
other agreement governing Indebtedness entered into after the Issue Date that contains encumbrances and restrictions that are not materially more restrictive
with respect to any Restricted Subsidiary than those in effect on the Issue Date with respect to that Restricted Subsidiary pursuant to agreements in effect on the Issue Date;
-
(9)
-
customary
provisions in partnership agreements, limited liability company organizational governance documents, joint venture agreements, shareholder agreements and
other similar agreements that restrict the transfer of ownership interests in such partnership, limited liability company, joint venture, corporation or similar Person or assets of such entities;
-
(10)
-
Purchase
Money Indebtedness incurred in compliance with the covenant described under "Limitations on Incurrence of Indebtedness" that impose
restrictions of the nature described in clause (c) above on the assets acquired;
-
(11)
-
restrictions
on cash or other deposits or net worth imposed by suppliers or landlords under contracts entered into in the ordinary course of business;
-
(12)
-
any
encumbrances or restrictions imposed by any amendments, replacements or refinancings of the contracts, instruments or obligations referred to in
clauses (1) through (11) above; provided that such amendments, replacements or refinancings are not materially more restrictive with
respect to such encumbrances and restrictions than those prior to such amendment, replacement or refinancing; and
-
(13)
-
any
encumbrances or restrictions solely in favor of the Issuer and/or Restricted Subsidiaries.
The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, in one transaction or a series of related
transactions, sell, lease, transfer or otherwise dispose of any of its assets to, or purchase any assets from, or enter into any contract, agreement, understanding, loan, advance or guarantee with, or
for the benefit of, any Affiliate (an "Affiliate Transaction"), unless such Affiliate Transaction is on terms that are no less favorable to the Issuer
or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time on an
S-40
Table of Contents
arm's-length
basis by the Issuer or that Restricted Subsidiary from a Person that is not an Affiliate of the Issuer or that Restricted Subsidiary.
The
foregoing restrictions shall not apply to:
-
(1)
-
transactions
between or among the Issuer and its Restricted Subsidiaries not involving any other Affiliate;
-
(2)
-
reasonable
director, officer and employee compensation (including bonuses) and other benefits (including retirement, health, and Stock Compensation Plans) and
indemnification arrangements and reasonable payments to Affiliates in consideration for securities issued in connection therewith;
-
(3)
-
transactions
pursuant to the Tax Liability Allocation and Indemnification Agreement;
-
(4)
-
loans
and advances permitted by clause (3) of the definition of "Permitted Investments";
-
(5)
-
Restricted
Payments of the type described in clause (1), (2) or (4) of the definition of "Restricted Payment" and which are made in accordance
with the covenant described under "Limitations on Restricted Payments";
-
(6)
-
(x)
any agreement in effect on the Issue Date and disclosed in this prospectus supplement, as in effect on the Issue Date or as thereafter amended or replaced in any
manner, that, taken as a whole, is not more disadvantageous to the Holders or the Issuer in any material respect than such agreement as it was in effect on the Issue Date or (y) any transaction
pursuant to any agreement referred to in the immediately preceding clause (x);
-
(7)
-
any
transaction with a joint venture or similar entity which would constitute an Affiliate Transaction solely because the Issuer or a Restricted Subsidiary owns an
equity interest in or otherwise controls such joint venture or similar entity; provided that no Affiliate of the Issuer or any of its Subsidiaries other
than the Issuer or a Restricted Subsidiary shall have a beneficial interest in such joint venture or similar entity;
-
(8)
-
ordinary
overhead arrangements in which any Subsidiary participates;
-
(9)
-
(a)
any transaction with an Affiliate where the only consideration paid by the Issuer or any Restricted Subsidiary is Qualified Equity Interests or (b) the
issuance or sale of any Qualified Equity Interests; and
-
(10)
-
transactions
between the Issuer and/or any of the Restricted Subsidiaries, on the one hand, and Zulily, LLC and/or any of its Subsidiaries, on the other
hand, if after giving pro forma effect to any such transaction, no Default shall have occurred and be continuing and the Consolidated Leverage Test would be satisfied.
The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or permit or suffer to
exist any Lien (other than Permitted Liens) of any nature whatsoever against any assets (including Equity Interests of a Restricted Subsidiary) of the Issuer or any Restricted Subsidiary, whether
owned at the Issue Date or thereafter acquired, which Lien secures Indebtedness, Hedging Obligations or trade payables.
The
foregoing shall not apply to Liens on Collateral to secure Indebtedness ("Permitted Parity Indebtedness") in an aggregate principal
amount not exceeding $5,000,000,000 that is secured by a Lien that is equal and ratable with or junior to the Lien in favor of the Collateral Agent for the benefit of the Trustee and the Holders with
respect to the Notes and the Note Guarantees; provided that, the Notes may be restricted from participating in providing instructions in respect of
remedies and
S-41
Table of Contents
enforcement
to the Collateral Agent with respect to the Collateral; provided further that, when there is no Credit Agreement outstanding, Liens incurred
pursuant to this paragraph in favor of holders of Permitted Parity Indebtedness that ranks pari passu with the Notes may be entitled to participate in
providing instructions in respect of remedies and enforcement to the Collateral Agent with respect to the Collateral ratably with the holders of any other such Indebtedness and the Holders of the
Notes in proportion to the amount of obligations under such Indebtedness.
The Issuer may designate any Subsidiary (including any newly formed or newly acquired Subsidiary) of the Issuer as an "Unrestricted Subsidiary"
under the Indenture (a "Designation") only if:
-
(1)
-
no
Default shall have occurred and be continuing at the time of or immediately after giving effect to such Designation; and
-
(2)
-
at
the time of and immediately after giving effect to such Designation, the Consolidated Leverage Test would be satisfied.
No
Subsidiary shall be Designated as an "Unrestricted Subsidiary" unless such Subsidiary:
-
(1)
-
has
no Indebtedness other than Non-Recourse Debt and other obligations arising by operation of law, including joint and several liability for taxes, ERISA
obligations and similar items, except, in each case, pursuant to Investments which are made in accordance with the covenant described under "Limitations on Restricted Payments";
-
(2)
-
is
not party to any agreement, contract, arrangement or understanding with the Issuer or any Restricted Subsidiary unless the terms of the agreement, contract,
arrangement or understanding comply with the covenant described above under "Limitations on Transactions with Affiliates";
-
(3)
-
is
a Person with respect to which neither the Issuer nor any Restricted Subsidiary has any direct or indirect obligation (a) to subscribe for additional
Equity Interests or (b) to maintain or preserve the Person's financial condition or to cause the Person to achieve any specified levels of operating results, except, in each case, pursuant to
Investments which are made in accordance with the covenant described under "Limitations on Restricted Payments"; and
-
(4)
-
will
not become a Subsidiary of the Issuer or its other Subsidiaries (other than another Unrestricted Subsidiary) where the Issuer or such other Subsidiary will
become a general partner of any such Subsidiary.
If,
at any time, any Unrestricted Subsidiary fails to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture on the date that is 30 days after the Issuer or any Restricted Subsidiary has obtained knowledge of such failure (unless such failure has been cured by such date), and
any Indebtedness of the Subsidiary and any Liens on assets of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary at such time and, if the Indebtedness is not permitted to be
incurred under the covenant described under "Limitations on Incurrence of Indebtedness" or the Lien is not permitted under the covenant described under "Limitations on
Liens," the Issuer shall be in default of the applicable covenant.
The
Issuer may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a "Redesignation") only if:
-
(1)
-
no
Default shall have occurred and be continuing at the time of and after giving effect to such Redesignation; and
S-42
Table of Contents
-
(2)
-
all
Liens, Indebtedness and Investments of such Unrestricted Subsidiary outstanding immediately following such Redesignation would, if incurred or made at such time,
have been permitted to be incurred or made for all purposes of the Indenture.
All
Designations and Redesignations must be evidenced by resolutions of the Board of Directors of the Issuer and an Officer's Certificate certifying compliance with the foregoing
provisions delivered to the Trustee.
The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into any Sale and Leaseback Transaction; provided that the Issuer or any Restricted Subsidiary may enter into a Sale and Leaseback Transaction if:
-
(1)
-
such
Sale and Leaseback Transaction involves a lease for a term of not more than three years;
-
(2)
-
such
Sale and Leaseback Transaction is between the Issuer and one of its Restricted Subsidiaries or between any of the Issuer's Restricted Subsidiaries;
-
(3)
-
the
Issuer or such Restricted Subsidiary could have (a) incurred the Indebtedness attributable to such Sale and Leaseback Transaction pursuant to the covenant
described under "Limitations on Incurrence of Indebtedness" and (b) incurred a Lien to secure such Indebtedness without equally and ratably securing the Notes pursuant to the
covenant described under "Limitations on Liens" or the lease in the Sale and Leaseback Transaction is not a capital lease and, upon its incurrence, such arrangements outstanding shall not
be in excess of 15% of Consolidated Net Tangible Assets at any one time outstanding; or
-
(4)
-
the
Issuer or such Restricted Subsidiary applies an amount equal to the net proceeds of such Sale and Leaseback Transaction within 365 days after such Sale
and Leaseback Transaction to the retirement or other discharge of Indebtedness of the Issuer or a Restricted Subsidiary.
Limitations on Mergers, Consolidations, etc.
The Issuer will not, directly or indirectly, in a single transaction or a series of related transactions, (a) consolidate or merge with
or into another Person, or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of the Issuer or the Issuer and the Restricted Subsidiaries (taken as
a whole) or (b) adopt a Plan of Liquidation unless, in either case:
-
(1)
-
either:
-
(a)
-
the
Issuer will be the surviving or continuing Person; or
-
(b)
-
the
Person formed by or surviving such consolidation or merger or to which such sale, lease, conveyance or other disposition shall be made (or, in the case of a Plan
of Liquidation, any Person to which assets are transferred) (collectively, the "Successor") is a corporation, limited liability company or limited
partnership organized and existing under the laws of any State of the United States of America or the District of Columbia, and the Successor expressly assumes, by agreements in form and substance
reasonably satisfactory to the Trustee, all of the obligations of the Issuer under the Notes and the Indenture;
-
(2)
-
immediately
prior to and immediately after giving effect to such transaction and the assumption of the obligations as set forth in clause (1)(b) above and the
incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, no Default shall have occurred and be continuing; and
S-43
Table of Contents
-
(3)
-
immediately
after and giving effect to such transaction and the assumption of the obligations set forth in clause (1)(b) above and the incurrence of any
Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, the Consolidated Leverage Test would be satisfied.
For purposes of this covenant, any Indebtedness of the Successor which was not Indebtedness of the Issuer immediately prior to the transaction shall be deemed to
have been incurred in connection with such transaction.
Except
as provided in the fourth paragraph under "Note Guarantees," no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving
Person) another Person, unless:
-
(1)
-
either:
-
(a)
-
such
Guarantor will be the surviving or continuing Person; or
-
(b)
-
the
Person formed by or surviving any such consolidation or merger is another Guarantor or assumes, by agreements in form and substance reasonably satisfactory to
the Trustee, all of the obligations of such Guarantor under the Note Guarantee of such Guarantor, the Indenture and the Security Documents; and
-
(2)
-
immediately
after giving effect to such transaction, no Default shall have occurred and be continuing.
For
purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or
assets of one or more Restricted Subsidiaries, the Equity Interests of which constitute all or substantially all of the properties and assets of the Issuer, will be deemed to be the transfer of all or
substantially all of the properties and assets of the Issuer.
Upon
any consolidation, combination or merger of the Issuer or a Guarantor, or any transfer of all or substantially all of the assets of the Issuer or Guarantor in accordance with the
foregoing, in which the Issuer or such Guarantor is not the continuing obligor under the Notes or its Note Guarantee, the surviving entity formed by such consolidation or into which the Issuer or such
Guarantor is merged or the Person to which the conveyance, lease or transfer is made will succeed to, and be substituted for, and may exercise every right and power of, the Issuer or such Guarantor
under the Indenture, the Notes and the Note Guarantees with the same effect as if such surviving entity had been named therein as the Issuer or such Guarantor and, except in the case of a lease, the
Issuer or such Guarantor, as the case may be, will be released from the obligation to pay the principal of and interest on the Notes or in respect of its Note Guarantee, as the case may be, and all of
the Issuer's or such Guarantor's other obligations and covenants under the Notes, the Indenture and its Note Guarantee, if applicable.
Notwithstanding
the foregoing, any Restricted Subsidiary may consolidate with, merge with or into or convey, transfer or lease, in one transaction or a series of transactions, all or
substantially all of its assets to the Issuer or another Restricted Subsidiary; provided if such Restricted Subsidiary is a Guarantor, that the
surviving entity remains or becomes a Guarantor.
If, after the Issue Date, (a) any Restricted Subsidiary (including any newly formed, newly acquired or newly Redesignated Restricted
Subsidiary) becomes a Material Domestic Subsidiary, (b) any Restricted Subsidiary (including any newly formed, newly acquired or newly Redesignated Restricted Subsidiary) guarantees any
Indebtedness under the Credit Agreement or any Permitted Parity
S-44
Table of Contents
Indebtedness
or (c) the Issuer otherwise elects to have any Restricted Subsidiary become a Guarantor, then, in each such case, the Issuer shall cause such Restricted Subsidiary
to:
-
(1)
-
execute
and deliver to the Trustee (a) a supplemental indenture in form and substance satisfactory to the Trustee pursuant to which such Restricted Subsidiary
shall unconditionally guarantee all of the Issuer's obligations under the Notes and the Indenture and (b) a notation of guarantee in respect of its Note Guarantee; and
-
(2)
-
deliver
to the Trustee one or more opinions of counsel that such supplemental indenture (a) has been duly authorized, executed and delivered by such
Restricted Subsidiary and (b) constitutes a valid and legally binding obligation of such Restricted Subsidiary in accordance with its terms (subject to customary qualifications).
The Issuer will not, and will not permit any Restricted Subsidiary to, change its line of business conducted by the Issuer and its Restricted
Subsidiaries on the Issue Date (other than businesses incidental or related thereto).
The Indenture will provide that 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 Issuer
will file with the SEC:
-
(1)
-
within
the time period specified in the SEC's rules and regulations for a non-accelerated filer, annual reports on Form 10-K (or any successor or comparable
form) containing the information required to be contained therein (or required in such successor or comparable form),
-
(2)
-
within
the time period specified in the SEC's rules and regulations for a non-accelerated filer, reports on Form 10-Q (or any successor or comparable form)
containing the information required to be contained therein (or required in such successor or comparable form),
-
(3)
-
promptly
from time to time after the occurrence of an event required to be therein reported (and in any event within the time period specified in the SEC's rules and
regulations), such other reports on Form 8-K (or any successor or comparable form), and
-
(4)
-
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;
provided, however, that the Issuer shall not be so obligated to file such reports with the SEC if the
SEC does not permit such filing, in which event the Issuer will make available such information to prospective purchasers of Notes, including by posting such reports on the primary website of the
Issuer or its Subsidiaries, in addition to providing such information to the Trustee and the Holders, in the case of Form 10-K within 30 days, and in each other case within
15 days, after the time the Issuer would be required to file such information with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act as a non-accelerated filer.
In
the event that:
-
(a)
-
the
rules and regulations of the SEC permit the Issuer and any direct or indirect parent of the Issuer to report at such parent entity's level on a consolidated
basis and
-
(b)
-
such
parent entity of the Issuer is not engaged in any business in any material respect other than incidental to its ownership, directly or indirectly, of the
capital stock of the Issuer,
S-45
Table of Contents
such
consolidated reporting at such parent entity's level in a manner consistent with that described in this covenant for the Issuer will satisfy this covenant.
In
addition, the Issuer will make such information available to prospective investors upon request. In addition, the Issuer has agreed that, for so long as any Notes remain outstanding
during any period when it is not subject to Section 13 or 15(d) of the Exchange Act, or otherwise permitted to furnish the SEC with certain information pursuant to Rule 12g3-2(b) of the
Exchange Act, it will furnish to the holders of the Notes and to prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
Notwithstanding
the foregoing, the Issuer will be deemed to have furnished such reports referred to above to the Trustee and the Holders if the Issuer has filed such reports with the SEC
via the EDGAR filing system and such reports are publicly available; provided, however, that the Trustee
shall have no obligation to determine whether or not the Issuer shall have made such filings.
In
the event that any direct or indirect parent of the Issuer is or becomes a Guarantor, 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 direct or indirect parent; provided that the same is
accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such direct or indirect parent and any of its Subsidiaries other than
the Issuer and its Subsidiaries, on the one hand, and the information relating to the Issuer and the Subsidiaries of the Issuer on a stand-alone basis, on the other hand.
The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale
unless:
-
(1)
-
at
the time of such transaction (or, if earlier, the date of the commitment to enter into such transaction) and after giving effect thereto and to the use of
proceeds thereof, (a) no Default shall have occurred and be continuing, and (b) the Consolidated Leverage Test would be satisfied; and
-
(2)
-
if
such Asset Sale involves the disposition of Collateral, the Issuer or such Subsidiary has complied with the provisions of the Indenture and the Security
Documents.
The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to 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 or agreed to be paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver
or agreement.
If on any date following the Issue Date (i) the Notes have Investment Grade Ratings from both Moody's and Standard & Poor's, and
the Issuer has delivered written notice of such Investment Grade Ratings to the Trustee, and (ii) no Default has occurred and is continuing under the
Indenture, then, beginning on that day and continuing at all times thereafter regardless of any subsequent changes in the ratings of the Notes or the occurrence of any Default, the covenants
specifically listed under the
S-46
Table of Contents
following
captions in this "Description of Notes" section will no longer be applicable to the Notes (collectively, the "Terminated Covenants"):
(1) "Limitations
on Incurrence of Indebtedness";
(2) "Limitations
on Restricted Payments";
(3) "Limitations
on Dividend and Other Restrictions Affecting Restricted Subsidiaries";
(4) "Limitations
on Asset Sales";
(5) clause (3)
under "Limitations on Mergers, Consolidations, etc."; and
(6) "Limitations
on Transactions with Affiliates."
No
Default, Event of Default or breach of any kind shall be deemed to exist under the Indenture or the Notes with respect to the Terminated Covenants based on, and none of the Issuer or
any of its Subsidiaries shall bear any liability for, any actions taken or events occurring after the Notes attain Investment Grade Ratings, regardless of whether such actions or event would have been
permitted if the applicable Terminated Covenants remained in effect.
There
can be no assurance that the Notes will ever achieve Investment Grade Ratings.
Events of Default
Each of the following will constitute an "Event of Default" under the
Indenture:
-
(1)
-
failure
by the Issuer to pay interest on any of the Notes when it becomes due and payable and the continuance of any such failure for 30 days;
-
(2)
-
failure
by the Issuer to pay the principal on any of the Notes when it becomes due and payable, whether at stated maturity, upon redemption, upon purchase, upon
acceleration or otherwise;
-
(3)
-
failure
by the Issuer to comply with any of its agreements or covenants described above under "Certain CovenantsLimitations on Mergers,
Consolidations, etc." or in respect of its obligations to make a Change of Control Offer as described under "Change of Control";
-
(4)
-
failure
by the Issuer to comply with any other agreement or covenant in the Indenture and continuance of this failure for 30 days after written notice of the
failure has been given to the Issuer by the Trustee or by the Holders of at least 25% of the aggregate principal amount of the Notes;
-
(5)
-
default
under any mortgage, indenture or other instrument or agreement under which there may be issued or by which there may be secured or evidenced Indebtedness of
the Issuer or any Restricted Subsidiary, whether such Indebtedness now exists or is incurred after the Issue Date, which default:
-
(a)
-
is
caused by a failure to pay at final maturity principal on such Indebtedness within the applicable express grace period and any extensions thereof,
-
(b)
-
results
in the acceleration of such Indebtedness prior to its express final maturity, or
-
(c)
-
results
in the commencement of judicial proceedings to foreclose upon, or to exercise remedies under applicable law or the applicable security documents to take
ownership of, the assets securing such Indebtedness, and
in
each case, the principal amount of such Indebtedness, together with any other Indebtedness with respect to which an event described in clause (a), (b) or (c) has occurred and
is continuing, aggregates $100.0 million or more (and provided that, for purposes of this clause (5) only,
S-47
Table of Contents
"Indebtedness"
shall include any Hedging Obligations with the "principal amount" of any Hedging Obligations at any time being the maximum aggregate amount (giving effect to any netting agreements)
that the Issuer or such Restricted Subsidiary would be required to pay if the agreement with respect to such Hedging Obligations terminated at such time);
-
(6)
-
one
or more judgments or orders that exceed $100.0 million in the aggregate (net of amounts covered by insurance or bonded) for the payment of money have been
entered by a court or courts of competent jurisdiction against the Issuer or any Restricted Subsidiary and such judgment or judgments have not been satisfied, stayed, annulled or rescinded within
60 days of being entered;
-
(7)
-
the
Issuer or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
-
(a)
-
commences
a voluntary case,
-
(b)
-
consents
to the entry of an order for relief against it in an involuntary case,
-
(c)
-
consents
to the appointment of a Custodian of it or for all or substantially all of its assets, or
-
(d)
-
makes
a general assignment for the benefit of its creditors;
-
(8)
-
a
court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
-
(a)
-
is
for relief against the Issuer or any Significant Subsidiary as debtor in an involuntary case,
-
(b)
-
appoints
a Custodian of the Issuer or any Significant Subsidiary or a Custodian for all or substantially all of the assets of the Issuer or any Significant
Subsidiary, or
-
(c)
-
orders
the liquidation of the Issuer or any Significant Subsidiary, and the order or decree remains unstayed and in effect for 60 days;
-
(9)
-
any
Note Guarantee ceases to be in full force and effect (other than in accordance with the terms of such Note Guarantee and the Indenture) or is declared null and
void and unenforceable or found to be invalid or any Guarantor denies its liability under its Note Guarantee (other than by reason of release of a Guarantor from its Note Guarantee in accordance with
the terms of the Indenture and the Note Guarantee);
-
(10)
-
(a)
the security interest under the Security Documents, at any time, ceases to be in full force and effect for any reason other than in accordance with the terms of
the Indenture and the Security Documents, (b) any security interest created thereunder or under the Indenture is declared invalid or unenforceable by a court of competent jurisdiction (other
than by reason of release in accordance with the terms of the Indenture and the Security Documents) or (c) the Issuer, any Guarantor, the Parent Pledgor or any of their respective Affiliates
asserts, in any pleading in any court of competent jurisdiction, that any such security interest is invalid or unenforceable; or
-
(11)
-
the
Parent Pledgor shall fail to observe or perform any covenant, condition or agreement contained in the Parent Pledge Agreement and such failure shall continue
unremedied for a period of 30 days after notice thereof from the Collateral Agent to the Parent Pledgor.
If
an Event of Default specified in clause (7) or (8) with respect to the Issuer or any Guarantor occurs, all outstanding Notes shall become due and payable without any
further action or notice. If any other Event of Default (other than an Event of Default specified in clause (7) or (8) above with respect to the Issuer or any Guarantor), shall have
occurred and be continuing under the Indenture, the Trustee, by written notice to the Issuer, or the Holders of at least 25% in aggregate principal
S-48
Table of Contents
amount
of the Notes then outstanding by written notice to the Issuer and the Trustee, may declare all amounts owing under the Notes to be due and payable immediately. Upon any such declaration of
acceleration, the aggregate principal of and accrued and unpaid interest on the outstanding Notes shall immediately become due and payable; provided, however, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of
the outstanding Notes may, under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the nonpayment of accelerated principal and interest have been cured or
waived as provided in the Indenture.
The
Trustee shall, within 30 days after the occurrence of any Default with respect to the Notes, give the Holders of such Notes written notice of all uncured Defaults thereunder
known to it; provided, however, that, except in the case of an Event of Default in payment with respect
to the Notes or a Default in complying with "Certain CovenantsLimitations on Mergers, Consolidations, etc.," the Trustee shall be protected in withholding such notice if and
so long as it in good faith determines that the withholding of such notice is in the interest of the Holders.
No
Holder will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless the Trustee:
-
(1)
-
has
failed to act for a period of 60 days after receiving written notice of a continuing Event of Default by such Holder and a request to act by Holders of at
least 25% in aggregate principal amount of Notes;
-
(2)
-
has
been offered indemnity satisfactory to it in its reasonable judgment; and
-
(3)
-
has
not received from the Holders of a majority in aggregate principal amount of the Notes a direction inconsistent with such request.
However,
such limitations do not apply to a suit instituted by a Holder of any Note for enforcement of payment of the principal of or interest on such Note on or after the due date
therefor (after giving effect to the grace period specified in clause (1) of the first paragraph of this "Events of Default" section).
The
Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture and, upon any Officer of the Issuer becoming aware of any Default, a
statement specifying such Default and what action the Issuer is taking or proposes to take with respect thereto.
Legal Defeasance and Covenant Defeasance
The Issuer may, at its option and at any time, elect to have its obligations and the obligations of the Guarantors discharged with respect to
the outstanding Notes ("Legal Defeasance"). Legal Defeasance means that the Issuer and the Guarantors shall be deemed to have paid and discharged the
entire indebtedness represented by the Notes and the Note Guarantees, and the Indenture shall cease to be of further effect as to all outstanding Notes and Note Guarantees, except as
to:
-
(1)
-
rights
of Holders of outstanding Notes to receive payments in respect of the principal of and interest on the Notes when such payments are due from the trust funds
referred to below,
-
(2)
-
the
Issuer's obligations with respect to the Notes concerning issuing temporary 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,
-
(3)
-
the
rights, powers, trust, duties, and immunities of the Trustee, and the Issuer's obligation in connection therewith, and
-
(4)
-
the
Legal Defeasance provisions of the Indenture.
S-49
Table of Contents
In
addition, the Issuer may, at its option and at any time, elect to have its obligations and the obligations of the Guarantors released with respect to most of the covenants under the
Indenture, except as described otherwise in the Indenture ("Covenant Defeasance"), and thereafter any omission to comply with such obligations shall not
constitute a Default. In the event Covenant Defeasance occurs, certain Events of Default (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) will no longer
apply. The Issuer may exercise its Legal Defeasance option regardless of whether it previously exercised Covenant Defeasance.
In
order to exercise either Legal Defeasance or Covenant Defeasance:
-
(1)
-
the
Issuer must irrevocably deposit with the Trustee, as trust funds, in trust solely for the benefit of the Holders, U.S. legal tender, U.S. Government Obligations
or a combination thereof, in such amounts as will be sufficient (without consideration of any reinvestment of interest) in the opinion of a nationally recognized firm of independent public accountants
selected by the Issuer, to pay the principal of and interest on the Notes on the stated date for payment or on the redemption date of the principal or installment of principal of or interest on the
Notes,
-
(2)
-
in
the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an opinion of counsel in the United States confirming that:
-
(a)
-
the
Issuer has received from, or there has been published by the Internal Revenue Service, a ruling, or
-
(b)
-
since
the Issue Date, there has been a change in the applicable U.S. federal income tax law,
in
either case to the effect that, and based thereon the opinion of counsel shall confirm that, the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of
the 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,
-
(3)
-
in
the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders 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 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 the Covenant Defeasance had not occurred,
-
(4)
-
no
Default shall have occurred and be continuing on the date of such deposit (other than a Default resulting from the borrowing of funds to be applied to such
deposit),
-
(5)
-
the
Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a Default under the Indenture or a default under any other
material agreement or instrument to which the Issuer or any of its Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is bound (other than any such Default or default resulting
solely from the borrowing of funds to be applied to such deposit),
-
(6)
-
the
Issuer shall have delivered to the Trustee an Officer's Certificate stating that the deposit was not made by it with the intent of preferring the Holders over
any other of its creditors or with the intent of defeating, hindering, delaying or defrauding any other of its creditors or others, and
-
(7)
-
the
Issuer shall have delivered to the Trustee an Officer's Certificate and an opinion of counsel, each stating that the conditions provided for in, in the case of
the Officer's
S-50
Table of Contents
Certificate,
clauses (1) through (6) and, in the case of the opinion of counsel, clauses (2) and/or (3) and (5) of this paragraph have been complied with.
If
the funds deposited with the Trustee to effect Covenant Defeasance are insufficient to pay the principal of and interest on the Notes when due, then the obligations of the Issuer and
the obligations of Guarantors under the Indenture will be revived and no such defeasance will be deemed to have occurred.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect (except as to transfer or exchange of Notes which shall survive until
all Notes have been canceled) as to all outstanding Notes when either:
-
(1)
-
all
the Notes that have been authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money
has been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from this trust) have been delivered to the Trustee for cancellation, or
-
(2)
-
(a)
all Notes not delivered to the Trustee for cancellation otherwise (i) have become due and payable, (ii) will become due and payable, or may be
called for redemption, within one year or (iii) have been called for redemption pursuant to the provisions described under "Optional Redemption," and, in any case, the Issuer has
irrevocably deposited or caused to be deposited with the Trustee as trust funds, in trust solely for the benefit of the Holders of such Notes, U.S. legal tender, U.S. Government Obligations 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 (including all principal and accrued
interest) on the Notes not theretofore delivered to the Trustee for cancellation,
-
(b)
-
the
Issuer has paid all sums payable by it under the Indenture with respect to the Notes, and
-
(c)
-
the
Issuer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or on the date of
redemption, as the case may be.
In
addition, the Issuer must deliver an Officer's Certificate and an opinion of counsel stating that all conditions precedent to satisfaction and discharge have been complied with.
Transfer and Exchange
A Holder will be able to register the transfer of or exchange Notes only in accordance with the provisions of the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Without the prior consent
of the Issuer, the Registrar is not required (1) to register the transfer of or exchange any Note selected for redemption, (2) to register the transfer of or exchange any Note for a
period of 15 days before a selection of Notes to be redeemed or (3) to register the transfer or exchange of a Note between a record date and the next succeeding interest payment date.
The
Notes will be issued in registered form and the registered Holder will be treated as the owner of such Note for all purposes.
S-51
Table of Contents
Amendment, Supplement and Waiver
Subject to certain exceptions, the Indenture or the Notes may be amended with the consent (which may include consents obtained in connection
with a tender offer or exchange offer for Notes) of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing Default under, or compliance with
any provision of, the Indenture may be waived (other than any continuing Default in the payment of the principal or interest on the Notes) with the consent (which may include consents obtained in
connection with a tender offer or exchange offer for Notes) of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Furthermore, without the consent of each Holder
affected, no amendment or waiver may:
-
(1)
-
reduce,
or change the maturity of, the principal of any Note;
-
(2)
-
reduce
the rate of or extend the time for payment of interest on any Note;
-
(3)
-
reduce
any premium payable upon redemption of the Notes or change the date on, or the circumstances under, which any Notes are subject to redemption (other than
provisions relating to the purchase of Notes described above under "Change of Control," except that if a Change of Control has occurred, no amendment or other modification of the
obligation of the Issuer to make a Change of Control Offer relating to such Change of Control shall be made without the consent of each Holder of the Notes affected);
-
(4)
-
make
any Note payable in money or currency other than that stated in the Notes;
-
(5)
-
modify
or change any provision of the Indenture or the related definitions to affect the ranking of the Notes or any Note Guarantee in a manner that adversely
affects the Holders;
-
(6)
-
reduce
the percentage of Holders necessary to consent to an amendment or waiver to the Indenture or the Notes;
-
(7)
-
waive
a default in the payment of principal of or premium or interest on any Notes (except a rescission of acceleration of the Notes by the Holders thereof as
provided in the Indenture and a waiver of the payment default that resulted from such acceleration);
-
(8)
-
impair
the rights of Holders to receive payments of principal of or interest on the Notes on or after the due date therefor or to institute suit for the enforcement
of any payment on the Notes;
-
(9)
-
release
any Guarantor that is a Material Domestic Subsidiary from any of its obligations under its Note Guarantee or the Indenture, except as permitted by the
Indenture, or amend the definition of Material Domestic Subsidiary in a manner adverse to Holders; or
-
(10)
-
make
any change in these amendment and waiver provisions.
In
addition, without the consent of at least 75% in aggregate principal amount of Notes then outstanding, no amendment, supplement or waiver may modify any Security Document or the
provisions of the Indenture dealing with the Security Documents or application of trust moneys, or otherwise release any Collateral, in each case in any manner that materially and adversely affects
the rights of the Holders to equally and ratably share in the Liens provided for in the Security Documents
in a manner that is materially disproportionate to the effect of such amendment, supplement or waiver on the holders of the other obligations secured by the Security Documents.
Notwithstanding
the foregoing, the Issuer and the Trustee (or, in the case of Security Documents, the Collateral Agent) may amend the Indenture, the Security Documents, the Note
Guarantees or the Notes without the consent of any Holder, to cure any ambiguity, defect or inconsistency; to provide for uncertificated Notes in addition to or in place of certificated Notes; to
provide for the assumption of the Issuer's or a Guarantor's obligations to the Holders in the case of a merger, consolidation or sale
S-52
Table of Contents
of
all or substantially all of the assets in accordance with "Certain CovenantsLimitations on Mergers, Consolidations, etc."; to release any Guarantor from any of its
obligations under its Note Guarantee or the Indenture (to the extent permitted by the Indenture); to make any change that does not materially adversely affect the rights of any Holder; in the case of
the Indenture, to maintain the qualification of the Indenture under the Trust Indenture Act; to mortgage, pledge, hypothecate or grant any other Lien in favor of the Trustee or the Collateral Agent
for the benefit of the Holders of the Notes as additional security for the payment and performance of all or any portion of the obligations under the Notes and the Indenture in any property or assets,
including any which are required to be mortgaged, pledged or hypothecated, or in which a Lien is required to be granted to or for the benefit of the Trustee or the Collateral Agent pursuant to the
Indenture, any of the Security Documents or otherwise; to add or remove Secured Parties (or any agent acting on their behalf) to any Security Documents or to release Collateral from the Lien of the
Indenture and the Security Documents when permitted or required by the Security Documents or the Indenture. 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.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Issuer or any Guarantor will have any liability for any obligations of the
Issuer under the Notes or the Indenture or of any Guarantor under its Note Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Note Guarantees. The waiver may not be effective to
waive liabilities under the federal securities laws. It is the view of the SEC that this type of waiver is against public policy.
Concerning the Trustee
U.S. Bank National Association will be the Trustee under the Indenture and has been appointed by the Issuer as Registrar and Paying Agent with
regard to the Notes. The Indenture will contain certain limitations on the rights of the Trustee, should it become a creditor of the Issuer, to obtain payment of claims in certain cases, or to realize
on certain assets received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest (as
defined in the Indenture), it must eliminate such conflict within 90 days, apply to the SEC for permission to continue (if the Indenture has been qualified under the Trust Indenture Act) or
resign.
The
Holders of a majority in principal amount of the then 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 will provide that, in case an Event of Default occurs and is not cured, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent person in similar circumstances 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, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to the Trustee.
Governing Law
The Indenture, the Notes and the Note Guarantees will be governed by, and construed in accordance with, the laws of the State of New York.
S-53
Table of Contents
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition
of all such terms.
"2012 Notes" means the 5.125% Senior Secured Notes due 2022 issued by the Issuer on July 2, 2012.
"2012 Notes Indenture" means the indenture governing the 2012 Notes dated as of July 2, 2012, among the Issuer and certain of its
subsidiaries party thereto and the trustee named therein from time to time, as amended, restated, supplemented or otherwise modified from time to time in accordance with the requirements thereof.
"2013 Notes" means the 4.375% Senior Secured Notes due 2023 and the 5.950% Senior Secured Notes due 2043 issued by the Issuer on
March 18, 2013.
"2013 Notes Indenture" means the indenture governing the 2013 Notes dated as of March 18, 2013, among the Issuer and certain of its
subsidiaries party thereto and the trustee named therein from time to time, as amended, restated, supplemented or otherwise modified from time to time in accordance with the requirements thereof.
"2014 Notes" means (i) the 4.850% Senior Secured Notes due 2024 issued by the Issuer on March 18, 2014 and (ii) the
4.45% Senior Secured Notes due 2025 and the 5.45% Senior Secured Notes due 2034 issued by the Issuer on August 21, 2014.
"2014 Notes Indentures" means (i) the indenture governing the 4.850% Senior Secured Notes due 2024 dated as of March 18,
2014, among the Issuer and certain of its subsidiaries party thereto and the trustee named therein from time to time, as amended, restated, supplemented or otherwise modified from time to time in
accordance with the requirements thereof and (ii) the indenture governing the 4.45% Senior Secured Notes due 2025 and the 5.45% Senior Secured Notes due 2034 dated as of August 21, 2014,
among the Issuer and certain of its subsidiaries party thereto and the trustee named therein from time to time, as amended, restated, supplemented or otherwise modified from time to time in accordance
with the requirements thereof.
"2018 Notes" means the 6.375% Senior Secured Notes due 2067 issued by the Issuer on September 13, 2018.
"2018 Notes Indenture" means the indenture governing the 2018 Notes dated as of September 13, 2018, among the Issuer and certain of
its subsidiaries party thereto and the trustee named therein from time to time, as amended, restated, supplemented or otherwise modified from time to time in accordance with the requirements thereof
"Acquired Indebtedness" means (1) with respect to any Person that becomes a Restricted Subsidiary after the Issue Date,
Indebtedness of such Person and its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary that was not incurred in connection with, or in contemplation of, such Person becoming
a Restricted Subsidiary and (2) with respect to the Issuer or any Restricted Subsidiary, any Indebtedness of a Person (other than the Issuer or a Restricted Subsidiary) existing at the time
such Person is merged with or into the Issuer or a Restricted Subsidiary, or Indebtedness expressly assumed by the Issuer or any Restricted Subsidiary in connection with the acquisition of an asset or
assets from another Person, which Indebtedness was not, in any case, incurred by such other Person in connection with, or in contemplation of, such merger or acquisition.
"Affiliate" of any Person means any other Person which directly or indirectly Controls or is Controlled by, or is under direct or indirect
common Control with, the referent Person.
"Affiliated Persons" means, with respect to any specified Person, (a) such specified Person's parents, spouse, siblings,
descendants, stepchildren, step grandchildren, nieces and nephews and their
S-54
Table of Contents
respective
spouses, (b) the estate, legatees and devisees of such specified Person and each of the Persons referred to in clause (a), and (c) any company, partnership, trust or
other entity or investment vehicle Controlled by any of the Persons referred to in clause (a) or (b) or the holdings of which are for the primary benefit of any of such Persons.
"amend" means to amend, supplement, restate, amend and restate or otherwise modify, including successively, and
"amendment" shall have a correlative meaning.
"asset" means any asset or property.
"Asset Acquisition" means
-
(1)
-
an
Investment by the Issuer or any Restricted Subsidiary in any other Person if, as a result of such Investment, such Person shall become a Restricted Subsidiary, or
shall be merged with or into the Issuer or any Restricted Subsidiary, or
-
(2)
-
the
acquisition by the Issuer or any Restricted Subsidiary of all or substantially all of the assets of any other Person or any division or line of business of any
other Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease, assignment or other disposition by the Issuer or any Restricted
Subsidiary to any Person other than the Issuer or any Restricted Subsidiary (including by means of a Sale and Leaseback Transaction or a merger or consolidation) (collectively, for purposes of this
definition, a "transfer"), in one transaction or a series of related transactions, of
any assets of the Issuer or any of its Restricted Subsidiaries other than in the ordinary course of business. For purposes of this definition, the term "Asset Sale" shall not
include:
-
(1)
-
transfers
of cash or Cash Equivalents;
-
(2)
-
transfers
of assets (including Equity Interests) that are governed by, and made in accordance with, the covenant described under "Certain
CovenantsLimitations on Mergers, Consolidations, etc.";
-
(3)
-
Permitted
Investments and Restricted Payments permitted under the covenant described under "Certain CovenantsLimitations on Restricted
Payments";
-
(4)
-
the
creation of or realization on any Lien permitted under the Indenture;
-
(5)
-
transfers
of inventory and damaged, worn out or obsolete equipment or assets that are no longer used or useful in the business of the Issuer or its Restricted
Subsidiaries;
-
(6)
-
sales
or grants of licenses or sublicenses to use the patents, trade secrets, know-how and other intellectual property, and licenses, leases or subleases of other
assets, of the Issuer or any Restricted Subsidiary to the extent not materially interfering with the business of Issuer and the Restricted Subsidiaries;
-
(7)
-
any
transfer or series of related transfers that, but for this clause, would be Asset Sales, if the aggregate Fair Market Value of the assets transferred in such
transaction or any such series of related transactions does not exceed $50.0 million;
-
(8)
-
Asset
Sales by the Issuer or any Restricted Subsidiary to any other Restricted Subsidiary or the Issuer; and
-
(9)
-
any
transfer or series of transfers that, but for this clause, would be Asset Sales if consummated at a time when, after giving pro forma effect thereto,
(x) the Consolidated Leverage Test is satisfied, and (y) no Default shall have occurred and be continuing or occur as a consequence thereof.
"Bankruptcy Law" means Title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors.
S-55
Table of Contents
"Board of Directors" means, with respect to any Person, (i) in the case of any corporation, the board of directors of such Person,
or the functional equivalent of the foregoing, (ii) in the case of any limited liability company, the board of managers of such Person, (iii) in the case of any partnership, the Board of
Directors of the general partner of such Person and (iv) in any other case, the functional equivalent of the foregoing or, in each case, other than for purposes of the definition of "Change of
Control," any duly authorized committee of such body.
"Business Day" means a day other than a Saturday, Sunday or other day on which banking institutions in New York are authorized or required
by law to close.
"Capitalized Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as finance leases on a balance
sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP; provided however, that any obligations relating to a
lease that would have been accounted by such Person as an operating lease in accordance with GAAP as of the Issue Date shall be deemed an operating lease and not a Capitalized Lease Obligation for all
purposes under the Indenture.
"Cash Equivalents" means:
-
(1)
-
marketable
direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith
and credit of the United States, in each case maturing within one year from the date of acquisition;
-
(2)
-
certificates
of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the date of acquisition
issued by any commercial bank organized under the laws of the United States or any state thereof;
-
(3)
-
commercial
paper of an issuer rated at least A-1 by Standard & Poor's or P-1 by Moody's, or carrying an equivalent rating by a nationally recognized rating
agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition;
-
(4)
-
repurchase
obligations of any commercial bank satisfying the requirements of clause (2) of this definition, having a term of not more than 30 days,
with respect to securities issued or fully guaranteed or insured by the United States government;
-
(5)
-
securities
with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States,
by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are rated at least A by Standard & Poor's or A by Moody's;
-
(6)
-
securities
with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the
requirements of clause (2) of this definition;
-
(7)
-
money
market mutual or similar funds that invest exclusively in assets satisfying the requirements of clauses (1) through (6) of this definition;
-
(8)
-
money
market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as amended, (ii) are
rated AAA by Standard & Poor's or Aaa by Moody's and (iii) have portfolio assets of at least $5,000,000,000; and
S-56
Table of Contents
-
(9)
-
in
the case of any Foreign Subsidiary, investments substantially comparable to any of the foregoing investments with respect to the country in which such Foreign
Subsidiary is organized.
"Cash Management Services Agreement" means any agreement with respect to any of the following bank services: (1) commercial credit
cards, other commercial cards, purchase cards and merchant card services, (2) stored value cards, (3) treasury management services or other payment services (including, without
limitation, electronic payment services, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).
"Change of Control" means the occurrence of any of the following events:
-
(1)
-
the
acquisition of beneficial ownership by any person or group (excluding any Permitted Holder or group Controlled by any Permitted Holder) of more than 30% of the
aggregate voting power of all outstanding classes or series of the Issuer's voting stock and such aggregate voting power exceeds the aggregate voting power of all outstanding classes or series of the
Issuer's voting stock beneficially owned by the Permitted Holders collectively, and either (a) such person or group does not have on the date of such acquisition or within 45 days
thereafter (i) an investment grade corporate family rating by Moody's or Standard & Poor's or (ii) a corporate family rating equal to or better than Qurate Retail's rating with
Moody's or Standard and Poor's or (b) on any day until the date that is six months after the date of such acquisition, the Issuer is rated by one of Moody's or Standard & Poor's and the
rating assigned by either of them is not an Investment Grade Rating;
-
(2)
-
after
the consummation of an initial public offering of the Issuer's Equity Interests, during any period of two consecutive years, individuals who at the beginning
of such period constituted the Board of Directors of the Issuer (together with any new directors whose election by the Board of Directors or whose nomination for election by the equity holders of the
Issuer was approved by a vote of the majority of the directors of the Issuer then still in office who were either directors at the beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority of the Issuer's Board of Directors then in office; or
-
(3)
-
the
Issuer shall adopt a plan of liquidation or dissolution or any such plan shall be approved by the stockholders of the Issuer.
For
purposes of this definition, a Person shall not be deemed to have beneficial ownership of securities subject to a stock purchase agreement, merger agreement or similar agreement
until the consummation of the transactions contemplated by such agreement.
"Collateral" has the meaning set forth under "Ranking."
"Collateral Agent" means JPMorgan Chase Bank, N.A. in its capacity as collateral agent under the Security Documents and any successors or
new collateral agents in such capacity.
"Consolidated Amortization Expense" for any period means the amortization expense of the Issuer and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Cash Flow" for any period means, without duplication, the sum of the amounts for such period of
-
(1)
-
Consolidated
Net Income, plus
-
(2)
-
in
each case only to the extent (and in the same proportion) deducted in determining Consolidated Net Income,
S-57
Table of Contents
-
(a)
-
Consolidated
Income Tax Expense,
-
(b)
-
Consolidated
Amortization Expense (but only to the extent not included in Consolidated Interest Expense),
-
(c)
-
Consolidated
Depreciation Expense,
-
(d)
-
Consolidated
Interest Expense net of consolidated interest income of the Issuer and its Restricted Subsidiaries, and
-
(e)
-
stock
compensation, as reported in the Issuer's financial statements,
in
each case determined on a consolidated basis in accordance with GAAP; provided that
-
(i)
-
the
aggregate amount of all other non-cash charges, expenses or losses reducing such Consolidated Net Income (excluding any non-cash charge, expense or loss that
results in an accrual of a reserve for cash charges in any future period and any non-cash charge, expense or loss relating to writeoffs, writedowns or reserves with respect to accounts or inventory)
for such period, and
-
(ii)
-
the
aggregate amount of all non-cash items, determined on a consolidated basis, to the extent such items increased Consolidated Net Income for such period
will,
in each case, be excluded from Consolidated Net Income for purposes of this definition only.
"Consolidated Depreciation Expense" for any period means the depreciation expense of the Issuer and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Income Tax Expense" for any period means the provision for taxes of the Issuer and its Restricted Subsidiaries, determined
on a consolidated basis in accordance with GAAP.
"Consolidated Interest Coverage Ratio" means the ratio of (i) Consolidated Cash Flow during the most recent four consecutive full
fiscal quarters for which financial statements are available (the "Four-Quarter Period") ending on or prior to the date of the transaction giving rise
to the need to calculate the Consolidated Interest Coverage Ratio (the "Transaction Date") to (ii) Consolidated Interest Expense for such
Four-Quarter Period. For purposes of this definition, Consolidated Cash Flow and Consolidated Interest Expense shall be calculated after giving effect on a pro forma basis for the period of such
calculation to:
-
(1)
-
the
incurrence of any Indebtedness or the issuance of any Preferred Stock of the Issuer or any Restricted Subsidiary (and the application of the proceeds thereof)
and any repayment of other Indebtedness or redemption of other Preferred Stock (and the application of the proceeds therefrom) (other than the incurrence or repayment of Indebtedness in the ordinary
course of business for working capital purposes pursuant to any revolving credit arrangement) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter
Period and on or prior to the Transaction Date, as if such incurrence, repayment, issuance or redemption, as the case may be (and the application of the proceeds thereof), occurred on the first day of
the Four- Quarter Period; and
-
(2)
-
any
Asset Sale, asset sale which is solely excluded from the definition of Asset Sale pursuant to clause (9) of such definition or Asset Acquisition
(including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Issuer or any Restricted Subsidiary (including any Person who becomes a
Restricted Subsidiary as a result of such Asset Acquisition or as a result of a Redesignation) incurring Acquired Indebtedness and also including any Consolidated Cash Flow (including any pro forma
expense and cost reductions calculated on a basis consistent with Regulation S-X under the Exchange Act)
S-58
Table of Contents
associated
with any such Asset Acquisition) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if
such Asset Sale, asset sale which is solely excluded from the definition of Asset Sale pursuant to clause (9) of such definition, or Asset Acquisition (including the incurrence of, or
assumption or liability for, any such Indebtedness or Acquired Indebtedness) occurred on the first day of the Four-Quarter Period.
In
calculating Consolidated Interest Expense for purposes of determining the denominator (but not the numerator) of this Consolidated Interest Coverage Ratio:
-
(a)
-
interest
on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date;
-
(b)
-
if
interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar
rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four-Quarter Period; and
-
(c)
-
notwithstanding
clause (a) or (b) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Hedging Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of the agreements governing such Hedging Obligations.
"Consolidated Interest Expense" for any period means the sum, without duplication, of the total interest expense of the Issuer and its
Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including, without duplication,
-
(1)
-
imputed
interest on Capitalized Lease Obligations,
-
(2)
-
commissions,
discounts and other fees and charges owed with respect to letters of credit securing financial obligations, bankers' acceptance financing and
receivables financings,
-
(3)
-
the
net costs associated with Hedging Obligations related to interest rates,
-
(4)
-
amortization
of debt issuance costs, debt discount or premium and other financing fees and expenses,
-
(5)
-
the
interest portion of any deferred payment obligations,
-
(6)
-
all
other non-cash interest expense,
-
(7)
-
capitalized
interest,
-
(8)
-
the
product of (a) all dividend payments on any series of Disqualified Equity Interests of the Issuer or any Preferred Stock of any Restricted Subsidiary
(other than any such Disqualified Equity Interests or any Preferred Stock held by the Issuer or a Wholly-Owned Restricted Subsidiary or to the extent paid in Qualified Equity Interests), multiplied by
(b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of the Issuer and the Restricted
Subsidiaries, expressed as a decimal,
-
(9)
-
all
interest payable with respect to discontinued operations, and
-
(10)
-
all
interest on any Indebtedness described in clause (6) or (7) of the definition of "Indebtedness."
S-59
Table of Contents
"Consolidated Leverage Ratio" means, at any date, the ratio of:
(i) Indebtedness
of the Issuer and its Restricted Subsidiaries as of such date of calculation (determined on a consolidated basis in accordance with GAAP)
to:
(ii) Consolidated
Cash Flow during the most recent four consecutive full fiscal quarters for which financial statements are available ending on or prior to the date of the
transaction giving rise to the need to calculate the Consolidated Leverage Ratio.
In
the event that the Issuer or any of its Restricted Subsidiaries incurs, repays, repurchases or redeems any Indebtedness subsequent to the commencement of the period for which the
Consolidated Leverage
Ratio is being calculated but prior to the event for which the calculation of the Consolidated Leverage Ratio is made, then the Consolidated Leverage Ratio shall be calculated giving pro forma effect
to such incurrence, repayment, repurchase or redemption of Indebtedness as if the same had occurred at the beginning of the applicable four-quarter period; provided that the Issuer may elect, pursuant
to an Officer's Certificate delivered to the Trustee to treat all or any portion of the commitment under
any Indebtedness as being incurred at such time, in which case any subsequent incurrence of Indebtedness under such commitment shall not be deemed, for purposes of this calculation, to be an
incurrence at such subsequent time.
"Consolidated Leverage Test" means, at any date, that the Consolidated Leverage Ratio is no greater than 3.50 to 1.00.
"Consolidated Net Income" for any period means the net income (or loss) of the Issuer and the Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included
therein), without duplication:
-
(1)
-
the
net income (or loss) of any Person that is not a Restricted Subsidiary, except to the extent that cash in an amount equal to any such income has actually been
received by the Issuer or any Restricted Subsidiary during such period;
-
(2)
-
except
to the extent includible in the consolidated net income of the Issuer pursuant to the foregoing clause (1), the net income (or loss) of any Person that
accrued prior to the date that (a) such Person becomes a Restricted Subsidiary or is merged into or consolidated with the Issuer or any Restricted Subsidiary or (b) the assets of such
Person are acquired by the Issuer or any Restricted Subsidiary;
-
(3)
-
any
gain (or loss), together with any related provisions for taxes on any such gain (or the tax effect of any such loss), realized during such period by the Issuer
or any Restricted Subsidiary upon (a) the acquisition of any securities, or the extinguishment of any Indebtedness, of the Issuer or any Restricted Subsidiary or (b) the sale of any
financial or equity investment by the Issuer or any Restricted Subsidiary;
-
(4)
-
gains
and losses due solely to fluctuations in currency values and the related tax effects according to GAAP;
-
(5)
-
gains
and losses with respect to Hedging Obligations;
-
(6)
-
the
cumulative effect of any change in accounting principles;
-
(7)
-
the
net income (or loss) associated with minority interests in Restricted Subsidiaries that are not Wholly-Owned Restricted Subsidiaries; and
-
(8)
-
any
extraordinary or nonrecurring gain (or extraordinary or nonrecurring loss), together with any related provision for taxes on any such extraordinary or
nonrecurring gain (or the tax
S-60
Table of Contents
For
the purpose of this definition of "Consolidated Net Income," "nonrecurring" means any gain or loss as of any date that is not
reasonably likely to recur within the two years following such date; provided that if there was a gain or loss similar to such gain or loss within the
two years preceding such date, such gain or loss shall not be deemed nonrecurring.
"Consolidated Net Tangible Assets" means the total amount of assets (including investments in joint ventures) of the Issuer and its
Restricted Subsidiaries after deducting therefrom (a) all current liabilities of the Issuer and its Restricted Subsidiaries and (b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and any other like intangibles of the Issuer and its Restricted Subsidiaries, all as set forth on the consolidated balance sheet of the Issuer for the most
recently completed fiscal quarter for which financial statements are available and computed in accordance with generally accepted accounting principles.
"Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and
"Controlled" have meanings correlative thereto.
"Coverage Ratio Exception" has the meaning set forth in the proviso in the first paragraph of the covenant described under
"Certain CovenantsLimitations on Incurrence of Indebtedness."
"Credit Agreement" means the Fourth Amended and Restated Credit Agreement dated December 31, 2018, by and among the Issuer and
Zulily, LLC, as borrowers, the guarantors party thereto from time to time, the lenders party thereto from time to time, JPMorgan Chase Bank, N.A., as administrative agent, and the other parties
thereto, including any notes, guarantees, collateral and security documents, instruments and agreements executed in connection therewith, and in each case as amended or refinanced from time to time.
"Credit Facilities" means one or more (A) debt facilities (which may be outstanding at the same time and including, without
limitation, the Credit Agreement) or commercial paper facilities, providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to lenders or to
special purpose entities formed to borrow from lenders against such receivables) or letters of credit, (B) debt securities (including, without limitation, the Notes), indentures or other forms
of debt financing (including convertible or exchangeable debt instruments or bank guarantees or bankers' acceptances), or (C) instruments or agreements evidencing any other Indebtedness, in
each case, with the same or different borrowers or issuers and, in each case, as amended, supplemented, modified, extended, restructured, renewed, refinanced, restated, replaced or refunded in whole
or in part from time to time (including increasing the amount of available borrowings thereunder or adding Subsidiaries of the Issuer as additional borrowers or guarantors thereunder).
"Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
"Default" means (1) any Event of Default or (2) any event, act or condition that, after notice or the passage of time or
both, would be an Event of Default.
"Designation" has the meaning given to this term in the covenant described under "Certain CovenantsLimitations
on Designation of Unrestricted Subsidiaries."
"Disqualified Equity Interests" of any Person means any class of Equity Interests of such Person that, by its terms, or by the terms of
any related agreement or of any security into which it is convertible, puttable or exchangeable, is, or upon the happening of any event or the passage of time would be,
required to be redeemed by such Person, whether or not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole
S-61
Table of Contents
or
in part, in each case on or prior to the date that is 91 days after the final maturity date of the Notes; provided, however, that any class of Equity
Interests of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to
the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Equity Interests that are not Disqualified Equity
Interests, and that is not convertible, puttable or exchangeable for Disqualified Equity Interests or Indebtedness, will not be deemed to be Disqualified Equity Interests so long as such Person
satisfies its obligations with respect thereto solely by the delivery of Equity Interests that are not Disqualified Equity Interests; provided, further,
however, that any Equity Interests that would not constitute Disqualified Equity Interests but
for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests are convertible, exchangeable or exercisable) the right to require the Issuer to
redeem such Equity Interests upon the occurrence of a change in control occurring prior to the 91st day after the final maturity date of the Notes shall not constitute Disqualified Equity
Interests if (1) the change of control provisions applicable to such Equity Interests are no more favorable to such holders than the provisions described under "Change of Control,"
and (2) such Equity Interests specifically provide that the Issuer will not redeem any such Equity Interests pursuant to such provisions prior to the Issuer's purchase of the Notes as required
pursuant to the provisions described under "Change of Control."
"Domestic Subsidiary" means any Subsidiary of the Issuer organized under the laws of the United States, any state thereof or the District
of Columbia.
"Equity Interests" of any Person means (1) any and all shares or other equity interests (including common stock, preferred stock,
limited liability company interests and partnership interests) in such Person and (2) all rights to purchase, warrants or options (whether or not currently exercisable), participations or other
equivalents of or interests in (however designated) such shares or other interests in such Person.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Existing Notes" means the 2012 Notes, each series of the 2013 Notes, each series of the 2014 Notes and the 2018 Notes.
"Existing Note Guarantees" means the guarantees of the Existing Notes by the Guarantors.
"Existing Notes Indentures" means the 2012 Notes Indenture, the 2013 Notes Indenture, the 2014 Notes Indentures and the 2018 Notes
Indenture.
"Fair Market Value" means, with respect to any asset, the price (after taking into account any liabilities relating to such assets) that
would be negotiated in an arm's-length transaction for cash between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction.
"Foreign Subsidiary" means any Subsidiary of the Issuer that is not a Domestic Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved
by a significant segment of the accounting profession of the United States, consistently applied.
"guarantee" means a direct or indirect guarantee by any Person of any Indebtedness of any other Person and includes any obligation, direct
or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) Indebtedness of such other Person (whether arising by
virtue of partnership arrangements, or by agreements to keep well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm's-length terms and are entered into
in the ordinary course of business), to take-or-pay, or to maintain financial
S-62
Table of Contents
statement
conditions or otherwise); or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); "guarantee," when used as a verb, and "guaranteed" have
correlative meanings.
"Guarantors" means each Material Domestic Subsidiary of the Issuer on the Issue Date, and each other Person that is required to, or at the
election of the Issuer does, become a Guarantor by the terms of the Indenture, in each case, until such Person is released from its Note Guarantee in accordance with the terms of the Indenture.
"Hedging Obligations" of any Person means the obligations of such Person under swap, cap, collar, forward purchase or similar agreements
or arrangements dealing with interest rates, currency exchange rates or commodity prices, either generally or under specific contingencies.
"Holder" means any registered holder, from time to time, of the Notes.
"incur" means, with respect to any Indebtedness or Obligation, incur, create, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to such Indebtedness or Obligation; provided that (1) the Indebtedness of a Person
existing at the time such Person became a Restricted Subsidiary shall be deemed to have been incurred by such Restricted Subsidiary and (2) neither the accrual of interest nor the accretion of
original issue discount or the accretion or accumulation of dividends on any Equity Interests shall be deemed to be an incurrence of Indebtedness.
"Indebtedness" of any Person at any date means, without duplication:
-
(1)
-
all
liabilities, contingent or otherwise, of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person
or only to a portion thereof) or with respect to deposits or advances of any kind;
-
(2)
-
all
obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;
-
(3)
-
all
reimbursement obligations of such Person in respect of letters of credit, letters of guaranty, bankers' acceptances and similar credit transactions;
-
(4)
-
all
obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables and accrued expenses incurred by such
Person in the ordinary course of business in connection with obtaining goods, materials or services;
-
(5)
-
all
Capitalized Lease Obligations of such Person;
-
(6)
-
all
Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such Person;
-
(7)
-
all
Indebtedness of others guaranteed by such Person to the extent of such guarantee; provided that Indebtedness of
the Issuer or its Subsidiaries that is guaranteed by the Issuer or the Issuer's Subsidiaries shall only be counted once in the calculation of the amount of Indebtedness of the Issuer and its
Subsidiaries on a consolidated basis; and
-
(8)
-
all
obligations of such Person under conditional sale or other title retention agreements relating to assets purchased by such Person (excluding obligations arising
from inventory transactions in the ordinary course of business).
The
amount of any Indebtedness which is incurred at a discount to the principal amount at maturity thereof as of any date shall be deemed to have been incurred at the accreted value
thereof as of such date. The amount of Indebtedness of any Person at any date shall be the outstanding balance
S-63
Table of Contents
at
such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (6), the
lesser of (a) the Fair Market Value of any asset subject to a Lien securing the Indebtedness of others on the date that the Lien attaches and (b) the amount of the Indebtedness secured.
"interest" means, with respect to the Notes, interest on the Notes.
"Investment Grade Rating" has the meaning set forth under "Change of Control."
"Investments" of any Person means:
-
(1)
-
all
direct or indirect investments by such Person in any other Person in the form of loans, advances or capital contributions or other credit extensions constituting
Indebtedness of such other Person, and any guarantee of Indebtedness of any other Person;
-
(2)
-
all
purchases (or other acquisitions for consideration) by such Person of Indebtedness, Equity Interests or other securities of any other Person (other than any such
purchase that constitutes a Restricted Payment of the type described in clause (2) of the definition thereof);
-
(3)
-
all
other items that would be classified as investments on a balance sheet of such Person prepared in accordance with GAAP (including, if required by GAAP, purchases
of assets outside the ordinary course of business); and
-
(4)
-
the
Designation of any Subsidiary as an Unrestricted Subsidiary.
Except
as otherwise expressly specified in this definition, the amount of any Investment (other than an Investment made in cash) shall be the Fair Market Value thereof on the date such
Investment is made. The amount of Investment pursuant to clause (4) shall be the Fair Market Value of the Issuer's proportionate interest in such Unrestricted Subsidiary as of the date of such
Unrestricted Subsidiary's designation as an Unrestricted Subsidiary. If the Issuer or any Restricted Subsidiary sells or otherwise disposes of any Equity Interests of any Restricted Subsidiary, or any
Restricted Subsidiary issues any Equity Interests, in either case, such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary, the Issuer shall be deemed to
have made an Investment on the date of any such sale or other disposition equal to the Fair Market Value of the Equity Interests of and all other Investments in such Restricted Subsidiary retained.
Notwithstanding the foregoing, purchases or redemptions of Equity Interests of the Issuer or Parent shall be deemed not to be Investments.
"Issue Date" means the date on which the Notes are originally issued.
"Issuer Stock Collateral" has the meaning set forth under "Ranking."
"Lien" means, with respect to any asset, any mortgage, deed of trust, lien (statutory or other), pledge, easement, charge, security
interest or other encumbrance of any kind or nature in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.
"Material Domestic Subsidiary" means any Domestic Subsidiary of the Issuer, as of the last day of the fiscal quarter of the Issuer most
recently ended for which financial statements are available, that has assets (including Equity Interests in Subsidiaries) or revenues (including both third party and intercompany revenues) with a
value in excess of 7.50% of the consolidated assets of the Issuer and its Domestic Subsidiaries or 7.50% of the consolidated revenues of the Issuer and its Domestic Subsidiaries; provided, that in the
event Domestic Subsidiaries that would otherwise not be Material Domestic Subsidiaries shall in the aggregate account for a percentage in excess of 7.50% of the consolidated assets of the Issuer and
its Domestic Subsidiaries or 7.50% of the consolidated revenues of the Issuer and its Domestic Subsidiaries as of the end of such fiscal quarter, then one or more of
S-64
Table of Contents
such
Domestic Subsidiaries designated by the Issuer (or, if the Issuer shall make no designation, one or more of such Domestic Subsidiaries in descending order based on their respective contributions
to the consolidated assets of the Issuer), shall be included as Material Domestic Subsidiaries to the extent necessary to eliminate such excess.
"Moody's" has the meaning set forth under "Change of Control."
"Non-Material Domestic Subsidiary" means any Domestic Subsidiary of the Issuer other than a Material Domestic Subsidiary.
"Non-Recourse Debt" means Indebtedness of an Unrestricted Subsidiary:
-
(1)
-
as
to which neither the Issuer nor any Restricted Subsidiary (a) provides credit support of any kind (including any undertaking, agreement or instrument that
would constitute Indebtedness) or (b) is directly or indirectly liable as a guarantor or otherwise, and
-
(2)
-
no
default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit
upon notice, lapse of time or both any holder of any other Indebtedness (other than the Credit Agreement, Existing Notes or Notes) of the Issuer or any Restricted Subsidiary to declare a default on
the other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity.
"Obligation" means any principal, interest, penalties, fees, indemnification, reimbursements, costs, expenses, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officer" means any of the following of the Issuer: the Chairman of the Board of Directors, the Chief Executive Officer, the Chief
Financial Officer, the President, any Vice President, the Treasurer or the Secretary.
"Officer's Certificate" means a certificate signed by an Officer.
"Parent" means Qurate Retail.
"Parent Pledge Agreement" has the meaning set forth under "SecurityIssuer Stock Collateral."
"Parent Pledgor" has the meaning set forth under "Ranking."
"Permitted Holders" means any one or more of (a) Qurate Retail, (b) John C. Malone, (c) Greg Maffei, (d) each
of the respective Affiliated Persons of the Persons referred to in clauses (b) and (c), and (e) any Person a majority of the aggregate voting power of all the outstanding classes or
series of the equity securities of which are beneficially owned by any one or more of the Persons referred to in clauses (a), (b), (c) and (d).
"Permitted Investment" means:
-
(1)
-
Investments
by the Issuer or any Restricted Subsidiary in any Restricted Subsidiary;
-
(2)
-
Investments
in the Issuer by any Restricted Subsidiary;
-
(3)
-
loans
and advances to directors, employees and officers of Parent (prior to the consummation of an initial public offering of the Issuer's Equity Interests) or the
Issuer or any of the Restricted Subsidiaries for bona fide business purposes and to purchase Equity Interests of the Parent (prior to the consummation of an initial public offering of the Issuer's
Equity Interests) or the Issuer (after the consummation of an initial public offering of the Issuer's Equity Interests) not in excess of $10.0 million at any one time outstanding;
-
(4)
-
cash
and Cash Equivalents;
S-65
Table of Contents
-
(5)
-
receivables
owing to the Issuer or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance
with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Issuer or any such Restricted Subsidiary deems reasonable under the
circumstances;
-
(6)
-
Investments
in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of
such trade creditors or customers;
-
(7)
-
Investments
made by the Issuer or any Restricted Subsidiary as a result of consideration received in connection with a sale of assets made in compliance with the
covenant described under "Certain CovenantsLimitations on Asset Sales";
-
(8)
-
lease,
utility and other similar deposits in the ordinary course of business;
-
(9)
-
stock,
obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Issuer or any Restricted Subsidiary or
in satisfaction of judgments;
-
(10)
-
any
Investment existing on, or made pursuant to binding commitments existing on, the Issue Date; and
-
(11)
-
Investments,
including in joint ventures of the Issuer or any of its Restricted Subsidiaries, not to exceed $100.0 million in the aggregate outstanding at
any time.
"Permitted Liens" means the following types of Liens:
-
(1)
-
Liens
for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and
as to which the Issuer or a Restricted Subsidiary shall have set aside on its books such reserves as may be required pursuant to GAAP;
-
(2)
-
statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the
ordinary course of business for sums not yet delinquent by more than 30 days or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;
-
(3)
-
pledges
and deposits made in the ordinary course of business in compliance with workers' compensation (or pursuant to letters of credit issued in connection with
such workers' compensation compliance), unemployment insurance and other social security laws or regulations;
-
(4)
-
Liens
incurred or deposits made in the ordinary course of business to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of- money bonds, letters of credit and other similar obligations (exclusive of obligations for the payment of borrowed money);
-
(5)
-
Liens
upon specific items of inventory or other goods and proceeds of any Person securing such Person's 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;
-
(6)
-
judgment
Liens not giving rise to an Event of Default;
S-66
Table of Contents
-
(7)
-
easements,
zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not
secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Issuer or any Restricted Subsidiary;
-
(8)
-
Liens
securing obligations in respect of trade-related letters of credit and covering the goods (or the documents of title in respect of such goods) financed or the
purchase of which is supported by such letters of credit and the proceeds and products thereof;
-
(9)
-
Liens
encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Issuer or any Restricted
Subsidiary, including rights of offset and setoff;
-
(10)
-
bankers'
Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by
the Issuer or any Restricted Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such
bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that in no case shall any such Liens secure
(either directly or indirectly) the repayment of any Indebtedness;
-
(11)
-
leases
or subleases granted to others that do not materially interfere with the ordinary course of business of the Issuer or any Restricted Subsidiary;
-
(12)
-
Liens
arising from filing Uniform Commercial Code financing statements regarding leases;
-
(13)
-
[Reserved];
-
(14)
-
Liens
securing Hedging Obligations entered into for bona fide hedging purposes of the Issuer or any Restricted Subsidiary in the ordinary course of business not for
the purpose of speculation;
-
(15)
-
Liens
existing on the Issue Date securing obligations outstanding on the Issue Date;
-
(16)
-
Liens
in favor of the Issuer or a Guarantor;
-
(17)
-
Liens
securing Purchase Money Indebtedness; provided that such Liens shall secure Capitalized Lease Obligations or be created within 90 days of the
acquisition of such fixed or capital assets and shall not extend to any asset other than the specified asset being financed and additions and improvements thereon;
-
(18)
-
Liens
securing Acquired Indebtedness permitted to be incurred under the Indenture; provided that the Liens do not extend to assets not subject to such Lien at the
time of acquisition (other than improvements thereon) and are no more favorable to the lienholders than those securing such Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness
by the Issuer or a Restricted Subsidiary;
-
(19)
-
deposits
and other Liens securing credit card operations of the Issuer and its Subsidiaries, provided the amount secured does not exceed amounts owed by the Issuer
and its Subsidiaries in connection with such credit card operations;
-
(20)
-
Liens
to secure Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (15), (17) and (18); provided that in
the case of Liens securing Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (15), (17) and (18) such Liens do not extend to any
additional assets (other than improvements thereon and replacements thereof);
S-67
Table of Contents
-
(21)
-
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;
-
(22)
-
Interests
of vendors in inventory arising out of such inventory being subject to a "sale or return" arrangement with such vendor or any consignment by any third
party of any inventory; and
-
(23)
-
Liens
incurred in the ordinary course of business of the Issuer or any Restricted Subsidiary with respect to obligations that do not in the aggregate exceed
$150.0 million at any one time outstanding, so long as such Liens do not encumber Collateral consisting of assets of the Issuer or any Restricted Subsidiary.
"Permitted Parity Indebtedness" has the meaning given to such term in the covenant described under
"Certain CovenantsLimitations on Liens."
"Person" means any individual, corporation, partnership, limited liability company, joint venture, incorporated or unincorporated
association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind.
"Plan of Liquidation" with respect to any Person, means a plan that provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or otherwise): (1) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such
Person other than as an entirety or substantially as an entirety; and (2) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition of
all or substantially all of the remaining assets of such Person to holders of Equity Interests of such Person.
"Preferred Stock" means, with respect to any Person, any and all preferred or preference stock or other equity interests (however
designated) of such Person whether now outstanding or issued after the Issue Date.
"principal" means, with respect to the Notes, the principal of, and premium, if any, on the Notes.
"Purchase Money Indebtedness" means Indebtedness, including Capitalized Lease Obligations, of the Issuer or any Restricted Subsidiary
incurred for the purpose of financing all or any part of the purchase price of property, plant or equipment used in the business of the Issuer or any Restricted Subsidiary or the cost of installation,
construction or improvement thereof; provided, however, that such Indebtedness is comprised of
Capitalized Lease Obligations or (1) the amount of such Indebtedness shall not exceed such purchase price or cost and (2) such Indebtedness shall be incurred within 90 days after
such acquisition of such asset by the Issuer or such Restricted Subsidiary or such installation, construction or improvement.
"Qualified Equity Interests" of any Person means Equity Interests of such Person other than Disqualified Equity Interests; provided that such Equity Interests shall not
be deemed Qualified Equity Interests to the extent sold or owed to a Subsidiary of such Person or
financed, directly or indirectly, using funds (1) borrowed from such Person or any Subsidiary of such Person until and to the extent such borrowing is repaid or (2) contributed,
extended, guaranteed or advanced by such Person or any Subsidiary of such Person (including, without limitation, in respect of any employee stock ownership or benefit plan). Unless otherwise
specified, Qualified Equity Interests refer to Qualified Equity Interests of the Issuer.
"Qurate Retail" means Qurate Retail, Inc. (f/k/a Liberty Interactive Corporation), a Delaware corporation, and any successor (by
merger, consolidation, transfer or otherwise) to all or substantially all of its assets; and any subsequent successor (by merger, consolidation, transfer or otherwise) to all or substantially all of a
successor's assets, provided, that if a Transferee Parent becomes the beneficial owner of all or substantially all of the equity securities of the Issuer then beneficially owned by Qurate
S-68
Table of Contents
Retail
as to which Qurate Retail has dispositive power, the term "Qurate Retail" shall also mean such Transferee Parent and any successor (by merger, consolidation, transfer or otherwise) to all or
substantially all of its assets. "Transferee Parent" for this purpose means, in the event of any transaction or series of related transactions involving
the direct or indirect transfer (or relinquishment of control) by Qurate Retail of a Person or Persons (a "Transferred Person") that hold equity
securities of the Issuer beneficially owned by Qurate Retail, such Transferred Person or its successor in such transaction or any ultimate parent entity (within the meaning of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended) of such Transferred Person or its successor if immediately after giving effect to such transaction or the last transaction in such series, voting
securities representing at least a majority of the voting power of the outstanding voting securities of such Transferred Person, successor or ultimate parent entity are beneficially owned by any
combination of Qurate Retail, Persons who prior to such transaction were beneficial owners of a majority of, or a majority of the voting power of, the outstanding voting securities of Qurate Retail
(or of any publicly traded class or series of voting securities of Qurate Retail designed to track the economic performance of a specified group of assets or businesses) or Persons who are Control
Persons as of the date of such transaction or the last transaction in such series. "Control Person" for this purpose means each of (a) the
Chairman of the Board of Qurate Retail, (b) the President of Qurate Retail, (c) any Executive Vice President or Senior Vice President of Qurate Retail, (d) each of the directors
of Qurate Retail and (e) the respective Affiliated Persons of the Persons referred to in clauses (a) through (d).
"Recovery" has the meaning set forth under "SecurityCertain Bankruptcy Provisions."
"redeem" means to redeem, repurchase, purchase, defease, retire, discharge or otherwise acquire or retire for value; and "redemption"
shall have a correlative meaning; provided that this definition shall not apply for purposes of "Optional Redemption."
"Redesignation" has the meaning given to such term in the covenant described under "Certain CovenantsLimitations
on Designation of Unrestricted Subsidiaries."
"refinance" means to refinance, repay, prepay, replace, renew or refund.
"Refinancing Indebtedness" means Indebtedness of the Issuer or a Restricted Subsidiary incurred in exchange for, or the proceeds of which
are used to redeem or refinance in whole or in part, any Indebtedness of the Issuer or any Restricted Subsidiary (the "Refinanced Indebtedness"); provided
that:
-
(1)
-
the
principal amount (and accreted value, in the case of Indebtedness issued at a discount) of the Refinancing Indebtedness does not exceed the principal amount (and
accreted value, as the case may be) of the Refinanced Indebtedness plus the amount of accrued and unpaid interest on the Refinanced Indebtedness, any reasonable premium paid to the holders of the
Refinanced Indebtedness and reasonable expenses incurred in connection with the incurrence of the Refinancing Indebtedness;
-
(2)
-
the
obligor of Refinancing Indebtedness does not include any Person (other than the Issuer or any Restricted Subsidiary) that is not an obligor of the Refinanced
Indebtedness;
-
(3)
-
if
the Refinanced Indebtedness was subordinated in right of payment to the Notes or the Note Guarantees, as the case may be, then such Refinancing Indebtedness, by
its terms, is subordinate in right of payment to the Notes or the Note Guarantees, as the case may be, at least to the same extent as the Refinanced Indebtedness;
-
(4)
-
the
Refinancing Indebtedness has a final stated maturity either (a) no earlier than the Refinanced Indebtedness being repaid or amended or (b) after
the final maturity date of the Notes; and
-
(5)
-
the
portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the final maturity date of the Notes has a Weighted Average Life to
Maturity at the time such
S-69
Table of Contents
Refinancing
Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Refinanced Indebtedness being repaid that is scheduled to mature on or
prior to the final maturity date of the Notes; provided that Refinancing Indebtedness in respect of Refinanced Indebtedness that has no amortization may provide for amortization installments, sinking
fund payments, senior maturity dates or other required payments of principal of up to 1% of the aggregate principal amount per annum.
"Restricted Payment" means any of the following:
-
(1)
-
the
declaration or payment of any dividend or any other distribution on Equity Interests of the Issuer or any Restricted Subsidiary or any payment made to the direct
or indirect holders (in their capacities as such) of Equity Interests of the Issuer or any Restricted Subsidiary, including, without limitation, any such payment in connection with any merger or
consolidation involving the Issuer but excluding (a) dividends or distributions payable solely in Qualified Equity Interests or through accretion or accumulation of such dividends on such
Equity Interests and (b) in the case of Restricted Subsidiaries, dividends or distributions payable to the Issuer or to a Restricted Subsidiary and pro
rata dividends or distributions payable to minority stockholders of any Restricted Subsidiary;
-
(2)
-
the
redemption of any Equity Interests of the Issuer or any Restricted Subsidiary, or any equity holder of the Issuer, including, without limitation, any payment in
exchange for such Equity Interests in connection with any merger or consolidation involving the Issuer but excluding any such Equity Interests held by the Issuer or any Restricted Subsidiary;
-
(3)
-
any
Investment other than a Permitted Investment; or
-
(4)
-
any
payment or redemption prior to the scheduled maturity or prior to any scheduled repayment of principal or sinking fund payment, as the case may be, in respect of
Subordinated Indebtedness (other than any Subordinated Indebtedness owed to and held by the Issuer or any Restricted Subsidiary).
"Restricted Subsidiary" means any Subsidiary of the Issuer other than an Unrestricted Subsidiary.
"Sale and Leaseback Transactions" means with respect to any Person an arrangement with any bank, insurance company or other lender or
investor or to which such lender or investor is a party, providing for the leasing by such Person of any asset of such Person which has been or is being sold or transferred by such Person to such
lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such asset.
"SEC" means the U.S. Securities and Exchange Commission.
"Secured Party" means the lenders and the agents under the Credit Agreement, holders of Existing Notes, the trustee under the Existing
Notes, providers of the Specified Swap Agreements, providers of the Specified Cash Management Services Agreements, the Trustee, the Holders, the Collateral Agent and any other party designated as an
additional secured party under the Security Documents in accordance with the terms of the Security Documents, Indenture, the Credit Agreement or the Existing Notes Indentures.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Security Documents" means, collectively, the Parent Pledge Agreement and any other security agreement relating to the Collateral, each as
in effect on the Issue Date (in the case of the Parent Pledge Agreement) and as any such Security Document may be amended, amended and restated, modified, renewed or replaced from time to time.
"Significant Subsidiary" means (1) any Restricted Subsidiary that would be a "significant subsidiary" as defined in
Regulation S-X promulgated pursuant to the Securities Act as such
S-70
Table of Contents
Regulation
is in effect on the Issue Date and (2) any Restricted Subsidiary that, when aggregated with all other Restricted Subsidiaries that are not otherwise Significant Subsidiaries and as
to which any event described in clause (7) or (8) under "Events of Default" has occurred and is continuing, would constitute a Significant Subsidiary under clause (1)
of this definition.
"Specified Cash Management Services Agreement" means any Cash Management Services Agreement entered into by the Issuer or any of its
subsidiaries and any Person that is a lender or an affiliate of a lender under the Credit Agreement at the time such Cash Management Services Agreement is entered into.
"Specified Swap Agreement" means any Swap Agreement in respect of interest rates, currency exchange rates or commodity prices existing on
the Issue Date or entered into by the Issuer or any Guarantor and any Person that is a lender or an affiliate of a lender under the Credit Agreement at the time such Swap Agreement is entered into and
is secured equally and ratably with such Credit Agreement pursuant to the terms of the Credit Agreement and Security Documents or any such agreement secured equally and ratably with any Credit
Facility pursuant to the terms of such Credit Facility and Security Documents.
"Standard & Poor's" has the meaning set forth under "Change of Control."
"Stock Compensation Plans" means compensation plans in connection with which the Issuer and its Subsidiaries make payments to Parent and
its Affiliates in consideration for securities of Parent issued to employees of the Issuer and its Subsidiaries.
"Subordinated Indebtedness" means Indebtedness of the Issuer or any Restricted Subsidiary that is expressly subordinated in right of
payment to the Notes or the Note Guarantees.
"Subsidiary" means, with respect to any Person:
-
(1)
-
any
corporation, limited liability company, association or other business entity of which more than 50% of the total voting power of the Equity Interests entitled
(without regard to the occurrence of any contingency) to vote in the election of the Board of Directors thereof is at the time owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of such Person (or a combination thereof); and
-
(2)
-
any
partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof).
Unless
otherwise specified, "Subsidiary" refers to a Subsidiary of the Issuer.
"Swap Agreement" means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan
providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Issuer or the Subsidiaries shall be a Swap Agreement.
"Tax Liability Allocation and Indemnification Agreement" means that certain Tax Liability Allocation and Indemnification Agreement entered
into as of April 26, 2004 by and between Liberty Interactive LLC (f/k/a Liberty Media Corporation) and the Issuer, as amended, modified or replaced from time to time in a manner no less
favorable to the Issuer than as in effect on the Issue Date; provided that such agreement may be amended from time to time in the future to permit Issuer to pay the portion of any additional
consolidated, combined or similar income taxes payable by any direct or indirect parent of Issuer that are attributable to the income of Issuer and/or any of its Subsidiaries.
S-71
Table of Contents
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Unrestricted Subsidiary" means (1) QVC France SAS, (2) any Subsidiary that at the time of determination shall be designated
an Unrestricted Subsidiary by the Board of Directors of the Issuer in accordance with the covenant described under "Certain CovenantsLimitations on Designation of
Unrestricted Subsidiaries" and (3) any Subsidiary of an Unrestricted Subsidiary.
"U.S. Government Obligations" means direct non-callable obligations of, or guaranteed by, the United States of America for the payment of
which guarantee or obligations the full faith and credit of the United States is pledged.
"Weighted Average Life to Maturity" when applied to any Indebtedness at any date, means the number of years obtained by dividing
(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of such payment by (2) the then outstanding principal amount of such Indebtedness.
"Wholly-Owned Restricted Subsidiary" means a Restricted Subsidiary of which 100% of the Equity Interests (except for directors' qualifying
shares or certain minority interests owned by other Persons solely due to local law requirements that there be more than one stockholder, but which interest is not in excess of what is required for
such purpose) are owned directly by the Issuer or through one or more Wholly-Owned Restricted Subsidiaries.
S-72
Table of Contents
Book-Entry, Form and Delivery
Global Notes; Book-Entry Issuance
The notes will initially be issued in the form of one or more fully registered "Global Notes," without interest coupons which will be deposited
with, or on behalf of, DTC, as the depositary, and registered in the name of its nominee, Cede & Co. Beneficial interests in the global notes will be represented through book-entry
accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC.
Investors
may elect to hold interests in the Global Notes through either DTC (in the United States), Clearstream Banking, Société Anonyme or Euroclear
Bank S.A./N.V., as operator of the Euroclear System (outside of the United States), if they are participants in these systems, or indirectly through organizations which are participants in
these systems. Cross-market transfers between persons holding directly or indirectly through DTC participants, on the one hand, and directly or indirectly through Clearstream or Euroclear
participants, on the other hand, will be effected in accordance with DTC rules on behalf of the relevant international clearing system by its U.S. depositary.
DTC
has informed us that it is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A
of the Exchange Act. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments
from over 100 countries that DTC's participants, or "Direct Participants," deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of
securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a
wholly owned subsidiary of The Depository Trust & Clearing Corporation, or "DTCC."
DTCC
is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the
users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing
corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly, or "Indirect Participants." The rules applicable to DTC and its Direct
Participants are on file with the Securities and Exchange Commission.
Purchases
of the notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the notes on DTC's records. The ownership interest of each
actual purchaser of each note, or the "Beneficial Owner," is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC
of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or
Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the notes are to be accomplished by entries made on the books of Direct and
Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the notes, except in the event that use of the
book-entry system for the notes is discontinued.
To
facilitate subsequent transfers, all notes deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other
name as may be
S-73
Table of Contents
requested
by an authorized representative of DTC. The deposit of the notes with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the notes; DTC's records reflect only the identity of the Direct Participants to whose accounts the notes are credited,
which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance
of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Redemption
notices will be sent to DTC. If less than all of the notes are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in
the notes to be redeemed.
Neither
DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the notes unless authorized by a Direct Participant in accordance with DTC's
Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to us as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts the notes are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption
proceeds, distributions and interest payments on the notes will be made to Cede & Co., or such other nominee as may be requested by an authorized representative
of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from us or the applicable trustee or depositary on the payment date
in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case
with the notes held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, the applicable
trustee or depositary, or us, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions and interest payments to
Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of us or the applicable trustee or depositary. Disbursement of such
payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
The
information in this section concerning DTC and DTC's book-entry system has been obtained from sources that we believe to be reliable, but we take no responsibility for the accuracy
thereof.
None
of the Company, the trustee, any depositary, or any agent of any of them will have any responsibility or liability for any aspect of DTC's or any participant's records relating to,
or for payments made on account of, beneficial interests in a Global Note, or for maintaining, supervising or reviewing any records relating to such beneficial interests.
Termination of a Global Note
If a Global Note is terminated for any reason, interest in it will be exchanged for certificates in non-book-entry form as certificated
securities. After such exchange, the choice of whether to hold the certificated notes directly or in street name will be up to the investor. Investors must consult their own banks or brokers to find
out how to have their interests in a Global Note transferred on termination to their own names, so that they will be holders of the notes. See "Form, Exchange and Transfer of Certificated
Registered Securities."
S-74
Table of Contents
Payment and Paying Agents
We will pay interest to the person listed in the trustee's records as the owner of the notes at the close of business on the record date for the
applicable interest payment date, even if that person no longer owns the note on the interest payment date. Because we pay all the interest for an interest period to the holders on the record date,
holders buying and selling the notes must work out between themselves the appropriate purchase price. The most common manner is to adjust the sales price of the notes to prorate interest fairly
between buyer and seller based on their respective ownership periods within the particular interest period.
We will make payments on the notes so long as they are represented by Global Notes in accordance with the applicable policies of the depositary
in effect from time to time. Under those policies, we will make payments directly to the depositary, or its nominee, and not to any indirect holders who own beneficial interest in the Global Notes. An
indirect holder's right to those payments will be governed by the rules and practices of the depositary and its participants.
In the event the notes become represented by certificates, we will make payments on the notes as follows. We will pay interest that is due on an
interest payment date by check mailed on the interest payment date to the holder of the note at his or her address shown on the trustee's records as of the close of business on the record date. We
will make all payments of principal by check at the office of the trustee in the contiguous United States and/or at other offices that may be specified in the indenture or a notice to holders against
surrender of the note.
If any payment is due on the notes on a day that is not a business day, we will make the payment on the next day that is a business day.
Payments made on the next business day in this situation will be treated under the indenture as if they were made on the original due date. Such payment will not result in a default under the notes or
the indenture, and no interest will accrue on the payment amount from the original due date to the next day that is a business day.
Book-entry and other indirect holders should consult their banks or brokers for information on how they will receive payments on the
notes.
Form, Exchange and Transfer of Certificated Registered Securities
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:
-
-
DTC notified us at any time that it is unwilling or unable to continue as depositary for the Global Notes;
-
-
DTC ceases to be registered as a clearing agency under the Exchange Act; or
-
-
an Event of Default with respect to such Global Note has occurred and is continuing.
Holders
may exchange their certificated securities for notes of smaller denominations or combined into fewer notes of larger denominations, as long as the total principal amount is not
changed and as long as the denomination is equal to or greater than $25.
Holders
may exchange or transfer their certificated securities at the office of the trustee. We have appointed the trustee to act as our agent for registering the notes in the name of
holders transferring
S-75
Table of Contents
notes.
We may at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts.
Holders
will not be required to pay a service charge for any registration of transfer or exchange of their certificated securities, but they may be required to pay any tax or other
governmental charge associated with the registration of transfer or exchange. The transfer or exchange will be made only if our transfer agent is satisfied with the holder's proof of legal ownership.
If
we redeem any of the notes, we may block the transfer or exchange of those notes selected for redemption during the period beginning 15 days before the day we mail the notice
of redemption and ending on the day of that mailing, in order to determine or fix the list of holders to prepare the mailing. We may also refuse to register transfer or exchanges of any certificated
notes selected for redemption, except that we will continue to permit transfers and exchanges of the unredeemed portion of any note that will be partially redeemed.
S-76
Table of Contents