Table of Contents
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-255937
The information in this preliminary prospectus supplement is notcomplete and
may be changed. This preliminary prospectus supplement is not an offer to sell
these securities, nor a solicitation of an offer to buy these securities, in
any jurisdiction where the offering is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 12, 2024
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated May 7, 2021)
$600,000,000
Sally Holdings LLC
Sally Capital Inc.
%Senior Notes due 2032
We are an international specialty retailer and distributor of professional
beauty supplies. Our Sally Beauty Supply business unit is anomni-channel
retailer that offers professional-quality beauty supplies at attractive prices
and provides education to retail consumers and salon professionals throughout
North America, South America and Europe. Our Beauty Systems Group business
unitis a leading full-service omni-channel distributor that offers
professional beauty supplies exclusively to salons and salon professionals
throughout the U.S. and Canada.
The Offering:
. Use of Proceeds: We intend to use the net proceeds of this offering, together with borrowings under our ABLFacility (as
defined herein) and cash on hand, to redeem all of our existing 5.625% senior notes due 2025 (the "senior unsecured 2025
notes") that remain outstanding, at a redemption price equal to 100.00% of the principal amount of thesenior unsecured
2025 notes being redeemed, plus accrued and unpaid interest to, but not including, March 13, 2024, the redemption date.
The Senior Notes:
. Issuers: Sally Holdings LLC and Sally Capital Inc. (the "issuers"),
indirect wholly-ownedsubsidiaries of Sally Beauty Holdings, Inc.
. Maturity: The notes will mature on March 1, 2032.
. Interest Payments: The notes will pay interest semi-annually in cash in
arrears on March 1 and October 1of each year, beginning on October 1, 2024.
. Guarantees: The notes will be fully and unconditionally guaranteed, jointly and
severally, on a senior unsecuredbasis by Sally Beauty Holdings, Inc. and Sally Investment
Holdings LLC, the parent companies of Sally Holdings LLC and Sally Capital Inc., as well
as by all of our existing and future domestic restricted subsidiaries, with certain
exceptions, whohave guaranteed our existing senior secured credit facility (the "ABL
Facility") and our term loan B facility (the "TLB Facility"). Each of the guarantees may
be released upon the occurrence of certain customary circumstancesdescribed in "Description
of notes--Parent guarantees" and "Description of notes--Subsidiary guarantees."
. Ranking: The notes and the guarantees will be the issuers' and the guarantors' general
unsecured seniorobligations, will rank equally in right of payment to all of the issuers' and
guarantors' existing and future senior debt, will be effectively subordinated to all of the
issuers' and the guarantors' existing and future secureddebt to the extent of the assets securing
that secured debt (including borrowings under our ABL Facility and TLB Facility), and will
be senior in right of payment to any future subordinated debt of the issuers and guarantors.
In addition, the noteswill be structurally subordinated to all of the liabilities of the
issuers' subsidiaries that do not guarantee the notes. See "Description of notes--Ranking."
. Optional Redemption: The issuers may redeem the notes, in whole or in part, at their option at any
time on orafter March 1, 2027 at the redemption prices described under "Description of notes--Optional
redemption," plus accrued and unpaid interest to, but not including, the redemption date. Prior to such
time, the notes may be redeemedat 100% of the principal amount thereof, plus the "applicable premium" and
accrued and unpaid interest to, but not including, the redemption date as described herein. In addition,
we may redeem up to 40% of the notes before March 1,2027, with the net cash proceeds from certain equity
offerings at a redemption price set forth herein, if, after any such redemption, at least 50% of the
aggregate principal amount of notes remains outstanding. See "Description ofnotes--Optional redemption."
. Change of Control: Upon the occurrence of certain defined events constituting a change of
control, each holder ofthe notes will have the right to require us to purchase such holder's
notes at a price of 101% of their principal amount plus accrued and unpaid interest, if any,
to, but not including, the date of purchase. See "Description ofnotes--Change of control."
. Form: The notes will be issued only in registered form in minimum
denominations of $2,000 and integral multiplesof $1,000 in excess thereof.
. No Trading Market: The notes will not be listed on any securities exchange. Currently, there is no public marketfor the notes
Investing in the notes involves risks that are described in the "
Supplemental risk factors
" section beginning on page
S-16
of this prospectus supplement and in the documents incorporated herein by
reference.
Per Note Total
Public offering price % $
Underwriting discount % $
Proceeds, before expenses, to us % $
The public offering price set forth above does not include accrued interest,
if any. Interest on the notes willbegin to accrue on , 2024 and must be paid
by the purchaser if the notes are delivered after , 2024.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities ordetermined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the notes to investors on or about , 2024
only in book-entry form through the facilitiesof The Depository Trust Company.
Joint Book-Running Managers
BofA Securities J.P. Morgan Truist Securities
Co-Managers
Citizens Capital Markets Regions Securities LLC US Bancorp
The date of this prospectus supplement is , 2024
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We have not, and the underwriters have not, authorized anyone to provide any
informationor to make any representation other than those contained or
incorporated by reference in this prospectus supplement, the accompanying
prospectus or in any free writing prospectuses we have prepared. We and the
underwriters take no responsibilityfor, and can provide no assurance as to the
reliability of, any other information that others may give you. This
prospectus supplement and the accompanying prospectus are an offer to sell
only the notes offered and are current only as to therespective dates of such
documents.
TABLE OF CONTENTS
Prospectus supplement
About this prospectus supplement S-1
Special note regarding S-1
non-GAAP
financial measures
Cautionary notice regarding forward-looking statements S-3
Prospectus supplement summary S-6
The offering S-8
Summary consolidated financial data S-13
Supplemental risk factors S-16
Use of proceeds S-24
Capitalization S-25
Description of certain other indebtedness S-26
Description of notes S-28
Certain U.S. federal income tax considerations S-90
Underwriting S-95
Legal matters S-102
Experts S-103
Where you can find more information S-104
Incorporation by reference S-105
Prospectus
Important information about this prospectus 1
Available information 2
Incorporation of certain information by reference 3
Special note on forward looking statements and risk factors 4
Company summary 5
Risk factors 6
Use of proceeds 7
Description of securities we may offer 8
Description of capital stock 9
Description of debt securities 13
Description of warrants 20
Description of purchase contracts 21
Description of units 22
Legal ownership and book-entry issuance 23
Selling securityholders 25
Plan of distribution 26
Legal matters 29
Experts 30
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ABOUT THIS PROSPECTUS SUPPLEMENT
This document has two parts, a prospectus supplement and an accompanying
prospectus dated May 7, 2021. This prospectus supplement and theaccompanying
prospectus are part of a registration statement on Form
S-3
that we filed with the Securities and Exchange Commission (the "Commission")
utilizing a "shelf" registrationprocess. The first part is the prospectus
supplement, which adds to and updates information contained in the
accompanying prospectus. The second part, the accompanying prospectus,
provides more general information, some of which may not apply tothis
offering. Generally, when we refer to this prospectus, we are referring to
both parts of this document combined. To the extent there is a conflict
between the information contained in this prospectus supplement, on the one
hand, and theinformation contained in the accompanying prospectus, on the
other hand, you should rely on the information in this prospectus supplement.
Any statement that we make in the accompanying prospectus will be modified or
superseded by any inconsistentstatement made by us in this prospectus
supplement.
The rules of the Commission allow us to incorporate by reference information
intothis prospectus supplement. This information incorporated by reference is
considered to be a part of this prospectus supplement, and information that we
file later with the Commission until this offering is completed, to the extent
incorporated byreference, will automatically update and supersede this
information. See "Incorporation by reference" on
page S-104
of this prospectus supplement. You should read both this prospectus
supplementand the accompanying prospectus together with additional information
described under the heading "Incorporation by reference" in this prospectus
supplement before purchasing any securities.
You should rely only on the information contained or incorporated by reference
in this prospectus supplement, the accompanying prospectusand any "free
writing prospectus" that we authorize to be delivered to you. We have not and
the underwriters have not authorized anyone to provide you with information
different from that contained or incorporated by reference in thisprospectus
supplement, the accompanying prospectus and any "free writing prospectus." You
should not assume that the information incorporated by reference or provided
in this prospectus supplement or the accompanying prospectus or any
freewriting prospectus prepared by us is accurate as of any date other than
the date on the front cover of those documents. Our business, financial
condition, cash flows, results of operations and prospects may have changed
since that date. Theinformation contained, or incorporated by reference, in
this prospectus supplement or the accompanying prospectus is not legal,
business or tax advice.
This prospectus supplement does not constitute an offer to sell, nor a
solicitation of an offer to buy, any note offered hereby by anyperson in any
jurisdiction in which it is unlawful for such person to make an offer or
solicitation. Neither the delivery of this prospectus supplement nor any sale
made under this prospectus supplement shall under any circumstances imply that
therehas been no change in our affairs or the affairs of our subsidiaries or
that the information set forth herein is correct as of any date subsequent to
the date hereof.
SPECIAL NOTE REGARDING
NON-GAAP
FINANCIAL MEASURES
We utilize financial measures and terms not calculated in accordance with
generally accepted accounting principles in the United States("GAAP") in order
to provide investors with an alternative method for assessing our operating
results in a manner that enables investors to more thoroughly evaluate our
current performance as compared to past performance.
This prospectus supplement includes "Adjusted EBITDA," which is a financial
measure that has not been calculated in accordance withGAAP and is therefore
referred to as a
"non-GAAP
financial measure." We have provided a definition below for this
non-GAAP
financial measure and have providedtables in "Summary consolidated financial
and operating data" starting on page
S-13
herein to reconcile this
non-GAAP
financial measure to its comparable GAAPfinancial measure.
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We define Adjusted EBITDA as GAAP net earnings before depreciation and
amortization,interest expense, income taxes, share-based compensation, costs
related to our restructuring plans,
COVID-19
related net expenses, costs related to our fuel for growth initiative and
other adjustments for therelevant time periods.
We believe that the
non-GAAP
financial measures we use provide valuableinformation regarding our earnings
and business trends by excluding specific items that we believe are not
indicative of the ongoing operating results of our businesses, thus offering a
useful way for investors to make a comparison of ourperformance over time and
against other companies in our industry. We provide these
non-GAAP
financial measures as supplemental information to our GAAP financial measures
and believe these
non-GAAP
measures provide investors with additional meaningful financial information
regarding our operating performance and cash flows. Our management and Board
of Directors also use these
non-GAAP
measures as supplemental measures to evaluate our businesses and the
performance of management, to determine performance-based compensation, to
make operating and strategic decisions, and to allocatefinancial resources. We
believe that these
non-GAAP
measures also provide meaningful information for investors and securities
analysts to evaluate our historical and prospective financial performance.
These
non-GAAP
measures should not be considered a substitute for or superior to GAAP
results. Furthermore, the
non-GAAP
measures presented by us may not be comparable to similarlytitled measures of
other companies.
In this prospectus supplement, the terms the "Company," "Sally Beauty,"
"ourcompany," "we," "our," "ours" and "us" refer to Sally Beauty Holdings,
Inc. and its consolidated subsidiaries, unless otherwise indicated or the
context otherwise requires. References to "SallyHoldings" refer to Sally
Holdings LLC, references to "Sally Capital" refer to Sally Capital Inc. and
references to the "issuers" refer to both Sally Holdings and Sally Capital
and, in each case, not to any of theirsubsidiaries.
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this prospectus supplement, in the accompanying prospectus and
in the documents incorporated by reference herein whichare not purely
historical facts or which depend upon future events may constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, (the "Securities Act"), and Section 21E ofthe
Securities Exchange Act of 1934, as amended, (the "Exchange Act"). Words such
as "anticipate," "believe," "estimate," "expect," "intend," "plan,"
"project,""target," "can," "could," "may," "should," "will," "would," "might,"
"anticipates" or similar expressions may also identify such forward-looking
statements.
Readers are cautioned not to place undue reliance on forward-looking
statements, as such statements speak only as of the date they weremade. Any
forward-looking statements involve risks and uncertainties that could cause
actual events or results to differ materially from the events or results
described in the forward-looking statements, including, but not limited to,
risks anduncertainties related to the following:
. the highly competitive nature of, and the increasing consolidation of, the beauty products distribution industry;
. the ability to anticipate and effectively respond to changes in consumer preferences and buying trends in atimely manner;
. potential fluctuation in our same store sales and quarterly financial performance;
. our dependence upon manufacturers who may be unwilling or unable to continue to supply products to us;
. the possibility of material interruptions in the supply of products by our third-party manufacturers ordistributors
or increases in the prices of the products we purchase from our third-party manufacturers or distributors;
. potential fluctuations in the price, availability and quality of inventory;
. products sold by us being found to be defective in labeling or content;
. compliance with current laws and regulations or becoming subject to additional or more stringent laws andregulations;
. the success of our strategic initiatives, including our store refresh program and increased marketing efforts,
toenhance the customer experience, attract new customers, drive brand awareness and improve customer loyalty;
. the success of our
e-commerce
businesses;
. product diversion to mass retailers or other unauthorized resellers;
. the operational and financial performance of our Armstrong McCall, L.P. franchise-based business;
. successful identification of acquisition candidates and successful completion of desirable acquisitions;
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. integration of acquired businesses;
. the success of our existing stores and our ability to increase sales at existing stores;
. the ability to open and operate new stores profitably;
. the volume of traffic to our stores;
. the impact of the health of the economy upon our business;
. the success of our cost control plans;
. the availability of labor and rising labor and rental costs;
. potential misconduct or improper activities by our associates and third parties;
. climate change and the increased focus by stakeholders on environmental issues;
. protecting our intellectual property rights, particularly our trademarks;
. the risk that our products may infringe on the intellectual property rights of
others or that we may be requiredto defend our intellectual property rights;
. successfully updating and integrating our information technology systems;
. disruptions in our information technology systems;
. a significant data security breach, including misappropriation of our customers', our
employees' or oursuppliers' confidential information, and the potential costs related thereto;
. the negative impact of a significant data security breach on our reputation
and the associated loss of confidenceof our customers, suppliers and others;
. the costs and diversion of management's attention required to investigate and remediate a data securitybreach and
to continuously upgrade our information technology security systems to address evolving cyber security threats;
. our ability to attract and retain highly skilled management and other personnel;
. severe weather, natural disasters or acts of violence or terrorism;
. currency fluctuations and related costs;
. the preparedness of our accounting and other management systems to meet financial reporting
and otherrequirements and the upgrade of our existing financial reporting system;
. our status as a holding company, with no operations of our own, and our associated dependence on our subsidiariesfor cash;
. our ability to execute and implement our share repurchase program;
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. our substantial indebtedness;
. the possibility that we may incur substantial additional debt, including secured debt, in the future;
. restrictions and limitations in the agreements and instruments governing our debt;
. the ability to generate the significant amount of cash needed for servicing all of our
debt, to refinance all ora portion of our indebtedness or to obtain additional financing;
. changes in interest rates increasing the cost of servicing our debt; and
. the costs and effects of litigation.
Additional factors that could cause actual events or results to differ
materially from the events or results described in the forward-lookingstatements
can be found in our Annual Report on Form
10-K
for the fiscal year ended September 30, 2023, which is incorporated by
reference into this prospectus supplement, and under the section entitled"Supple
mental risk factors" in this prospectus supplement. The events described in
the forward-looking statements might not occur or might occur to a different
extent or at a different time than we have described. As a result, our
actualresults may differ materially from the results contemplated by these
forward-looking statements. We assume no obligation to publicly update or
revise any forward-looking statements.
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PROSPECTUS SUPPLEMENT SUMMARY
The following summary does not contain all the information that may be
important to purchasers of our notes. You should carefully read theentire
prospectus supplement, including the "Supplemental risk factors" section, the
accompanying prospectus and the other information incorporated by reference in
this prospectus supplement, before making any investment decision.
Our company
Sally Beauty Holdings is aleading international specialty retailer and
distributor of professional beauty supplies. As experts in hair color and
care, we aim to empower our customers to express themselves through their hair
and beyond.
We operate two business segments that offer beauty products in key categories,
including hair care, hair color, styling tools and nails.
. Sally Beauty Supply ("SBS")
--An omni-channel retailer that offers professional-qualitybeauty supplies at attractive
prices and provides education to retail consumers and salon professionals throughout
North America, South America and Europe. SBS operates primarily through retail stores
(generally operating under the Sally Beautybanner) and digital platforms, including our
www.sallybeauty.com
website and a mobile
commerce-based app.
. Beauty Systems Group ("BSG")
--A leading full-service omni-channel distributor that
offersprofessional beauty supplies exclusively to
salons and salon professionals throughout the U.S. and
Canada. These salon professionals primarily rely on
just-in-time
inventory due to capital constraints and limited warehouse and shelf
space. BSG operates through company-operated stores (generally
operating under the Cosmo Prof banner), franchised stores, distributor
sales consultants ("DSCs") anddigital platforms, including our
www.cosmoprofbeauty.com
website, a mobile commerce-based
app and chain portals.
The breadth, depth and professional quality of our hair color and care
assortment provides us with a differentiated core business in anindustry which
is otherwise fragmented. Due to our long history, brand heritage, product and
process-specific knowledge and training of associates, we provide unmatched
hair color and care expertise to consumers. We also have strong positioning
withsuppliers given our focus and economies of scale of purchasing. By
operating in a variety of channels, we are able to reach broad, diversified
geographies and customer segments using a variety of product assortments and
tactics.
Operating and growth strategy
Ouroperating and growth strategy is guided by our vision to own professional
hair color and care for both the
do-it-yourself
("DIY") enthusiast and professionalstylist. SBS's differentiation is to offer
a vast array of hair color and care solutions for
in-home
use, and this is supported by the content and education we provide our
customers. At BSG, we are thelargest North American distributor of
professional hair color and care, offering stylists and salons the most
extensive portfolio of third-party brands in the market.
We remain focused on driving top line growth and profitability by executing on
our strategic initiatives:
. Customer Centricity
--Our DIY customers and professional stylists value the services,
education andinnovation we provide. We continue to build customer
centricity through our value-added services and concepts, including
Studio by Sally, Cosmo Prof Direct, Licensed Colorist on Demand,
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Happy Beauty Co. and Walmart.com digital marketplace. As we gain insights and customer feedback from these concepts,
we believe there are opportunities for us to expand on these concepts furtherand to provide growth beyond our core.
. Owned Brands and Innovation
--We believe our focus on growing our owned brands at SBS and innovatingwill help us attract new customers and keep long-term
relationships with existing customers. During the fiscal year ended September 30, 2023, we expanded our owned brand
portfolio with the launch of bondbar and brought to market manyinnovative products from new and key vendors. At BSG, we launched
brands like Amika, Wella's Ultimate Repair and Danger Jones, and expanded our distribution with Color Wow. Additionally,
at the end of the fiscal year endedSeptember 30, 2023, we expanded our distribution rights and significantly strengthened
BSG's position in a strategically important market with the asset acquisition of Goldwell of New York. We are focused on
expanding on our ownedbrand offerings to drive higher sales penetration, increasing our BSG distribution footprint through
expanding high-profile brands, and bringing to market innovation across our key categories of hair care and hair color.
. Efficiency and Optimization
--During the fiscal year ended September 30, 2023, we were ableto substantially complete our distribution
center consolidation and store optimization plan, resulting in strong sales recapture rates and cost savings.
We also set in motion our Fuel for Growth ("FFG") initiative. FFG is a mandate torethink the way we work,
generating cost savings and modernizing key parts of our business. For example, our transition to pooled
distribution and ongoing changes to our store shipping frequency has lowered our transportation costs. We
believe theseefficiency and optimization initiatives will help us offset inflationary pressures and continued
growth investments in the future. We believe focusing in these areas will position our company for future
growth, further enhance our ability to meetour customers where they are and attract new customers.
Additional information
Sally Holdings LLC is a Delaware limited liability company formed in 2006.
Sally Capital Inc., a Delaware corporation incorporated in 2006, isa
wholly-owned subsidiary of Sally Holdings LLC and will serve as
co-issuer
of the notes to facilitate the offering of the notes. Sally Capital Inc. does
not have any assets or operations of any kind and willnot receive any proceeds
from the offering of the notes.
Our principal executive offices are located at 3001 Colorado Boulevard,
Denton,Texas 76210, and our telephone number is (940)
898-7500.
Our principal website can be accessed at
www.sallybeautyholdings.com
. The information on our websites is not a part of this prospectus
supplementand is not incorporated herein by reference, and you should rely
only on the information contained or incorporated by reference in this
prospectus supplement when making a decision as to whether to invest in the
notes.
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THE OFFERING
The summary below describes the principal terms of the notes and the
guarantees and is not intended to be complete. Certain of the termsand
conditions below are subject to important limitations and exceptions. The
"Description of notes" section of this prospectus supplement contains a more
detailed description of the terms and conditions of the notes and guarantees.
Issuers Sally Holdings LLC and Sally Capital Inc.
Sally Capital has only nominal assets, does not currently conduct any operations and was formed solely to act as a
co-issuer
of notes issued by Sally Holdings.
Notes Offered $600,000,000 aggregate principal amount of % senior notes due 2032.
Issue Price %, plus accrued interest from and including , 2024.
Maturity Date March 1, 2032.
Interest Interest on the notes will accrue at a rate of % per annum, payable semi-annually in arrears in cash on March
1 and October 1 of each year, commencing October 1, 2024. Interest will accrue from andincluding , 2024.
Guarantors Sally Beauty Holdings, Inc. and Sally Investment Holdings LLC, the parent companies of Sally Holdings and Sally Capital,
as well as all of our existing and future domestic restricted subsidiaries, with certain exceptions, who have guaranteed
ourABL Facility and our TLB Facility. Each of the guarantees may be released upon the occurrence of certain customary
circumstances described in "Description of notes--Parent guarantees" and "Description of notes--Subsidiaryguarantees."
Optional Redemption We may redeem the notes, in whole or in part, at any time on or after
March 1, 2027, at the redemption prices described under "Description
of notes--Optional redemption," together with accrued and unpaid
interest, if any, to,but not including, the redemption date.
At any time prior to March 1, 2027, we may redeem the notes, in whole or in part,
at a redemption price equal to 100% of their principal amount plus a make-whole
premium described in "Description ofnotes--Optional redemption," together with
accrued and unpaid interest, if any, to, but not including, the redemption date.
In addition, at any time and from time to time prior to March 1, 2027, we may redeem up
to 40% of the aggregate principalamount of outstanding notes (including any additional
notes) with the proceeds of certain equity offerings at a redemption price equal to
% of their principal amount, plus accrued and unpaid interest, if any, to, but not
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including, the redemption date. We may make such redemption only if, after any such redemption, at least 50% of the aggregate
principal amount of notes (including any additional notes) remainsoutstanding. See "Description of notes--Optional redemption."
Change of Control In the event of a change of control under the terms of the indenture governing the notes,
each holder of the notes will have the right to require us to purchase such holder's notes
at a price of 101% of their principal amount, plus accruedand unpaid interest, if any, to,
but not including, the date of purchase. See "Description of notes--Change of control."
Ranking The notes will be general unsecured obligations of the issuers and will rank:
. equal in right of payment to all existing and future senior indebtedness of the issuers, including our ABLFacility and TLB
Facility and other obligations that are not, by their terms, expressly subordinated in right of payment to the notes;
. senior in right of payment to any future indebtedness and other obligations of the issuers
that are, by theirterms, expressly subordinated in right of payment to the notes;
. effectively subordinated to all secured indebtedness, including our ABL Facility, TLB Facility and other securedobligations
of the issuers, to the extent of the value of the assets securing such indebtedness and other obligations; and
. structurally subordinated to all indebtedness and other liabilities (including
trade payables) of oursubsidiaries that do not guarantee the notes.
The guarantee of the notes of each guarantor will be a general unsecured senior obligation of that guarantor and will rank:
. equal in right of payment to all existing and future senior indebtedness
of such guarantor, including suchguarantor's guarantee of our ABL Facility
and TLB Facility and other obligations of that guarantor that are not, by
their terms, expressly subordinated in right of payment to the guarantee;
. senior in right of payment to any future indebtedness and other obligations of that guarantor
that are, by theirterms, expressly subordinated in right of payment to the guarantee; and
. effectively subordinated to all secured indebtedness, including such
guarantor's guarantee of our ABLFacility, TLB Facility and other
secured obligations of that guarantor to the extent of the value
of the assets securing such indebtedness and other obligations.
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As of December 31, 2023, after giving effect to this offering and the use of
proceeds therefrom, incremental ABL Facility borrowings and cash on hand to redeem
the senior unsecured 2025 notes, we would havehad consolidated total indebtedness
(excluding any operating lease obligations) of approximately $1,037 million,
including the notes, of which approximately $437 million (outstanding under the ABL
Facility and the TLB Facility) was securedand effectively senior to the notes,
$0.3 million (representing finance lease obligations) ranked equally in right of
payment with the notes and none was subordinated in right of payment to the notes.
As of December 31, 2023, we also had $586.0 million of operating lease liabilities.
In addition, as of December 31, 2023, our
non-guarantor
subsidiaries had liabilities (including trade payables, but excluding amounts due to related parties)
ofapproximately $208 million, all of which was structurally senior to the notes and the guarantees.
As of December 31, 2023, after giving effect to this offering and the use of proceeds therefrom,
incremental ABL Facility borrowings and cash on hand to redeem the senior unsecured 2025
notes, we would havehad additional availability under our ABL Facility of up to approximately
$443 million, all of which would be secured and would be effectively senior to the notes.
Certain Covenants The indenture governing the notes will contain covenants that, among other
things, limit our ability and the ability of our restricted subsidiaries to:
. incur more debt;
. pay dividends, redeem stock or make other distributions;
. make certain investments;
. create liens;
. transfer or sell assets;
. merge or consolidate; and
. enter into transactions with our affiliates.
These covenants are subject to important exceptions and qualifications, which are described under
"Description of notes--Certain covenants" and "Description of notes--Merger andconsolidation."
Trading Market for the Notes We do not intend to apply for a listing of the notes on any securities
exchange or any automated dealer quotation system. The underwriters
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have advised us that they presently intend to make a market in the notes. However, you
should be aware that they are not obligated to make a market in the notes and may
discontinue theirmarket-making activities at any time without notice. As a result,
a liquid market for the notes may not be available if you try to sell your notes.
Form and Denomination The notes will be initially issued in the form of one
or more global notes, without coupons, in minimum
denominations of $2,000 and integral multiples of $1,000
in excess thereof, and deposited with the trustee for the
notes as a custodian forThe Depository Trust Company
("DTC") as depositary, and registered in the name of DTC
or its nominee. See "Description of notes--Form,
denomination, transfer, exchange and book-entry procedures."
Use of Proceeds We estimate that the net proceeds from the issuance and sale of the notes
we are offering will be approximately $592 million, after deducting
underwriting discounts and commissions and estimated offering expenses
payable by us. We intend touse the net proceeds of this offering,
together with borrowings under our ABL Facility and cash on hand, to
redeem all of the senior unsecured 2025 notes that remain outstanding,
at a redemption price equal to 100.00% of the principal amount of
thenotes being redeemed, plus accrued and unpaid interest to, but not
including, the redemption date. On February 12, 2024, we delivered a
notice of conditional full redemption to the holders of our senior
unsecured 2025 notes, which stated thatwe intend to redeem the senior
unsecured 2025 notes on March 13, 2024, subject to certain conditions,
including the consummation of this offering. This prospectus supplement
shall not constitute a notice of redemption, an offer to purchase,
asolicitation of an offer to purchase or a solicitation of consent with
respect to our senior unsecured 2025 notes. See "Use of proceeds" on page
S-24
of this prospectus supplement.
Trustee, Registrar and Paying Agent Computershare Trust Company, N.A.
Additional Notes Subject to certain conditions, we may, without consent of the holders of the
notes, issue additional notes having identical terms and conditions as the
notes (except for the issue date and, in some cases, the public offering price,
the firstinterest payment date and the initial interest accrual date). Such
additional notes may be consolidated and form a single series with the previously
outstanding notes; provided that if the additional notes are not fungible
with the notes for U.S.federal income tax purposes, the additional notes will
be issued with a different CUSIP or other identifying number than the notes.
Tax Considerations You should consult your independent tax advisor with respect to the tax consequences of owning the
notes in light of your own particular situation. See "Certain U.S. federal income tax considerations."
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Risk Factors Investing in the notes involves substantial risk. You should carefully consider all of the
information in this prospectus supplement and the accompanying prospectus, or incorporated by
reference herein, including the discussion under thecaptions "Risk Factors" in the prospectus
and "Supplemental risk factors" in this prospectus supplement, before investing in the notes.
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following summary consolidated financial and operating data of Sally
Beauty Holdings, Inc. for each of the fiscal years in the three-yearperiod
ended September 30, 2023 has been derived from our audited consolidated
financial statements incorporated by reference into this prospectus
supplement. The following summary consolidated financial and operating data
for each of thethree-month periods ended December 31, 2022 and 2023 have been
derived from our unaudited condensed consolidated financial statements
incorporated by reference into this prospectus supplement. Financial and
operating data for the twelve monthsended December 31, 2023 has been derived
by adding the relevant results for the fiscal year ended September 30, 2023 to
the relevant results for the three months ended December 31, 2023 and
subtracting the relevantresults for the three months ended December 31, 2022.
The following summary consolidated financial and operating data should be read
together with "Management's Discussion and Analysis of Financial Condition and
Results ofOperations" and the historical financial statements and notes
thereto incorporated by reference into this prospectus supplement from our
Annual Report on Form
10-K
for the fiscal year endedSeptember 30, 2023 and our Quarterly Report on Form
10-Q
for the quarter ended December 31, 2023. The financial or operating data for
any past period is not necessarily indicative of the resultsfor any future
period.
Fiscal Three Months Twelve
Year Ended Ended Months
Ended
Sep. Sep. Sep. Dec. Dec. Dec.
30, 30, 30, 31, 31, 31,
2021 2022 2023 2022 2023 2023
Results of operations information
(dollars in thousands):
Net $ 3,874,997 $ 3,815,565 $ 3,728,131 $ 957,055 $ 931,302 $ 3,702,378
sales
Cost of 1,921,663 1,896,400 1,829,951 468,481 464,126 1,825,596
goods sold
Gross 1,953,334 1,919,165 1,898,180 488,574 467,176 1,876,782
profit
Selling, general and 1,530,280 1,553,948 1,555,946 391,580 398,138 1,562,504
administrative expenses
Restructuring 4,611 27,577 17,205 10,406 (85 ) 6,714
Operating 418,443 337,640 325,029 86,588 69,123 307,564
earnings
Interest 93,509 93,543 72,979 17,923 17,314 72,370
expense
Earnings before provision 324,934 244,097 252,050 68,665 51,809 235,194
for income taxes
Provision for 85,076 60,544 67,450 18,328 13,419 62,541
income taxes
Net $ 239,858 $ 183,553 $ 184,600 $ 50,337 $ 38,390 $ 172,653
earnings
Operating
data:
Number of
stores at
end-of-period
(including
franchises):
Sally Beauty 3,549 3,439 3,148 3,146 3,143 3,143
Supply
Beauty Systems 1,362 1,355 1,338 1,352 1,332 1,332
Group
Total 4,911 4,794 4,486 4,498 4,475 4,475
Professional distributor sales 719 718 670 688 656 656
consultants (end of period)
Comparable sales
growth (decline)(1):
Sally Beauty 9.1 % (0.6 )% 3.4 % 3.0 % (1.9 )% 2.1 %
Supply
Beauty Systems 10.3 % 2.3 % (1.3 )% (1.5 )% 0.7 % (0.7 )%
Group
Consolidated 9.6 % 0.6 % 1.4 % 1.1 % (0.8 )% 0.9 %
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Fiscal Year Ended Three Months Ended Twelve
Months
Ended
Sep. 30, Sep. 30, Sep. 30, Dec. 31, Dec. 31, Dec. 31,
2021 2022 2023 2022 2023 2023
Other financial data (dollars in thousands):
Rent $ 247,623 $ 250,719 $ 240,924
Capital expenditures $ 73,669 $ 99,250 $ 90,742 $ 96,286
Adjusted EBITDA(2) $ 574,979 $ 501,939 $ 459,026 $ 125,785 $ 107,100 $ 440,341
Pro forma secured debt(3) $ 437,000 $ 437,000
Pro forma total debt(3) $ 1,037,252 $ 1,037,252
Ratio of pro forma secured debt to Adjusted EBITDA 1.0x 1.0x
Ratio of pro forma total debt to Adjusted EBITDA 2.3x 2.4x
(1) We believe that comparable sales is an appropriate performance indicator to measure
our sales growth comparedto the prior period. In calculating our comparable
sales growth, comparable sales include (i) sales from our own stores that have been
operating for 14 months or longer as of the last day of a month, (ii) sales via
e-commerce,
(iii) sales to franchisees and (iv) full-service sales. Our comparable sales exclude the effect of changes in foreign
exchange rates and sales from stores relocated until 14 months after therelocation. Revenue from acquired stores is excluded
from our comparable sales calculation until 14 months after the acquisition. Our calculation of comparable sales might not
be the same as the calculation of this measure by other retailers, as thecalculation varies across the retail industry.
(2) We define Adjusted EBITDA as GAAP net earnings before depreciation and amortization, interest
expense, incometaxes, share-based compensation, costs related to our restructuring plans,
COVID-19
related net expenses, costs related to our FFG initiative and other
adjustments for the relevant time periods as indicated inthe accompanying
non-GAAP
reconciliation to the comparable GAAP financial measures. We present Adjusted EBITDA because we
believe it provides investors with important additional information to evaluate ourperformance.
The following table presents a reconciliation of net earnings, the most
directly comparable financialmeasure under GAAP, to Adjusted EBITDA for the
periods indicated.
Fiscal Year Ended Three Months Ended Twelve
Months
Ended
Sep. 30, Sep. 30, Sep. 30, Dec. 31, Dec. 31, Dec. 31,
2021 2022 2023 2022 2023 2023
(dollars in thousands)
Net earnings $ 239,858 $ 183,553 $ 184,600 $ 50,337 $ 38,390 $ 172,653
Depreciation and amortization 102,201 99,929 102,412 25,285 28,063 105,190
Interest expense 93,509 93,543 72,979 17,923 17,314 72,370
Provision for income taxes 85,076 60,544 67,450 18,328 13,419 62,541
COVID-19 36,624 6,223 3,701 1,052 -- 2,649
& Other(a)
Restructuring 6,055 47,439 12,022 7,725 (85 ) 4,212
Share-based compensation 11,656 10,708 15,862 5,135 5,118 15,845
Fuel for Growth & Other -- 4,881 4,881
Adjusted EBITDA $ 574,979 $ 501,939 $ 459,026 $ 125,785 $ 107,100 $ 440,341
(non-GAAP)
(a) Other expenses grouped with Fuel for Growth beginning in the first quarter of fiscal year 2024, as
COVID-19-related
expenses are no longer adjusted out as a separate line item.
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(3) As of September 30, 2023 or December 31, 2023, as indicated, gives effect
to this offering, the useof proceeds therefrom, incremental ABL Facility
borrowings and cash on hand to redeem the senior unsecured 2025 notes as
if they occurred on September 30, 2023 or December 31, 2023, as indicated.
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SUPPLEMENTAL RISK FACTORS
An investment in the notes involves risk. Before deciding to purchase any
notes, you should carefully consider the risks described below aswell as other
factors and information included in or incorporated by reference into this
prospectus supplement, including the risk factors set forth in our Annual
Report on Form
10-K
for the fiscal year endedSeptember 30, 2023, which is incorporated by
reference into this prospectus supplement. Any such risks could materially and
adversely affect our business, financial condition, results of operations or
prospects. However, the risks describedbelow and in our Annual Report on Form
10-K
for the fiscal year ended September 30, 2023 are not the only risks facing us
or that may affect your investment. Additional risks and uncertainties
notcurrently known to us or that we currently view as immaterial may also
materially and adversely affect our business, financial condition, results of
operations or prospects or your investment.
We have substantial debt and may incur substantial additional debt, which
could adversely affect our financial health, our ability to obtain financingin
the future, our ability to react to changes in our business and our ability to
fulfill our obligations under the notes.
As ofDecember 31, 2023, after giving effect to this offering and the use of
proceeds therefrom, incremental ABL Facility borrowings and cash on hand to
redeem the senior unsecured 2025 notes, we would have had consolidated total
indebtedness ofapproximately $1,037 million, including the notes (but
excluding $586.0 million of operating lease obligations).
Oursubstantial debt could have important consequences for holders of the
notes. For example, it could:
. make it more difficult for us to satisfy our obligations with respect to the notes and our
other indebtedness,resulting in possible defaults on and acceleration of such indebtedness;
. limit our ability to obtain additional financing for working capital, capital
expenditures, acquisitions, debtservice requirements or general corporate purposes;
. require us to dedicate a substantial portion of our cash flow from
operations to the payment of principal andinterest on our indebtedness,
thereby reducing the availability of such cash flow to fund working
capital, capital expenditures and other general corporate purposes;
. restrict the ability of our subsidiaries to pay dividends or otherwise transfer
assets to us, which could limitour ability to make required payments on our debt;
. increase our vulnerability to general adverse economic and industry conditions, including interest ratefluctuations (because a
portion of our borrowings are at variable rates of interest), including borrowings under our ABL Facility and our TLB Facility;
. place us at a competitive disadvantage compared to our competitors that have proportionately less debt orcomparable
debt at more favorable interest rates and that, as a result, may be better positioned to withstand economic downturns;
. limit our ability to refinance indebtedness or cause the associated costs of such refinancing to increase; and
. limit our flexibility to adjust to changing market conditions and our
ability to withstand competitive pressuresor prevent us from carrying
out capital spending that is necessary or important to our growth
strategy and efforts to improve operating margins of our business.
Any of the foregoing impacts of our substantial indebtedness could have a
material adverse effect on our business, financial condition,results of
operations or prospects.
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In addition, we and our subsidiaries may incur substantial additional
indebtedness in thefuture. As of December 31, 2023, after giving effect to the
incremental ABL Facility borrowings as described in "Use of proceeds," our ABL
Facility provided us commitments for additional borrowings of up to
approximately$443 million, subject to borrowing base limitations, outstanding
letters of credit and limitations on cash hoarding above certain balances,
once utilized. If new debt is added to our current debt levels, the related
risks that we face wouldincrease, and we may not be able to meet all of our
debt obligations.
Despite our current indebtedness levels, we and our subsidiaries may be ableto
incur substantially more debt, including secured debt, which could further
exacerbate the risks associated with our substantial indebtedness.
We and our subsidiaries may incur substantial additional indebtedness in the
future. The terms of the instruments governing our indebtednessdo not, and the
indenture governing the notes will not, fully prohibit us or our subsidiaries
from doing so. In particular, as of December 31, 2023, and after giving effect
to the offering of the notes and the use of proceeds therefrom,incremental ABL
Facility borrowings and cash on hand to redeem the senior unsecured 2025
notes, our ABL Facility provided us commitments for additional borrowings of
up to approximately $443 million, subject to borrowing base limitations,outstand
ing letters of credit and limitations on cash hoarding above certain balances,
once utilized. In addition, the indenture governing the notes being offered
hereby allows us to incur substantial additional secured debt. See
"Descriptionof notes--Certain covenants--Limitation on Indebtedness".
Additionally, any operating leases (which can be material given the nature of
our business) will be excluded for the purposes of any financial definitions
or ratios determined orcalculated under the indenture governing the notes or
the TLB Facility. If new debt is added to our current debt levels, the related
risks that we face would increase, and we may not be able to meet all our debt
obligations.
In addition, our ABL Facility and our TLB Facility, as well as the indenture
governing the notes being offered hereby, do not prevent us fromincurring
obligations that do not constitute indebtedness.
The agreements and instruments governing our debt contain restrictions and
limitationsthat could significantly impact our ability to operate our business.
The ABL Facility contains covenants that, among otherthings, restrict our and
our subsidiaries' ability to:
. change our line of business;
. engage in certain mergers, consolidations and transfers of all or substantially all of our assets;
. make certain dividends, stock repurchases and other distributions;
. make acquisitions of all of the business or assets of, or stock representing beneficial ownership of, any person;
. dispose of certain assets;
. make voluntary prepayments on the notes being offered hereby or make amendments to the terms thereof;
. prepay certain other debt or amend specific debt agreements;
. change our fiscal year; and
. create or incur negative pledges.
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In addition, if we fail to maintain a specified minimum level of borrowing
capacity underour ABL Facility, we will then be obligated to maintain a
specified fixed-charge coverage ratio. Our ability to comply with these
covenants in future periods will depend on our ongoing financial and operating
performance, which in turn will besubject to economic conditions and to
financial, market and competitive factors, many of which are beyond our
control. Our ability to comply with these covenants in future periods will
also depend substantially on the pricing of our products, oursuccess at
implementing cost reduction initiatives and our ability to successfully
implement our overall business strategy.
The indenturegoverning the notes being offered hereby and our TLB Facility
also contain restrictive covenants that, among other things, limit our ability
and the ability of our restricted subsidiaries to:
. dispose of assets;
. incur additional indebtedness (including guarantees of additional indebtedness);
. pay dividends, repurchase stock or make other distributions;
. prepay subordinated debt;
. create liens on assets;
. make investments (including joint ventures);
. engage in mergers, consolidations or sales of all or substantially all of our assets;
. engage in certain transactions with affiliates; and
. permit restrictions on our subsidiaries' ability to pay dividends to us.
The restrictions in the indenture governing the notes being offered hereby and
the terms of our ABL Facility and our TLB Facility may preventus from taking
actions that we believe would be in the best interest of our business and may
make it difficult for us to successfully execute our business strategy or
effectively compete with companies that are not similarly restricted. We may
alsoincur future debt obligations that might subject us to additional
restrictive covenants that could affect our financial and operational
flexibility. We cannot assure you that we will be granted waivers or
amendments to these agreements if we areunable to comply with these
agreements, or that we will be able to refinance our debt on terms acceptable
to us, or at all.
Our abilityto comply with the covenants and restrictions contained in the ABL
Facility, our TLB Facility and the indenture governing the notes being offered
hereby may be affected by economic, financial and industry conditions beyond
our control. The breach ofany of these covenants and restrictions could result
in a default under either the ABL Facility, the TLB Facility or the indentures
that would permit the applicable lenders or note holders, as the case may be,
to declare all amounts outstandingthereunder to be due and payable, together
with accrued and unpaid interest. If we are unable to repay our outstanding
indebtedness, lenders having secured obligations, such as the lenders under
the ABL Facility and our TLB Facility, could proceedagainst the collateral
securing the debt. In any such case, we may be unable to borrow under the ABL
Facility and may not be able to repay the amounts due under our TLB Facility
or the notes being offered hereby. This could have serious consequencesfor our
financial condition and results of operations and could cause us to become
bankrupt or insolvent.
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Our ability to generate the significant amount of cash needed to service all
of our debt, to refinanceall or a portion of our indebtedness or to obtain
additional financing depends on many factors beyond our control.
Our ability tomake scheduled payments on, or to refinance our obligations
under, our debt will depend on our financial and operating performance, which,
in turn, will be subject to prevailing economic and competitive conditions and
to the financial and businessfactors, many of which may be beyond our control,
such as those described under "Risk Factors--Operational, Strategic and
General Business Risks" and "Risk Factors--Financial Risks" in our Annual
Report on Form
10-K
for the fiscal year ended September 30, 2023.
If our cash flow and capital resources areinsufficient to fund our debt
service obligations, we may be forced to reduce or delay capital expenditures,
sell assets, seek to obtain additional equity capital or restructure our debt.
In the future, our cash flow and capital resources may not besufficient for
payments of interest on and principal of our debt, and such alternative
measures may not be successful and may not permit us to meet our scheduled
debt service obligations.
We cannot assure you that we will be able to refinance any of our indebtedness
or obtain additional financing, particularly because of ourhigh levels of debt
and the debt incurrence restrictions imposed by the agreements governing our
debt, as well as prevailing market conditions. In the absence of such
operating results and resources, we could face substantial liquidity problems
andmight be required to dispose of material assets or operations to meet our
debt service and other obligations. Our ABL Facility, our TLB Facility and the
indenture governing the notes being offered hereby restrict our ability to
dispose of assets anduse the proceeds from any such dispositions. We cannot
assure you that we will be able to consummate any asset sales, or, if we do,
what the timing of the sales will be or whether the proceeds that we realize
will be adequate to meet debt serviceobligations when due.
If we default on our obligations to pay our other 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 ABL Facility or our TLB Facility,which is not waived by the
required holders of such indebtedness, could leave us unable to pay principal,
premium, if any, or interest on the notes and could substantially decrease the
market value of the notes. If we are unable to generatesufficient cash flow
and are otherwise unable to obtain funds necessary to meet required payments
of principal, premium, if any, or interest on such indebtedness, or if we
otherwise fail to comply with the various covenants, including financial
andoperating covenants, in the instruments governing our indebtedness,
including our ABL Facility and our TLB Facility, we could be in default under
the terms of the agreements governing such indebtedness. In the event of such
default, the holders ofsuch indebtedness could elect to declare all the funds
borrowed thereunder to be due and payable, together with any accrued and
unpaid interest, the lenders under our ABL Facility or our TLB Facility could
elect to terminate their commitments, ceasemaking further loans and/or
institute foreclosure proceedings against the assets securing such facilities
and we could be forced into bankruptcy or liquidation. If our operating
performance declines, we may in the future need to seek waivers fromthe
required lenders under our ABL Facility or our TLB Facility to avoid being in
default. If we breach our covenants under our ABL Facility or our TLB Facility
and seek waivers, we may not be able to obtain waivers from the required
lendersthereunder.
You should not expect Sally Capital to participate in making payments on the
notes.
Sally Capital, a wholly-owned subsidiary of Sally Holdings, acts as a
co-issuer
solely to facilitatethe issuance of the notes. Sally Capital does not have any
operations or assets of any kind and will not receive any proceeds from the
issuance of the notes. You should not expect Sally Capital to participate in
servicing any of our obligations inthe notes.
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The notes will be effectively subordinated to our and our guarantors' secured
indebtedness to theextent of the value of the collateral securing such
indebtedness.
The notes and the related guarantees will not be secured.However, as of
December 31, 2023, after giving effect to this offering and the use of
proceeds therefrom, incremental ABL Facility borrowings and cash on hand to
redeem the senior unsecured 2025 notes, we would have had $1,037 millionof
total indebtedness outstanding, including the notes being offered hereby, of
which approximately $437 million would have constituted senior secured debt
under the ABL Facility and the TLB Facility and we would have had
additionalavailability of approximately $443 million under our ABL Facility,
all of which would be secured. In addition, the indenture governing the notes
being offered hereby allows us to incur substantial additional secured debt,
which would ranksenior to the notes if incurred. The notes will be effectively
subordinated to any of our secured indebtedness to the extent of the value of
the collateral securing such indebtedness. The effect of this subordination is
that upon a default inpayment on, or the acceleration of, any of our secured
indebtedness, or in the event of a bankruptcy, insolvency, liquidation,
dissolution, reorganization or similar proceeding involving the issuers or any
of the guarantors of the notes, theproceeds from the sale of assets securing
our secured indebtedness will be available to pay obligations on the notes
only after all of our secured indebtedness has been paid in full.
The notes will be structurally subordinated to all indebtedness of those of
our existing or future subsidiaries that are not, or do not become,guarantors
of the notes, including all of our foreign subsidiaries.
The notes will not be guaranteed by certain of our currentand future
subsidiaries, including our
non-U.S.
subsidiaries. Accordingly, claims of holders of the notes will be structurally
subordinated to all indebtedness and the claims of creditors of any
non-guarantor
subsidiaries, including trade creditors. All indebtedness and obligations of any
non-guarantor
subsidiaries will have to be satisfied before any of the assets ofsuch
subsidiaries would be available for distribution upon liquidation or otherwise
to us or a guarantor of the notes. The indenture governing the notes permits
these
non-guarantor
subsidiaries to incurcertain additional debt, including secured debt, and does
not limit their ability to incur other liabilities that are not considered
indebtedness under the indenture. For the twelve months ended December 31,
2023, our
non-guarantor
subsidiaries represented approximately 20% of our consolidated net sales, 14%
of our operating income and 13% of our Adjusted EBITDA. In addition, as of
December 31, 2023, our
non-guarantor
subsidiaries held approximately 25% of our consolidated assets and had
approximately $208 million of liabilities (including trade payables, but
excluding amounts due to related parties), to whichthe notes and the
guarantees would have been structurally subordinated.
U.S. federal and state statutes allow courts, under specific circumstances,to
void the notes and the guarantees, subordinate claims in respect of the notes
and the guarantees and require noteholders to return payments received from
the issuers or the guarantors.
Our direct and indirect domestic subsidiaries that are obligors under the ABL
Facility and the TLB Facility will guarantee the obligationsunder the notes.
The issuance of the notes by the issuers and the issuance of the guarantees by
the guarantors may be subject to review under state and federal laws if a
bankruptcy, liquidation or reorganization case or a lawsuit, including
incircumstances in which bankruptcy is not involved, were commenced at some
future date by, or on behalf of, unpaid creditors of the issuers or the unpaid
creditors of a guarantor. Under the federal bankruptcy laws and comparable
provisions of statefraudulent transfer laws, a court may avoid or otherwise
decline to enforce the notes or a guarantor's guarantee, or may subordinate
the notes or such guarantee to the issuers' or the applicable guarantor's
existing and futureindebtedness. While the relevant laws may vary from state
to state, a court might do so if it found that when the notes were issued, or
when the applicable guarantor entered into its guarantee, or, in some states,
when payments became due under thenotes or such guarantee, the issuers or the
applicable guarantor received less than reasonably equivalent value or fair
consideration and:
. was insolvent or rendered insolvent by reason of such incurrence;
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. was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital;or
. intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.
A court would likely find that the issuers or a guarantor did not receive
reasonably equivalent value or fairconsideration for the notes or such
guarantee, as applicable, if the issuers or such guarantor did not
substantially benefit directly or indirectly from the issuance of the notes.
The measures of insolvency for purposes of these fraudulent transferlaws vary
depending upon the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, an issuer or a
guarantor, as applicable, would be considered insolvent if:
. the sum of its debts, including contingent liabilities, was greater than the fair saleable value of its assets;
. the present fair saleable value of its assets was less than the amount that would be required to pay its
probableliability on its existing debts, including contingent liabilities, as they become absolute and mature; or
. it could not pay its debts as they become due.
A court might also void the notes or a guarantee, without regard to the above
factors, if the court found that the notes were issued or theapplicable
guarantor entered into its guarantee with actual intent to hinder, delay or
defraud its creditors. In addition, any payment by the issuers or a guarantor
pursuant to the notes or its guarantee, as applicable, could be avoided and
requiredto be returned to the issuers or such guarantor or to a fund for the
benefit of the issuers' or such guarantor's creditors, and accordingly the
court might direct you to repay any amounts that you had already received from
the issuers orsuch guarantor. Although each guarantee will be limited as
necessary to prevent that guarantee from constituting a fraudulent conveyance
under applicable law, this provision may not be effective to protect the
guarantees from being voided under thefraudulent transfer laws described above.
To the extent a court deems the notes or any of the guarantees as fraudulent
transfers or holdsthe notes or any of the guarantees unenforceable for any
other reason, holders of the notes would cease to have any direct claim
against the issuers or the applicable guarantor. If a court were to take this
action, the issuers' or theapplicable guarantor's assets would be applied
first to satisfy the issuers' or the applicable guarantor's other liabilities,
if any, and might not be applied to the payment of the notes. Sufficient funds
to repay the notes may not beavailable from other sources, including the
remaining guarantors, if any.
Each guarantee will contain a provision intended to limit theguarantor's
liability to the maximum amount that it could incur without causing the
incurrence of obligations under its guarantee to be a fraudulent transfer.
This provision may not be effective to protect the guarantees from being
avoidedunder applicable fraudulent transfer laws or may reduce the guarantor's
obligation to an amount that effectively makes the guarantee worthless.
We may not have the ability to raise the funds necessary to finance the change
of control offer or the asset disposition offer required by the indenturegoverni
ng the notes being offered hereby.
Upon the occurrence of a "change of control," as defined in the indenturegoverni
ng the notes being offered hereby, we must offer to buy back the notes at a
price equal to 101% of the principal amount, together with accrued and unpaid
interest, if any, to the date of the repurchase. Similarly, we must offer to
buy backthe notes (or repay other indebtedness in certain circumstances), at a
price equal to 100% of the principal amount of the notes (or other debt)
purchased, together with accrued and unpaid interest, if any, to the date of
repurchase, with theproceeds of certain asset dispositions (as defined in the
indenture governing the notes being offered hereby). Our failure to purchase,
or give notice of purchase of, the notes offered hereby would be a default
under the indenture governing thenotes offered hereby, which would also
trigger a cross-default under our other outstanding indebtedness.
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If a change of control or asset disposition occurs that would require us to
repurchase thenotes, it is possible that we may not have sufficient assets to
make the required repurchase of the notes or to satisfy all obligations under
our ABL Facility, our TLB Facility and the indenture governing the notes
offered hereby. A change ofcontrol would also trigger a default under our ABL
Facility and our TLB Facility. In order to satisfy our obligations, we could
seek to refinance the indebtedness under our ABL Facility and our TLB Facility
and the indenture governing the notesoffered hereby or obtain a waiver from
the lenders or holders of the notes. We cannot assure you that we would be
able to obtain a waiver or refinance our indebtedness on terms acceptable to
us, if at all. Any failure to make the required change ofcontrol offer or
asset disposition offer would result in an event of default under the
indenture governing the notes.
We could enter into certaincorporate transactions that may not constitute a
change of control under the indenture governing the notes but which could
nevertheless adversely affect holders of the notes.
The indenture governing the notes permits a variety of acquisition,
refinancing, recapitalization and other leveraged transactions that maynot be
considered change of control transactions. As a result, we could enter into
any such transactions without being required to make an offer to repurchase
the notes even though the transaction could increase our total outstanding
debt, adverselyaffect our capital structure or credit ratings or otherwise
materially adversely affect the holders of the notes.
Holders of the notes may not beable to determine when a "change of control"
giving rise to their right to have the notes repurchased has occurred
following a sale of "substantially all" of our assets.
The definition of "change of control" in the indenture governing the notes
will include the phrase relating to the sale of "allor substantially all" of
our assets. Although there is a limited body of case law interpreting the
phrase "substantially all," there is no precise established definition of the
phrase under applicable law. Accordingly, in certaincircumstances, there may
be a degree of uncertainty as to whether a particular transaction would
involve a disposition of "substantially all" of our assets. As a result, it
may be unclear as to whether a change of control has occurred andwhether we
are required to make an offer to repurchase the notes.
There is no established trading market for the notes offered hereby. If an
actualtrading market does not develop for the notes, you may not be able to
resell them quickly, for the price that you paid or at all.
The notes offered hereby will constitute a new issue of securities, and there
is no established trading market for the notes. We do not intendto apply for
the notes to be listed on any securities exchange or to arrange for quotation
on any automated dealer quotation systems. The underwriters have advised us
that they intend to make a market in the notes, but they are not obligated to
doso. Each underwriter may discontinue any market-making at any time, in its
sole discretion. As a result, we cannot assure you as to the liquidity of any
trading market for the notes or your ability to sell the notes at a particular
time, at afavorable price or at all.
If no active trading market develops, you may not be able to resell your notes
at their fair market value orat all. The liquidity of, and trading market for,
the notes may also be adversely affected by, among other things:
. the number of holders of the notes;
. prevailing interest rates;
. our operating performance and financial condition;
. the prospects for companies in our industry, generally;
. the interest of securities dealers in making a market; and
. the market for similar securities.
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Historically, the market for
non-investment
gradedebt has been subject to disruptions that have caused volatility in
prices of securities similar to the notes. It is possible that the market for
the notes will be subject to disruptions. Any disruptions may have a negative
effect on holders,regardless of our prospects and financial performance.
Many of the covenants in the indenture that will govern the notes will not
apply during anyperiod in which the notes are rated investment grade by at
least two of Moody's, S&P and Fitch.
Many of the covenants inthe indenture that will govern the notes will not
apply to us during any period in which the notes are rated investment grade by
at least two of Moody's, S&P and Fitch provided at such time no default or
event of default has occurred and iscontinuing. These covenants restrict,
among other things, our ability to pay distributions, incur debt and to enter
into certain other transactions. There can be no assurance that the notes will
ever be rated investment grade or, if they are ratedinvestment grade, that the
notes will maintain these ratings. However, suspension of these covenants
would allow us to incur debt, pay dividends and make other distributions and
engage in certain other transactions that would not be permitted whilethese
covenants were in force. To the extent the covenants are subsequently
reinstated, any such actions taken while covenants were suspended would not
result in an event of default under the indenture governing the notes. See
"Description ofnotes--Certain covenants--Effectiveness of Covenants."
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USE OF PROCEEDS
We anticipate that the estimated net proceeds of this offering will be
approximately $592 million after deducting the underwriters'discount and
certain offering expenses.
We intend to use the net proceeds of this offering, together with
approximately $40 millionof borrowings under our ABL Facility and
approximately $57 million of cash on hand, to redeem all of our senior
unsecured 2025 notes that remain outstanding, at a redemption price equal to
100.00% of the principal amount of the notes beingredeemed, plus accrued and
unpaid interest to, but not including, March 13, 2024, the redemption date.
On February 12, 2024, wedelivered a notice of conditional full redemption to
the holders of our senior unsecured 2025 notes, which stated that we intend to
redeem the senior unsecured 2025 notes on March 13, 2024, subject to certain
conditions, including theconsummation of this offering. This prospectus
supplement shall not constitute a notice of redemption, an offer to purchase,
a solicitation of an offer to purchase or a solicitation of consent with
respect to our senior unsecured 2025 notes.
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CAPITALIZATION
The following table sets forth Sally Beauty's consolidated cash and cash
equivalents and capitalization as ofDecember 31, 2023:
. on an actual basis; and
. on an as adjusted basis giving effect to the issuance of the notes offered hereby and the use of proceedstherefrom, incremental
ABL Facility borrowings and cash on hand to redeem the senior unsecured 2025 notes, as described in "Use of proceeds."
You should read this table in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results ofOperations" contained in our Form
10-Q
for the quarter ended December 31, 2023 and the unaudited condensed
consolidated financial statements and the notes thereto incorporated by
reference intothis prospectus supplement from our Form
10-Q
for the quarter ended December 31, 2023.
As of
December 31,2023
Actual As
adjusted(1)
(dollars in thousands)
Cash and cash equivalents(2) $ 120,999 $ 63,999
Long-Term Debt:
Secured long-term debt
:
ABL Facility(2) $ -- 40,000
TLB Facility(3) 397,000 397,000
Unsecured long-term debt
:
Senior unsecured 2025 notes 679,961 --
Notes offered hereby(4) 600,000
Other(5) 252 252
Total debt(6) 1,077,213 1,037,252
Total stockholders' equity 541,340 541,340
Total capitalization $ 1,618,553 1,578,592
(1) Does not reflect accrued interest on the notes offered hereby.
(2) As of December 31, 2023, $17 million of standby letters of credit were issued and $483 millionof borrowings were available
under our ABL Facility. As of December 31, 2023, after giving effect to this offering and the use of proceeds therefrom,
incremental ABL Facility borrowings and $57 million of cash on hand to redeem the seniorunsecured 2025 notes, we would have
had availability of up to approximately $443 million and approximately $40 million outstanding under our ABL Facility.
(3) Excludes unamortized discount of $2.1 million.
(4) Represents the principal amount of the notes offered hereby.
(5) Other unsecured long-term debt includes $0.3 million of finance lease obligations and no other long-termdebt.
(6) Does not include (i) $586.0 million of operating lease liabilities and (ii) $5.7 million ofunamortized debt issuance costs.
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DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
The following is a description of our material indebtedness other than the
notes offered hereby. The following summaries are qualified intheir entirety
by reference to the credit agreement and related documents and indenture to
which each summary relates, copies of which are available upon request.
ABL Facility
On July 6, 2017,the Company and certain of the Company's indirect and direct
subsidiaries that are borrowers or guarantors (the "Loan Parties") entered
into the ABL Facility among the Loan Parties, Bank of America, N.A., as
administrative, collateraland Canadian agent and the lenders named therein.
The ABL Facility was most recently amended on April 19, 2023, to, among other
things, modify certain provisions to replace the London Interbank Offered Rate
("LIBOR") with theSecured Overnight Financing Rate ("Term SOFR"). The ABL
Facility matures on May 11, 2026. The ABL Facility is secured by a
first-priority lien in and upon the accounts and inventory (and the proceeds
thereof) of the Company andits domestic subsidiaries. The ABL Facility is
secured by a second-priority lien in and upon the remaining assets of the
Company and its domestic subsidiaries. The ABL Facility provides for revolving
commitments in an aggregate principal amountequal to $500.0 million (with
availability thereunder subject to a customary borrowing base). The ABL
Facility has a $40.0 million Canadian
sub-facility,
and certain of the Company's foreignsubsidiaries have access to the ABL
Facility upon certain terms and conditions. As of December 31, 2023, $482.6
million was available to be borrowed under the ABL Facility.
TLB Facility
In February 2023, theCompany, Sally Holdings and Sally Capital (collectively,
the "Borrowers") and certain of the Company's other direct and indirect
domestic subsidiaries entered into a credit agreement with Bank of America,
N.A., as Administrative Agentand Collateral Agent, and the lenders and other
parties thereto, providing for the TLB Facility in an aggregate principal
amount equal to $400.0 million, the net proceeds of which were used to repay
our then-existing term loan B due 2024. TheTLB Facility matures on the earlier
of (i) February 28, 2030 and (ii) the date that is 91 days prior to the stated
maturity of the senior unsecured 2025 notes unless all amounts exceeding
$200.0 million of the seniorunsecured 2025 notes are refinanced or repaid in
accordance with the requirements of the TLB Facility (the "Maturity Date").
The outstanding principal balance of the TLB Facility is repayable in
quarterly installments equal to 0.25% of theoriginal principal amount of the
TLB Facility, with a final installment equal to the entire remaining
outstanding principal amount due on the Maturity Date. The TLB Facility was
issued at a discount of 0.75%, and we incurred $4.7 million inissuance costs;
both of which are being amortized using the effective interest method.
In September 2023, the first refinancingamendment of the TLB Facility was
entered into, providing for a
25-basis-point
reduction in the fixed interest spread on the TLB Facility. The TLB Facility
bears interest at a floating rate equal to, at ouroption, either adjusted Term
SOFR plus 2.25% or an adjusted base rate plus 1.25%. No other terms of the
agreement were amended. In connection with the repricing, the Borrowers
evaluated the fair value of the debt, before and after the amendment, foreach
syndicate loan and recognized a loss on extinguishment of $1.8 million within
interest expense.
The TLB Facility is secured bya first-priority lien in and upon substantially
all of the assets of the Company and its domestic subsidiaries other than the
accounts, inventory (and the proceeds thereof) and other assets that secure
the ABL Facility on a first-priority basis (the"ABL Priority Collateral").
Additionally, the TLB Facility is secured by a second-priority lien in and
upon the ABL Priority Collateral.
The TLB Facility does not contain any financial maintenance covenants and is
subject to a covenant package that is substantially consistentwith the
covenant package in the indenture that will govern the notes. The TLB Facility
is subject to a customary asset sale mandatory prepayment provision and is
subject to a customary excess cash flow
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mandatory prepayment provision. The TLB Facility may be prepaid without
penalty or premium, other than customary breakage costs for prepayments that
are made prior to the last date of an interestperiod.
Senior unsecured 2025 notes
On December 3, 2015, we issued the senior unsecured 2025 notes in an aggregate
principal amount of $750.00 million. AtDecember 31, 2023, $679.96 million in
aggregate principal amount of these notes were outstanding. The senior
unsecured 2025 notes are guaranteed on a senior unsecured basis by the
Company, Sally Investment Holdings LLC and the samedomestic subsidiaries, with
certain exceptions, that guarantee our obligations under the ABL Facility and
the TLB Facility. The obligations under these senior unsecured 2025 notes are
senior unsecured obligations.
Beginning on December 1, 2023, the senior unsecured 2025 notes became
redeemable, in whole or in part, at any time and from time to time,at a price
of 100.00% of the principal amount, plus accrued and unpaid interest.
We intend to use the net proceeds of this offering,together with borrowings
under our ABL Facility and cash on hand, to redeem the entire $679.96 million
aggregate principal amount of our senior unsecured 2025 notes, at a redemption
price equal to 100.00% of the principal amount of the notesbeing redeemed,
plus accrued and unpaid interest to, but not including, March 13, 2024, the
redemption date. See "Use of proceeds."
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DESCRIPTION OF NOTES
General
In this Description ofnotes, the words "we," "us," and "our" refer to the
Company and the
Co-Issuer
(as such terms are defined in
"--
Certain Definitions
"
below
)
andnot to any of their respective subsidiaries. Other capitalized terms
defined in "--Certain Definitions" below are used in this "Description of
notes" as so defined below. Any reference to a "Holder" or a"Noteholder" in
this Description of notes refers to the Holders of the Notes (as defined
below). Any reference to "Notes" or a "class" of Notes in this Description of
notes refers to the Notes as a class.
The following description of the particular terms of the Notes (referred to in
the accompanying prospectus as the "
debtsecurities
") and the Guarantees supplements and, to the extent it is inconsistent with
the description in the prospectus, replaces the description of the general
terms and provisions of the debt securities and the guarantees set forth inthe
accompanying prospectus, to which reference is hereby made. The Notes offered
by this prospectus supplement (the "
Notes
") are to be issued under an indenture, dated as of May 18, 2012, among the
Company and the
Co-Issuer,
as issuers, the Guarantors and Computershare Trust Company, N.A. as successor
to Wells Fargo Bank, National Association, as trustee, as amended and
supplemented from time to time (the "
BaseIndenture
") and as supplemented by a fifth supplemental indenture (together with the
Base Indenture, the "
Indenture
"), to be dated as of February, 2024, among the Company and the
Co-Issuer,
as issuers, the Guarantors and Computershare Trust Company, N.A., as trustee
(in such capacity, the "
Trustee
").
The Indenture allows the Company from time to time, without notice to or the
consent of the holders or beneficial owners of the Notes, tocreate and issue
an unlimited principal amount of additional Notes having the same terms and
conditions (except for the Issue Date and, in some case, the initial issue
price and the first interest payment date) as the Notes (the "
AdditionalNotes
"), subject to compliance with the covenant described under the subheading
"--Certain Covenants--Limitation on Indebtedness." Any Additional Notes will
be part of the same series as the Notes that will vote on allmatters with the
Holders of the Notes;
provided
that if such Additional Notes are not fungible with the Notes for U.S. federal
income tax purposes, then such Additional Notes will have a separate CUSIP
number and ISIN from the Notes. Unlessthe context otherwise requires, for all
purposes of the Indenture and this "Description of notes," references to the
Notes will include any Additional Notes actually issued.
The following is a summary of certain provisions of the Indenture. It does not
purport to be complete and is subject to, and is qualified inits entirety by
reference to, all the provisions of the Indenture, including the definitions
of certain terms therein and those terms made a part thereof by the Trust
Indenture Act of 1939, as amended (the "
TIA
"). The Indenturecontains provisions that define your rights and govern the
obligations of the Company and the
Co-Issuer
under the Notes. You may request a copy of the Indenture at the Company's
address set forth in thesection entitled "Incorporation by Reference."
Brief description of the notes and the guarantees
The Notes will be:
. unsecured Senior Indebtedness of the Company;
. pari passu
in right of payment with all existing and future Senior Indebtedness of the Company;
. effectively subordinated to all secured Indebtedness of the Company to the extent of the value of the assetssecuring
such secured Indebtedness, including borrowings under the Senior ABL Facility and the Senior Term Loan B;
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. structurally subordinated to all Indebtedness and other liabilities
(including trade payables) of theCompany's Subsidiaries (other than the
Co-Issuer
and Subsidiaries that become Subsidiary Guarantors pursuant to the
provisions described below under "--Subsidiary Guarantees"); and
. senior in right of payment to all existing and future Subordinated Obligations of the Company.
The Notes will have a corresponding status as Indebtedness of the
Co-Issuer.
The Guarantees of each Parent Guarantor and of each Subsidiary Guarantor in
respect of the Notes will be:
. unsecured Senior Indebtedness of such Guarantor;
. pari passu
in right of payment with all existing and future Senior Indebtedness of such Guarantor;
. effectively subordinated to all secured Indebtedness of such Guarantor
to the extent of the value of the assetssecuring such secured
Indebtedness, including such Guarantor's Guarantee of the borrowings
under the Senior ABL Facility and the Senior Term Loan B;
. structurally subordinated to all Indebtedness and other liabilities (including
trade payables) of each suchGuarantor's Subsidiaries (other than the Company, the
Co-Issuer
and the other Guarantors); and
. senior in right of payment to all existing and future Guarantor Subordinated Obligations of such Guarantor.
Principal, maturity and interest
The Company will initially issue $600.0 million aggregate principal amount of
Notes on the Issue Date. Additional Notes may be issuedunder the Indenture in
one or more series from time to time, subject to the limitations set forth
under "--Certain Covenants--Limitation on Indebtedness," and will vote as a
class with the Notes and otherwise will be treated asNotes for purposes of the
Indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase;
provided
that if any Additional Notes are not fungible with the Notes for U.S. federal
income tax purposes, suchAdditional Notes will have a separate CUSIP number
and ISIN from the Notes.
The Notes will mature on March 1, 2032. Each Notewill bear interest at a rate
of% per annum and interest will accrue on all Notes from and including2024.
Interest will be payable semi-annually in cash to Holders of record at the
close of business on the February 15 orSeptember 15 immediately preceding the
interest payment date on March 1 and October 1 of each year, commencing
October 1, 2024. Interest will be paid on the basis of a
360-day
year consisting of twelve
30-day
months.
Principal of, and premium, if any, and interest on, theNotes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company maintained for such purposes (which initially shall be the designated
corporate trust office of the Trustee), except that, at the option ofthe
Company, payment of interest may be made by check mailed to the address of the
registered Holders of the Notes as such address appears in the register of
Holders (the "
Note Register
").
The Notes will be issued only in fully registered form, without coupons. The
Notes will be issued in minimum denominations of $2,000 (the"
Minimum Denomination
") and any integral multiple of $1,000 in excess thereof.
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The Notes are a new issue of securities with no established trading market. We
do not intendto apply for listing of the Notes on any national securities
exchange or for inclusion of the Notes in any automated quotation system.
Optionalredemption
The Notes will be redeemable, at the Company's option, at any time prior to
maturity at varying redemption prices inaccordance with the provisions set
forth below.
The Notes will be redeemable, at the Company's option, in whole or in part, at
anytime and from time to time on and after March 1, 2027 and prior to maturity
at the applicable redemption price set forth below. Such redemption may be
made upon notice mailed by first-class mail or electronically delivered (or
otherwisetransmitted in accordance with DTC's (as defined below) procedures)
to each Holder's registered address, not less than 10 nor more than 60 days
prior to the redemption date. The Notes will be so redeemable at the following
redemptionprices (expressed as a percentage of principal amount), plus accrued
and unpaid interest, if any, to, but not including, the relevant redemption
date (subject to the right of Holders of record on the relevant record date to
receive interest due onthe relevant interest payment date), if redeemed during
the
12-month
period commencing on March 1 of the years set forth below:
Redemption period Price
2027 %
2028 %
2029 and thereafter 100.000 %
In addition, the Indenture will provide that at any time and from time to time
on or prior toMarch 1, 2027, the Company at its option may redeem up to 40% of
the original aggregate principal amount of the Notes (including the principal
amount of any Additional Notes), with funds in an equal aggregate amount (the"
Redemption Amount
") not exceeding the aggregate proceeds of one or more Equity Offerings (as
defined below), at a redemption price (expressed as a percentage of principal
amount thereof) of%, plus accrued and unpaidinterest, if any, to, but not
including, the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date);
provided, however
, that if the Notes areredeemed, an aggregate principal amount of the Notes
equal to at least 50% of the original aggregate principal amount of Notes
(including the principal amount of any Additional Notes) must remain
outstanding after each such redemption of Notes.
"
Equity Offering
" means a sale of Capital Stock (
x
) that is a sale of Capital Stock or options, warrants orrights with respect
to the Capital Stock of the Company (other than Disqualified Stock), or (
y
) that is a sale of Capital Stock or options, warrants or rights with respect
to the Capital Stock of any direct or indirect parent of theCompany the
proceeds of which in an amount equal to or exceeding the Redemption Amount are
contributed to the equity capital of the Company or any of its Restricted
Subsidiaries. Such redemption may be made upon notice mailed by first-class
mail orelectronically delivered (or otherwise transmitted in accordance with
DTC's procedures) to each Holder's registered address, not less than 10 nor
more than 60 days prior to, but not including, the redemption date (but in no
event more than180 days after the completion of the related Equity Offering).
In addition, at any time prior to March 1, 2027 the Notes mayalso be redeemed
or purchased (by the Company or any other Person) in whole or in part, at the
Company's option, at a price equal to 100% of the principal amount thereof
plus the Applicable Premium (as defined below) as of, and accrued butunpaid
interest, if any, to, but not including, the date of redemption or purchase
(the "
Redemption Date
") (subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interestpayment date). Such redemption or
purchase may be made upon notice mailed by first-class mail or electronically
delivered (or otherwise transmitted in accordance with DTC's procedures) to
each Holder's registered address, not less than 10nor more than 60 days prior
to the Redemption Date.
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"
Applicable Premium
" means, with respect to a Note at any Redemption Date,the greater of:
(i) 1.0% of the principal amount of such Note; and
(ii) the excess of:
(a) the present value at such Redemption Date of (1)
the redemption price of such Note on March 1,
2027(such redemption price being set forth in the
table appearing above under the heading entitled "
Optional Redemption
") plus (
2
) all required remaining scheduled interest payments due on the Note
throughMarch 1, 2027 (excluding accrued but unpaid interest, if
any, to, but not including, the Redemption Date), computed using a
discount rate equal to the Treasury Rate plus 50 basis points, over
(b) the principal amount of the Note on such Redemption Date,
in each case as calculated by the Company or on behalf of the Company by such
Person as the Company shall designate;
provided
that suchcalculation shall not be a duty or obligation of the Trustee.
"
Treasury Rate
" means, with respect to a Redemption Date,the yield to maturity at the time
of computation of United States Treasury securities with a constant maturity
(as compiled and published in the most recent Federal Reserve Statistical
Release H.15 that has become publicly available at least twoBusiness Days
prior to such Redemption Date (or, if such Statistical Release is no longer
published, any publicly available source of similar market data)) most nearly
equal to the period from such Redemption Date to March 1, 2027;
provided
,
however
, that if the period from the Redemption Date to such date is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained bylinear
interpolation (calculated to the nearest
one-twelfth
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that if the period from theRedemption
Date to March 1, 2027, is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used. The Company will (a) calculate theTreasury
Rate on the second Business Day preceding the applicable Redemption Date and
(b) prior to such Redemption Date, file with the Trustee an Officer's
Certificate setting forth the Applicable Premium and the Treasury Rate and
showingthe calculation of each in reasonable detail.
Selection and notice
In the case of any partial redemption, if the Notes to be redeemed are not
Global Notes, the Trustee shall select the Notes to be redeemed orpurchased
(i) if the Notes are listed on any national securities exchange and the
Trustee has been notified by the Company of such listing, in compliance with
the requirements of the principal national securities exchange on which the
Notes arelisted or (ii) on a
pro rata
basis to the extent practical, although no Note of the Minimum Denomination in
original principal amount or less will be redeemed in part. Notes to be
redeemed that are Global Notes will be selected inaccordance with DTC
procedures. Notices of redemption will be delivered electronically if held at
DTC or mailed by first-class mail at least 10 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at itsregistered
address.
If any Note is to be redeemed in part only, the notice of redemption relating
to such Note shall state the portion ofthe principal amount thereof to be
redeemed. A replacement Note in principal amount equal to the unredeemed
portion of the original Note will be issued in the name of the Holder thereof
upon cancellation of the original Note. Notes called forredemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on the Notes or portions of the Notes called for redemption.
Notice of any redemption upon any corporate transaction or other event
(including any Equity Offering, incurrence of Indebtedness, Change ofControl,
Asset Disposition or other transaction) may be given prior to the
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completion of such transaction or event. In addition, any redemption described
above or notice thereof may, at the Company's discretion, be subject to one or
more conditions precedent,including, but not limited to, completion of a
corporate transaction or other event. If any redemption is so subject to the
satisfaction of one or more conditions precedent, the notice thereof shall
describe each such condition and, if applicable,shall state that, in the
Company's discretion, the redemption date may be delayed until such time as
any or all such conditions shall be satisfied (or waived by the Company in its
sole discretion) (even if delayed to a date more than 60 daysafter the date on
which the notice of redemption is first sent), and/or such redemption may not
occur and such notice may be rescinded in the event that any or all such
conditions shall not have been satisfied (or waived by the Company in its
solediscretion) by the redemption date, or by the redemption date as so
delayed, and/or that such notice may be rescinded at any time by the Company
if the Company determines in its sole discretion that any or all of such
conditions will not besatisfied (or waived). The Company should provide
written notice to the Trustee by 10:00 am New York time on the redemption date
(subject to DTC procedures) stating that such condition has not been
satisfied, the notice of redemption is rescinded ordelayed, and the redemption
shall not occur or shall be delayed. In addition, the Company may provide in
such notice that payment of the redemption price and performance of the
Company's obligations with respect to such redemption may beperformed by
another Person.
No sinking fund; open market purchases
We are not required to make any sinking fund payments with respect to the
Notes. However, under certain circumstances, we may be required tooffer to
purchase the Notes as described under the headings "--Change of Control" and
"--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock." We
may at any time and from time to time purchase Notesin the open market or
otherwise.
Parent guarantees
Sally Beauty Holdings, Inc. and Sally Investment Holdings LLC (collectively,
the "
Parent Guarantors
" and each of Sally BeautyHoldings, Inc. and Sally Investment Holdings LLC
individually in such capacity, a "
Parent Guarantor
"), as primary obligors and not merely as sureties, jointly and severally with
all of the Subsidiary Guarantors have agreed to,subject to certain customary
release provisions detailed below, irrevocably and fully and unconditionally
Guarantee (the "
Parent Guarantees
"), on an unsecured senior basis, the punctual payment when due, whether at
Stated Maturity,by acceleration or otherwise, of all monetary obligations of
the Company under the Indenture, whether for principal of or interest on the
Notes, expenses, indemnification or otherwise, subject to certain customary
release provisions detailed below(all such obligations guaranteed by each
Parent Guarantor being herein called the "
Parent Guaranteed Obligations
"). Each Parent Guarantor, pursuant to its Parent Guarantee, agrees to pay, in
addition to the amount stated above, anyand all reasonable
out-of-pocket
expenses (including reasonable counsel fees and expenses) incurred by the
Trustee or the Holders in enforcing any rights under itsParent Guarantee.
Each Parent Guarantee is a continuing Guarantee and shall (i) subject to the
next two paragraphs, remain in fullforce and effect until payment in full of
the principal amount of all outstanding Notes (whether by payment at maturity,
purchase, redemption, defeasance, retirement or other acquisition) and all
other applicable Parent Guaranteed Obligations of theapplicable Parent
Guarantor then due and owing, (ii) be binding upon such Parent Guarantor and
(iii) inure to the benefit of and be enforceable by the Trustee, the Holders
and their permitted successors, transferees and assigns.
Each Parent Guarantor will automatically and unconditionally be released from
all obligations under its Parent Guarantee, and its ParentGuarantee will
thereupon terminate and be discharged and of no further force or effect, (i)
upon the merger or consolidation of any Parent Guarantor with and into the
Company or another Parent Guarantor or Subsidiary Guarantor that is
thesurviving Person in such merger or consolidation, or upon the liquidation
of such Parent Guarantor following the transfer of all of its assets to the
Company or another Parent Guarantor or Subsidiary Guarantor, (ii) upon
defeasance or covenantdefeasance of the Company's obligations,
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or satisfaction and discharge of the Indenture, (iii) subject to customary
contingent reinstatement provisions, upon payment in full of the aggregate
principal amount of all Notes thenoutstanding and all other Parent Guaranteed
Obligations then due and owing or (iv) as described under "--Amendments and
Waivers." Upon any such occurrence specified in the preceding paragraph and
the receipt of an Officer'sCertificate and an Opinion of Counsel, the Trustee
shall execute any documents reasonably required in order to evidence such
release, discharge and termination in respect of the applicable Parent
Guarantee.
Neither the Company nor any such Parent Guarantor shall be required to make a
notation on the Notes to reflect any such Parent Guarantee orany such release,
termination or discharge.
Subsidiary guarantees
On the Issue Date, each Domestic Subsidiary that guarantees payment by the
Company of any Indebtedness of the Company under the Senior ABLFacility or the
Senior Term Loan B will guarantee payment of the Notes under the Indenture.
From and after the Issue Date, the Company will cause each Domestic Subsidiary
that guarantees payment by the Company of any Indebtedness of the Companyunder
a Credit Facility to execute and deliver to the Trustee a supplemental
indenture or other instrument pursuant to which such Domestic Subsidiary will
guarantee payment of the Notes, whereupon such Domestic Subsidiary will become
a SubsidiaryGuarantor for all purposes under the Indenture. In addition, the
Company may cause any Subsidiary that is not a Subsidiary Guarantor so to
guarantee payment of the Notes and become a Subsidiary Guarantor.
Each Subsidiary Guarantor, as primary obligor and not merely as surety, will,
subject to certain customary release provisions detailed below,jointly and
severally, irrevocably and fully and unconditionally Guarantee, on an
unsecured senior basis, the punctual payment when due, whether at Stated
Maturity, by acceleration or otherwise, of all monetary obligations of the
Company under theIndenture and the Notes, whether for principal of or interest
on the Notes, expenses, indemnification or otherwise (all such obligations
guaranteed by such Subsidiary Guarantors being herein called the "
Subsidiary GuaranteedObligations
"). Such Subsidiary Guarantor will agree to pay, in addition to the amount
stated above, any and all reasonable
out-of-pocket
expenses (includingreasonable counsel fees and expenses) incurred by the
Trustee or the Holders in enforcing any rights under its Subsidiary Guarantee.
Theobligations of each Subsidiary Guarantor will be limited to the maximum
amount that will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (including but not limited to any
Guarantee by it of any BankIndebtedness), result in the obligations of such
Subsidiary Guarantor under the Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under applicable law, or being
void or unenforceable under any law relating toinsolvency of debtors.
Each such Subsidiary Guarantee shall be a continuing Guarantee and shall (i)
remain in full force and effectuntil payment in full of the principal amount
of all outstanding Notes (whether by payment at maturity, purchase,
redemption, defeasance, retirement or other acquisition) and all other
Subsidiary Guaranteed Obligations then due and owing unlessearlier terminated
as described below, (ii) be binding upon such Subsidiary Guarantor and (iii)
inure to the benefit of and be enforceable by the Trustee, the Holders and
their permitted successors, transferees and assigns.
Notwithstanding the preceding paragraph, any Subsidiary Guarantor will
automatically and unconditionally be released from all obligationsunder its
Subsidiary Guarantee, and such Subsidiary Guarantee shall thereupon terminate
and be discharged and of no further force or effect, (i) concurrently with any
direct or indirect sale or disposition (by merger or otherwise) of
suchSubsidiary Guarantor or any interest therein, in accordance with the terms
of the Indenture (including the covenants described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" and
"--CertainCovenants--Merger and Consolidation") by the Company or a Restricted
Subsidiary, following which such Subsidiary Guarantor is no longer a
Restricted Subsidiary of the Company, (ii) concurrently with any direct or
indirect sale ordisposition (by merger or
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otherwise) of all or substantially all the assets of such Subsidiary Guarantor
to a Person that is not the Company or a Restricted Subsidiary of the Company,
in accordance with the terms of theIndenture (including the covenants
described under "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock"), (iii) at any time that such Subsidiary Guarantor is
released from all of its obligations under all ofits Guarantees of payment by
the Company of any Indebtedness of the Company under all then-existing Credit
Facilities or Public Debt (it being understood that a release subject to
contingent reinstatement is still a release, and that if any suchGuarantee is
so reinstated, such Subsidiary Guarantee shall also be reinstated to the
extent that such Subsidiary Guarantor would then be required to provide a
Subsidiary Guarantee pursuant to the covenant described under "--CertainCovenant
s--Future Subsidiary Guarantors"), (iv) upon the merger or consolidation of
any Subsidiary Guarantor with and into the Company or another Subsidiary
Guarantor that is the surviving Person in such merger or consolidation, or
upon theliquidation of such Subsidiary Guarantor following the transfer of all
of its assets to the Company or another Subsidiary Guarantor, (v) concurrently
with any Subsidiary Guarantor becoming an Unrestricted Subsidiary, (vi) upon
legal orcovenant defeasance of the Company's obligations, or satisfaction and
discharge of the Indenture, (vii) subject to customary contingent
reinstatement provisions, upon payment in full of the aggregate principal
amount of all Notes thenoutstanding and all other Subsidiary Guaranteed
Obligations then due and owing, (viii) upon the liquidation or dissolution of
such Subsidiary Guarantor provided no Default or Event of Default has occurred
that is continuing or (ix) asdescribed under "--Amendments and Waivers." In
addition, the Company will have the right, upon 30 days' written notice to the
Trustee, to cause any Subsidiary Guarantor that has not guaranteed payment by
the Company of anyIndebtedness of the Company under any then existing Credit
Facility or Public Debt to be unconditionally released from all obligations
under its Subsidiary Guarantee, and such Subsidiary Guarantee shall thereupon
terminate and be discharged and ofno further force or effect. Upon any such
occurrence specified in this paragraph and the receipt of an Officer's
Certificate and an Opinion of Counsel, the Trustee shall execute any documents
reasonably required in order to evidence suchrelease, discharge and
termination in respect of such Subsidiary Guarantee.
Neither the Company nor any such Subsidiary Guarantor shallbe required to make
a notation on the Notes to reflect any such Subsidiary Guarantee or any such
release, termination or discharge.
Notwithstanding the foregoing, this prospectus supplement does not offer and
shall not be deemed to be an offer of Subsidiary Guarantees byArcadia Beauty
Labs II LLC.
Ranking
The indebtedness evidenced by the Notes will (a) be unsecured Senior
Indebtedness of the Company, (b) rank
pari passu
in right of payment with all existing and future Senior Indebtedness of the
Company and (c) be senior in right of payment to all existing and future
Subordinated Obligations of the Company. The Notes will also be effectively
subordinated toall secured Indebtedness of the Company to the extent of the
value of the assets securing such Indebtedness and structurally subordinated
to all Indebtedness and other liabilities (including trade payables) of its
Subsidiaries (other than the
Co-Issuer
and any Subsidiaries that become Subsidiary Guarantors pursuant to the
provisions described above under "--Subsidiary Guarantees"). The Notes will
have a corresponding status as Indebtednessof the
Co-Issuer.
Each Parent Guarantee will (a) be unsecured Senior Indebtedness of
theapplicable Parent Guarantor, (b) rank
pari passu
in right of payment with all existing and future Senior Indebtedness of such
Person and (c) be senior in right of payment to all existing and future
Guarantor Subordinated Obligationsof such Person. Such Parent Guarantee is
also effectively subordinated to all secured Indebtedness of such Person to
the extent of the value of the assets securing such Indebtedness and
structurally subordinated to all Indebtedness and otherliabilities (including
trade payables) of the Subsidiaries of such Person (other than the Company, the
Co-Issuer
and any Subsidiaries that become Subsidiary Guarantors pursuant to the
provisions describedabove under "--Subsidiary Guarantees").
Each Subsidiary Guarantee will (a) be unsecured Senior Indebtedness of
theapplicable Subsidiary Guarantor, (b) rank
pari passu
in right of payment with all existing and future Senior Indebtedness of such
Person and (c) be senior in right of payment to all existing and future
Guarantor SubordinatedObligations of
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such Person. Such Subsidiary Guarantee will also be effectively subordinated
to all secured Indebtedness of such Person to the extent of the value of the
assets securing such Indebtedness andstructurally subordinated to all
Indebtedness and other liabilities (including trade payables) of the
Subsidiaries of such Person (other than any Subsidiaries that become
Subsidiary Guarantors pursuant to the provisions described above under"--Subsidi
ary Guarantees").
All of the operations of the Company are conducted through its Subsidiaries.
Claims ofcreditors of such Subsidiaries, including trade creditors, and claims
of preferred shareholders (if any) of such Subsidiaries will have priority
with respect to the assets and earnings of such Subsidiaries over the claims
of creditors of theCompany, including Holders of the Notes, except for the
Co-Issuer
and unless such Subsidiary is a Subsidiary Guarantor. The Notes, therefore,
will be structurally subordinated to creditors (including tradecreditors) and
preferred shareholders (if any) of other Subsidiaries of the Company (other
than the
Co-Issuer
and Subsidiaries that become Subsidiary Guarantors with respect to the Notes).
Certain of theoperations of a Subsidiary Guarantor may be conducted through
Subsidiaries thereof that are not also Subsidiary Guarantors. Claims of
creditors of such Subsidiaries, including trade creditors, and claims of
preferred shareholders (if any) of suchSubsidiaries will have priority with
respect to the assets and earnings of such Subsidiaries over the claims of
creditors of such Subsidiary Guarantor, including claims under its Subsidiary
Guarantee of the Notes. Such Subsidiary Guarantee, if any,therefore, will be
structurally subordinated to creditors (including trade creditors) and
preferred shareholders (if any) of such Subsidiaries. Although the Indenture
limits the incurrence of Indebtedness (including preferred stock) by certain
ofthe Company's Subsidiaries, such limitation is subject to a number of
significant qualifications.
Change of control
Upon the occurrence of a Change of Control (as defined below), each Holder of
Notes will have the right to require the Company to repurchaseall or any part
of the Notes of such Holder at a purchase price in cash equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to, but
not including, the date of repurchase (the "
Change of Control SettlementDate
") (subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date);
provided
,
however
, that the Company shall not be obligated to repurchase Notespursuant to this
covenant in the event that it has exercised its right to redeem all of the
Notes as described under "--Optional Redemption."
The term "
Change of Control
" means:
(i)any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one ormore Permitted Holders or a Parent, becomes
the "beneficial owner" (as defined in
Rules 13d-3
and
13d-5
under the Exchange Act), directly or indirectly,of more than 50% of the total
voting power of the Voting Stock of the Company,
provided
that (x) so long as the Company is a Subsidiary of any Parent, no "person"
shall be deemed to be or become a "beneficialowner" of more than 50% of the
total voting power of the Voting Stock of the Company unless such "person"
shall be or become a "beneficial owner" of more than 50% of the total voting
power of the Voting Stock of such Parentand (y) any Voting Stock of which any
Permitted Holder is the "beneficial owner" shall not in any case be included
in any Voting Stock of which any such "person" is the "beneficial owner"; or
(ii)the Company merges or consolidates with or into, or sells or transfers (in
one or a series of related transactions)all or substantially all of the assets
of the Company and its Restricted Subsidiaries to, another Person (other than
one or more Permitted Holders) and any "person" (as defined in clause (i)
above), other than one or more PermittedHolders or any Parent, is or becomes
the "beneficial owner" (as so defined), directly or indirectly, of more than
50% of the total voting power of the Voting Stock of the surviving Person in
such merger or consolidation, or the transfereePerson in such sale or transfer
of assets, as the case may be,
provided
that (x) so long as such surviving or
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transferee Person is a Subsidiary of a parent Person, no "person" shall be
deemed to be or become a "beneficial owner" of more than 50% of the total
voting power of the VotingStock of such surviving or transferee Person unless
such "person" shall be or become a "beneficial owner" of more than 50% of the
total voting power of the Voting Stock of such parent Person and (y) any
Voting Stock of whichany Permitted Holder is the "beneficial owner" shall not
in any case be included in any Voting Stock of which any such "person" is the
beneficial owner.
Notwithstanding the foregoing, a transaction will not be deemed to involve a
Change of Control if (1) the Company and/or
Co-Issuer
become a direct or indirect wholly-owned Subsidiary of a holding company and
(2)(A) the direct or indirect beneficial owners of the Voting Stock of such
holding company immediately following thetransaction are substantially the
same as the beneficial owners of the Voting Stock of the Company and/or the
Co-Issuer
immediately prior to that transaction or (B) immediately following that
transactionno Person (other than a holding company satisfying the requirements
of this sentence) is the beneficial owner, directly or indirectly, of more
than 50% of the Voting Stock of such holding company.
Unless the Company has exercised its right to redeem all the Notes as
described under "--Optional Redemption," the Companyshall, not later than 30
days following the date the Company obtains actual knowledge of any Change of
Control having occurred, mail a notice (a "
Change of Control Offer
") to each Holder with a copy to the Trustee stating:(1) that a Change of
Control has occurred or may occur and that such Holder has, or upon such
occurrence will have, the right to require the Company to purchase such
Holder's Notes at a purchase price in cash equal to 101% of the principalamount
thereof, plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on a record date to receive
interest on the relevant interest payment date); (2) the circumstances and
relevant facts andfinancial information regarding such Change of Control; (3)
the repurchase date (which shall be no earlier than 30 days nor later than 60
days from the date such notice is mailed); (4) the instructions determined by
the Company, consistent withthis covenant, that a Holder must follow in order
to have its Notes purchased; and (5) if such notice is mailed prior to the
occurrence of a Change of Control, that such offer is conditioned on the
occurrence of such Change of Control. No Notewill be repurchased in part if
less than the Minimum Denomination in original principal amount of such Note
would be left outstanding.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if (a) a third party makes the Change ofControl Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under
suchChange of Control Offer, (b) notice of redemption of all outstanding Notes
has been given pursuant to the Indenture as described above under the caption
"--Optional Redemption," unless and until there is a default in payment ofthe
applicable redemption price or (c) in connection with or in contemplation of
any Change of Control, the Company has made an offer to purchase any and all
outstanding Notes validly tendered at a cash price equal to or higher than the
Changeof Control payment (an "Alternate Offer") and has purchased all
outstanding Notes properly tendered in accordance with the terms of such
Alternate Offer.
If Holders of not less than 90% in aggregate principal amount of all
outstanding Notes validly tender and do not withdraw such Notes inconnection
with any tender offer or other offer to purchase the Notes (including pursuant
to a Change of Control Offer or an offer to purchase with the proceeds from
any Asset Disposition) and the Company, or any other Person making such offer
inlieu of the Company, purchases all of the Notes validly tendered and not
validly withdrawn by such Holders, the Company will have the right, upon not
less than 10 nor more than 60 days' prior notice, to redeem all Notes that
remain outstandingfollowing such purchase at a redemption price in cash equal
to the applicable price paid to holders in such purchase, plus accrued and
unpaid interest, if any, to, but excluding, the redemption date (subject to
the right of Holders of Notes on therelevant regular record date to receive
interest due on the relevant interest payment date).
The Company will comply, to the extentapplicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to
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this covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws andregulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
The Change of Control purchasefeature is a result of negotiations between the
Company and the underwriters. The Company has no present plans to engage in a
transaction involving a Change of Control, although it is possible that the
Company could decide to do so in the future.Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or recapitalizations, that
would not constitute a Change of Control under the Indenture, but thatcould
increase the amount of Indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings. Restrictions on the
ability of the Company to Incur additional Indebtedness are contained in the
covenantsdescribed under "--Certain Covenants-- Limitation on Indebtedness"
and "--Certain Covenants--Limitation on Liens." Such restrictions can only be
waived with the consent of the Holders of a majority in principalamount of the
Notes then outstanding. Except for the limitations contained in such
covenants, however, the Indenture will not contain any covenants or provisions
that may afford Holders protection in the event of a highly leveraged
transaction. Inaddition, Holders may not be entitled to require the Company to
repurchase their Notes in certain circumstances involving a significant change
in the composition of the Company's Board of Directors, including in
connection with a proxy contestwhere the Board of Directors initially opposed
a dissident slate of directors but approves them later as continuing directors.
Theoccurrence of a Change of Control would constitute a default under our
Senior ABL Agreement and our Senior Term Loan B Agreement. Agreements
governing future Indebtedness of the Company may contain prohibitions of
certain events that wouldconstitute a Change of Control or require such
Indebtedness to be repurchased or repaid upon a Change of Control. The Senior
ABL Agreement and the Senior Term Loan B Agreement prohibit, and the
agreements governing future Indebtedness of the Companymay prohibit, the
Company from repurchasing the Notes upon a Change of Control unless the
Indebtedness governed by such Senior ABL Agreement and Senior Term Loan B
Agreement or the agreements governing such future Indebtedness, as the case
may be,has been repurchased or repaid (or an offer made to effect such
repurchase or repayment has been made and the Indebtedness of those creditors
accepting such offer has been repurchased or repaid) and/or other specified
requirements have been met.Moreover, the exercise by the Holders of their
right to require the Company to repurchase the Notes could cause a default
under such agreements, even if the Change of Control itself does not, due to
the financial effect of such repurchase on theCompany and its Subsidiaries.
Finally, the Company's ability to pay cash to the Holders upon a repurchase
may be limited by the Company's then existing financial resources. There can
be no assurance that sufficient funds will be availablewhen necessary to make
any required repurchases. The provisions under the Indenture relating to the
Company's obligation to make an offer to purchase the Notes as a result of a
Change of Control may be waived or modified with the writtenconsent of the
Holders of a majority in principal amount of the Notes. As described above
under "--Optional Redemption," the Company also has the right to redeem the
Notes at specified prices, in whole or in part, upon a Change ofControl or
otherwise.
The definition of Change of Control includes a phrase relating to the sale or
other transfer of "all orsubstantially all" of the Company's assets. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise definition of the phrase under applicable law.
Accordingly, in certaincircumstances there may be a degree of uncertainty in
ascertaining whether a particular transaction would involve a disposition of
"all or substantially all" of the assets of the Company, and therefore it may
be unclear as to whether aChange of Control has occurred and whether the
Holders of the Notes have the right to require the Company to repurchase such
Notes.
Anysuch notice in respect of a Change of Control Offer or Alternate Offer may
be sent prior to the occurrence of a Change of Control if a definitive
agreement is in place for the Change of Control at the time the Change of
Control Offer or AlternateOffer is made, to the extent that such notice states
that the Change of Control Offer or Alternate Offer is conditional on the
occurrence of such Change of Control and describes each
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such condition, and, if applicable, stating that, in the Company's discretion,
the Change of Control Settlement Date may be delayed until such time
(including more than 60 days after thenotice is mailed or delivered, including
by electronic transmission) as any or all such conditions shall be satisfied
(or waived by the Company in its sole discretion), or that such purchase may
not occur and such notice may be rescinded in theevent that the Company shall
determine that any or all such conditions shall not have been satisfied (or
waived by the Company in its sole discretion) by the Change of Control
Settlement Date, or by the Change of Control Settlement Date as sodelayed, or
such notice may be rescinded at any time in the Company's discretion if in the
good faith judgment of the Company any or all such conditions will not be
satisfied.
Certain covenants
The Indenture willcontain covenants including, among others, the covenants as
described below.
Effectiveness of Covenants.
The Indenture willprovide that, if on any day following the Issue Date (a) the
Notes have Investment Grade Ratings from at least two Rating Agencies and (b)
no Default has occurred and is continuing under the Indenture, then, beginning
on that day subjectto the provisions of the following paragraph, the covenants
specifically listed under the following captions in this "Description of
notes" section of this prospectus supplement (collectively, the "
Suspended Covenants
")will be suspended:
(i)"--Limitation on Indebtedness";
(ii)"--Limitation on Restricted Payments";
(iii)"--Limitation on Restrictions on Distributions from Restricted
Subsidiaries";
(iv)"--Limitation on Sales of Assets and Subsidiary Stock";
(v)"--Limitation on Transactions with Affiliates";
(vi)"--Future Subsidiary Guarantors"; and
(vii)clause (iii) of the first paragraph of "--Merger and Consolidation."
During any period that the foregoing covenants have been suspended, the Board
of Directors may not designate any Subsidiaries of the Companyas Unrestricted
Subsidiaries unless such designation would have complied with the covenant
described under "--Limitation on Restricted Payments" as if such covenant
would have been in effect during such period.
If on any subsequent date one or both of the Rating Agencies downgrade the
ratings assigned to the Notes below an Investment Grade Rating or aDefault or
an Event of Default occurs and is continuing, the foregoing covenants will be
reinstated as of and from the date of such rating decline (any such date, a "
Reversion Date
"). The period of time between the suspension ofcovenants as set forth above
and the Reversion Date is referred to as the "
Suspension Period
." Upon such reinstatement, all Indebtedness Incurred during the Suspension
Period will be deemed to have been Incurred under the exceptionprovided by
clause (b)(iii) of "--Limitation on Indebtedness." With respect to Restricted
Payments made after any such reinstatement, the amount of Restricted Payments
will be calculated as if the covenant described under"--Limitation on
Restricted Payments" had been in effect since the Issue Date but excluding the
Suspension Period. For purposes of the covenant described under "--Limitation
on Sales of Assets and Subsidiary Stock," uponthe occurrence of a Reversion
Date the amount of Excess Proceeds not applied in accordance with such
covenant will be deemed to be reset to zero.
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During the Suspension Period, any reference in the definitions of
"PermittedLiens" and "Unrestricted Subsidiary" to the covenant described under
"--Limitation on Indebtedness" or any provision thereof shall be construed as
if such covenant were in effect during the Suspension Period.
Notwithstanding that the Suspended Covenants may be reinstated, no Default or
Event of Default will be deemed to have occurred as a result ofany failure by
the Company or any Subsidiary to comply with the Suspended Covenants during
any Suspension Period (or upon termination of the Suspension Period or after
that time arising out of events that occurred or actions taken during
theSuspension Period) and the Company and any Subsidiary will be permitted,
without causing a Default or Event of Default or breach of any kind under the
Indenture, to honor, comply with or otherwise perform any contractual
commitments or obligationsentered into during a Suspension Period following a
Reversion Date and to consummate the transactions contemplated thereby.
There can beno assurance that the Notes will ever achieve or maintain
Investment Grade Ratings.
Limitation on Indebtedness.
TheIndenture will provide as follows:
(a)The Company will not, and will not permit any Restricted Subsidiary to,
Incur anyIndebtedness (including Acquired Indebtedness);
provided
,
however
, that the Company and any Restricted Subsidiary may Incur Indebtedness
(including Acquired Indebtedness), if on the date of the Incurrence and after
giving
proforma
effect thereto (including
pro forma
application of the proceeds thereof) the Consolidated Coverage Ratio would
have been at least 2.00:1.00.
(b)Notwithstanding the foregoing paragraph (a), the Company and its Restricted
Subsidiaries may Incur the following Indebtedness:
(i)Indebtedness Incurred pursuant to any Credit Facility (including but not
limited to in respect of letters of creditor bankers' acceptances issued or
created thereunder) and Indebtedness Incurred other than under any Credit
Facility, and (without limiting the foregoing), in each case, any Refinancing
Indebtedness in respect thereof, in a maximum principalamount at any time
outstanding not exceeding in the aggregate the amount equal to (A) $1,400.0
million,
plus
(B) the greater of (x) $600.0 million and (y) an amount equal to (1) the
Borrowing Base
less
(2) the aggregate principal amount of Indebtedness Incurred by Special Purpose
Subsidiaries that are Domestic Subsidiaries and then outstanding pursuant to
clause (ix) of this paragraph (b),
plus
(C) in the event of anyrefinancing of any such Indebtedness, the aggregate
amount of interest and fees, underwriting discounts, premiums, defeasance
costs and other costs and expenses incurred in connection with such
refinancing;
(ii)Indebtedness (A) of any Restricted Subsidiary to the Company or (B) of the
Company or any RestrictedSubsidiary to any Restricted Subsidiary;
provided
, that any subsequent issuance or transfer of any Capital Stock of such
Restricted Subsidiary to which such Indebtedness is owed, or other event, that
results in such Restricted Subsidiaryceasing to be a Restricted Subsidiary or
any other subsequent transfer of such Indebtedness (except to the Company or a
Restricted Subsidiary) will be deemed, in each case, an Incurrence of such
Indebtedness by the issuer thereof not permitted bythis clause (ii);
(iii)Indebtedness represented by the Notes (other than any Additional Notes),
any Indebtedness(other than the Indebtedness described in clause (ii) above)
outstanding on the Issue Date and any Refinancing Indebtedness Incurred in
respect of any Indebtedness described in this clause (iii) or paragraph (a)
above;
(iv)Purchase Money Obligations and Capitalized Lease Obligations, finance
lease obligations or mortgage financings,Disqualified Stock issued by the
Company or any Restricted
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Subsidiaries and Preferred Stock issued by Restricted Subsidiaries to finance
all or any part of the acquisition, purchase, lease, construction, rental
payments, design, installation, repair,replacement or improvement of property
(real or personal), vehicles, plant or equipment or other fixed or capital
assets (whether through the direct purchase of assets or the Capital Stock of
any Person owning such assets) and any RefinancingIndebtedness with respect
thereto, in an aggregate principal amount at any time outstanding not
exceeding an amount equal to the greater of $330.0 million and 12.5% of
Consolidated Total Assets;
(v)Indebtedness consisting of accommodation guarantees for the benefit of
trade creditors of the Company or any of itsRestricted Subsidiaries;
(vi)(A) Guarantees (including any future Guarantees) by the Company or any
RestrictedSubsidiary of Indebtedness or any other obligation or liability of
the Company or any Restricted Subsidiary (other than any Indebtedness Incurred
by the Company or such Restricted Subsidiary, as the case may be, in violation
of the covenantdescribed under "--Limitation on Indebtedness"), or (B) without
limiting the covenant described under "--Limitation on Liens," Indebtedness of
the Company or any Restricted Subsidiary arising by reason of any Liengranted
by or applicable to such Person securing Indebtedness of the Company or any
Restricted Subsidiary (other than any Indebtedness Incurred by the Company or
such Restricted Subsidiary, as the case may be, in violation of the covenant
describedunder "--Limitation on Indebtedness");
(vii)Indebtedness of the Company or any Restricted Subsidiary(A) arising from
the honoring of a check, draft or similar instrument of such Person drawn
against insufficient funds,
provided
that such Indebtedness is extinguished within five Business Days of its
Incurrence or (B) consisting ofguarantees, indemnities, obligations in respect
of earnouts or other purchase price adjustments, or similar obligations,
Incurred in connection with the acquisition or disposition of any business,
assets or Person;
(viii)Indebtedness of the Company or any Restricted Subsidiary (A) in respect
of letters of credit, bankers'acceptances, bank guarantees, discounted bills
of exchange or other similar instruments supporting trade payables or
discounting or factoring of receivables, warehouse receipts or similar
facilities, and reinvestment and reimbursement obligationsrelated thereto or
relating to liabilities or obligations Incurred, in the ordinary course of
business (including those issued to governmental entities in connection with
self-insurance under applicable workers' compensation statutes), or(B)
constituting reimbursement obligations with respect to letters of credit and
bank guarantees issued in the ordinary course of business, including letters
of credit in respect of workers' compensation claims, health, disability or
otherbenefits to employees or former employees or their families or property,
casualty or liability insurance or self-insurance, and letters of credit in
connection with the maintenance of, or pursuant to the requirements of,
environmental or otherpermits or licenses from governmental authorities, or
other Indebtedness with respect to reimbursement type obligations regarding
workers compensation claims or similar obligations incurred in the ordinary
course of business or any governmentalrequirements, or completion guarantees,
surety, judgment, appeal or performance bonds, or other similar bonds,
instruments or obligations, or advance payments, customs, VAT or other tax
guarantees or similar instruments provided by the Company orany Restricted
Subsidiary or liabilities Incurred in connection with the cash management,
cash pooling, tax and accounting operations of the Company or any Restricted
Subsidiary, or other similar obligations Incurred in the ordinary course
ofbusiness, or (C) Hedging Obligations, entered into for bona fide hedging
purposes, or (D) Management Guarantees, or (E) the financing of insurance
premiums in the ordinary course of business or (F) netting, overdraft
protectionand other arrangements arising under standard business terms of any
bank at which the Company or any Restricted Subsidiary maintains an overdraft,
cash pooling or other similar facility or arrangement;
(ix)Indebtedness (A) of a Special Purpose Subsidiary secured by a Lien on all
or part of the assets disposed ofin, or otherwise Incurred in connection with,
a Financing Disposition or (B) otherwise
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Incurred in connection with a Special Purpose Financing; provided that (1)
such Indebtedness is not recourse to the Company or any Restricted Subsidiary
that is not a Special PurposeSubsidiary (other than with respect to Special
Purpose Financing Undertakings), (2) in the event such Indebtedness shall
become recourse to the Company or any Restricted Subsidiary that is not a
Special Purpose Subsidiary (other than with respect toSpecial Purpose
Financing Undertakings), such Indebtedness will be deemed to be, and must be
classified by the Company as, Incurred at such time (or at the time initially
Incurred) under one or more of the other provisions of this covenant for
solong as such Indebtedness shall be so recourse; and (3) in the event that at
any time thereafter such Indebtedness shall comply with the provisions of the
preceding subclause (1), the Company may classify such Indebtedness in whole
or in partas Incurred under this clause (b)(ix) of this covenant;
(x)Indebtedness of any Person that is assumed by theCompany or any Restricted
Subsidiary in connection with its acquisition of assets from such Person or
any Affiliate thereof or is issued and outstanding on or prior to the date on
which such Person was acquired by the Company or any RestrictedSubsidiary or
merged or consolidated with or into any Restricted Subsidiary (including
Indebtedness Incurred to finance, or otherwise Incurred in connection with,
such acquisition),
provided
that on the date of such acquisition, merger orconsolidation, after giving
effect thereto, either (A) the Company could Incur at least $1.00 of
additional Indebtedness pursuant to paragraph (a) above or (B) the
Consolidated Coverage Ratio of the Company would equal or exceed theConsolidated
Coverage Ratio of the Company immediately prior to giving effect thereto; and
any Refinancing Indebtedness with respect to any such Indebtedness;
(xi)Indebtedness of the Company or any Restricted Subsidiary in an aggregate
principal amount at any time outstandingnot exceeding an amount equal to (A)
(1) the Foreign Borrowing Base
less
(2) the aggregate principal amount of Indebtedness Incurred by Special Purpose
Subsidiaries that are Foreign Subsidiaries and then outstanding pursuant
toclause (ix) of this paragraph (b)
plus
(B) in the event of any refinancing of any Indebtedness Incurred under this
clause (xi), the aggregate amount of interest and fees, underwriting
discounts, premiums, defeasance costs and othercosts and expenses incurred in
connection with such refinancing;
(xii)Contribution Indebtedness and anyRefinancing Indebtedness with respect
thereto; and
(xiii)Indebtedness of the Company or any Restricted Subsidiaryin an aggregate
principal amount at any time outstanding not exceeding an amount equal to the
greater of $330.0 million and 12.5% of Consolidated Total Assets.
(c)For purposes of determining compliance with, and the outstanding principal
amount of any particular Indebtedness Incurred pursuantto and in compliance
with, this covenant, (i) any other obligation of the obligor on such
Indebtedness (or of any other Person who could have Incurred such Indebtedness
under this covenant) arising under any Guarantee, Lien or letter of
credit,bankers' acceptance or other similar instrument or obligation
supporting such Indebtedness shall be disregarded to the extent that such
Guarantee, Lien or letter of credit, bankers' acceptance or other similar
instrument or obligationsecures the principal amount of such Indebtedness;
(ii) the accrual of interest, the accretion of accreted value, the payment of
interest in the form of additional Indebtedness, the payment of dividends on
Disqualified Stock in the form ofadditional shares of Disqualified Stock,
accretion or amortization of original issue discount or liquidation
preferences and increases in the amount of Indebtedness outstanding solely as
a result of fluctuations in the exchange rate or currencieswill not be deemed
to be an incurrence of Indebtedness for purposes of this covenant; (iii) in
the event that Indebtedness meets the criteria of more than one of the types
of Indebtedness described in paragraphs (a) and (b) above, theCompany, in its
sole discretion, shall classify such item of Indebtedness and may include the
amount and type of such Indebtedness in one or more of such paragraphs or
clauses thereof (including in part under one such paragraph or clause thereof
andin part under another such paragraph or clause thereof); and (iv) the
amount of Indebtedness issued at a price that is less than the principal
amount thereof shall be equal to the amount of the
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liability in respect thereof determined in accordance with GAAP and the
principal amount of any
non-interest
bearing Indebtedness or other discountsecurity constituting Indebtedness at
any date shall be the principal amount thereof that would be shown on a
consolidated balance sheet of the Company dated such date prepared in
accordance with GAAP.
(d)For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Indebtedness denominated in aforeign
currency, the Dollar-equivalent principal amount of such Indebtedness Incurred
pursuant thereto shall be calculated based on the relevant currency exchange
rate in effect on the date that such Indebtedness was Incurred, in the case of
termIndebtedness, or first committed, in the case of revolving credit
Indebtedness,
provided
that (
x
) the Dollar-equivalent principal amount of any such Indebtedness outstanding
on the Issue Date shall be calculated based on therelevant currency exchange
rate in effect on the Issue Date, (
y
) if such Indebtedness is Incurred to refinance other Indebtedness denominated
in a foreign currency (or in a different currency from such Indebtedness so
being Incurred),and such refinancing would cause the applicable Dollar-denominat
ed restriction to be exceeded if calculated at the relevant currency exchange
rate in effect on the date of such refinancing, such Dollar-denominated
restriction shall be deemed not tohave been exceeded so long as the principal
amount of such refinancing Indebtedness does not exceed (
i
) the outstanding or committed principal amount (whichever is higher) of such
Indebtedness being refinanced plus (
ii
) theaggregate amount of fees, underwriting discounts, premiums and other
costs and expenses incurred in connection with such refinancing and (
z
) the Dollar-equivalent principal amount of Indebtedness denominated in a
foreign currency andIncurred pursuant to a Credit Facility shall be calculated
based on the relevant currency exchange rate in effect on, at the Company's
option, (
i
) the Issue Date, (
ii
) any date on which any of the respective commitmentsunder such Credit
Facilities shall be reallocated between or among facilities or subfacilities
thereunder, or on which such rate is otherwise calculated for any purpose
thereunder, or (
iii
) the date of such Incurrence. The principalamount of any Indebtedness
Incurred to refinance other Indebtedness, if Incurred in a different currency
from the Indebtedness being refinanced, shall be calculated based on the
currency exchange rate applicable to the currencies in which suchrespective
Indebtedness is denominated that is in effect on the date of such refinancing.
(e)If Indebtedness, Disqualified Stockor Preferred Stock originally incurred
in reliance upon a percentage of Consolidated Total Assets under this covenant
is being refinanced and such refinancing would cause the maximum amount of
Indebtedness, Disqualified Stock or Preferred Stockthereunder to be exceeded
at such time, then such refinancing will nevertheless be permitted thereunder
and such additional Indebtedness, Disqualified Stock or Preferred Stock will
be deemed to have been incurred under the applicable provision solong as the
principal amount or liquidation preference of such refinancing Indebtedness,
Disqualified Stock or Preferred Stock does not exceed the principal amount or
liquidation preference of Indebtedness, Disqualified Stock or Preferred
Stockbeing refinanced,
plus
additional Indebtedness, Disqualified Stock or Preferred Stock incurred to pay
accrued but unpaid interest or dividends, premiums (including tender
premiums), defeasance costs, underwriting or initial purchaserdiscounts, fees,
costs and expenses (including original issue discount, upfront fees or similar
fees) in connection with such refinancing.
Limitation on Restricted Payments.
The Indenture will provide as follows:
(a)The Company shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to:
(i)declare or pay any dividend or make any distribution on or in respect of
its Capital Stock (including any suchpayment in connection with any merger or
consolidation to which the Company is a party) except dividends, payments or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and dividends, payments or distributions payableto the Company or any
Restricted Subsidiary (and, in the case of any such Restricted Subsidiary
making such dividend, payment or distribution, to other holders of its Capital
Stock on no more than a
pro rata
basis, measured by value),
(ii)purchase, redeem, retire or otherwise acquire for value any Capital Stock
of the Company held by Persons other thanthe Company or a Restricted
Subsidiary (other than any acquisition of
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Capital Stock deemed to occur upon the exercise of options if such Capital
Stock represents a portion of the exercise price thereof),
(iii)voluntarily purchase, repurchase, redeem, defease or otherwise
voluntarily acquire or retire for value, prior toscheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated Obligations
(other than a purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value in anticipation of satisfying a
sinkingfund obligation, principal installment or final maturity, in each case
due within one year of the date of such acquisition or retirement) or
(iv)make any Investment (other than a Permitted Investment) in any Person,
(any such dividend, distribution, purchase, repurchase, redemption,
defeasance, other acquisition or retirement or Investment as set forth
inclauses (i) through (iv) above, referred to as a "
Restricted Payment
"), if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment and after giving effect thereto:
(1)a Default shall have occurred and be continuing (or would result therefrom);
(2)the Company could not Incur at least an additional $1.00 of Indebtedness
pursuant to paragraph (a) of thecovenant described under "--Limitation on
Indebtedness"; or
(3)the aggregate amount of suchRestricted Payment and all other Restricted
Payments (the amount so expended, if other than in cash, to be as determined
in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a resolution of the Board ofDirectors) declared or
made subsequent to the Issue Date and then outstanding would exceed, without
duplication, the sum of:
(A)an amount (which may not be less than zero) equal to 50% of the
Consolidated Net Income accrued during the period(treated as one accounting
period) beginning on October 1, 2015 to the end of the most recent fiscal
quarter ending prior to the date of such Restricted Payment for which
consolidated financial statements of the Company are available;
(B)the aggregate Net Cash Proceeds and the Fair Market Value of property or
assets (x)(i) received by the Company ascapital contributions to the Company
after the Issue Date or from the issuance or sale (other than to a Restricted
Subsidiary) of its Capital Stock (other than Disqualified Stock) after the
Issue Date (other than Excluded Contributions andContribution Amounts) or (ii)
that becomes part of the capital of the Company or a Restricted Subsidiary
through consolidation or merger following the Issue Date and (y) received by
the Company or any Restricted Subsidiary from theissuance and sale by the
Company or any Restricted Subsidiary after the Issue Date of Indebtedness
(other than to the Company or any Restricted Subsidiary) that shall have been
converted into or exchanged for Capital Stock of the Company (other
thanDisqualified Stock) or Capital Stock of any Parent, plus the amount of any
cash and the Fair Market Value of any property or assets, received by the
Company or any Restricted Subsidiary upon such conversion or exchange;
(C)the aggregate amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from(i) dividends, distributions, interest
payments, return of capital, repayments of Investments or other transfers of
assets to the Company or any Restricted Subsidiary from any Unrestricted
Subsidiary, including dividends or other distributionsrelated to dividends or
other distributions made pursuant to clause (x) of the following paragraph (b),
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or (ii) the redesignation of any Unrestricted Subsidiary as a Restricted
Subsidiary (valued in each case as provided in the definition of "Investment"),
not to exceed in the caseof any such Unrestricted Subsidiary the aggregate
amount of Investments (other than Permitted Investments) made by the Company
or any Restricted Subsidiary in such Unrestricted Subsidiary after the Issue
Date;
(D)the aggregate Net Cash Proceeds and the Fair Market Value of property or
assets received by the Company or aRestricted Subsidiary from the sale or
other disposition, liquidation or repayment (including by way of dividends) of
any Investment constituting a Restricted Payment (without duplication of any
amount deducted in calculating the amount ofInvestments at any time
outstanding included in the amount of Restricted Payments); and
(E)$350.0 million.
(b)The provisions of the foregoing paragraph (a) do not prohibit any of the
following (each, a "
PermittedPayment
"):
(i)any purchase, redemption, repurchase, defeasance or other acquisition or
retirement ofCapital Stock of the Company or Subordinated Obligations made by
exchange (including any such exchange pursuant to the exercise of a conversion
right or privilege in connection with which cash is paid in lieu of the
issuance of fractional shares)for, or out of the proceeds of the substantially
concurrent issuance or sale of, Capital Stock of the Company (other than
Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary) or a substantially concurrent capitalcontribution to the Company,
in each case other than Excluded Contributions and Contribution Amounts;
provided,
that the Net Cash Proceeds from such issuance, sale or capital contribution
shall be excluded in subsequent calculations underclause (3)(B) of the
preceding paragraph (a);
(ii)any purchase, redemption, repurchase, defeasance or otheracquisition or
retirement of Subordinated Obligations (w) made by exchange for, or out of the
proceeds of the substantially concurrent issuance or sale of, Indebtedness of
the Company or Refinancing Indebtedness Incurred in compliance with
thecovenant described under "--Limitation on Indebtedness," (x) from Net
Available Cash to the extent permitted by the covenant described under
"--Limitation on Sales of Assets and Subsidiary Stock," (y) following
theoccurrence of a Change of Control (or other similar event described therein
as a "change of control"), but only if the Company shall have complied with
the covenant described under "--Change of Control" and, if required,purchased
all Notes tendered pursuant to the offer to repurchase all the Notes required
thereby, prior to purchasing or repaying such Subordinated Obligations or (z)
constituting Acquired Indebtedness;
(iii)dividends paid within 60 days after the date of declaration thereof if at
such date of declaration such dividendwould have complied with the preceding
paragraph (a);
(iv)Investments or other Restricted Payments in an aggregateamount outstanding
at any time not to exceed the amount of Excluded Contributions;
(v)loans, advances, dividendsor distributions by the Company to any Parent to
permit any Parent to repurchase or otherwise acquire its Capital Stock
(including any options, warrants or other rights in respect thereof), or
payments by the Company to repurchase or otherwiseacquire Capital Stock of any
Parent or the Company (including any options, warrants or other rights in
respect thereof), in each case from Management Investors, such payments,
loans, advances, dividends or distributions not to exceed an amount (netof
repayments of any such loans or advances) equal to (x)(1) $25.0 million, plus
(2) $5.0 million multiplied by the number of calendar years that have
commenced since the Issue Date, plus (y) the Net Cash Proceeds received by
theCompany since the Issue Date from, or as a capital
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contribution from, the issuance or sale to Management Investors of Capital
Stock (including any options, warrants or other rights in respect thereof), to
the extent such Net Cash Proceeds are notincluded in any calculation under
clause (3)(B)(x) of the preceding paragraph (a), plus (z) the cash proceeds of
key man life insurance policies received by the Company or any Restricted
Subsidiary (or by any Parent and contributed to theCompany) since the Issue
Date to the extent such cash proceeds are not included in any calculation
under clause (3)(A) of the preceding paragraph (a);
(vi)the payment by the Company of, or loans, advances, dividends or
distributions by the Company to any Parent to pay,dividends on the common
stock or equity of the Company or any Parent following a public offering of
such common stock or equity in an amount not to exceed in any fiscal year the
greater of (A) 6.0% of the aggregate gross proceeds received by theCompany
(whether directly, or indirectly through a contribution to common equity
capital) in or from such public offering and (B) 5.0% of Market Capitalization;
(vii)Restricted Payments (including loans or advances) in an aggregate amount
outstanding at any time not to exceed anamount (net of repayments of any such
loans or advances) equal to the greater of $330.0 million and 12.5% of
Consolidated Total Assets;
(viii)loans, advances, dividends or distributions to any Parent or other
payments by the Company or any RestrictedSubsidiary (A) pursuant to the Tax
Sharing Agreement or (B) to pay or permit any Parent to pay any Parent
Expenses or any Related Taxes;
(ix)payments by the Company, or loans, advances, dividends or distributions by
the Company to any Parent to makepayments, to holders of Capital Stock of the
Company or any Parent in lieu of issuance of fractional shares of such Capital
Stock, not to exceed $5.0 million in the aggregate outstanding at any time;
(x)dividends or other distributions of Capital Stock, Indebtedness or other
securities of Unrestricted Subsidiaries;
(xi)the declaration and payment of dividends to holders of any class or series
of Disqualified Stock, or of anyPreferred Stock of a Restricted Subsidiary,
Incurred in accordance with the terms of the covenant described under "Certain
Covenants--Limitation on Indebtedness" above; and
(xii)other Restricted Payments if, immediately after giving effect to such
Restricted Payment (including the incurrenceof any Indebtedness to finance
such payment) as if it had occurred at the beginning of the most recently
ended four full fiscal quarters for which consolidated financial statements of
the Company are available, the Consolidated Total Leverage Ratiowould have
been less than or equal to 3.25:1.00;
provided
, that (
A
) in the case of clauses (iii), (vi) and (xii), thenet amount of any such
Permitted Payment shall be included in subsequent calculations of the amount
of Restricted Payments, (
B
) in the case of clause (v), at the time of any calculation of the amount of
Restricted Payments, the netamount of Permitted Payments that have then
actually been made under clause (v) that is in excess of 50% of the total
amount of Permitted Payments then permitted under clause (v) shall be included
in such calculation of the amount ofRestricted Payments, (
C
) in all cases other than pursuant to clauses (A) and (B) immediately above,
the net amount of any such Permitted Payment shall be excluded in subsequent
calculations of the amount of Restricted Payments and(
D
) solely with respect to clauses (vii) and (xii), no Default or Event of
Default shall have occurred or be continuing at the time of any such Permitted
Payment after giving effect thereto.
(c)For purposes of determining compliance with this covenant, in the event
that a proposed Restricted Payment or Investment (or aportion thereof) meets
the criteria of clauses (i) through (xii) above or is entitled to be made
pursuant to the first paragraph of this covenant and/or one or more of the
exceptions contained in the
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definition of "Permitted Investments," the Company will be entitled to
classify or later reclassify (based on circumstances existing on the date of
such reclassification) suchRestricted Payment or Investment (or portion
thereof) among such clauses (i) through (xii) and such first paragraph and/or
one or more of the exceptions contained in the definition of "Permitted
Investments," in a manner thatotherwise complies with this covenant.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
TheIndenture will provide that the Company will not, and will not permit any
Restricted Subsidiary to, create or otherwise cause to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to(
i
) pay dividends or make any other distributions on its Capital Stock or pay
any Indebtedness or other obligations owed to the Company, (
ii
) make any loans or advances to the Company or (
iii
) transfer any of itsproperty or assets to the Company (
provided
that dividend or liquidation priority between classes of Capital Stock, or
subordination of any obligation (including the application of any remedy bars
thereto) to any other obligation, will not bedeemed to constitute such an
encumbrance or restriction), except any encumbrance or restriction:
(1)pursuant to anagreement or instrument in effect at or entered into on the
Issue Date, any Credit Facility, the Indenture or the Notes;
(2)pursuant to any agreement or instrument of a Person, or relating to
Indebtedness or Capital Stock of a Person, whichPerson is acquired by or
merged or consolidated with or into the Company or any Restricted Subsidiary,
or which agreement or instrument is assumed by the Company or any Restricted
Subsidiary in connection with an acquisition of assets from suchPerson, as in
effect at the time of such acquisition, merger or consolidation (except to the
extent that such Indebtedness was incurred to finance, or otherwise in
connection with, such acquisition, merger or consolidation);
provided
that forpurposes of this clause (2), if a Person other than the Company is the
Successor Company with respect thereto, any Subsidiary thereof or agreement or
instrument of such Person or any such Subsidiary shall be deemed acquired or
assumed, as the casemay be, by the Company or a Restricted Subsidiary, as the
case may be, when such Person becomes such Successor Company;
(3)pursuant to an agreement or instrument (a "
Refinancing Agreement
") effecting a refinancing ofIndebtedness Incurred pursuant to, or that
otherwise extends, renews, refunds, refinances or replaces, an agreement or
instrument referred to in clause (1) or (2) of this covenant or this clause
(3) (an "
Initial Agreement
") orcontained in any amendment, supplement or other modification to an
Initial Agreement (an "
Amendment
");
provided
,
however
, that the encumbrances and restrictions contained in any such Refinancing
Agreement or Amendmenttaken as a whole are not materially less favorable to
the Holders of the Notes than encumbrances and restrictions contained in the
Initial Agreement or Initial Agreements to which such Refinancing Agreement or
Amendment relates (as determined ingood faith by the Company);
(4)(
A
) that restricts in a customary manner the subletting, assignment ortransfer
of any property or asset that is subject to a lease, license or similar
contract, or the assignment or transfer of any lease, license or other
contract, (
B
) by virtue of any transfer of, agreement to transfer, option or rightwith
respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by the Indenture, (
C
) contained in mortgages, pledges or other security agreements securing
Indebtedness of aRestricted Subsidiary to the extent restricting the transfer
of the property or assets subject thereto, (
D
) pursuant to customary provisions restricting dispositions of real property
interests set forth in any reciprocal easementagreements of the Company or any
Restricted Subsidiary, (
E
) pursuant to Purchase Money Obligations that impose encumbrances or
restrictions on the property or assets so acquired, (
F
) on cash or other deposits or net worthimposed by customers or suppliers
under agreements entered into in the ordinary course of business, (
G
) pursuant to customary provisions contained in agreements and instruments
entered into in the ordinary course of business (includingbut not limited to
leases and joint venture and other similar agreements entered into in the
ordinary course
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of business), (
H
) that arises or is agreed to in the ordinary course of business and does not
detract from the value of property or assets of the Company or any Restricted
Subsidiary inany manner material to the Company or such Restricted Subsidiary,
or (
I
) pursuant to Hedging Obligations;
(5)with respect to a Restricted Subsidiary (or any of its property or assets)
imposed pursuant to an agreement enteredinto for the direct or indirect sale
or disposition of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary (or the property or assets that are subject to such
restriction) pending the closing of such sale ordisposition;
(6)by reason of any applicable law, rule, regulation or order, or required by
any regulatoryauthority having jurisdiction over the Company or any Restricted
Subsidiary or any of their businesses;
(7)pursuant to an agreement or instrument (A) relating to any Indebtedness
permitted to be Incurred subsequent tothe Issue Date pursuant to the
provisions of the covenant described under "--Limitation on Indebtedness" (
i
) if the encumbrances and restrictions contained in any such agreement or
instrument taken as a whole are not materiallyless favorable to the Holders of
the Notes than the encumbrances and restrictions contained in the Initial
Agreements (as determined in good faith by the Company), or (
ii
) if such encumbrance or restriction is not materially moredisadvantageous to
the Holders of the Notes than is customary in comparable financings (as
determined in good faith by the Company) and either (
x
) the Company determines in good faith that such encumbrance or restriction
will notmaterially affect the Company's ability to make principal or interest
payments on the Notes or (
y
) such encumbrance or restriction applies only if a default occurs in respect
of a payment or financial covenant relating to suchIndebtedness, (
B
) relating to any sale of receivables by a Foreign Subsidiary or (
C
) relating to Indebtedness of or a Financing Disposition by or to or in favor
of any Special Purpose Entity; or
(8)any encumbrances or restrictions imposed by any amendments, modifications,
restatements, renewals, increases,supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in
clauses (1) through (7) above;
provided
that such amendments, modifications, restatements, renewals,increases,
supplements, refundings, replacements or refinancings are, in the good faith
judgment of the Company, no more restrictive in any material respect with
respect to such encumbrance and other restrictions, taken as a whole, than
those priorto such amendment, modification, restatement, renewal, increase,
supplement, refunding, replacement or refinancing.
Limitation onSales of Assets and Subsidiary Stock
. The Indenture will provide as follows:
(a)The Company will not, and will not permitany Restricted Subsidiary to, make
any Asset Disposition unless:
(i)the Company or such Restricted Subsidiaryreceives consideration (including
by way of relief from, or by any other Person assuming responsibility for, any
liabilities, contingent or otherwise) at the time of such Asset Disposition at
least equal to the fair market value of the shares andassets subject to such
Asset Disposition, as such fair market value may be determined (and shall be
determined, to the extent such Asset Disposition or any series of related
Asset Dispositions involves aggregate consideration in excess of$50.0 million)
in good faith by the Board of Directors, whose determination shall be
conclusive (including as to the value of all noncash consideration),
(ii)in the case of any Asset Disposition (or series of related Asset
Dispositions) having a fair market value in excessof $50.0 million, at least
75% of the consideration therefor (excluding, in the case of an Asset
Disposition (or series of related Asset Dispositions), any consideration by
way of relief
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from, or by any other Person assuming responsibility for, any liabilities,
contingent or otherwise, that are not Indebtedness) received by the Company or
such Restricted Subsidiary is in the formof cash, and
(iii)an amount equal to 100% (or 50% if immediately after giving effect to
such Asset Disposition asif it had occurred at the beginning of the most
recently ended four full fiscal quarters for which consolidated financial
statements of the Company are available, the Consolidated Total Leverage Ratio
would have been less than or equal to 3.25:1.00)of the Net Available Cash from
such Asset Disposition is applied by the Company (or any Restricted
Subsidiary, as the case may be) as follows within 450 after the later of the
date of such Asset Disposition and the date of receipt of such NetAvailable
Cash (a binding commitment entered into within such 450-day period shall be
treated as a permitted application of the Net Available Cash so long as such
Net Available Cash shall be applied to satisfy such commitment within 180 days
of thedate of such commitment):
(A)
first
, either (
x
) to the extent the Company elects (or isrequired by the terms of any Bank
Indebtedness, any Senior Indebtedness of the Company or any Subsidiary
Guarantor or any Indebtedness of a Restricted Subsidiary that is not a
Subsidiary Guarantor), to prepay, repay or purchase any such Indebtednessor
(in the case of letters of credit, bankers' acceptances or other similar
instruments) cash collateralize any such Indebtedness (in each case other than
Indebtedness owed to the Company or a Restricted Subsidiary), or (
y
) to theextent the Company or such Restricted Subsidiary elects, to invest in
Additional Assets (including by means of an investment in Additional Assets by
a Restricted Subsidiary with an amount equal to Net Available Cash received by
the Company oranother Restricted Subsidiary),
provided
that
if such investment in Additional Assets is a project authorized by the Board
of Directors that will take longer than the period described in clause (iii)
above to complete,within the period of time necessary to complete such project;
(B)
second
, to the extent of the balance ofsuch Net Available Cash after application in
accordance with clause (A) above (such balance, the "Excess Proceeds"), to
make an offer to purchase Notes and (to the extent the Company or such
Restricted Subsidiary elects, or isrequired by the terms thereof) to purchase,
redeem or repay any other Senior Indebtedness of the Company or a Restricted
Subsidiary, pursuant and subject to the conditions of the Indenture and the
agreements governing such other Indebtedness; and
(C)
third
, to the extent of the balance of such Net Available Cash after application in
accordance withclauses (A) and (B) above, to fund (to the extent consistent
with any other applicable provision of the Indenture) any general corporate
purpose (including but not limited to the repurchase, repayment or other
acquisition or retirement of anySubordinated Obligations);
provided
,
however
, that in connection with any prepayment, repayment or purchase of
Indebtednesspursuant to clause (A)(x) or (B) above, the Company or such
Restricted Subsidiary will retire such Indebtedness and will cause the related
loan commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid,repaid or purchased.
Notwithstanding the foregoing provisions of this covenant, the Company and the
Restricted Subsidiaries shall not berequired to apply any Net Available Cash
or equivalent amount in accordance with this covenant except to the extent
that the aggregate Net Available Cash from all Asset Dispositions or
equivalent amount that is not applied in accordance with thiscovenant exceeds
$100.0 million. If the aggregate principal amount of Notes or other
Indebtedness of the Company or a Restricted Subsidiary validly tendered and
not withdrawn (or otherwise subject to purchase, redemption or repayment)
inconnection with an offer pursuant to clause (B) above
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exceeds the Excess Proceeds, the Excess Proceeds will be apportioned between
such Notes and such other Indebtedness of the Company or a Restricted
Subsidiary, with the portion of the ExcessProceeds payable in respect of such
Notes to equal the lesser of (
x
) the Excess Proceeds amount multiplied by a fraction, the numerator of which
is the outstanding principal amount of such Notes and the denominator of which
is the sum ofthe outstanding principal amount of the Notes and the outstanding
principal amount of the relevant other Indebtedness of the Company or a
Restricted Subsidiary, and (
y
) the aggregate principal amount of Notes validly tendered and notwithdrawn.
For the purposes of clause (ii) of paragraph (a) above, the following are
deemed to be cash: (1) Temporary CashInvestments and Cash Equivalents, (2) the
assumption of Indebtedness of the Company (other than Disqualified Stock of
the Company) or any Restricted Subsidiary and the release of the Company or
such Restricted Subsidiary from all liability onpayment of the principal
amount of such Indebtedness in connection with such Asset Disposition, (3)
Indebtedness of any Restricted Subsidiary that is no longer a Restricted
Subsidiary as a result of such Asset Disposition, to the extent thatthe
Company and each other Restricted Subsidiary are released from any Guarantee
of payment of the principal amount of such Indebtedness in connection with
such Asset Disposition, (4) securities received by the Company or any
RestrictedSubsidiary from the transferee that are converted by the Company or
such Restricted Subsidiary into cash within 180 days, (5) consideration
consisting of Indebtedness of the Company or any Restricted Subsidiary, (6)
Additional Assets and(7) any Designated Noncash Consideration received by the
Company or any of its Restricted Subsidiaries in an Asset Disposition having
an aggregate Fair Market Value, taken together with all other Designated
Noncash Consideration receivedpursuant to this clause, not to exceed an
aggregate amount at any time outstanding equal to the greater of $165.0
million and 5.75% Consolidated Total Assets (with the Fair Market Value of
each item of Designated Noncash Consideration beingmeasured at the time
received and without giving effect to subsequent changes in value).
(b)In the event of an Asset Dispositionthat requires the purchase of Notes
pursuant to clause (iii)(B) of paragraph (a) above, the Company will be
required to purchase Notes tendered pursuant to an offer by the Company for
the Notes (the "
Offer
") at a purchase priceof 100% of their principal amount plus accrued and
unpaid interest to the Purchase Date in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. If the aggregate purchase price of the Notestendered pursuant to
the Offer is less than the Net Available Cash allotted to the purchase of
Notes, the remaining Net Available Cash will be available to the Company for
use in accordance with clause (iii)(B) of paragraph (a) above (to repayother
Indebtedness of the Company or a Restricted Subsidiary) or clause (iii)(C) of
paragraph (a) above. The Company shall not be required to make an Offer for
Notes pursuant to this covenant if the Net Available Cash available therefor
(afterapplication of the proceeds as provided in clause (iii)(A) of paragraph
(a) above) is less than $100.0 million for any particular Asset Disposition
(which lesser amounts shall be carried forward for purposes of determining
whether an Offeris required with respect to the Net Available Cash from any
subsequent Asset Disposition). No Note will be repurchased in part if less
than the Minimum Denomination in original principal amount of such Note would
be left outstanding.
(c)Notwithstanding any other provisions of this covenant, (i) to the extent
that any of or all the Net Available Cash of any AssetDisposition received or
deemed to be received by a Foreign Subsidiary (a "
Foreign Disposition
") is (x) prohibited or delayed by applicable local law, (y) restricted by
applicable organizational documents or any agreementor (z) subject to other
onerous organizational or administrative impediments from being repatriated to
the United States, the portion of such Net Available Cash so affected will not
be required to be applied in compliance with this covenant,and such amounts
may be retained by the applicable Foreign Subsidiary so long, but only so
long, as the applicable local law, documents or agreements will not permit
repatriation to the United States (the Company hereby agreeing to use
reasonableefforts (as determined in the Company's reasonable business
judgment) to otherwise cause the applicable Foreign Subsidiary to within one
year following the date on which the respective payment would otherwise have
been required, promptly takeall commercially reasonable actions reasonably
required by the applicable local law, applicable organizational impediments or
other impediment to permit such repatriation), and if within one year
following the date on which
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the respective payment would otherwise have been required, such repatriation
of any of such affected Net Available Cash is permitted under the applicable
law, applicable organizationalimpediments or other impediment, such
repatriation will be promptly effected and the amount of such repatriated Net
Available Cash will be promptly (and in any event not later than five (5)
Business Days after such repatriation) applied (net ofadditional taxes payable
or reserved against as a result thereof) in compliance with this covenant and
(ii) to the extent that the Company has determined in good faith that
repatriation of any of or all the Net Available Cash of any ForeignDisposition
would have an adverse tax consequence (which for the avoidance of doubt,
includes, but is not limited to, any repatriation whereby doing so the
Company, any of its Subsidiaries or any of their respective affiliates and/or
equity ownerswould incur a tax liability, including as a result of a dividend
or deemed dividend, or a withholding tax) with respect to such Net Available
Cash, the Net Available Cash so affected may be retained by the applicable
Foreign Subsidiary. The
non-application
of any prepayment amounts as a consequence of the foregoing provisions will
not, for the avoidance of doubt, constitute a Default or an Event of Default.
(d)The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any othersecurities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Company will comply with theapplicable
securities laws and regulations and will not be deemed to have breached its
obligations under this covenant by virtue thereof.
Limitation on Transactions with Affiliates.
The Indenture will provide as follows:
(a)The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into or conduct anytransaction or series of
related transactions (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Company
(an "
Affiliate Transaction
") unless (i) the termsof such Affiliate Transaction are not materially less
favorable to the Company or such Restricted Subsidiary, as the case may be,
than those that could be obtained at the time in a transaction with a Person
who is not such an Affiliate and(ii) if such Affiliate Transaction involves
aggregate consideration in excess of $35.0 million, the terms of such
Affiliate Transaction have been approved by a majority of the Board of
Directors of the Company.
(b)The provisions of the preceding paragraph (a) will not apply to:
(i)any Restricted Payment Transaction,
(ii)(1) the entering into, maintaining or performance of any employment
contract, collective bargaining agreement,benefit plan, program or
arrangement, related trust agreement or any other similar arrangement for or
with any employee, officer or director heretofore or hereafter entered into in
the ordinary course of business, including vacation, health,insurance,
deferred compensation, severance, retirement, savings or other similar plans,
programs or arrangements, (2) the payment of compensation, performance of
indemnification or contribution obligations, or any issuance, grant or award
ofstock, options, other equity-related interests or other securities, to
employees, officers or directors in the ordinary course of business, (3) the
payment of reasonable fees to directors of the Company or any of its
Subsidiaries (as determinedin good faith by the Company or such Subsidiary),
(4) any transaction with an officer or director in the ordinary course of
business not involving more than $100,000 in any one case, or (5) Management
Advances and payments in respect thereof(or in reimbursement of any expenses
referred to in the definition of such term),
(iii)any transaction between oramong any of the Company, one or more
Restricted Subsidiaries, or one or more Special Purpose Entities,
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(iv)any transaction arising out of agreements or instruments inexistence on
the Issue Date (including, without limitation, the Tax Sharing Agreement) and
any payments made pursuant thereto,
(v)any transaction in the ordinary course of business on terms not materially
less favorable to the Company or therelevant Restricted Subsidiary than those
that could be obtained at the time in a transaction with a Person who is not
an Affiliate of the Company,
(vi)any transaction in the ordinary course of business, or approved by a
majority of the Board of Directors, betweenthe Company or any Restricted
Subsidiary and any Affiliate of the Company controlled by the Company that is
a joint venture or similar entity;
(vii)any transaction as to which a fairness opinion of a nationally recognized
appraisal or investment banking firm isdelivered to the Trustee; and
(viii)any issuance or sale of Capital Stock (other than Disqualified Stock) of
theCompany or capital contribution to the Company.
Limitation on Liens.
The Indenture will provide that the Company shall not,and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or permit to exist
any Lien (other than Permitted Liens) on any of its property or assets
(including Capital Stock of any other Person), whether owned on the date ofthe
Indenture or thereafter acquired, securing any Indebtedness (the "
Initial Lien
"), unless contemporaneously therewith effective provision is made to secure
the Indebtedness due under the Indenture and the Notes or, in respect ofLiens
on any Restricted Subsidiary's property or assets, any Subsidiary Guarantee of
such Restricted Subsidiary, equally and ratably with (or on a senior basis to,
in the case of Subordinated Obligations or Guarantor Subordinated
Obligations)such obligation for so long as such obligation is so secured by
such Initial Lien. Any such Lien thereby created in favor of the Notes or any
such Subsidiary Guarantee will be automatically and unconditionally released
and discharged upon(
i
) the release and discharge of the Initial Lien to which it relates, (
ii
) in the case of any such Lien in favor of any such Subsidiary Guarantee, upon
the termination and discharge of such Subsidiary Guarantee in accordancewith
the terms of the Indenture or (
iii
) any sale, exchange or transfer (other than a transfer constituting a
transfer of all or substantially all of the assets of the Company that is
governed by the provisions of the covenant describedunder "--Merger and
Consolidation" below) to any Person not an Affiliate of the Company of the
property or assets secured by such Initial Lien, or of all of the Capital
Stock held by the Company or any Restricted Subsidiary in, or allor
substantially all the assets of, any Restricted Subsidiary creating such
Initial Lien.
For purposes of the foregoing covenant,(A) a Lien securing an item of
Indebtedness need not be permitted solely by reference to one category of
permitted Liens (or any portion thereof) described in the definition of
"Permitted Liens" but may be permitted in part under anycombination thereof
and (B) in the event that a Lien meets the criteria of more than one of the
types of Permitted Liens, the Company, in its sole discretion, will classify,
and may reclassify, such Lien and only be required to include theamount and
type of such Lien as a Permitted Lien, and a Lien may be divided and
classified and reclassified into more than one of such types of Liens. In
addition, (1) for purposes of calculating compliance with the foregoing
covenant, in noevent will the amount of any Indebtedness or Liens securing any
Indebtedness be required to be included more than once despite the fact more
than one Person is or becomes liable with respect to such Indebtedness and
despite the fact suchIndebtedness is secured by the property of more than one
Person (for example, and for avoidance of doubt, in the case where there are
Liens on the property of one or more of the Company and its Subsidiaries
securing any Indebtedness, the amount ofsuch Indebtedness secured shall only
be included once for purposes of such calculations) and (2) the expansion of
Liens by virtue of accrual of interest, the accretion of accreted value, the
payment of interest or dividends in the form ofadditional Indebtedness,
amortization of original issue discount and increases in the amount of
Indebtedness outstanding solely as a result of fluctuations in the exchange
rate of currencies will not be deemed to be an incurrence of Liens forpurposes
of this covenant.
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Future Subsidiary Guarantors.
As set forth more particularly under"--Subsidiary Guarantees," the Indenture
will provide that from and after the Issue Date the Company will cause each
Domestic Subsidiary that guarantees, directly or indirectly, payment by the
Company of any Indebtedness of the Companyunder a Credit Facility (or other
Indebtedness that is Incurred under clause (b)(i) of the covenant described
under "--Limitation on Indebtedness") or Public Debt to execute and deliver to
the Trustee a supplemental indenture orother instrument pursuant to which such
Domestic Subsidiary will guarantee payment of the Notes, whereupon such
Domestic Subsidiary will become a Subsidiary Guarantor for all purposes under
the Indenture. The Company will also have the right tocause any other
Subsidiary so to guarantee payment of the Notes. Subsidiary Guarantees will be
subject to release and discharge under certain circumstances prior to payment
in full of the Notes. See "--Subsidiary Guarantees."
SEC Reports.
The Indenture will provide that, notwithstanding that the Company may not be
required to be or remain subject tothe reporting requirements of Section 13(a)
or 15(d) of the Exchange Act, the Company will file with the SEC (unless such
filing is not permitted under the Exchange Act or by the SEC), so long as the
Notes are outstanding, the annual reports,information, documents and other
reports that the Company is required to file with the SEC pursuant to such
Section 13(a) or 15(d) or would be so required to file if the Company were so
subject. The Company will also, within 15 days after thedate on which the
Company was so required to file or would be so required to file if the Company
were so subject, transmit by mail to all Holders, as their names and addresses
appear in the Note Register, and to the Trustee (or make available on aCompany
website) copies of any such information, documents and reports (without
exhibits) so required to be filed. Notwithstanding the foregoing, if any
audited or reviewed financial statements or information required to be
included in any suchfiling are not reasonably available on a timely basis as a
result of the Company's accountants not being "independent" (as defined
pursuant to the Exchange Act and the rules and regulations of the SEC
thereunder), the Company may, inlieu of making such filing or transmitting or
making available the information, documents and reports so required to be
filed, elect to make a filing on an alternative form or transmit or make
available unaudited or unreviewed financial statementsor information
substantially similar to such required audited or reviewed financial
statements or information,
provided
that (a) the Company shall in any event be required to make such filing and so
transmit or make available suchaudited or reviewed financial statements or
information no later than the first anniversary of the date on which the same
was otherwise required pursuant to the preceding provisions of this paragraph
(such initial date, the "
ReportingDate
") and (b) if the Company makes such an election and such filing has not been
made, or such information, documents and reports have not been transmitted or
made available, as the case may be, within 90 days after such ReportingDate,
liquidated damages will accrue on the Notes at a rate of 0.50% per annum from
the date that is 90 days after such Reporting Date to the earlier of (x) the
date on which such filing has been made, or such information, documents and
reportshave been transmitted or made available, as the case may be, and (y)
the first anniversary of such Reporting Date (provided that not more than
0.50% per annum in liquidated damages shall be payable for any period
regardless of the number ofsuch elections by the Company). The Company will be
deemed to have satisfied the requirements of this paragraph if any Parent
files and provides reports, documents and information of the types otherwise
so required, in each case within theapplicable time periods, and the Company
is not required to file such reports, documents and information separately
under the applicable rules and regulations of the SEC (after giving effect to
any exemptive relief) because of the filings by suchParent. The Company also
will comply with the other provisions of TIA (s)314(a). Delivery of such
reports, information and documents to the Trustee shall be for informational
purposes only and the Trustee's receipt of such shall notconstitute actual or
constructive knowledge or notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants under the Indenture or the Notes (as
towhich the Trustee shall have no duty to monitor and shall be entitled to
rely exclusively on Officer's Certificates). The Trustee shall not be
obligated to monitor or confirm, on a continuing basis or otherwise, the
Company's, the
Co-Issuer's
or any other person's compliance with the covenants in the Indenture or to
determine whether any such reports, information or other documents are filed
with the SEC through the SEC's EDGARfiling system (or any successor filing
system) or posted on any website, on Intralinks or any comparable
password-protected online data system or to examine such reports, information
or documents to ensure compliance with the provisions of theIndenture or to
ascertain the correctness or otherwise of the information or the statements
contained therein or to participate in any conference calls.
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Merger and consolidation
The Indenture will provide that the Company will not consolidate with or merge
with or into, or convey, transfer or lease all or substantiallyall its assets
to, any Person, unless:
(i)the resulting, surviving or transferee Person (the "
SuccessorCompany
") will be a Person organized and existing under the laws of the United States
of America, any State thereof or the District of Columbia and the Successor
Company (if not the Company) will expressly assume all the obligations of
theCompany under the Notes and the Indenture by executing and delivering to
the Trustee a supplemental indenture in form reasonably satisfactory to the
Trustee;
(ii)immediately after giving effect to such transaction (and treating any
Indebtedness that becomes an obligation ofthe Successor Company or any
Restricted Subsidiary as a result of such transaction as having been Incurred
by the Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default will have occurred and be continuing;
(iii)immediately after giving effect to such transaction, either (A) the
Successor Company could Incur at least$1.00 of additional Indebtedness
pursuant to paragraph (a) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness," or (B) the Consolidated Coverage Ratio
of the Company (or, if applicable, theSuccessor Company with respect thereto)
would equal or exceed the Consolidated Coverage Ratio of the Company
immediately prior to giving effect to such transaction;
(iv)each Guarantor (other than (x) any Guarantor that will be released from
its obligations under its Guarantee inconnection with such transaction and (y)
any party to any such consolidation or merger) shall have delivered a
supplemental indenture in form reasonably satisfactory to the Trustee,
confirming its Guarantee (other than any Guarantee that willbe discharged or
terminated in connection with such transaction) shall apply to such Person's
obligations under the Indenture and the Notes; and
(v)the Company will have delivered to the Trustee an Officer's Certificate and
an Opinion of Counsel, each to theeffect that such consolidation, merger or
transfer complies with the provisions described in this paragraph, provided
that (x) in giving such opinion such counsel may rely on an Officer's
Certificate as to compliance with the foregoingclauses (ii) and (iii) and as
to any matters of fact, and (y) no Opinion of Counsel will be required for a
consolidation, merger or transfer described in the last paragraph of this
covenant.
Any Indebtedness that becomes an obligation of the Successor Company or any
Restricted Subsidiary (or that is deemed to be Incurred by anyRestricted
Subsidiary that becomes a Restricted Subsidiary) as a result of any such
transaction undertaken in compliance with this covenant, and any Refinancing
Indebtedness with respect thereto, shall be deemed to have been Incurred in
compliancewith the covenant described under "--Certain Covenants--Limitation
on Indebtedness."
The Successor Company will succeedto, and be substituted for, and may exercise
every right and power of, the Company under the Indenture, and thereafter the
predecessor Company shall be relieved of all obligations and covenants under
the Indenture, except that the predecessorCompany in the case of a lease of
all or substantially all its assets will not be released from the obligation
to pay the principal of and interest on the Notes.
Clauses (ii) and (iii) of the first paragraph of this "Merger and
Consolidation" covenant will not apply to any transaction inwhich (
1
) any Restricted Subsidiary consolidates with, merges into or transfers all or
part of its assets to the Company or (
2
) the Company consolidates or merges with or into or transfers all or
substantially all itsproperties and assets to (
x
) an Affiliate incorporated or organized for the purpose of reincorporating or
reorganizing the Company in another jurisdiction or changing its legal
structure to a corporation or other entity or(
y
) a Restricted Subsidiary of the Company so long as all assets of the Company
and the Restricted Subsidiaries
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immediately prior to such transaction (other than Capital Stock of such
Restricted Subsidiary) are owned by such Restricted Subsidiary and its
Restricted Subsidiaries immediately after theconsummation thereof.
Limited condition transactions
When calculating the availability under any basket or ratio under the
Indenture or compliance with any provision of the Indenture inconnection with
any Limited Condition Transaction and any actions or transactions related
thereto (including acquisitions, Investments, the Incurrence or issuance of
Indebtedness and the use of the proceeds thereof, the Incurrence of
Liens,repayments, Restricted Payments and Asset Dispositions), in each case,
at the option of the Company (the Company's election to exercise such option,
an "
LCT Election
"), the date of determination for availability under any suchbasket or ratio
and whether any such action or transaction is permitted (or any requirement or
condition therefor is complied with or satisfied (including as to the absence
of any Default or Event of Default)) under the Indenture shall be deemed tobe
the date (the "
LCT Test Date
") the definitive agreements for such Limited Condition Transaction are
entered into (or, if applicable, the date of delivery of an irrevocable
notice, declaration of a dividend or similar event) andif, after giving pro
forma effect to the Limited Condition Transaction and any actions or
transactions related thereto (including acquisitions, Investments, the
Incurrence or issuance of Indebtedness and the use of proceeds thereof, the
Incurrenceof Liens, repayments, Restricted Payments and Asset Dispositions)
and any related pro forma adjustments, the Company or any of its Restricted
Subsidiaries would have been permitted to take such actions or consummate such
transactions on the relevantLCT Test Date in compliance with such ratio, test
or basket (and any related requirements and conditions), such ratio, test or
basket (and any related requirements and conditions) shall be deemed to have
been complied with (or satisfied) for allpurposes;
provided
that (a) compliance with such ratios, tests or baskets (and any related
requirements and conditions) shall not be determined or tested at any time
after the applicable LCT Test Date for such Limited ConditionTransaction and
any actions or transactions related thereto (including acquisitions,
Investments, the Incurrence or issuance of Indebtedness and the use of
proceeds thereof, the Incurrence of Liens, repayments, Restricted Payments and
AssetDispositions) and (b) Consolidated EBITDA for purposes of the
Consolidated Coverage Ratio will be calculated using an assumed interest rate
based on the indicative interest margin contained in any financing commitment
documentation with respectto such Indebtedness or, if no such indicative
interest margin exists, as reasonably determined by the Company in good faith.
For the avoidance of doubt, if the Company has made an LCT Election, (1) if
any of the ratios, tests or baskets forwhich compliance was determined or
tested as of the LCT Test Date would at any time after the LCT Test Date have
been exceeded or otherwise failed to have been complied with as a result of
fluctuations in any such ratio, test or basket, includingdue to fluctuations
in Consolidated EBITDA or Consolidated Total Assets of the Company (as
applicable), such baskets, tests or ratios will not be deemed to have been
exceeded or failed to have been complied with as a result of such fluctuations
(andno Default or Event of Default shall be deemed to have occurred due to
such failure to comply), and (2) in calculating the availability under any
ratio, test or basket in connection with any action or transaction unrelated
to such LimitedCondition Transaction following the relevant LCT Test Date and
prior to the earlier of the date on which such Limited Condition Transaction
is consummated and the date that the definitive agreement or date for
redemption, purchase or repaymentspecified in an irrevocable notice for such
Limited Condition Transaction is terminated, expires or passes, as applicable,
without consummation of such Limited Condition Transaction, any such ratio,
test or basket shall be determined or testedgiving pro forma effect to such
Limited Condition Transaction.
Defaults
An Event of Default will be defined in the Indenture as:
(i)a default in any payment of interest on any Note when due, continued for 30
days;
(ii)a default in the payment of principal of any Note when due, whether at its
Stated Maturity, upon optionalredemption, upon required repurchase, upon
declaration of acceleration or otherwise;
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(iii)the failure by the Company to comply with its obligations underthe first
paragraph of the covenant described under "--Merger and Consolidation" above;
(iv)thefailure by the Company to comply for 30 days after notice with any of
its obligations under the covenant described under "--Change of Control" above
(other than a failure to purchase Notes);
(v)the failure by the Company to comply for 60 days after notice with its
other agreements contained in the Notes orthe Indenture;
(vi)the failure by any Guarantor to comply for 45 days after notice with its
obligations under itsSubsidiary Guarantee or Parent Guarantee, as applicable;
(vii)the failure by the Company or any RestrictedSubsidiary to pay any
Indebtedness within any applicable grace period after final maturity or the
acceleration of any such Indebtedness by the holders thereof because of a
default, if the total amount of such Indebtedness so unpaid or acceleratedexceed
s $100.0 million or its foreign currency equivalent (the "
cross acceleration provision
");
(viii)certain events of bankruptcy, insolvency or reorganization of the
Company or a Significant Subsidiary, or ofother Restricted Subsidiaries that
are not Significant Subsidiaries but would in the aggregate constitute a
Significant Subsidiary if considered as a single Person (the "
bankruptcy provisions
");
(ix)the rendering of any judgment or decree for the payment of money in an
amount (net of any insurance or indemnitypayments actually received in respect
thereof prior to or within 90 days from the entry thereof, or to be received
in respect thereof in the event any appeal thereof shall be unsuccessful) in
excess of $100.0 million or its foreign currencyequivalent against the Company
or a Significant Subsidiary, or jointly and severally against other Restricted
Subsidiaries that are not Significant Subsidiaries but would in the aggregate
constitute a Significant Subsidiary if considered as a singlePerson, that is
not discharged, or bonded or insured by a third Person, if such judgment or
decree remains outstanding for a period of 90 days following such judgment or
decree and is not discharged, waived or stayed (the "
judgment defaultprovision
"); or
(x)the failure of any Parent Guarantee, or of any Subsidiary Guarantee by a
Guarantorthat is a Significant Subsidiary, to be in full force and effect
(except as contemplated by the terms thereof or of the Indenture) or the
denial or disaffirmation in writing by any Parent Guarantor or any Subsidiary
Guarantor that is a SignificantSubsidiary, of its obligations under the
Indenture or any Parent Guarantee or Subsidiary Guarantee, as the case may be,
if such Default continues for 10 days.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntaryor is effected
by operation of law or pursuant to any judgment, decree or order of any court
or any order, rule or regulation of any administrative or governmental body.
However, a Default under clause (iv), (v) or (vi) will not constitute an Event
of Default until the Trustee or the Holders of at least30% in principal amount
of the outstanding Notes notify the Company of the Default and the Company
does not cure such Default within the time specified in such clause after
receipt of such notice.
If an Event of Default (other than a Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company) occurs andis
continuing under the Indenture, the Trustee by notice to the Company, or the
Holders of at least 30% in principal amount of the outstanding Notes by
written notice to the Company and the Trustee, may declare the principal of
and accrued butunpaid interest on all the Notes to be due and payable. Upon
the effectiveness of such a declaration, such principal and interest will be
due and payable immediately.
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In the event of a declaration of acceleration of the Notes because an Event of
Defaultdescribed in clause (vii) has occurred and is continuing, the
declaration of acceleration of the Notes shall be automatically annulled if
the event of default or payment default triggering such Event of Default
pursuant to clause(vii) shall be remedied or cured, or waived by the holders
of the Indebtedness, or the Indebtedness that gave rise to such Event of
Default shall have been discharged in full, within 20 Business Days after the
declaration of acceleration withrespect thereto and if (1) the annulment of
the acceleration of the Notes would not conflict with any judgment or decree
of a court of competent jurisdiction and (2) all existing Events of Default,
except
non-payment
of principal, premium or interest, on the Notes that became due solely because
of the acceleration of the Notes, have been cured or waived.
Notwithstanding the foregoing, if an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Companyoccurs and is
continuing, the principal of and accrued but unpaid interest on all the Notes
will become immediately due and payable without any declaration or other act
on the part of the Trustee or any Holders. Under certain circumstances,
theHolders of a majority in principal amount of the outstanding Notes may
rescind any such acceleration with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, theTrustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such
Holders have offered to the Trustee indemnity or security satisfactory to it
against anycost, loss, liability, claim, damage or expense and including
reasonable attorneys' fees and expenses and court costs. Except to enforce the
right to receive payment of principal, premium (if any) or interest when due,
no Holder may pursue anyremedy with respect to the Indenture or the Notes
unless (
i
) such Holder has previously given a Responsible Officer of the Trustee
written notice that an Event of Default is continuing, (
ii
) Holders of at least 30% inprincipal amount of the outstanding Notes have
requested the Trustee in writing to pursue the remedy, (
iii
) such Holders have offered the Trustee security or indemnity satisfactory to
it against any cost, loss, liability, claim, damageor expense and including
reasonable attorneys' fees and expenses and court costs, (
iv
) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and(
v
) the Holders of a majority in principal amount of the outstanding Notes have
not given the Trustee a direction inconsistent with such request within such
60-day
period. Subject to certainrestrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or powerconferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights
of any other Holder or that would involve the Trustee inpersonal liability (it
being understood that the Trustee does not have an affirmative duty to
ascertain whether or not such direction is unduly prejudicial to such
Holders). Prior to taking any action under the Indenture, the Trustee will
beentitled to indemnification satisfactory to it in its sole discretion
against all costs, losses, claims, damages and expenses, including reasonable
attorneys' fees and expenses and court costs caused by taking or not taking
such action.
The Indenture will provide that if a Default occurs and is continuing and is
actually known to a Responsible Officer of the Trustee, theTrustee must
deliver to each Holder a notice of the Default within 90 days after it occurs.
Except in the case of a Default in the payment of principal of, or premium (if
any) or interest on, any Note, the Trustee may withhold notice if and so
longas it in good faith determines that withholding notice is in the interests
of the Noteholders. In addition, the Company is required to deliver to the
Trustee, within 120 days after the end of each fiscal year, a certificate
indicating whether thesigners thereof know of any Default occurring during the
previous year. The Company also is required to deliver to the Trustee, within
30 days after the occurrence thereof, written notice of any event that would
constitute certain Defaults, theirstatus and what action the Company is taking
or proposes to take in respect thereof.
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Any notice of Default, notice of acceleration or instruction to the Trustee to
provide anotice of Default, notice of acceleration or take any other action
(or refrain from taking any action) relating to a Default other than a payment
default or a bankruptcy or insolvency default (a "
Noteholder Direction
") provided byany one or more Holders (other than a Regulated Bank) (each a "
Directing Holder
") must be accompanied by a written representation from each such Holder
delivered to the Company and the Trustee that such Holder is not (or, in
thecase such Holder is DTC or its nominee, that such Holder is being
instructed solely by beneficial owners that are not) Net Short (a "
Position Representation
"), which representation, in the case of a Noteholder Direction relating tothe
delivery of a notice of Default shall be deemed a continuing representation
until the resulting Event of Default is cured or otherwise ceases to exist or
the Notes are accelerated. In addition, each Directing Holder is deemed, at
the time ofproviding a Noteholder Direction, to covenant to provide the
Company (with a copy to the Trustee) with such other information as the
Company may reasonably request from time to time in order to verify the
accuracy of such Directing Holder'sPosition Representation within five
Business Days of request therefor (a "
Verification Covenant
"). In any case in which the Holder is DTC or its nominee (after delivery to
the Trustee of appropriate confirmation of beneficialownership satisfactory to
the Trustee), any Position Representation or Verification Covenant required
hereunder shall be provided by the beneficial owner of the Notes in lieu of
DTC or its nominee and DTC shall be entitled to conclusively rely onsuch
Position Representation and Verification Covenant in delivering its direction
to the Trustee. The Trustee shall have no duty whatsoever to provide this
information to the Company or to obtain this information for the Company.
If, following the delivery of a Noteholder Direction, but prior to
acceleration of the Notes, the Company determines in good faith that thereis a
reasonable basis to believe a Directing Holder was, at any relevant time, in
breach of its Position Representation and provides to the Trustee an officers'
certificate stating that the Company has initiated litigation in a court
ofcompetent jurisdiction seeking a determination that such Directing Holder
was, at such time, in breach of its Position Representation, and seeking to
invalidate any Default, Event of Default or acceleration (or notice thereof)
that resulted from theapplicable Noteholder Direction, the cure period with
respect to such Default shall be automatically stayed and the cure period with
respect to such Default or Event of Default shall be automatically
reinstituted and any remedy stayed pending afinal and
non-appealable
determination of a court of competent jurisdiction on such matter. If,
following the delivery of a Noteholder Direction, but prior to acceleration of
the Notes, the Company provides tothe Trustee an Officer's Certificate stating
that a final and
non-appealable
determination of a court of competent jurisdiction on such matter has been
made that a Directing Holder failed to satisfy itsVerification Covenant, the
cure period with respect to such Default shall be automatically stayed and the
cure period with respect to any Default or Event of Default that resulted from
the applicable Noteholder Direction shall be automaticallyreinstituted and any
remedy stayed pending satisfaction of such Verification Covenant. Any breach
of the Position Representation as confirmed by a final and
non-appealable
determination of a court of competentjurisdiction on such matter shall result
in such Holder's participation in such Noteholder Direction being disregarded;
and, if, without the participation of such Holder, the percentage of Notes
held by the remaining Holders that provided suchNoteholder Direction would
have been insufficient to validly provide such Noteholder Direction, such
Noteholder Direction shall be void ab initio (other than any indemnity or
security such Holder may have offered the Trustee), with the effect thatsuch
Default or Event of Default shall be deemed never to have occurred,
acceleration voided and the Trustee shall be deemed not to have received such
Noteholder Direction or any notice of such Default or Event of Default.
Notwithstanding anything in the preceding two paragraphs to the contrary, any
Noteholder Direction delivered to the Trustee during thependency of an Event
of Default as the result of a payment default, bankruptcy, insolvency or
similar proceeding shall not require compliance with the foregoing paragraphs.
For the avoidance of doubt, (i) the foregoing paragraphs shall not apply to
any Holder that is a Regulated Bank and (ii) the Trusteeshall be entitled to
conclusively rely on any Noteholder Direction delivered to it in accordance
with the Indenture, shall have no duty to inquire as to or investigate the
accuracy of any Position Representation, enforce compliance with anyVerification
Covenant, verify any statements in any Officer's Certificate delivered to it,
or otherwise make calculations, investigations or determinations with respect
to Net Shorts. The Trustee shall have no liability to the Parent, theCompany,
the
Co-Issuer
any Holder or any other Person in acting in good faith on a Noteholder
Direction.
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With their acquisition of the Notes, each Holder and subsequent purchaser of
the Notesconsents to the delivery of its Position Representation by the
Trustee to the Company in accordance with the terms of the Indenture. The
Indenture will provide that each Holder and subsequent purchaser of the Notes
waives any and all claims, in lawand/or in equity, against the Trustee and
agrees not to commence any legal proceeding against the Trustee in respect of,
and agrees that the Trustee will not be liable for any action that the Trustee
takes in accordance with, the Indenture orarising out of or in connection with
following instructions or taking actions in accordance with a Noteholder
Direction. The Indenture will also provide that the Company will waive any and
all claims, in law and/or in equity, against the Trustee,and agrees not to
commence any legal proceeding against the Trustee in respect of, and agrees
that the Trustee will not be liable for any action that the Trustee takes in
accordance with the Indenture, or arising out of or in connection
withfollowing instructions or taking actions in accordance with a Noteholder
Direction.
Any and all other actions that the Trustee takes oromits to take under this
"Description of Notes" and all fees, costs and expenses of the Trustee and its
agents and counsel arising hereunder and in connection herewith shall be
covered by the Company's indemnification under theIndenture. The Indenture
will provide that the Trustee will treat all Holders equally with respect to
their rights described under the Indenture. In connection with the requisite
percentages required under the Indenture, the Trustee will also treatall
outstanding Notes equally irrespective of any Position Representation in
determining whether the requisite percentage has been obtained with respect to
the initial delivery of the Noteholder Direction.
Amendments and waivers
Subject tocertain exceptions, the Indenture may be amended with the consent of
the Holders of a majority in principal amount of the Notes then outstanding
and any past default or compliance with any provisions may be waived with the
consent of the Holders ofa majority in principal amount of the Notes then
outstanding (including in each case, consents obtained in connection with a
tender offer or exchange offer for Notes). However, without the consent of
each Holder of an outstanding Note affected, noamendment or waiver may (
i
) reduce the principal amount of Notes whose Holders must consent to an
amendment or waiver, (
ii
) reduce the rate of or extend the time for payment of interest on any Note, (
iii
) reducethe principal of or extend the Stated Maturity of any Note, (
iv
) reduce the premium payable upon the redemption of any Note, or change the
date on which any Note may be redeemed as described under "--Optional
Redemption"above, (
v
) make any Note payable in money other than that stated in such Note, (
vi
) impair the right of any Holder to receive payment of principal of and
interest on such Holder's Notes on or after the due dates thereforor to
institute suit for the enforcement of any such payment on or with respect to
such Holder's Notes, or (
vii
) make any change in the amendment or waiver provisions described in this
sentence.
Without the consent of any Holder, the Company, the
Co-Issuer,
the Trustee and (as applicable) anySubsidiary Guarantor or Parent Guarantor
may amend the Indenture to cure any ambiguity, manifest error, omission,
defect or inconsistency, to provide for the assumption by a successor of the
obligations of the Company, the
Co-Issuer
or a Subsidiary Guarantor or Parent Guarantor under the Indenture, to provide
for uncertificated Notes in addition to or in place of certificated Notes, to
add Guarantees with respect to the Notes, tosecure the Notes, to confirm and
evidence the release, termination or discharge of any Guarantee or Lien with
respect to or securing the Notes when such release, termination or discharge
is provided for under the Indenture, to add to the covenantsof the Company for
the benefit of the Noteholders or to surrender any right or power conferred
upon the Company, to provide for or confirm the issuance of Additional Notes
in accordance with the Indenture, to conform the text of the Indenture,
theNotes or any Subsidiary Guarantee or Parent Guarantee to any provision of
this "Description of notes" (to the extent that such provision in this
"Description of notes" was intended to be a verbatim recitation of a provision
ofthe Indenture, the Notes or any Subsidiary Guarantee or Parent Guarantee, as
provided in an Officer's Certificate delivered to the Trustee), to make any
change that does not materially adversely affect the rights of any Holder, or
to complywith any requirement of the SEC in connection with the qualification
of the Indenture under the TIA or otherwise.
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The consent of the Noteholders is not necessary under the Indenture to approve
theparticular form of any proposed amendment or waiver. It is sufficient if
such consent approves the substance of the proposed amendment or waiver. Until
an amendment or waiver becomes effective, a consent to it by a Noteholder is a
continuing consentby such Noteholder and every subsequent Holder of all or
part of the related Note. Any such Noteholder or subsequent holder may revoke
such consent as to its Note by written notice to the Trustee or the Company,
received thereby before the date onwhich the Company certifies to the Trustee
that the Holders of the requisite principal amount of Notes have consented to
such amendment or waiver. After an amendment or waiver under the Indenture
becomes effective, the Company is required to mail toNoteholders a notice
briefly describing such amendment or waiver. However, the failure to give such
notice to all Noteholders, or any defect therein, will not impair or affect
the validity of the amendment or waiver.
Defeasance
The Company at any time mayterminate all obligations of the Company and the
Co-Issuer
under the Notes and the Indenture ("
legal defeasance
"), except for certain obligations, including those relating to the
defeasancetrust and obligations to register the transfer or exchange of the
Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a
registrar and paying agent in respect of the Notes.
The Company at any time may terminate its obligations under certain covenants
under the Indenture, including the covenants described under"--Certain
Covenants" and "Change of Control," the operation of the default provisions
relating to such covenants described under "--Defaults" above, the operation
of the cross acceleration provision, thebankruptcy provisions with respect to
Subsidiaries and the judgment default provision described under "--Defaults"
above, and the limitations contained in clauses (iii), (iv) and (v) under
"--Merger andConsolidation" above ("
covenant defeasance
"). If the Company exercises its legal defeasance option or its covenant
defeasance option, each Subsidiary Guarantor and each Parent Guarantor will be
released from all of itsobligations with respect to its Subsidiary Guarantee
or Parent Guarantee, respectively.
The Company may exercise its legal defeasanceoption notwithstanding its prior
exercise of its covenant defeasance option. If the Company exercises its legal
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default with respect thereto. If the Companyexercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (v) (as it relates to the covenants
described under "--Certain Covenants" above), (vi),(vii), (viii) (but only
with respect to events of bankruptcy, insolvency or reorganization of a
Subsidiary), (ix) or (x) under "--Defaults" above or because of the failure of
the Company to comply with clause (iii), (iv) or(v) under "--Merger and
Consolidation" above.
Either defeasance option may be exercised to any redemption date or tothe
maturity date for the Notes. In order to exercise either defeasance option,
the Company must irrevocably deposit or cause to be deposited in trust (the "
defeasance trust
") with the Trustee money or U.S. Government Obligations,or a combination
thereof, sufficient (without reinvestment), in the opinion of an independent
firm of certified public accountants or a nationally recognized valuation,
appraisal or investment banking firm in the event that all or part of
thedeposit consists of U.S. Government Obligations, to pay principal of, and
premium (if any) and interest on, the Notes to redemption or maturity, as the
case may be (
provided
that if such redemption is made pursuant to the provisions describedin the
seventh paragraph under "Optional Redemption," (
x
) the amount of money or U.S. Government Obligations, or a combination
thereof, that the Company must irrevocably deposit or cause to be deposited
will be determined using anassumed Applicable Premium calculated as of the
date of such deposit, and (
y
) the Company must irrevocably deposit or cause to be deposited additional
money in trust on the redemption date as necessary to pay the Applicable
Premium asdetermined on such date (any such amount, the "Applicable Premium
Deficit") (it being understood that any defeasance shall be subject to the
condition subsequent that such Applicable Premium Deficit is in fact paid);
provided, that theTrustee shall have no liability whatsoever in the event that
such Applicable Premium Deficit is not in fact paid after any defeasance of
the Indenture and that any Applicable Premium Deficit will be set forth in an
Officer's Certificatedelivered to the Trustee simultaneously with the deposit
of such Applicable Premium Deficit that confirms that such Applicable Premium
Deficit will be
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applied toward such redemption), and must comply with certain other
conditions, including delivery to the Trustee of (1) an Opinion of Counsel to
the effect that holders and beneficialowners of the Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit and defeasance and will be subject to federal income tax on the same
amount and in the same manner and at the same times as wouldhave been the case
if such deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel (
x
) must be based on a ruling of the Internal Revenue Service or other change in
applicable federalincome tax law since the Issue Date and (
y
) need not be delivered if all Notes not theretofore delivered to the Trustee
for cancellation have become due and payable, will become due and payable at
their Stated Maturity within one year,or have been or are to be called for
redemption within one year under arrangements reasonably satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company) and (2) anOfficer's Certificate and an Opinion
of Counsel, each stating that all conditions precedent provided for or
relating to legal defeasance or covenant defeasance, as the case may be, have
been complied.
Satisfaction and discharge
TheIndenture will be discharged and cease to be of further effect (except as
to surviving rights of registration of transfer or exchange of the Notes, as
expressly provided for in the Indenture) as to all outstanding Notes and
related Guarantees when(
i
) either (
a
) all Notes previously authenticated and delivered (other than certain lost,
stolen or destroyed Notes, and certain Notes for which provision for payment
was previously made and thereafter the funds have been releasedto the Company)
have been delivered to the Trustee for cancellation or (
b
) all Notes not previously delivered to the Trustee for cancellation (
x
) have become due and payable, (y) will become due and payable at theirStated
Maturity within one year or (
z
) have been or are to be called for redemption within one year under
arrangements reasonably satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at theexpense, of the Company; (
ii
) the Company has irrevocably deposited or caused to be deposited with the
Trustee money, U.S. Government Obligations or a combination thereof,
sufficient (without reinvestment) in the opinion of anindependent firm of
certified public accountants or a nationally recognized valuation, appraisal
or investment banking firm in the event that all or part of the deposit
consists of U.S. Government Obligations, to pay and discharge the
entireindebtedness on the Notes not previously delivered to the Trustee for
cancellation, for principal, premium, if any, and interest to the date of
redemption or their Stated Maturity, as the case may be (
provided
that if such redemption is madepursuant to the provisions described in the
seventh paragraph under "Optional Redemption," (
x
) the amount of money or U.S. Government Obligations, or a combination
thereof, that the Company must irrevocably deposit or cause to bedeposited
will be determined using an assumed Applicable Premium calculated as of the
date of such deposit, and (
y
) the Company must irrevocably deposit or cause to be deposited the Applicable
Premium Deficit (it being understood thatany discharge shall be subject to the
condition subsequent that such Applicable Premium Deficit is in fact paid);
provided, that the Trustee shall have no liability whatsoever in the event
that such Applicable Premium Deficit is not in fact paidafter any discharge of
the Indenture and that any Applicable Premium Deficit will be set forth in an
Officer's Certificate delivered to the Trustee simultaneously with the deposit
of such Applicable Premium Deficit that confirms that suchApplicable Premium
Deficit will be applied toward such redemption); (
iii
) the Company has paid or caused to be paid all other sums payable under the
Indenture by the Company; and (
iv
) the Company has delivered to the Trustee anOfficer's Certificate and an
Opinion of Counsel each to the effect that all conditions precedent under the
"Satisfaction and Discharge" section of the Indenture relating to the
satisfaction and discharge of the Indenture have beencomplied with,
provided
that any such counsel may rely on any Officer's Certificate as to matters of
fact (including as to compliance with the foregoing clauses (i), (ii) and
(iii)).
No personal liability of directors, officers, employees, incorporators and
stockholders
No director, officer, employee, incorporator or stockholder of the Company, the
Co-Issuer,
anySubsidiary Guarantor, any Parent Guarantor or any Subsidiary of any thereof
shall have any liability for any obligation of the Company, the
Co-Issuer,
any Subsidiary Guarantor or any Parent Guarantor under theIndenture, the
Notes, any Subsidiary Guarantee or any Parent Guarantee, or for any claim
based on, in respect of,
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or by reason of, any such obligation or its creation. Each Noteholder, by
accepting the Notes, waives and releases all such liability. The waiver and
release are part of the consideration forissuance of the Notes.
Concerning the trustee
Computershare Trust Company, N.A. is the Trustee under the Indenture with
respect to the Notes and will be the registrar and paying agent withregard to
the Notes (in such respective capacities, the "Registrar" and "Paying Agent").
The Indenture will providethat, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are set forth
specifically in the Indenture. During the existence of an Event of Default,
the Trustee will exercise such of the rights andpowers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and the TIA impose certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtainpayment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions;
provided
, that if it acquires anyconflicting interest as described in the TIA, it must
eliminate such conflict, apply to the SEC for permission to continue as
Trustee with such conflict, or resign.
Transfer and exchange
A Noteholder maytransfer or exchange Notes in accordance with the Indenture.
Upon any transfer or exchange, the Registrar and the Trustee may require such
Noteholder, among other things, to furnish appropriate endorsements and
transfer documents and the Company mayrequire such Noteholder to pay any taxes
or other governmental charges required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note selected for
redemption or purchase or to transfer or exchange anyNote for a period of 15
Business Days prior to the day of the mailing of the notice of redemption or
purchase. No service charge will be made for any registration of transfer or
exchange of the Notes, but the Company may require payment of a sumsufficient
to cover any transfer tax or other governmental charge payable in connection
with the transfer or exchange. The Notes will be issued in registered form and
the registered holder of a Note will be treated as the owner of such Note for
allpurposes.
The transferor shall also provide or cause to be provided to the Trustee all
information necessary to allow the Trustee tocomply with any applicable tax
reporting obligations, including without limitation, any cost basis reporting
obligations under Section 6045 of the Code. The Trustee may rely on any such
information provided to it and shall have noresponsibility to verify or ensure
the accuracy of such information.
Governing law
The Indenture will provide that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York,without regard
to conflicts of laws principles.
Certain definitions
"
Acquired Indebtedness
" means Indebtedness of a Person (
i
) existing at the time such Person becomes a Subsidiaryor (
ii
) assumed in connection with the acquisition of assets from such Person, in
each case other than Indebtedness Incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary or such acquisition.
AcquiredIndebtedness shall be deemed to be Incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes
a Subsidiary.
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"
Additional Assets
" means (
i
) any property or assets thatreplace the property or assets that are the
subject of an Asset Disposition; (
ii
) any property or assets (other than Indebtedness and Capital Stock) used or
to be used by the Company or a Restricted Subsidiary or otherwise useful in
aRelated Business (including any capital expenditures on any property or
assets already so used); (
iii
) the Capital Stock of a Person that is engaged in a Related Business and
becomes a Restricted Subsidiary as a result of the acquisition ofsuch Capital
Stock by the Company or another Restricted Subsidiary; or (
iv
) Capital Stock of any Person that at such time is a Restricted Subsidiary
acquired from a third party.
"
Affiliate
" of any specified Person means any other Person, directly or indirectly,
controlling or controlled by or underdirect or indirect common control with
such specified Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly,whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"
Asset Disposition
" means any sale, lease, transfer or other disposition of shares of Capital
Stock of a RestrictedSubsidiary (other than directors' qualifying shares, or
(in the case of a Foreign Subsidiary) to the extent required by applicable
law), property or other assets (each referred to for the purposes of this
definition as a"
disposition
") by the Company or any of its Restricted Subsidiaries (including any
disposition by means of a merger, consolidation or similar transaction), other
than (
i
) a disposition to the Company or a RestrictedSubsidiary, (
ii
) a disposition in the ordinary course of business, (
iii
) the sale or discount (with or without recourse, and on customary or
commercially reasonable terms) of accounts receivable or notes receivable
arising inthe ordinary course of business, or the conversion or exchange of
accounts receivable for notes receivable, (
iv
) any Restricted Payment Transaction, (
v
) a disposition that is governed by the provisions described under"--Merger
and Consolidation," (
vi
) any Financing Disposition, (
vii
) any "fee in lieu" or other disposition of assets to any governmental
authority or agency that continue in use by the Company or anyRestricted
Subsidiary, so long as the Company or any Restricted Subsidiary may obtain
title to such assets upon reasonable notice by paying a nominal fee, (
viii
) any exchange of property pursuant to or intended to qualify underSection
1031 (or any successor section) of the Code, or any exchange of equipment to
be leased, rented or otherwise used in a Related Business, (
ix
) any financing transaction with respect to property built or acquired by the
Companyor any Restricted Subsidiary after the Issue Date, including without
limitation any sale/leaseback transaction or asset securitization, (
x
) any disposition arising from foreclosure, condemnation or similar action
with respect to anyproperty or other assets, or exercise of termination rights
under any lease, license, concession or other agreement, (
xi
) any disposition of Capital Stock, Indebtedness or other securities of an
Unrestricted Subsidiary,(
xii
) a disposition of Capital Stock of a Restricted Subsidiary pursuant to an
agreement or other obligation with or to a Person (other than the Company or a
Restricted Subsidiary) from whom such Restricted Subsidiary was acquired,
orfrom whom such Restricted Subsidiary acquired its business and assets
(having been newly formed in connection with such acquisition), entered into
in connection with such acquisition, (
xiii
) a disposition of not more than 5% of theoutstanding Capital Stock of a
Foreign Subsidiary that has been approved by the Board of Directors, (
xiv
) any disposition or series of related dispositions for aggregate
consideration not to exceed $30.0 million,(
xv
) dispositions of Temporary Cash Investments and Cash Equivalents, (
xvi
)(A) the lease, assignment or sublease, license or sublicense of any real or
personal property in the ordinary course of business and (B) the exerciseof
termination rights with respect to any lease, sublease, license or sublicense
or other agreement, (
xvii
) the
non-exclusive
licensing or sublicensing of intellectual property or other generalintangibles
in the ordinary course of business or consistent with industry practice, (
xviii
) any surrender or waiver of contract rights or the settlement, release or
surrender of contract rights or other litigation claims in the ordinarycourse
of business or consistent with industry practice, (
xix
) the unwinding of any Hedging Obligations in the ordinary course of business, (
xx
) sales, transfers and other dispositions of Investments in joint ventures to
theextent required by, or made pursuant to, customary buy/sell arrangements
between the joint venture parties set forth in joint venture arrangements and
similar binding arrangements, (
xxi
) the lapse, abandonment or other disposition ofintellectual property rights
in the ordinary course of business or consistent with industry practice, which
in the reasonable good faith determination of the Company, are not material to
the conduct of the business of the Company and its RestrictedSubsidiaries
taken as a whole, (
xxii
) dispositions of property to the extent that such
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property is exchanged for credit against the purchase price of similar
replacement property or (
xxiii
) the granting of any Liens not prohibited by the covenant described
under"--Certain Covenants--Limitation on Liens."
"
Bank Indebtedness
" means any and all amounts, whetheroutstanding on the Issue Date or
thereafter incurred, payable under or in respect of any Credit Facility,
including without limitation principal, premium (if any), interest (including
interest accruing on or after the filing of any petition inbankruptcy or for
reorganization relating to the Company or any Restricted Subsidiary whether or
not a claim for post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees, other monetaryobligati
ons of any nature and all other amounts payable thereunder or in respect
thereof.
"
Board of Directors
" means,for any Person, the board of directors or other governing body of such
Person or, if such Person does not have such a board of directors or other
governing body and is owned or managed by a single entity, the Board of
Directors of such entity, or,in either case, any committee thereof duly
authorized to act on behalf of such Board of Directors. Unless otherwise
provided, "Board of Directors" means the Board of Directors of the Company.
"
Borrowing Base
" means the sum of (
1
) 90% of the face amount of credit card Receivables of the Company and
itsDomestic Subsidiaries, (2) 85% of the book value of Inventory of the
Company and its Domestic Subsidiaries, (
3
) 85% of the book value of other Receivables of the Company and its Domestic
Subsidiaries and (
4
) cash, Cash Equivalentsand Temporary Cash Investments of the Company and its
Domestic Subsidiaries (in each case, determined as of the end of the most
recently ended fiscal month of the Company for which internal consolidated
financial statements of the Company areavailable, and, in the case of any
determination relating to any Incurrence of Indebtedness, on a pro forma basis
including (
x
) any property or assets of a type described above acquired since the end of
such fiscal month and(
y
) any property or assets of a type described above being acquired in
connection therewith).
"
Business Day
"means a day other than a Saturday, Sunday or other day on which commercial
banking institutions are authorized or required by law to close in New York
City (or any other city in which a Paying Agent maintains its office).
"
Capital Stock
" of any Person means any and all shares of, rights to purchase, warrants or
options for, or other equivalentsof or interests in (however designated)
equity of such Person, including any Preferred Stock, but excluding any debt
securities convertible into such equity.
"
Capitalized Lease Obligation
" means an obligation that is required to be classified and accounted for as a
capitalized leasefor financial reporting purposes in accordance with GAAP;
provided
,
however
, that all obligations of any Person that are or would have been treated as
operating leases (including for avoidance of doubt, any network lease or
anyoperating indefeasible right of use) for purposes of GAAP prior to the
issuance by the Financial Accounting Standards Board on February 25, 2016 of
an Accounting Standards Update (the "ASU") shall continue to be accounted for
asoperating leases for purposes of all financial definitions and calculations
for purpose of the Indenture (whether or not such operating lease obligations
were in effect on such date) notwithstanding the fact that such obligations
are required inaccordance with the ASU (on a prospective or retroactive basis
or otherwise) to be treated as Capitalized Lease Obligations in the financial
statements to be delivered pursuant to "--SEC Reports". The Stated Maturity of
any CapitalizedLease Obligation shall be the date of the last payment of rent
or any other amount due under the related lease.
"
CashEquivalents
" means any of the following: (a) securities issued or fully guaranteed or
insured by the United States of America or a member state of the European
Union or any agency or instrumentality of any thereof, (b) timedeposits,
certificates of deposit or bankers' acceptances of (i) any lender under the
Senior ABL Agreement or any affiliate thereof or (ii) any commercial bank
having capital and surplus in excess of $500,000,000 and the commercialpaper
of the holding company of which is rated at least
A-1
or the equivalent thereof by S&P or at least
P-1
or the equivalent thereof by Moody's (or if at suchtime neither is issuing
ratings, then a comparable rating of
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another nationally recognized rating agency), (c) money market instruments,
commercial paper or other short-term obligations rated at least
A-1
or theequivalent thereof by S&P or at least
P-1
or the equivalent thereof by Moody's (or if at such time neither is issuing
ratings, then a comparable rating of another nationally recognized rating
agency),(d) investments in money market funds subject to the risk limiting
conditions of Rule
2a-7
or any successor rule of the SEC under the Investment Company Act of 1940, as
amended and (e) investments similarto any of the foregoing denominated in
foreign currencies approved by the Board of Directors.
"
Code
" means the InternalRevenue Code of 1986, as amended.
"
Co-Issuer
" means Sally Capital Inc., aDelaware corporation, and any successor in
interest thereto.
"
Commodities Agreement
" means, in respect of a Person, anycommodity futures contract, forward
contract, option or similar agreement or arrangement (including derivative
agreements or arrangements), as to which such Person is a party or beneficiary.
"
Company
" means Sally Holdings LLC, a Delaware limited liability company, and any
successor in interest thereto.
"
Consolidated Coverage Ratio
" as of any date of determination means the ratio of (
i
) the aggregate amount ofConsolidated EBITDA for the period of the most recent
four consecutive fiscal quarters ending prior to the date of such
determination for which consolidated financial statements of the Company are
available to (
ii
) Consolidated InterestExpense for such four fiscal quarters;
provided
, that
(1)if since the beginning of such period the Companyor any Restricted
Subsidiary has Incurred any Indebtedness that remains outstanding on such date
of determination or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness,Consolidated
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period (except that in
makingsuch computation, the amount of Indebtedness under any revolving credit
facility outstanding on the date of such calculation shall be computed based
on (A) the average daily balance of such Indebtedness during such four fiscal
quarters or suchshorter period for which such facility was outstanding or (B)
if such facility was created after the end of such four fiscal quarters, the
average daily balance of such Indebtedness during the period from the date of
creation of such facilityto the date of such calculation),
(2)if since the beginning of such period the Company or any RestrictedSubsidiary
has repaid, repurchased, redeemed, defeased or otherwise acquired, retired or
discharged any Indebtedness that is no longer outstanding on such date of
determination (each, a "
Discharge
") or if the transaction giving riseto the need to calculate the Consolidated
Coverage Ratio involves a Discharge of Indebtedness (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid), ConsolidatedEBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Discharge of such Indebtedness, including with the
proceeds of such new Indebtedness, as if such Discharge had occurred onthe
first day of such period,
(3)if since the beginning of such period the Company or any Restricted
Subsidiaryshall have disposed of any company, any business or any group of
assets constituting an operating unit of a business (any such disposition, a
"Sale"), the Consolidated EBITDA for such period shall be reduced by an amount
equal to theConsolidated EBITDA (if positive) attributable to the assets that
are the subject of such Sale for such period or increased by an amount equal
to the Consolidated EBITDA (if negative) attributable thereto for such period
and Consolidated InterestExpense for such period shall be reduced by an amount
equal to (
A
) the Consolidated Interest Expense attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, redeemed, defeased
or otherwiseacquired, retired or discharged with respect to the Company and
its continuing Restricted Subsidiaries in
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connection with such Sale for such period (including but not limited to
through the assumption of such Indebtedness by another Person) plus (
B
) if the Capital Stock of any RestrictedSubsidiary is sold, the Consolidated
Interest Expense for such period attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and its continuing Restricted
Subsidiaries are no longer liable for such Indebtednessafter such Sale,
(4)if since the beginning of such period the Company or any Restricted
Subsidiary (by merger,consolidation or otherwise) shall have made an
Investment in any Person that thereby becomes a Restricted Subsidiary, or
otherwise acquired any company, any business or any group of assets
constituting an operating unit of a business, including anysuch Investment or
acquisition occurring in connection with a transaction causing a calculation
to be made hereunder (any such Investment or acquisition, a "
Purchase
"), Consolidated EBITDA and Consolidated Interest Expense for suchperiod shall
be calculated after giving pro forma effect thereto (including the Incurrence
of any related Indebtedness) as if such Purchase occurred on the first day of
such period, and
(5)if since the beginning of such period any Person became a Restricted
Subsidiary or was merged or consolidated withor into the Company or any
Restricted Subsidiary, and since the beginning of such period such Person
shall have Discharged any Indebtedness or made any Sale or Purchase that would
have required an adjustment pursuant to clause (2), (3) or(4) above if made by
the Company or a Restricted Subsidiary since the beginning of such period,
Consolidated EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if suchDischarge, Sale or
Purchase occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to begiven to
any Sale, Purchase or other transaction, or the amount of income or earnings
relating thereto and the amount of Consolidated Interest Expense associated
with any Indebtedness Incurred or repaid, repurchased, redeemed, defeased or
otherwiseacquired, retired or discharged in connection therewith, the pro
forma calculations in respect thereof (including without limitation in respect
of anticipated cost savings or synergies relating to any such Sale, Purchase
or other transaction, whichcost savings or synergies shall consist solely of
operating expense reductions and other operating improvements or synergies
reasonably expected to result from such Sale, Purchase or other transaction to
the extent reasonably anticipated to berealized and supportable in the good
faith judgment of the Company and actions necessary for realization thereof
have been taken or are to be taken within 18 months of the applicable Sale,
Purchase or other transaction and to the extent such actionsshall not have
been taken within such period, such cost savings and synergies shall not be
given further effect) shall be as determined in good faith by the Chief
Financial Officer or an authorized Officer of the Company. If any Indebtedness
bears afloating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the
entire period (taking intoaccount any Interest Rate Agreement applicable to
such Indebtedness). If any Indebtedness bears, at the option of the Company or
a Restricted Subsidiary, a rate of interest based on a prime or similar rate,
a eurocurrency interbank offered rate orother fixed or floating rate, and such
Indebtedness is being given pro forma effect, the interest expense on such
Indebtedness shall be calculated by applying such optional rate as the Company
or such Restricted Subsidiary may designate. If anyIndebtedness that is being
given pro forma effect was Incurred under a revolving credit facility, the
interest expense on such Indebtedness shall be computed based upon the average
daily balance of such Indebtedness during the applicable period; or,if lower,
the maximum commitments under such revolving credit facilities as of the
applicable calculation date. Interest on a Capitalized Lease Obligation shall
be deemed to accrue at an interest rate determined in good faith by a
responsiblefinancial or accounting officer of the Company to be the rate of
interest implicit in such Capitalized Lease Obligation in accordance with GAAP.
"
Consolidated EBITDA
" means, for any period, the Consolidated Net Income for such period, plus the
following to the extentdeducted in calculating such Consolidated Net Income,
without duplication: (
i
) provision for all taxes (whether or not paid, estimated or accrued) based on
income, profits or capital, (
ii
) Consolidated Interest Expense andany Special Purpose Financing Fees, (
iii
) depreciation, amortization (including but not limited to amortization of
goodwill and intangibles and amortization and
write-off
of financing costs) andall
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other
non-cash
charges or
non-cash
losses, (
iv
) any expenses or charges related to any Equity Offering,Investment or
Indebtedness permitted by the Indenture (whether or not consummated or
incurred) and (
v
) the amount of any minority interest expense.
"
Consolidated Interest Expense
" means, for any period, (
i
) the total interest expense of the Company and itsRestricted Subsidiaries to
the extent deducted in calculating Consolidated Net Income, net of any
interest income of the Company and its Restricted Subsidiaries, including
without limitation any such interest expense consisting of(
a
) interest expense attributable to Capitalized Lease Obligations, (
b
) amortization of debt discount, (
c
) interest in respect of Indebtedness of any other Person that has been
Guaranteed by the Company or anyRestricted Subsidiary, but only to the extent
that such interest is actually paid by the Company or any Restricted
Subsidiary, (
d
) non-cash
interest expense, (
e
) the interest portion ofany deferred payment obligation and (
f
) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, plus (
ii
) dividends paid in cash in respect of PreferredStock and Disqualified Stock
of the Company held by Persons other than the Company or a Restricted
Subsidiary and minus (
iii
) to the extent otherwise included in such interest expense referred to in
clause (i) above, amortization or
write-off
of financing costs, in each case under clauses (i) through (iii) as determined
on a Consolidated basis in accordance with GAAP;
provided
, that gross interest expense shall be determinedafter giving effect to any
net payments made or received by the Company and its Restricted Subsidiaries
with respect to Interest Rate Agreements.
"
Consolidated Net Income
" means, for any period, the net income (loss) of the Company and its
Restricted Subsidiaries,determined on a Consolidated basis in accordance with
GAAP (other than clause (iv) below) and before any reduction in respect of
Preferred Stock dividends;
provided
, that there shall not be included in such Consolidated Net Income:
(i)any net income (loss) of any Person if such Person is not a Restricted
Subsidiary, except that(
A
) subject to the limitations contained in clause (iii) below, the Company's
equity in the net income of any such Person for such period shall be included
in such Consolidated Net Income up to the aggregate amount actuallydistributed
by such Person during such period to the Company or a Restricted Subsidiary as
a dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in
clause(ii) below) and (
B
) the Company's equity in the net loss of such Person shall be included to the
extent of the aggregate Investment of the Company or any of its Restricted
Subsidiaries in such Person,
(ii)solely for purposes of determining the amount available for Restricted
Payments under clause (a)(3)(A) of thecovenant described under "--Certain
Covenants-- Limitation on Restricted Payments," any net income (loss) of any
Restricted Subsidiary that is not the
Co-Issuer
or a Subsidiary Guarantor ifsuch Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the
making of similar distributions by such Restricted Subsidiary, directly or
indirectly, to the Company by operation of the terms of suchRestricted
Subsidiary's charter or any agreement, instrument, judgment, decree, order,
statute or governmental rule or regulation applicable to such Restricted
Subsidiary or its stockholders (other than (
x
) restrictions that havebeen waived or otherwise released, (
y
) restrictions pursuant to the Notes or the Indenture and (
z
) restrictions in effect on the Issue Date with respect to a Restricted
Subsidiary and other restrictions with respect to suchRestricted Subsidiary
that taken as a whole are not materially less favorable to the Noteholders
than such restrictions in effect on the Issue Date), except that (
A
) subject to the limitations contained in clause (iii) below, theCompany's
equity in the net income of any such Restricted Subsidiary for such period
shall be included in such Consolidated Net Income up to the aggregate amount
of any dividend or distribution that was or that could have been made by
suchRestricted Subsidiary during such period to the Company or another
Restricted Subsidiary (subject, in the case of a dividend that could have been
made to another Restricted Subsidiary, to the limitation contained in this
clause) and (
B
) thenet loss of such Restricted Subsidiary shall be included to the extent of
the aggregate Investment of the Company or any of its other Restricted
Subsidiaries in such Restricted Subsidiary,
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(iii)any gain or loss realized upon the sale or other disposition ofany asset
of the Company or any Restricted Subsidiary (including pursuant to any
sale/leaseback transaction) that is not sold or otherwise disposed of in the
ordinary course of business (as determined in good faith by the Board of
Directors),
(iv)any item classified as an extraordinary, unusual or nonrecurring gain,
loss or charge (including fees, expenses andcharges associated with any
acquisition, merger or consolidation after the Issue Date),
(v)the cumulative effectof a change in accounting principles,
(vi)all deferred financing costs written off and premiums paid in
connectionwith any early extinguishment of Indebtedness,
(vii)any unrealized gains or losses in respect of CurrencyAgreements,
(viii)any unrealized foreign currency transaction gains or losses in respect
of Indebtedness of anyPerson denominated in a currency other than the
functional currency of such Person,
(ix)any
non-cash
compensation charge arising from any grant of stock, stock options or other
equity-based awards,
(x)to the extent otherwise included in Consolidated Net Income, any unrealized
foreign currency translation ortransaction gains or losses in respect of
Indebtedness or other obligations of the Company or any Restricted Subsidiary
owing to the Company or any Restricted Subsidiary, and
(xi)any
non-cash
charge, expense or other impact attributable to application ofthe purchase
method of accounting (including the total amount of depreciation and
amortization, cost of sales or other
non-cash
expense resulting from the
write-up
ofassets to the extent resulting from such purchase accounting adjustments).
In the case of any unusual or nonrecurring gain, loss orcharge not included in
Consolidated Net Income pursuant to clause (iv) above in any determination
thereof, the Company will deliver an Officer's Certificate to the Trustee
promptly after the date on which Consolidated Net Income is sodetermined,
setting forth the nature and amount of such unusual or nonrecurring gain, loss
or charge. Notwithstanding the foregoing, for the purpose of clause (a)(3)(A)
of the covenant described under "--Certain Covenants--Limitation onRestricted
Payments" only, there shall be excluded from Consolidated Net Income, without
duplication, any income consisting of dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Companyor a Restricted Subsidiary, and any income consisting of return of
capital, repayment or other proceeds from dispositions or repayments of
Investments consisting of Restricted Payments, in each case to the extent such
income would be included inConsolidated Net Income and such related dividends,
repayments, transfers, return of capital or other proceeds are applied by the
Company to increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(C) or(D) thereof.
"
Consolidated Total Assets
" means, as of any date of determination, the total assets reflected on
theconsolidated balance sheet of the Company and its Restricted Subsidiaries
as at the end of the most recently ended fiscal quarter of the Company for
which such a balance sheet is available, determined on a Consolidated basis in
accordance with GAAP(and, in the case of any determination relating to any
Incurrence of Indebtedness or any Investment, on a pro forma basis including
any property or assets being acquired in connection therewith).
"
Consolidated Total Indebtedness
" means, as of any date of determination, an amount equal to the aggregate
amount of alloutstanding Indebtedness of the Company and its Restricted
Subsidiaries on a
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Consolidated basis consisting of Indebtedness for borrowed money, Capitalized
Lease Obligations and debt obligations evidenced by bonds, notes, debentures
or similar instruments, as determinedand calculated in accordance with GAAP.
"
Consolidated Total Leverage Ratio
" means, as of any date of determination, theratio of (a)(i) Consolidated
Total Indebtedness,
minus
(ii) cash and Cash Equivalents of the Company and its Restricted Subsidiaries
on a Consolidated basis, in each case as of the end of the most recent fiscal
quarter ending prior tothe date of such determination for which consolidated
financial statements of the Company are available to (b) the aggregate amount
of Consolidated EBITDA for the period of the most recent four consecutive
fiscal quarters ending prior to thedate of such determination for which
consolidated financial statements of the Company are available, in each case
with such pro forma adjustments to Consolidated Total Indebtedness and
Consolidated EBITDA as are appropriate and consistent with thepro forma
adjustment provisions set forth in the definition of "Consolidated Coverage
Ratio."
For purposes of this definition,whenever pro forma effect is to be given to
any Sale, Purchase or other transaction, or the amount of income or earnings
relating thereto and the amount of Indebtedness Incurred or repaid,
repurchased, redeemed, defeased or otherwise acquired,retired or discharged in
connection therewith, the pro forma calculations in respect thereof (including
without limitation in respect of anticipated cost savings or synergies
relating to any such Sale, Purchase or other transaction, which costsavings or
synergies shall consist solely of operating expense reductions and other
operating improvements or synergies reasonably expected to result from such
Sale, Purchase or other transaction to the extent reasonably anticipated to be
realizedand supportable in the good faith judgment of the Company and actions
necessary for realization thereof have been taken or are to be taken within 18
months of the applicable Sale, Purchase or other transaction and to the extent
such actions shallnot have been taken within such period, such cost savings
and synergies shall not be given further effect) shall be as determined in
good faith by the Chief Financial Officer or an authorized Officer of the
Company.
"
Consolidation
" means the consolidation of the accounts of each of the Restricted
Subsidiaries with those of the Company inaccordance with GAAP;
provided
that "Consolidation" will not include consolidation of the accounts of any
Unrestricted Subsidiary, but the interest of the Company or any Restricted
Subsidiary in any Unrestricted Subsidiarywill be accounted for as an
investment. The term "Consolidated" has a correlative meaning.
"
ContributionAmounts
" means the aggregate amount of capital contributions applied by the Company
to permit the Incurrence of Contribution Indebtedness pursuant to clause
(b)(xii) of the covenant described under "--CertainCovenants--Limitation on
Indebtedness."
"
Contribution Indebtedness
" means Indebtedness of the Company or anyRestricted Subsidiary in an
aggregate principal amount not greater than the aggregate amount of cash
contributions (other than Excluded Contributions) made to the capital of the
Company or such Restricted Subsidiary after the Issue Date (whetherthrough the
issuance or sale of Capital Stock or otherwise);
provided
that such Contribution Indebtedness
(a)
is incurred within 180 days after the making of the related cash contribution
and
(b)
is sodesignated as Contribution Indebtedness pursuant to an Officer's
Certificate on the date of Incurrence thereof.
"
CreditFacilities
" means one or more of (i) the Senior ABL Facility, (ii) the Senior Term Loan
B and (iii) any other facilities or arrangements designated by the Company, in
each case with one or more banks or other lenders orinstitutions providing for
revolving credit loans, term loans, receivables financings (including without
limitation through the sale of receivables to such institutions or to special
purpose entities formed to borrow from such institutions againstsuch
receivables or the creation of any Liens in respect of such receivables in
favor of such institutions), letters of credit or other Indebtedness, in each
case, including all agreements, instruments and documents executed and
delivered pursuantto or in connection with any of the foregoing, including but
not limited to any notes and letters of credit issued pursuant thereto and any
guarantee and
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collateral agreement, patent and trademark security agreement, mortgages or
letter of credit applications and other guarantees, pledge agreements,
security agreements and collateral documents, ineach case as the same may be
amended, supplemented, waived or otherwise modified from time to time, or
refunded, refinanced, restructured, replaced, renewed, repaid, increased or
extended from time to time (whether in whole or in part, whether withthe
original banks, lenders or institutions or other banks, lenders or
institutions or otherwise, and whether provided under any original Credit
Facility or one or more other credit agreements, indentures, financing
agreements or other CreditFacilities or otherwise). Without limiting the
generality of the foregoing, the term "Credit Facility" shall include any
agreement (i) changing the maturity of any Indebtedness Incurred thereunder or
contemplated thereby,(ii) adding Subsidiaries as additional borrowers or
guarantors thereunder, (iii) increasing the amount of Indebtedness Incurred
thereunder or available to be borrowed thereunder or (iv) otherwise altering
the terms and conditionsthereof.
"
Currency Agreement
" means, in respect of a Person, any foreign exchange contract, currency swap
agreement orother similar agreement or arrangements (including derivative
agreements or arrangements), as to which such Person is a party or a
beneficiary.
"
Default
" means any event or condition that is, or after notice or passage of time or
both would be, an Event of Default.
"
Derivative Instrument
" means, with respect to a Person, any contract, instrument or other right to
receive payment ordelivery of cash or other assets to which such Person or any
Affiliate of such Person that is acting in concert with such Person in
connection with such Person's investment in the Notes (other than a Regulated
Bank or a Screened Affiliate) is aparty (whether or not requiring further
performance by such Person), the value and/or cash flows of which (or any
material portion thereof) are materially affected by the value and/or
performance of the Notes and/or the creditworthiness of theCompany, the
Co-Issuer, the Parent and/or any one or more of the Guarantors (the "
Performance References
").
"
Designated Noncash Consideration
" means the Fair Market Value of noncash consideration received by the Company
or one of itsRestricted Subsidiaries in connection with an Asset Disposition
that is so designated as Designated Noncash Consideration pursuant to an
Officer's Certificate, setting forth the basis of such valuation.
"
Disqualified Stock
" means, with respect to any Person, any Capital Stock (other than Management
Stock) that by its terms (orby the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (other than following the occurrence of a Change of
Control or other similar event described under suchterms as a "change of
control," or an Asset Disposition) (
i
) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise (other than solely as a result of a change of control or asset
sale, so longas any rights of the holders thereof upon the occurrence of a
change of control or asset sale event shall be subject to the prior repayment
in full of the Notes), (
ii
) is convertible or exchangeable for Indebtedness or Disqualified Stock or(
iii
) is redeemable at the option of the holder thereof (other than following the
occurrence of a Change of Control or other similar event described under such
terms as a "change of control," or an Asset Disposition), in wholeor in part,
in each case on or prior to the final Stated Maturity of the Notes;
provided,
however, that if such Capital Stock is issued pursuant to any plan for the
benefit of future, current or former employees, directors, officers, membersof
management, consultants or independent contractors (or any permitted
transferees or heirs thereof) of the Company or its Restricted Subsidiaries or
by any such plan to such employees, directors, officers, members of
management, consultants orindependent contractors (or any permitted
transferees or heirs thereof), such Capital Stock will not constitute
Disqualified Stock solely because it may be required to be repurchased by the
Company or its Restricted Subsidiaries in order to satisfyapplicable statutory
or regulatory obligations or as a result of such employee's, director's,
officer's, management member's, consultant's or independent contractor's
termination, death ordisability;
provided
further any Capital Stock held by any future, current or former employee,
director, officer, member of management, consultant or independent contractor
(or any permitted transferees or heirs thereof) of theCompany, any of its
Restricted Subsidiaries or any other entity in
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which a Company or any Restricted Subsidiary of the Company has an Investment
and is designated in good faith as an "affiliate" by the Board of Directors
(or the compensation committeethereof), in each case pursuant to any equity
subscription or equity holders' agreement, management equity plan or stock
option plan or any other management or employee benefit plan or agreement will
not constitute Disqualified Stock solelybecause it may be required to be
repurchased by the Company or any Restricted Subsidiary of the Company in
order to satisfy applicable statutory or regulatory obligations or as a result
of such employee's, director's, officer's,management member's, consultant's or
independent contractor's termination, death or disability.
"
DomesticSubsidiary
" means any Restricted Subsidiary of the Company other than a Foreign
Subsidiary.
"
Exchange Act
"means the Securities Exchange Act of 1934, as amended.
"
Excluded Contribution
" means Net Cash Proceeds, or the FairMarket Value of property or assets,
received by the Company as capital contributions to the Company after the
Issue Date or from the issuance or sale (other than to a Restricted
Subsidiary) of Capital Stock (other than Disqualified Stock) of theCompany, in
each case to the extent designated as an Excluded Contribution pursuant to an
Officer's Certificate of the Company and not previously included in the
calculation set forth in clause (a)(3)(B)(x) of the covenant described
under"--Certain Covenants--Limitation on Restricted Payments" for purposes of
determining whether a Restricted Payment may be made.
"
Fair Market Value
" means, with respect to any asset or property, the fair market value of such
asset or property asdetermined in good faith by the Board of Directors, whose
determination will be conclusive.
"
Financing Disposition
"means any sale, transfer, conveyance or other disposition of, or creation or
incurrence of any Lien on, property or assets by the Company or any Subsidiary
thereof to or in favor of any Special Purpose Entity, or by any Special
Purpose Subsidiary,in each case in connection with the Incurrence by a Special
Purpose Entity of Indebtedness, or obligations to make payments to the obligor
on Indebtedness, which may be secured by a Lien in respect of such property or
assets.
"
Fitch
" means Fitch Ratings Ltd. and its successors.
"
Foreign Borrowing Base
" means the sum of (
1)
90% of the face amount of credit card Receivables of ForeignSubsidiaries, (
2
)
85% of the book value of Inventory of Foreign Subsidiaries, (
3
) 85% of the book value of other Receivables of Foreign Subsidiaries, and (
4
) cash, Cash Equivalents and Temporary Cash Investments ofForeign Subsidiaries
(in each case, determined as of the end of the most recently ended fiscal
month of the Company for which internal consolidated financial statements of
the Company are available, and, in the case of any determination relating
toany Incurrence of Indebtedness, on a pro forma basis including (
x
) any property or assets of a type described above acquired since the end of
such fiscal month and (
y
) any property or assets of a type described above beingacquired in connection
therewith); provided that the Foreign Borrowing Base shall in no event be less
than the amount thereof determined as of December 31, 2023.
"
Foreign Subsidiary
" means (
a
) any Restricted Subsidiary of the Company that is not organized under the
laws ofthe United States of America or any state thereof or the District of
Columbia and (
b
) any Restricted Subsidiary of the Company that has no material assets other
than securities or Indebtedness of one or more Foreign Subsidiaries
(orSubsidiaries thereof), and other assets relating to an ownership interest
in any such securities, Indebtedness or Subsidiaries.
"
GAAP
" means generally accepted accounting principles in the United States of
America as in effect on the Issue Date (forpurposes of the definitions of the
terms "Borrowing Base," "Consolidated Coverage Ratio," "Consolidated EBITDA,"
"Consolidated Interest Expense," "Consolidated Net Income," "Consolidated
TotalAssets," "Consolidated Total Indebtedness," "Consolidated Total Leverage
Ratio," "Foreign Borrowing Base"
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and "Indebtedness," all defined terms in the Indenture to the extent used in
or relating to any of the foregoing definitions, and all ratios and
computations based on any of theforegoing definitions) and as in effect from
time to time (for all other purposes of the Indenture), including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified PublicAccountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAPcontained in
the Indenture shall be computed in conformity with GAAP.
"
Guarantee
" means any obligation, contingent orotherwise, of any Person directly or
indirectly guaranteeing any Indebtedness or other obligation of any other
Person;
provided
that the term "Guarantee" shall not include endorsements for collection or
deposit in the ordinarycourse of business. The term "Guarantee" used as a verb
has a corresponding meaning.
"
Guarantors
" means theParent Guarantors and the Subsidiary Guarantors.
"
Guarantor Subordinated Obligations
" means, with respect to aGuarantor, any Indebtedness of such Guarantor
(whether outstanding on the Issue Date or thereafter Incurred) that is
expressly subordinated in right of payment to the obligations of such
Guarantor under its Guarantee pursuant to a written agreement.
"
Hedging Obligations
" of any Person means the obligations of such Person pursuant to any Interest
Rate Agreement,Currency Agreement or Commodities Agreement.
"
Holder
" or "
Noteholder
" means the Person in whose name aNote is registered in the Note Register.
"
Holding
" means Sally Beauty Holdings, Inc., a Delaware corporation, and anysuccessor
in interest thereto.
"
Incur
" means issue, assume, enter into any Guarantee of, incur or otherwise
becomeliable for; and the terms "
Incurs
," "
Incurred
" and "
Incurrence
" shall have a correlative meaning;
provided
, that any Indebtedness or Capital Stock of a Person existing at the time such
Personbecomes a Subsidiary (whether by merger, consolidation, acquisition or
otherwise) shall be deemed to be Incurred by such Subsidiary at the time it
becomes a Subsidiary. Accrual of interest, the accretion of accreted value and
the payment of interestin the form of additional Indebtedness will not be
deemed to be an Incurrence of Indebtedness. Any Indebtedness issued at a
discount (including Indebtedness on which interest is payable through the
issuance of additional Indebtedness) shall bedeemed Incurred at the time of
original issuance of the Indebtedness at the initial accreted amount thereof.
"
Indebtedness
" means, with respect to any Person on any date of determination (without
duplication):
(i)the principal of indebtedness of such Person for borrowed money,
(ii)the principal of obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments,
(iii)all reimbursement obligations of such Person in respect of letters of
credit, bankers' acceptances orother similar instruments (the amount of such
obligations being equal at any time to the aggregate then undrawn and
unexpired amount of such letters of credit, bankers' acceptances or other
instruments plus the aggregate amount of drawingsthereunder that have not then
been reimbursed),
(iv)all obligations of such Person to pay the deferred and unpaidpurchase
price of property (except Trade Payables), which purchase price is due more
than one year after the date of placing such property in final service or
taking final delivery and title thereto,
(v)all Capitalized Lease Obligations of such Person,
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(vi)the redemption, repayment or other repurchase amount of suchPerson with
respect to any Disqualified Stock of such Person or (if such Person is a
Subsidiary of the Company other than the
Co-Issuer
or a Subsidiary Guarantor) any Preferred Stock of such Subsidiary,
butexcluding, in each case, any accrued dividends (the amount of such
obligation to be equal at any time to the maximum fixed involuntary
redemption, repayment or repurchase price for such Capital Stock, or if less
(or if such Capital Stock has no suchfixed price), to the involuntary
redemption, repayment or repurchase price therefor calculated in accordance
with the terms thereof as if then redeemed, repaid or repurchased, and if such
price is based upon or measured by the fair market value ofsuch Capital Stock,
such fair market value shall be as determined in good faith by the Board of
Directors or the board of directors or other governing body of the issuer of
such Capital Stock),
(vii)all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtednessis assumed by such Person; provided
that the amount of Indebtedness of such Person shall be the lesser of (A) the
fair market value of such asset at such date of determination (as determined
in good faith by the Company) and (B) the amount ofsuch Indebtedness of such
other Persons,
(viii)all Guarantees by such Person of Indebtedness of other Persons, tothe
extent so Guaranteed by such Person, and
(ix)to the extent not otherwise included in this definition, netHedging
Obligations of such Person (the amount of any such obligation to be equal at
any time to the termination value of such agreement or arrangement giving rise
to such Hedging Obligation that would be payable by such Person at such time).
For the avoidance of doubt, any operating leases, as such instruments would be
determined in accordance with GAAP on the Issue Date, shall bedeemed not to
constitute Indebtedness.
The amount of Indebtedness of any Person at any date shall be determined as
set forth above orotherwise provided in the Indenture, or otherwise shall
equal the amount thereof that would appear as a liability on a balance sheet
of such Person (excluding any notes thereto) prepared in accordance with GAAP.
"
Interest Rate Agreement
" means, with respect to any Person, any interest rate protection agreement,
future agreement, optionagreement, swap agreement, cap agreement, collar
agreement, hedge agreement or other similar agreement or arrangement
(including derivative agreements or arrangements), as to which such Person is
party or a beneficiary.
"
Intermediate Holdings
" means Sally Investment Holdings LLC, a Delaware limited liability company,
and any successor ininterest thereto.
"
Inventory
" means goods held for sale, lease or use by a Person in the ordinary course
of business,net of any reserve for goods that have been segregated by such
Person to be returned to the applicable vendor for credit, as determined in
accordance with GAAP.
"
Investment
" in any Person by any other Person means any direct or indirect advance, loan
or other extension of credit (otherthan to customers, dealers, licensees,
franchisees, suppliers, directors, officers or employees of any Person in the
ordinary course of business) or capital contribution (by means of any transfer
of cash or other property to others or any paymentfor property or services for
the account or use of others) to, or any purchase or acquisition of Capital
Stock, Indebtedness or other similar instruments issued by, such Person. For
purposes of the definition of "Unrestricted Subsidiary"and the covenant
described under "--Certain Covenants--Limitation on Restricted Payments" only,
(i) "Investment" shall include the portion (proportionate to the Company's
equity interest in such Subsidiary) of theFair Market Value of the net assets
of any Subsidiary
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of the Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary,
provided
that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the
Companyshall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary in an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less(y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the Fair Market Value of the net assets of such Subsidiary at the time of such
redesignation, and (ii) any property transferred to or from anUnrestricted
Subsidiary shall be valued at its Fair Market Value at the time of such
transfer. Guarantees shall not be deemed to be Investments. The amount of any
Investment outstanding at any time shall be the original cost of such
Investment,reduced (at the Company's option) by any dividend, distribution,
interest payment, return of capital, repayment or other amount or value
received in respect of such Investment;
provided
, that to the extent that the amount of RestrictedPayments outstanding at any
time pursuant to paragraph (a) of the covenant described under "--Certain
Covenants--Limitation on Restricted Payments" is so reduced by any portion of
any such amount or value that would otherwisebe included in the calculation of
Consolidated Net Income, such portion of such amount or value shall not be so
included for purposes of calculating the amount of Restricted Payments that
may be made pursuant to paragraph (a) of the covenantdescribed under
"--Certain Covenants--Limitation on Restricted Payments."
"
Investment Grade Rating
"means a rating of
BBB-
or better by Fitch, Baa3 or better by Moody's and BBB- or better by S&P (or,
in either case, the equivalent of such rating by such organization), or an
equivalent rating by anyother Rating Agency.
"
Issue Date
" means the first date on which Notes are issued.
"
Lien
" means any mortgage, pledge, security interest, encumbrance, lien or charge
of any kind (including any conditional saleor other title retention agreement
or lease in the nature thereof);
provided
that in no event shall an operating lease (determined in accordance with GAAP)
be deemed to constitute a Lien.
"
Limited Condition Transaction
" means (1) any Investment or acquisition (whether by merger, consolidation or
otherwise),whose consummation is not conditioned on the availability of, or on
obtaining, third-party financing, (2) any redemption, repurchase, defeasance,
satisfaction and discharge or repayment of Indebtedness requiring irrevocable
notice in advance ofsuch redemption, repurchase, defeasance, satisfaction and
discharge or repayment and (3) any dividends or distributions on, or
redemptions of, Capital Stock requiring irrevocable notice in advance thereof.
"Long Derivative Instrument
" means a Derivative Instrument (i) the value of which generally increases,
and/or thepayment or delivery obligations under which generally decrease, with
positive changes to the Performance References and/or (ii) the value of which
generally decreases, and/or the payment or delivery obligations under which
generally increase,with negative changes to the Performance References.
"
Management Advances
" means (
1
) loans or advances madeto directors, officers or employees of any Parent, the
Company or any Restricted Subsidiary (
x
) in respect of travel, entertainment or moving-related expenses incurred in
the ordinary course of business, (
y
) in respect ofmoving-related expenses incurred in connection with any closing
or consolidation of any facility, or (
z
) in the ordinary course of business and (in the case of this clause (z)) not
exceeding $7.5 million in the aggregate outstandingat any time, (
2
) promissory notes of Management Investors acquired in connection with the
issuance of Management Stock to such Management Investors, (
3
) Management Guarantees, or (
4
) other Guarantees of borrowingsby Management Investors in connection with the
purchase of Management Stock, which Guarantees are permitted under the
covenant described under "--Certain Covenants--Limitation on Indebtedness."
"
Management Guarantees
" means guarantees (
x
) of up to an aggregate principal amount outstanding at any time of$20.0
million of borrowings by Management Investors in connection with their
purchase of Management Stock or (
y
) made on behalf of, or in respect of loans or advances made to, directors,
officers or
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employees of any Parent, the Company or any Restricted Subsidiary (
1
) in respect of travel, entertainment and moving-related expenses incurred in
the ordinary course of business, or(
2
) in the ordinary course of business and (in the case of this clause (2)) not
exceeding $7.5 million in the aggregate outstanding at any time.
"
Management Investors
" means the officers, directors, employees and other members of the management
of any Parent, theCompany or any of their respective Subsidiaries, or family
members or relatives thereof (
provided
that, solely for purposes of the definition of "Permitted Holders," such
relatives shall include only those Persons who are or becomeManagement
Investors in connection with estate planning for or inheritance from other
Management Investors, as determined in good faith by the Company, which
determination shall be conclusive), or trusts, partnerships or limited
liability companiesfor the benefit of any of the foregoing, or any of their
heirs, executors, successors and legal representatives, who at any date
beneficially own or have the right to acquire, directly or indirectly, Capital
Stock of the Company or any Parent.
"
Management Stock
" means Capital Stock of the Company or any Parent (including any options,
warrants or other rights inrespect thereof) held by any of the Management
Investors.
"
Market Capitalization
" means an amount equal to (i) thetotal number of issued and outstanding
shares of capital stock of the Company or any Parent on the date of
declaration of the relevant dividend or making of any other Restricted
Payment, as applicable, multiplied by (ii) the arithmetic mean ofthe closing
prices per share of such capital stock on the New York Stock Exchange (or, if
the primary listing of such capital stock is on another exchange, on such
other exchange) for the 30 consecutive trading days immediately preceding such
date.
"
Moody's
" means Moody's Investors Service, Inc., and its successors.
"
Net Available Cash
" from an Asset Disposition means cash payments received (including any cash
payments received by way ofdeferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring person of Indebtedness or otherobligations relating to the
properties or assets that are the subject of such Asset Disposition or
received in any other
non-cash
form) therefrom, in each case net of (
i
) all legal, title andrecording tax expenses, commissions and other fees and
expenses incurred, and all federal, state, provincial, foreign and local taxes
required to be paid or to be accrued as a liability under GAAP, as a
consequence of such Asset Disposition(including as a consequence of any
transfer of funds in connection with the application thereof in accordance
with the covenant described under "--Certain Covenants--Limitation on Sales of
Assets and Subsidiary Stock"), (
ii
)all payments made, and all installment payments required to be made, on any
Indebtedness (
x
) that is secured by any assets subject to such Asset Disposition, in
accordance with the terms of any Lien upon such assets, or(
y
) that must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law, be repaid out of the proceeds from
such Asset Disposition, including but not limited to any payments required to
bemade to increase borrowing availability under the Senior ABL Facility (or
any other revolving credit facility), (
iii
) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as aresult of such Asset
Disposition, or to any other Person (other than the Company or a Restricted
Subsidiary) owning a beneficial interest in the assets disposed of in such
Asset Disposition, (
iv
) any liabilities or obligations associatedwith the assets disposed of in such
Asset Disposition and retained by the Company or any Restricted Subsidiary
after such Asset Disposition, including without limitation pension and other
post-employment benefit liabilities, liabilities related toenvironmental
matters, and liabilities relating to any indemnification obligations
associated with such Asset Disposition, and (
v
) the amount of any purchase price or similar adjustment (
x
) claimed by any Person to be owed bythe Company or any Restricted Subsidiary,
until such time as such claim shall have been settled or otherwise finally
resolved, or (
y
) paid or payable by the Company or any Restricted Subsidiary, in either case
in respect of such AssetDisposition.
"
Net Cash Proceeds
," with respect to any issuance or sale of any securities of the Company or
anySubsidiary by the Company or any Subsidiary, or any capital contribution,
means the cash proceeds of such
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issuance, sale or contribution net of attorneys' fees, accountants' fees,
underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and otherfees actually incurred in connection with such
issuance, sale or contribution and net of taxes paid or payable as a result
thereof.
"
Net Short
" means, with respect to a Holder or beneficial owner, as of a date of
determination, either (i) the value ofits Short Derivative Instruments exceeds
the sum of the (x) the value of its Notes plus (y) the value of its Long
Derivative Instruments as of such date of determination or (ii) it is
reasonably expected that such would have been thecase were a Failure to Pay or
Bankruptcy Credit Event (each as defined in the 2014 ISDA Credit Derivatives
Definitions) to have occurred with respect to the Company, the Co-Issuer, the
Parent or any other Guarantor immediately prior to such date ofdetermination.
"
Obligations
" means, with respect to any Indebtedness, any principal, premium (if any),
interest(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company or any Restricted
Subsidiary whether or not a claim for post-filing interest is allowed in such
proceedings), fees,charges, expenses, reimbursement obligations, Guarantees of
such Indebtedness (or of Obligations in respect thereof), other monetary
obligations of any nature and all other amounts payable thereunder or in
respect thereof.
"
Officer
" means, with respect to the Company or any other obligor upon the Notes, the
Chairman of the Board, the President,the Chief Executive Officer, the Chief
Financial Officer, any Vice President, the Controller, the Treasurer or the
Secretary (
a
) of such Person or (
b
) if such Person is owned or managed by a single entity, of such entity (orany
other individual designated as an "Officer" for the purposes of the Indenture
by the Board of Directors).
"
Officer's Certificate
" means, with respect to the Company or any other obligor upon the Notes, a
certificate signed byone Officer of such Person and delivered to the Trustee.
"
Opinion of Counsel
" means a written opinion from legal counselwho is reasonably acceptable to
the Trustee. The counsel may be an employee of or counsel to the Company.
"
Parent
" meansany of Holding, Intermediate Holdings, and any Other Parent and any
other Person that is a Subsidiary of Holding, Intermediate Holdings, or any
Other Parent and of which the Company is a Subsidiary. As used herein, "Other
Parent" means aPerson of which the Company becomes a Subsidiary after the
Issue Date,
provided
that either (
x
) immediately after the Company first becomes a Subsidiary of such Person,
more than 50% of the Voting Stock of such Person shall beheld by one or more
Persons that held more than 50% of the Voting Stock of a Parent of the Company
immediately prior to the Company first becoming such Subsidiary or (
y
) such Person shall be deemed not to be an Other Parent for thepurpose of
determining whether a Change of Control shall have occurred by reason of the
Company first becoming a Subsidiary of such Person.
"
Parent Expenses
" means (i) costs (including all professional fees and expenses) incurred by
any Parent in connectionwith its reporting obligations under, or in connection
with compliance with, applicable laws or applicable rules of any governmental,
regulatory or self-regulatory body or stock exchange, the Indenture or any
other agreement or instrument relatingto Indebtedness of the Company or any
Restricted Subsidiary, including in respect of any reports filed with respect
to the Securities Act, Exchange Act or the respective rules and regulations
promulgated thereunder, (ii) expenses incurred byany Parent in connection with
the acquisition, development, maintenance, ownership, prosecution, protection
and defense of its intellectual property and associated rights (including but
not limited to trademarks, service marks, trade names, tradedress, patents,
copyrights and similar rights, including registrations and registration or
renewal applications in respect thereof; inventions, processes, designs,
formulae, trade secrets,
know-how,
confidential information, computer software, data and documentation, and any
other intellectual property rights; and licenses of any of the foregoing) to
the extent such intellectual property and associated rights relate to the
business orbusinesses of the Company or any Subsidiary thereof, (iii)
indemnification obligations of any Parent owing to directors, officers,
employees or other
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Persons under its charter or
by-laws
or pursuant to written agreements with any such Person, or obligations in
respect of director and officer insurance(including premiums therefor), (iv)
other operational expenses of any Parent incurred in the ordinary course of
business, and (v) fees and expenses incurred by any Parent in connection with
any offering of Capital Stock or Indebtedness,(x) where the net proceeds of
such offering are intended to be received by or contributed or loaned to the
Company or a Restricted Subsidiary, or (y) in a prorated amount of such
expenses in proportion to the amount of such net proceedsintended to be so
received, contributed or loaned, or (z) otherwise on an interim basis prior to
completion of such offering so long as any Parent shall cause the amount of
such expenses to be repaid to the Company or the relevant RestrictedSubsidiary
out of the proceeds of such offering promptly if completed.
"
Parent Guarantee
" means any guarantee that mayfrom time to time be entered into by any Parent
on the Issue Date or after the Issue Date with respect to the Notes. As used
in the Indenture, "Parent Guarantee" refers to a Parent Guarantee of the Notes.
"
Parent Guarantor
" means any Parent that enters into a Parent Guarantee. As used in the
Indenture, "ParentGuarantor" refers to a Parent Guarantor of the Notes.
"
Permitted Holder
" means any of the following:(
i
) any of the Management Investors and their respective Affiliates; and (
ii
) any Person acting in the capacity of an underwriter (solely to the extent
that and for so long as such Person is acting in such capacity) inconnection
with a public or private offering of Capital Stock of any Parent or the
Company. In addition, any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) whose status as a "beneficial owner" (asdefined in
Rules
13d-3
and
13d-5
under the Exchange Act) constitutes or results in a Change of Control in
respect of which a Change of Control Offer is made inaccordance with the
requirements of the Indenture, together with its Affiliates, shall thereafter
constitute Permitted Holders.
"
Permitted Investment
" means an Investment by the Company or any Restricted Subsidiary in, or
consisting of, any of thefollowing:
(i)a Restricted Subsidiary, the Company, or a Person that will, upon the
making of such Investment,become a Restricted Subsidiary;
(ii)another Person if as a result of such Investment such other Person is
mergedor consolidated with or into, or transfers or conveys all or
substantially all its assets to, or is liquidated into, the Company or a
Restricted Subsidiary;
(iii)Temporary Cash Investments or Cash Equivalents;
(iv)receivables owing to the Company or any Restricted Subsidiary, if created
or acquired in the ordinary course ofbusiness;
(v)any securities or other Investments received as consideration in, or
retained in connection with,sales or other dispositions of property or assets,
including Asset Dispositions made in compliance with the covenant described
under "--Certain Covenants--Limitation on Sales of Assets and Subsidiary
Stock";
(vi)securities or other Investments received in settlement of debts created in
the ordinary course of business andowing to, or of other claims asserted by,
the Company or any Restricted Subsidiary, or as a result of foreclosure,
perfection or enforcement of any Lien, or in satisfaction of judgments,
including in connection with any bankruptcy proceeding orother reorganization
of another Person;
(vii)Investments in existence or made pursuant to legally binding
writtencommitments in existence on the Issue Date;
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(viii)Currency Agreements, Interest Rate Agreements, CommoditiesAgreements and
related Hedging Obligations, which obligations are Incurred in compliance with
the covenant described under "--Certain Covenants--Limitation on Indebtedness";
(ix)pledges or deposits (
x
) with respect to leases or utilities provided to third parties in the
ordinarycourse of business or (
y
) otherwise described in the definition of "Permitted Liens" or made in
connection with Liens permitted under the covenant described under "--Certain
Covenants--Limitation on Liens";
(x)(1) Investments in or by any Special Purpose Subsidiary, or in connection
with a Financing Disposition by or toor in favor of any Special Purpose
Entity, including Investments of funds held in accounts permitted or required
by the arrangements governing such Financing Disposition or any related
Indebtedness, or (2) any promissory note issued by theCompany, or any Parent,
provided that if such Parent receives cash from the relevant Special Purpose
Entity in exchange for such note, an equal cash amount is contributed by any
Parent to the Company;
(xi)bonds secured by assets leased to and operated by the Company or any
Restricted Subsidiary that were issued inconnection with the financing of such
assets so long as the Company or any Restricted Subsidiary may obtain title to
such assets at any time by paying a nominal fee, canceling such bonds and
terminating the transaction;
(xii)Notes;
(xiii)any Investment to the extent made using Capital Stock of the Company
(other than Disqualified Stock), or CapitalStock of any Parent, as
consideration;
(xiv)Management Advances;
(xv)Investments in Related Businesses in an aggregate amount outstanding at
any time not to exceed the greater of$250.0 million and 9.5% of Consolidated
Total Assets;
(xvi)any transaction to the extent it constitutes anInvestment that is
permitted by and made in accordance with the provisions of paragraph (b) of
the covenant described under "--Certain Covenants--Limitation on Transactions
with Affiliates" (except transactions described inclauses (i), (v) and (vi) of
such paragraph);
(xvii)Investments consisting of purchases and acquisitions ofinventory,
supplies, material, services, equipment or similar assets or the
non-exclusive
licensing or contribution of intellectual property pursuant to joint marketing
arrangements with other Persons; and
(xviii)other Investments in an aggregate amount outstanding at any time not to
exceed the greater of$250.0 million and 9.5% of Consolidated Total Assets.
If any Investment pursuant to clause (xv) or (xviii) above is made in
anyPerson that is not a Restricted Subsidiary and such Person thereafter
becomes a Restricted Subsidiary, such Investment shall thereafter be deemed to
have been made pursuant to clause (i) above and not clause (xv) or (xviii)
above for solong as such Person continues to be a Restricted Subsidiary.
"
Permitted Liens
" means:
(i)Liens for taxes, assessments or other governmental charges not yet
delinquent or the nonpayment of which in theaggregate would not reasonably be
expected to have a material adverse effect on the Company and its Restricted
Subsidiaries or that are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto aremaintained on the
books of the Company or a Subsidiary thereof, as the case may be, in
accordance with GAAP;
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(ii)carriers', warehousemen's, mechanics',landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business in
respect of obligations that are not overdue for a period of more than 60 days
or that are bonded or that are being contested ingood faith and by appropriate
proceedings;
(iii)pledges, deposits or Liens in connection with workers'compensation,
unemployment insurance and other social security and other similar legislation
or other insurance-related obligations (including, without limitation, pledges
or deposits securing liability to insurance carriers under insurance
orself-insurance arrangements);
(iv)pledges, deposits or Liens to secure the performance of bids, tenders,
trade,government or other contracts (other than for borrowed money),
obligations for utilities, leases, licenses, statutory obligations, completion
guarantees, surety, judgment, appeal or performance bonds, other similar
bonds, instruments or obligations,and other obligations of a like nature
incurred in the ordinary course of business;
(v)easements (includingreciprocal easement agreements),
rights-of-way,
building, zoning and similar restrictions, utility agreements, covenants,
reservations, restrictions, encroachments,charges, and other similar
encumbrances or title defects incurred, or leases or subleases granted to
others, in the ordinary course of business, which do not in the aggregate
materially interfere with the ordinary conduct of the business of theCompany
and its Subsidiaries, taken as a whole;
(vi)Liens existing on, or provided for under written arrangementsexisting on,
the Issue Date, or (in the case of any such Liens securing Indebtedness of the
Company or any of its Subsidiaries existing or arising under written
arrangements existing on the Issue Date) securing any Refinancing Indebtedness
inrespect of such Indebtedness so long as the Lien securing such Refinancing
Indebtedness is limited to all or part of the same property or assets (plus
improvements, accessions, proceeds or dividends or distributions in respect
thereof) that secured(or under such written arrangements could secure) the
original Indebtedness;
(vii)(1) mortgages, liens, securityinterests, restrictions, encumbrances or
any other matters of record that have been placed by any developer, landlord
or other third party on property over which the Company or any Restricted
Subsidiary of the Company has easement rights or on anyleased property and
subordination or similar agreements relating thereto and (2) any condemnation
or eminent domain proceedings affecting any real property;
(viii)Liens securing Indebtedness (including Liens securing any Obligations in
respect thereof) consisting of HedgingObligations, Purchase Money Obligations
or Capitalized Lease Obligations Incurred in compliance with the covenant
described under "--Certain Covenants--Limitation on Indebtedness";
(ix)Liens arising out of judgments, decrees, orders or awards in respect of
which the Company shall in good faith beprosecuting an appeal or proceedings
for review, which appeal or proceedings shall not have been finally
terminated, or if the period within which such appeal or proceedings may be
initiated shall not have expired;
(x)leases, subleases, licenses or sublicenses to third parties;
(xi)Liens securing Indebtedness (including Liens securing any Obligations in
respect thereof) consisting of(1) Indebtedness Incurred in compliance with
clause (b)(i), (b)(iv), (b)(v), (b)(vii), (b)(viii), (b)(ix) or (b)(xi) of the
covenant described under " --Certain Covenants--Limitation on Indebtedness,"
or clause (b)(iii)thereof (other than the Notes and Refinancing Indebtedness
Incurred in respect of Indebtedness described in paragraph (a) thereof), (2)
Bank Indebtedness, (3) the Notes, (4) Indebtedness of any Restricted
Subsidiary that is not aSubsidiary Guarantor, (5) Indebtedness or
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other obligations of any Special Purpose Entity, or (6) obligations in respect
of Management Advances or Management Guarantees; in each case including Liens
securing any Guarantee of anythereof;
(xii)Liens existing on property or assets of a Person at the time such Person
becomes a Subsidiary of theCompany (or at the time the Company or a Restricted
Subsidiary acquires such property or assets, including any acquisition by
means of a merger or consolidation with or into the Company or any Restricted
Subsidiary);
provided
,
however
,that such Liens are not created in connection with, or in contemplation of,
such other Person becoming such a Subsidiary (or such acquisition of such
property or assets), and that such Liens are limited to all or part of the
same property or assets(plus improvements, accessions, proceeds or dividends
or distributions in respect thereof) that secured (or, under the written
arrangements under which such Liens arose, could secure) the obligations to
which such Liens relate;
(xiii)Liens on Capital Stock, Indebtedness or other securities of an
Unrestricted Subsidiary that secure Indebtednessor other obligations of such
Unrestricted Subsidiary;
(xiv)any encumbrance or restriction (including, but notlimited to, put and
call agreements) with respect to Capital Stock of any joint venture or similar
arrangement pursuant to any joint venture or similar agreement;
(xv)Liens securing Indebtedness (including Liens securing any Obligations in
respect thereof) consisting of RefinancingIndebtedness Incurred in respect of
any Indebtedness secured by, or securing any refinancing, refunding,
extension, renewal or replacement (in whole or in part) of any other
obligation secured by, any other Permitted Liens, provided that any suchnew
Lien is limited to all or part of the same property or assets (plus
improvements, accessions, proceeds or dividends or distributions in respect
thereof) that secured (or, under the written arrangements under which the
original Lien arose, couldsecure) the obligations to which such Liens relate;
(xvi)Liens (
1
) arising by operation of law (or byagreement to the same effect) in the
ordinary course of business, (
2
) on property or assets under construction (and related rights) in favor of a
contractor or developer or arising from progress or partial payments by a
third partyrelating to such property or assets, (
3
) on receivables (including related rights), (
4
) on cash set aside at the time of the Incurrence of any Indebtedness or
government securities purchased with such cash, in either case to theextent
that such cash or government securities prefund the payment of interest on
such Indebtedness and are held in an escrow account or similar arrangement to
be applied for such purpose, (
5
) securing or arising by reason of any nettingor
set-off
arrangement entered into in the ordinary course of banking or other trading
activities, (
6
) in favor of the Company or any Restricted Subsidiary (other than Liens on
property or assetsof the Company or any Subsidiary Guarantor in favor of any
Restricted Subsidiary that is not a Subsidiary Guarantor), (
7
) arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered intoin the ordinary course of
business, (
8
) relating to pooled deposit or sweep accounts to permit satisfaction of
overdraft, cash pooling or similar obligations incurred in the ordinary course
of business, (
9
) attaching tocommodity trading or other brokerage accounts incurred in the
ordinary course of business, (
10
) arising in connection with repurchase agreements permitted under the
covenant described under "--Certain Covenants--Limitationon Indebtedness," on
assets that are the subject of such repurchase agreements, (
11
) in favor of any Special Purpose Entity in connection with any Financing
Disposition, (
12
) Liens in favor of customs and revenueauthorities arising as a matter of law
to secure payment of customs duties in connection with the importation of
goods, and (
13
) Liens deemed to exist in connection with Investments in repurchase
agreements permitted by the Indenture;
(xvii)Liens (i) on cash advances or cash earnest money deposits in favor of
the seller of any property to beacquired in an Investment permitted under the
Indenture to be applied against the purchase price for such Investment and
(ii) consisting of a letter of intent or an agreement to sell, transfer, lease
or otherwise dispose of any property in atransaction permitted under the
Indenture;
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(xviii)any encumbrance or restriction (including put, callarrangements, tag,
drag, right of first refusal and similar rights) with respect to Capital Stock
of any joint venture or similar arrangement pursuant to any joint venture or
similar agreement;
(xix)Liens arising from Uniform Commercial Code (or equivalent statutes)
financing statement filings regardingoperating leases entered into by the
Company and its Restricted Subsidiaries in the ordinary course of business or
consistent with industry practice or purported Liens evidenced by the filing
of precautionary Uniform Commercial Code (or equivalentstatutes) financing
statements or similar public filings; and
(xx)other Liens securing obligations incurred in theordinary course of
business, which obligations do not exceed the greater of $330.0 million and
12.0% of Consolidated Total Assets at any time outstanding.
"
Person
" means any individual, corporation, partnership, joint venture, association,
joint-stock company, limited liabilitycompany, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"
Preferred Stock
" as applied to the Capital Stock of any corporation means Capital Stock of
any class or classes (howeverdesignated) that by its terms is preferred as to
the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of suchcorporation.
"
Public Debt
" means any Indebtedness consisting of bonds, debentures, notes or other
similar debtsecurities issued in (i) a public offering registered under the
Securities Act or (ii) a private placement to institutional and other
investors (x) in accordance with Section 4(a)(2) under the Securities Act or
(y) acquiredfor resale in accordance with Rule 144A and/or Regulation S under
the Securities Act, whether or not it includes registration rights entitling
the holders of such debt securities to registration thereof with the SEC for
public resale.
"
Purchase Money Obligations
" means any Indebtedness Incurred to finance or refinance the acquisition,
leasing, constructionor improvement of property (real or personal) or assets,
and whether acquired through the direct acquisition of such property or assets
or the acquisition of the Capital Stock of any Person owning such property or
assets, or otherwise.
"
Rating Agency
" means (a) Fitch, (b) Moody's (c) S&P or (d) if Fitch, Moody's or S&P or
anyor all of them shall not make a rating on the Notes publicly available, a
nationally recognized statistical rating agency or agencies, as the case may
be, selected by the Company, which shall be substituted for Fitch, Moody's or
S&P or anyor all of them, as the case may be.
"
Receivable
" means a right to receive payment pursuant to an arrangement withanother
Person pursuant to which such other Person is obligated to pay, as determined
in accordance with GAAP.
"
refinance
" means refinance, refund, replace, renew, repay, modify, restate, defer,
substitute, supplement, reissue, resellor extend (including pursuant to any
defeasance or discharge mechanism); and the terms "
refinances
," "
refinanced
" and "
refinancing
" as used for any purpose in the Indenture shall have a correlativemeaning.
"
Refinancing Indebtedness
" means Indebtedness that is Incurred to refinance any Indebtedness existing
on thedate of the Indenture or Incurred in compliance with the Indenture
(including Indebtedness of the Company that refinances Indebtedness of any
Restricted Subsidiary (to the extent permitted in the Indenture) and
Indebtedness of any RestrictedSubsidiary that refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness;
provided,
that (
1
) if the Indebtedness being refinanced is Subordinated Obligations orGuarantor
Subordinated Obligations, the Refinancing Indebtedness has a final Stated
Maturity at the time such Refinancing Indebtedness is Incurred that is equal
to or greater than the final Stated Maturity of the Indebtedness being
refinanced (or ifshorter, the Notes), (
2
) such Refinancing
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Indebtedness is Incurred in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less
than the sum of (
x
) theaggregate principal amount (or if issued with original issue discount,
the aggregate accreted value) then outstanding of the Indebtedness being
refinanced, plus (
y
) fees, underwriting discounts, premiums and other costs and expensesincurred
in connection with such Refinancing Indebtedness and (
3
) Refinancing Indebtedness shall not include (
x
) Indebtedness of a Restricted Subsidiary that is not the
Co-Issuer
or aSubsidiary Guarantor that refinances Indebtedness of the Company, the
Co-Issuer
or a Subsidiary Guarantor that could not have been initially Incurred by such
Restricted Subsidiary pursuant to the covenantdescribed under "--Certain
Covenants--Limitation on Indebtedness" or (
y
) Indebtedness of the Company or a Restricted Subsidiary that refinances
Indebtedness of an Unrestricted Subsidiary.
"
Regulated Bank
" means a banking organization with a consolidated combined capital and
surplus of at least $5.0 billionthat is (1) a U.S. depository institution the
deposits of which are insured by the Federal Deposit Insurance Corporation;
(2) a corporation organized under Section 25A of the U.S. Federal Reserve Act
of 1913; (3) a branch, agencyor commercial lending company of a foreign bank
operating pursuant to approval by and under the supervision of the Board of
Governors of the Federal Reserve System of the United States (or any
successor) under 12 CFR part 211; (4) a
non-U.S.
branch of a foreign bank managed and controlled by a U.S. branch referred to
in clause (3); or (5) any other U.S. or
non-U.S.
depository institution or anybranch, agency or similar office thereof
supervised by a bank regulatory authority in any jurisdiction.
"
RelatedBusiness
" means those businesses in which the Company or any of its Subsidiaries is
engaged on the date of the Indenture, or that are similar, related,
complementary, incidental or ancillary thereto or extensions, developments or
expansionsthereof.
"
Related Taxes
" means (
x
) any taxes, charges or assessments, including but not limited to sales,use,
transfer, rental, ad valorem, value-added, stamp, property, consumption,
franchise, license, capital, net worth, gross receipts, excise, occupancy,
intangibles or similar taxes, charges or assessments (other than federal,
state or local taxesmeasured by income and federal, state or local withholding
imposed by any government or other taxing authority on payments made by any
Parent other than to another Parent), required to be paid by any Parent by
virtue of its being incorporated orhaving Capital Stock outstanding (but not
by virtue of owning stock or other equity interests of any corporation or
other entity other than the Company, any of its Subsidiaries or any Parent),
or being a holding company parent of the Company, any ofits Subsidiaries or
any Parent or receiving dividends from or other distributions in respect of
the Capital Stock of the Company, any of its Subsidiaries or any Parent, or
having guaranteed any obligations of the Company or any Subsidiary thereof,or
having made any payment in respect of any of the items for which the Company
or any of its Subsidiaries is permitted to make payments to any Parent
pursuant to the covenant described under "--Certain Covenants-- Limitation
onRestricted Payments," or acquiring, developing, maintaining, owning,
prosecuting, protecting or defending its intellectual property and associated
rights (including but not limited to receiving or paying royalties for the use
thereof) relatingto the business or businesses of the Company or any
Subsidiary thereof, (
y
) any taxes attributable to any taxable period (or portion thereof) ending on
or prior to the Issue Date or (
z
) any other federal, state, foreign,provincial or local taxes measured by
income for which any Parent is liable up to an amount not to exceed, with
respect to federal taxes, the amount of any such taxes that the Company and
its Subsidiaries would have been required to pay on aseparate company basis,
or on a Consolidated basis as if the Company had filed a consolidated return
on behalf of an affiliated group (as defined in Section 1504 of the Code or an
analogous provision of state, local or foreign law) of which itwere the common
parent, or with respect to state and local taxes, the amount of any such taxes
that the Company and its Subsidiaries would have been required to pay on a
separate company basis, or on a combined basis as if the Company had filed
acombined return on behalf of an affiliated group consisting only of the
Company and its Subsidiaries.
"
ResponsibleOfficer
" means, when used with respect to the Trustee, any officer within the
corporate trust department of the Trustee, including any vice president,
assistant vice president, assistant secretary, assistant treasurer, trust
officer or anyother officer of the Trustee who customarily performs functions
similar to those performed by the Persons and also means, with respect to a
particular corporate trust matter, any other officer to whom any corporate
trust matter relating to theIndenture is referred because of such Person's
knowledge of and
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familiarity with the particular subject, and who, in each case, has direct
responsibility for the administration of the Indenture.
"
Restricted Payment Transaction
" means any Restricted Payment permitted pursuant to the covenant described
under"--Certain Covenants--Limitation on Restricted Payments," any Permitted
Payment, any Permitted Investment, or any transaction specifically excluded
from the definition of the term "Restricted Payment" (including pursuantto the
exception contained in clause (i) and the parenthetical exclusions contained
in clauses (ii) and (iii) of such definition).
"
Restricted Subsidiary
" means any Subsidiary of the Company other than an Unrestricted Subsidiary.
"
Screened Affiliate
" means any Affiliate of a Holder (i) that makes investment decisions
independently from such Holder andany other Affiliate of such Holder that is
not a Screened Affiliate, (ii) that has in place customary information screens
between it and such Holder and any other Affiliate of such Holder that is not
a Screened Affiliate and such screens prohibitthe sharing of information with
respect to the Company, the Co-Issuer, the Parent or its Subsidiaries, (iii)
whose investment policies are not directed by such Holder or any other
Affiliate of such Holder that is acting in concert with such Holderin
connection with its investment in the Notes, and (iv) whose investment
decisions are not influenced by the investment decisions of such Holder or any
other Affiliate of such Holder that is acting in concert with such Holders in
connection withits investment in the Notes.
"
SEC
" means the Securities and Exchange Commission.
"
Senior ABL Agreement
" means the Credit Agreement, dated July 6, 2017 and as most recently amended
onApril 19, 2023, among the Company, Beauty Systems Group LLC, Sally Beauty
Supply LLC, the other borrowers and guarantors party thereto from time to
time, the lenders party thereto from time to time, and Bank of America, N.A.,
asAdministrative Agent, Collateral Agent, Canadian Agent and Canadian
Collateral Agent, as such agreement may be further amended, supplemented,
waived or otherwise modified from time to time or refunded, refinanced,
restructured, replaced, renewed,repaid, increased or extended from time to
time (whether in whole or in part, whether with the original administrative
agent and lenders or other agents and lenders or otherwise, and whether
provided under the original Senior ABL Agreement or othercredit agreements or
otherwise).
"
Senior ABL Facility
" means the collective reference to the Senior ABL Agreement, anyLoan
Documents (as defined therein), any notes and letters of credit issued
pursuant thereto and any guarantee and collateral agreement, patent and
trademark security agreement, mortgages, letter of credit applications and
other guarantees, pledgeagreements, security agreements and collateral
documents, and other instruments and documents, executed and delivered
pursuant to or in connection with any of the foregoing, in each case as the
same may be amended, supplemented, waived or otherwisemodified from time to
time, or refunded, refinanced, restructured, replaced, renewed, repaid,
increased or extended from time to time (whether in whole or in part, whether
with the original agent and lenders or other agents and lenders or
otherwise,and whether provided under the original Senior ABL Agreement or one
or more other credit agreements, indentures (including the Indenture) or
financing agreements or otherwise). Without limiting the generality of the
foregoing, the term "SeniorABL Facility" shall include any agreement (
i
) changing the maturity of any Indebtedness Incurred thereunder or
contemplated thereby, (
ii
) adding Subsidiaries of the Company as additional borrowers or guarantorsthereu
nder, (
iii
) increasing the amount of Indebtedness Incurred thereunder or available to be
borrowed thereunder or (
iv
) otherwise altering the terms and conditions thereof.
"
Senior Indebtedness
" means any Indebtedness of the Company or any Restricted Subsidiary other
than, in the case of theCompany, Subordinated Obligations and, in the case of
any Subsidiary Guarantor, Guarantor Subordinated Obligations.
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"
Senior Term Loan B
" means the collective reference to the Senior Term LoanB Agreement, any Loan
Documents (as defined therein), any notes and letters of credit issued
pursuant thereto and any guarantee and collateral agreement, patent and
trademark security agreement, mortgages, letter of credit applications and
otherguarantees, pledge agreements, security agreements and collateral
documents, and other instruments and documents, executed and delivered
pursuant to or in connection with any of the foregoing, in each case as the
same may be amended, supplemented,waived or otherwise modified from time to
time, or refunded, refinanced, restructured, replaced, renewed, repaid,
increased or extended from time to time (whether in whole or in part, whether
with the original agent and lenders or other agents andlenders or otherwise,
and whether provided under the original Senior Term Loan B Agreement or one or
more other credit agreements, indentures (including the Indenture) or
financing agreements or otherwise). Without limiting the generality of
theforegoing, the term "Senior Term Loan B" shall include any agreement (i)
changing the maturity of any Indebtedness Incurred thereunder or contemplated
thereby, (ii) adding Subsidiaries of the Company as additional borrowers
orguarantors thereunder, (iii) increasing the amount of Indebtedness Incurred
thereunder or available to be borrowed thereunder or (iv) otherwise altering
the terms and conditions thereof.
"
Senior Term Loan B Agreement
" means the Credit Agreement, dated as of February 28, 2023 by and among the
Company,the
Co-Issuer,
Sally Beauty Holding, Inc., Sally Investments Holdings LLC, the other
borrowers and guarantors party thereto from time to time, the lenders party
thereto from time to time, and Bank of America,N.A., in its capacity as
administrative agent, as such agreement may be further amended, supplemented,
waived or otherwise modified from time to time or refunded, refinanced,
restructured, replaced, renewed, repaid, increased or extended from timeto
time (whether in whole or in part, whether with the original administrative
agent and lenders or other agents and lenders or otherwise, and whether
provided under the original Senior ABL Agreement or other credit agreements or
otherwise).
"
Short Derivative Instrument
" means a Derivative Instrument (i) the value of which generally decreases,
and/or the payment ordelivery obligations under which generally increase, with
positive changes to the Performance References and/or (ii) the value of which
generally increases, and/or the payment or delivery obligations under which
generally decrease, with negativechanges to the Performance References.
"
Significant Subsidiary
" means any Restricted Subsidiary that would be a"significant subsidiary" of
the Company within the meaning of Rule
1-02
under Regulation
S-X
promulgated by the SEC, as such Regulation is in effect on theIssue Date.
"
Special Purpose Entity
" means (
x
) any Special Purpose Subsidiary or (
y
) any otherPerson that is engaged in the business of acquiring, selling,
collecting, financing or refinancing Receivables, accounts (as defined in the
Uniform Commercial Code as in effect in any jurisdiction from time to time),
other accounts and/or otherreceivables, and/or related assets.
"
Special Purpose Financing
" means any financing or refinancing of assets consistingof or including
Receivables of the Company or any Restricted Subsidiary that have been
transferred to a Special Purpose Entity or made subject to a Lien in a
Financing Disposition.
"
Special Purpose Financing Fees
" means distributions or payments made directly or by means of discounts with
respect to anyparticipation interest issued or sold in connection with, and
other fees paid to a Person that is not a Restricted Subsidiary in connection
with, any Special Purpose Financing.
"
Special Purpose Financing Undertakings
" means representations, warranties, covenants, indemnities, guarantees of
performanceand (subject to clause (y) of the proviso below) other agreements
and undertakings entered into or provided by the Company or any of its
Restricted Subsidiaries that the Company determines in good faith (which
determination shall be conclusive)are customary or otherwise necessary or
advisable in connection with a Special Purpose Financing or a Financing
Disposition;
provided
that (
x
) it is understood that
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Special Purpose Financing Undertakings may consist of or include (
i
) reimbursement and other obligations in respect of notes, letters of credit,
surety bonds and similar instrumentsprovided for credit enhancement purposes
or (
ii
) Hedging Obligations, or other obligations relating to Interest Rate
Agreements, Currency Agreements or Commodities Agreements entered into by the
Company or any Restricted Subsidiary, inrespect of any Special Purpose
Financing or Financing Disposition, and (
y
) subject to the preceding clause (x), any such other agreements and
undertakings shall not include any Guarantee of Indebtedness of a Special
Purpose Subsidiary bythe Company or a Restricted Subsidiary that is not a
Special Purpose Subsidiary.
"
Special Purpose Subsidiary
" means aSubsidiary of the Company that (
a
) is engaged solely in (
x
) the business of acquiring, selling, collecting, financing or refinancing
Receivables, accounts (as defined in the Uniform Commercial Code as in effect
in anyjurisdiction from time to time) and other accounts and receivables
(including any thereof constituting or evidenced by chattel paper, instruments
or general intangibles), all proceeds thereof and all rights (contractual and
other), collateral andother assets relating thereto, and (
y
) any business or activities incidental or related to such business, and (
b
) is designated as a "Special Purpose Subsidiary" by the Company.
"
S&P
" means Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc., and itssuccessors.
"
Stated Maturity
" means, with respect to any security, the date specified in such security as
the fixed dateon which the payment of principal of such security is due and
payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof upon thehappening of any contingency).
"
Subordinated Obligations
" means any Indebtedness of the Company (whether outstanding onthe date of the
Indenture or thereafter Incurred) that is expressly subordinated in right of
payment to the Notes pursuant to a written agreement.
"
Subsidiary
" of any Person means any corporation, association, partnership or other
business entity of which more than 50% ofthe total voting power of shares of
Capital Stock or other equity interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at thetime owned or
controlled, directly or indirectly, by (
i
) such Person or (
ii
) one or more Subsidiaries of such Person.
"
Subsidiary Guarantee
" means any guarantee that may from time to time be entered into by a
Restricted Subsidiary of theCompany on the Issue Date or after the Issue Date
pursuant to the covenant described under "--Certain Covenants--Future
Subsidiary Guarantors." As used in the Indenture, "Subsidiary Guarantee"
refers to a SubsidiaryGuarantee of the Notes.
"
Subsidiary Guarantor
" means any Restricted Subsidiary of the Company that enters into aSubsidiary
Guarantee. As used in the Indenture, "Subsidiary Guarantor" refers to a
Subsidiary Guarantor of the Notes.
"
Successor Company
" shall have the meaning assigned thereto in clause (i) under "--Merger
andConsolidation."
"
Tax Sharing Agreement
" means the Tax Sharing Agreement, dated as of November 16, 2006, amongthe
Company, Holding and Intermediate Holdings, as the same may be amended,
supplemented, waived or otherwise modified from time to time in accordance
with the terms thereof and of the Indenture.
"
Temporary Cash Investments
" means any of the following: (
i
) any investment in (
x
) direct obligationsof the United States of America, a member state of the
European Union or any country in whose currency funds are being held pending
their application in the making of an investment or capital expenditure by the
Company or a
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Restricted Subsidiary in that country or with such funds, or any agency or
instrumentality of any thereof or obligations Guaranteed by the United States
of America or a member state of theEuropean Union or any country in whose
currency funds are being held pending their application in the making of an
investment or capital expenditure by the Company or a Restricted Subsidiary in
that country or with such funds, or any agency orinstrumentality of any of the
foregoing, or obligations guaranteed by any of the foregoing or (
y
) direct obligations of any foreign country recognized by the United States of
America rated at least "A" by S&P or
"A-1"
by Moody's (or, in either case, the equivalent of such rating by such
organization or, if no rating of S&P or Moody's then exists, the equivalent of
such rating by any nationallyrecognized rating organization),
(ii)
overnight bank deposits, and investments in time deposit accounts,
certificates of deposit, bankers' acceptances and money market deposits (or,
with respect to foreign banks, similar instruments)maturing not more than one
year after the date of acquisition thereof issued by (
x
) any bank or other institutional lender under a Credit Facility or any
affiliate thereof or (
y
) a bank or trust company that is organizedunder the laws of the United States
of America, any state thereof or any foreign country recognized by the United
States of America having capital and surplus aggregating in excess of $250.0
million (or the foreign currency equivalent thereof)and whose long term debt
is rated at least "A" by S&P or
"A-1"
by Moody's (or, in either case, the equivalent of such rating by such
organization or, if no rating of S&P orMoody's then exists, the equivalent of
such rating by any nationally recognized rating organization) at the time such
Investment is made, (
iii
) repurchase obligations with a term of not more than 30 days for underlying
securities ofthe types described in clause (i) or (ii) above entered into with
a bank meeting the qualifications described in clause (ii) above, (
iv
) Investments in commercial paper, maturing not more than 270 days after the
date of acquisition,issued by a Person (other than that of the Company or any
of its Subsidiaries), with a rating at the time as of which any Investment
therein is made of
"P-2"
(or higher) according to Moody's or
"A-2"
(or higher) according to S&P (or, in either case, the equivalent of such
rating by such organization or, if no rating of S&P or Moody's then exists,
the equivalent of such rating by anynationally recognized rating organization),
(
v
) Investments in securities maturing not more than one year after the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States of America, or byany political subdivision or taxing
authority thereof, and rated at least "A" by S&P or "A" by Moody's (or, in
either case, the equivalent of such rating by such organization or, if no
rating of S&P or Moody'sthen exists, the equivalent of such rating by any
nationally recognized rating organization), (
vi
) Preferred Stock (other than of the Company or any of its Subsidiaries)
having a rating of "A" or higher by S&P or "A2"or higher by Moody's (or, in
either case, the equivalent of such rating by such organization or, if no
rating of S&P or Moody's then exists, the equivalent of such rating by any
nationally recognized rating organization), (
vii
)investment funds investing 95% of their assets in securities of the type
described in clauses (i)-(vi) above (which funds may also hold reasonable
amounts of cash pending investment and/or distribution), (
viii
) any money market depositaccounts issued or offered by a domestic commercial
bank or a commercial bank organized and located in a country recognized by the
United States of America, in each case, having capital and surplus in excess
of $250.0 million (or the foreigncurrency equivalent thereof), or investments
in money market funds subject to the risk limiting conditions of Rule
2a-7
(or any successor rule) of the SEC under the Investment Company Act of 1940,
as amended,and (
ix
) similar investments approved by the Board of Directors in the ordinary
course of business.
"
TIA
"means the Trust Indenture Act of 1939 (15 U.S.C. (s)(s) 77aaa-7bbbb) as in
effect on the date of the Indenture, except as provided in the Indenture.
"
Trade Payables
" means, with respect to any Person, any accounts payable or any indebtedness
or monetary obligation to tradecreditors created, assumed or guaranteed by
such Person arising in the ordinary course of business in connection with the
acquisition of goods or services.
"
Trustee
" means the party named as such in the Indenture until a successor replaces it
and, thereafter, means the successor.
"
Unrestricted Subsidiary
" means (i) any Subsidiary of the Company that at the time of determination is
anUnrestricted Subsidiary, as designated by the Board of Directors in the
manner provided below, and (ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of the Company (including
any newlyacquired or newly formed Subsidiary of the Company) to be an
Unrestricted Subsidiary
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unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or owns or holds any Lien on any property of, the Company or
any other Restricted Subsidiary of theCompany that is not a Subsidiary of the
Subsidiary to be so designated;
provided
, that (A) such designation was made at or prior to the Issue Date, or (B) the
Subsidiary to be so designated has total consolidated assets of $1,000 orless
or (C) if such Subsidiary has consolidated assets greater than $1,000, then
such designation would be permitted under the covenant described under
"--Certain Covenants--Limitation on Restricted Payments." The Board
ofDirectors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary;
provided,
that immediately after giving effect to such designation (x) the Company could
Incur at least $1.00 of additional Indebtedness under paragraph(a) in the
covenant described under "--Certain Covenants-- Limitation on Indebtedness",
(y) the Consolidated Coverage Ratio would be greater than it was immediately
prior to giving effect to such designation or (z) suchSubsidiary shall be a
Special Purpose Subsidiary with no Indebtedness outstanding other than
Indebtedness that can be Incurred (and upon such designation shall be deemed
to be Incurred and outstanding) pursuant to paragraph (b) of the covenantdescrib
ed under "--Certain Covenants--Limitation on Indebtedness." Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Company'sBoard
of Directors giving effect to such designation and an Officer's Certificate of
the Company certifying that such designation complied with the foregoing
provisions.
"
U.S. Government Obligation
" means (x) any security that is (i) a direct obligation of the United States
of Americafor the payment of which the full faith and credit of the United
States of America is pledged or (ii) an obligation of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the paymentof which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case
under the preceding clause (i) or (ii), is not callable or redeemable at the
option of the issuer thereof, and(y) any depositary receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act) as custodian with
respect to any U.S. Government Obligation that is specified in clause (x)
above and held by such bank for the accountof the holder of such depositary
receipt, or with respect to any specific payment of principal of or interest
on any U.S. Government Obligation that is so specified and held,
provided
that (except as required by law) such custodian isnot authorized to make any
deduction from the amount payable to the holder of such depositary receipt
from any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interestevidenced by such
depositary receipt.
"
Voting Stock
" of an entity means all classes of Capital Stock of such entity thenoutstanding
and normally entitled to vote in the election of directors or all interests
in such entity with the ability to control the management or actions of such
entity.
Form, denomination, transfer, exchange and book-entry procedures
The Notes will be issued only in fully registered form, without interest
coupons. The Notes will be issued only in minimum denominations ofthe Minimum
Denomination and any integral multiple of $1,000 in excess thereof. The Notes
will not be issued in bearer form. The Notes sold in this offering will be
issued only against payment in immediately available funds.
Global Notes
The Notes will beissued in the form of one or more registered notes in global
form, without interest coupons, or the "Global Notes." Upon issuance, each of
the Global Notes will be deposited with the Trustee as custodian for The
Depository Trust Company,or "DTC," and registered in the name of Cede & Co.,
as nominee of DTC.
Ownership of beneficial interests in eachGlobal Note will be limited to
persons who have accounts with DTC, or "DTC participants," or persons who hold
interests through DTC participants. We expect that under procedures
established by DTC:
. upon deposit of each Global Note with DTC's custodian, DTC will credit portions of the principal
amount ofthe Global Note to the accounts of the DTC participants designated by the underwriters; and
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. ownership of beneficial interests in each Global Note will be shown on, and transfer
of ownership of thoseinterests will be effected only through, records maintained
by DTC (with respect to interests of DTC participants) and the records of DTC
participants (with respect to other owners of beneficial interests in the Global Note).
Beneficial interests in the Global Notes may not be exchanged for Notes in
physical, certificated form except in the limited circumstancesdescribed below.
Exchanges among Global Notes
Beneficial interests in one Global Note may generally be exchanged for
interests in another Global Note. A beneficial interest in a GlobalNote that
is transferred to a person who takes delivery through another Global Note
will, upon transfer, become subject to any transfer restrictions and other
procedures applicable to beneficial interests in the other Global Note.
Book-entry procedures for Global Notes
All interests in the Global Notes will be subject to the operations and
procedures of DTC. We provide the following summaries of thoseoperations and
procedures solely for the convenience of investors. The operations and
procedures of each settlement system are controlled by that settlement system
and may be changed at any time. Neither we nor the underwriters are
responsible forthose operations or procedures.
DTC has advised us that it is:
. a limited purpose trust company organized under the laws of the State of New York;
. a "banking organization" within the meaning of the New York State Banking Law;
. a member of the Federal Reserve System;
. a "clearing corporation" within the meaning of the Uniform Commercial Code; and
. a "clearing agency" registered under Section 17A of the Securities Exchange Act of 1934.
DTC was created to hold securities for its participants and to facilitate the
clearance and settlement of securitiestransactions between its participants
through electronic book-entry changes to the accounts of its participants.
DTC's participants include securities brokers and dealers, including the
underwriters; banks and trust companies; clearingcorporations and other
organizations. Indirect access to DTC's system is also available to others
such as banks, brokers, dealers and trust companies; these indirect
participants clear through or maintain a custodial relationship with a
DTCparticipant, either directly or indirectly. Investors who are not DTC
participants may beneficially own securities held by or on behalf of DTC only
through DTC participants or indirect participants in DTC.
So long as DTC's nominee is the registered owner of a Global Note, that
nominee will be considered the sole owner or holder of the Notesrepresented by
that Global Note for all purposes under the Indenture. Except as provided
below, owners of beneficial interests in a Global Note:
. will not be entitled to have Notes represented by the Global Note registered in their names;
. will not receive or be entitled to receive physical, certificated Notes; and
. will not be considered the owners or holders of the Notes under the Indenture for any purpose, including
withrespect to the giving of any direction, instruction or approval to the Trustee under the Indenture.
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As a result, each investor who owns a beneficial interest in a Global Note
must rely on theprocedures of DTC to exercise any rights of a Holder of Notes
under the Indenture (and, if the investor is not a participant or an indirect
participant in DTC, on the procedures of the DTC participant through which the
investor owns its interest).
The laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently,your ability to
transfer your beneficial interests in a Global Note to such persons may be
limited to that extent. Because DTC can act only on behalf of its
participants, which in turn act on behalf of indirect participants and certain
banks, yourability to pledge your interests in a Global Note to persons or
entities that do not participate in the DTC system, or otherwise take actions
in respect of such interests, may be affected by the lack of a physical
certificate evidencing suchinterests.
Payments of principal, premium (if any) and interest with respect to the Notes
represented by a Global Note will be made bythe Trustee or Paying Agent in
Dollars to DTC's nominee, as the registered holder of the Global Note. Neither
we nor the Trustee will have any responsibility or liability for the payment
of amounts to owners of beneficial interests in a GlobalNote, for any aspect
of the records relating to or payments made on account of those interests by
DTC, or for maintaining, supervising or reviewing any records of DTC relating
to those interests.
Payments by participants and indirect participants in DTC to the owners of
beneficial interests in a Global Note will be governed by standinginstructions
and customary industry practice and will be the responsibility of those
participants or indirect participants and DTC. Transfers between participants
in DTC will be effected under DTC's procedures and will be settled in
same-day
funds.
Cross-market transfers of beneficial interests in Global Notes between
DTCparticipants, on the one hand, and Euroclear or Clearstream participants,
on the other hand, will be effected within DTC through the DTC participants
that are acting as depositaries for Euroclear and Clearstream. To deliver or
receive an interest ina Global Note held in a Euroclear or Clearstream
account, an investor must send transfer instructions to Euroclear or
Clearstream, as the case may be, under the rules and procedures of that system
and within the established deadlines of that system.If the transaction meets
its settlement requirements, Euroclear or Clearstream, as the case may be,
will send instructions to its DTC depositary to take action to effect final
settlement by delivering or receiving interests in the relevant GlobalNotes in
DTC, and making or receiving payment under normal procedures for
same-day
funds settlement applicable to DTC. Euroclear and Clearstream participants may
not deliver instructions directly to the DTCdepositaries that are acting for
Euroclear or Clearstream.
Because the settlement of cross-market transfers takes place during New
Yorkbusiness hours, DTC participants may employ their usual procedures for
sending securities to the applicable DTC participants acting as depositaries
for Euroclear and Clearstream. The sale proceeds will be available to the DTC
participant seller onthe settlement date. Thus, to a DTC participant, a
cross-market transaction will settle no differently from a trade between two
DTC participants. Because of time zone differences, the securities account of
a Euroclear or Clearstream participant thatpurchases an interest in a Global
Note from a DTC participant will be credited on the business day for Euroclear
or Clearstream immediately following the DTC settlement date. Cash received in
Euroclear or Clearstream from the sale of an interest ina Global Note to a DTC
participant will be reflected in the account of the Euroclear or Clearstream
participant the following business day, and receipt of the cash proceeds in
the Euroclear or Clearstream participant's account will beback-valued to the
date on which settlement occurs in New York. DTC, Euroclear and Clearstream
have agreed to the above procedures to facilitate transfers of interests in
the Global Notes among participants in those settlement systems. However,
thesettlement systems are not obligated to perform these procedures and may
discontinue or change these procedures at any time. Neither we nor the Trustee
will have any responsibility or liability for the performance by DTC,
Euroclear or Clearstream ortheir participants or indirect participants of
their obligations under the rules and procedures governing their operations,
including maintaining, supervising or reviewing the records relating to, or
payments made on account of, beneficial ownershipinterests in Global Notes.
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DTC has advised us that it will take any action permitted to be taken by a
Holder of Notes(including the presentation of Notes for exchange as described
below and the conversion of Notes) only at the direction of one or more
participants to whose account with DTC, interests in the Global Notes are
credited and only in respect of suchportion of the aggregate principal amount
of the Notes as to which such participant or participants has or have given
such direction.
Certificatednotes
Notes in physical, certificated form will be issued and delivered to each
person that DTC identifies as a beneficial ownerof the related Notes only if:
. DTC notifies us at any time that it is unwilling or unable to continue as depositary
for the Global Notes and asuccessor depositary is not appointed within 120 days;
. DTC ceases to be registered as a clearing agency under the Securities Exchange
Act of 1934 and a successordepositary is not appointed within 120 days;
. we, at our option, notify the Trustee that we elect to cause the issuance of certificated Notes; or
. an Event of Default shall have occurred and be continuing with respect to the Notes and the
Trustee has receiveda written request from DTC to issue the Notes in certificated form.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax
considerations to you of the purchase, ownership, and disposition ofthe notes
as of the date hereof. This discussion is based upon provisions of the
Internal Revenue Code of 1986, as amended (the "
Code
"), and applicable U.S. Treasury regulations, administrative rulings and
judicial decisionscurrently in effect as of the date hereof, all of which are
subject to change (possibly retroactively), which could alter the U.S. federal
income tax considerations described below. No rulings have been or will be
sought from the Internal RevenueService ("
IRS
") with respect to the statements made and the conclusions reached in the
following discussion, and there can be no assurance that the IRS will agree
with such statements and conclusions. This discussion is a summaryfor general
information only and is applicable solely with respect to notes held as a
capital asset (generally, property held for investment) by a beneficial owner
who purchased the notes for cash pursuant to this offering at the offer price
setforth on the front cover hereof.
The following discussion does not purport to be a complete analysis of all the
potential U.S. federalincome tax considerations that may be relevant to
particular holders in light of their particular circumstances. Without
limiting the generality of the foregoing, this discussion does not address the
effect of any special rules applicable to certaintypes of beneficial owners,
including, without limitation, dealers in securities, insurance companies,
banks or other financial institutions, thrifts, real estate investment trusts,
regulated investment companies,
tax-exempt
entities, persons that have a "functional currency" other than the U.S.
dollar, persons who hold notes as part of a straddle, conversion transaction,
or other risk reduction or integratedtransaction, traders in securities that
elect to use a
mark-to-market
method of tax accounting for their securities holdings, retirement plans,
individual retirementaccounts or other
tax-deferred
accounts, qualified pension plans, certain former citizens or former long-term
residents of the United States, controlled foreign corporations, passive
foreign investmentcompanies, persons required to accelerate the recognition of
any item of gross income with respect to the notes as a result of such income
being recognized on an applicable financial statement, pass through entities,
including partnerships andSubchapter S corporations, or any investors therein.
Furthermore, this discussion does not discuss any alternative minimum tax
consequences or any considerations under U.S. federal tax laws other than
those pertaining to the income tax, and it doesnot address any considerations
under any state, local or foreign tax laws. In addition, this discussion does
not address the tax consequences of the ownership and disposition of the notes
arising under the unearned income Medicare contribution taxpursuant to the
Health Care and Education Reconciliation Act of 2010. Prospective investors
are urged to consult their tax advisors as to the particular tax consequences
to them of the purchase, ownership and disposition of the notes, including
withrespect to the applicability and effect of any U.S. federal, state, local
or foreign tax laws or any tax treaty, and any changes (or proposed changes)
in tax laws or interpretations thereof.
For purposes of this discussion, the term "
U.S. Holder
" means a beneficial owner of a note who is (i) an individualcitizen or
resident of the United States, (ii) a corporation (or other entity treated as
a corporation for U.S. federal income tax purposes) created or organized in or
under the laws of the United States, any state thereof or the District
ofColumbia, (iii) an estate, the income of which is subject to U.S. federal
income taxation regardless of its source, or (iv) a trust, if (x) a court
within the United States is able to exercise primary supervision over
theadministration of the trust and one or more U.S. persons have the authority
to control all substantial decisions of the trust or (y) the trust has in
effect a valid election to be treated as a U.S. person. A "
Non-U.S.
Holder"
means a beneficial owner of a note other than a U.S. Holder and other than a
partnership (including an entity or arrangement treated as a partnership for
U.S. federal income tax purposes).
If an entity or arrangement classified as a partnership for U.S. federal
income tax purposes holds a note, the U.S. federal income taxtreatment of a
partner in such partnership will generally depend on the status of the partner
and the activities of the partner and the partnership. The tax treatment of
such an entity, and the tax treatment of any partner in such an entity, are
notaddressed in this discussion. Prospective investors that are treated as
partnerships for U.S. federal income tax purposes or partners in such an
entity holding a note are urged to consult their tax advisors.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT AN INDEPENDENT TAX ADVISOR AS TO
THE U.S. FEDERAL, STATE, LOCAL,
NON-U.S.
AND ANY OTHER TAX CONSEUQNECES TO IT OF AN INVESTMENT IN THE NOTES.
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U.S. Holders
Certain contingent payments
Incertain circumstances, we may redeem the notes at times earlier than the
final maturity. See "Description of notes--Optional redemption" and
"Description of notes--Change of control" above. The possibility of
suchredemptions may implicate special rules under Treasury regulations
governing "contingent payment debt instruments." According to those Treasury
regulations, the possibility that we will be required to make such a
contingent payment on thenotes will not affect the amount of income a holder
recognizes in advance of the payment if there is only a remote chance as of
the date the notes are issued that such payment will be made. We believe and
intend to take the position that suchcontingency will not cause the
"contingent payment debt instrument" rules of the Treasury regulations to
apply to the notes. Our position that the "contingent payment debt instrument"
rules of the Treasury regulations will notapply to the notes is binding on a
holder unless such holder discloses its contrary position to the IRS in the
manner required by applicable Treasury regulations. Our position is not,
however, binding on the IRS, and if the IRS were to challengethis position
successfully, a holder might be required to, among other things, accrue
interest income based on a projected payment schedule and comparable yield,
which may be in excess of stated interest, and treat as ordinary income rather
thancapital gain any income realized on the taxable disposition of a note. In
the event the contingency on the notes occurs, it could affect the amount,
timing and character of the income or loss recognized by a holder. Prospective
investors are urgedto consult their tax advisors regarding the tax
consequences if the notes were treated as contingent payment debt instruments.
The remainder of this discussion assumes that the notes will not be considered
contingent payment debt instruments.
Payments of interest
It isanticipated, and this discussion assumes, that the notes will be issued
with no more than
de minimis
"original issue discount" as that term is defined in the Code and the Treasury
regulations promulgated thereunder. In such case,interest on the notes will
generally be taxable to a U.S. Holder as ordinary income at the time it is
received or accrued, in accordance with its usual method of accounting for tax
purposes. If, however, the issue price of the notes is less thantheir stated
principal amount and the difference is equal to or more than a
de minimis
amount (as set forth in the applicable Treasury regulations), a U.S. Holder
will be required to include the difference in income as original issue
discountas it accrues in accordance with a constant yield method.
Sale or other taxable disposition of notes
A U.S. Holder generally will recognize gain or loss upon the sale, exchange,
redemption, retirement or other taxable disposition of the notesequal to the
difference between (a) the amount realized upon the sale, exchange,
redemption, retirement, or other taxable disposition (except to the extent
attributable to accrued and unpaid stated interest, which will generally be
taxable asordinary income to the extent not previously included in income),
and (b) the U.S. Holder's adjusted tax basis in the notes. A U.S. Holder's
adjusted tax basis in a note generally will equal its purchase price for the
note.
Gain or loss on the disposition of notes will generally be capital gain or
loss and will be long-term capital gain or loss if the notes havebeen held for
more than one year at the time of disposition. Certain non-corporate U.S.
Holders, including individuals, may be eligible for a reduced rate of tax on
long-term capital gains. The deductibility of capital losses is subject
tocertain limitations.
Information reporting and backup withholding
In general, information reporting requirements will apply with respect to
payments of principal and interest on the notes to a U.S. Holder andwith
respect to payments to a U.S. Holder of any proceeds from a
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taxable disposition of the notes. In addition, a U.S. Holder may be subject to
backup withholding on such payments that are subject to information reporting
if the U.S. Holder fails to supply itscorrect taxpayer identification number
in the manner required by applicable law, fails to certify that it is not
subject to backup withholding or otherwise fails to comply with applicable
backup withholding rules.
Any amounts withheld from a U.S. Holder under the backup withholding
provisions may be credited against the U.S. federal income tax liability,if
any, of the U.S. Holder and may entitle the U.S. Holder to a refund, provided
that the required information is timely furnished to the IRS.
Non-U.S.
Holders
U.S. federal withholding tax
Payments of interest made to a
Non-U.S.
Holder will be subject to U.S. federal withholding tax ata 30% rate unless (a)
the
Non-U.S.
Holder provides us or our paying agent with a properly executed (1) IRS Form
W-8BEN
or
W-8BEN-E (or
other applicable form) claiming an exemption from or reduction in withholding
tax under an applicable tax treaty or (2) IRS Form
W-8ECI (or
other applicable form) stating that interest paid on a note is not subject to
withholding tax because it is effectively connected with the
Non-U.S.
Holder's conduct of a trade or business (as describedbelow under "--U.S.
federal income tax") in the United States or (b) the
Non-U.S.
Holder meets all four of the following requirements (in which case no U.S.
federal withholding taxwill be imposed under the "portfolio interest"
exemption of the Code):
. the
Non-U.S.
Holder is not a bank receiving interest described in section881(c)(3)(A) of the Code;
. the
Non-U.S.
Holder does not actually (or constructively) own 10% or moreof the total combined voting power of
all classes of our voting stock within the meaning of the Code and applicable Treasury regulations;
. the
Non-U.S.
Holder is not a controlled foreign corporation that isrelated to us, directly or indirectly, through stock ownership; and
. the
Non-U.S.
Holder either (a) provides its
name and address on anIRS Form
W-8BEN
or
W-8BEN-E
(or other applicable form) and certifies, under penalties of perjury, that
it is not a U.S. person or(b) holds its notes through certain foreign
intermediaries and satisfies the certification requirements of applicable
Treasury regulations. Special certification and other rules apply to certain
Non-U.S.
Holders that are entities
rather than individuals.
A
Non-U.S. Holders
isurged to consult its tax advisor regarding the availability of the above
exemptions and the procedure for obtaining such exemptions, if available. A
claim for exemption will not be valid if the person receiving the applicable
form has actualknowledge or reason to know that the statements on the form are
false.
Subject to the discussion below under "--Foreign AccountTax Compliance Act,"
the 30% U.S. federal withholding tax generally will not apply to any gain that
you realize on the sale, exchange, retirement or other disposition of a note.
U.S. federal income tax
If
a Non-U.S. Holder
is engaged in a trade or business in the United States and interest on the
notes is effectively connected with its conduct of that trade or business (or
the interest is attributable to apermanent establishment maintained by it in
the United States if a tax treaty applies),
the Non-U.S. Holder
will be subject to U.S. federal income tax on that interest on a net income
basis(although exempt from the 30% withholding tax,
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provided it complies with certain certification and disclosure requirements
discussed above in "--U.S. federal withholding tax"). In addition, if
a Non-U.S. Holder
is a foreign corporation, it may be subject to a branch profits tax equal to
30% (or lower applicable treaty rate) of such effectively connected interest.
Any gain realized on the disposition of a note generally will not be subject
to U.S. federal income tax unless:
. the gain is effectively
connected with a
Non-U.S.
Holder's conductof a trade or business in the United States (or, if a tax
treaty applies, attributable to a permanent establishment maintained by a
Non-U.S.
Holder in the United States); or
. a
Non-U.S.
Holder is an individual who is present in the United Statesfor 183 days or more
in the taxable year of that disposition, and certain other conditions are met.
If
a Non-U.S. Holder
is an individual and is described in the first bullet above, it will be
subject to tax on the net gain derived from the sale under regular graduated
U.S. federal income tax rates in asimilar manner to a U.S. Holder. If
a Non-U.S. Holder
is a foreign corporation and is described in the first bullet above, it will
be subject to tax on its gain under regular graduated U.S. federalincome tax
rates in a similar manner to a U.S. Holder and, in addition, may be subject to
the branch profits tax on its effectively connected earnings and profits at a
rate of 30% or at such lower rate as may be specified by an applicable income
taxtreaty. If
a Non-U.S. Holder
is described in the second bullet above, it will be required to pay a flat 30%
tax on the gain derived from the sale, which tax may be offset by U.S.-source
capitallosses for the
year. Non-U.S. Holders
should consult any applicable income tax or other treaties that may provide
for different rules.
Information reporting and backup withholding
The amount of interest paid to a
Non-U.S.
Holder, and any tax withheld with respect to such interestpayments, regardless
of whether any withholding was required, must be reported annually to the IRS
and to the
Non-U.S.
Holder. Copies of the information returns reporting the amount of interest
paid to a
Non-U.S.
Holder and the amount of any withholding may also be made available to the tax
authorities in the country in which the
Non-U.S.
Holder resides under the provisions ofan applicable income tax treaty.
In general, a
Non-U.S.
Holder will not be subject to backupwithholding and information reporting with
respect to payments made by us with respect to the notes if the
Non-U.S.
Holder provided the applicable withholding agent with an IRS Form
W-8BEN
or
W-8BEN-E
(or other applicable form) as described above and the applicable withholding
agent does not have actual knowledge orreason to know that the holder is a
United States person. In addition, no backup withholding or information
reporting will be required with respect to the gross proceeds of the sale of
notes made within the United States or conducted through certainU.S. financial
intermediaries if (a) the payor receives the certification described above and
does not have actual knowledge or reason to know that the holder is a United
States person or (b) the
Non-U.S.
Holder otherwise establishes an exemption. Backup withholding is not an
additional tax. Any amounts withheld from a
Non-U.S.
Holder under the backup withholdingprovisions may be credited against the U.S.
federal income tax liability, if any, of the
Non-U.S.
Holder and may entitle the
Non-U.S.
Holder to a refund, provided thatthe required information is timely furnished
to the IRS.
Foreign Account Tax Compliance Act
Sections 1471 through 1474 of the Code, the Treasury regulations promulgated
thereunder, and IRS administrative guidance, which are commonlyreferred to as
the "Foreign Account Tax Compliance Act" ("FATCA"), generally impose
withholding at a rate of 30% in certain circumstances on interest payable on
the notes held by or through certain financial institutions(including
investment funds), unless such institution (a) enters into, and complies with,
an agreement with the IRS to report, on an annual basis, information with
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respect to interests in, and accounts maintained by, the institution that are
owned by certain U.S. persons or by certain
non-U.S.
entities that are whollyor partially owned by U.S. persons and to withhold on
certain payments, or (b) if required under an intergovernmental agreement
between the United States and an applicable foreign country, reports such
information to its local tax authority,which will exchange such information
with the U.S. authorities. An intergovernmental agreement between the United
States and an applicable foreign country may modify these requirements.
Accordingly, the entity through which the notes are held willaffect the
determination of whether such withholding is required. Similarly, interest
payable on the notes held by an investor that is a
non-financial
non-U.S.
entitythat does not qualify under certain exemptions generally will be subject
to withholding at a rate of 30%, unless such entity either (a) certifies that
such entity does not have any "substantial United States owners" or(b)
provides certain information regarding the entity's "substantial United States
owners," which we will in turn provide to the U.S. Department of the Treasury.
Withholding under FATCA would also have applied to payments of gross proceeds
from dispositions of notes after December 31, 2018.However, proposed Treasury
regulations would eliminate FATCA withholding on gross proceeds from a
disposition of notes. In the preamble to such proposed regulations, the U.S.
Department of the Treasury stated that taxpayers generally may rely onthese
proposed Treasury regulations until final Treasury regulations are issued. A
Non-U.S.
Holder should consult its tax advisor regarding the possible implications of
FATCA on an investment in the notes.
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UNDERWRITING
BofA Securities, Inc. is acting as sole representative of each of the
underwriters named below. Subject to the terms and conditions set forthin an
underwriting agreement among the issuers, the guarantors named therein and the
underwriters, the issuers have agreed to sell to the underwriters, and each of
the underwriters has agreed, severally and not jointly, to purchase from the
issuers,the principal amount of notes set forth opposite its name below.
Underwriter Principal
Amount of Notes
BofA Securities, Inc.
J.P. Morgan Securities LLC
Truist Securities, Inc.
Citizens JMP Securities, LLC
Regions Securities LLC
U.S. Bancorp Investments, Inc.
Total $ 600,000,000
Subject to the terms and conditions set forth in the underwriting agreement,
the underwriters have agreed,severally and not jointly, to purchase all of the
notes sold under the underwriting agreement if any of these notes are
purchased. If an underwriter defaults, the underwriting agreement provides
that the purchase commitments of the
non-defaulting
underwriters may be increased or the underwriting agreement may be terminated.
We haveagreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments the underwriters may be required to make in respect of those
liabilities.
The underwriters are offering the notes, subject to prior sale, when, as and
if issued to and accepted by them, subject to approval of legalmatters by
their counsel, including the validity of the notes, and other conditions
contained in the underwriting agreement, such as the receipt by the
underwriters of officer's certificates and legal opinions. The underwriters
reserve theright to withdraw, cancel or modify offers to the public and to
reject orders in whole or in part.
Commissions and Discounts
The representative has advised us that the underwriters propose initially to
offer the notes at the offering price set forth on the cover pageof this
prospectus supplement. After the initial offering, the public offering price
or any other term of the offering may be changed.
The following table shows the underwriting discount that we will pay to the
underwriters in connection with this offering:
Note Paid by Us
Per note %
Total $
The expenses of the offering, not including the underwriting discount, are
estimated at $2,000,000 and arepayable by us.
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New Issue of Notes
The notes are a new issue of securities with no established trading market. We
do not intend to apply for listing of the notes on any nationalsecurities
exchange or for inclusion of the notes on any automated dealer quotation
system. We have been advised by the underwriters that they presently intend to
make a market in the notes after completion of the offering. However, they are
underno obligation to do so and may discontinue any market-making activities
at any time without any notice. We cannot assure the liquidity of the trading
market for the notes or that an active public market for the notes will
develop. If an activetrading market for the notes does not develop, the market
price and liquidity of the notes may be adversely affected. If the notes are
traded, they may trade at a discount from their initial offering price,
depending on prevailing interest rates,the market for similar securities, our
operating performance and financial condition, general economic conditions and
other factors.
No Sales ofSimilar Securities
We have agreed that we will not, directly or indirectly, for a period of 30
days after the date of thisprospectus supplement, without first obtaining the
prior written consent of BofA Securities, Inc., issue, sell, offer to contract
or grant any option to sell, pledge, transfer or otherwise dispose of, any
debt securities or securities exchangeablefor or convertible into debt
securities, except for the notes sold to the underwriters pursuant to the
underwriting agreement.
Over-allotment,stabilizing and related transactions
In connection with this offering, the underwriters may engage in over-allotment,
stabilizingtransactions and syndicate covering transactions.
. Over-allotment involves sales in excess of the offering size, which creates a short position for theunderwriters.
. Stabilizing transactions involve bids to purchase the notes in the open market
for the purpose of pegging, fixingor maintaining the price of the notes.
. Syndicate covering transactions involve purchases of the notes in the open market
after the distribution has beencompleted in order to cover short positions.
Any of these activities may prevent a decline in the market price of thenotes
and may also cause the price of the notes to be higher than it would otherwise
be in the absence of these transactions. The underwriters may conduct these
transactions in the
over-the-counter
market or otherwise. If the underwriters commence any of these transactions,
they may discontinue them at any time.
Neither the issuers nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that thetransactions
described above may have on the price of the notes. In addition, neither the
issuers nor any of the underwriters make any representation that the issuers
will engage in these transactions or that any transaction, once commenced,
willnot be discontinued without notice.
Settlement
We expect that delivery of the notes will be made against payment therefor on
or about , which will be the business day following the date of this
prospectus supplement (such settlement being referred to as "T+"). Under
Rule 15c6-1
under the Exchange Act, trades inthe secondary market are required to settle
in two business days, unless the parties to any such trade expressly agree
otherwise. Accordingly, purchasers who wish to trade notes on the date of
pricing or the next succeeding business days, will be required, by virtue of
the fact that the notes initially settle in T+, to specify an alternate
settlement arrangement
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at the time of any such trade to prevent a failed settlement. Purchasers of
the notes who wish to trade the notes on the date of pricing or the next
succeedingbusiness days should consult their advisors.
Other relationships
The underwriters and certain of their affiliates are full service financial
institutions engaged in various activities, which may includesecurities
trading, commercial and investment banking, financial advisory, investment
management, investment research, principal investment, hedging, financing and
brokerage activities. The underwriters and certain of their affiliates have
providedand may in the future provide certain financial advisory, investment
banking and commercial banking services in the ordinary course of business for
the issuers and the issuers' subsidiaries and certain of the issuers'
affiliates, for whichthey receive customary fees and expense reimbursement. In
the ordinary course of their various business activities, the underwriters and
their affiliates may make or hold a broad array of investments and actively
trade debt and equity securities (orrelated derivative securities) and
financial instruments (which may include bank loans and/or credit default
swaps) for their own account and for the accounts of their customers and may
at any time hold long and short positions in such securitiesand instruments.
Such investments and securities activities may involve securities and/or
instruments of the issuers or the issuers' affiliates.
In particular, under the Company's ABL Facility, JPMorgan Chase Bank, N.A., an
affiliate of J.P. Morgan Securities LLC, serves as a JointLead Arranger and
Syndication Agent and a lender, Bank of America, N.A., an affiliate of BofA
Securities, Inc., serves as the Administrative Agent, Collateral Agent,
Canadian Agent and a Joint Lead Arranger and Syndication Agent and also serves
as aletter of credit issuer and lender, Truist Bank, an affiliate of Truist
Securities, Inc., serves as a Joint Leader Arranger, Syndication Agent and a
lender, Citizens Bank, N.A., an affiliate of Citizens Capital Markets, Inc.,
serves as a lender,U.S. Bank National Association, an affiliate of U.S.
Bancorp Investments, Inc., serves as a lender and Regions Bank, an affiliate
of Regions Securities LLC, serves as a lender. Bank of America, N.A. also
serves as the Administrative Agent andCollateral Agent under the TLB Facility
and is also a joint lead arranger and a joint bookrunner under the TLB
Facility and Citizens Bank, N.A. also serves as a joint lead arranger and a
joint bookrunner under the TLB Facility. J.P. MorganSecurities LLC is also a
party to the Company's share repurchase program. Lastly, certain of the
underwriters and their affiliates may hold a portion of the issuers' senior
unsecured 2025 notes, which the issuers intend to redeem inconnection with
this offering, and therefore, such underwriters or their affiliates may
receive a portion of the net proceeds from this offering.
In addition, in the ordinary course of their business activities, the
underwriters and their affiliates may make or hold a broad array ofinvestments
and actively trade debt and equity securities (or related derivative
securities) and financial instruments (including bank loans) for their own
account and for the accounts of their customers. Such investments and
securities activitiesmay involve securities and/or instruments of the issuers
or the issuers' affiliates. If the underwriters or their affiliates have a
lending relationship with the issuers, certain of those underwriters or their
affiliates may hedge their creditexposure to the issuers consistent with their
customary risk management policies. Typically, such underwriters and their
affiliates would hedge such exposure by entering into transactions which
consist of either the purchase of credit default swapsor the creation of short
positions in the issuers' securities, including potentially the notes offered
hereby. Any such credit default swaps or short positions could adversely
affect future trading prices of the notes offered hereby. Theunderwriters and
their affiliates may also make investment recommendations and/or publish or
express independent research views in respect of such securities or financial
instruments and may hold, or recommend to clients that they acquire,
longand/or short positions in such securities and instruments.
Selling restrictions
European Economic Area
Neitherthis prospectus supplement nor the accompanying prospectus is a
prospectus for the purposes of the Prospectus Regulation (as defined below).
This prospectus supplement and the accompanying prospectus
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have been prepared on the basis that any offer of notes in any Member State of
the European Economic Area (the "EEA") will only be made to a legal entity
which is a qualified investorunder the Prospectus Regulation ("Qualified
Investors"). Accordingly, any person making or intending to make an offer in
that Member State of the notes which are the subject of the offering
contemplated in this prospectus supplement andaccompanying prospectus may only
do so with respect to EEA Qualified Investors. Neither the issuers nor the
underwriters have authorized, nor do they authorize, the making of any offer
of notes other than to EEA Qualified Investors. The expression"Prospectus
Regulation" means Regulation (EU) 2017/1129.
PROHIBITION OF SALES TO EEA RETAIL INVESTORS
--The notes arenot intended to be offered, sold or otherwise made available to
and should not be offered, sold or otherwise made available to any retail
investor in the EEA. For these purposes, (1) a retail investor means a person
who is one (or more) of:(i) a retail client as defined in point (11) of
Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II"); or (ii) a
customer within the meaning of Directive (EU) 2016/97 (as amended, the
"Insurance DistributionDirective"), where that customer would not qualify as a
professional client as defined in point (10) of Article 4(1) of MiFID II; or
(iii) not a qualified investor as defined in the Prospectus Regulation and (2)
the expression"offer" includes the communication in any form and by any means
of sufficient information on the terms of the offer and the notes to be
offered so as to enable an investor to decide to purchase or subscribe for the
notes. Consequently nokey information document required by Regulation (EU) No
1286/2014 (as amended, the "PRIIPs Regulation") for offering or selling the
notes or otherwise making them available to retail investors in the EEA has
been prepared and thereforeoffering or selling the notes or otherwise making
them available to any retail investor in the EEA may be unlawful under the
PRIIPs Regulation.
United Kingdom
Neither thisprospectus supplement nor the accompanying prospectus is a
prospectus for the purposes of the UK Prospectus Regulation (as defined
below). This prospectus supplement and the accompanying prospectus have been
prepared on the basis that any offer ofnotes in the United Kingdom (the "UK")
will only be made to a legal entity which is a qualified investor under the UK
Prospectus Regulation ("UK Qualified Investors"). Accordingly, any person
making or intending to make an offerin the UK of notes which are the subject
of the offering contemplated in this prospectus supplement and the
accompanying prospectus may only do so with respect to UK Qualified Investors.
Neither the issuers nor the underwriters have authorized, nordo they
authorize, the making of any offer of notes other than to UK Qualified
Investors. The expression "UK Prospectus Regulation" means Regulation (EU)
2017/1129 as it forms part of domestic law of the UK by virtue of the European
Union(Withdrawal) Act 2018, as amended by the European Union (Withdrawal
Agreement) Act 2020 (the "EUWA").
PROHIBITION OF SALESTO UK RETAIL INVESTORS
--The notes are not intended to be offered, sold or otherwise made available
to and should not be offered, sold or otherwise made available to any retail
investor in the UK. For these purposes, (1) a retailinvestor means a person
who is one (or more) of (i) a retail client, as defined in point (8) of
Article 2 of Regulation (EU) 2017/565 as it forms part of domestic law of the
UK by virtue of the EUWA; or (ii) a customer within themeaning of the
provisions of the UK's Financial Services and Markets Act 2000 (as amended,
the "FSMA") and any rules or regulations made under the FSMA to implement the
Insurance Distribution Directive, where that customer would notqualify as a
professional client, as defined in point (8) of Article 2(1) of Regulation
(EU) No 600/2014 as it forms part of domestic law of the UK by virtue of the
EUWA; or (iii) not a qualified investor as defined in Article 2 of the
UKProspectus Regulation and (2) the expression "offer" includes the
communication in any form and by any means of sufficient information on the
terms of the offer and the notes to be offered so as to enable an investor to
decide topurchase or subscribe for the notes. Consequently no key information
document required by Regulation (EU) 1286/2014 as it forms part of domestic
law of the UK by virtue of the EUWA (the "UK PRIIPs Regulation") for offering
or selling thenotes or otherwise making them available to retail investors in
the UK has been prepared and therefore offering or selling the notes or
otherwise making them available to any retail investor in the UK may be
unlawful under the UK PRIIPs Regulation.
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The communication of this prospectus supplement, the accompanying prospectus
and any otherdocument or materials relating to the issue of the notes offered
hereby is not being made, and such documents and/or materials have not been
approved, by an authorized person for the purposes of section 21 of the FSMA.
Accordingly, such documentsand/or materials are not being distributed to, and
must not be passed on to, the general public in the UK. The communication of
such documents and/or materials as a financial promotion is only being made to
those persons in the UK who (i) haveprofessional experience in matters
relating to investments and who qualify as investment professionals within the
meaning of Article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (as amended, the"Financial Promotion Order"),
(ii) are persons falling within Article 49(2)(a) to (d) ("high net worth
companies, unincorporated associations etc.") of the Financial Promotion Order
or (iii) who are any other persons to whomit may otherwise lawfully be made
under the Financial Promotion Order (all such persons together being referred
to as "relevant persons"). In the UK, the notes offered are only available to,
and any investment or investment activity towhich this prospectus supplement
and the accompanying prospectus relates will be engaged in only with, relevant
persons. Any person in the UK that is not a relevant person should not act or
rely on this prospectus supplement or the accompanyingprospectus or any of
their contents.
Any invitation or inducement to engage in investment activity (within the
meaning of Section 21of the FSMA) in connection with the issue or sale of the
notes may only be communicated or caused to be communicated in circumstances
in which Section 21(1) of the FSMA does not apply to the issuers.
All applicable provisions of the FSMA must be complied with in respect to
anything done by any person in relation to the notes in, from orotherwise
involving the UK
Canada
The notes may be sold only to purchasers purchasing, or deemed to be
purchasing, as principal that are accredited investors, as defined inNational
Instrument
45-106
Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario),
and are permitted clients, as defined in National Instrument
31-103
Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any
resale of the notes must be made in accordance with an exemption from, or in a
transaction not subject to, the prospectusrequirements of applicable
securities laws.
Securities legislation in certain provinces or territories of Canada may
provide a purchaserwith remedies for rescission or damages if this prospectus
supplement or the accompanying prospectus (including any amendment thereto)
contains a misrepresentation, provided that the remedies for rescission or
damages are exercised by the purchaserwithin the time limit prescribed by the
securities legislation of the purchaser's province or territory. The purchaser
should refer to any applicable provisions of the securities legislation of the
purchaser's province or territory forparticulars of these rights or consult
with a legal advisor.
Pursuant to section 3A.3 of National Instrument
33-105
Underwriting Conflicts (NI
33-105),
the underwriters are not required to comply with the disclosure requirements
of NI
33-105
regarding underwriters conflicts of interest in connection with this offering.
Hong Kong
The notes may not be offered or sold in Hong Kong by means of any document
other than (i) to "professional investors" withinthe meaning of the Securities
and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made
thereunder, or (ii) in other circumstances which do not result in the document
being a "prospectus" within the meaning of theCompanies (Winding Up and
Miscellaneous Provisions) Ordinance (Cap. 32, Laws of Hong Kong) (the
"C(WUMP)O") or which do not constitute an offer to the public within the
meaning of the C(WUMP)O, and no advertisement, invitation or documentrelating
to the notes may be issued or
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may be in the possession of any person for the purpose of issue (whether in
Hong Kong or elsewhere), which is directed at, or the contents of which are
likely to be accessed or read by, thepublic in Hong Kong (except if permitted
to do so under the securities laws of Hong Kong) other than with respect to
the notes which are or are intended to be disposed of only to persons outside
Hong Kong or only to "professionalinvestors" within the meaning of the
Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules
made thereunder.
Japan
The notes offered in this prospectus supplement have not been and will not be
registered under the Financial Instruments andExchange Law of Japan (the
Financial Instruments and Exchange Act) and the underwriters have acknowledged
and agreed that they will not offer or sell any notes, directly or indirectly,
in Japan or to, or for the account or benefit of, any residentof Japan (which
term as used herein means any person resident in Japan, including any
corporation or other entity organized under the laws of Japan), or to others
for
re-offering
or resale, directly orindirectly, in Japan or to, or for account or the
benefit of, any resident of Japan, except pursuant to an exemption from the
registration requirements of, and otherwise in compliance with, the Financial
Instruments and Exchange Act and any otherapplicable laws, regulations and
ministerial guidelines of Japan in effect at the relevant time.
Singapore
This prospectus supplement has not been and will not be registered as a
prospectus under the Securities and Futures Act, Chapter 289 ofSingapore, as
modified or amended from time to time (the "SFA") by the Monetary Authority of
Singapore, and the offer of the notes in Singapore is made primarily pursuant
to the exemptions under Sections 274 and 275 of the SFA.Accordingly, this
prospectus supplement and any other document or material in connection with
the offer or sale, or invitation for subscription or purchase, of the notes
may not be circulated or distributed, nor may the notes be offered or sold,
orbe made the subject of an invitation for subscription or purchase, whether
directly or indirectly, to any person in Singapore other than (i) to an
institutional investor (as defined in SFA) (an "Institutional Investor")
pursuant toSection 274 of the SFA, (ii) to an accredited investor (as defined
in Section 4A of the SFA) (an "Accredited Investor") or other relevant person
(as defined in Section 275(2) of the SFA) (a "relevant person")and pursuant to
Section 275(1) of the SFA, or to any person pursuant to an offer referred to
in Section 275(1A) of the SFA, and in accordance with the conditions,
specified in Section 275 of the SFA and (where applicable) Regulation 3of the
Securities and Futures (Classes of Investors) Regulations 2018, or (iii)
otherwise pursuant to, and in accordance with the conditions of any other
applicable exemption or provision of the SFA.
It is a condition of the offer that where the notes are subscribed for or
acquired pursuant to an offer made in reliance on Section 275of the SFA by a
Relevant Person which is:
(a) a corporation (which is not an Accredited Investor) the sole business of
which is to holdinvestments and the entire share capital of which is owned by
one or more individuals, each of whom is an Accredited Investor; or
(b) atrust (where the trustee is not an Accredited Investor), the sole purpose
of which is to hold investments and each beneficiary of the trust is an
individual who is an Accredited Investor,
the securities or securities-based derivatives contracts (each term as defined
in Section 2(1) of the SFA) of that corporation and thebeneficiaries' rights
and interest (howsoever described) in that trust shall not be transferred
within 6 months after that corporation or that trust has subscribed for or
acquired the notes except:
(1) to an Institutional Investor, or an Accredited Investor or other Relevant
Person, or which arises from an offer referred to inSection 275(1A) of the SFA
(in the case of that corporation) or Section 276(4)(i)(B) of the SFA (in the
case of that trust);
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(2) where no consideration is or will be given for the transfer;
(3) where the transfer is by operation of law;
(4) as specified in Section 276(7) of the SFA; or
(5) as specified in Regulation 37A of the Securities and Futures (Offers of
Investments) (Securities and Securities based DerivativesContracts)
Regulations 2018.
Singapore SFA Product Classification--Solely for the purposes of its
obligations pursuant tosections 309B(1)(a) and 309B(1)(c) of the SFA, the
issuers have determined, and hereby notifies all relevant persons (as defined
in Section 309A of the SFA) that the notes are "prescribed capital markets
products" (as defined inthe Securities and Futures (Capital Markets Products)
Regulations 2018) and Excluded Investment Products (as defined in MAS Notice
SFA
04-N12:
Notice on the Sale of Investment Products and MAS Notice
FAA-N16:
Notice on Recommendations on Investment Products).
Dubai International Financial Centre
This prospectus supplement relates to an Exempt Offer in accordance with the
Offered Securities Rules of the Dubai Financial ServicesAuthority ("DFSA").
This prospectus supplement is intended for distribution only to persons of a
type specified in the Offered Securities Rules of the DFSA. It must not be
delivered to, or relied on by, any other person. The DFSA has noresponsibility
for reviewing or verifying any documents in connection with Exempt Offers. The
DFSA has not approved this prospectus supplement nor taken steps to verify the
information set forth herein and has no responsibility for the prospectussupplem
ent. The notes to which this prospectus supplement relates may be illiquid
and/or subject to restrictions on their resale. Prospective purchasers of the
notes offered should conduct their own due diligence on the notes. If you do
notunderstand the contents of this prospectus supplement you should consult an
authorized financial advisor.
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LEGAL MATTERS
The validity of the notes being offered by this prospectus supplement will be
passed upon for us by Alston & Bird LLP, Atlanta,Georgia. Certain legal
matters will be passed upon for the underwriters by Freshfields Bruckhaus
Deringer US LLP, New York, New York.
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EXPERTS
The consolidated financial statements of Sally Beauty Holdings, Inc. and its
subsidiaries as of September 30, 2023 and 2022, and for eachof the years in
the three-year period ended September 30, 2023, and management's assessment of
the effectiveness of internal control over financial reporting as of September
30, 2023 have been incorporated by reference herein inreliance upon the report
of KPMG LLP, independent registered public accounting firm, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a registration statement on Form
S-3
under the Securities Act withrespect to the securities offered by this
prospectus supplement and the accompanying prospectus. This prospectus
supplement, filed as part of the registration statement, does not contain all
the information set forth in the registration statementand its exhibits and
schedules, portions of which have been omitted as permitted by the rules and
regulations of the Commission. For further information about us, we refer you
to the registration statement and to its exhibits and schedules.
We are subject to the informational requirements of the Exchange Act and are
required to file annual, quarterly and current reports, proxystatements and
other information with the Commission. Our filings are available to the public
at the Commission's internet site at http://www.sec.gov. We also make
available, free of charge, through the investing portion of our website
ourAnnual Report on Form
10-K,
Quarterly Reports on Form
10-Q,
Current Reports on Form
8-K,
Proxy Statement on Schedule 14A (and anyamendments to those forms) as soon as
reasonably practicable after they are filed with or furnished to the
Commission. Our website address is http://www.sallybeautyholdings.com. Please
note that our website address is provided in this prospectussupplement as an
inactive textual reference only. The information found on or accessible
through our website is not part of this prospectus supplement or the
accompanying prospectus and is therefore not incorporated by reference in this
prospectussupplement.
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INCORPORATION BY REFERENCE
The Commission's rules allow us to incorporate by reference information into
this prospectus supplement. This means that we can discloseimportant
information to you by referring you to another document. Any information
referred to in this way is considered part of this prospectus supplement from
the date we file that document. Any reports filed by us with the Commission
after thedate of this prospectus supplement until this offering is completed
will automatically update and, where applicable, supersede any information
contained in this prospectus supplement or incorporated by reference in this
prospectus supplement.
We incorporate by reference into this prospectus supplement the following
documents or information filed with the Commission (other than, ineach case,
documents or information deemed to have been furnished and not filed in
accordance with Commission rules):
. our Annual Report on
Form
10-K
for the fiscal year ended September 30, 2023;
. the information responsive to Part III of
Form
10-K
for the fiscal year ended September 30, 2023 provided in our Proxy Statement on
Schedule 14A
filed on December 13, 2023;
. our Quarterly Report on
Form
10-Q
for the quarter ended December 31, 2023;
. our Current Reports on Form
8-K
filed with the Commission on
January 31, 2024
; and
. all documents filed by us under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act on or after the date ofthis prospectus supplement until the
completion of this offering (except for information furnished to the
Commission that is not deemed to be "filed" for purposes of the Exchange Act).
We will provide without charge to each person, including any beneficial owner,
to whom this prospectus supplement is delivered, upon his orher written or
oral request, a copy of any or all of the information that has been
incorporated by reference into this prospectus supplement, excluding exhibits
to those documents, unless they are specifically incorporated by reference
into thosedocuments. These documents are available on our website at
http://www.sallybeautyholdings.com. The contents of our website are not part
of this prospectus supplement or the accompanying prospectus. You can also
request those documents from ourInvestor Relations Department at the following
address:
3001 Colorado Boulevard
Denton, Texas 76210
(940)
297-3877
S-105
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Prospectus
Sally Beauty Holdings, Inc.
Common stock, preferred stock, debt securities, guarantees of debt securities,
warrants, purchase contracts and units
Sally Holdings LLC
Sally Capital Inc.
Debt securities
Guarantees of debt securities
From time to time, we may offer and sell the following securities:
Sally BeautyHoldings, Inc.
. Sally Beauty Holdings, Inc. may offer and sell the following securities:
. common stock;
. preferred stock (which we may issue in one or more series);
. debt securities (which we may issue in one or more series);
. guarantees of debt securities;
. warrants to purchase common stock, preferred stock or debt securities;
. purchase contracts; or
. units.
The debtsecurities, preferred stock, warrants and purchase contracts may be
convertible into or exercisable or exchangeable for our common or preferred
stock or other securities.
Sally Holdings LLC and Sally Capital Inc.
Sally Holdings LLCand Sally Capital Inc. may offer and sell the following
securities:
. debt securities (which we may issue in one or more series); or
. guarantees of debt securities.
Other
Co-Registrants
The
Co-Registrants
listed in the Table of Additional Registrants may offer and sell the following
securities:
. guarantees of debt securities issued by Sally Beauty Holdings, Inc., Sally Holdings LLC or SallyCapital Inc.
We may offer and sell these securities to or through one or more underwriters,
dealers and agents, other third parties, ordirectly to purchasers, or through
a combination of these methods, on a continuous or delayed basis. In addition,
certain selling securityholders may offer and sell our securities from time to
time.
This prospectus describes some of the general terms that may apply to these
securities. The specific terms of any securities to be offered will be
described in asupplement to this prospectus that contains specific information
about the offering and the terms of the securities.
Our common stock is listed on the New YorkStock Exchange and trades under the
ticker symbol "SBH." Each prospectus supplement will indicate if the
securities offered thereby will be listed on any securities exchange.
Investing in our securities involves risks. You should refer to the
risk factors
referenced on page 6 of this prospectus andcarefully consider that information
before buying our securities.
Neither the Securities and Exchange Commission nor any state securities
commission hasapproved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
Prospectus dated May 7, 2021.
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Table of contents
Page
Important information about this prospectus 1
Available information 2
Incorporation of certain information by reference 3
Special note on forward looking statements and risk factors 4
Company summary 5
Risk factors 6
Use of proceeds 7
Description of securities we may offer 8
Description of capital stock 9
Description of the debt securities 13
Description of warrants 20
Description of purchase contracts 21
Description of units 22
Legal ownership and book-entry issuance 23
Selling securityholders 25
Plan of distribution 26
Legal matters 29
Experts 30
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Important information about this prospectus
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, or the Commission, using a "shelf"registrati
on process. Under this shelf registration process, we may, from time to time,
sell any combination of the securities described in this prospectus in one or
more offerings. This prospectus provides you with a general description of
thesecurities we may offer. No person is authorized to give any information or
represent anything not contained in this prospectus or any prospectus
supplement. We are only offering the securities in places where sales of those
securities arepermitted. You should not assume that the information contained
in this prospectus and any accompanying prospectus supplement or information
incorporated by reference herein or therein, is current as of any date other
than the date of suchinformation. Our business, financial condition, results
of operations and prospects may have changed since that date. Each time we
offer securities, we will provide a prospectus supplement that will contain
specific information about the terms ofthat offering and the manner in which
the securities will be offered. The prospectus supplement may also add,
update, change or clarify information contained in or incorporated by
reference into this prospectus. Any statement that we make in thisprospectus
will be modified or superseded by any inconsistent statement made by us in a
prospectus supplement. If there is any inconsistency between the information
in this prospectus and the information in the prospectus supplement, you
should relyon the information in the prospectus supplement. We urge you to
read this prospectus, any accompanying prospectus supplement and other
offering material together with additional information described under the
heading "Incorporation of CertainInformation By Reference."
In this prospectus, we refer to common stock, preferred stock, debt
securities, guarantees of debt securities, warrants,purchase contracts and
units collectively as the "securities." The terms the "Company," "Sally
Beauty," "our company," "we," "our," "ours" and "us" refer to Sally
BeautyHoldings, Inc. and its consolidated subsidiaries, unless otherwise
indicated or the context otherwise requires, including that in the discussion
of the capital stock and related matters, where these terms refer solely to
Sally BeautyHoldings, Inc. and not to any of its subsidiaries. The term "Sally
Holdings" refers to Sally Holdings LLC, and the term "Sally Capital" refers to
Sally Capital Inc.
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Available information
We are required to file annual, quarterly and current reports, proxy
statements and other information with the Commission. You may read and copy
any documents filed byus at the Commission's public reference room at 100 F
Street, N.E., Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330
for further information on the public reference room. Our filings with the
Commission are also available to thepublic through the Commission's Internet
site at http://www.sec.gov and through the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, on which our common stock is listed.
We have filed with the Commission a registration statement on
Form S-3
relating to the securities covered by this prospectusand any prospectus
supplement. This prospectus is a part of the registration statement and does
not contain all the information in the registration statement. Whenever a
reference is made in this prospectus or any prospectus supplement to a
contractor other document, the reference is only a summary and you should
refer to the exhibits that are a part of the registration statement for a copy
of the contract or other document. You may review a copy of the registration
statement at theCommission's public reference room in Washington, D.C., as
well as through the Commission's Internet site.
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Incorporation of certain information by reference
The Commission's rules allow us to incorporate by reference information into
this prospectus. This means that we can disclose important information to you
byreferring you to another document. Any information referred to in this way
is considered part of this prospectus from the date we file that document. Any
reports filed by us with the Commission after the date of this prospectus will
automaticallyupdate and, where applicable, supersede any information contained
in this prospectus or incorporated by reference in this prospectus.
We incorporate by referenceinto this prospectus the following documents or
information filed with the Commission (other than, in each case, documents or
information deemed to have been furnished and not filed in accordance with
Commission rules):
. our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2020, including portions of our Proxy Statement for the
2021 Annual Meeting of Stockholders to the extent specifically incorporated byreference therein;
. our Quarterly Reports on
Form 10-Q
for the quarters ended
December 31, 2020
and
March 31, 2021
;
. our Current Reports on
Form 8-K
filed with the Commission on
November 17, 2020
,
November 30, 2020
,
January 28, 2021
,
January 29, 2021
,
March 1, 2021
and
March 22, 2021
;
. the description of our common stock, set forth under the caption "Description of New Sally Capital
Stock" in theCompany's prospectus which forms a part of the Company's registration statementon
Form S-4
filed with the Commission on August
2, 2006, as thereafter amended; and
. all documents filed by us under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended,on or after the date of this prospectus and before
the termination of the applicable offering (except for information furnished to the
Commission that is not deemed to be "filed" for purposes of the Exchange Act).
We will provide without charge to each person, including any beneficial owner,
to whom this prospectus is delivered, upon his or her written or oral request,
a copy ofany or all of the information that has been incorporated by reference
into this prospectus, excluding exhibits to those documents, unless they are
specifically incorporated by reference into those documents. These documents
are available on ourwebsite at http://www.sallybeautyholdings.com. You can
also request those documents from our Investor Relations Department at the
following address:
3001 Colorado Boulevard
Denton, Texas 76210
(940) 297-3877
Exceptas expressly provided above, no other information, including information
on our website, is incorporated by reference into this prospectus.
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Special note on forward looking statements and risk factors
Statements in this prospectus and in the documents incorporated by reference
herein which are not purely historical facts or which depend upon future
events mayconstitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, which we refer to as the
Securities Act, and Section 21E of the Securities Exchange Act of 1934, as
amended, which we referto as the Exchange Act. Words such as "anticipate,"
"believe," "estimate," "expect," "intend," "plan," "project," "target," "can,"
"could,""may," "should," "will," "would" or similar expressions may also
identify such forward-looking statements.
Readers arecautioned not to place undue reliance on forward-looking statements
as such statements speak only as of the date they were made and involve risks
and uncertainties that could cause actual events or results to differ
materially from the events orresults described in the forward-looking
statements. The most important factors that could cause actual events or
results to differ materially from the events or results described in our
forward-looking statements are set forth in our description ofrisk factors in
Item 1A to our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2020, as filed with the Commission,
and as updated in any future filings with the Commission. Theserisk factors
should be read in conjunction with the forward-looking statements in this
prospectus and in the documents incorporated by reference herein.
Forward-looking statements speak only as of the date they are made, and we do
not undertakeany obligation to update any forward-looking statement.
The events described in the forward-looking statements might not occur or
might occur to a different extentor at a different time than we have
described. As a result, our actual results may differ materially from the
results contemplated by these forward-looking statements. We assume no
obligation to publicly update or revise any forward-lookingstatements. New
information, future events or risks may cause the forward-looking events we
discuss in this prospectus not to occur or to occur in a manner different from
what we expect.
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Company summary
Our company
Sally Beauty Holdings, Inc. is an international specialtyretailer and
distributor of professional beauty supplies with operations primarily in North
America, South America and Europe. We are one of the largest distributors of
professional beauty supplies in the U.S. based on store count. At March
31,2021, we operated two business segments, Sally Beauty Supply, or SBS, and
Beauty Systems Group, or BSG, with 4,854 company-operated stores, 142
franchised stores and
e-commerce
platforms. SBS targets retailconsumers, salons and salon professionals, while
BSG exclusively targets salons and salon professionals. Within BSG, we also
have one of the largest networks of distributor sales consultants for
professional beauty products in North America,with approximately 704 sales
consultants who sell directly to salons and salon professionals.
We provide our customers with a wide variety of leading third-partybranded and
owned-brand professional beauty supplies, including hair color products, and
care products, styling tools, skin and nail care products and other beauty
items. For each of the fiscal years ended September 30, 2020, 2019 and
2018,approximately 80% of our consolidated net sales were from customers
located in the U.S.
For the fiscal year ended September 30, 2020, our consolidated netsales and
consolidated operating earnings were $3,514.3 million and $258.8 million,
respectively.
Our history
Sally Beauty Supply began operations with a single store in New Orleans in
1964 and was acquired in 1969 by our former parent company, The Alberto-Culver
Company, whichwe refer to as Alberto-Culver. BSG became a subsidiary of
Alberto-Culver in 1995. In 2006, we separated from Alberto-Culver and became
an independent company listed on the New York Stock Exchange.
Our principal executive offices are located at 3001 Colorado Boulevard,
Denton, Texas 76210, and our telephone number is
(940) 898-7500.
Our website can be accessed at
www.sallybeautyholdings.com
. The contents of our website are not part of this prospectus.
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Risk factors
Investing in our securities involves risk. You should carefully consider the
specific risks discussed or incorporated by reference in the applicable
prospectussupplement, together with all the other information contained in the
prospectus supplement or incorporated by reference in this prospectus and the
applicable prospectus supplement. You should also consider the risks,
uncertainties and assumptionsdiscussed under the caption "Risk Factors"
included in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2020, which is incorporated by
reference in this prospectus.These risk factors may be amended, supplemented
or superseded from time to time by other reports we file with the Commission
in the future.
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Use of proceeds
We will use the net proceeds we receive from the sale of the securities
offered by this prospectus for general corporate purposes, unless we specify
otherwise in theapplicable prospectus supplement. General corporate purposes
may include additions to working capital, capital expenditures, repayment of
debt, the financing of possible acquisitions and investments or stock
repurchases.
We will not receive any proceeds from the resale of securities by selling
securityholders under this prospectus or any supplement to it.
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Description of securities we may offer
This prospectus contains summary descriptions of our common stock, preferred
stock, debt securities, warrants, purchase contracts and units that we may
offer from timeto time. These summary descriptions are not meant to be
complete descriptions of each security. The particular terms of any security
will be described in the related prospectus supplement and other offering
material.
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Description of capital stock
Overview
The following is a description of Sally BeautyHoldings, Inc.`s third restated
certificate of incorporation ("Certificate of Incorporation") and amended and
restated
by-laws
("By-Laws").
The following descriptions of our capital stock and provisions of the
Certificate of Incorporation and
By-Laws
are summaries of their material terms and provisions and are qualified by
reference to theCertificate of Incorporation and
By-Laws.
The descriptions do not purport to be complete statements of the provisions of
the Certificate of Incorporation and
By-Laws.
You must read those documents for complete information on the terms of our
capital stock.
Authorized capital stock
Our authorized capital stock consists of 500,000,000 shares of common stock,
par value $0.01 per share and 50,000,000 shares of preferred stock, par value
$0.01 pershare. On April 30, 2021, we had 112,953,969 shares of our common
stock and no shares of our preferred stock outstanding.
Common stock
Holders of our common stock are entitled to one vote for each share held on
all matters submitted to a vote of our stockholders. Accordingly, holders of a
majority ofthe shares of our common stock entitled to vote in any election of
directors may elect all of the directors standing for election, subject to the
rights of holders of any class or series of preferred stock, if any. Holders
of our common stock arenot entitled to cumulative voting rights.
Holders of our common stock are entitled to receive any dividends that may be
declared by our board of directors, subjectto any preferential dividend rights
of outstanding preferred stock. In the event of liquidation, dissolution or
winding up, holders of our common stock are entitled to receive proportionately
any of the assets remaining after the payment ofliabilities and subject to the
prior rights of any of our outstanding preferred stock.
The holders of our common stock do not have preemptive rights. The
rights,preferences and privileges of holders of our common stock will be
subject to, and may be adversely affected by, the rights of holders of shares
of any of our outstanding preferred stock.
Our common stock is listed on the New York Stock Exchange under the symbol
"SBH."
Computershare Trust Company, N.A. serves as the transfer agent and registrar
for our common stock.
Preferred stock
Our Certificate of Incorporation provides that our board ofdirectors has the
authority, without further vote or action by our stockholders, to issue up to
50,000,000 shares of our preferred stock in one or more series and to fix the
voting powers, designations, preferences and relative, participating,optional
or other special rights, and the qualifications, limitations and restrictions
thereof, of any such class or series.
The issuance of shares of our preferredstock, or the issuance of rights to
purchase shares of preferred stock, could be used to satisfy certain
regulatory requirements or to discourage an unsolicited acquisition proposal.
See "Certain Anti-Takeover Provisions of Sally BeautyHoldings, Inc.
Certificate of Incorporation and
By-Laws
and Delaware Law." In addition, under some circumstances, the issuance of
preferred stock could adversely affect the voting power of holders ofour
common stock.
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Certain anti-takeover provisions of Sally Beauty Holdings, Inc. Certificate of
Incorporation and
By-Laws
and Delaware Law
A number of provisions in our Certificate of Incorporation and
By-Laws
and under the Delaware General Corporate Law ("DGCL") may make it more
difficult to acquire control of us. These provisions may have the effect of
discouraging a future takeover attempt notapproved by our board of directors
but which individual stockholders may deem to be in their best interests or in
which stockholders may receive a substantial premium for their shares over
then current market prices. As a result, our stockholderswho might desire to
participate in such a transaction may not have an opportunity to do so. In
addition, these provisions may adversely affect the prevailing market price of
the common stock. These provisions are intended to:
. enhance the likelihood of continuity and stability in the composition of our board of directors;
. discourage some types of transactions that may involve an actual or threatened change in control of us;
. discourage certain tactics that may be used in proxy fights;
. ensure that our board of directors will have sufficient time to act in what our
board of directors believes to be in thebest interests of us and stockholders; and
. encourage persons seeking to acquire control of us to consult first with our board
of directors to negotiate the terms ofany proposed business combination or offer.
Filling vacancies; removal
Our Certificate of Incorporation provides that our directors may be removed,
with or without cause, at a meeting of our stockholders by a majority of
shares thenentitled to vote. In addition, our directors shall be elected for a
term expiring at the next succeeding annual meeting of stockholders or until
their death, resignation, removal, or disqualification.
Vacancies in our board of directors may be filled only by a majority of the
remaining directors.
Any director elected to fill a vacancy will hold office for the remainder of
the term in which the vacancy occurred (including a vacancy created by
increasing the sizeof our board of directors) and until such director's
successor shall have been duly elected and qualified. No decrease in the
number of directors will shorten the term of any incumbent director. Our
By-Laws
provide that the number of directors shall be fixed and increased or decreased
from time to time by resolution of our board of directors.
These provisions currently have the effect of making it difficult for a
potential acquirer to gain control of our board of directors.
No stockholder action by written consent; special meetings
OurCertificate of Incorporation provides that any action required or permitted
to be taken by our stockholders must be effected at a meeting and vote by
stockholders. Further, our
By-Laws
provide that specialmeetings may be called only by our board of directors or
our chairman of the board of directors, chief executive officer or president.
These provisions may have the effect of delaying consideration of a
stockholder proposal until the next annualmeeting unless a special meeting is
called by an officer at the request of our board of directors or our chairman
of the board of directors, chief executive officer or president.
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Advance notice requirements for nomination of directors and presentation of
new business at meetings of SallyBeauty Holdings, Inc. stockholders
Our
By-Laws
provide for advance notice requirements for stockholderproposals and director
nominations. Generally, to be timely, for our annual general meeting of
stockholders, notice must be received at our principal executive offices not
less than 90 days nor more than 120 days prior to the firstanniversary date of
the annual meeting for the preceding year.
These provisions make it more difficult procedurally for a stockholder to
place a proposal ornomination on the meeting agenda or to take action without
a meeting and, therefore, may reduce the likelihood that a stockholder will
seek to take independent action to replace directors or seek a stockholder
vote with respect to other matters thatare not supported by management.
Undesignated preferred stock
Our ability to authorize undesignated preferred stock makes it possible for
our board of directors to issue preferred stock with voting or other rights or
preferencesthat could impede the success of any attempt to acquire us. These
and other provisions may have the effect of deterring or preventing hostile
takeovers or delaying or preventing changes in control or management of our
Company.
Section 203 of the DGCL
We are subject to Section 203 of the DGCLwhich provides that, subject to the
exceptions specified in that section, a corporation may not engage in any
business combination with any interested stockholder for a three-year period
following the time that such stockholder becomes an interestedstockholder
unless:
. prior to that time, the board of directors of the corporation approved either the business
combination or the transactionthat resulted in the stockholder becoming an interested stockholder;
. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interestedstockholder owned
at least 85 percent of the voting stock of the corporation outstanding
at the time the transaction commenced (excluding certain shares); or
. subsequent to that time, the business combination is approved by the board
of directors of the corporation and by theaffirmative vote of at least
two-thirds
of the outstanding voting stock that is
not owned by the interested stockholder.
Except as specified in Section 203 of the DGCL, an "interested stockholder" is
defined to include:
. any person that is the owner of 15 percent or more of the outstanding voting stock
of the corporation, or is anaffiliate or associate of the corporation and was
the owner of 15 percent or more of the outstanding voting stock of the corporation
at any time within three years immediately prior to the relevant date; and
. the affiliates and associates of any person described in the preceding clause.
Under certain circumstances, Section 203 of the DGCL makes it more difficult
for a person who would be an interested stockholder to effect various
businesscombinations with a corporation for a three-year period. It is
anticipated that the provisions of Section 203 may encourage persons
interested in acquiring us to negotiate in advance with our board of
directors, since those persons could avoidthe stockholder approval requirement
if a majority of the directors then in office approves either the business
combination or the transaction that results in the stockholder becoming an
interested stockholder.
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Limitations of liability of directors
Our Certificate of Incorporation provides that no director will be personally
liable to us or our stockholders for monetary damages for breach of fiduciary
duty as adirector, except to the extent that this limitation on or exemption
from liability is not permitted by the DGCL. As currently enacted, the DGCL
permits a corporation to provide in its certificate of incorporation that a
director of the corporationwill not be personally liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability for:
. any breach of the director's duty of loyalty to the corporation or our stockholders;
. acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
. payments of unlawful dividends or unlawful stock repurchases or redemptions; or
. any transaction from which the director derived an improper personal benefit.
The principal effect of this limitation on liability provision is that a
stockholder will be unable to recover monetary damages against a director for
breach offiduciary duty unless the stockholder can demonstrate that one of the
exceptions listed in the DGCL applies. The inclusion of this provision in our
Certificate of Incorporation may discourage or deter stockholders or
management from bringing alawsuit against our directors for a breach of their
fiduciary duties, even though such an action, if successful, might otherwise
have benefited us and our stockholders. This provision should not affect the
availability of equitable remedies such asan injunction or rescission of a
transaction based upon a director's breach of his or her fiduciary duties.
The DGCL provides that a corporation may indemnifyits directors and officers
as well as its other employees and agents against judgments, fines, amounts
paid in settlement and expenses, including attorneys' fees, actually and
reasonably incurred in connection with various proceedings, otherthan an
action brought by or in the right of the corporation, if such person acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal actionor proceeding, if he or she had no reasonable cause to believe
his or her conduct was unlawful. A similar standard applies to actions brought
by or in the right of the corporation, except that indemnification in such a
case may only extend toexpenses, including attorneys' fees, incurred in
connection with the defense or settlement of such actions, and the statute
requires court approval before there can be any indemnification where the
person seeking indemnification has been foundliable to the corporation.
Our Certificate of Incorporation and, with regard to our officers, our
By-Laws
provide that wewill indemnify our current and former directors and officers to
the fullest extent permitted by the DGCL. Under these provisions and subject
to the DGCL, we are required to indemnify our directors and officers for all
expense, liability and loss(including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) reasonably incurred
or suffered by such director or officer in connection with pending or
threatened legal proceedings because of thedirector's or officer's position
with us or another entity that the director or officer serves as a director,
officer, employee or agent at our request, subject to various conditions, and
pay the expenses incurred by directors and officersin defending any such
proceeding in advance of its final disposition to enable them to defend
against such proceedings. To receive indemnification, the director or officer
must have met the applicable standard of conduct required by Delaware law tobe
indemnified.
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Description of the debt securities
General
The following description of the terms of the debt securitiescontains certain
general terms that may apply to the debt securities. The specific terms of any
debt securities will be described in one or more prospectus supplements
relating to those debt securities and other offering materials we may provide.
Debt securities may be issued by Sally Beauty, Sally Holdings and/or Sally
Capital. When describing any debt securities, references to "we","us", "our"
and the "Company" refers to the issuer(s) of those debt securities.
Unless otherwise specified in the applicableprospectus supplement, the debt
securities will be issued under an indenture, dated as of May 18, 2012 (the
"Indenture"), between us and Computershare Trust Company, N.A. as successor to
Wells Fargo Bank, National Association, astrustee (such trustee or any
successor trustee, the "Trustee"). The Indenture is included as an exhibit to
the registration statement of which this prospectus is a part. The terms of
the debt securities will include those stated in theIndenture and any
supplemental indentures that specify the terms of a particular series of debt
securities. The Indenture will be subject to and governed by the terms of the
Trust Indenture Act of 1939.
We have summarized below the material provisions of the Indenture and the debt
securities, or indicated which material provisions will be described in the
relatedprospectus supplement. These descriptions are only summaries, and each
investor in our debt securities should refer to the Indenture (including any
applicable supplemental indentures), the applicable prospectus supplement and
any related documents,which describes completely the terms and definitions
summarized below and contains additional information regarding the debt
securities. Any reference to particular sections or defined terms of the
Indenture in any statement under this headingqualifies the entire statement
and incorporates by reference the applicable section or definition into that
statement.
The debt securities will be our directgeneral obligations and may be secured
or unsecured. We may issue senior or subordinated debt securities, as
specified in the prospectus supplement relating to that issuance of debt
securities.
The Indenture does not limit the amount of debt securities that we may issue.
The Indenture allows us to reopen a previous issue of a series of debt
securities and issueadditional debt securities of that issue.
We are a holding company and conduct substantially all of our operations
through subsidiaries. As a result, claims ofholders of the debt securities
will effectively have a junior position to claims of creditors of our
subsidiaries, except to the extent that we may be recognized as a creditor of
those subsidiaries. In addition, our right to participate as ashareholder in
any distribution of assets of any subsidiary (and thus the ability of holders
of the debt securities to benefit as creditors of the company from such
distribution) is junior to creditors of that subsidiary.
We may issue debt securities from time to time in one or more series. The debt
securities may be denominated and payable in U.S. dollars or foreign
currencies. We mayalso issue debt securities, from time to time, with the
principal amount, interest or other amounts payable on any relevant payment
date to be determined by reference to one or more currency exchange rates,
securities or baskets of securities,commodity prices, indices or any other
financial, economic or other measure or instrument, including the occurrence or
non-occurrence
of any event or circumstance. In addition, we may issue debt securities aspart
of units issued by us. All references in this prospectus, or any prospectus
supplement to other amounts will include premium, if any, other cash amounts
payable under the applicable indenture, and the delivery of securities or
baskets ofsecurities under the terms of the debt securities.
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Debt securities may contain tranches that bear interest at a fixed rate, which
may be zero, and tranches that bearinterest at a floating rate.
The prospectus supplement and other offering materials we may provide relating
to the particular series of debt securities beingoffered will specify the
particular terms of, and other information relating to, those debt securities,
including whether the debt securities will be guaranteed, the terms and
conditions of such guarantees and provisions for the accession of
theguarantors to certain obligations under the Indenture.
Some of the debt securities may be issued as original issue discount debt
securities (the "OriginalIssue Discount Securities"). Original Issue Discount
Securities bear no interest or bear interest at below market rates and will be
sold at a discount below their stated principal amount. The prospectus
supplement relating to an issue ofOriginal Issue Discount Securities will
contain information relating to United States federal income tax, accounting,
and other special considerations applicable to Original Issue Discount
Securities.
In the case of debt securities issued by Sally Beauty, the Indenture may
contain provisions with regard to the conversion or exchange of the debt
securities, at theoption of the holders of such debt securities or Sally
Beauty, as the case may be, for or into new securities of a different series,
Sally Beauty's common stock or other securities.
Holders may present debt securities for exchange or transfer, in the manner,
at the places and subject to the restrictions stated in the debt securities
and described inthe applicable prospectus supplement and other offering
material we may provide. We will provide these services without charge except
for any tax or other governmental charge payable in connection with these
services and subject to any limitationsprovided in the Indenture.
Holders may transfer debt securities in definitive bearer form by delivery to
the transferee. If any of the securities are held in globalform, the
procedures for transfer of interests in those securities will depend upon the
procedures of the depositary for those global securities. See "Legal Ownership
and Book-Entry Issuance" below.
We will generally have no obligation to repurchase, redeem, or change the
terms of debt securities upon any event (including a change in control) that
might have anadverse effect on our credit quality.
Guarantees
The paymentobligations of Sally Beauty under any series of debt securities may
be guaranteed by one or more of Sally Beauty's direct or indirect
subsidiaries, including Sally Holdings, Sally Capital or by other persons. The
payment obligations of SallyHoldings and Sally Capital under any series of
debt security may be guaranteed fully and unconditionally by Sally Beauty, and
may be guaranteed by one or more of Sally Beauty's other direct or indirect
subsidiaries or by other persons. If aseries of debt securities is so
guaranteed, the guarantors will execute a supplemental indenture or notation
of guarantee as further evidence of their guarantee. The applicable prospectus
supplement will describe the terms of any guarantee.
The obligations of each guarantor under its guarantee may be limited to the
maximum amount that will not result in such guarantee obligations constituting
a fraudulentconveyance or fraudulent transfer under federal or state law,
after giving effect to all other contingent and fixed liabilities of that
subsidiary and any collections from or payments made by or on behalf of any
other guarantor in respect to itsobligations under its guarantee.
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Events of default
Unlessotherwise provided in the applicable prospectus supplement for a series
of debt securities, the following are events of default under the Indenture
with respect to any series of debt securities:
. failure to pay any installment of interest on such series of debt securities when due, continued for 30 days;
. failure to pay principal of, or premium, if any, on such series of debt securities when due;
. failure to deposit any sinking fund payment with respect to such series of debt securities when due, continued for30 days;
. failure to observe or perform any other covenant or agreement in such series of debt securities
or the Indenture, continuedfor 60 days after receipt by the Company of notice of such
failure specifying such failure and requiring the same to be remedied from the trustee or
holders of at least 25% of the principal amount of such series of debt securities outstanding;
. certain events of bankruptcy, insolvency or reorganization of the Company; and
. any other event of default we may provide for that series of debt securities.
If an event of default with respect to the outstanding debt securities of a
particular series occurs and continues, either the trustee or the holders of
at least 25% inaggregate principal amount of such series of outstanding debt
securities may declare the principal amount of such series of debt securities
to be due and payable immediately; provided that, in the case of certain
events of bankruptcy, insolvency orreorganization, such principal amount, or
portion thereof will automatically become due and payable without any action
by the trustee or any holder. However, at any time after an acceleration with
respect to the debt securities of a particularseries has occurred, but before
a judgment or decree based on such acceleration has been obtained, the holders
of a majority in aggregate principal amount of the outstanding debt securities
of such series may, under certain circumstances, rescindand annul such
acceleration. For information as to waiver of defaults, see "Modification and
Waiver" below.
If the principal or any premium or interest onany debt security is payable in
a currency other than U.S. dollars and such currency is not available to the
Company for making payment due to the imposition of exchange controls or other
circumstances beyond the Company's control, the Companyis entitled to satisfy
its obligations to holders of such debt securities by making such payment in
U.S. dollars in an amount equal to the U.S. dollar equivalent of the amount
payable in such other currency, as determined by the trustee as providedin the
Indenture. Any payment made under such circumstances in U.S. Dollars where the
required payment is in a currency other than U.S. Dollars will not constitute
an event of default under the Indenture.
Subject to the duty of the trustee during default to act with the required
standard of care, the trustee will be under no obligation to exercise any of
its rights orpowers under the Indenture at the request or direction of any of
the holders, unless such holders have offered the trustee security or
indemnity reasonably satisfactory to the trustee. Subject to such
indemnification and certain other limitations,the holders of a majority in
aggregate principal amount of the outstanding debt securities of a particular
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the trustee, orexercising any trust
or power conferred on the trustee, with respect to the debt securities of such
series.
Other than with respect to a lawsuit for the payment ofprincipal, premium, if
any, and interest on any series of debt securities when due, the Indenture
provides that no holder of such series of debt securities may institute any
action against the Company under the Indenture without first complying withthe
conditions set forth in the Indenture.
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The Company will furnish to the trustee an annual statement as to the
Company's performance of certain of itsobligations under the Indenture and as
to any default in such performance.
The provisions set forth in the prior five paragraphs may be revised or
superseded byadditional or replacement provisions described in an applicable
prospectus supplement for a series of debt securities.
Modification and waiver
Unless otherwise provided in the applicable prospectus supplement for a series
of debt securities, modifications and amendments of the Indenture with respect
to anyseries of debt securities outstanding may be made by the Company and the
trustee with the consent of holders of a majority in aggregate principal
amount of such series, except that no such modification or amendment may,
without the consent of theholder of each outstanding debt security of the
applicable series affected thereby:
. extend the stated maturity date of the principal of, or any installment of
principal of or interest on, any such debtsecurity, or reduce the principal
amount of or the rate (or extend the time for payment) of interest on,
or any premium payable upon the redemption of, any such debt security;
. reduce the amount of principal payable upon acceleration of the maturity thereof;
. change the place or currency of payment of principal of, or premium, if any, or interest on, any such debt security;
. impair the right to institute suit for the enforcement of any payment on, or with respect to, any such debt security;
. reduce the percentage in aggregate principal amount of such series of outstanding debt securities, the consent of
theholders of which is required for any amendment, supplemental indenture or waiver provided for in the Indenture;
. modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisionsof the Indenture
cannot be modified or waived without the consent of the holder of
each outstanding debt security of the series affected thereby;
. cause any such debt security to become subordinate in right of payment to any
other debt, except to the extent provided inthe terms of such security; or
. if such debt security provides that the holder may require us to repurchase or convert such debt security, impair
suchholder's right to require repurchase or conversion of such debt security on the terms provided therein.
Unless otherwise provided in theapplicable prospectus supplement for a series
of debt securities, the Company and the trustee may also modify and amend the
Indenture without the consent of any holder of debt securities in limited
circumstances, such as clarifications and changesthat would not adversely
affect the holders.
The holders of a majority in aggregate principal amount of any series of
outstanding debt securities may, on behalf ofthe holders of all such debt
securities, waive the Company's compliance with any provisions of the
Indenture or such series of debt securities, subject to the rights of the
holders to receive payment of the principal of, and premium, if any,and
interest on, such debt securities on the maturity date and, if the terms of
such debt security so provide, to convert such security in accordance with its
terms, and to institute suit for the enforcement of any such payment after
such respectivedates. Unless otherwise provided in the applicable prospectus
supplement for a series of debt securities, the holders of a majority in
aggregate principal amount
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of any series of outstanding debt securities may, on behalf of the holders of
all such debt securities, waive any past default under the Indenture, except a
default in the payment of theprincipal of, or premium, if any, or interest on,
such debt securities or in respect of any provision of the Indenture that
cannot be modified or amended without the consent of the holder of each
outstanding debt security of such series affectedthereby.
Legal Defeasance and Covenant Defeasance
The followingprovisions related to Legal Defeasance and Covenant Defeasance,
as such terms are defined below, will apply unless otherwise provided in an
applicable prospectus supplement for a series of debt securities.
The Indenture provides that the Company may, at its option, elect to discharge
its obligations with respect to any series of debt securities ("LegalDefeasance"
). If Legal Defeasance occurs, the Company will be deemed to have paid and
discharged all amounts owed under the applicable series of debt securities,
and the Indenture will cease to be of further effect as to such series of
debtsecurities, except that:
. holders will be entitled to receive timely payments for the principal of, premium, if any, and interest
on, such series ofdebt securities, from the funds deposited for that purpose (as explained below);
. the Company's obligations will continue with respect to the issuance of temporary debt securities, the registration
ofdebt securities, and the replacement of mutilated, destroyed, lost or stolen debt securities of the applicable series;
. the trustee will retain its rights, powers, trusts, duties, and immunities,
and the Company will retain its obligations inconnection therewith; and
. other Legal Defeasance provisions of the Indenture will remain in effect.
In addition, the Company may, at its option and at any time, elect to cause
the release of its obligations with respect to most of the covenants in the
Indenture("Covenant Defeasance") with respect to any series of debt
securities. If Covenant Defeasance occurs, certain events (not including
non-payment
events and bankruptcy, insolvency and reorganizationevents) relating to the
Company described under "Events of Default" will no longer constitute events
of default with respect to such series of debt securities. The Company may
exercise Legal Defeasance regardless of whether it previouslyexercised
Covenant Defeasance.
In order to exercise either Legal Defeasance or Covenant Defeasance (each, a
"Defeasance") with respect to any series ofdebt securities:
(1) the Company must irrevocably deposit with the trustee, in trust, for the benefit of holders
of the debt securities of such series, U.S. legal tender, U.S. government securities,
a combination thereof or otherobligations as may be provided with respect to such series
of debt securities, in amounts that will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of, premium, if
any, andinterest on, the applicable series of debt securities on the stated date for
payment or any redemption date thereof, and the trustee must have, for benefit of holders
of such debt securities, a valid, perfected, exclusive security interest in thetrust;
(2) in the case of Legal Defeasance, the Company must deliver to the trustee an opinion
of counsel in the United States reasonably acceptable to the trustee confirming that:
. the Company has received from, or there has been published by, the Internal Revenue Service, a ruling; or
. since the date of the Indenture, there has been a change in the applicable federal income tax law; in
either case to theeffect that holders of such series of debt securities will not recognize income, gain or
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loss for federal income tax purposes as a result of the Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have beenthe case if the Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company must deliver
to the trustee an opinion of counsel in the United States
reasonably acceptable to the trustee confirming that holders of
such series of debt securities willnot recognize income, gain or
loss for federal income tax purposes as a result of the Covenant
Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would
have been the case if theCovenant Defeasance had not occurred;
(4) no default or event of default may have occurred and be continuing under the
Indenture on the date of the deposit with respect to such series of debt securities;
in addition, no event of default relating to bankruptcyor insolvency may occur
at any time from the date of the deposit to the 91st calendar day thereafter;
(5) the Defeasance may not result in a breach or violation of, or constitute
a default under the Indenture or any other material agreement
or instrument to which the Company or any of its subsidiaries is a
party or by whichthe Company or any of its subsidiaries is bound;
(6) the Company must deliver to the trustee an officers' certificate stating that the deposit was not
made by the Company with the intent to hinder, delay or defraud any other of its creditors; and
(7) the Company must deliver to the trustee an officers' certificate confirming the
satisfaction of conditions in clauses (1) through (6) above, and an opinion of
counsel confirming the satisfaction of theconditions in clauses (1) (with respect
to the validity and perfection of the security interest), (2), (3) and (5) above.
TheDefeasance will be effective on the earlier of (i) the 91st day after the
deposit, and (ii) the day on which all the conditions above have been
satisfied.
If the amount deposited with the trustee to effect a Covenant Defeasance is
insufficient to pay the principal of, premium, if any, and interest on, the
applicable seriesof debt securities when due, then the Company's obligations
under the Indenture and such series of debt securities will be revived, and
such Defeasance will be deemed not to have occurred.
Restrictive covenants
We will describe restrictive covenants for any seriesof debt securities in the
applicable prospectus supplement and other offering materials relating to such
series of debt securities.
Consolidation, merger,conveyance, transfer or lease
Unless otherwise provided in the applicable prospectus supplement for a series
of debt securities, the Company may not consolidateor merge with or into, or
transfer or lease its assets substantially as an entirety to, any entity,
unless:
. the Company is the surviving entity or, if not, the successor entity formed by such consolidation
or into which the Companyis merged or which acquires or leases the Company's assets
is organized and existing under the laws of any U.S. jurisdiction and expressly assumes
the Company's obligations with respect to the debt securities and under the Indenture;
. no default or event of default exists or will occur immediately after giving effect to the transaction; and
. the Company has delivered to the trustee the certificates and opinions required under the Indenture.
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Form, exchange and transfer
The Company will issue the debt securities only in fully registered form,
without interest coupons. Unless provided otherwise in the prospectus
supplement and the otheroffering materials relating to a particular series of
debt securities, the debt securities will be issued in minimum denominations
of $1,000 and integral multiples thereof. No service charge will be made for
any registration of transfer or exchangeof debt securities, but the Company
may require payment of a sum sufficient to cover any tax or government charge
payable in connection therewith. If any series of the debt securities are to
be redeemed in part, the Company will not be required toissue, register the
transfer of or exchange such series of the debt securities during a period
beginning at the opening of business 15 days before the day of the mailing of
a notice of redemption and ending at the close of business on the dayof such
mailing or to register the transfer of or exchange any debt securities so
selected for redemption in part, except the unredeemed portion of any debt
securities being redeemed in part.
The Company will cause to be kept at the office of the registrar a register in
which, subject to such reasonable regulations as it may prescribe, the Company
willprovide for the registration of the debt securities and registration of
transfers of the debt securities. The Company initially will appoint the
trustee at its corporate trust office as paying agent and registrar for the
debt securities. The Companymay vary or terminate the appointment of any
paying agent or registrar, or appoint additional or other such agents or
approve any change in the office through which any such agent acts. The
Company will cause notice of any resignation, terminationor appointment of the
trustee or any paying agent or registrar, and of any change in the office
through which any such agent will act, to be provided to holders of the debt
securities.
The trustee
All payments of principal on, premium, if any, and interest on,and all
registration, transfer, exchange, authentication and delivery of, the debt
securities will be effected by the trustee or its agent at an office
designated by the trustee at its corporate trust office.
The Indenture provides that, except during the continuance of an event of
default, the trustee will perform only such duties as are specifically set
forth in theIndenture. During the existence of an event of default under the
Indenture, the trustee will exercise such rights and powers vested in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's ownaffairs. Subject to these provisions, the trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any of the holders of the debt securities, unless
they shall have offered to the trusteesecurity and indemnity reasonably
satisfactory to the trustee.
The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
which we refer to as theTrust Indenture Act, contain limitations on the rights
of the trustee, should it become a creditor of the Company, to obtain payment
of claims in certain cases or to liquidate certain property received by it in
respect of any such claim as securityor otherwise. The trustee is permitted to
engage in other transactions with the Company or any of its affiliates. If the
trustee acquires any conflicting interest, it must eliminate such conflict or
resign.
Affiliates of the trustee may serve as agents and lenders under our credit
facilities or engage in other transactions with us from time to time
Governing law
New York law governs the Indenture and will govern the debtsecurities.
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Description of warrants
We may issue warrants to purchase common stock, preferred stock, debt
securities or other securities. We may issue warrants independently or
together with othersecurities. Warrants sold with other securities may be
attached to or separate from the other securities. We will issue warrants, if
any, under one or more warrant agreements between us and one or more warrant
agents that we will name in theprospectus supplement.
The prospectus supplement relating to any warrants we offer will include
specific terms relating to the offering, including, among others,the aggregate
number of warrants offered, the exercise price of the warrants, the dates or
periods during which the warrants are exercisable and any other specific terms
of the warrants.
The description in the applicable prospectus supplement and other offering
material of any warrants we offer will not necessarily be complete and will be
qualified inits entirety by reference to the applicable warrant agreement,
which will be filed with the Commission if we offer warrants. For more
information on how you can obtain copies of the applicable warrant agreement
if we offer warrants, see"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
We urge you to read the applicable warrant agreement and the applicable
prospectus supplement and any other offering material in their entirety before
investing in our warrants.
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Description of purchase contracts
We may issue stock purchase contracts representing contracts obligating
holders to purchase from us, and us to sell to the holders, a specified or
varying number ofshares of common stock and/or preferred stock at a future
date or dates. Alternatively, the stock purchase contracts may obligate us to
purchase from holders, and obligate holders to sell to us, a specified or
varying number of shares of commonstock and/or preferred stock. The price per
share and the number of shares may be fixed at the time the stock purchase
contracts are entered into or may be determined by reference to a specific
formula set forth in the stock purchase contracts. Thestock purchase contracts
may be entered into separately or as a part of a stock purchase unit that
consists of (a) stock purchase contracts and (b) warrants. The stock purchase
contracts may require us to make periodic payments to theholders of the stock
purchase units or require the holders of the stock purchase units to make
periodic payments to us.
These payments may be secured or unsecuredor prefunded and may be paid on a
current or on a deferred basis. The stock purchase contracts may require
holders to secure their obligations under the contracts in a specified manner.
The description in the applicable prospectus supplement and other offering
material of any stock purchase contracts or stock purchase units we offer will
not necessarilybe complete and will be qualified in its entirety by reference
to the applicable purchase contract agreement, which will be filed with the
Commission if we offer stock purchase contracts or stock purchase units. For
more information on how you canobtain copies of the applicable purchase
contract agreement if we offer stock purchase contracts or stock purchase
units, see "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE." We urge you to
read the applicable purchase contractagreement and any applicable prospectus
supplement in their entirety.
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Description of units
We may issue units comprised of one or more of the other securities described
in this prospectus in any combination. Each unit will be issued so that the
holder of theunit is also the holder of each security included in the unit.
Thus, the holder of a unit will have the rights and obligations of a holder of
each included security. The unit agreement under which a unit is issued may
provide that the securitiesincluded in the unit may not be held or transferred
separately, at any time or at any time before a specified date. The applicable
prospectus supplement will describe:
. the designation and terms of the units and of the other securities comprising the units,
including whether and under whatcircumstances those securities may be traded separately;
. the terms of the unit agreement governing the units;
. any provisions for the issuance, payment, settlement, transfer or exchange of the units or the securities comprising theunits;
. the United States federal income tax considerations relevant to the units; and
. whether the units will be issued in fully registered global form.
The description in the applicable prospectus supplement and other offering
material of any units we offer and any related unit agreement will not
necessarily be completeand will be qualified in its entirety by reference to
the applicable unit agreement, which will be filed with the Commission if we
offer units. For more information on how you can obtain copies of the
applicable unit agreement if we offer units, see"INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE." We urge you to read the applicable unit agreement
and any applicable prospectus supplement in their entirety.
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Legal ownership and book-entry issuance
The securities offered by means of this prospectus may be issued in whole or
in part in book-entry form, meaning that beneficial owners of the securities
will notreceive certificates representing their ownership interests in the
securities, except in the event the book-entry system for the securities is
discontinued. Securities issued in book-entry form will be evidenced by one or
more global securities thatwill be deposited with, or on behalf of, a
depository identified in the applicable prospectus supplement relating to the
securities. The Depository Trust Company is expected to serve as depository.
Unless and until it is exchanged in whole or inpart for the individual
securities represented thereby, a global security may not be transferred
except as a whole by the depository for the global security to a nominee of
such depository or by a nominee of such depository to such depository
oranother nominee of such depository or by the depository or any nominee of
such depository to a successor depository or a nominee of such successor.
Global securities may be issued in either registered or bearer form and in
either temporary orpermanent form. The specific terms of the depository
arrangement with respect to a class or series of securities that differ from
the terms described here will be described in the applicable prospectus
supplement.
Unless otherwise indicated in the applicable prospectus supplement, we
anticipate that the following provisions will apply to depository arrangements.
Upon the issuance of a global security, the depository for the global security
or its nominee will credit on its book-entry registration and transfer system
therespective principal amounts of the individual securities represented by
such global security to the accounts of persons that have accounts with such
depository, who are called "participants." Such accounts will be designated by
theunderwriters, dealers or agents with respect to the securities or by us if
we directly offer and sell the securities. Ownership of global securities will
be limited to the depository's participants or persons that may hold interests
throughsuch participants. Ownership of global securities will be shown on, and
the transfer of that ownership will be effected only through, records
maintained by the applicable depository or its nominee (with respect to
ownership interests ofparticipants) and records of the participants (with
respect to ownership interests of persons who hold through participants). The
laws of some states require that certain purchasers of securities take
physical delivery of such securities indefinitive form. Such limits and laws
may impair the ability to own, pledge or transfer beneficial interest in a
global security.
So long as the depository for aglobal security or its nominee is the
registered owner of such global security, such depository or nominee, as the
case may be, will be considered the sole owner or holder of the securities
represented by such global security for all purposes underthe applicable
instrument defining the rights of a holder of the securities. Except as
provided below or in the applicable prospectus supplement, owners of global
securities will not:
. be entitled to have any of the individual securities of the series represented by such global security registered in theirnames;
. receive or be entitled to receive physical delivery of any such securities in definitive form; and
. be considered the owners or holders thereof under the applicable instrument defining the rights of the holders of thesecurities.
Payments of amounts payable with respect to individual securities represented
by a global security registered in the name of adepository or its nominee will
be made to the depository or its nominee, as the case may be, as the
registered owner of the global security representing such securities. None of
us, our officers and directors or any paying agent or securityregistrar for an
individual series of securities will have any responsibility or liability for
any aspect of the records relating to or payments made on account of
beneficial ownership interests
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in the global security for such securities or for maintaining, supervising or
reviewing any records relating to such ownership interests.
We expect that the depository for a series of securities offered by means of
this prospectus or its nominee, upon receipt of any payment of dividend or
other amount inrespect of a permanent global security representing any of such
securities, will immediately credit its participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of globalsecurities for such securities as shown on the
records of such depository or its nominee. We also expect that payments by
participants to owners of such global security held through such participants
will be governed by standing instructions andcustomary practices, as is the
case with securities held for the account of customers in bearer form or
registered in "street name." Such payments will be the responsibility of such
participants.
If a depository for a series of securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not
appointed by uswithin 90 days, we will issue individual securities of such
series in exchange for the global security representing such series of
securities. In addition, we may, at any time and in our sole discretion,
subject to any limitations described inthe applicable prospectus supplement
relating to such securities, determine not to have any securities of such
series represented by one or more global securities and, in such event, will
issue individual securities of such series in exchange forthe global security
or securities representing such series of securities.
The information in this section concerning the depository and its book-entry
systems hasbeen obtained from sources that we believe to be reliable, but we
take no responsibility for the accuracy thereof.
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Selling securityholders
We may register securities covered by this prospectus for
re-offers
and resales by any selling securityholders named in aprospectus supplement. We
are a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act, which allows us to add secondary sales of our securities by any selling
securityholders by filing a prospectus supplement with theCommission. We may
register these securities to permit selling securityholders to resell their
securities when they deem appropriate. Selling securityholders may resell all,
a portion or none of their securities at any time and from time to
time.Selling securityholders may also sell, transfer or otherwise dispose of
some or all of their securities in transactions exempt from the registration
requirements of the Securities Act. We do not know when or in what amounts the
sellingsecurityholders may offer securities for sale under this prospectus and
any prospectus supplement. We may pay all expenses incurred with respect to
the registration of the securities owned by the selling securityholders, other
than underwritingfees, discounts or commissions, which will be borne by the
selling securityholders. We will provide you with a prospectus supplement
naming the selling securityholder(s), the amount of securities to be
registered and sold and any other terms of thesecurities being sold by the
selling securityholder(s).
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Plan of distribution
We or the selling securityholders may offer and sell from time to time the
securities in any one or more of the following ways:
. to or through underwriters, brokers or dealers or other third parties;
. directly to one or more other purchasers;
. through a block trade in which the broker or dealer engaged to handle the block trade will attempt to sell the
securitiesas agent, but may position and resell a portion of the block as principal to facilitate the transaction;
. through agents on a best-efforts basis; or
. otherwise through a combination of any of the above methods of sale.
In addition, we may enter into option, share lending or other types of
transactions that require us to deliver shares of common stock to an
underwriter, broker or dealeror other third parties, who will then resell or
transfer the shares of common stock under this prospectus. We may also enter
into hedging transactions with respect to our securities.
Any selling securityholder will act independently of us in making decisions
with respect to the timing, manner and size of each sale of shares of common
stock covered bythis prospectus.
We may enter into derivative transactions with third parties, or sell
securities not covered by this prospectus to third parties in privatelynegotiate
d transactions. If the applicable prospectus supplement indicates, in
connection with those derivatives, the third parties may sell securities
covered by this prospectus and the applicable prospectus supplement, including
in short saletransactions. If so, the third party may use securities pledged
by us or borrowed from us or others to settle those sales or to close out any
related open borrowings of stock, and may use securities received from us in
settlement of thosederivatives to close out any related open borrowings of
stock. The third party in such sale transactions will be an underwriter and,
if not identified in this prospectus, will be identified in the applicable
prospectus supplement (or apost-effective amendment). In addition, we may
otherwise loan or pledge securities to a financial institution or other third
party that in turn may sell the securities short using this prospectus. Such
financial institution or other third party maytransfer its economic short
position to investors in our securities or in connection with a concurrent
offering of other securities.
Shares of common stock may alsobe exchanged for satisfaction of the selling
securityholders' obligations or other liabilities to their creditors. Such
transactions may or may not involve brokers or dealers.
Each time we or the selling securityholders sell securities, we will provide a
prospectus supplement that will name any underwriter, dealer or agent involved
in theoffer and sale of the securities if required. The prospectus supplement
will also set forth the terms of the offering, including:
. the purchase price of the securities and the proceeds we will receive from the sale of the securities;
. any underwriting discounts and other items constituting underwriters' compensation;
. any public offering or purchase price and any discounts or commissions allowed or
re-allowed
or paid to dealers;
. any commissions allowed or paid to agents;
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. any other offering expenses;
. any securities exchanges on which the securities may be listed;
. the method of distribution of the securities;
. the terms of any agreement, arrangement or understanding entered into with the underwriters, brokers or dealers; and
. any other information we think is important.
If underwriters or dealers are used in the sale, the securities will be
acquired by the underwriters or dealers for their own account. The securities
may be sold fromtime to time by us or the selling securityholders in one or
more transactions:
. at a fixed price or prices, which may be changed;
. at market prices prevailing at the time of sale;
. at prices related to such prevailing market prices;
. at varying prices determined at the time of sale; or
. at negotiated prices.
Such sales may be effected:
. in transactions on any national securities exchange or quotation service
on which the securities may be listed or quoted atthe time of sale;
. in transactions in the
over-the-counter
market;
. in block transactions in which the broker or dealer so engaged will attempt
to sell the securities as agent but mayposition and resell a portion
of the block as principal to facilitate the transaction, or in crosses,
in which the same broker acts as an agent on both sides of the trade;
. through the writing of options; or
. through other types of transactions.
The securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more of suchfirms. Unless otherwise set forth in the prospectus supplement,
the obligations of underwriters or dealers to purchase the securities offered
will be subject to certain conditions precedent and the underwriters or
dealers will be obligated topurchase all the offered securities if any are
purchased. Any public offering price and any discount or concession allowed or
reallowed or paid by underwriters or dealers to other dealers may be changed
from time to time.
The selling securityholders might not sell any securities under this
prospectus. In addition, any securities covered by this prospectus that
qualify for sale pursuant toRule 144 of the Securities Act may be sold under
Rule 144 rather than pursuant to this prospectus. The securities may be sold
directly by us or through agents designated by us from time to time. Any agent
involved in the offer or sale ofthe securities in respect of which this
prospectus is delivered will be named, and any commission payable by us to
such agent will be set forth in, the prospectus supplement. Unless otherwise
indicated in the prospectus supplement, any such agentwill be acting on a best
efforts basis for the period of its appointment.
Offers to purchase the securities offered by this prospectus may be solicited,
and salesof the securities may be made by us or by selling securityholders
directly to institutional investors or others, who may be deemed to be
underwriters within the meaning of the Securities Act with respect to any
resale of the securities. The terms ofany offer made in this manner will be
included in the prospectus supplement relating to the offer.
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If indicated in the applicable prospectus supplement, underwriters, dealers or
agents will be authorized to solicitoffers by certain institutional investors
to purchase securities from us pursuant to contracts providing for payment and
delivery at a future date. In all cases, these purchasers must be approved by
us. Underwriters and other agents will not haveany responsibility in respect
of the validity or performance of these contracts.
Some of the underwriters, dealers or agents used by us in any offering
ofsecurities under this prospectus may be customers of, engage in transactions
with, and perform services for us or affiliates of ours in the ordinary course
of business. Underwriters, dealers, agents and other persons may be entitled
under agreementswhich may be entered into with us to indemnification against
and contribution toward certain civil liabilities, including liabilities under
the Securities Act, and to be reimbursed by us for certain expenses.
Subject to any restrictions relating to debt securities in bearer form, any
securities initially sold outside the United States may be resold in the
United Statesthrough underwriters, dealers or otherwise.
Any underwriters to which offered securities are sold by us for public
offering and sale may make a market in suchsecurities, but those underwriters
will not be obligated to do so and may discontinue any market making at any
time.
The anticipated date of delivery of thesecurities offered by this prospectus
will be described in the applicable prospectus supplement relating to the
offering.
If five percent or more of the netproceeds of any offering of securities made
under this prospectus will be received by members of the Financial Industry
Regulatory Authority, which we refer to in this prospectus as "FINRA,"
participating in the offering or by affiliatesor associated persons of such
FINRA members, the offering will be conducted in accordance with FINRA Conduct
Rule 5121.
The maximum aggregate commission ordiscount to be received by any member of
FINRA or independent broker dealer will not be greater than 8% of the gross
proceeds of the sale of securities offered pursuant to this prospectus and any
applicable prospectus supplement.
To comply with the securities laws of some states, if applicable, the
securities may be sold in these jurisdictions only through registered or
licensed brokers ordealers. In addition, in some states the securities may not
be sold unless they have been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
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Legal matters
Alston & Bird LLP will pass upon the validity of any securities we offer by
this prospectus and any prospectus supplement. If the validity of
anysecurities is also passed upon by counsel for underwriters participating in
an offering of securities offered by this prospectus and any prospectus
supplement, the underwriters' counsel will be named in the applicable
prospectus supplement.
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Experts
The consolidated financial statements of Sally Beauty Holdings, Inc. and
subsidiaries as of September 30, 2020 and 2019 and for each of the three
fiscal yearsin the period ended September 30, 2020, and management's
assessment of the effectiveness of internal control over financial reporting
as of September 30, 2020 have been incorporated by reference herein from the
Annual Report on Form
10-K
for the fiscal year ended September 30, 2020 in reliance upon the report of
KPMG LLP, an independent registered public accounting firm, incorporated by
reference herein, and upon the authority ofsaid firm as experts in accounting
and auditing.
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$600,000,000
Sally Holdings LLC
Sally Capital Inc.
% Senior Notes due 2032
PROSPECTUSSUPPLEMENT
JointBook-Running Managers
BofA Securities
J.P. Morgan
TruistSecurities
Co-Managers
Citizens Capital Markets
Regions Securities LLC
US Bancorp
, 2024
{graphic omitted}