sv4
As filed with the Securities and
Exchange Commission on November 24, 2009
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF
1933
SPIRIT AEROSYSTEMS,
INC.
(Exact name of Registrant as
specified in its charter)
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Delaware
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3728
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20-2130528
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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3801 South Oliver
Wichita, Kansas 67210
(316) 526-9000
(Address, including zip code,
and telephone number,
including area code, of
Registrants principal executive offices)
SPIRIT AEROSYSTEMS HOLDINGS,
INC.
(Exact name of Registrant as
specified in its charter)
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Delaware
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3728
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20-2436320
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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3801 South Oliver
Wichita, Kansas 67210
(316) 526-9000
(Address, including zip code,
and telephone number,
including area code, of
Registrants principal executive offices)
See Table of Additional
Registrants Below
Jonathan A.
Greenberg, Esq.
Senior Vice President, General
Counsel & Secretary
Spirit AeroSystems Holdings,
Inc.
3801 South Oliver
Wichita, Kansas 67210
(316) 526-9000
(Name, address, including zip
code, and telephone number,
including area code, of agent
for service)
Copies of communications
to:
Joel I.
Greenberg, Esq.
Mark S.
Kingsley, Esq.
Kaye Scholer LLP
425 Park Avenue
New York, New York
10022
(212) 836-8000
Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable
after this registration statement becomes effective.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following box.
o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-acceleratedfiler o
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Smaller reporting
company o
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(Do not check if a smaller
reporting company)
If applicable, place
an þ in
the box to designate the appropriate rule provision relied upon
in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issue Tender
Offer)
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Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender
Offer)
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CALCULATION OF REGISTRATION
FEE
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Proposed Maximum
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Proposed Maximum
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Title of Each Class of
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Amount to be
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Offering Price
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Aggregate
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Amount of
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Securities to be Registered
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Registered
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per Unit(1)
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Offering Price(1)
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Registration Fee
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71/2% Senior
Notes Due 2017
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$300,000,000
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100%
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$300,000,000
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$16,740
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Guarantees of the
71/2% Senior
Notes
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$300,000,000
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(2)
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(2)
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None
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Total
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$300,000,000
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$300,000,000
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$16,740
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(1)
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Estimated pursuant to
Rule 457(f) under the Securities Act of 1933, as amended,
solely for the purposes of calculating the registration fee.
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(2)
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Pursuant to Rule 457(n) under
the Securities Act of 1933, as amended, no separate
consideration will be received for the guarantee.
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The Registrants hereby amend this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrants shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
Table of Additional Registrants
(1)(2)(3)
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State or Other Jurisdiction of
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Primary Standard
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I.R.S. Employer
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Exact Name of Registrant as Specified in its Charter
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Incorporation or Organization
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Classification Code Number
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Identification No.
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Spirit AeroSystems Finance, Inc.
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Delaware
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3728
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76-0805773
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Spirit AeroSystems International Holdings, Inc.
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Delaware
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3728
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16-1748867
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Spirit AeroSystems Investco, LLC
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Delaware
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3728
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26-1672193
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Spirit AeroSystems North Carolina, Inc.
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North Carolina
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3728
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26-2948869
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Spirit AeroSystems Operations International, Inc.
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Delaware
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3728
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26-1663068
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(1)
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The address and telephone number
for each of the principal executive offices of each of the
Additional Registrants, is 3801 South Oliver, Wichita, Kansas
67210,
(316) 526-9000.
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(2)
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The name, address, including zip
code, and telephone number, including area code, of agent for
service for each of the Additional Registrants is Jonathan A.
Greenberg, Senior Vice President, General Counsel and Secretary,
Spirit AeroSystems Holdings, Inc., 3801 South Oliver Wichita,
Kansas 67210,
(316) 526-9000.
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(3)
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Copies of communications to any
Additional Registrant should be sent to Joel I.
Greenberg, Esq., and Mark S. Kingsley, Esq., Kaye
Scholer LLP, 425 Park Avenue, New York, NY 10022 (telephone
number
(212) 836-8000).
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THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
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SUBJECT TO COMPLETION,
DATED 24, 2009
PROSPECTUS
Spirit AeroSystems,
Inc.
OFFER TO EXCHANGE
$300,000,000 OF
71/2%
SENIOR NOTES DUE 2017
FOR
$300,000,000 OF
71/2%
SENIOR NOTES DUE 2017
WHICH HAVE BEEN
REGISTERED
UNDER THE SECURITIES ACT OF
1933, AS AMENDED
THE EXCHANGE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY
TIME,
ON ,
20 , UNLESS EXTENDED.
Terms of the exchange offer:
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The notes being offered hereby (the Exchange Notes)
are being registered with the Securities and Exchange Commission
and are being offered in exchange for all of the Spirit
AeroSystems, Inc. (Spirit) outstanding
71/2%
Senior Notes due 2017 or (the Original Notes) that
were previously issued in an offering exempt from the
registration requirements of the Securities Act of 1933, as
amended, (the Securities Act). The terms of the
exchange offer are summarized below and are more fully described
in this prospectus.
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Spirit will exchange all Original Notes that are validly
tendered and not withdrawn prior to the expiration of the
exchange offer.
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You may withdraw tenders of Original Notes at any time prior to
the expiration of the exchange offer.
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Spirit believes that the exchange of Original Notes will not be
a taxable event for U.S. federal income tax purposes, but
you should see The Exchange Offer Tax
Consequences of the Exchange Offer and Material
U.S. Federal Income Tax Considerations on
pages 50 and 103, respectively, of this prospectus for more
information.
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Spirit will not receive any proceeds from the exchange offer.
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The terms of the Exchange Notes are substantially identical to
the Original Notes, except that the Exchange Notes are
registered under the Securities Act and the transfer
restrictions and registration rights applicable to the Original
Notes do not apply to the Exchange Notes.
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The Exchange Notes will be guaranteed on a senior unsecured
basis by Spirit AeroSystems Holdings, Inc., and by each of the
following wholly owned subsidiaries of Spirit AeroSystems
Holdings, Inc.: Spirit AeroSystems Finance, Inc., Spirit
AeroSystems International Holdings, Inc., Spirit AeroSystems
Investco, LLC, Spirit AeroSystems North Carolina, Inc. and
Spirit AeroSystems Operations International, Inc.
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Spirit does not intend to list the Exchange Notes on any
securities exchange or to have them approved for any automated
quotation system.
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See the section entitled Description of the Notes
that begins on page 55 for more information about the
Exchange Notes to be issued in this exchange offer.
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the exchange offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
Exchange Notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
underwriter within the meaning of the Securities
Act. This prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with
resales of Exchange Notes received in exchange for outstanding
Original Notes where such outstanding Original Notes were
acquired by such broker-dealer as a result of market-making
activities or other trading activities. Spirit has agreed that,
for a period of 180 days after the expiration of this
exchange offer (or such shorter period until the date on which a
broker-dealer is no longer required to deliver a prospectus),
Spirit will make this prospectus available to any broker-dealer
for use in connection with any such resale. See Plan of
Distribution.
This investment involves risks. See the section
entitled Risk Factors that begins on page 15
for a discussion of the risks that you should consider prior to
tendering your outstanding Original Notes in the exchange.
Neither the Securities and Exchange Commission nor any state
securities commission nor any other regulatory body has approved
or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of this prospectus
is ,
2009.
This prospectus, the letter of transmittal and the notice of
guaranteed delivery are
first being mailed to all holders
of the Original Notes
on ,
2009.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SPIRIT AEROSYSTEMS,
INC., SPIRIT AEROSYSTEMS HOLDINGS, INC. OR ITS SUBSIDIARY
GUARANTORS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL CREATE UNDER ANY CIRCUMSTANCES AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
SPIRIT AEROSYSTEMS, INC., SPIRIT AEROSYSTEMS HOLDINGS, INC. OR
ITS SUBSIDIARY GUARANTORS SINCE THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED
HEREBY OR AN OFFER TO SELL ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION WHERE, OR TO ANY PERSON WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. THE INFORMATION CONTAINED IN
THIS PROSPECTUS SPEAKS ONLY AS OF THE DATE OF THIS PROSPECTUS
UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE
APPLIES.
TABLE OF
CONTENTS
i
INDUSTRY
AND MARKET DATA
This prospectus includes industry data that we obtained from
publicly available sources and periodic industry publications
and analyses from industry consultants. Industry publications
generally state that the information contained therein has been
obtained from sources believed to be reliable, but there can be
no assurance as to the accuracy or completeness of included
information. We have not independently verified any of the data
from third-party sources nor have we ascertained the underlying
economic assumptions relied upon therein.
IMPORTANT
TERMS USED IN THIS PROSPECTUS
In this prospectus, unless the context indicates otherwise and
except as expressly set forth in the section captioned
Description of the Notes, the terms the
Company, Spirit Holdings,
we, us and our refer to
Spirit AeroSystems Holdings, Inc. and all entities owned or
controlled by Spirit AeroSystems Holdings, Inc., including
Spirit AeroSystems, Inc. The terms Spirit and the
Issuer refer solely to Spirit AeroSystems, Inc.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus incorporates important business and financial
information about the Company that is not included in or
delivered with this prospectus. We incorporate by reference the
documents listed below and any additional documents filed by us
with the Securities and Exchange Commission (the
SEC) under Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act, as amended (the Exchange
Act), to the extent such documents are deemed
filed for purposes of the Exchange Act, until Spirit
completes its offering of the Exchange Notes:
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our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008, filed with the
SEC on February 20, 2009 (the financial statements
contained in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 have been
retrospectively amended to reflect the addition of condensed
consolidating financial information, as contained in the
Companys Current Report on
Form 8-K
filed with the SEC on November 24, 2009);
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our Quarterly Reports on
Form 10-Q
for the quarterly periods ended April 2, 2009, July 2,
2009 and October 1, 2009, filed with the SEC on May 8,
2009, August 7, 2009 and November 6, 2009,
respectively (the financial statements contained in the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended October 1, 2009 have been
retrospectively amended to reflect the addition of condensed
consolidating financial information, as contained in the
Companys Current Report on
Form 8-K
filed with the SEC on November 24, 2009);
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our Current Reports on
Form 8-K
filed with the SEC on June 10, 2009, July 2, 2009,
August 26, 2009, September 21, 2009 (Film No.
091077968), September 25, 2009, October 1, 2009 and
November 24, 2009; and
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our Definitive Proxy Statement on Schedule 14A, filed with
the SEC on March 20, 2009.
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Any statement contained in this prospectus or in a document
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained in this
prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified
or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus. You can
obtain any of the documents incorporated by reference through
us, the SEC or the SECs website,
http://www.sec.gov.
Documents we have incorporated by reference are available from
us without charge, excluding exhibits to those documents unless
we have specifically incorporated by reference such exhibits in
this prospectus. Any person, including any beneficial owner, to
whom this prospectus is delivered,
ii
may obtain the documents we have incorporated by reference in,
but not delivered with, this prospectus by requesting them by
telephone or in writing at the following address:
Spirit
AeroSystems Holdings, Inc.
3801 South Oliver
Wichita, Kansas 67210
Attention: Corporate Secretary
(316) 526-9000
To obtain timely delivery you must request this information
no later than five (5) business days before the date you
must make your investment decision. Such date
is ,
20 .
This prospectus summarizes documents and other information in a
manner we believe to be accurate, but we refer you to the actual
documents for a more complete understanding of the information
we discuss in this prospectus. In making an investment decision,
you must rely on your own examination of such documents, our
business and the terms of the offering and the notes, including
the merits and risks involved. When we refer to this prospectus,
we mean not only this prospectus but also any documents which
are incorporated or deemed to be incorporated in this prospectus
by reference. You should rely only on the information
incorporated by reference or provided in this prospectus or any
supplement to this prospectus. We have not authorized anyone
else to provide you with different information. This prospectus
is used to offer and sell the Exchange Notes referred to in this
prospectus, and only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this
prospectus is current only as of the date of this prospectus.
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes certain forward-looking
statements that involve many risks and uncertainties. When
used, words such as anticipate, believe,
continue, estimate, expect,
forecast, intend, may,
plan, project, should,
will and other similar words or phrases, or the
negative thereof, unless the context requires otherwise, are
intended to identify forward-looking statements. These
statements reflect managements current views with respect
to future events and are subject to risks and uncertainties,
both known and unknown. Our actual results may vary materially
from those anticipated in forward-looking statements.
Important factors that could cause actual results to differ
materially from those reflected in such forward looking
statements and that should be considered in evaluating our
outlook include, but are not limited to, the following:
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our ability to continue to grow our business and execute our
growth strategy; including the timing and execution of new
programs;
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our ability to perform our obligations and manage costs related
to our new commercial and business aircraft development programs;
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reduction in the build rates of certain Boeing aircraft
including, but not limited to, the B737 program, the B747
program, the B767 program and the B777 program, and build rates
of the Airbus A320 and A380 programs, which could be affected by
the impact of a deep recession on business and consumer
confidence and the impact of continuing turmoil in the global
financial and credit markets;
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declining business jet manufacturing rates and customer
cancellations or deferrals as a result of the weakened global
economy;
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the success and timely execution of key milestones such as first
flight and delivery of Boeings new B787 and Airbus
new A350 XWB (Xtra Wide-Body) aircraft programs, including
receipt of necessary regulatory approvals and customer adherence
to their announced schedules;
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our ability to enter into supply arrangements with additional
customers and the ability of all parties to satisfy their
performance requirements under existing supply contracts with
Boeing and Airbus, our two major customers, and other customers
and the risk of nonpayment by such customers;
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any adverse impact on Boeings and Airbus production
of aircraft resulting from cancellations, deferrals or reduced
orders by their customers or labor disputes;
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any adverse impact on the demand for air travel or our
operations from the outbreak of diseases such as the influenza
outbreak caused by the H1N1 virus, avian influenza, severe acute
respiratory syndrome or other epidemic or pandemic outbreaks;
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returns on pension plan assets and impact of future discount
rate changes on pension obligations;
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our ability to borrow additional funds or refinance debt;
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competition from original equipment manufacturers and other
aerostructures suppliers;
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the effect of governmental laws, such as U.S. export
control laws, the Foreign Corrupt Practices Act, environmental
laws and agency regulations, both in the U.S. and abroad;
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the cost and availability of raw materials and purchased
components;
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our ability to successfully extend or renegotiate our primary
collective bargaining contracts with our labor unions;
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our ability to recruit and retain highly skilled employees and
our relationships with the unions representing many of our
employees;
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spending by the U.S. and other governments on defense;
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the possibility that our cash flows and borrowing facilities may
not be adequate for our additional capital needs or for payment
of interest on and principal of our indebtedness;
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our exposure under our revolving credit facility to higher
interest payments should interest rates increase substantially;
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the outcome or impact of ongoing or future litigation and
regulatory actions; and
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our exposure to potential product liability and warranty claims.
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These factors are not exhaustive, and new factors may emerge or
changes to the foregoing factors may occur that could impact our
business. These forward-looking statements involve a number of
risks and uncertainties that could cause actual results to
differ materially from those suggested by the forward-looking
statements. Forward-looking statements should, therefore, be
considered in light of various factors, including those set
forth in this prospectus under Risk Factors and
elsewhere in this prospectus. In light of such risks and
uncertainties, we caution you not to rely on these
forward-looking statements in deciding whether to invest in the
notes. As with any projection or forecast, these statements are
inherently susceptible to uncertainty and changes in
circumstances. Except to the extent required by law, we are
under no obligation to, and expressly disclaim any obligation
to, update or alter our forward-looking statements after the
date of this prospectus whether as a result of such changes, new
information, subsequent events or otherwise.
iv
PROSPECTUS
SUMMARY
The following summary highlights some of the information from
this prospectus and does not contain all the information that is
important to you. Before deciding to participate in the exchange
offer, you should read the entire prospectus, including the
section entitled Risk Factors and our consolidated
financial statements and the related notes and other information
incorporated by reference herein. Some statements in this
Prospectus Summary are forward-looking statements. See
Disclosure Regarding Forward-Looking Statements. In
this prospectus, unless the context indicates otherwise and
except as expressly set forth in the section captioned
Description of the Notes, the terms the
Company, Spirit Holdings,
we, us and our refer to
Spirit AeroSystems Holdings, Inc. and all entities owned or
controlled by Spirit AeroSystems Holdings, Inc., including
Spirit AeroSystems, Inc. The terms Spirit and the
Issuer refer solely to Spirit AeroSystems, Inc.
Our
Company
Overview
We are the largest independent non-OEM (original equipment
manufacturer) aircraft parts designer and manufacturer of
commercial aerostructures in the world, as well as the largest
independent supplier of aerostructures to The Boeing Company
(Boeing). In addition, we are one of the largest
independent suppliers of aerostructures to Airbus, a division of
European Aeronautic Defense & Space NV
(Airbus). Boeing and Airbus are the two largest
aircraft OEMs in the world. Aerostructures are structural
components such as fuselages, propulsion systems and wing
systems for commercial and military aircraft. For the twelve
months ended December 31, 2008 and the nine months ended
October 1, 2009, we generated net revenues of
$3,771.8 million and $3,000.8 million, respectively.
Spirit was formed in December 2004 and operations commenced on
June 17, 2005, following the acquisition by an investor
group of Boeings commercial aerostructures manufacturing
operations in Wichita, Kansas and Tulsa and McAlester, Oklahoma,
herein referred to as Boeing Wichita. The
acquisition of Boeing Wichita is herein referred to as the
Boeing Acquisition. Although Spirit began operations
as a stand-alone company in 2005, its predecessor, Boeing
Wichita, had 75 years of operating history and expertise in
the commercial and military aerostructures industry. The Boeing
Acquisition was completed by an investor group led by Onex
Partners LP and Onex Corporation (Onex). Spirit
Holdings, Spirits parent company, has had publicly traded
shares on the New York Stock Exchange under the ticker
SPR since November 2006. Onex continues to hold
approximately 95% of the class B shares, which represents
approximately 73% of total Spirit Holdings stockholder voting
power.
On April 1, 2006, we became a supplier to Airbus through
our acquisition of the aerostructures division of BAE Systems
(Operations) Limited, herein referred to as BAE
Systems. The acquired division of BAE Systems is herein
referred to as BAE Aerostructures, and the
acquisition of BAE Aerostructures is herein referred to as the
BAE Acquisition.
We manufacture aerostructures for every Boeing commercial
aircraft currently in production, including the majority of the
airframe content for the Boeing B737, the most popular major
commercial aircraft in history. As a result of our unique
capabilities both in process design and composite materials, we
were awarded a contract that makes us the largest aerostructures
content supplier on the Boeing B787, Boeings next
generation twin aisle aircraft. In addition, we are one of the
largest content suppliers of wing systems for the Airbus A320
family, and we are a significant supplier for the Airbus A380
and the new Airbus A350 XWB. Sales related to the large
commercial aircraft market, some of which may be used in
military applications, represented approximately 98% our net
revenues for each of the nine-month period ended October 1,
2009 and the twelve-month period ended December 31, 2008.
We derive our revenues primarily through long-term supply
agreements with Boeing and requirements contracts with Airbus.
For each of the nine-month period ended October 1, 2009 and
the twelve-month period ended December 31, 2008,
approximately 85% and 11% of our net revenues were generated
from sales to
1
Boeing and Airbus, respectively. We are currently the
sole-source supplier of 96% of the products we sell to Boeing
and Airbus, as measured by dollar value of the products sold. We
are a critical partner to our customers due to the broad range
of products we currently supply to them and our leading design
and manufacturing capabilities using both metallic and composite
materials. Under our supply agreements with Boeing and
requirements contracts with Airbus, we supply our products for
the life of the aircraft program (other than the A350 XWB and
A380), including commercial derivative models. For the A350 XWB
and A380, we have long-term requirements contracts with Airbus
that cover a fixed number of product units at established prices.
We are organized into three principal reporting segments:
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Fuselage Systems, which includes the forward, mid and rear
fuselage sections;
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Propulsion Systems, which includes nacelles, struts/pylons and
engine structural components; and
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Wing Systems, which includes wing systems and components, flight
control surfaces and other miscellaneous structural parts.
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Fuselage Systems, Propulsion Systems and Wing Systems
represented approximately 50%, 26% and 24%, respectively, of our
net revenues for the nine months ended October 1, 2009 and
approximately 47%, 27% and 25%, respectively, of our net
revenues for the twelve months ended December 31, 2008. The
Fuselage Systems and Propulsion Systems segments manufacture
products at our facilities in Wichita, Kansas, while the Wing
Systems segment manufactures products at our facilities in Tulsa
and McAlester, Oklahoma and Prestwick, Scotland. We opened a new
manufacturing facility in Subang, Malaysia in early 2009 for the
production of composite panels for wing components, and we
expect to open another manufacturing facility in Kinston, North
Carolina in 2010 that will initially produce components for the
Airbus A350 XWB aircraft. All other activities fall within the
All Other segment, representing less than 1% of our net revenues
for each of the nine-month period ended October 1, 2009 and
the twelve-month period ended December 31, 2008,
principally made up of sundry sales of miscellaneous services,
tooling contracts and sales of natural gas through a
tenancy-in-common
with other companies that have operations in Wichita as
discussed elsewhere in this prospectus.
Industry
Overview
Based on our research, the global market for aerostructures is
estimated to have totaled $35.9 billion in annual revenues
in 2008. Currently, OEMs (principally Boeing, Airbus,
Bombardier, Inc. (Bombardier), Embraer-Empresa
Brasileira de Aeronautica SA (Embraer), Gulfstream
Aerospace Corporation (Gulfstream), Hawker
Beechcraft Corporation and Cessna Aircraft Company) outsource
approximately half of the aerostructures market to independent
third parties such as us. We expect the outsourcing of the
design, engineering and manufacturing of aerostructures to
increase as OEMs increasingly focus operations on final assembly
and support services for their customers. The original equipment
aerostructures market can be divided by end market application
into three market sectors: (1) commercial (including
regional and business jets), (2) military and
(3) modifications, upgrades, repairs and spares. While we
serve all three market sectors, we primarily derive our current
revenues from the commercial market sector. We estimate that in
2008, the commercial sector represented approximately 68% of the
total aerostructures market, while the military sector
represented approximately 25% and the modifications, upgrades,
repairs and spares sector (both commercial and military)
represented approximately 7%.
Demand for commercial aerostructures is highly correlated to
demand for new aircraft. From 2005 through 2008, Boeing and
Airbus experienced an unprecedented order intake and backlog
growth. In that period, the two manufacturers obtained combined
total gross orders of approximately 8,400 aircraft. Their
aggregate backlog increased from nearly 2,600 to over 7,400
aircraft. However, many industry experts believe that due to
declining demand for commercial air travel including both
passenger and freight activity, annual commercial net orders
could fall behind industry deliveries in 2009, resulting in a
decrease in aggregate backlog. Despite the anticipated order
slowdown, high backlog levels continue to drive stable
production and delivery forecasts in the near-term from both
Boeing and Airbus. If the commercial backlog were to decline,
2
there could be a resulting near-term impact on production rates.
If production rates fell, we would take actions to reduce costs
and limit capital spending to mitigate the resulting loss of
revenues and production base. The following table sets forth the
historical deliveries of Boeing and Airbus for 2003 through
2008, and the announced delivery expectations for 2009.
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2003
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2004
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2005
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2006
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2007
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2008
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2009(1)
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Boeing
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281
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285
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290
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398
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441
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375
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480-485
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Airbus
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305
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320
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378
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434
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453
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483
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≥483
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Total
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586
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605
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668
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832
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894
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858
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≥963
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(1) |
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Boeing has announced that it expects its 2009 deliveries to be
between
480-485.
Airbus announced that it expects to deliver as many aircraft in
2009 as it did in 2008, and Airbus delivered 483 aircraft in
2008. |
Our
Competitive Strengths
We believe our key competitive strengths include:
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Leading Position in the Growing Commercial Aerostructures
Market. We are the largest independent non-OEM
commercial aerostructures manufacturer, with an estimated 16%
market share of the global aerostructures market. We are
currently the sole-source supplier of 96% of the products we
sell to Boeing and Airbus, as measured by dollar value of the
products sold. The significant Boeing and Airbus aircraft order
backlog for scheduled deliveries between
2010-2012,
and our strong relationships with Boeing and Airbus, should
enable us to continue to profitably grow our core commercial
aerostructures business.
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Participation on High Volume and Major Growth
Platforms. We derive a high proportion of our
Boeing revenues from Boeings high volume B737 program and
a high proportion of our Airbus revenues from the high volume
A320 program. Boeings backlog consists of over 2,100 B737s
(more than six years of backlog at current build rates) and
Airbuss backlog consists of approximately 2,400 A320s
(nearly six years of backlog at current build rates). The B737
and A320 families are Boeings and Airbus best
selling commercial airplanes, respectively. We have also been
awarded a significant amount of work on the major new twin aisle
programs launched by Boeing and Airbus, the B787 and the A350
XWB, respectively.
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Stable Base Business with Predictable Cash
Flows. We have entered into exclusive long-term
agreements with Boeing and Airbus, our two largest customers,
making us the exclusive supplier for most of the business
covered by these contracts. Under our agreements with Boeing and
Airbus, we supply our products for the life of the aircraft
program (other than the A380 and A350 XWB), including commercial
derivative models. For the A380 and A350 XWB, we have a
long-term supply contract with Airbus that covers a fixed number
of units. We believe our long-term supply contracts with our two
largest customers provide us with a stable base business upon
which to build. As of October 1, 2009, our backlog was at
$28.2 billion. Our cash from operations has remained stable
with $211 million, $180 million and $274 million
derived in 2008, 2007 and 2006, respectively. We are investing a
portion of our cash flow from our base business into long-term
growth initiatives, including the B787 and other new programs.
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Strong Incumbent and Competitive Position. We
have a strong incumbent position on the products we currently
supply to Boeing and Airbus, forged by our long-standing
relationships and long-term supply agreements with Boeing and
Airbus. Many members of our management team have a long history
of working with Boeing and Airbus as employees of our
predecessors, Boeing Wichita and BAE Aerostructures. Our
relationship with Boeing is further strengthened by the fact
that many members of our senior management team are former
Boeing executives or managers.
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We believe that OEMs incur significant costs to change
aerostructures suppliers once contracts are awarded. Such
changes after a contract award require additional testing and
certification, which may
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create production delays and significant costs for both the OEM
and the new supplier. We also believe it would be cost
prohibitive for other suppliers to duplicate our facilities and
the over 20,000 major pieces of equipment that we own or
operate. The combined insurable replacement value of all the
buildings and equipment we own or operate is approximately
$5.2 billion, including approximately $2.2 billion and
approximately $1.8 billion for buildings and equipment,
respectively, that we own and approximately $1.2 billion
for other equipment used in the operation of our business. As a
result, we believe that so long as we continue to meet our
customers requirements, the probability that they will
change suppliers on our current statement of work is quite low.
Our incumbent position also provides us with a competitive
advantage with respect to new business from our customers.
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Industry Leading Technology, Design Capabilities and
Manufacturing Expertise. We possess
industry-leading engineering capabilities that include
significant expertise in structural design and technology, use
of metallic and composite materials, stress analysis, systems
engineering and acoustics technology. With approximately 1,070
degreed engineering and technical employees (including
approximately 260 degreed contract engineers), we possess
knowledge and manufacturing know-how that customers depend upon
and that would be difficult for other suppliers to replicate.
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Competitive and Predictable Cost Structure. In
connection with the Boeing Acquisition, we achieved
comprehensive cost reductions. The primary contributors to
establishing our competitive cost structure were: (1) labor
savings, (2) pension and other benefit savings,
(3) reduced corporate overhead, and (4) operational
efficiency improvements. Collective bargaining agreements with
most of our labor unions have typically been three to five years
in length and we expect to be able to continue to negotiate
labor contracts of similar duration. As a result, we expect our
labor costs to be fairly stable and predictable during the
course of each contract. We maintain continuous focus on expense
management and process improvement. We believe that our
competitive cost structure has positioned us to win new business
and was a key factor in several recent significant contract
awards.
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Experienced Management Team. We have an
experienced and proven management team with an average of more
than 20 years of aerospace industry experience. Our
management team has successfully expanded our business, reduced
costs and established and grown Spirits stand-alone
operations. Many of our executives and senior managers have
lengthy experience working for or with our primary customers,
Boeing and Airbus, which provides us with detailed insight into
how we can better serve our customers.
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Our
Business Strategy
Our goal is to remain a leading aerostructures manufacturer and
to grow revenues while maximizing our profitability. Our
strategy includes the following:
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Support Aircraft Deliveries. We value our
relationships with our major customers. We are the largest
independent non-OEM aerostructures supplier to Boeing. In
addition, we are one of the largest independent non-OEM
aerostructures suppliers to Airbus. Our business strategy is
focused on meeting or exceeding our customers
expectations. We are constantly seeking to improve our
manufacturing efficiency and maintain our high standards of
quality and on-time delivery to meet these expectations. We are
focused on supporting our customers increase in new
aircraft production and the introduction of key aircraft
programs such as the Boeing B787 and the Airbus A350 XWB. We are
adjusting our manufacturing processes, properties and facilities
to accommodate an increase in production and a shift in mix to a
higher ratio of larger aircraft, which generally have higher
dollar value content.
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Win New Business from Existing and New
Customers. We have established a sales and
marketing infrastructure to support our efforts to win business
from new and existing customers. We believe that we are well
positioned to win additional work from Boeing and Airbus, given
our strong relationships, our size, our design and build
capabilities and our financial resources. We believe that
opportunities for increased business from our customers will
arise on work that they currently produce internally and may
shift to an external supplier in the future and work on new
aircraft programs. We also have significant opportunities to
increase our sales to OEMs other than Boeing and Airbus and have
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significant opportunities to grow business outside our core
platforms. We believe our design, engineering and manufacturing
capabilities are highly attractive to potential new customers
and provide a competitive advantage in winning new
aerostructures business. As a result of leveraging our core
capabilities, competitive cost position and sales and marketing
efforts, we have won several significant contracts from
non-Boeing customers through competitive bids since the Boeing
Acquisition.
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Our customer base has expanded to include Sikorsky, Rolls-Royce,
Gulfstream, Bombardier, Mitsubishi Aircraft Corporation,
Southwest Airlines and Continental Airlines.
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Research and Development Investment in Next Generation
Technologies. We invest in research and
development, or R&D, for current programs to strengthen our
relationships with our customers and new programs to generate
new business. As part of our R&D effort, we work closely
with OEMs and integrate our engineering teams into their design
processes. We believe our close coordination with OEMs positions
us to win new business on new commercial and military platforms.
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Provide New Value-Added Services to our
Customers. We possess the core competencies not
only to manufacture, but also to design, integrate and assemble
complex system and structural components. We have been selected
to assemble and integrate avionics, electrical systems,
hydraulics, wiring and other components for the forward fuselage
and pylons for the Boeing B787. We believe our ability to
integrate complex components into aerostructures is a service
that greatly benefits our customers by reducing their flow time
and inventory holding costs.
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We also intend to increase our aftermarket sales of the products
we manufacture and have developed a global direct sales and
marketing channel. In September 2006, we entered into a
distribution agreement with Aviall Services, Inc. to sell
certain aftermarket products worldwide (excluding the
U.S. and Canada). We also produce spares for certain out of
production aircraft and regional/business jet programs.
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Continued Improvement to our Low Cost
Structure. We remain focused on further reducing
costs and we have identified and begun to implement several such
opportunities in our business. We expect that most of our future
cost saving opportunities will arise from increased
productivity, continued outsourcing of non-core activities, and
improved procurement and sourcing through our global sourcing
initiatives. We believe our strategic sourcing expertise should
allow us to develop and manage low cost supply chains in Asia
and Central Europe. One of our goals is to continue to increase
our material sourcing from low cost jurisdictions.
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Pursue Strategic Acquisitions on an Opportunistic
Basis. The commercial aerostructures market is
highly fragmented with many small private businesses and
divisions of larger public companies. Given this market
fragmentation, coupled with the trend by OEMs to outsource work
to larger Tier 1 manufacturers that coordinate suppliers
and integrate systems into airframes, we believe our industry
could experience significant consolidation in the coming years.
Although our main focus is to grow our business organically, we
believe we are well positioned to capture additional market
share and diversify our current business through opportunistic
strategic acquisitions.
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Recent
Developments
On October 9, 2009, engineers represented by the Society of
Professional Engineering Employees in Aerospace
Wichita Engineering Unit at Spirit approved a new contract
effective through December 1, 2012.
On September 30, 2009, Spirit completed an offering of
$300.0 million aggregate principal amount of the Original
Notes. The Original Notes were sold to qualified institutional
buyers in accordance with Rule 144A under the Securities
Act and outside the United States only to
non-U.S. persons
in accordance with Regulation S under the Securities Act. A
portion of the net proceeds of the offering of the Original
Notes was used to repay $200.0 million in borrowings under
Spirits existing senior secured revolving credit facility
with the remaining net proceeds used for general corporate
purposes and to pay fees and expenses incurred in connection
with the offering.
5
On August 25, 2009, Ulrich (Rick) Schmidt, Executive Vice
President and Chief Financial Officer of Spirit Holdings and
Spirit, notified us of his decision to retire. His last working
day at Spirit Holdings and Spirit was Friday, October 2,
2009, and he will remain an employee of Spirit Holdings and
Spirit through early December of 2009. Philip D. Anderson,
Spirit Holdings and Spirits Treasurer and Vice
President, Investor Relations, assumed the additional role of
interim Chief Financial Officer, effective October 3, 2009,
pending a search for Mr. Schmidts replacement.
On July 9, 2009, Textron Inc., the parent company of Cessna
Aircraft Company, filed a Current Report on
Form 8-K
with the SEC stating that it had formally cancelled further
development of the Cessna Citation Columbus business jet. Spirit
had been selected as the supplier for the fuselage and empennage
on the Cessna Citation Columbus in February 2008. In the second
quarter of 2009, we recorded a $10.9 million charge to
reflect the estimated impact of this termination. Spirit has
submitted termination claims to Cessna seeking recovery of costs
incurred.
Company
Information
Spirit, formerly known as Mid-Western Aircraft Systems, Inc., is
a Delaware corporation that was formed on December 20,
2004. Spirits predecessor, Boeing Wichita, had more than
75 years of operating history as a division of Boeing. Our
principal executive offices are located at 3801 South Oliver,
Wichita, Kansas 67210 and our telephone number at that address
is
(316) 526-9000.
Our website address is www.spiritaero.com. Information contained
on our website is not part of this prospectus and is not
incorporated in this prospectus by reference.
6
The
Exchange Offer
On September 30, 2009, Spirit completed the offering of
$300.0 million aggregate principal amount of the Original
Notes. The Original Notes were sold to qualified institutional
buyers in accordance with Rule 144A under the Securities
Act and outside the United States only to
non-U.S. persons
in accordance with Regulation S under the Securities Act.
As part of the offering, we entered into a registration rights
agreement with the initial purchasers of the Original Notes in
which we agreed, among other things, to deliver this prospectus
and to complete an exchange offer for the Original Notes. The
summary below describes the principal terms of the exchange
offer. The section of this prospectus entitled The
Exchange Offer contains a more detailed description of the
terms and conditions of the exchange offer.
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Securities Offered: |
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Up to $300,000,000 aggregate principal amount of
71/2% Senior
Notes due 2017 which have been registered under the Securities
Act, which we refer to as the Exchange Notes. The
form and terms of the Exchange Notes are identical in all
material respects to those of the Original Notes. The Exchange
Notes, however, will not contain transfer restrictions and
registration rights applicable to the Original Notes. |
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The Exchange Offer: |
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Spirit is offering to exchange $1,000 principal amount of the
Exchange Notes for each $1,000 principal amount of outstanding
Original Notes. |
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In order to be exchanged, an Original Note must be properly
tendered and accepted. All Original Notes that are validly
tendered and not withdrawn will be exchanged. As of the date of
this prospectus, there are $300.0 million in aggregate
principal amount of the Original Notes outstanding. Spirit will
issue Exchange Notes promptly after the expiration of the
exchange offer. |
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Resales: |
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We are registering the exchange offer in reliance on the
position enunciated by the SEC in Exxon Capital Holdings Corp.,
SEC No-Action Letter (April 13, 1988), Morgan
Stanley & Co, Inc., SEC No-Action Letter (June 5,
1991), and Shearman & Sterling, SEC No-Action Letter
(July 2, 1993). Based on interpretations by the staff of
the SEC, as set forth in these no-action letters issued to third
parties not related to us, we believe that the Exchange Notes
issued in the exchange offer may be offered for resale, resold
or otherwise transferred by you without compliance with the
registration and prospectus delivery requirements of the
Securities Act as long as: |
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you are acquiring the Exchange Notes in the ordinary
course of your business;
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you are not participating, do not intend to
participate and have no arrangement or understanding with any
person to participate, in a distribution of the Exchange Notes;
and
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you are not our affiliate.
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Rule 405 under the Securities Act defines
affiliate as a person that, directly or indirectly,
controls or is controlled by, or is under common control with, a
specified person. In the absence of an exemption, you must
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with the resale
of the Exchange Notes. If you fail to comply with these |
7
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requirements you may incur liabilities under the Securities Act,
and we will not indemnify you for such liabilities. |
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Each broker or dealer that receives Exchange Notes for its own
account in exchange for Original Notes that were acquired as a
result of market-making or other trading activities must
acknowledge that it will comply with the registration and
prospectus delivery requirements of the Securities Act in
connection with any offer to resell, resale, or other transfer
of the Exchange Notes issued in the exchange offer. |
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Record Date: |
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We mailed this prospectus and the related offer documents to the
registered holders of the Original Notes
on ,
2009. |
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Expiration Date: |
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5:00 p.m., New York City time,
on ,
20 , unless we extend the expiration date. |
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Withdrawal Rights: |
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You may withdraw tenders of the Original Notes at any time prior
to 5:00 p.m., New York City time, on the expiration date.
For more information, see the section entitled The
Exchange Offer under the heading Terms of the
Exchange Offer. |
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Conditions to the Exchange Offer: |
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The exchange offer is subject to certain customary conditions,
which we may waive in our sole discretion. For more information,
see the section entitled The Exchange Offer under
the heading Conditions to the Exchange Offer. The
exchange offer is not conditioned upon the exchange of any
minimum principal amount of Original Notes. |
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Procedures for Tendering Original Notes: |
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If you wish to accept the exchange offer, you must
(1) complete, sign and date the accompanying letter of
transmittal, or a facsimile copy of such letter, in accordance
with its instructions and the instructions in this prospectus,
and (2) mail or otherwise deliver the executed letter of
transmittal, together with the Original Notes and any other
required documentation to the exchange agent at the address set
forth in the letter of transmittal. If you are a broker, dealer,
commercial bank, trust company or other nominee and you hold
Original Notes through The Depository Trust Company
(DTC) and wish to accept the exchange offer, you
must do so pursuant to DTCs automated tender offer
program. By executing or agreeing to be bound by the letter of
transmittal, you will represent to us, among other things,
(1) that you are, or the person or entity receiving the
Exchange Notes is, acquiring the Exchange Notes in the ordinary
course of business, (2) that neither you nor any such other
person or entity has any arrangement or understanding with any
person to participate in the distribution of the Exchange Notes
within the meaning of the Securities Act and (3) that
neither you nor any such other person or entity is our affiliate
within the meaning of Rule 405 under the Securities Act. |
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If you are a beneficial owner whose Original Notes are
registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and you wish to tender in the
exchange offer, we urge you to promptly contact the person or
entity in whose name |
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your Original Notes are registered and instruct that person or
entity to tender on your behalf. If you wish to tender in the
exchange offer on your own behalf, you must, prior to completing
and executing the letter of transmittal and delivering your
Original Notes, either make appropriate arrangements to register
ownership of your Original Notes in your name or obtain a
properly completed bond power from the person or entity in whose
name your Original Notes are registered. The transfer of
registered ownership may take considerable time. |
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Guaranteed Delivery Procedures: |
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If you wish to tender your Original Notes and your Original
Notes are not immediately available or you cannot deliver your
Original Notes, the letter of transmittal or any other documents
required to the exchange agent (or comply with the procedures
for book-entry transfer) prior to the expiration date, you must
tender your Original Notes according to the guaranteed delivery
procedures set forth in the section entitled The Exchange
Offer under the heading Guaranteed Delivery
Procedures. |
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Registration Rights Agreement: |
|
Contemporaneously with the initial sale of the Original Notes,
we entered into a registration rights agreement with the initial
purchasers pursuant to which we agreed, among other things,
(1) to use our reasonable best efforts to consummate an
exchange offer and (2) if required, to have a shelf
registration statement declared effective with respect to
resales of the Original Notes. This exchange offer is intended
to satisfy those obligations set forth in the registration
rights agreement. After the exchange offer is complete, except
in limited circumstances with respect to specific types of
holders of Original Notes, we will have no further obligation to
provide for the registration under the Securities Act of such
Original Notes. See the section entitled The Exchange
Offer. |
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Federal Income Tax Considerations: |
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The exchange pursuant to the exchange offer will generally not
be a taxable event for U.S. federal income tax purposes. For
more details, see the sections entitled The Exchange
Offer Tax Consequences of the Exchange Offer
and Material U.S. Federal Income Tax Considerations. |
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Consequences of Failure to Exchange: |
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If you do not exchange the Original Notes, they will remain
entitled to all the rights and preferences and will continue to
be subject to the limitations contained in the indenture
governing the Original Notes. However, following the exchange
offer, except in limited circumstances with respect to specific
types of holders of Original Notes, we will have no further
obligation to provide for the registration under the Securities
Act of such Original Notes. |
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Absence of an Established Market for the Notes: |
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The Exchange Notes will be a new class of securities for which
there is currently no market. We do not intend to apply for
listing of the Original Notes or the Exchange Notes on any
securities exchange or for quotation of such notes. Although
certain of the initial purchasers have informed us that they
intend to make a market in the Exchange Notes, they are not
obligated to do so, and may discontinue market-making activities
at any time without |
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notice. Accordingly, we cannot assure you that a liquid market
for the Exchange Notes will develop or be maintained. |
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Use of Proceeds: |
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We will not receive any proceeds from the exchange offer. For
more details, see the Use of Proceeds section. |
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Exchange Agent: |
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The Bank of New York Mellon Trust Company, N.A., is serving
as the exchange agent in connection with the exchange offer. The
address, telephone number and facsimile number of the exchange
agent are listed under the heading The Exchange
Offer Exchange Agent. |
10
The
Exchange Notes
The form and terms of the Exchange Notes are the same as the
form and terms of the Original Notes for which they are being
exchanged, except that the Exchange Notes will be registered
under the Securities Act. As a result, the Exchange Notes will
not bear legends restricting their transfer and will not have
provisions providing for the benefit of the registration rights
or the obligation to pay additional interest because of our
failure to register the Exchange Notes and complete this
exchange offer as required. The Exchange Notes represent the
same debt as the Original Notes for which they are being
exchanged. Both the Original Notes and the Exchange Notes are
governed by the same indenture. The summary below describes the
principal terms of the Exchange Notes. Certain of the terms and
conditions described below are subject to important limitations
and exceptions. The Description of the Notes section
of this prospectus contains a more detailed description of the
terms and conditions of the Exchange Notes. We use the term
notes in this prospectus to collectively refer to
the Original Notes and the Exchange Notes.
|
|
|
Issuer |
|
Spirit AeroSystems, Inc. |
|
Guarantors |
|
The Exchange Notes will be fully and unconditionally guaranteed,
jointly and severally, on a senior unsecured basis by Spirit
Holdings and by each of the following wholly owned subsidiaries
of Spirit Holdings: Spirit AeroSystems Finance, Inc., Spirit
AeroSystems International Holdings, Inc., Spirit AeroSystems
Investco, LLC, Spirit AeroSystems North Carolina, Inc. and
Spirit AeroSystems Operations International, Inc. (collectively
with Spirit Holdings, the Guarantors), and any
additional existing and future domestic subsidiaries of Spirit
that guarantee Spirits obligations under its senior
secured credit facility. |
|
Optional Redemption |
|
The Issuer may redeem the Exchange Notes, in whole or in part,
at any time on or after October 1, 2013, at the redemption
prices specified in Description of the Notes
Optional Redemption, plus accrued and unpaid interest and
additional interest, if any, to the redemption date. |
|
|
|
At any time prior to October 1, 2013, the Issuer may redeem
the Exchange Notes, in whole or in part, at a redemption price
equal to 100% of the principal amount plus a make-whole premium
together with accrued and unpaid interest and additional
interest, if any, to the redemption date. |
|
|
|
The Issuer may redeem up to 35% of the Exchange Notes before
October 1, 2012 with the net cash proceeds from certain
equity offerings. |
|
Notes Offered |
|
$300.0 million aggregate principal amount of
71/2% Senior
Notes due 2017. |
|
Maturity Date |
|
October 1, 2017. |
|
Interest |
|
Interest on the Exchange Notes will accrue at a rate of
71/2%
per annum, payable in cash semi-annually in arrears, on April 1
and October 1 of each year, commencing April 1, 2010. |
|
Change of Control |
|
Following specific kinds of changes of control the Issuer will
be required to offer to purchase all of the Exchange Notes at a
purchase price of 101% of their principal amount, plus accrued
and unpaid interest and additional interest, if any, to the date
of purchase. For more details, see Description of the
Notes Change of Control. |
11
|
|
|
Ranking |
|
The Exchange Notes will be senior unsecured obligations and will: |
|
|
|
rank equally in right of payment with all of
Spirits and the Guarantors other existing and future
senior indebtedness;
|
|
|
|
be senior in right of payment to all of
Spirits and the Guarantors existing and future debt
that is by its terms expressly subordinated to the notes and
guarantees;
|
|
|
|
be effectively subordinated to Spirits and the
Guarantors secured debt, including secured debt under
Spirits existing senior secured credit facility, to the
extent of the assets securing such debt; and
|
|
|
|
be structurally junior to any debt or obligations of
any non-Guarantor subsidiaries.
|
|
|
|
As of October 1, 2009, after the completion of the offering
of the Original Notes and the related transactions, Spirit
Holdings and its subsidiaries had total debt of approximately
$883.6 million, approximately $573.5 of which constituted
secured debt and effectively ranked senior to the notes to the
extent of the assets securing such debt. In addition, Spirit
Holdings and its subsidiaries had approximately
$729.0 million of availability under the revolving portion
of the Issuers existing senior secured credit facility
(excluding outstanding letters of credit), all of which would be
senior to the Exchange Notes offered hereby. |
|
Certain Covenants |
|
The indenture governing the notes, among other things, limits
the ability of Spirit and the Guarantors to: |
|
|
|
incur additional debt;
|
|
|
|
pay dividends, redeem stock or make other
distributions;
|
|
|
|
make other restricted payments and investments;
|
|
|
|
create liens without granting equal and ratable
liens to the holders of the notes;
|
|
|
|
enter into sale and leaseback transactions;
|
|
|
|
merge, consolidate or transfer or dispose of
substantially all of their assets; and
|
|
|
|
enter into certain types of transactions with
affiliates.
|
|
|
|
These covenants are subject to a number of important
qualifications and limitations. See Description of the
Notes Certain Covenants. |
|
Original Issue Discount |
|
The Exchange Notes will be issued with original issue discount
for U.S. federal income tax purposes. Accordingly, U.S. holders
may be required to include original issue discount in gross
income for U.S. federal income tax purposes over the term of the
Exchange Notes in advance of the receipt of cash payments to
which such income is attributable. For more information, see
Material U.S. Federal Income Tax Considerations. |
12
SUMMARY
HISTORICAL CONSOLIDATED FINANCIAL DATA OF SPIRIT AEROSYSTEMS
HOLDINGS, INC.
The following table sets forth summary historical consolidated
financial data and should be read in conjunction with our
consolidated financial statements, condensed consolidated
financial statements and related notes thereto and
Managements Discussion and Analysis of Financial
Condition and Results of Operations section, which are
incorporated by reference into this prospectus. Financial data
for the twelve-month periods ended December 31, 2006, 2007
and 2008 are derived from our audited consolidated financial
statements, which are incorporated by reference into this
prospectus. Financial data for the nine-month periods ended
September 25, 2008 and October 1, 2009 are derived
from our unaudited condensed consolidated financial statements,
which are incorporated by reference into this prospectus. Our
fiscal year ends on December 31.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1,
|
|
|
September 25,
|
|
|
Fiscal Year Ended December 31,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Consolidated Statement of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
3,000.8
|
|
|
$
|
3,125.7
|
|
|
$
|
3,771.8
|
|
|
$
|
3,860.8
|
|
|
$
|
3,207.7
|
|
|
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1)
|
|
|
2,637.2
|
|
|
|
2,596.1
|
|
|
|
3,163.2
|
|
|
|
3,197.2
|
|
|
|
2,934.3
|
|
|
|
|
|
Selling, general and administrative(2)
|
|
|
103.6
|
|
|
|
119.0
|
|
|
|
154.5
|
|
|
|
192.1
|
|
|
|
225.0
|
|
|
|
|
|
Research and development
|
|
|
41.6
|
|
|
|
33.1
|
|
|
|
48.4
|
|
|
|
52.3
|
|
|
|
104.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
$
|
2,782.4
|
|
|
$
|
2,748.2
|
|
|
$
|
3,366.1
|
|
|
$
|
3,441.6
|
|
|
$
|
3,264.0
|
|
|
|
|
|
Operating income (loss)
|
|
|
218.4
|
|
|
|
377.5
|
|
|
|
405.7
|
|
|
|
419.2
|
|
|
|
(56.3
|
)
|
|
|
|
|
Interest expense and financing fee amortization(3)
|
|
|
(29.1
|
)
|
|
|
(29.5
|
)
|
|
|
(39.2
|
)
|
|
|
(36.8
|
)
|
|
|
(50.1
|
)
|
|
|
|
|
Interest income
|
|
|
6.2
|
|
|
|
15.1
|
|
|
|
18.6
|
|
|
|
29.0
|
|
|
|
29.0
|
|
|
|
|
|
Other income (loss), net
|
|
|
5.2
|
|
|
|
0.9
|
|
|
|
(1.2
|
)
|
|
|
8.4
|
|
|
|
5.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity in net loss of
affiliate
|
|
|
200.7
|
|
|
|
364.0
|
|
|
|
383.9
|
|
|
|
419.8
|
|
|
|
(71.5
|
)
|
|
|
|
|
Income tax benefit (provision)(4)
|
|
|
(58.8
|
)
|
|
|
(118.4
|
)
|
|
|
(118.5
|
)
|
|
|
(122.9
|
)
|
|
|
88.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before equity in net loss of affiliate
|
|
|
141.9
|
|
|
|
245.6
|
|
|
|
265.4
|
|
|
|
296.9
|
|
|
|
16.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net loss of affiliate
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
141.7
|
|
|
$
|
245.6
|
|
|
$
|
265.4
|
|
|
$
|
296.9
|
|
|
$
|
16.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
206.7
|
|
|
$
|
177.7
|
|
|
$
|
216.5
|
|
|
$
|
133.4
|
|
|
$
|
184.3
|
|
|
|
|
|
Accounts receivable, net
|
|
|
235.8
|
|
|
|
211.9
|
|
|
|
149.3
|
|
|
|
159.9
|
|
|
|
200.2
|
|
|
|
|
|
Inventory, net
|
|
|
2,204.6
|
|
|
|
1,768.8
|
|
|
|
1,882.0
|
|
|
|
1,342.6
|
|
|
|
882.2
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
1,224.0
|
|
|
|
1,053.2
|
|
|
|
1,068.3
|
|
|
|
963.8
|
|
|
|
773.8
|
|
|
|
|
|
Total assets
|
|
|
4,283.7
|
|
|
|
3,862.7
|
|
|
|
3,760.3
|
|
|
|
3,339.9
|
|
|
|
2,722.2
|
|
|
|
|
|
Total debt
|
|
|
883.6
|
|
|
|
591.9
|
|
|
|
588.0
|
|
|
|
595.0
|
|
|
|
618.2
|
|
|
|
|
|
Total Shareholders equity
|
|
$
|
1,455.9
|
|
|
$
|
1,508.6
|
|
|
$
|
1,297.0
|
|
|
$
|
1,266.6
|
|
|
$
|
859.0
|
|
|
|
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
(211.3
|
)
|
|
$
|
146.6
|
|
|
$
|
210.7
|
|
|
$
|
180.1
|
|
|
$
|
273.6
|
|
|
|
|
|
Net cash (used in) investing activities
|
|
|
(71.3
|
)
|
|
|
(88.8
|
)
|
|
|
(119.8
|
)
|
|
|
(239.1
|
)
|
|
|
(473.6
|
)
|
|
|
|
|
Net cash provided (used in) by financing activities
|
|
|
271.1
|
|
|
|
(8.3
|
)
|
|
|
3.5
|
|
|
|
8.3
|
|
|
|
140.9
|
|
|
|
|
|
Capital expenditures
|
|
$
|
(158.0
|
)
|
|
$
|
(175.2
|
)
|
|
$
|
(235.8
|
)
|
|
$
|
(288.2
|
)
|
|
$
|
(343.2
|
)
|
|
|
|
|
|
|
|
(1) |
|
Included in the fiscal year ended December 31, 2006 cost of
sales are non-recurring charges of $321.9 million for the
Union Equity Participation Plan (UEP). Included in
2007 costs of sales are charges of $1.2 million for the UEP. |
13
|
|
|
(2) |
|
Includes non-cash stock compensation expenses of
$6.4 million and $11.3 million for the respective
nine-month periods ended October 1, 2009 and
September 25, 2008, and $15.3 million,
$32.6 million of $56.6 million for the respective
fiscal years starting with the fiscal year ended
December 31, 2008. Included in the fiscal year ended
December 31, 2007 are $4.9 million of costs associated
with the potential acquisition of Airbus European
manufacturing sites in 2007. Also included in the fiscal year
ended December 31, 2006 are $8.3 million of charges
related to the Companys initial public offering in
November 2006 (IPO). |
|
(3) |
|
Included in the fiscal year ended December 31, 2006
interest expense and financing fee amortization are expenses
related to the IPO of $3.7 million. |
|
(4) |
|
Included in the fiscal year ended December 31, 2006 income
tax benefit is a $40.1 million federal and a
$4.0 million state tax valuation allowance reversal. |
14
RISK
FACTORS
Prospective participants in the exchange offer should
carefully consider all of the information contained or
incorporated by reference in this prospectus, including the
risks and uncertainties described below, in evaluating your
participation in the exchange offer. The risks set forth below
(with the exception of the first risk factor) are generally
applicable to the Original Notes as well as the Exchange Notes.
These risks and uncertainties are those that we currently
believe may materially and adversely affect our company, our
business or results of operations in the future or investments
in our securities. These risks are not the only ones facing our
company. Additional risks and uncertainties that we are unaware
of or that we currently deem immaterial may also materially and
adversely affect our company, our business or results of
operations in the future or investments in our securities.
Risk
Factors Associated with the Exchange Offer
If you
fail to follow the exchange offer procedures, your Original
Notes will not be accepted for exchange.
We will not accept your Original Notes for exchange if you do
not follow the exchange offer procedures. We will issue Exchange
Notes as part of this exchange offer only after timely receipt
of your Original Notes, a properly completed and duly executed
letter of transmittal and all other required documents.
Therefore, if you want to tender your Original Notes, please
allow sufficient time to ensure timely delivery. If we do not
receive your Original Notes, letter of transmittal, and all
other required documents by the expiration date of the exchange
offer, or you do not otherwise comply with the guaranteed
delivery procedures for tendering your Original Notes, we will
not accept your Original Notes for exchange. We are under no
duty to give notification of defects or irregularities with
respect to the tenders of Original Notes for exchange. If there
are defects or irregularities with respect to your tender of
Original Notes, we will not accept your Original Notes for
exchange unless we decide in our sole discretion to waive such
defects or irregularities.
If you
fail to exchange your Original Notes for Exchange Notes, they
will continue to be subject to the existing transfer
restrictions and you may not be able to sell them.
We did not register the Original Notes under the Securities Act
or any applicable state or foreign securities laws, nor do we
intend to do so following the exchange offer. Original Notes
that are not tendered in the exchange offer will therefore
continue to be subject to the existing transfer restrictions and
may be transferred only in limited circumstances under
applicable securities laws. As a result, if you hold Original
Notes after the exchange offer, you may not be able to sell
them. To the extent any Original Notes are tendered and accepted
in the exchange offer, the trading market, if any, for the
Original Notes that remain outstanding after the exchange offer
may be adversely affected due to a reduction in market liquidity.
Because
there is no public market for the Exchange Notes, you may not be
able to resell them.
The Exchange Notes will be registered under the Securities Act
but will constitute a new issue of securities with no
established trading market, and there can be no assurance as to
the liquidity of any trading market that may develop, the
ability of holders to sell their Exchange Notes or the price at
which the holders will be able to sell their Exchange Notes.
We understand that certain of the initial purchasers of the
Original Notes presently intend to make a market in the Exchange
Notes. However, they are not obligated to do so, and any
market-making activity with respect to the Exchange Notes may be
discontinued at any time without notice. In addition, any
market-making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act and may be limited
during the exchange offer or the pendency of an applicable shelf
registration statement. There can be no assurance that an active
market will exist for the Exchange Notes or that any trading
market that does develop will be liquid.
15
If you
are a broker-dealer, your ability to transfer the Exchange Notes
may be restricted.
A broker-dealer that purchased the Original Notes for its own
account as part of market-making or trading activities must
comply with the prospectus delivery requirements of the
Securities Act when it sells the Exchange Notes. Our obligation
to make this prospectus available to broker-dealers is limited.
Consequently, we cannot guarantee that a proper prospectus will
be available to broker-dealers wishing to resell their Exchange
Notes.
Risk
Factors Related to Our Business and Industry
Our
commercial business is cyclical and sensitive to commercial
airlines profitability. The business of commercial
airlines is, in turn, affected by general economic conditions
and world safety considerations.
We compete in the aerostructures segment of the aerospace
industry. Our business is affected indirectly by the financial
condition of the commercial airlines and other economic factors,
including general economic conditions and world safety
considerations that affect the demand for air transportation.
Specifically, our commercial business is dependent on the demand
from passenger airlines and cargo carriers for the production of
new aircraft. Accordingly, demand for our commercial products is
tied to the worldwide airline industrys ability to finance
the purchase of new aircraft and the industrys forecasted
demand for seats, flights, routes and cargo capacity. Similarly,
the size and age of the worldwide commercial aircraft fleet
affects the demand for new aircraft and, consequently, for our
products. Such factors, in conjunction with evolving economic
conditions, cause the market in which we operate to be cyclical
to varying degrees, thereby affecting our business and operating
results.
The financial health of the commercial airline industry has a
direct and significant effect on our commercial aircraft
programs. The commercial airline industry is impacted by the
strength of the global economy and geo-political events around
the world. Near-term challenges include economic weakness in the
airline industry and the continuing turmoil in global credit
markets (leading to widespread economic slowdown, restricted
discretionary spending, inability to finance airplane purchases,
and a slowdown in air traffic). Possible exogenous shocks such
as expanding conflicts in the Middle East, renewed terrorist
attacks against the industry, or pandemic health crises have the
potential to cause precipitous declines in air traffic. Any
protracted economic slump, future terrorist attacks, war or
health concerns could cause airlines to cancel or delay the
purchase of additional new aircraft which could result in a
deterioration of commercial airplane backlogs. If demand for new
aircraft decreases, there would likely be a decrease in demand
for our commercial aircraft products, and our business,
financial condition and results of operations could be
materially adversely affected.
Our
business could be materially adversely affected if one of our
components causes an aircraft accident.
Our operations expose us to potential liabilities for personal
injury or death as a result of the failure of an aircraft
component that has been designed, manufactured or serviced by us
or our suppliers. While we believe that our liability insurance
is adequate to protect us from future product liability claims,
it may not be adequate. Also, we may not be able to maintain
insurance coverage in the future at an acceptable cost. Any such
liability not covered by insurance or for which third-party
indemnification is not available could require us to dedicate a
substantial portion of our cash flows to make payments on such
liability, which could have a material adverse effect on our
business, financial condition and results of operations.
An accident caused by one of our components could also damage
our reputation for quality products. We believe our customers
consider safety and reliability as key criteria in selecting a
provider of aerostructures. If an accident were to be caused by
one of our components, or if we were to otherwise fail to
maintain a satisfactory record of safety and reliability, our
ability to retain and attract customers could be materially
adversely affected.
16
Our
business could be materially adversely affected by material
product warranty obligations.
Our operations expose us to potential liability for warranty
claims made by customers or third parties with respect to
aircraft components that have been designed, manufactured, or
serviced by us or our suppliers. Material product warranty
obligations could have a material adverse effect on our
business, financial condition and results of operations.
Because
we depend on Boeing and, to a lesser extent, Airbus, as our
largest customers, our sales, cash flows from operations and
results of operations will be negatively affected if either
Boeing or Airbus reduces the number of products it purchases
from us or if either experiences business
difficulties.
Currently, Boeing is our largest customer and Airbus is our
second-largest customer. For the nine months ended
October 1, 2009, and for the twelve months ended
December 31, 2008, approximately 85% and 11% of our net
revenues were generated from sales to Boeing and Airbus,
respectively. Although our strategy, in part, is to diversify
our customer base by entering into supply arrangements with
additional customers, we cannot give any assurance that we will
be successful in doing so. Even if we are successful in
obtaining and retaining new customers, we expect that Boeing
and, to a lesser extent, Airbus, will continue to account for a
substantial portion of our sales for the foreseeable future.
Although we are a party to various supply contracts with Boeing
and Airbus which obligate Boeing and Airbus to purchase all of
their requirements for certain products from us, those
agreements generally do not require specific minimum purchase
volumes. In addition, if we breach certain obligations under
these supply agreements and Boeing or Airbus exercises its right
to terminate such agreements, our business will be materially
adversely affected. In addition, we have agreed to a limitation
on recoverable damages in the event Boeing wrongfully terminates
our main supply agreement with it with respect to any model of
airplane program, so if this occurs, we may not be able to
recover the full amount of our actual damages. Furthermore, if
Boeing or Airbus (1) experiences a decrease in requirements
for the products which we supply to it; (2) experiences a
major disruption in its business, such as a strike, work
stoppage or slowdown, a supply-chain problem or a decrease in
orders from its customers; or (3) files for bankruptcy
protection; our business, financial condition and results of
operations could be materially adversely affected.
Our
largest customer, Boeing, operates in a very competitive
business environment.
Boeing operates in a highly competitive industry. Competition
from Airbus, Boeings main competitor, as well as from
regional jet makers, has intensified as these competitors expand
aircraft model offerings and competitively price their products.
As a result of this competitive environment, Boeing continues to
face pressure on product offerings and sale prices. While we do
have requirements contracts with Airbus, we currently have
substantially more business with Boeing and thus any adverse
effect on Boeings production of aircraft resulting from
this competitive environment may have a material adverse effect
on our business, financial condition and results of operations.
Our
business depends, in large part, on sales of components for a
single aircraft program, the B737.
For the nine months ended October 1, 2009 and the twelve
months ended December 31, 2008, approximately 54% and 53%,
respectively, of our net revenues were generated from sales of
components to Boeing for the B737 aircraft. While we have
entered into long-term supply agreements with Boeing to continue
to provide components for the B737 for the life of the aircraft
program, including commercial and the military
P-8A
Poseidon derivatives, Boeing does not have any obligation to
purchase components from us for any replacement for the B737
that is not a commercial derivative model. In the event Boeing
develops a next-generation single-aisle aircraft program to
replace the B737 which is not a commercial derivative, we may
not have the next-generation technology, engineering and
manufacturing capability necessary to obtain significant
aerostructures supply business for such replacement program, may
not be able to provide components for such replacement program
at competitive prices or, for other reasons, may not be engaged
by Boeing to the extent of our involvement in the B737 or at
all. If we were unable to obtain significant aerostructures
supply business for the B737 replacement program, our business,
financial condition and results of operations could be
materially adversely affected.
17
The
profitability of the B787 program depends significantly on the
assumptions surrounding a satisfactory settlement of
assertions.
Due to the nature of the work performed related to the B787, we
regularly commence work or incorporate customer requested
changes prior to negotiating pricing terms for the engineering
work or the product which has been modified. We have the legal
right to negotiate pricing for customer directed changes. We
assert to our customers our contractual rights to obtain the
additional revenue or cost reimbursement we expect to receive
upon finalizing pricing terms. An expected recovery value of
these assertions is incorporated into our contract profitability
estimates when applying contract accounting. Our inability to
recover these expected values, among other factors, could result
in the recognition of a forward loss on the B787 program and
could have a material adverse effect on our results of
operations.
Our
business depends, in part, on the success of a new model
aircraft, the B787.
The success of our business will depend, in part, on the success
of Boeings new B787 program. We have entered into supply
agreements with Boeing pursuant to which we are a Tier 1
supplier to the B787 program. We have made and will continue to
make a significant investment in this program before the first
commercial delivery of a B787 jetliner. On August 27, 2009,
Boeing announced an additional delay of the first flight of the
B787 to the end of 2009, pushing the first B787 customer
delivery out to the fourth quarter of 2010. Amounts capitalized
into inventory represent our primary working capital exposure to
the B787 delays. Given the low margins we currently project in
our first contract accounting block, in the event Boeing is
unable to meet currently anticipated production levels or if we
are not able to achieve the cost reductions we expect,
successfully implement customer driven engineering changes, or
successfully complete contract negotiations, including
assertions, we could eventually need to recognize a forward loss
in our current contract accounting block. Any additional delays
in the B787 program, including delays in negotiations of certain
contractual matters with Boeing, could further impact our cash
flows from operations and could materially adversely affect our
business, financial condition and results of operations.
We may
be required to repay Boeing up to approximately
$960.2 million of advance payments made to us by Boeing
under the B787 Supply Agreement, as amended, in the event that
Boeing does not take delivery of a sufficient number of ship
sets prior to the termination of the aircraft
program.
We are required to repay Boeing the $700.0 million, without
interest, of advance payments made to us by Boeing through 2007
under the original B787 Supply Agreement, in the amount of a
$1.4 million offset against the purchase price of each of
the first five hundred B787 ship sets delivered to Boeing. In
the event that Boeing does not take delivery of five hundred
B787 ship sets by the end of the aircraft program, any advances
not then repaid will first be applied against any outstanding
B787 payments then due by Boeing to us, with any remaining
balance to be repaid at the rate of $84.0 million per year
beginning in the year in which we deliver our final B787
production ship set to Boeing, prorated for the remaining
portion of the year in which we make our final delivery.
On March 26, 2008, Boeing and Spirit amended their existing
B787 Supply Agreement to, among other things, require Boeing to
make additional advance payments to Spirit in 2008 in the amount
of $396.0 million for production articles. The additional
advances will be applied against the full purchase price of the
ship sets delivered (net of the $1.4 million per ship set
applied against the initial $700.0 million of advances
described above) until fully repaid, which is expected to occur
before the delivery of the 50th ship set. In the event that
Boeing does not take delivery of a sufficient number of ship
sets to repay the additional advances by the end of the aircraft
program, any additional advances not then repaid will first be
applied against any outstanding B787 payments then due by Boeing
to us, with any remaining balance repaid beginning in the year
in which we deliver our final B787 production ship set to
Boeing, with the full amount to be repaid no later than the end
of the subsequent year. As of October 1, 2009, the amount
of advance payments made to us by Boeing under the B787 Supply
Agreement and not yet repaid was approximately
$960.2 million.
On June 23, 2009, Boeing and Spirit further amended their
existing B787 Supply Agreement to, among other things, require
Boeing to make additional advances to Spirit. These additional
advances will be paid to
18
Spirit quarterly in amounts determined pursuant to pricing
provisions set forth in the agreement, and will be recovered
over future units. In the event that Boeing does not take
delivery of a sufficient number of ship sets to recover these
additional advances by the end of 2021, Spirit would be required
to repay any outstanding balance in six equal annual
installments. The first advance payment was made to Spirit in
August 2009.
Accordingly, portions of the advance repayment liability are
included as current and long-term liabilities in our
consolidated balance sheet.
We
incur risk associated with new programs.
New programs with new technologies typically carry risks
associated with design responsibility, development of new
production tools, hiring and training of qualified personnel,
increased capital and funding commitments, ability to meet
customer specifications, delivery schedules and unique
contractual requirements, supplier performance, ability of the
customer to meet its contractual obligations to us, and our
ability to accurately estimate costs associated with such
programs. In addition, any new aircraft program may not generate
sufficient demand or may experience technological problems or
significant delays in the regulatory certification or
manufacturing and delivery schedule. If we were unable to
perform our obligations under new programs to the
customers satisfaction, if we were unable to manufacture
products at our estimated costs, or if a new program in which we
had made a significant investment was terminated or experienced
weak demand, delays or technological problems, our business,
financial condition and results of operations could be
materially adversely affected. This risk includes the potential
for default, quality problems, or inability to meet weight
requirements and could result in low margin or forward loss
contracts, and the risk of having to write-off inventory if it
were deemed to be unrecoverable over the life of the program. In
addition, beginning new work on existing programs also carries
risks associated with the transfer of technology, knowledge and
tooling.
In order to perform on new programs we may be required to
construct or acquire new facilities requiring additional
up-front investment costs. In the case of significant program
delays
and/or
program cancellations, for the costs that are not recoverable,
we could be required to bear the construction and maintenance
costs and incur potential impairment charges for the new
facilities. Also, we may need to expend additional resources to
determine an alternate revenue-generating use for the
facilities. Likewise, significant delays in the construction or
acquisition of a plant site could impact production schedules.
Our
operations depend on our ability to maintain continuing,
uninterrupted production at our manufacturing facilities. Our
production facilities are subject to physical and other risks
that could disrupt production.
Our manufacturing facilities could be damaged or disrupted by a
natural disaster, war, terrorist activity or sustained
mechanical failure. Although we have obtained property damage
and business interruption insurance, a major catastrophe, such
as a fire, flood, tornado or other natural disaster at any of
our sites, war or terrorist activities in any of the areas where
we conduct operations or the sustained mechanical failure of a
key piece of equipment could result in a prolonged interruption
of all or a substantial portion of our business. Any disruption
resulting from these events could cause significant delays in
shipments of products and the loss of sales and customers and we
may not have insurance to adequately compensate us for any of
these events. A large portion of our operations takes place at
one facility in Wichita, Kansas and any significant damage or
disruption to this facility in particular would materially
adversely affect our ability to service our customers.
We
operate in a very competitive business
environment.
Competition in the aerostructures segment of the aerospace
industry is intense. Although we have entered into requirements
contracts with Boeing and Airbus under which we are their
exclusive supplier for certain aircraft parts, we will face
substantial competition from both OEMs and non-OEM
aerostructures suppliers in trying to expand our customer base
and the types of parts we make.
OEMs may choose not to outsource production of aerostructures
due to, among other things, their own direct labor and other
overhead considerations and capacity utilization at their own
facilities. Consequently,
19
traditional factors affecting competition, such as price and
quality of service, may not be significant determinants when
OEMs decide whether to produce a part in-house or to outsource.
Our principal competitors among aerostructures suppliers are
Alenia Aeronautica, Fuji Heavy Industries, Ltd., GKN Aerospace,
The Goodrich Corporation, Kawasaki Heavy Industries, Inc.,
Mitsubishi Heavy Industries, Saab AB, Snecma, Triumph Group,
Inc., Aircelle S.A., NORDAM and Vought Aircraft Industries. Some
of our competitors have greater resources than we do and,
therefore, may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements, or devote
greater resources to the promotion and sale of their products
than we can. Additionally, as part of its Power 8 restructuring
plan, Airbus has identified certain French and German
manufacturing facilities for potential sale to third parties in
the future. If these facilities are sold, or otherwise attempt
to obtain work from third parties, the facilities could become
competitors of Spirit. Providers of aerostructures have
traditionally competed on the basis of cost, technology, quality
and service. We believe that developing and maintaining a
competitive advantage will require continued investment in
product development, engineering, supply-chain management and
sales and marketing, and we may not have enough resources to
make such investments. For these reasons, we may not be able to
compete successfully in this market or against such competitors,
which could have a material adverse effect on our business,
financial condition and results of operations.
High
switching costs may substantially limit our ability to obtain
business that is currently under contract with other
suppliers.
Once a contract is awarded by an OEM to an aerostructures
supplier, the OEM and the supplier are typically required to
spend significant amounts of time and capital on design,
manufacture, testing and certification of tooling and other
equipment. For an OEM to change suppliers during the life of an
aircraft program, further testing and certification would be
necessary, and the OEM would be required either to move the
tooling and equipment used by the existing supplier for
performance under the existing contract, which may be expensive
and difficult (or impossible), or to manufacture new tooling and
equipment. Accordingly, any change of suppliers would likely
result in production delays and additional costs to both the OEM
and the new supplier. These high switching costs may make it
more difficult for us to bid competitively against existing
suppliers and less likely that an OEM will be willing to switch
suppliers during the life of an aircraft program, which could
materially adversely affect our ability to obtain new work on
existing aircraft programs.
Because
of our limited operating history, our historical financial
statements do not reflect the impact of an extended market
downturn on our financial condition and results of
operations.
Our historical financial statements are not indicative of how we
would operate through an extended market downturn. Since the
Boeing Acquisition and until the latter part of 2008, we had
operated in a market experiencing an upturn; however since the
latter part of 2008, we have been operating during a period of a
deep economic recession. In 2005, Boeing and Airbus experienced
record aggregate annual airplane orders, followed in 2006 with
aggregate annual order totals that, at the time, were the second
highest ever. Aggregate annual orders, net of cancellations,
remained strong in 2007 at 2,754. However, aggregate annual
orders, net of cancellations, for 2008 decreased to 1,439 and
orders, net of cancellations, for the first half of 2009 were
69. Our financial results from this limited history provide
little indication of our ability to operate in a market
experiencing significantly lower demand for our products and the
products of our customers. As such, we cannot give any assurance
that we will be able to successfully operate in such a market at
historical profitability levels.
Increases
in labor costs, potential labor disputes and work stoppages at
our facilities or the facilities of our suppliers or customers
could materially adversely affect our financial
performance.
Our financial performance is affected by the availability of
qualified personnel and the cost of labor. A majority of our
workforce is represented by unions. If our workers were to
engage in a strike, work stoppage or other slowdown, we could
experience a significant disruption of our operations, which
could cause us to be unable to deliver products to our customers
on a timely basis and could result in a breach of our supply
agreements. This could result in a loss of business and an
increase in our operating expenses, which could
20
have a material adverse effect on our business, financial
condition and results of operations. In addition, our
non-unionized labor force may become subject to labor union
organizing efforts, which could cause us to incur additional
labor costs and increase the related risks that we now face.
We have agreed with Boeing to continue to operate substantial
manufacturing operations in Wichita, Kansas until at least
June 16, 2015. This may prevent us from being able to offer
our products at prices that are competitive in the marketplace
and could have a material adverse effect on our ability to
generate new business.
In addition, many aircraft manufacturers, airlines and aerospace
suppliers have unionized work forces. On September 6, 2008,
Boeing employees represented by the International Association of
Machinists and Aerospace Workers (the IAM) went on
strike (the IAM Strike) following the expiration of
their collective bargaining agreement with Boeing. The IAM
Strike, which lasted 58 days, temporarily halted commercial
aircraft production by Boeing and had a significant short-term
adverse effect on our operations. The IAM ratified a new
four-year agreement with Boeing on November 2, 2008.
Additional strikes, work stoppages or slowdowns experienced by
aircraft manufacturers, airlines or aerospace suppliers could
reduce our customers demand for additional aircraft
structures or prevent us from completing production of our
aircraft structures.
Our collective bargaining agreements with three of the five
unions that represent our U.S. employees, including the
IAM, which represents approximately 46% of our
U.S. workforce, expire in 2010. We can not give any
assurance that we will be able to negotiate new collective
bargaining agreements with our unions, on commercially
reasonable terms or at all. If we are unable to successfully
negotiate new collective bargaining agreements, or if we enter
into new collective bargaining agreements on terms which are
less favorable to us than our existing agreements, our operating
expenses could increase which could have a material adverse
effect on our business, financial condition and results of
operations.
Our
business may be materially adversely affected if we lose our
government, regulatory or industry approvals, if more stringent
government regulations are enacted, or if industry oversight is
increased.
The Federal Aviation Administration (FAA) prescribes
standards and qualification requirements for aerostructures,
including virtually all commercial airline and general aviation
products, and licenses component repair stations within the
United States. Comparable agencies, such as the Joint Aviation
Authorities (JAA) in Europe, regulate these matters
in other countries. If we fail to qualify for or obtain a
required license for one of our products or services or lose a
qualification or license previously granted, the sale of the
subject product or service would be prohibited by law until such
license is obtained or renewed and our business, financial
condition and results of operations could be materially
adversely affected. In addition, designing new products to meet
existing regulatory requirements and retrofitting installed
products to comply with new regulatory requirements can be
expensive and time consuming.
From time to time, the FAA, the JAA or comparable agencies
propose new regulations or changes to existing regulations.
These changes or new regulations generally increase the costs of
compliance. To the extent the FAA, the JAA or comparable
agencies implement regulatory changes, we may incur significant
additional costs to achieve compliance.
In addition, certain aircraft repair activities we intend to
engage in may require the approval of the aircrafts OEM.
Our inability to obtain OEM approval could materially restrict
our ability to perform such aircraft repair activities.
We are
subject to regulation of our technical data and goods under U.S.
export control laws.
As a manufacturer and exporter of defense and dual-use technical
data and commodities, we are subject to U.S. laws and
regulations governing international trade and exports,
including, but not limited to, the International Traffic in Arms
Regulations, administered by the U.S. Department of State,
and the Export Administration Regulations, administered by the
U.S. Department of Commerce. Collaborative agreements that
we may have with foreign persons, including manufacturers and
suppliers, are also subject to U.S. export
21
control laws. In addition, we are subject to trade sanctions
against embargoed countries, administered by the Office of
Foreign Assets Control within the U.S. Department of the
Treasury.
A determination that we have failed to comply with one or more
of these export controls or trade sanctions could result in
civil or criminal penalties, including the imposition of fines
upon us as well as the denial of export privileges and debarment
from participation in U.S. government contracts.
Additionally, restrictions may be placed on the export of
technical data and goods in the future as a result of changing
geopolitical conditions. Any one or more of such sanctions could
have a material adverse effect on our business, financial
condition and results of operations.
We are
subject to environmental, health and safety regulations and our
ongoing operations may expose us to related
liabilities.
Our operations are subject to extensive regulation under
environmental, health and safety laws and regulations in the
United States and the United Kingdom. We may be subject to
potentially significant fines or penalties, including criminal
sanctions, if we fail to comply with these requirements. We have
made, and will continue to make, significant capital and other
expenditures to comply with these laws and regulations. We
cannot predict with certainty what environmental legislation
will be enacted in the future or how existing laws will be
administered or interpreted. Our operations involve the use of
large amounts of hazardous substances and regulated materials
and generate many types of wastes, including emissions of
hexavalent chromium and volatile organic compounds, or so-called
greenhouse gases such as carbon dioxide. Spills and releases of
these materials may subject us to
clean-up
liability for remediation and claims of alleged personal injury,
property damage and damage to natural resources, and we may
become obligated to reduce our emissions of hexavalent chromium
and volatile organic compounds. We cannot give any assurance
that the aggregate amount of future remediation costs and other
environmental liabilities will not be material.
Boeing, our predecessor at the Wichita facility, is under an
administrative consent order issued by the Kansas Department of
Health and Environment to contain and remediate contaminated
groundwater which underlies a majority of the site. Pursuant to
this order and its agreements with us, Boeing has a long-term
remediation plan in place, and treatment, containment and
remediation efforts are underway. If Boeing does not comply with
its obligations under the order and these agreements, we may be
required to undertake such efforts and make material
expenditures.
In connection with the BAE Acquisition, we acquired a
manufacturing facility in Prestwick, Scotland that is adjacent
to contaminated property retained by BAE Systems. The
contaminated property may be subject to a regulatory action
requiring remediation of the land. It is also possible that the
contamination may spread into the property we acquired. BAE
Systems has agreed to indemnify us, subject to certain
contractual limitations and conditions, for certain clean up
costs and other losses, liabilities, expenses and claims related
to existing pollution on the acquired property, existing
pollution that migrates from the acquired property to a third
partys property and any pollution that migrates to our
property from property retained by BAE Systems. If BAE Systems
does not comply with its obligations under the agreement, we may
be required to undertake such efforts and make material
expenditures.
In the future, contamination may be discovered at or emanating
from our facilities or at off-site locations where we send
waste. The remediation of such newly discovered contamination,
related claims for personal injury or damages, or the enactment
of new laws or a stricter interpretation of existing laws, may
require us to make additional expenditures, some of which could
be material.
Significant
consolidation in the aerospace industry could make it difficult
for us to obtain new business.
Suppliers in the aerospace industry have consolidated and formed
alliances to broaden their product and integrated system
offerings and achieve critical mass. This supplier consolidation
is in part attributable to aircraft manufacturers more
frequently awarding long-term sole-source or preferred supplier
contracts to the most capable suppliers, thus reducing the total
number of suppliers. If this consolidation were to continue, it
may become more difficult for us to be successful in obtaining
new customers.
22
We may
be materially adversely affected by high fuel
prices.
Due to the competitive nature of the airline industry, airlines
are often unable to pass on increased fuel prices to customers
by increasing fares. Fluctuations in the global supply of crude
oil and the possibility of changes in government policy on jet
fuel production, transportation and marketing make it difficult
to predict the future availability of jet fuel. In the event
there is an outbreak or escalation of hostilities or other
conflicts, or significant disruptions in oil production or
delivery in oil-producing areas or elsewhere, there could be
reductions in the production or importation of crude oil and
significant increases in the cost of fuel. If there were major
reductions in the availability of jet fuel or significant
increases in its cost, the airline industry and, as a result,
our business, could be materially adversely affected.
Interruptions
in deliveries of components or raw materials or increased prices
for components or raw materials used in our products could delay
production and/or materially adversely affect our financial
performance, profitability, margins and revenues.
We are highly dependent on the availability of essential
materials and purchased components from our suppliers, some of
which are available only from a sole source or limited sources.
Our dependency upon regular deliveries from particular suppliers
of components and raw materials means that interruptions or
stoppages in such deliveries could materially adversely affect
our operations until arrangements with alternate suppliers, to
the extent alternate suppliers exist, could be made. If any of
our suppliers were unable or refused to deliver materials to us
for an extended period of time, or if we were unable to
negotiate acceptable terms for the supply of materials with
these or alternative suppliers, our business could suffer.
Moreover, we are dependent upon the ability of our suppliers to
provide materials and components that meet specifications,
quality standards and delivery schedules. Our suppliers
failure to provide expected raw materials or component parts
that meet our technical specifications could adversely affect
production schedules and contract profitability. We may not be
able to find acceptable alternatives, and any such alternatives
could result in increased costs for us and possible forward
losses on certain contracts. Even if acceptable alternatives are
found, the process of locating and securing such alternatives
might be disruptive to our business and might lead to
termination of our supply agreements with our customers.
Our continued supply of materials is subject to a number of
risks including:
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the destruction of our suppliers facilities or their
distribution infrastructure;
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a work stoppage or strike by our suppliers employees;
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the failure of our suppliers to provide materials of the
requisite quality or in compliance with specifications;
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the failure of essential equipment at our suppliers plants;
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the failure of our suppliers to satisfy U.S. and
international import and export control laws for goods that we
purchase from such suppliers;
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the failure of suppliers to meet regulatory standards;
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the failure, shortage or delays in the delivery of raw materials
to our suppliers;
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contractual amendments and disputes with our suppliers; and
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inability of suppliers to perform as a result of the weakened
global economy or otherwise.
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In addition, our profitability is affected by the prices of the
components and raw materials, such as titanium, aluminum and
carbon fiber, used in the manufacturing of our products. These
prices may fluctuate based on a number of factors beyond our
control, including world oil prices, changes in supply and
demand, general economic conditions, labor costs, competition,
import duties, tariffs, currency exchange rates and, in some
cases, government regulation. Although our supply agreements
with Boeing and requirements contracts with Airbus allow us to
pass on certain unusual increases in component and raw material
costs to Boeing and Airbus in limited situations, we may not be
fully compensated for such increased costs.
23
Our
business will suffer if certain key officers or employees
discontinue employment with us or if we are unable to recruit
and retain highly skilled staff.
The success of our business is highly dependent upon the skills,
experience and efforts of our President and Chief Executive
Officer, Jeffrey Turner, and certain of our other key officers
and employees. As the top executive officer of Boeing Wichita
for almost ten years prior to the Boeing Acquisition,
Mr. Turner gained extensive experience in running our
business and long-standing relationships with many high-level
executives at Boeing, our largest customer. We believe
Mr. Turners reputation in the aerospace industry and
relationship with Boeing are critical elements in maintaining
and expanding our business. The loss of Mr. Turner or other
key personnel could have a material adverse effect on our
business, operating results or financial condition. Our business
also depends on our ability to continue to recruit, train and
retain skilled employees, particularly skilled engineers. The
market for these resources is highly competitive. We may be
unsuccessful in attracting and retaining the engineers we need
and, in such event, our business could be materially adversely
affected. The loss of the services of any skilled key personnel,
or our inability to hire new personnel with the requisite
skills, could impair our ability to provide products to our
customers or manage our business effectively.
We are
subject to the requirements of the National Industrial Security
Program Operating Manual (NISPOM) for our facility
security clearance (FCL), which is a prerequisite
for our ability to perform on classified contracts for the U.S.
Government.
A Department of Defense (DoD) FCL is required for a
company to be awarded and perform on classified contracts for
the DoD and certain other agencies of the U.S. Government.
From time to time we have performed and may perform on
classified contracts. For the nine months ended October 1,
2009 we generated no revenues from such classified contracts.
For the twelve months ended December 31, 2008 we generated
less than 1% of our net revenues from such classified contracts.
We have obtained an FCL at the Secret level. Due to
the fact that more than 50% of our voting power is effectively
controlled by a
non-U.S. entity
(Onex), we are required to operate in accordance with the terms
and requirements of our Special Security Agreement
(SSA) with the DoD. If we were to violate the terms
and requirements of our SSA, the NISPOM, or any other applicable
U.S. Government industrial security regulations, we could
lose our FCL. We cannot give any assurance that we will be able
to maintain our FCL. If for some reason our FCL is invalidated
or terminated, we may not be able to continue to perform our
classified contracts in effect at that time, and we would not be
able to enter into new classified contracts, which could
adversely affect our revenues.
We
derive a significant portion of our revenues from direct and
indirect sales outside the United States and are subject to the
risks of doing business in foreign countries.
We derive a significant portion of our revenues from sales by
Boeing and Airbus to customers outside the United States. In
addition, for the nine-month period ended October 1, 2009
and the twelve-month period ended December 31, 2008, direct
sales to our
non-U.S. customers
accounted for approximately 11% and 12% of our net revenues,
respectively. We expect that our and our customers
international sales will continue to account for a significant
portion of our revenues for the foreseeable future. As a result,
we are subject to risks of doing business internationally,
including:
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changes in regulatory requirements;
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domestic and foreign government policies, including requirements
to expend a portion of program funds locally and governmental
industrial cooperation requirements;
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fluctuations in foreign currency exchange rates;
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the complexity and necessity of using foreign representatives
and consultants;
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uncertainties and restrictions concerning the availability of
funding credit or guarantees;
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imposition of tariffs and embargos, export controls and other
trade restrictions;
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the difficulty of management and operation of an enterprise
spread over various countries;
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compliance with a variety of foreign laws, as well as
U.S. laws affecting the activities of U.S. companies
abroad; and
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economic and geopolitical developments and conditions, including
international hostilities, acts of terrorism and governmental
reactions, inflation, trade relationships and military and
political alliances.
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While these factors or the effect of these factors are difficult
to predict, adverse developments in one or more of these areas
could materially adversely affect our business, financial
condition and results of operations in the future.
Our
fixed-price contracts may commit us to unfavorable
terms.
We provide most of our products and services through long-term
contracts in which the pricing terms are fixed based on certain
production volumes. Accordingly, we bear the risk that increased
or unexpected costs may reduce our profit margins or cause us to
sustain losses on these contracts. Other than certain increases
in raw material costs which can be passed on to our customers,
we must fully absorb cost overruns, notwithstanding the
difficulty of estimating all of the costs we will incur in
performing these contracts and in projecting the ultimate level
of sales that we may achieve. Our failure to anticipate
technical problems, estimate delivery reductions, estimate costs
accurately or control costs during performance of a fixed-price
contract may reduce the profitability of a contract or cause a
loss.
This risk particularly applies to products such as the Boeing
B787, for which we had delivered ten production articles as of
October 1, 2009 since the inception of the program, and in
respect of which our profitability at the contracted price
depends on our being able to achieve production cost reductions
as we gain production experience. Pricing for the initial
configuration of the B787-8, the base model currently in
production, is generally established through 2021, with prices
decreasing as cumulative volume levels are achieved. Prices are
subject to adjustment for abnormal inflation (above a specified
level in any year) and for certain production, schedule and
other specific changes. When we negotiated the B787-8 pricing,
we assumed that favorable trends in volume, learning curve
efficiencies and future pricing from suppliers would reduce our
production costs over the life of the B787 program, thus
maintaining or improving our margin on each B787 we produced. We
cannot give any assurance that our development of new
technologies or capabilities will be successful or that we will
be able to reduce our B787 production costs over the life of the
program. Our failure to reduce production costs as we have
anticipated could result in decreasing margin on the B787 during
the life of the program and the need to record a forward loss.
Many of our other production cost estimates also contain pricing
terms which anticipate cost reductions over time. In addition,
although we have entered into these fixed price contracts with
our customers, they may nonetheless seek to re-negotiate pricing
with us in the future. Any such higher costs or re-negotiations
could materially adversely affect our profitability, margins and
revenues.
We
face a
class-action
lawsuit which could potentially result in substantial costs,
diversion of managements attention and resource, and
negative publicity.
A lawsuit has been filed against Spirit, Onex, and Boeing
alleging age discrimination in the hiring of employees by Spirit
when Boeing sold Boeing Wichita to Onex. The complaint was filed
in U.S. District Court in Wichita, Kansas and seeks
class-action
status, an unspecified amount of compensatory damages and more
than $1.5 billion in punitive damages. The Asset Purchase
Agreement between Onex and Boeing relating to the Boeing
Acquisition requires Spirit to indemnify Boeing for its damages
resulting from the employment decisions that were made by us
with respect to former employees of Boeing Wichita which relate
or allegedly relate to the involvement of, or consultation, with
employees of Boeing in such employment decisions. The lawsuit
could result in substantial costs, divert managements
attention and resources from our operations and negatively
affect our public image and reputation. An unfavorable outcome
or prolonged litigation related to these matters could
materially harm our business.
25
We are
implementing a new Enterprise Resource Planning
(ERP) software system, which could increase our
information technology expenditures and cause unexpected
production delays.
We have recently implemented an ERP software system at our
Wichita, Kansas facility and have begun implementation of such
software system in the Tulsa, Oklahoma and the Kinston, North
Carolina facilities. Our total expenditures for this system
could exceed the planned budget. In addition, unexpected
problems with the implementation could result in production or
other delays.
We do
not own most of the intellectual property and tooling used in
our business.
Our business depends on using certain intellectual property and
tooling that we have rights to use under license grants from
Boeing. These licenses contain restrictions on our use of Boeing
intellectual property and tooling and may be terminated if we
default under certain of these restrictions. Our loss of license
rights to use Boeing intellectual property or tooling would
materially adversely affect our business. In addition, we must
honor our contractual commitments to our other customers related
to intellectual property and comply with infringement laws
governing our use of intellectual property. In the event we
obtain new business from new or existing customers, we will need
to pay particular attention to these contractual commitments and
any other restrictions on our use of intellectual property to
make sure that we will not be using intellectual property
improperly in the performance of such new business. In the event
we use any such intellectual property improperly, we could be
subject to an infringement claim by the owner or licensee of
such intellectual property. See the section entitled
Business Our Relationship with
Boeing License of Intellectual Property in
Item 1 of our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008. In addition to
the licenses with Boeing, Spirit licenses some of the
intellectual property needed for performance under some of its
supply contracts from its customers under those supply
agreements.
In the future, our entry into new markets may require obtaining
additional license grants from Boeing
and/or from
other third parties. If we are unable to negotiate additional
license rights on acceptable terms (or at all) from Boeing
and/or other
third parties as the need arises, our ability to enter new
markets may be materially restricted. In addition, we may be
subject to restrictions in future licenses granted to us that
may materially restrict our use of third party intellectual
property.
Our
success depends in part on the success of our research and
development initiatives.
We spent approximately $41.6 million and $48.4 million
on research and development during the nine months ended
October 1, 2009 and the twelve months ended
December 31, 2008, respectively. Our significant
expenditures on our research and development efforts may not
create any new sales opportunities or increases in productivity
that are commensurate with the level of resources invested.
We are in the process of developing specific technologies and
capabilities in pursuit of new business and in anticipation of
customers going forward with new programs. If any such programs
do not go forward or are not successful, we may be unable to
recover the costs incurred in anticipation of such programs and
our profitability and revenues may be materially adversely
affected.
Any
future business combinations, acquisitions, mergers, or joint
ventures will expose us to risks, including the risk that we may
not be able to successfully integrate these businesses or
achieve expected operating synergies.
We actively consider strategic transactions from time to time.
We evaluate acquisitions, joint ventures, alliances or
co-production programs as opportunities arise, and we may be
engaged in varying levels of negotiations with potential
competitors at any time. We may not be able to effect
transactions with strategic alliance, acquisition or
co-production program candidates on commercially reasonable
terms or at all. If we enter into these transactions, we also
may not realize the benefits we anticipate. In addition, we may
not be
26
able to obtain additional financing for these transactions. The
integration of companies that have previously been operated
separately involves a number of risks, including, but not
limited to:
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demands on management related to the increase in size after the
transaction;
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the diversion of managements attention from the management
of daily operations to the integration of operations;
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difficulties in the assimilation and retention of employees;
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difficulties in the assimilation of different cultures and
practices, as well as in the assimilation of geographically
dispersed operations and personnel, who may speak different
languages;
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difficulties combining operations that use different currencies
or operate under different legal structures;
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difficulties in the integration of departments, systems
(including accounting systems), technologies, books and records
and procedures, as well as in maintaining uniform standards,
controls (including internal accounting controls), procedures
and policies; and
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constraints (contractual or otherwise) limiting our ability to
consolidate, rationalize
and/or
leverage supplier arrangements to achieve integration.
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Consummating any acquisitions, joint ventures, alliances or
co-production programs could result in the incurrence of
additional debt and related interest expense, as well as
unforeseen contingent liabilities.
The
interests of our controlling stockholder may conflict with your
interests.
Onex Partners LP, Onex Corporation and their respective partners
and affiliates that beneficially own our class B common
stock, herein referred to collectively as the Onex
entities, own 32,411,638 shares of our class B
common stock. Our class A common stock has one vote per
share, while our class B common stock has ten votes per
share on all matters to be voted on by our stockholders. The
Onex entities control approximately 69% of the combined voting
power of our outstanding common stock. Accordingly, and for so
long as the Onex entities continue to hold class B common
stock that represents at least 10% of the total number of shares
of common stock outstanding, Onex will exercise a controlling
influence over our business and affairs and will have the power
to determine all matters submitted to a vote of our
stockholders, including the election of directors and approval
of significant corporate transactions such as amendments to our
certificate of incorporation, mergers and the sale of all or
substantially all of our assets. Onex could cause corporate
actions to be taken even if the interests of Onex conflict with
the interests of our other stockholders or the holders of the
notes. Gerald W. Schwartz, the Chairman, President and Chief
Executive Officer of Onex Corporation, owns shares representing
a majority of the voting rights of the shares of Onex
Corporation.
We
could be required to make future contributions to our defined
benefit pension and postretirement benefit plans as a result of
adverse changes in interest rates and the capital
markets.
Our estimates of liabilities and expenses for pensions and other
postretirement benefits incorporate significant assumptions
including the rate used to discount the future estimated
liability, the long-term rate of return on plan assets and
several assumptions relating to the employee workforce (salary
increases, medical costs, retirement age and mortality). A
dramatic decrease in the fair value of our plan assets resulting
from movements in the financial markets may cause the status of
our plans to go from an over-funded status to an under-funded
status and result in cash funding requirements to meet any
minimum required funding levels. Our results of operations,
liquidity, or shareholders equity in a particular period
could be affected by a decline in the rate of return on plan
assets, the rate used to discount the future estimated
liability, or changes in employee workforce assumptions.
27
Risk
Factors Related to Investment in the Notes
Our
substantial debt could adversely affect our financial condition
and our ability to operate our business and prevent us from
fulfilling our obligations under the notes. The terms of the
indenture and our senior secured credit facility impose
significant operating and financial restrictions on our company
and our subsidiaries, which could also adversely affect our
operating flexibility and put us at a competitive disadvantage
by preventing us from capitalizing on business
opportunities.
We have a substantial amount of debt, which requires significant
interest and principal payments. After the issuance of the
Original Notes and application of the proceeds, including
repayment of borrowings under our existing senior secured
revolving credit facility without any reduction of the
lenders commitment thereunder, as of October 1, 2009
we had approximately $883.6 million of total debt
outstanding.
The terms of the indenture governing the notes and our senior
secured credit facility impose significant operating and
financial restrictions on us, which limit our ability, among
other things, to:
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incur additional debt or issue preferred stock;
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pay dividends or make distributions to our stockholders;
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repurchase or redeem our capital stock;
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make investments;
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incur liens without granting equal and ratable liens to the
holders of the notes;
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enter into transactions with our stockholders and affiliates;
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sell certain assets;
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acquire the assets of, or merge or consolidate with, other
companies; and
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incur restrictions on the ability of our subsidiaries to make
distributions or transfer assets to us.
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These restrictions could have important consequences to the
holders of the notes, including the following:
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making it more difficult for us to satisfy our obligations with
respect to the notes and our other debt;
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limiting our ability to obtain additional financing to fund
future working capital, capital expenditures, strategic
acquisitions or other general corporate requirements;
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requiring a substantial portion of our cash flows to be
dedicated to debt service payments instead of other purposes;
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increasing our vulnerability to general adverse economic and
industry conditions;
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limiting our financial flexibility in planning for and reacting
to changes in the industry in which we compete;
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placing us at a disadvantage compared to other, less leveraged
competitors;
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having a material adverse effect on us if we fail to comply with
the covenants in the indenture governing the notes or in the
instruments governing our other debt; and
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increasing our cost of borrowing.
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Our revolving credit facility is a significant source of
liquidity for our business. A portion of our revolving credit
facility aggregating $320.2 million matures on
June 30, 2010 and the remaining portion of our revolving
credit facility matures on June 30, 2012. The failure to
extend or renew this agreement could have a significant effect
on our ability to invest sufficiently in our programs, fund day
to day operations, or pursue strategic opportunities.
The terms of any future indebtedness we may incur could include
more restrictive covenants. We cannot assure you that we will be
able to maintain compliance with the covenants in the agreements
governing our
28
indebtedness in the future or, if we fail to do so, that we will
be able to obtain waivers from the lenders
and/or amend
the covenants. Furthermore, because the indenture governing the
notes contains a cross-acceleration provision rather
than a cross-default provision, a default under the agreements
governing our other indebtedness may not result in a default
under the indenture governing the notes.
In addition, despite the restrictions and limitations described
above, subject to the limits contained in the indenture
governing the notes and our other debt instruments, we may be
able to incur additional debt from time to time to finance
working capital, capital expenditures, investments or
acquisitions, or for other purposes. The indenture governing the
notes does not prohibit the incurrence of additional
indebtedness by us, the Issuer or our subsidiaries. If we incur
additional debt, the risks related to our high level of debt
could intensify. See Description of the Notes.
We may
not be able to generate a sufficient amount of cash flow to meet
our debt service obligations, including the notes.
Our ability to make scheduled payments or to refinance our
obligations with respect to the notes and our other debt will
depend on our financial and operating performance, which, in
turn is subject to prevailing economic conditions and to certain
financial, competitive, business and other factors, including
the availability of financing in the banking and capital markets
as well as the other risks described herein, beyond our control.
If our cash flow and capital resources are insufficient to fund
our debt service obligations, including the notes, and our other
commitments, we could face substantial liquidity problems and
may be forced to reduce or delay scheduled expansions and
capital expenditures, sell material assets or operations, obtain
additional capital or restructure our debt. In addition, we
cannot assure you that our operating performance, cash flow and
capital resources will be sufficient for payment of our debt in
the future. If we are unable to meet our debt obligations or to
fund our other liquidity needs, we will need to restructure or
refinance all or a portion of our debt, including the notes,
which could cause us to default on our debt obligations and
impair our liquidity. Any refinancing of our indebtedness could
be at higher interest rates and may require us to comply with
more onerous covenants which could further restrict our business
operations. In the event that we are required to dispose of
material assets or operations or restructure our debt to meet
our debt service and other obligations, we cannot provide
assurance that we could effect any of these actions on a timely
basis, on commercially reasonable terms or at all, or that these
actions would be sufficient to meet our capital requirements. In
addition, the terms of our existing or future debt agreements
may restrict us from effecting certain or any of these
alternatives.
If we cannot make scheduled payments on our debt, we will be in
default and, as a result:
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our debt holders could declare all outstanding principal and
interest to be due and payable; and
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we could be forced into bankruptcy or liquidation.
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Despite
our debt levels, we may incur additional debt.
Despite the restrictions and limitations described above, we may
be able to incur significant additional indebtedness. Our senior
secured credit facility permits additional borrowings under
certain circumstances and the indenture governing the notes does
not prohibit the incurrence of additional indebtedness by us or
our subsidiaries. See Description of Certain
Indebtedness and Description of the Notes. As
of October 1, 2009, after the issuance of the Original
Notes and the application of the net proceeds therefrom, we had
approximately $729.0 million of additional borrowings
available to us under our senior secured credit facility,
excluding outstanding letters of credit, subject to compliance
with our financial and other covenants under the terms of such
credit facility.
The
notes are unsecured and effectively subordinated to all of our
secured debt.
The notes will not be secured by any of our assets or the assets
of our subsidiaries. The payment of our senior secured credit
facilities is secured by a security interest in substantially
all of our assets and the assets of Spirit and our
U.S. subsidiaries, including equipment, inventory and
certain intangible assets, a pledge of the capital stock of
substantially all of our U.S. subsidiaries and a portion of
the capital stock of our
non-U.S. subsidiaries.
If we become insolvent or are liquidated, or if payment under
our senior secured credit
29
facility or any other secured debt obligation that we may have
from time to time is accelerated, our secured lenders would be
entitled to exercise the remedies available to a secured lender
under applicable law and will have a claim on those assets
before the holders of the notes. As a result, the notes are
effectively subordinated to our secured debt to the extent of
the assets securing such debt in the event of our bankruptcy or
liquidation. As of October 1, 2009, after the issuance of
the Original Notes and the application of the net proceeds
therefrom, we had approximately $573.5 million of secured
debt outstanding under our senior secured credit facility.
Our
ability to meet our obligations under our indebtedness depends
in part on the earnings and cash flows of Spirits
subsidiaries and the ability of Spirits subsidiaries to
pay dividends or advance or repay funds to Spirit.
We conduct a portion of our operations through Spirits
subsidiaries, some of which have not guaranteed the notes.
Consequently, our ability to service our debt is dependent, in
part, upon the earnings from the businesses conducted by
Spirits subsidiaries. Spirits subsidiaries are
separate and distinct legal entities and have no obligation to
pay any amounts to Spirit, whether by dividends, loans, advances
or other payments. The ability of Spirits subsidiaries to
pay dividends and make other payments to Spirit depends on their
earnings, capital requirements and general financial conditions
and is restricted by, among other things, applicable corporate
and other laws and regulations as well as, in the future,
agreements to which Spirits subsidiaries may be a party.
The
notes are structurally subordinated to all indebtedness and
other liabilities of our
non-U.S.
subsidiaries.
None of our
non-U.S. subsidiaries
have guaranteed the notes or otherwise have any obligations to
make payments in respect of the notes, which are Spirits
direct, unsecured obligations. As a result, claims of holders of
the notes are effectively subordinated to all indebtedness and
other liabilities of our
non-U.S. subsidiaries.
In the event of any bankruptcy, liquidation, dissolution or
similar proceeding involving one of our
non-U.S. subsidiaries,
any of our rights or the rights of the holders of the notes to
participate in the assets of that subsidiary will be effectively
subordinated to the claims of creditors of that subsidiary
(including any trade creditors, debt holders, secured creditors,
taxing authorities and guarantee holders), and following payment
by that subsidiary of its liabilities, the subsidiary may not
have sufficient assets remaining to make payments to us as a
shareholder, member or otherwise. In addition, if we caused a
non-U.S. subsidiary
to pay a dividend to enable us to make payments in respect of
the notes and such a transfer were deemed a fraudulent transfer
or an unlawful distribution, the holders of the notes could be
required to return the payment to (or for the benefit of) the
creditors of our
non-U.S. subsidiaries.
As of October 1, 2009, our
non-U.S. subsidiaries
had approximately $8.8 million of indebtedness outstanding
for borrowed money and $6.0 million of capital leases, as
well as significant other liabilities (excluding any guarantees
by such subsidiaries of our revolving secured credit facility),
all of which are structurally senior to the notes. The
non-U.S. subsidiaries
represented approximately 12% and 14% of our total net revenues
for the nine-month period ended October 1, 2009 and the
twelve-month period ended December 31, 2008, respectively.
In addition, these
non-U.S. subsidiaries
represented approximately 10% of our total assets as of
October 1, 2009. See Note 23 to our audited
consolidated financial statements as of December 31, 2008,
included as Exhibit 99.1 in our Current Report on
Form 8-K,
filed with the SEC on November 24, 2009 and Note 21 to
our unaudited condensed consolidated financial statements as of
October 1, 2009, included as Exhibit 99.2 in our
Current Report on
Form 8-K,
filed with the SEC on November 24, 2009, for financial
information regarding certain of our
non-U.S. subsidiaries
that are not subsidiary guarantors of the notes and obligations
of Spirit.
In addition, although the indenture governing the notes
restricts the ability of our subsidiaries to incur indebtedness,
our subsidiaries may issue certain indebtedness and the
indenture does not in any case limit the amount of liabilities
other than indebtedness that may be incurred by our subsidiaries.
30
We may
not be able to finance a change of control offer required by the
indenture.
Upon a change of control, as defined under the indenture
governing the notes, you will have the right to require us to
offer to purchase all of the notes then outstanding at a price
equal to 101% of the principal amount of the notes, plus accrued
interest and additional interest, if any. In order to obtain
sufficient funds to pay the purchase price of the outstanding
notes, we expect that we would have to refinance the notes. We
cannot assure you that we would be able to refinance the notes
on reasonable terms, if at all. Moreover, we cannot assure you
that we will have or will be able to borrow sufficient funds at
the time of any change of control to make any required
repurchases of notes or that restrictions in our senior secured
indebtedness that we have incurred or that we may incur in the
future, including the senior secured credit facility, would
permit us to make the required repurchases. Our failure to offer
to purchase all outstanding notes or to purchase all validly
tendered notes would be an event of default under the indenture.
Such an event of default may cause the acceleration of our other
debt. Our existing or future debt also may contain restrictions
on repayment requirements with respect to specified events or
transactions that constitute a change of control under the
indenture.
If the
notes are rated investment grade at any time by both
Moodys and Standard & Poors, most of the
restrictive covenants and corresponding events of default
contained in the indenture governing the notes will be
suspended.
If, at any time, the credit rating on the notes, as determined
by both Moodys Investors Service and Standard &
Poors Ratings Services, equals or exceeds Baa3 and
BBB , respectively, or any equivalent replacement
ratings, we will no longer be subject to most of the restrictive
covenants and corresponding events of default contained in the
indenture. Any restrictive covenants or corresponding events of
default that cease to apply to us as a result of achieving these
ratings will be restored if one or both of the credit ratings on
the notes later falls below these thresholds. However, during
any period in which these restrictive covenants are suspended,
we may incur other indebtedness, make restricted payments and
take other actions that would have been prohibited if these
covenants had been in effect. If the restrictive covenants are
later restored, the actions taken while the covenants were
suspended will not result in an event of default under the
indenture even if they would constitute an event of default at
the time the covenants are restored. Accordingly, if these
covenants and corresponding events of default are suspended,
holders of the notes will have less credit protection than at
the time the Original Notes were issued.
Failure
to comply with covenants in the indenture or in any future
financing agreements could result in cross-defaults under some
of such financing agreements and our senior secured credit
facility, which cross-defaults could jeopardize our ability to
satisfy our obligations under the notes.
Various risks, uncertainties and events beyond our control could
affect our ability to comply with the covenants, financial tests
and ratios required by the credit agreement or any future
financing agreements we may enter into. Failure to comply with
any of the covenants in the credit agreement or in any future
financing agreements could result in a default under those
agreements and under other agreements containing cross-default
provisions, including our senior secured credit facility. A
default would permit lenders to cease to make further extensions
of credit, accelerate the maturity of the debt under these
agreements and foreclose upon any collateral securing that debt.
Under these circumstances, we might not have sufficient funds or
other resources to satisfy all of our obligations, including our
ability to repay our senior secured credit facility and our
obligations under the notes.
An
adverse rating of the notes may cause their trading price to
fall.
If a rating agency rates the notes, it may assign a rating that
is lower than expected. Ratings agencies also may lower ratings
on the notes in the future. If rating agencies assign a
lower-than-expected rating or reduce, or indicate that they may
reduce, their ratings in the future, the trading price of the
notes could significantly decline.
31
You
may be required to include original issue discount on the notes
in your gross income for United States federal income tax
purposes in advance of the receipt of cash payments attributable
to that income.
The notes have been issued with original issue discount
(OID) for United States federal income tax purposes.
U.S. Holders (as defined in Material
U.S. Federal Income Tax Considerations) are required
to include any OID in gross income (as ordinary income) on a
constant yield basis for United States federal income tax
purposes in advance of the receipt of cash payments to which
such income is attributable and regardless of such
U.S. Holders method of tax accounting. For more
information, see Material U.S. Federal Income Tax
Considerations.
If we
file a bankruptcy petition, or if a bankruptcy petition is filed
against us, you may receive a lesser amount for your claim under
the notes than you would have been entitled to receive under the
indenture governing the notes.
If we file a bankruptcy petition under the United States
Bankruptcy Code after the issuance of the notes, or if such a
bankruptcy petition is filed against us, your claim against us
for the principal amount of your notes may be limited to an
amount equal to:
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the original issue price for the notes; and
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the portion of original issue discount that does not constitute
unmatured interest for purposes of the United States
Bankruptcy Code.
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Any original issue discount that was not amortized as of the
date of any bankruptcy filing would constitute unmatured
interest. Accordingly, under these circumstances, you may
receive a lesser amount than you would have been entitled to
receive under the terms of the indenture governing the notes,
even if sufficient funds are available.
Fraudulent
conveyance laws may permit courts to void the guarantors
guarantees, of the notes in specific circumstances, which would
interfere with the payment under the guarantors
guarantees.
Federal and state statutes may allow courts, under specific
circumstances described below, to void the guarantors
guarantees, of the notes. If such a voidance occurs, our
noteholders might be required to return payments received from
our guarantors in the event of bankruptcy or other financial
difficulty of our guarantors. Under United States federal
bankruptcy law and comparable provisions of state fraudulent
conveyance laws, a guarantee could be set aside if, among other
things, a subsidiary guarantor, at the time it incurred the debt
evidenced by its guarantee:
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incurred the guarantee with the intent of hindering, delaying or
defrauding current or future creditors; or
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received less than reasonably equivalent value or fair
consideration for incurring the guarantee, and
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was insolvent or was rendered insolvent by reason of the
incurrence;
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was engaged, or about to engage, in a business or transaction
for which the assets remaining with it constituted unreasonably
small capital to carry on such business; or
|
|
|
|
intended to incur, or believed that it would incur, debts beyond
its ability to pay as those debts mature.
|
The tests for fraudulent conveyance, including the criteria for
insolvency, will vary depending upon the law of the jurisdiction
that is being applied. Generally, however, a debtor would be
considered insolvent if, at the time the debtor incurred the
debt, either:
|
|
|
|
|
the sum of the debtors debts and liabilities, including
contingent liabilities, was greater than the debtors
assets at fair valuation;
|
32
|
|
|
|
|
the present fair saleable value of the debtors assets was
less than the amount required to pay the probable liability on
the debtors total existing debts and liabilities,
including contingent liabilities, as they became absolute and
matured; or
|
|
|
|
it could not pay its debts as they became due.
|
If a court voids any guarantee(s) or holds them unenforceable,
you will cease to be a creditor of the Company or applicable
guarantor(s) and will be a creditor solely of the Issuer and any
remaining guarantor(s).
USE OF
PROCEEDS
The exchange offer is intended to satisfy our obligations under
the registration rights agreement that we entered into with the
initial purchasers in connection with the private offering of
the Original Notes. We will not receive any cash proceeds from
the issuance of the Exchange Notes. The Original Notes that are
surrendered in exchange for the Exchange Notes will be retired
and cancelled and cannot be reissued. As a result, the issuance
of the Exchange Notes will not result in any increase or
decrease in our indebtedness.
Spirits net cash proceeds from the private offering of the
Original Notes, after deducting initial purchaser discounts,
original issue discount and its fees and expenses, were
approximately $286.3 million. We used the net cash proceeds
of the offering of the Original Notes to repay borrowings under
our existing senior secured revolving credit facility without
any reduction of the lenders commitment thereunder and for
general corporate purposes.
33
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
our unaudited capitalization at October 1, 2009. You should
read this table in conjunction with the information included
under the headings Use of Proceeds, Summary
Historical Consolidated Financial Data of Spirit AeroSystems
Holdings, Inc. and Selected Consolidated Financial
Information of Spirit AeroSystems Holdings, Inc., the
Managements Discussion and Analysis of Financial
Condition and Results of Operations section and with the
Companys audited consolidated financial statements and
related notes thereto for the fiscal year ended
December 31, 2008 and unaudited condensed consolidated
financial statements and related notes thereto for the quarterly
period ended October 1, 2009 which are included elsewhere
in, or incorporated by reference into, this prospectus.
|
|
|
|
|
|
|
As of October 1, 2009
|
|
|
|
Actual
|
|
|
|
(In millions)
|
|
|
Cash and cash equivalents
|
|
$
|
206.7
|
|
|
|
|
|
|
Revolving Credit Facility(1)
|
|
|
|
|
Term Loan due September 2013
|
|
|
573.5
|
|
Malaysian Term Loan due May 2017
|
|
|
8.8
|
|
Capital Leases(2)
|
|
|
6.0
|
|
Other
|
|
|
1.9
|
|
|
|
|
|
|
Total Senior Secured Debt
|
|
|
590.2
|
|
Senior Notes due October 1, 2017, net of discount(3)
|
|
|
293.4
|
|
|
|
|
|
|
Total Debt
|
|
|
883.6
|
|
Stockholders Equity
|
|
|
1,455.9
|
|
|
|
|
|
|
Total Capitalization
|
|
$
|
2,339.5
|
|
|
|
|
|
|
|
|
|
(1) |
|
As of October 1, 2009, we had no outstanding balance under
our existing senior secured revolving credit facility.
Commitments for $320.2 million of the revolving credit
facility mature on June 30, 2010 and commitments for the
balance, totaling $408.8 million, mature on June 30,
2012. See Description of Certain Indebtedness. |
|
(2) |
|
Includes a $4.1 million capital lease for the
Companys St. Nazaire facility in France and a
$1.9 million capital lease for the Companys Malaysia
facility. |
|
(3) |
|
Consists of $300.0 million aggregate principal amount of
notes sold at a discounted price of 97.804% of their face value.
The discount will accrete and be included in interest expense as
the notes mature. |
34
RATIO OF
EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed
charges for the periods indicated (dollars in thousands, except
ratio amounts).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spirit Holdings
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 17,
|
|
|
|
January 1,
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
2005
|
|
|
Fiscal Year
|
|
|
|
Ended
|
|
|
Twelve Months Ended
|
|
|
through
|
|
|
|
through
|
|
|
Ended
|
|
|
|
October 1,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 29,
|
|
|
|
June 16,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(in millions, except ratios)
|
|
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income from continuing operations before adjustment for
noncontrolling interests in consolidated subsidiaries or income
or loss from equity investees
|
|
$
|
200.7
|
|
|
$
|
383.9
|
|
|
$
|
419.8
|
|
|
$
|
(71.5
|
)
|
|
$
|
(76.6
|
)
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Add: Fixed Charge (from below)
|
|
$
|
36.5
|
|
|
$
|
47.0
|
|
|
$
|
46.6
|
|
|
$
|
62.1
|
|
|
$
|
29.4
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Add: Amortization of capitalized interest
|
|
$
|
1.7
|
|
|
$
|
1.5
|
|
|
$
|
1.0
|
|
|
$
|
0.2
|
|
|
$
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Add: Distributed income of equity investee
|
|
$
|
(0.2
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Subtract Capitalized interest expense
|
|
$
|
5.1
|
|
|
$
|
5.4
|
|
|
$
|
7.5
|
|
|
$
|
10.3
|
|
|
$
|
3.0
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$
|
233.6
|
|
|
$
|
427.0
|
|
|
$
|
459.9
|
|
|
$
|
(19.5
|
)
|
|
$
|
(50.2
|
)
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (including amortization of debt issuance costs,
debt discounts and premiums)
|
|
$
|
29.1
|
|
|
$
|
39.2
|
|
|
$
|
36.8
|
|
|
$
|
50.1
|
|
|
$
|
25.5
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Add: Capitalized interest expense
|
|
$
|
5.1
|
|
|
$
|
5.4
|
|
|
$
|
7.5
|
|
|
$
|
10.3
|
|
|
$
|
3.0
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Add: Portion of rentals representing interest (1/3 operating
lease payments)
|
|
$
|
2.3
|
|
|
$
|
2.4
|
|
|
$
|
2.3
|
|
|
$
|
1.7
|
|
|
$
|
0.9
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$
|
36.5
|
|
|
$
|
47.0
|
|
|
$
|
46.6
|
|
|
$
|
62.1
|
|
|
$
|
29.4
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Ratio of earnings to fixed charges
|
|
|
6.4
|
|
|
|
9.1
|
|
|
|
9.9
|
|
|
|
A
|
|
|
|
B
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
A) |
|
Due to the registrants loss in 2006, the ratio coverage
was less than 1:1. The registrant needed to generate additional
earnings of $81.6 to achieve a coverage ratio of 1:1. |
|
B) |
|
Due to the registrants loss in 2005, the ratio coverage
was less than 1:1. The registrant needed to generate additional
earnings of $79.6 to achieve a coverage ratio of 1:1. |
35
SELECTED
CONSOLIDATED FINANCIAL INFORMATION OF SPIRIT AEROSYSTEMS
HOLDINGS, INC.
The following table sets forth our selected consolidated
financial data for each of the periods indicated. The periods
prior to and including June 16, 2005 reflect data of the
Wichita Division of Boeing Commercial Airplanes
(Predecessor) for financial accounting purposes. The
periods beginning June 17, 2005 reflect our financial data
after the Boeing Acquisition. Financial data for the year ended
December 31, 2004 (Predecessor), and the period from
January 1, 2005 through June 16, 2005 (Predecessor),
the period from June 17, 2005 through December 29,
2005 (Spirit Holdings) and the twelve-month periods ended
December 31, 2006, December 31, 2007 and
December 31, 2008 (Spirit Holdings) are derived from the
audited consolidated financial statements of Predecessor or the
audited consolidated financial statements of Spirit Holdings, as
applicable. The audited historical financial information for the
years ended December 31, 2006, December 31, 2007 and
December 31, 2008 (Spirit Holdings) was derived from our
audited consolidated financial statements contained in our
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008, filed with the
SEC on February 20, 2009 which have been retrospectively
amended to reflect the addition of condensed consolidating
financial information, as contained in our Current Report on
Form 8-K
filed with the SEC on November 24, 2009. The unaudited
historical financial information as of, and for, the nine-month
periods ended October 1, 2009 and September 25, 2008
(Spirit Holdings) was derived from our unaudited condensed
consolidated financial statements contained in our Quarterly
Report on
Form 10-Q,
filed with the SEC on November 6, 2009 which have been
retrospectively amended to reflect the addition of condensed
consolidating financial information, as contained in our Current
Report on
Form 8-K
filed with the SEC on November 24, 2009.
This information is only a summary and should be read in
conjunction with our consolidated financial statements and
accompanying notes and Managements Discussion and
Analysis of Financial Condition and Results of Operations
contained in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 and Quarterly
Reports on
Form 10-Q
for the quarters ended April 2, 2009, July 2, 2009 and
October 1, 2009, each of which is incorporated by reference
into this registration statement. The selected financial data
for the nine months ended October 1, 2009 and
September 25, 2008 has been derived from our unaudited
condensed consolidated financial statements which, in the
opinion of management, contains all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation
of the financial condition, results of operations and cash flows
for these periods. Historical results of operations may not be
indicative of results to be expected for any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spirit Holdings
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
|
|
Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from
|
|
|
|
from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 17,
|
|
|
|
January 1,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
2005
|
|
|
Fiscal Year
|
|
|
|
Nine Months Ended
|
|
|
Twelve Months Ended
|
|
|
through
|
|
|
|
through
|
|
|
Ended
|
|
|
|
October 1,
|
|
|
September 25,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 29,
|
|
|
|
June 16,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Statement of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
3,000.8
|
|
|
$
|
3,125.7
|
|
|
$
|
3,771.8
|
|
|
$
|
3,860.8
|
|
|
$
|
3,207.7
|
|
|
$
|
1,207.6
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Cost of sales(1)
|
|
|
2,637.2
|
|
|
|
2,596.1
|
|
|
|
3,163.2
|
|
|
|
3,197.2
|
|
|
|
2,934.3
|
|
|
|
1,056.4
|
|
|
|
|
1,163.9
|
|
|
|
2,074.3
|
|
Selling, general and administrative expenses(2)
|
|
|
103.6
|
|
|
|
119.0
|
|
|
|
154.5
|
|
|
|
192.1
|
|
|
|
225.0
|
|
|
|
140.7
|
|
|
|
|
79.7
|
|
|
|
155.1
|
|
Research and development
|
|
|
41.6
|
|
|
|
33.1
|
|
|
|
48.4
|
|
|
|
52.3
|
|
|
|
104.7
|
|
|
|
78.3
|
|
|
|
|
11.0
|
|
|
|
18.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spirit Holdings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
|
|
Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from
|
|
|
|
from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 17,
|
|
|
|
January 1,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
2005
|
|
|
Fiscal Year
|
|
|
|
Nine Months Ended
|
|
|
Twelve Months Ended
|
|
|
through
|
|
|
|
through
|
|
|
Ended
|
|
|
|
October 1,
|
|
|
September 25,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 29,
|
|
|
|
June 16,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
218.4
|
|
|
|
377.5
|
|
|
|
405.7
|
|
|
|
419.2
|
|
|
|
(56.3
|
)
|
|
|
(67.8
|
)
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Interest expense and financing fee (amortization)(3)
|
|
|
(29.1
|
)
|
|
|
(29.5
|
)
|
|
|
(39.2
|
)
|
|
|
(36.8
|
)
|
|
|
(50.1
|
)
|
|
|
(25.5
|
)
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Interest income
|
|
|
6.2
|
|
|
|
15.1
|
|
|
|
18.6
|
|
|
|
29.0
|
|
|
|
29.0
|
|
|
|
15.4
|
|
|
|
|
|
|
|
|
|
|
Other income (loss), net
|
|
|
5.2
|
|
|
|
0.9
|
|
|
|
(1.2
|
)
|
|
|
8.4
|
|
|
|
5.9
|
|
|
|
1.3
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity in net loss of
affiliate
|
|
|
200.7
|
|
|
|
364.0
|
|
|
|
383.9
|
|
|
|
419.8
|
|
|
|
(71.5
|
)
|
|
|
(76.6
|
)
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Income tax benefit (provision)(4)
|
|
|
(58.8
|
)
|
|
|
(118.4
|
)
|
|
|
(118.5
|
)
|
|
|
(122.9
|
)
|
|
|
88.3
|
|
|
|
(13.7
|
)
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before equity in net loss of affiliate
|
|
|
141.9
|
|
|
|
245.6
|
|
|
|
265.4
|
|
|
|
296.9
|
|
|
|
16.8
|
|
|
|
(90.3
|
)
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Equity in net loss of affiliate
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
141.7
|
|
|
$
|
245.6
|
|
|
$
|
265.4
|
|
|
$
|
296.9
|
|
|
$
|
16.8
|
|
|
$
|
(90.3
|
)
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Net income (loss) per share, basic
|
|
$
|
1.03
|
|
|
$
|
1.79
|
|
|
$
|
1.94
|
|
|
$
|
2.21
|
|
|
$
|
0.15
|
|
|
$
|
(0.80
|
)
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Shares used in per share calculation, basic
|
|
|
138.2
|
|
|
|
136.9
|
|
|
|
137.0
|
|
|
|
134.5
|
|
|
|
115.6
|
|
|
|
113.5
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Net income (loss) per share, diluted
|
|
$
|
1.01
|
|
|
$
|
1.76
|
|
|
$
|
1.91
|
|
|
$
|
2.13
|
|
|
$
|
0.14
|
|
|
$
|
(0.80
|
)
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Shares used in per share calculation, diluted
|
|
|
140.0
|
|
|
|
139.2
|
|
|
|
139.2
|
|
|
|
139.3
|
|
|
|
122.0
|
|
|
|
113.5
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
(1) |
|
Included in the fiscal year ended December 31, 2007 cost of
sales are charges of $1.2 million for the UEP. Included in
the fiscal year ended December 31, 2006 cost of sales are
non-recurring charges of $321.9 million for the UEP. |
|
(2) |
|
Includes non-cash stock compensation expenses of
$6.4 million and $11.3 million for the respective
nine-month periods ended October 1, 2009 and
September 25, 2008 and $15.3 million,
$32.6 million, $56.6 million, $34.7 million,
$22.1 million and $23.3 million for the respective
periods starting with the twelve months ended December 31,
2008. Included in the fiscal year ended December 31, 2007
are $4.9 million of costs associated with the potential
acquisition of Airbus European manufacturing sites in
2007. Also included in the fiscal year ended December 31,
2006 are $8.3 million of charges related to the
Companys IPO in November 2006. |
|
(3) |
|
Included in the fiscal year ended December 31, 2006
interest expense and financing fee amortization are expenses
related to the IPO of $3.7 million. |
|
(4) |
|
Included in the fiscal year ended December 31, 2006 income
tax benefit is a $40.1 million federal and a
$4.0 million state tax valuation allowance reversal. |
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spirit Holdings
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
|
Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from
|
|
|
from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 17,
|
|
|
January 1,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2005
|
|
Fiscal Year
|
|
|
Nine Months Ended
|
|
Twelve Months Ended
|
|
through
|
|
|
through
|
|
Ended
|
|
|
October 1,
|
|
September 25,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 29,
|
|
|
June 16,
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
2005
|
|
2004
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Audited)
|
|
|
|
|
|
Consolidated Balance Sheet Data (at period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents(1)
|
|
$
|
206.7
|
|
|
$
|
177.7
|
|
|
$
|
216.5
|
|
|
$
|
133.4
|
|
|
$
|
184.3
|
|
|
$
|
241.3
|
|
|
|
$
|
0.8
|
|
|
$
|
3.0
|
|
Accounts receivable, net
|
|
$
|
235.8
|
|
|
$
|
211.9
|
|
|
$
|
149.3
|
|
|
$
|
159.9
|
|
|
$
|
200.2
|
|
|
$
|
98.8
|
|
|
|
$
|
0.4
|
|
|
$
|
2.0
|
|
Inventories, net
|
|
$
|
2,204.6
|
|
|
$
|
1,768.8
|
|
|
$
|
1,882.0
|
|
|
$
|
1,342.6
|
|
|
$
|
882.2
|
|
|
$
|
510.7
|
|
|
|
$
|
487.6
|
|
|
$
|
524.6
|
|
Property, plant & equipment, net
|
|
$
|
1,224.0
|
|
|
$
|
1,053.2
|
|
|
$
|
1,068.3
|
|
|
$
|
963.8
|
|
|
$
|
773.8
|
|
|
$
|
518.8
|
|
|
|
$
|
528.4
|
|
|
$
|
511.0
|
|
Total assets
|
|
$
|
4,283.7
|
|
|
$
|
3,862.7
|
|
|
$
|
3,760.3
|
|
|
$
|
3,339.9
|
|
|
$
|
2,722.2
|
|
|
$
|
1,656.6
|
|
|
|
$
|
1,020.4
|
|
|
$
|
1,043.6
|
|
Total debt
|
|
$
|
883.6
|
|
|
$
|
591.9
|
|
|
$
|
588.0
|
|
|
$
|
595.0
|
|
|
$
|
618.2
|
|
|
$
|
721.6
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Long-term debt
|
|
$
|
583.5
|
|
|
$
|
583.8
|
|
|
$
|
580.9
|
|
|
$
|
579.0
|
|
|
$
|
594.3
|
|
|
$
|
710.0
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Shareholders equity
|
|
$
|
1,455.9
|
|
|
$
|
1,508.6
|
|
|
$
|
1,297.0
|
|
|
$
|
1,266.6
|
|
|
$
|
859.0
|
|
|
$
|
325.8
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in) operating activities
|
|
$
|
(211.3
|
)
|
|
$
|
146.6
|
|
|
$
|
210.7
|
|
|
$
|
180.1
|
|
|
$
|
273.6
|
|
|
$
|
223.8
|
|
|
|
$
|
(1,177.8
|
)
|
|
$
|
(2,164.9
|
)
|
Cash flow (used in) investing activities
|
|
$
|
(71.3
|
)
|
|
$
|
(88.8
|
)
|
|
$
|
(119.8
|
)
|
|
$
|
(239.1
|
)
|
|
$
|
(473.6
|
)
|
|
$
|
(1,030.3
|
)
|
|
|
$
|
(48.2
|
)
|
|
$
|
(54.4
|
)
|
Cash flow provided by (used in) financing activities
|
|
$
|
271.1
|
|
|
$
|
(8.3
|
)
|
|
$
|
3.5
|
|
|
$
|
8.3
|
|
|
$
|
140.9
|
|
|
$
|
1,047.8
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Capital expenditures
|
|
$
|
(158.0
|
)
|
|
$
|
(175.2
|
)
|
|
$
|
(235.8
|
)
|
|
$
|
(288.2
|
)
|
|
$
|
(343.2
|
)
|
|
$
|
(144.6
|
)
|
|
|
$
|
(48.2
|
)
|
|
$
|
(54.4
|
)
|
|
|
|
(1) |
|
Prior to the Boeing Acquisition, the Predecessor was part of
Boeings cash management system, and consequently, had no
separate cash balance. Therefore, at June 16, 2005, and
December 31, 2004, the Predecessor had negligible cash on
the balance sheet. |
38
THE
EXCHANGE OFFER
Purpose
and Effect of the Exchange Offer
On September 30, 2009, Spirit sold $300.0 million in
aggregate principal amount at maturity of the outstanding
Original Notes in a private placement. The Original Notes were
sold to the initial purchasers who in turn resold the notes to a
limited number of Qualified Institutional Buyers, as
defined under the Securities Act.
The exchange offer is designed to provide holders of Original
Notes with an opportunity to acquire Exchange Notes which,
unlike the Original Notes, will not be restricted securities and
will be freely transferable at all times, subject to any
restrictions on transfer imposed by state blue sky
laws and provided that the holder is not our affiliate within
the meaning of the Securities Act and represents that the
Exchange Notes are being acquired in the ordinary course of the
holders business and the holder is not engaged in, and
does not intend to engage in, a distribution of the Exchange
Notes.
The outstanding Original Notes in the aggregate principal amount
of $300,000,000 were originally issued and sold on
September 30, 2009, the issue date, to Banc of America
Securities LLC and the other initial purchasers, pursuant to the
purchase agreement dated as of September 24, 2009. The
Original Notes were issued and sold in a transaction not
registered under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act.
The concurrent resale of the Original Notes by the initial
purchasers to investors was accomplished in reliance upon the
exemption provided by Rule 144A and Regulation S under
the Securities Act. The Original Notes are restricted securities
and may not be reoffered, resold or transferred other than
pursuant to a registration statement filed pursuant to the
Securities Act or unless an exemption from the registration
requirements of the Securities Act is available. Pursuant to
Rule 144 under the Securities Act, the Original Notes may
generally be resold (a) commencing six months after the
issue date, in an amount up to, for any three-month period, the
greater of 1% of the Original Notes then outstanding or the
average weekly trading volume of the Original Notes during the
four calendar weeks preceding the filing of the required notice
of sale with the SEC so long as Spirit Holdings remains current
in its periodic filing obligations and (b) commencing one
year after the issue date, in any amount and otherwise without
restriction by a holder who is not, and has not been for the
preceding three months, our affiliate. Certain other exemptions
may also be available under other provisions of the federal
securities laws for the resale of the Original Notes.
In connection with the sale of the Original Notes, we and the
initial purchasers entered into a registration rights agreement,
dated September 30, 2009 (the registration rights
agreement). Under the registration rights agreement, we
agreed to file with the SEC an exchange offer registration
statement regarding the exchange of the Original Notes for new
Exchange Notes which are registered under the Securities Act
within 180 calendar days after the closing of the offering of
the Original Notes. We also agreed to (i) use our
reasonable best efforts to cause the exchange offer registration
statement to be declared effective by the SEC within 240
calendar days after the closing of the offering of the Original
Notes, (ii) keep the exchange offer registration statement
effective until the closing of the exchange offer and
(iii) use our reasonable best efforts to consummate the
exchange offer within 360 calendar days after the closing of the
offering of the Original Notes. Once the exchange offer
registration statement of which this prospectus forms a part has
been declared effective, we will offer the Exchange Notes in
exchange for surrender of the Original Notes. We will keep the
exchange offer open for at least 20 business days (or longer if
required by applicable law) after the date that notice of the
exchange offer is mailed to holders of the Original Notes. We
will use our commercially reasonable efforts to keep this
registration statement continuously effective, if requested by
one or more broker-dealers, for a period ending on the earlier
of (x) 180 days from the date on which the exchange
offer registration statement is declared effective by the SEC
and (ii) the date on which a broker-dealer is no longer
required to deliver a prospectus with respect to the transfer
restricted securities (as defined in the registration rights
agreement) in connection with market-making or other trading
activities. For each Original Note surrendered to us pursuant to
the exchange offer, the holder who surrendered such note will
receive an Exchange Note having a principal amount equal to that
of the surrendered note. Interest on each Exchange Note will
accrue from the last interest payment date on which interest was
paid on the Original Note surrendered in exchange therefor or,
if no interest has been paid on such note, from the original
issue date of
39
such Original Note. You are a holder with respect to the
exchange offer if you are a person in whose name any Original
Notes are registered on our books or any person who has obtained
a properly completed assignment of Original Notes from the
registered holder.
In addition, in connection with any resales of Exchange Notes,
any broker dealer (a Participating Broker Dealer)
which acquired the notes for its own account as a result of
market making or other trading activities must deliver a
prospectus meeting the requirements of the Securities Act. The
SEC has taken the position that Participating Broker Dealers may
fulfill their prospectus delivery requirements with respect to
the Exchange Notes (other than a resale of an unsold allotment
from the offering of the Original Notes) with the prospectus
contained in the exchange offer registration statement. We have
agreed to make available for a period of up to 180 days
after consummation of the exchange offer (or shorter as provided
in the preceding paragraph) a prospectus meeting the
requirements of the Securities Act to any Participating Broker
Dealer and any other persons with similar prospectus delivery
requirements, for use in connection with any resale of Exchange
Notes. A Participating Broker Dealer or any other person that
delivers such a prospectus to purchasers in connection with such
resales will be subject to certain of the civil liability
provisions under the Securities Act and will be bound by the
provisions of the registration rights agreement (including
certain indemnification rights and obligations thereunder).
We are making the exchange offer to comply with our obligations
under the registration rights agreement. Upon the effectiveness
of the registration statement, we will offer the Exchange Notes
in exchange for the Original Notes. A copy of the registration
rights agreement has been filed as an exhibit to the
registration statement of which this prospectus is a part.
Each holder of the notes who wishes to exchange the Original
Notes for Exchange Notes in the exchange offer will be required
to make certain representations to us, including representations
that:
|
|
|
|
|
any Exchange Notes to be received by it will be acquired in the
ordinary course of its business,
|
|
|
|
it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes,
|
|
|
|
it is not an affiliate (as defined in Rule 405
under the Securities Act) of the Issuer or, if it is such an
affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act, to the extent
applicable, and
|
|
|
|
it is not acting on behalf of any person who could not
truthfully make the foregoing representations.
|
In addition, the registration rights agreement provides that in
the event:
(i) any changes in law or the applicable interpretations of
the staff of the SEC do not permit the Issuer to effect the
exchange offer,
(ii) for any other reason the exchange offer is not
consummated within 360 calendar days after the closing of the
offering of the Original Notes,
(iii) under certain circumstances, if the initial
purchasers shall so request or
(iv) any holder of the Original Notes is not eligible to
participate in the exchange offer, we will,
(a) as promptly as practicable, file with the SEC a shelf
registration statement covering resales of the Original Notes,
(b) use our reasonable best efforts to cause the shelf
registration statement to be declared effective under the
Securities Act as promptly as practicable but no later than the
later of (1) 90 days after the time such obligation to
file first arises and (2) April 30, 2010 and
(c) use our reasonable best efforts to keep the shelf
registration statement effective until the earlier of the first
anniversary of the effectiveness of such shelf registration
statement and the date all Original Notes covered by the shelf
registration statement have been sold in the manner set forth
and as contemplated in the shelf registration statement. We
further agreed to use our reasonable best efforts to keep the
shelf registration statement effective until the first
anniversary of the effectiveness of such shelf registration
statement. We will, in the event of the filing of the shelf
registration statement, provide to each holder of the Original
Notes copies of the prospectus which is a part of the shelf
40
registration statement, notify each such holder when the shelf
registration statement has become effective and take certain
other actions as are required to permit unrestricted resales of
the Original Notes. A holder of Original Notes that sells its
Original Notes pursuant to the shelf registration statement
generally (i) will be required to be named as a selling
securityholder in the related prospectus and to deliver a
prospectus to purchasers, (ii) will be subject to certain
of the civil liability provisions under the Securities Act in
connection with such sales and (iii) will be bound by the
provisions of the registration rights agreement that are
applicable to such a holder (including certain indemnification
rights and obligations thereunder). In addition, each holder of
Original Notes will be required to deliver information to be
used in connection with the shelf registration statement and to
provide comments on the shelf registration statement within the
time periods set forth in the registration rights agreement to
have its Original Notes included in the shelf registration
statement and to benefit from the provisions regarding
additional interest described in the following paragraph.
Subject to the Suspension Rights discussed below, pursuant to
the registration rights agreement, in the event that
(i) the exchange offer registration statement has not been
declared effective within the time period described above,
(ii) the exchange offer is not consummated and no shelf
registration statement is declared effective within the time
period described above or (iii) the shelf registration
statement is declared effective but shall thereafter become
unusable for a period in excess of five days, the interest rate
borne by the notes will be increased by 0.25% per annum,
beginning the day after the date specified in clause (i),
(ii) or (iii) above, as applicable. Thereafter, the
interest rate borne by the notes will be increased by an
additional 0.25% per annum for each 90 day period that
elapses before additional interest ceases to accrue in
accordance with the following sentence; provided that the
aggregate increase in such annual interest rate may in no event
exceed 1.00%. Upon (x) the effectiveness of the exchange
offer registration statement (in the case of clause (i)
above), (y) the consummation of the exchange offer or the
effectiveness of a shelf registration statement, as the case may
be (in the case of clause (ii) above), or (z) the
shelf registration statement, together with any amendment or
supplement thereto, becomes usable (in the case of
clause (iii) above), the interest rate borne by the notes
will be reduced to the original interest rate if we are
otherwise in compliance with the terms of the registration
rights agreement described in this paragraph; provided, however,
that if, after any such reduction in interest rate, a different
event specified in clause (i), (ii) or (iii) above
occurs, the interest rate may again be increased pursuant to the
foregoing provisions.
Under the terms of the registration rights agreement, the Issuer
and the guarantors may allow the exchange offer registration
statement, at any time after the consummation of the exchange
offer (if otherwise required to keep it effective), or the shelf
registration statement and the related prospectus to cease to
remain effective and usable or may delay the filing or the
effectiveness of the shelf registration statement if not then
filed or effective, as applicable (the Suspension
Rights), for one or more periods of 45 days in the
aggregate in any twelve-month period if the board of directors
of Spirit or Spirit Holdings determines in good faith that it is
in the best interests of Spirit or Spirit Holdings not to
disclose the existence of or facts surrounding any proposed or
pending material corporate transaction involving the Issuer or
any of the guarantors, and the Issuer mails notification to the
holders within the specified period. The Issuer and the
guarantors also agreed that the period during which the exchange
offer registration statement is required to be effective and
usable shall be extended by the number of days during which such
registration statement was not effective or usable.
This summary of certain provisions of the registration rights
agreement does not purport to be complete and is subject to, and
is qualified in its entirety by, the complete provisions of the
registration rights agreement, a copy of which has been filed as
an exhibit to the registration statement of which this
prospectus is a part.
Resale of
the Exchange Notes
We have not requested, and do not intend to request, an
interpretation by the staff of the SEC as to whether the
Exchange Notes issued pursuant to the exchange offer in exchange
for the Original Notes may be offered for sale, resold or
otherwise transferred by any holder without compliance with the
registration and prospectus delivery provisions of the
Securities Act. Instead, under existing interpretations of the
Securities Act by the SEC contained in the Exxon Capital
Holdings Corp., SEC No-Action Letter (April 13, 1988),
Morgan Stanley & Co, Inc., SEC No-Action Letter
(June 5, 1991), and Shearman & Sterling, SEC
No-Action
41
Letter (July 2, 1993) issued to third parties not
related to us and subject to the immediately following sentence,
we believe that you may exchange Original Notes for Exchange
Notes in the ordinary course of business and that the Exchange
Notes would generally be freely transferable by holders thereof
after the exchange offer without further registration under the
Securities Act and without delivering to purchasers of the
Exchange Notes a prospectus that satisfies the requirements of
Section 10 of the Securities Act (subject to certain
representations required to be made by each holder of the
Original Notes, as set forth above). However, any purchaser of
the Original Notes who is an affiliate of us and any
purchaser of the Original Notes who intends to participate in
the exchange offer for the purpose of distributing the Exchange
Notes (i) will not be able to rely on the interpretations
of the staff of the SEC, (ii) will not be able to tender
its Original Notes in the exchange offer and (iii) must
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale
or transfer of the notes unless such sale or transfer is made
pursuant to an exemption from such requirements.
In addition, if:
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you are a broker-dealer tendering Original Notes purchased
directly from us for your own account; or
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you acquire Exchange Notes in the exchange offer for the purpose
of distributing or participating in the distribution of the
Exchange Notes,
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you cannot rely on the position of the staff of the SEC
contained in such no-action letters and must comply with the
registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless
an exemption from registration is otherwise available.
Each broker-dealer that receives Exchange Notes for its own
account in exchange for Original Notes, which the broker-dealer
acquired as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of the Exchange Notes.
The letter of transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an underwriter within the meaning
of the Securities Act. A broker-dealer may use this prospectus,
as it may be amended or supplemented from time to time, in
connection with resales of Exchange Notes received in exchange
for Original Notes which the broker-dealer acquired as a result
of market-making or other trading activities. See Plan of
Distribution for a discussion of the exchange and resale
obligations of broker-dealers in connection with the exchange
offer.
Terms of
the Exchange Offer
This prospectus and the accompanying letter of transmittal
together constitute the exchange offer. Upon the terms and
subject to the conditions set forth in this prospectus and in
the letter of transmittal, we will accept for exchange Original
Notes which are properly tendered on or before the expiration
date and are not withdrawn as permitted below. The expiration
date for this exchange offer is 5:00 p.m., New York City
time,
on ,
20 , or such later date and time to which we, in our
sole discretion, extend the exchange offer (the Expiration
Date).
As of the date of this prospectus, $300.0 million in
aggregate principal amount at maturity of the Original Notes are
outstanding. This prospectus, together with the letter of
transmittal, is being sent to all registered holders of the
Original Notes as of the date of this prospectus. There will be
no fixed record date for determining registered holders of the
Original Notes entitled to participate in the exchange offer;
however, holders of the Original Notes must tender their
certificates therefor or cause their Original Notes to be
tendered by book-entry transfer before the Expiration Date of
the exchange offer to participate.
The form and terms of the Exchange Notes being issued in the
exchange offer are the same as the form and terms of the
Original Notes, except that:
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the Exchange Notes being issued in the exchange offer will have
been registered under the Securities Act;
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the Exchange Notes being issued in the exchange offer will not
bear the restrictive legends restricting their transfer under
the Securities Act; and
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the Exchange Notes being issued in the exchange offer will not
contain provisions providing for registration rights or the
obligation to pay additional interest because of our failure to
register the Exchange Notes and complete this exchange offer as
required.
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Outstanding Original Notes being tendered in the exchange offer
must be in integral multiples of $1,000.
We intend to conduct the exchange offer in accordance with the
provisions of the registration rights agreement and applicable
federal securities laws. Original Notes that are not tendered
for exchange under the exchange offer will remain outstanding
and will be entitled to the rights under the indenture governing
the notes. Except in limited circumstances, any Original Notes
not tendered for exchange will not retain any rights under the
registration rights agreement and will remain subject to
transfer restrictions. See Consequences of
Failure to Exchange.
We will be deemed to have accepted validly tendered Original
Notes when, as and if we will have given oral or written notice
of its acceptance to the exchange agent. The exchange agent will
act as agent for the tendering holders for the purposes of
receiving the Exchange Notes from us. If any tendered Original
Notes are not accepted for exchange because of an invalid
tender, the occurrence of other events set forth in this
prospectus, or otherwise, certificates for any unaccepted
Original Notes will be returned, or, in the case of Original
Notes tendered by book-entry transfer, those unaccepted Original
Notes will be credited to an account maintained with DTC,
without expense to the tendering holder of those Original Notes
promptly after the termination or withdrawal or the exchange
offer. See Procedures for Tendering.
Subject to the instructions in the letter of transmittal, those
who tender Original Notes in the exchange offer will not be
required to pay brokerage commissions or fees or transfer taxes
with respect to the exchange under the exchange offer. Except as
set forth in instructions in the letter of transmittal, we will
pay all charges and expenses, other than transfer taxes
described below, in connection with the exchange offer. See
Fees and Expenses.
Expiration
Date; Extensions, Amendments
The Expiration Date is 5:00 p.m., New York City time
on ,
20 , unless we, in our sole discretion, extend the
Expiration Date. We may, in our sole discretion, terminate the
exchange offer.
To extend the Expiration Date, we will notify the exchange agent
of any extension by oral or written notice and we will notify
the holders of Original Notes, or cause them to be notified, by
making a public announcement of the extension, prior to
9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
We reserve the right (1) to refuse to accept any Original
Notes, to extend the Expiration Date or to terminate this
exchange offer and not accept any Original Notes for exchange if
any of the conditions set forth herein under
Conditions to the Exchange Offer shall
not have been satisfied or waived by us prior to the Expiration
Date, by giving oral or written notice of such delay, extension
or termination to the exchange agent; or (2) to amend the
terms of this exchange offer in any manner deemed by us to be
advantageous to the holders of the Original Notes. Any such
refusal in acceptance, extension, termination or amendment will
be followed as promptly as practicable by oral or written notice
thereof to the exchange agent. If this exchange offer is amended
in a manner determined by us to constitute a material change, or
if we waive a material condition, we will promptly disclose the
amendment or waiver in a manner reasonably calculated to inform
the holders of Original Notes of the amendment or waiver, and
extend the offer if required by law.
Without limiting the manner in which we may choose to make a
public announcement of any delay, extension, amendment or
termination of the exchange offer, we will have no obligation to
publish, advertise or otherwise communicate that public
announcement, other than by making a timely release to an
appropriate news agency.
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Conditions
to the Exchange Offer
Without regard to other terms of the exchange offer, we are not
required to accept for exchange, or to issue Exchange Notes in
the exchange offer for, any Original Notes and we may terminate
or amend the exchange offer, if at any time before the
acceptance of Original Notes for exchange, if:
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any federal law, statute, rule or regulation is proposed,
adopted or enacted which, in our judgment, might reasonably be
expected to impair our ability to proceed with the exchange
offer;
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any action or proceeding is instituted or threatened in any
court or by or before any governmental agency with respect to
the exchange offer that, in our judgment, might impair our
ability to proceed with the exchange offer;
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any stop order is threatened or in effect with respect to the
registration statement of which this prospectus constitutes a
part or the qualification of the indenture under the
Trust Indenture Act of 1939;
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any governmental approval or approval by holders of the Original
Notes has not been obtained if we, in our reasonable judgment,
deem this approval necessary for the consummation of the
exchange offer; or
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there occurs a change in the current interpretation by the staff
of the SEC which permits the Exchange Notes to be issued in the
exchange offer to be offered for resale, resold and otherwise
transferred by the holders of the Exchange Notes, other than
broker-dealers and any holder which is an affiliate
of ours within the meaning of Rule 405 under the Securities
Act, without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the
Exchange Notes acquired in the exchange offer are acquired in
the ordinary course of that holders business and that
holder has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes to be
issued in the exchange offer.
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The preceding conditions are for our sole benefit and we may
assert them regardless of the circumstances giving rise to any
such condition. The failure by us at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such
right, and each such right shall be deemed an ongoing right
which may be asserted any time and from time to time by us. If
we determine that any of these conditions is not satisfied, we
may:
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refuse to accept any Original Notes and return all tendered
Original Notes to the tendering holders, or, in the case of
Original Notes tendered by book-entry transfer, credit those
Original Notes to an account maintained with DTC;
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extend the Expiration Date and retain all Original Notes
tendered before the Expiration Date of the exchange offer,
subject, however, to the rights of the holders who have tendered
the Original Notes to withdraw their Original Notes; or
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waive unsatisfied conditions with respect to the exchange offer
and accept all properly tendered Original Notes that have not
been withdrawn. If the waiver constitutes a material change to
the exchange offer, we will promptly disclose the waiver by
means of a prospectus supplement that will be distributed to the
registered holders of the Original Notes, and we will extend the
exchange offer for a period of up to ten business days,
depending on the significance of the waiver and the manner of
disclosure of the registered holders of the Original Notes, if
the exchange offer would otherwise expire during this period.
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Procedures
for Tendering
To effectively tender Original Notes held in physical form, a
holder of the Original Notes must complete, sign and date the
letter of transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the letter of
transmittal, and mail or otherwise deliver such letter of
transmittal or a facsimile thereof, together with the
certificates representing such Original Notes and any other
required documents, to the exchange agent prior to
5:00 p.m., New York City time, on the Expiration Date.
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A holder may also, in lieu of the above, deposit Original Notes
held in physical form with DTC and make a book-entry transfer as
set forth below.
To effectively tender Original Notes by book-entry transfer to
the account maintained by the exchange agent at DTC, holders of
Original Notes may request a DTC participant to, on their
behalf, in lieu of physically completing and signing the letter
of transmittal and delivering it to the exchange agent,
electronically transmit their acceptance through DTCs
Automated Tender Offer Program (ATOP), and DTC will
then edit and verify the acceptance and send an agents
message (an Agents Message) to the exchange
agent for its acceptance. An Agents Message is a message
transmitted by DTC to, and received by, the exchange agent and
forming a part of the Book-Entry Confirmation (as defined
below), which states that DTC has received an express
acknowledgment from the DTC participant tendering Original Notes
on behalf of the holder of such Original Notes that such DTC
participant has received and agrees to bound by the terms and
conditions of the exchange offer as set forth in this prospectus
and the related letter of transmittal and that we may enforce
such agreement against such participant. Certificates
representing Original Notes, or a timely confirmation of a
book-entry transfer of the Original Notes into the exchange
agents account at DTC (a Book-Entry
Confirmation), pursuant to the book-entry transfer
procedures described below, as well as either a properly
completed and duly executed consent and letter of transmittal
(or manually signed facsimile thereof), or an Agents
Message pursuant to DTCs ATOP system, and any other
documents required by the letter of transmittal, must be mailed
or delivered to the exchange agent on or prior to
5:00 p.m., New York City time, on the Expiration Date.
Holders of Original Notes whose certificates for Original Notes
are not lost but are not immediately available or who cannot
deliver their certificates and all other documents required by
the letter of transmittal to the exchange agent on or prior to
the Expiration Date, or who cannot complete the procedures for
book-entry transfer on or prior to the Expiration Date, may
tender their Original Notes according to the guaranteed delivery
procedures set forth in The Exchange Offer
Guaranteed Delivery Procedures section of this prospectus.
The method of delivery of the letter of transmittal, any
required signature guarantees, the Original Notes and all other
required documents, including delivery of Original Notes through
DTC, and transmission of an Agents Message through
DTCs ATOP system, is at the election and risk of the
tendering holders, and the delivery will be deemed made only
when actually received or confirmed by the exchange agent. If
Original Notes are sent by mail, it is suggested that the
mailing be registered mail, properly insured, with return
receipt requested, made sufficiently in advance of the
Expiration Date, as desired, to permit delivery to the exchange
agent prior to 5:00 p.m. on the Expiration Date. Holders
tendering Original Notes through DTCs ATOP system must
allow sufficient time for completion of the ATOP procedures
during the normal business hours of DTC on such respective
date.
No Original Notes, letters of transmittal, Agents Messages
or other required documents should be sent to us. Delivery of
all Original Notes, letters of transmittal, Agents
Messages and other documents must be made to the exchange agent.
Holders may also request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect such
tender for such holders.
The tender by a holder of Original Notes will constitute an
agreement between such holder and us in accordance with the
terms and subject to the conditions set forth herein and in the
letter of transmittal. Holders of Original Notes registered in
the name of a broker, dealer, commercial bank, trust company or
other nominee who wish to tender must contact such registered
holder promptly and instruct such registered holder how to act
on such non-registered holders behalf.
Signatures on a letter of transmittal or a notice of withdrawal,
as the case may be, must be guaranteed by an eligible
guarantor institution within the meaning of
Rule 17Ad-15
under the Exchange Act (each an Eligible
Institution) unless the Original Notes tendered pursuant
thereto are tendered (1) by a registered holder of Original
Notes who has not completed the box entitled Special
Issuance Instructions or Special Delivery
Instructions on the letter of transmittal or (2) for
the account of an Eligible Institution.
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If a letter of transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and,
unless waived by us, evidence satisfactory to us of their
authority to so act must be submitted with such letter of
transmittal.
All questions as to the validity, form, eligibility, time of
receipt and withdrawal of the tendered Original Notes will be
determined by us in our sole discretion, which determination
will be final and binding. We reserve the absolute right to
reject any and all Original Notes not validly tendered or any
Original Notes which, if accepted, would, in the opinion of our
counsel, be unlawful. We also reserve the absolute right to
waive any irregularities or conditions of tender as to
particular Original Notes. Our interpretation of the terms and
conditions of this exchange offer, including the instructions in
the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in
connection with tenders of Original Notes must be cured within
such time as we shall determine. None of us, the exchange agent,
or any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Original
Notes, nor shall any of them incur any liability for failure to
give such notification. Tenders of Original Notes will not be
deemed to have been made until such irregularities have been
cured or waived. Any Original Notes received by the exchange
agent that are not validly tendered and as to which the defects
or irregularities have not been cured or waived will be returned
without cost to such holder by the exchange agent, unless
otherwise provided in the letter of transmittal, promptly after
the termination or withdrawal of the exchange offer.
We reserve the right, in our sole discretion, to purchase or
make offers for any Original Notes after the Expiration Date,
from time to time, through open market or privately negotiated
transactions, one or more additional exchange or tender offers,
or otherwise, as permitted by law, the indenture and our other
debt agreements. Following consummation of this exchange offer,
the terms of any such purchases or offers could differ
materially from the terms of this exchange offer.
By tendering, each holder will be required to make certain
representations to us, as more fully described above under the
section entitled The Exchange Offer Purpose
and Effect of the Exchange Offer. In addition, see above
the discussion set forth under the section entitled The
Exchange Offer Resale of the Exchange Notes
for restrictions and limitations applicable to any holder or any
such other person who is an affiliate (as defined
under Rule 405 of the Securities Act) of us or is engaged
in or intends to engage in or has an arrangement or
understanding with any person to participate in a distribution
of Exchange Notes to be acquired in the exchange offer
Acceptance
of Original Notes for Exchange; Delivery of Exchange Notes
Issued in the Exchange Offer
Upon satisfaction or waiver of all of the conditions to the
exchange offer, we will accept, promptly after the Expiration
Date, all Original Notes properly tendered and will issue
Exchange Notes registered under the Securities Act. For purposes
of the exchange offer, we will be deemed to have accepted
properly tendered Original Notes for exchange when, as and if we
have given oral or written notice to the exchange agent, with
written confirmation of any oral notice to be given promptly
thereafter. See Conditions to the Exchange
Offer for a discussion of the conditions that must be
satisfied before we accept any Original Notes for exchange.
For each Original Note accepted for exchange, the holder will
receive an Exchange Note registered under the Securities Act
having a principal amount equal to that of the surrendered
Original Note. Accordingly, registered holders of Exchange Notes
issued in the exchange offer on the relevant record date for the
first interest payment date following the completion of the
exchange offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest
has been paid on the Original Notes, from September 30,
2009. Original Notes that we accept for exchange will cease to
accrue interest from and after the date of completion of the
exchange offer. Under the registration rights agreement, we may
be required to make additional payments in the form of
additional interest to the holders of the Original Notes under
circumstances relating to the timing of the exchange offer.
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In all cases, we will issue Exchange Notes in the exchange offer
for Original Notes that are accepted for exchange only after the
exchange agent timely receives:
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certificates for such Original Notes or a timely book-entry
confirmation of such Original Notes into the exchange
agents account at DTC;
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a properly completed and duly executed letter of transmittal or
an Agents Message; and
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all other required documents.
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If for any reason set forth in the terms and conditions of the
exchange offer we do not accept any tendered Original Notes, or
if a holder submits Original Notes for a greater principal
amount than the holder desires to exchange, we will return such
unaccepted or non-exchanged Original Note without cost to the
tendering holder. In the case of Original Notes tendered by
book-entry transfer into the exchange agents account at
DTC, such non-exchanged Original Notes will be credited to an
account maintained with DTC. We will return the Original Notes
or have them credited to the DTC account promptly after the
termination or withdrawal of the exchange offer.
Book-Entry
Transfer
The exchange agent will make a request to establish an account
with respect to the Original Notes at DTC for purposes of this
exchange offer within two business days after the date of this
prospectus. Any financial institution that is a participant in
DTCs ATOP systems may use DTCs ATOP procedures to
tender Original Notes. Such participant may make book-entry
delivery of Original Notes by causing DTC to transfer such
Original Notes into the exchange agents account at DTC in
accordance with DTCs procedures for transfer. However,
although delivery of Original Notes may be effected through
book-entry transfer at DTC, the letter of transmittal, or
facsimile thereof, with any required signature guarantees, or an
Agents Message pursuant to the ATOP procedures and any
other required documents must, in any case, be transmitted to
and received by the exchange agent at the address set forth in
this prospectus on or prior to the Expiration Date, or the
guaranteed delivery procedures described below must be complied
with. Delivery of documents to DTC will not constitute valid
delivery to the exchange agent.
Guaranteed
Delivery Procedures
Holders whose certificates for Original Notes are not lost but
are not immediately available or who cannot deliver their
certificates and all other required documents to the exchange
agent on or prior to the Expiration Date, or who cannot complete
the procedures for book-entry transfer on or prior to the
Expiration Date, may nevertheless effect a tender of their
Original Notes if:
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the tender is made through an eligible institution;
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prior to the Expiration Date, the exchange agent receives by
facsimile transmission, mail or hand delivery from such eligible
institution a validly completed and duly executed letter of
transmittal (or facsimile thereof) or an Agents Message
pursuant to DTCs ATOP system, and a notice of guaranteed
delivery, substantially in the form provided with this
prospectus, which
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sets forth the name and address of the holder of the Original
Notes and the amount of Original Notes tendered;
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states that the tender is being made thereby; and
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guarantees that within three NYSE trading days after the date of
execution of the notice of guaranteed delivery, the certificates
for all physically tendered Original Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and
any other documents required by the letter of transmittal will
be deposited by the eligible institution with the exchange
agent; and
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the certificates for all physically tendered Original Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the
case may be, and all other documents required by the letter of
transmittal are
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received by the exchange agent within three NYSE trading days
after the date of execution of the notice of guaranteed delivery.
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Withdrawal
of Tenders
Tenders of Original Notes may be properly withdrawn at any time
prior 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal of a tender to be effective, a written notice
of withdrawal delivered by hand, overnight by courier or by
mail, or a manually signed facsimile transmission, or a properly
transmitted Request Message through DTCs ATOP
system, must be received by the exchange agent prior to
5:00 p.m., New York City time, on the Expiration Date. Any
such notice of withdrawal must:
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specify the name of the person that tendered the Original Notes
to be properly withdrawn;
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identify the Original Notes to be properly withdrawn, including
the principal amount of such Original Notes;
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in the case of Original Notes tendered by book-entry transfer,
specify the number of the account at DTC from which the Original
Notes were tendered and specify the name and number of the
account at DTC to be credited with the properly withdrawn
Original Notes and otherwise comply with the procedures of such
facility;
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contain a statement that such holder is withdrawing its election
to have such Original Notes exchanged for Exchange Notes;
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other than a notice transmitted through DTCs ATOP system,
be signed by the holder in the same manner as the original
signature on the letter of transmittal by which such Original
Notes were tendered, including any required signature
guarantees, or be accompanied by documents of transfer to have
the Trustee with respect to the Original Notes register the
transfer of such Original Notes in the name of the person
withdrawing the tender; and
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specify the name in which such Original Notes are registered, if
different from the person who tendered such Original Notes.
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All questions as to the validity, form, eligibility and time of
receipt of such notice will be determined by us, and our
determination shall be final and binding on all parties. Any
Original Notes so properly withdrawn will be deemed not to have
been validly tendered for exchange for purposes of this exchange
offer and no Exchange Notes will be issued with respect thereto
unless the Original Notes so withdrawn are validly re-tendered
thereafter. Any Original Notes that have been tendered for
exchange but are not exchanged for any reason will be returned
to the tendering holder thereof without cost to such holder, or,
in the case of Original Notes tendered by book-entry transfer
into the exchange agents account at DTC pursuant to the
book-entry transfer procedures described above, such Original
Notes will be credited to an account maintained with DTC for the
Original Notes promptly after the termination or withdrawal of
the exchange offer. Properly withdrawn Original Notes may be
re-tendered by following the procedures described above at any
time on or prior to the Expiration Date.
Termination
of Certain Rights
All rights given to holders of Original Notes under the
registration rights agreement will terminate upon the
consummation of the exchange offer except with respect to our
duty:
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to use our commercially reasonable efforts to keep the shelf
registration statement continuously effective, if requested by
one or more broker-dealers, for a period ending on the earlier
of (x) 180 days from the date on which the exchange
offer registration statement is declared effective by the SEC
and (ii) the date on which a broker-dealer is no longer
required to deliver a prospectus with respect to the Transfer
Restricted Securities (as defined in the registration rights
agreement) in connection with market-making or other trading
activities;
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our obligation to make available for a period of up to
180 days after consummation of the exchange offer a
prospectus meeting the requirements of the Securities Act to any
Participating Broker Dealer and any other persons with similar
prospectus delivery requirements, for use in connection with any
resale of Exchange Notes; and
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under certain limited circumstances with respect to specific
types of holders of Original Notes, we may have a further
obligation to provide for the registration under the Securities
Act of Original Notes held by such holders.
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Exchange
Agent
We have appointed The Bank of New York Mellon as exchange agent
in connection with the exchange offer. In such capacity, the
exchange agent has no fiduciary duties to the holders of the
notes and will be acting solely on the basis of our directions.
Letters of transmittal, Agents or Request Messages through
DTCs ATOP system, notices of guaranteed delivery and all
correspondence in connection with this exchange offer should be
sent or delivered by each holder of Original Notes or a
beneficial owners broker, dealer, commercial bank, trust
company or other nominee to the exchange agent at the addresses
set forth in the letter of transmittal. We will pay the exchange
agent reasonable and customary fees for its services, will
reimburse it for its reasonable out-of-pocket expenses in
connection therewith and subject to certain limitations will
indemnify, defend and hold it and its directors, officers,
employees, and agents harmless in its capacity as the exchange
agent against any loss, liability, cost or expense arising out
of or in connection with the exchange offer.
Holders should direct questions, requests for assistance and for
additional copies of this prospectus or the letter of
transmittal to the exchange agent addressed as follows:
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By Mail, Hand Delivery or Overnight Courier:
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By Facsimile Transmission:
(for eligible institutions only)
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The Bank of New York Mellon Trust Company, N.A.
Attn: Corporate Trust Reorganization Unit
101 Barclay Street 7 East
New York, NY 10286
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(212) 298-1915
Confirm by Telephone
(212) 815-5098
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Fees and
Expenses
The expense of soliciting tenders pursuant to the exchange offer
will be borne by us. The principal solicitation is being made by
mail. Additional solicitations may, however, be made by
facsimile transmission, telephone, email or in person by our
officers and other employees and those of our affiliates.
We have not retained any dealer-manager in connection with the
exchange offer and we will not make any payments to brokers,
dealers or other persons soliciting acceptances of the exchange
offer. We will, however, pay the exchange agent reasonable and
customary fees for its services and will reimburse it for its
related reasonable out-of-pocket expenses. We may also pay
brokerage houses and other custodians, nominees and fiduciaries
the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this prospectus, letters of transmittal and
related documents to the beneficial owners of the Original Notes
and in handling or forwarding tenders for exchange.
Except as set forth below, holders who tender their Original
Notes for exchange will not be obligated to pay any transfer
taxes. In addition, if a tendering holder handles the
transaction through its broker, dealer, commercial bank, trust
company or other institution, the holder may be required to pay
brokerage fees or commissions. If Original Notes are to be
issued for principal amounts not tendered or accepted for
exchange in the name of any person other than the registered
holder of the Original Notes tendered or if tendered Original
Notes are registered in the name of any person other than the
person signing the letter of transmittal, or if a transfer tax
is imposed for any reason other than the exchange of Original
Notes pursuant to the exchange offer, then the amount of any
such transfer taxes, whether imposed on the registered holder or
any other persons, will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or
49
exemption therefrom is not submitted with the consent and letter
of transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
Consequences
of Failure of Exchange Original Notes
Holders who desire to tender their Original Notes in exchange
for Exchange Notes registered under the Securities Act should
allow sufficient time to ensure timely delivery. Neither the
exchange agent nor we are under any duty to give notification of
defects or irregularities with respect to the tenders of
Original Notes for exchange.
Original Notes that are not tendered, tendered but subsequently
withdrawn or are tendered but not accepted will, following the
completion of the exchange offer, continue to be subject to the
provisions in the indenture regarding the transfer and exchange
of the Original Notes and the existing restrictions on transfer
set forth in the legend on the Original Notes and in the
offering memorandum dated September 24, 2009, relating to
the Original Notes. The Original Notes that are not exchanged
for Exchange Notes pursuant to the exchange offer will remain
restricted securities within the meaning of Rule 144 under
the Securities Act. Accordingly, such Original Notes may be
resold only (i) to us or our subsidiaries, (ii) to a
qualified institutional buyer in compliance with Rule 144A
under the Securities Act, (iii) to an institutional
accredited investor that, prior to such transfer, furnishes to
the trustee (which is The Bank of New York Mellon
Trust Company, N.A.) a signed letter containing certain
representations and agreements relating to the restrictions on
transfer of the Original Notes (the form of which letter can be
obtained from the trustee) and, if requested by us and the
trustee, an opinion of counsel acceptable to us that such
transfer is in compliance with the Securities Act,
(iv) pursuant to the exemption from registration provided
by Rule 144 under the Securities Act (if available) or
(v) pursuant to an effective registration statement under
the Securities Act or any other available exemption therefrom.
The liquidity of the Original Notes could be adversely affected
by the exchange offer.
Except in limited circumstances with respect to specific types
of holders of Original Notes, we will have no further obligation
to provide for the registration under the Securities Act of such
Original Notes and except under certain limited circumstances,
we do not currently anticipate that we will take any action to
register the Original Notes under the Securities Act or under
any state securities laws.
Holders of the Exchange Notes issued in the exchange offer and
any Original Notes which remain outstanding after completion of
the exchange offer will vote together as a single class for
purposes of determining whether holders of the requisite
percentage of the class have taken certain actions or exercised
certain rights under the indenture.
Tax
Consequences of the Exchange Offer
The exchange of Original Notes for Exchange Notes will not be
treated as a taxable transaction for U.S. federal income
tax purposes because the Exchange Notes will not be considered
to differ materially in kind or in extent from the Original
Notes. Rather, the Exchange Notes received by a holder of
Original Notes will be treated as a continuation of such
holders investment in the Original Notes. As a result,
there will be no material U.S. federal income tax
consequences to holders exchanging Original Notes for Exchange
Notes.
Accounting
Treatment
The Exchange Notes will be recorded at the same carrying value
as the Original Notes, as reflected in our accounting records on
the date of the exchange. Accordingly, no gain or loss for
accounting purposes will be recognized.
Neither we nor our board of directors make any recommendation
to holders of Original Notes as to whether to tender or refrain
from tendering all or any portion of their Original Notes
pursuant to the exchange offer. Moreover, no one has been
authorized to make any such recommendation. Holders of Original
Notes must make their own decision whether to tender pursuant to
the exchange offer and, if so, the aggregate amount of Original
Notes to tender, after reading this prospectus and the letter of
transmittal and consulting with their advisors, if any, based on
their own financial position and requirements.
50
DESCRIPTION
OF CERTAIN INDEBTEDNESS
Overview. We and a syndicate of financial
institutions entered into a Second Amended and Restated Credit
Agreement as of November 27, 2006. The credit agreement has
been amended pursuant to agreements dated as of March 18,
2008 and June 8, 2009. The credit agreement as amended
provides us with a term loan and a revolving credit facility. We
refer to the term loan and revolving credit facility provided
thereunder as our senior secured credit facility. As of
October 1, 2009, the outstanding principal amount of the
term loan was $573.5 million. The maximum aggregate
commitment available under the revolving credit facility is
$729.0 million, and as of October 1, 2009, there were
no amounts outstanding thereunder. A portion of the revolving
credit facility is available for swingline loans and the
issuance of letters of credit. Both the face amount of any
outstanding letters of credit and any swingline loans reduce
availability under the revolving credit facility on a
dollar-for-dollar basis. We have the option exercisable prior to
June 30, 2012 to request that the revolving credit facility
be increased by up to $75 million. The lenders under the
credit agreement have no obligation to provide any such
additional commitment and any such increase is subject to
certain conditions precedent. The proceeds of the term loan were
used to refinance existing indebtedness. The proceeds of loans
made under the revolving credit facility are available for
working capital and other general corporate purposes, including
the financing of capital expenditures and acquisitions.
Interest Rates and Fees. The term loan bears
interest at a rate equal to, at our option, (a) a base rate
determined by reference to the highest of (1) the prime
rate of Bank of America, N.A. in Charlotte, North Carolina,
(2) the federal funds rate plus
1/2
of 1.0% and (3) LIBOR for an interest period of one month
commencing on such date plus 1.0%, in each case plus an
applicable margin of 0.75%, or (b) a LIBOR rate determined
by reference to the cost of funds for U.S. dollar deposits
for the interest period relevant to such borrowing adjusted for
certain additional costs, plus an applicable margin of 1.75%.
Revolving credit loans that mature on June 30, 2010 bear
interest at a rate equal to, at our option, (a) a base rate
determined by reference to the highest of (1) the prime
rate of Bank of America, N.A. in Charlotte, North Carolina,
(2) the federal funds rate plus
1/2
of 1.0% and (3) LIBOR for an interest period of one month
commencing on such date plus 1.0%, in each case plus an
applicable margin, or (b) a LIBOR rate determined by
reference to the cost of funds for U.S. dollar deposits for
the interest period relevant to such borrowing adjusted for
certain additional costs, plus an applicable margin. As of the
issue date, the applicable margin with respect to base rate
borrowings under this portion of the revolving credit facility
is 1.50% and the applicable margin with respect to LIBOR rate
borrowings under this portion of the revolving credit facility
is 2.50%. The applicable margin for borrowings under this
portion of the revolving credit facility is subject to
adjustment based on our total leverage, and may range from 1.25%
to 1.75% with respect to base rate borrowings and from 2.25% to
2.75% with respect to LIBOR rate borrowings.
Revolving credit loans that mature on June 30, 2012 bear
interest at a rate equal to, at our option, (a) a base rate
determined by reference to the highest of (1) the prime
rate of Bank of America, N.A. in Charlotte, North Carolina,
(2) the federal funds rate plus
1/2
of 1.0% and (3) LIBOR for an interest period of one month
commencing on such date plus 1.0%, in each case plus an
applicable margin, or (b) a LIBOR rate determined by
reference to the cost of funds for U.S. dollar deposits for
the interest period relevant to such borrowing adjusted for
certain additional costs, plus an applicable margin. As of the
issue date, the applicable margin with respect to base rate
borrowings under this portion of the revolving credit facility
is 2.50% and the applicable margin with respect to LIBOR rate
borrowings under this portion of the revolving credit facility
is 3.50%. The applicable margin for borrowings under this
portion of the revolving credit facility are subject to
adjustment based on our consolidated total leverage, and may
range from 2.00% to 3.00% with respect to base rate borrowings
and from 3.00% to 4.00% with respect to LIBOR rate borrowings.
In addition to paying interest on outstanding principal under
the senior secured credit facility, we are required to pay an
unused line fee on the unused portion of the commitments under
the revolving credit facility. The unused line fee is 0.50% per
year with respect to that portion of the revolving credit
facility that matures on June 30, 2010 and is 0.75% with
respect to that portion of the revolving credit facility that
matures on June 30, 2012. We are required to pay
participation fees with respect to letters of credit issued
under the revolving credit facility. The fee for letters of
credit that expire on or prior to June 30, 2010 is equal to
the
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applicable margin for borrowings under that portion of the
revolving credit facility that matures on June 30, 2010.
The fee for letters of credit that expire after June 30,
2010 is equal to the applicable margin for borrowings under that
portion of the revolving credit facility that matures on
June 30, 2012. We are also required to pay to the issuing
banks under our senior secured credit facility letter of credit
fronting fees in respect of letters of credit equal to 0.25% per
year, and to the administrative agent thereunder customary
administrative fees.
Maturities, Amortization and Prepayments. The
term loan matures on September 30, 2013. The term loan
amortizes on a quarterly basis, with installments in the amount
of $1,478,125 due on September 30, 2010 and on the last day
of each calendar quarter ending thereafter on or prior to
September 30, 2012. Installments in the amount of
$138,943,750 are due on December 31, 2012 and thereafter on
the last day of each of the succeeding three calendar quarters.
Commitments for $320.2 million of the revolving credit
facility mature on June 30, 2010. The balance of the
commitments under the revolving credit facility, totaling
$408.8 million, mature on June 30, 2012. There is no
scheduled amortization under either portion of the revolving
credit facility.
The senior secured credit facility requires us to prepay or cash
collateralize obligations thereunder, subject to certain
exceptions, with:
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100% of the net cash proceeds from asset sales;
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100% of the net casualty proceeds from insurance or net
condemnation proceeds;
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100% of the net cash proceeds from issuance of debt other than
debt permitted under the senior secured credit facility; and
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50% of our excess cash flow if our consolidated total leverage
ratio is great than 2.50 to 1.00 (reducing to 0% if our
consolidated total leverage ratio is equal to or less than 2.50
to 1.00).
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The foregoing prepayments are required to be applied first to
scheduled installments of the term loan on a pro rata
basis until the term loan is paid in full, then to loans
outstanding under the revolving credit facility (accompanied by
a permanent reduction of the revolving credit facility), and
then to cash collateralize outstanding letters of credit.
We may voluntarily repay outstanding loans and reduce or
terminate unfunded commitments under the senior secured credit
facility at any time without premium or penalty, other than
customary breakage costs with respect to repayment
of LIBOR loans.
Guarantees and Collateral. All of our
obligations under the senior secured credit facility are
guaranteed unconditionally by Spirit Holdings and our existing
and future direct and indirect domestic subsidiaries (other than
non-wholly owned domestic subsidiaries that are prohibited from
providing such guarantees). All obligations under the senior
secured credit facility, including guarantees of those
obligations, are secured on a first priority basis by
substantially all of our assets and the assets of the
guarantors, subject to certain exceptions and permitted liens.
The obligations guaranteed by the guarantors and secured by our
assets and the assets of the guarantors includes our obligations
under various currency and interest rate swap transactions that
we have entered into in the ordinary course of our business.
Covenants and Events of Default. Our senior
secured credit facility contains representations, warranties and
covenants that are customary for facility of similar type and
nature, including a number of the negative covenants that, among
other things and subject to certain exceptions, restrict our
ability and the ability of the guarantors to:
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incur or guarantee additional indebtedness;
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pay dividends, or make redemptions and repurchases, with respect
to capital stock;
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make investments, loans and advances;
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engage in mergers and acquisitions;
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engage in asset sales (including sales of capital stock of
subsidiaries) and sale and lease back transactions;
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create restrictions on the payment of dividends and
distributions;
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create or incur liens; and
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engage in transactions with affiliates.
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Our senior secured credit facility also includes financial
maintenance covenants that require us to comply with specified
leverage ratios and interest coverage ratios as at the end of
each of our fiscal quarters.
Our senior secured credit facility includes events of default
with respect to:
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default in the payment of principal when due;
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default in the payment of interest, fees or other amounts after
a specified grace period;
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material breach of representations or warranties;
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failure to make any payment when due under any indebtedness with
a principal amount in excess of a specified amount;
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a change of control (as defined in the credit agreement
governing the senior secured credit facility);
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certain bankruptcy events;
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material judgments;
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certain ERISA violations;
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invalidity of certain security agreements or guarantees;
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our failure to maintain compliance on a pro forma basis
with the financial maintenance covenant that tests our leverage
following the occurrence of certain events relating to the
discontinuance of the B787 program; and
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default by us under certain provisions of the GTA or the
occurrence of an event that requires us pursuant to the terms of
the GTA to transfer to Boeing assets with a fair market value in
excess of $35 million.
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For information on our other indebtedness, see
Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and
Capital Resources in our Quarterly Report on
Form 10-Q
for the quarterly period ended October 1, 2009, filed with
the SEC on November 6, 2009, and in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008, filed with the
SEC on February 20, 2009, which are incorporated by
reference into this prospectus.
Malaysian
Facility Agreement
On June 2, 2008, Spirit Malaysia entered into a Facility
Agreement (Facility Agreement) for a term loan
facility of Ringgit Malaysia (RM) 69.2 million
(approximately USD $20.0 million) (the Malaysia
Facility), with EXIM Bank, to be used towards partial
financing of plant and equipment (including the acquisition of
production equipment), materials, inventory and administrative
costs associated with the establishment of an aerospace-related
composite component assembly plant, which is leased, plus
potential additional work packages at Malaysia International
Aerospace Center in Subang, Selangor, Malaysia (the
Project). Funds for the Project will be available on
a drawdown basis over a twenty-four month period from the date
of the Facility Agreement. Spirit Malaysia is scheduled to make
periodic draws against the Malaysia Facility.
The indebtedness repayment requires quarterly principal
installments of approximately RM 3.3 million (approximately
USD $1.0 million) from June 2011 through May 2017, or until
the entire loan principal has been repaid.
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Outstanding amounts drawn under the Malaysia Facility are
subject to a fixed interest rate of 3.5% per annum, payable
quarterly. The amount currently drawn as of October 1, 2009
was $8.8 million.
The obligations under the Malaysian Facility are guaranteed by
Spirit Malaysia and all obligations under the Malaysia Facility
are secured by a first lien over certain equipment used in
connection with the Project.
France
Factory
On July 17, 2009, Spirits indirect wholly-owned
subsidiary, Spirit AeroSystems France SARL (Spirit
France) entered into a capital lease agreement for 9.0
million Euros (approximately $13.1 million), with BNP Paribas
Bank (BNP) to be used towards the construction of a
plant associated with the establishment of an aerospace-related
component assembly plant in Saint Nazaire, France (the
Project). Spirit France will act as BNPs
construction agent during the construction phase of the Project
and lease payments will begin upon completion of construction,
which is expected during the third quarter of 2010.
The capital lease repayment is variable based on the three-month
Euribor rate and is paid quarterly. Payments are expected to be
approximately 0.2 million Euro ($0.3 million) from July 2010
through April 2025 with a residual amount of 0.9 million Euro
($1.3 million) to be paid at the conclusion of the capital lease
agreement.
Outstanding amounts expended by BNP under the capital lease
agreement are capitalized as Construction in Progress on Spirit
Frances books with a corresponding amount of Construction
Debt. During the third quarter of 2009, Spirit recorded
$4.1 million in Construction Debt.
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DESCRIPTION
OF THE NOTES
Spirit has issued the Original Notes, and will issue the
Exchange Notes (solely for purposes of this section, together
with the Original Notes, the Notes), under an
indenture dated as of September 30, 2009 (the
Indenture) among Spirit, each Guarantor and
The Bank of New York Mellon Trust Company, N.A., as Trustee
(the Trustee), in a private transaction not
subject to the requirements of the Securities Act.
The statements under this caption relating to the Indenture and
the Notes are summaries and are not a complete description
thereof, and where reference is made to particular provisions,
such provisions, including the definitions of certain terms, are
qualified in their entirety by reference to all of the
provisions of the Indenture and the Notes and those terms made
part of the Indenture by the Trust Indenture Act of 1939,
as amended (the Trust Indenture Act).
The definitions of certain capitalized terms used in the
following summary are set forth below under
Certain Definitions. Unless otherwise
indicated, references under this caption to Sections or Articles
are references to sections and articles of the Indenture. A copy
of the Indenture is filed as an exhibit to the registration
statement of which this prospectus forms a part.
The definitions of certain capitalized terms used in the
following summary are set forth below under
Certain Definitions. For purposes of
this section of this prospectus, references to the
Issuer, we, us,
our or similar terms refer solely to Spirit
AeroSystems, Inc., and not to its consolidated subsidiaries, and
references to Holdings means Spirit AeroSystems
Holdings, Inc. and not to its consolidated subsidiaries.
General
The initial offering of the Notes was for $300,000,000 in
aggregate principal amount of
71/2% senior
notes due 2017. The Issuer may issue additional notes (the
Additional Notes) under the Indenture, subject to
the limitations described below under the covenant
Limitation on Incurrence of Debt. The Notes and any
Additional Notes subsequently issued under the Indenture would
be treated as a single class for all purposes of the Indenture,
including, without limitation, waivers, amendments, redemptions
and offers to purchase.
Principal,
Maturity and Interest
Interest on the Notes is payable at
71/2%
per annum. Interest on the Notes is payable semi-annually in
immediately available funds in arrears on April 1 and
October 1, commencing on April 1, 2010. The Issuer
will make each interest payment to the Holders of record of the
Notes on the immediately preceding March 15 and
September 15. Interest on the Notes accrues from the most
recent date to which interest has been paid or, if no interest
has been paid, from and including the Issue Date. Interest will
be computed on the basis of a
360-day year
comprised of twelve
30-day
months.
Principal of and premium, if any, and interest on the Notes is
payable, and the Notes are exchangeable and transferable, at the
office or agency of the Issuer maintained for such purposes,
which, initially, is the corporate trust office of the Trustee
located at The Bank of New York Mellon Trust Company, N.A.,
Corporate Trust Division, 2 North LaSalle Street,
Suite 1020, Chicago, IL 60602; provided,
however, that payment of interest may be made at the
option of the Issuer by check mailed to the Person entitled
thereto as shown on the security register. The Notes were issued
only in fully registered form without coupons, in denominations
of $2,000 and any integral multiple of $1,000 in excess thereof.
No service charge will be made for any registration of transfer,
exchange or redemption of Notes, except in certain circumstances
for any tax or other governmental charge that may be imposed in
connection therewith. Additional Interest may accrue and be
payable under the circumstances set forth therein. See The
Exchange Offer. References herein to interest
shall be deemed to include any such Additional Interest.
Guarantees
The Notes are guaranteed, on a full, unconditional, joint and
several basis, by the Guarantors pursuant to a guarantee (the
Note Guarantees). As of the Issue Date,
Holdings and each of our Subsidiaries that guarantees our
obligations under the Credit Agreement are Guarantors. The Note
Guarantees are senior obligations of each Guarantor and rank
equally with all existing and future senior Debt of such
Guarantor. The
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Note Guarantees are effectively subordinated to any secured debt
of such Guarantor to the extent of the assets securing such
Debt. The Indenture provides that the obligations of a Guarantor
under its Note Guarantee is limited to the maximum amount as
will result in the obligations of such Guarantor under the Note
Guarantee not to be deemed to constitute a fraudulent conveyance
or fraudulent transfer under federal or state law.
As of the date of the Indenture, all of our Subsidiaries became
Restricted Subsidiaries. However, under the
circumstances described below under the subheading
Certain Covenants Limitation on
Creation of Unrestricted Subsidiaries, any of our
Subsidiaries may be designated as Unrestricted
Subsidiaries. Unrestricted Subsidiaries are not subject to
many of the restrictive covenants in the Indenture and do not
guarantee the Notes.
The Indenture provides that (i) in the event of a sale or
other transfer or disposition of all of the Capital Interests in
any Subsidiary Guarantor to any Person that is not an Affiliate
of the Issuer in compliance with the terms of the Indenture, or
(ii) in the event all or substantially all the assets or
Capital Interests of a Subsidiary Guarantor are sold or
otherwise transferred, by way of merger, consolidation or
otherwise, to a Person that is not an Affiliate of the Issuer in
compliance with the terms of the Indenture, or (iii) in the
event that a Subsidiary Guarantor shall no longer guarantee
(other than by virtue of its Note Guarantee) any Debt under any
Credit Facility or any other Debt of Holdings or any of its
Restricted Subsidiaries of at least $10.0 million, then
such Subsidiary Guarantor (or the Person concurrently acquiring
such assets of such Subsidiary Guarantor) shall be deemed
automatically and unconditionally released and discharged of any
obligations under its Note Guarantee in support thereof, as
evidenced by a supplemental indenture executed by the Issuer,
the Guarantors and the Trustee, without any further action on
the part of the Trustee or any Holder; provided that the
Issuer delivers an Officers Certificate to the Trustee
certifying that the net cash proceeds of such sale or other
disposition will be applied in accordance with the
Limitation on Asset Sales covenant.
Not all of our Subsidiaries guaranteed the Notes. Claims of
creditors of non-guarantor Subsidiaries, including trade
creditors, secured creditors and creditors holding debt and
guarantees issued by those Subsidiaries, and claims of preferred
stockholders (if any) of those subsidiaries generally will have
priority with respect to the assets and earnings of those
subsidiaries over the claims of creditors of the Issuer,
including Holders of the Notes. The non-guarantor Subsidiaries
represented approximately 12% and 14% of Holdings total
net revenues for the nine-month period ended October 1,
2009 and the twelve-month period ended December 31, 2008,
respectively. In addition, these non-guarantor Subsidiaries
represented approximately 10% of Holdings total assets as
of October 1, 2009.
Ranking
Ranking
of the Notes
The Notes are general unsecured obligations of the Issuer. As a
result, the Notes rank:
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equally in right of payment with all existing and future senior
Debt of the Issuer;
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senior in right of payment to all existing and future Debt of
the Issuer, if any, that is by its terms expressly subordinated
to the Notes;
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effectively subordinated to secured Debt of the Issuer,
including secured Debt under the Credit Agreement, to the extent
of the assets securing such Debt; and
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structurally junior to any Debt or Obligations of any
non-guarantor Subsidiaries.
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As of October 1, 2009, after giving effect to the issuance
of the Notes and the related transactions, Holdings and its
Subsidiaries had total debt of approximately
$883.6 million, of which approximately $573.5 million
effectively ranked senior to the Notes to the extent of the
assets securing such debt. In addition, as of October 1,
2009, the Issuer and its Subsidiaries had approximately
$729.0 million of availability under the revolving portion
of the Credit Agreement (excluding outstanding letters of
credit).
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Ranking
of the Note Guarantees
Each Note Guarantee is a general unsecured obligation of each
Guarantor. As such, each Note Guarantee ranks:
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equally in right of payment with all existing and future senior
Debt of the Guarantors;
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senior in right of payment to all existing and future Debt of
the Guarantors, if any, that is by its terms expressly
subordinated to such Guarantors Note Guarantee; and
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effectively subordinated to all secured debt of such Guarantors,
to the extent of the value of the Guarantors assets
securing such debt.
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Sinking
Fund
There are no mandatory sinking fund payment obligations with
respect to the Notes.
Optional
Redemption
The Notes are subject to redemption, at the option of the
Issuer, in whole or in part, at any time on or after
October 1, 2013 upon not less than 30 nor more than
60 days notice at the following
Redemption Prices (expressed as percentages of the
principal amount to be redeemed) set forth below, plus accrued
and unpaid interest, if any, to, but not including, the
redemption date (subject to the right of Holders of record on
the relevant regular record date to receive interest due on an
interest payment date that is on or prior to the redemption
date), if redeemed during the
12-month
period beginning on October 1 of the years indicated below:
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|
|
|
|
Year
|
|
Redemption Price
|
|
2013
|
|
|
103.750
|
%
|
2014
|
|
|
101.875
|
%
|
2015 and thereafter
|
|
|
100.000
|
%
|
At any time prior to October 1, 2013, the Issuer may, on
one or more occasions, redeem all or any portion of the Notes,
upon not less than 30 nor more than 60 days notice,
at a redemption price equal to 100% of the principal amount of
the Notes redeemed, plus the Applicable Premium as of the date
of redemption, including accrued and unpaid interest to the
redemption date.
In addition to the optional redemption provisions of the Notes
in accordance with the provisions of the preceding paragraphs,
prior to October 1, 2012, the Issuer may, with the net
proceeds of one or more Qualified Equity Offerings, redeem up to
35% of the aggregate principal amount of the outstanding Notes
(including Additional Notes) at a Redemption Price equal to
107.5% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption; provided
that at least 65% of the principal amount of Notes then
outstanding (including Additional Notes) remains outstanding
immediately after the occurrence of any such redemption
(excluding Notes held by Holdings, the Issuer or its
Subsidiaries) and that any such redemption occurs within
90 days following the closing of any such Qualified Equity
Offering.
If less than all of the Notes are to be redeemed, the Trustee
will select the Notes or portions thereof to be redeemed by lot,
pro rata or by any other method the Trustee shall deem fair and
appropriate (subject to The Depository Trust Company
procedures).
No Notes of $2,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail (and, to the
extent permitted by applicable procedures or regulations,
electronically) at least 30 days before the redemption date
to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice
of redemption that relates to that Note shall state the portion
of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion of the Note
will be issued in the name of the Holder thereof upon
cancellation of the Note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption
date, interest ceases to accrue on Notes or portions of them
called for redemption.
57
The Issuer may at any time, and from time to time, purchase
Notes in the open market or otherwise, subject to compliance
with applicable securities laws.
Change of
Control
Upon the occurrence of a Change of Control, unless the Issuer
has exercised its right to redeem all of the Notes as described
under Optional Redemption, the Issuer will make an
Offer to Purchase all of the outstanding Notes at a Purchase
Price in cash equal to 101% of the principal amount tendered,
together with accrued interest, if any, to but not including the
Purchase Date. For purposes of the foregoing, an Offer to
Purchase shall be deemed to have been made if (i) within
60 days following the date of the consummation of a
transaction or series of transactions that constitutes a Change
of Control, the Issuer or a third party commences an Offer to
Purchase for all outstanding Notes at the Purchase Price and
(ii) all Notes properly tendered pursuant to the Offer to
Purchase are purchased on the terms of such Offer to Purchase.
The phrase all or substantially all, as used in the
definition of Change of Control, has not been
interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a
consequence, in the event the Holders of the Notes elected to
exercise their rights under the Indenture and the Issuer elects
to contest such election, there could be no assurance how a
court interpreting New York law would interpret such phrase. As
a result, it may be unclear as to whether a Change of Control
has occurred and whether a Holder of Notes may require the
Issuer to make an Offer to Purchase the Notes as described above.
The provisions of the Indenture may not afford Holders
protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction
affecting the Issuer that may adversely affect Holders, if such
transaction is not the type of transaction included within the
definition of Change of Control. A transaction involving the
management of Holdings or its Affiliates, or a transaction
involving a recapitalization of Holdings, will result in a
Change of Control only if it is the type of transaction
specified in such definition. The definition of Change of
Control may be amended or modified with the written consent of a
majority in aggregate principal amount of outstanding Notes. See
Amendment, Supplement and Waiver.
The Issuer will be required to comply with the requirements of
Rule 14e-1
under the Exchange Act and any other applicable securities laws
or regulations in connection with any repurchase of the Notes as
described above. To the extent that the provisions of any
securities laws or regulations conflict with the Change of
Control provisions of the Indenture, the Issuer will comply with
the applicable securities laws and regulations and will be
deemed to have complied with its obligations under the Change of
Control provisions of the Indenture by virtue of such compliance.
The Issuer will not be required to make an Offer to Purchase
upon a Change of Control if (i) a third party makes such
Offer to Purchase contemporaneously with or upon a Change of
Control in the manner, at the times and otherwise in compliance
with the requirements of the Indenture and purchases all Notes
validly tendered and not withdrawn under such Offer to Purchase
or (ii) a notice of redemption has been given by the Issuer
or a third party pursuant to the Indenture as described above
under the caption Optional Redemption.
The Issuers ability to pay cash to the Holders of Notes
upon a Change of Control may be limited by the Issuers
then existing financial resources. Further, the Credit Agreement
contains, and future agreements of the Issuer may contain,
prohibitions of certain events, including events that would
constitute a Change of Control. If the exercise by the Holders
of Notes of their right to require the Issuer to repurchase the
Notes upon a Change of Control occurred at the same time as a
change of control event under one or more of the Issuers
other debt agreements, the Issuers ability to pay cash to
the Holders of Notes upon a repurchase may be further limited by
the Issuers then existing financial resources. See
Risk Factors Risks Relating to the Notes.
Even if sufficient funds were otherwise available, the terms of
Credit Facilities (and other Debt) may prohibit the
Issuers prepayment of Notes before their scheduled
maturity. Consequently, if the Issuer is not able to prepay the
Credit Facilities or other Debt containing such restrictions or
obtain requisite consents, the Issuer will be unable to fulfill
its repurchase obligations, resulting in a default under the
Indenture.
58
In addition, an Offer to Purchase may be made by the Issuer or a
third party in advance of a Change of Control, conditional upon
such Change of Control, if a definitive agreement is in place
for the Change of Control at the time of launching the Offer to
Purchase.
Certain
Covenants
Set forth below are summaries of certain covenants contained in
the Indenture. During any period of time (a Suspension
Period) that: (i) the Notes have Investment Grade
Ratings from both Rating Agencies and (ii) no Default has
occurred and is continuing under the Indenture (the occurrence
of the events described in the foregoing clauses (i) and
(ii) being collectively referred to as a Covenant
Suspension Event), Holdings and its Restricted
Subsidiaries will not be subject to the following provisions of
the Indenture (collectively, the Suspended
Covenants), and during a Suspension Period, neither
Holdings nor the Issuer may designate any of its Subsidiaries as
Unrestricted Subsidiaries unless Holdings or the Issuer, as the
case may be, could have designated such Subsidiaries as
Unrestricted Subsidiaries in compliance with the Indenture
assuming the covenants set forth below had not been suspended:
(a) Limitation on Restricted
Payments;
(b) Limitation on Incurrence of
Debt;
(c) Limitation on Dividend and Other
Payment Restrictions Affecting Restricted Subsidiaries;
(d) clause (iii) of the first paragraph of
Consolidation, Merger, Transfer or Lease;
(e) Limitation on Transactions with
Affiliates;
(f) Limitation on Asset Sales; and
(g) Certain Covenants Note
Guarantees.
In the event that Holdings and its Restricted Subsidiaries are
not subject to the Suspended Covenants with respect to the Notes
for any Suspension Period and, subsequently, (x) either one
or both Rating Agencies withdraws its rating or downgrades the
rating assigned to the Notes below the required Investment Grade
Rating or (y) Holdings or any of its affiliates enters into
an agreement to effect a transaction that would result in a
Change of Control and either one or both Rating Agencies
indicate that if consummated, such transaction (alone or
together with any related recapitalization or refinancing
transactions) would cause such Rating Agency to withdraw its
Investment Grade Rating or downgrade the ratings assigned to the
Notes below an Investment Grade Rating (such date of withdrawal
or downgrade in clause (x) or (y), a Reinstatement
Date), then Holdings and its Restricted Subsidiaries
will after the Reinstatement Date again be subject to the
Suspended Covenants with respect to future events for the
benefit of the Notes.
On the Reinstatement Date, all Debt incurred, or Redeemable
Capital Interests or Preferred Interests issued, during a
Suspension Period will be (i) classified as having been
Incurred or issued pursuant to the first paragraph of
Limitation on Incurrence of Debt
below or one of the clauses set forth in the definition of
Permitted Debt (to the extent such Debt (including
Debt arising by virtue of the issuance of Redeemable Capital
Interests or Preferred Interests) would be permitted to be
Incurred thereunder as of the Reinstatement Date and after
giving effect to Debt Incurred prior to the Suspension Period
and outstanding on the Reinstatement date and (ii) subject
to the covenants described below under the caption
Limitation on Incurrence of Debt and
Note Guarantees. To the extent such Debt
(including Debt arising by virtue of the issuance of Redeemable
Capital Interests or Preferred Interests) would not be so
permitted to be Incurred pursuant to the covenant described
below under the caption Limitation on
Incurrence of Debt such Debt (including Debt arising by
virtue of the issuance of Redeemable Capital Interests or
Preferred Interests) will be deemed to have been outstanding on
the Issue Date, so that it is classified as permitted under
clause (d) of the definition of Permitted Debt. To the
extent Debt or Guarantees were incurred prior to or during a
Suspension Period, Holdings and its Restricted Subsidiaries
shall on the Reinstatement Date comply with the covenant
described under Note Guarantees.
59
Calculations made after the Reinstatement Date of the amount
available to be made as Restricted Payments under the covenant
described below under the caption Limitation
on Restricted Payments will be made as though such
covenant had been in effect from the Issue Date and throughout
the Suspension Period. Accordingly, Restricted Payments made
during the Suspension Period will reduce the amount available to
be made as Restricted Payments under the first paragraph of the
covenant described below under the caption
Restricted Payments to the extent
provided therein.
Notwithstanding that the Suspended Covenants may be reinstated,
no Default or Event of Default will be deemed to have occurred
as a result of a failure to comply with the Suspended Covenants
during a Suspension Period (or on the Reinstatement Date or
after a Suspension Period based solely on events that occurred
during the Suspension Period).
There can be no assurance that the Notes will ever achieve or
maintain an Investment Grade Rating.
Limitation
on Incurrence of Debt
Holdings will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Debt (including Acquired Debt);
provided, that Holdings, the Issuer and any of its
Restricted Subsidiaries (other than any Foreign Restricted
Subsidiary) may Incur Debt (including Acquired Debt) if,
immediately after giving effect to the Incurrence of such Debt
and the receipt and application of the proceeds therefrom,
(a) the Consolidated Fixed Charge Coverage Ratio of
Holdings and its Restricted Subsidiaries, determined on a pro
forma basis as if any such Debt (including any other Debt,
other than Debt Incurred under the revolving portion of a Credit
Facility, being Incurred contemporaneously), and any other Debt
(other than Debt Incurred under the revolving portion of the
Credit Facility) Incurred since the beginning of the Four
Quarter Period had been Incurred and the proceeds thereof had
been applied at the beginning of the Four Quarter Period, and
any other Debt repaid (other than Debt Incurred under the
revolving portion of a Credit Facility) since the beginning of
the Four Quarter Period had been repaid at the beginning of the
Four Quarter Period, would be greater than 2.25 to 1.00 and
(b) no Event of Default shall have occurred and be
continuing at the time or as a consequence of the Incurrence of
such Debt.
If the Debt which is the subject of a determination under this
provision is Acquired Debt, or Debt Incurred in connection with
the simultaneous acquisition of any Person, business, property
or assets, or Debt of an Unrestricted Subsidiary being
designated as a Restricted Subsidiary, then such ratio shall be
determined by giving effect (on a pro forma basis, as if
the transaction had occurred at the beginning of the Four
Quarter Period) to (x) the Incurrence of such Acquired Debt
or such other Debt by Holdings or any of its Restricted
Subsidiaries and (y) the inclusion, in Consolidated Cash
Flow Available for Fixed Charges, of the Consolidated Cash Flow
Available for Fixed Charges of the acquired Person, business,
property or assets or redesignated Subsidiary.
Notwithstanding the first paragraph above, Holdings and its
Restricted Subsidiaries may Incur Permitted Debt.
For purposes of determining any particular amount of Debt under
this Limitation on Incurrence of Debt covenant,
(x) Debt outstanding under the Credit Agreement on the
Issue Date shall at all times be treated as Incurred pursuant to
clause (a) of the definition of Permitted Debt,
and (y) Guarantees or obligations with respect to letters
of credit supporting Debt otherwise included in the
determination of such particular amount shall not be included.
For purposes of determining compliance with this
Limitation on Incurrence of Debt covenant, in the
event that an item of Debt meets the criteria of more than one
of the types of Debt described above, including categories of
Permitted Debt and under part (a) in the first paragraph of
this Limitation on Incurrence of Debt covenant, the
Issuer, in its sole discretion, shall classify, and from time to
time may reclassify, all or any portion of such item of Debt.
For purposes of determining compliance of any
non-U.S. dollar-denominated
Debt with this covenant, the amount outstanding under
U.S. dollar-equivalent principal amount of Indebtedness
denominated in a foreign currency shall at all times be
calculated based on the relevant currency exchange rate in
effect on the date such Debt was Incurred, in the case of the
term Debt, or first committed, in the cases of the revolving
credit Debt, provided, however, that if such Debt is
Incurred to Refinance other Debt denominated in the same or
different currency, and such Refinancing would cause the
60
applicable U.S. dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in
effect on the date of such Refinancing, such
U.S. dollar-denominated restriction shall be deemed not to
have been exceeded so long as the principal amount of such
Refinancing Debt does not exceed the principal amount of such
indebtedness being Refinanced.
The accrual of interest, the accretion or amortization of
original issue discount and the payment of interest on Debt in
the form of additional Debt or payment of dividends on Capital
Interests in the forms of additional shares of Capital Interests
with the same terms will not be deemed to be an Incurrence of
Debt or issuance of Capital Interests for purposes of this
covenant.
Limitation
on Restricted Payments
Holdings will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted
Payment unless, at the time of and after giving effect to the
proposed Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or will occur as a consequence thereof;
(b) after giving effect to such Restricted Payment on a
pro forma basis, Holdings would be permitted to Incur at
least $1.00 of additional Debt (other than Permitted Debt)
pursuant to the provisions described in the first paragraph
under the Limitation on Incurrence of Debt
covenant; and
(c) after giving effect to such Restricted Payment on a
pro forma basis, the aggregate amount expended or
declared for all Restricted Payments made on or after the Issue
Date (excluding Restricted Payments permitted by
clauses (ii) through (vii) and clause (ix) of the
next succeeding paragraph), shall not exceed the sum (without
duplication) of
(1) 50% of the Consolidated Net Income (or, if Consolidated
Net Income shall be a deficit, minus 100% of such deficit) of
Holdings accrued on a cumulative basis during the period (taken
as one accounting period) from the beginning of the first full
fiscal quarter during which the Issue Date occurs and ending on
the last day of the fiscal quarter immediately preceding the
date of such proposed Restricted Payment, plus
(2) 100% of the aggregate net proceeds (including the Fair
Market Value of property other than cash) received by Holdings
(and subsequently contributed to the Issuer) subsequent to the
initial issuance of the Notes either (i) as a contribution
to its common equity capital or (ii) from the issuance and
sale of its Qualified Capital Interests, including Qualified
Capital Interests issued upon the conversion of Debt and from
the exercise of options, warrants or other rights to purchase
such Qualified Capital Interests (other than, in each case,
Capital Interests or Debt sold to a Subsidiary of Holdings or an
employee stock ownership plan or trust established by Holdings
and other than Excluded Contributions), plus
(3) to the extent that any Investment (other than Permitted
Investments or Investments in Unrestricted Subsidiaries or
Investments made pursuant to clause (x) below) that was
made on or after the Issue Date is sold for cash or otherwise
disposed of, liquidated, redeemed, repurchased or repaid for
cash or other assets, or to the extent Holdings otherwise
realizes any proceeds on the sale of such Investment or proceeds
representing the return of capital on such Investment, the
lesser of (i) the initial amount of such Investment, or
(ii) to the extent not otherwise included in the
calculation of Consolidated Net Income of Holdings for such
period, the net cash return of capital or net Fair Market
Value of return of capital with respect to such Investment, less
the cost of any such disposition or liquidation, plus
(4) to the extent that any Unrestricted Subsidiary of
Holdings designated as such on or after the Issue Date is
redesignated as a Restricted Subsidiary (other than if
originally designated as an Unrestricted Subsidiary pursuant to
clause (x) below), the lesser of (i) the Fair Market
Value of Holdings Investment in such Subsidiary as of the
date of such redesignation or (ii) such Fair Market Value
as of the date on which such Subsidiary was originally
designated as an Unrestricted Subsidiary.
61
Notwithstanding whether the foregoing provisions would prohibit
Holdings and its Restricted Subsidiaries from making a
Restricted Payment, Holdings and its Restricted Subsidiaries may
make the following Restricted Payments:
(i) the payment of any dividend on Capital Interests in
Holdings or a Restricted Subsidiary within 60 days after
declaration thereof if at the declaration date such payment was
permitted by the foregoing provisions of this covenant;
(ii) the purchase, repurchase, redemption, defeasance or
other acquisition or retirement of any Qualified Capital
Interests of Holdings by conversion into, or by or in exchange
for, Qualified Capital Interests, or out of net cash proceeds of
the substantially concurrent sale (other than to a Restricted
Subsidiary of Holdings or an employee stock ownership plan or
trust established by Holdings) of other Qualified Capital
Interests of Holdings;
(iii) the redemption, defeasance, repurchase or acquisition
or retirement for value of any Debt of Holdings, the Issuer or
another Guarantor that is subordinate in right of payment to the
Notes or the applicable Note Guarantee out of the net cash
proceeds of a substantially concurrent issue and sale (other
than to a Restricted Subsidiary of Holdings) of (x) new
subordinated Debt of Holdings, the Issuer or such Guarantor, as
the case may be, Incurred in accordance with the Indenture,
(y) Qualified Capital Interests of Holdings or (z) in
the case of a redemption, defeasance, repurchase or acquisition
or retirement for value of Redeemable Capital Interests or
Preferred Interests, of Redeemable Capital Interests or
Preferred Interests that have terms that are not taken as a
whole materially more burdensome to Holdings and its Restricted
Subsidiaries than the terms of the Capital Interests to be
redeemed, defeased, repurchased or acquired;
(iv) the purchase, redemption, retirement or other
acquisition for value of Capital Interests in Holdings held by
present or former employees, consultants, officers or directors
of Holdings or any of its Restricted Subsidiaries (or any of
their respective permitted transferees, assigns, estates or
heirs) upon death, disability, retirement or termination of
employment or service or alteration of employment or service or
similar status or pursuant to the terms of any agreement under
which such Capital Interests were issued; provided that the
aggregate cash consideration paid for such purchase, redemption,
retirement or other acquisition of such Capital Interests does
not exceed $5.0 million in any calendar year, provided,
further, that any unused amounts in any calendar year may be
carried forward to one or more future periods subject to a
maximum aggregate amount of repurchases made pursuant to this
clause (iv) not to exceed $10.0 million in any
calendar year; provided, however, that such amount in any
calendar year may be increased by an amount not to exceed
(A) the cash proceeds received by Holdings or any of its
Restricted Subsidiaries from the sale of Qualified Capital
Interests of Holdings to employees, consultants, officers or
directors of Holdings and its Restricted Subsidiaries that
occurs after the Issue Date; provided, however, that the amount
of such cash proceeds utilized for any such repurchase,
retirement, other acquisition or dividend will not increase the
amount available for Restricted Payments under clause (c)
of the first paragraph of this covenant; plus (B) the cash
proceeds of key man life insurance policies received by Holdings
and its Restricted Subsidiaries after the Issue Date;
(v) repurchase of Capital Interests deemed to occur upon
the exercise of stock options, warrants or other convertible or
exchangeable securities;
(vi) cash payment, in lieu of issuance of fractional shares
in connection with the exercise of warrants, options or other
securities convertible into or exchangeable for the Capital
Interests of Holdings or a Restricted Subsidiary;
(vii) the declaration and payment of dividends to holders
of any class or series of Capital Interests of Holdings or any
Restricted Subsidiary that constitute (A) Redeemable
Capital Interests or (B) Preferred Interests the issuance
of which has resulted in the Incurrence of Debt, in each case to
the extent that the Debt Incurred in connection with such
issuance was Incurred in compliance with the covenant described
above under Limitation on Incurrence of
Debt and such dividends are included in the definition of
Consolidated Fixed Charges;
62
(viii) to the extent no Event of Default has occurred and
is continuing or will occur as a consequence thereof, upon the
occurrence of a Change of Control or an Asset Sale, the
defeasance, redemption, repurchase or other acquisition of any
subordinated Debt pursuant to provisions substantially similar
to those described under Change of
Control and Limitation on Asset
Sales at a Purchase Price not greater than 101% of the
principal amount thereof (in the case of a Change of Control) or
at a percentage of the principal amount thereof not higher than
the principal amount applicable to the Notes (in the case of an
Asset Sale), plus any accrued and unpaid interest thereon;
provided that prior to or contemporaneously with such
defeasance, redemption, repurchase or other acquisition, the
Issuer has made an Offer to Purchase with respect to the Notes
and has repurchased all Notes validly tendered for payment and
not withdrawn in connection therewith;
(ix) Restricted Payments that are made with Excluded
Contributions; and
(x) to the extent no Event of Default has occurred and is
continuing or will occur as a consequence thereof, other
Restricted Payments not in excess of $75.0 million in the
aggregate.
If any Person in which an Investment is made, which Investment
constitutes a Restricted Payment when made, thereafter becomes a
Restricted Subsidiary in accordance with the Indenture, all such
Investments previously made in such Person shall be Permitted
Investments, and for the avoidance of doubt all such Investments
shall no longer be counted as Restricted Payments for purposes
of calculating the aggregate amount of Restricted Payments
pursuant to clause (c) of the first paragraph under this
Limitation on Restricted Payments covenant, in each
case to the extent such Investments would otherwise be so
counted.
For purposes of this covenant, if a particular Restricted
Payment involves a non-cash payment, including a distribution of
assets, then such Restricted Payment shall be deemed to be an
amount equal to the cash portion of such Restricted Payment, if
any, plus an amount equal to the Fair Market Value of the
non-cash portion of such Restricted Payment.
Limitation
on Liens
Holdings will not, and will not permit any of its Restricted
Subsidiaries, directly or indirectly, to enter into, create,
incur, assume or suffer to exist any Liens of any kind, other
than Permitted Liens, on or with respect to any of its property
or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom, which Liens secure
Debt (the Initial Lien), without securing the
Notes and the applicable Note Guarantee, as the case may be,
equally and ratably with (or prior to) the Debt secured by such
Lien until such time as such Debt is no longer secured by such
Lien; provided that if the Debt so secured is
subordinated by its terms to the Notes or such Note Guarantee,
the Lien securing such Debt will also be so subordinated by its
terms to the Notes and such Note Guarantees at least to the same
extent. Any such Lien thereby created to secure the Notes or any
such Note Guarantee will be automatically and unconditionally
released and discharged upon (i) the release and discharge
of the Initial Lien to which it relates or (ii) any sale,
exchange or transfer to any Person not an Affiliate of Holdings
of the property or assets secured by such Initial Lien, or of
all of the Capital Interests held by Holdings or any Restricted
Subsidiary in, or all or substantially all the assets of, any
Restricted Subsidiary creating such Initial Lien.
Limitation
on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
Holdings will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, cause or suffer to
exist or become effective or enter into any encumbrance or
restriction on the ability of any Restricted Subsidiary to
(i) pay dividends or make any other distributions on its
Capital Interests owned by Holdings or any Restricted Subsidiary
or pay any Debt or other obligation owed to Holdings or any
Restricted Subsidiary, (ii) make loans or advances to
Holdings or any Restricted Subsidiary thereof or
(iii) transfer any of its property or assets to Holdings or
any Restricted Subsidiary.
63
However, the preceding provisions will not apply to the
following encumbrances or restrictions existing under or by
reason of:
(a) any encumbrance or restriction in existence on the
Issue Date, including those required by the Credit Agreement or
by any other agreement or documents entered into in connection
with the Credit Agreement and any amendments, modifications,
restatements, renewals, increases, supplements or Refinancings,
of any of the foregoing agreements or documents, provided
that the amendments, modifications, restatements, renewals,
increases, supplements or Refinancings, in the good faith
judgment of the Issuer, are no more restrictive, taken as a
whole, with respect to such dividend or other payment
restrictions than those contained in these agreements on the
Issue Date or Refinancings thereof;
(b) any encumbrance or restriction pursuant to an agreement
relating to an acquisition of property, so long as the
encumbrances or restrictions in any such agreement relate solely
to the property so acquired (and are not or were not created in
anticipation of or in connection with the acquisition thereof);
(c) any encumbrance or restriction which exists with
respect to a Person that becomes a Restricted Subsidiary or
merges with or into a Restricted Subsidiary on or after the
Issue Date, which is in existence at the time such Person
becomes a Restricted Subsidiary, but not created in connection
with or in anticipation of such Person becoming a Restricted
Subsidiary, and which is not applicable to any Person or the
property or assets of any Person other than such Person or the
property or assets of such Person becoming a Restricted
Subsidiary;
(d) any encumbrance or restriction pursuant to an agreement
effecting a permitted Refinancing or extension of Debt issued
pursuant to an agreement containing any encumbrance or
restriction referred to in the foregoing clauses (a)
through (c), so long as the encumbrances and restrictions
contained in any such Refinancing agreement are no less
favorable in any material respect to the Holders than the
encumbrances and restrictions contained in the agreements
governing the Debt being Refinanced in the good faith judgment
of the Issuer;
(e) customary provisions restricting subletting or
assignment of any lease, contract, or license of Holdings or any
Restricted Subsidiary or provisions in agreements that restrict
the assignment of such agreement or any rights thereunder;
(f) any encumbrance or restriction by reason of applicable
law, rule, regulation or order;
(g) any encumbrance or restriction under the Indenture, the
Notes and the Note Guarantees;
(h) any encumbrance or restriction under an agreement
relating to a disposition of assets or Capital Interests,
including, without limitation, any agreement for the sale or
other disposition of or by a Subsidiary that restricts
distributions by that Subsidiary pending its sale or other
disposition;
(i) restrictions on cash and other deposits or net worth
imposed by customers or suppliers under contracts entered into
in the ordinary course of business;
(j) customary provisions with respect to the disposition or
distribution of assets or property in joint venture agreements,
limited liability company agreements, partnership agreements,
shareholder agreements, asset sale agreements, stock sale
agreements, sale leaseback agreements and other similar
agreements;
(k) any instrument governing any Debt or Capital Interest
of a Person acquired by Holdings or any of the Restricted
Subsidiaries as in effect at the time of such acquisition
(except to the extent such Debt or Capital Interest was incurred
in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Debt, such Debt was
permitted by the terms of the Indenture to be Incurred;
(l) purchase money obligations (including Capital Lease
Obligations) for property acquired in the ordinary course of
business that impose restrictions on that property so acquired
of the nature described in clause (iii) of the first
paragraph hereof;
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(m) Liens securing Debt otherwise permitted to be Incurred
under the Indenture, including the provisions of the covenant
described above under the caption Limitation
on Liens, that limit the right of the debtor to dispose of
the assets subject to such Liens;
(n) any Non-Recourse Receivable Subsidiary Indebtedness or
other contractual requirements of a Receivable Subsidiary that
is a Restricted Subsidiary in connection with a Qualified
Receivables Transaction; provided that such restrictions apply
only to such Receivable Subsidiary or the receivables and
related assets described in the definition of Qualified
Receivables Transaction which are subject to such Qualified
Receivables Transaction; and
(o) any other agreement governing Debt entered into after
the Issue Date that contains encumbrances and restrictions that
are not materially more restrictive with respect to any
Restricted Subsidiary than those in effect on the Issue Date
with respect to that Restricted Subsidiary pursuant to
agreements in effect on the Issue Date.
Nothing contained in this Limitation on Dividends and
Other Payments Affecting Restricted Subsidiaries covenant
shall prevent Holdings or any Restricted Subsidiary from
(i) creating, incurring, assuming or suffering to exist any
Liens in compliance with the Limitation on Liens
covenant or (ii) restricting the sale or other disposition
of property or assets of Holdings or any of its Restricted
Subsidiaries that secure Debt of Holdings or any of its
Restricted Subsidiaries Incurred in accordance with the
Limitation on Incurrence of Debt and
Limitation on Liens covenants in the Indenture.
Limitation
on Asset Sales
Holdings will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) Holdings (or the Restricted Subsidiary, as the case may
be) receives consideration at the time of the Asset Sale at
least equal to the Fair Market Value of the assets or Capital
Interests issued or sold or otherwise disposed of; and
(2) at least 75% of the consideration received in the Asset
Sale by Holdings or such Restricted Subsidiary is in the form of
cash or Eligible Cash Equivalents. For purposes of this clause
(2), each of the following will be deemed to be cash:
(a) any liabilities, as shown on the most recent
consolidated balance sheet of Holdings or any Restricted
Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the Notes or any Note
Guarantee) that are assumed by the transferee of any such assets
pursuant to a customary assignment and assumption agreement that
releases Holdings or such Restricted Subsidiary from further
liability;
(b) any securities, notes or other obligations received by
Holdings or any such Restricted Subsidiary from such transferee
that are converted by Holdings or such Restricted Subsidiary
into cash within 180 days of their receipt to the extent of
the cash received in that conversion; and
(c) any Designated Non-cash Consideration received by
Holdings or any such Restricted Subsidiary in such Asset Sale
having an aggregate Fair Market Value, taken together with all
other Designated Non-cash Consideration received pursuant to
this clause (c) that is at that time outstanding, not to
exceed $50.0 million at the time of the receipt of such
Designated Non-cash Consideration, with the Fair Market Value of
each item of Designated Non-cash Consideration being measured at
the time received and without giving effect to subsequent
changes in value.
Within 360 days after the receipt of any Net Cash Proceeds
from an Asset Sale, Holdings (or the applicable Restricted
Subsidiary, as the case may be) may apply such Net Cash Proceeds
at its option:
(i) to permanently repay Debt under the Credit Facilities
and, if the Obligation repaid is revolving credit Debt, to
correspondingly reduce commitments with respect thereto;
65
(ii) to acquire all or substantially all of the assets of,
or any Capital Interests of, another Permitted Business, if,
after giving effect to any such acquisition of Capital
Interests, the Permitted Business is or becomes a Restricted
Subsidiary of Holdings;
(iii) to make a capital expenditure in or that is used or
useful in a Permitted Business or to make expenditures for
maintenance, repair or improvement of existing properties and
assets;
(iv) to acquire other assets (other than inventory) that
are used or useful in a Permitted Business;
(v) to repay or repurchase Debt secured by the assets of
Holdings or any Restricted Subsidiaries; or
(vi) any combination of the foregoing.
Any Net Cash Proceeds from Asset Sales that are not applied or
invested as provided in the preceding paragraph of this covenant
will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $25.0 million,
the Issuer will, within 30 days, make an Offer to Purchase
to all Holders of Notes, and to all holders of other Pari Passu
Debt containing provisions similar to those set forth in the
Indenture with respect to asset sales, equal to the Excess
Proceeds. The offer price in any Offer to Purchase will be equal
to 100% of the principal amount plus accrued and unpaid interest
to the date of purchase, and will be payable in cash. If any
Excess Proceeds remain after consummation of an Offer to
Purchase, the Issuer may use those funds for any purpose not
otherwise prohibited by the Indenture and they will no longer
constitute Excess Proceeds. If the aggregate principal amount of
Notes and other Pari Passu Debt tendered into such Offer to
Purchase exceeds the amount of Excess Proceeds, the Excess
Proceeds will be allocated between the Notes and such other Pari
Passu Debt based on the principal amount (or accreted value, if
applicable) of the Notes and such other Pari Passu Debt tendered
and the Trustee will select the Notes to be purchased on a pro
rata basis among all the Notes tendered (subject to The
Depository Trust Company procedures). Upon completion of
each Offer to Purchase, the amount of Excess Proceeds will be
reset at zero.
The Issuer will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other applicable securities laws
and regulations thereunder to the extent those laws and
regulations are applicable in connection with each repurchase of
Notes pursuant to an Offer to Purchase. To the extent that the
provisions of any securities laws or regulations conflict with
the Asset Sale provisions of the Indenture, the Issuer will
comply with the applicable securities laws and regulations and
will be deemed to have complied with its obligations under the
Asset Sale provisions of the Indenture by virtue of such
compliance.
Limitation
on Transactions with Affiliates
Holdings will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any payment to, or
sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets
from, or enter into or make or amend any transaction or series
of related transactions, contract, agreement, loan, advance or
guarantee with, or for the benefit of, any Affiliate of Holdings
(each of the foregoing, an Affiliate
Transaction) involving aggregate consideration in
excess of $10.0 million, unless:
(i) such Affiliate Transaction is on terms that are not
materially less favorable to Holdings or the relevant Subsidiary
than those that could reasonably have been obtained in a
comparable arms-length transaction by Holdings or such
Subsidiary with an unaffiliated party; and
(ii) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $20.0 million, Holdings delivers to the
Trustee a resolution adopted by the majority of the Board of
Directors of Holdings approving such Affiliate Transaction and
set forth in an Officers Certificate certifying that such
Affiliate Transaction complies with clause (i)
above; and
(iii) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate
consideration in excess of $50.0 million, Holdings must
obtain and deliver to the Trustee a written opinion of a
nationally recognized investment banking, accounting or
appraisal firm stating that the transaction is fair to Holdings
or such Restricted Subsidiary, as the case may be, from a
financial point of view.
66
The foregoing limitations do not limit, and shall not apply to:
(1) Restricted Payments that are permitted by the
provisions of the Indenture described above under
Limitation on Restricted Payments and
Permitted Investments permitted under the Indenture;
(2) the payment of reasonable and customary compensation
and indemnities and other benefits (including retirement,
health, option, deferred compensation and other benefit plans)
to members of the Board of Directors of Holdings or a Restricted
Subsidiary;
(3) the payment of reasonable and customary compensation
and other benefits (including retirement, health, option,
deferred compensation and other benefit plans) and indemnities
to officers and employees of Holdings or any Restricted
Subsidiary;
(4) transactions between or among Holdings
and/or its
Restricted Subsidiaries;
(5) any agreement or arrangement as in effect on the Issue
Date and any amendment or modification thereto so long as such
amendment or modification is not more disadvantageous to the
Holders of the Notes in any material respect;
(6) any contribution of capital to Holdings or any
Restricted Subsidiary;
(7) transactions permitted by, and complying with, the
provisions of the Indenture described below under
Consolidation, Merger, Conveyance, Transfer or
Lease;
(8) any transaction with a joint venture, partnership,
limited liability company or other entity in the ordinary course
of business that would constitute an Affiliate Transaction
solely because Holdings or a Restricted Subsidiary owns an
equity interest in such joint venture, partnership, limited
liability company or other entity;
(9) transactions with customers, clients, suppliers or
purchasers or sellers of goods or services, in each case, on
terms that are not materially less favorable to Holdings or such
Restricted Subsidiary, as the case may be, as determined in good
faith by Holdings, than those that could be obtained in a
comparable arms-length transaction with a Person that is
not an Affiliate of Holdings; and
(10) transactions effected as part of a Qualified
Receivables Transaction.
Limitation
on Sale and Leaseback Transactions
Holdings will not, and will not permit any of its Restricted
Subsidiaries to, enter into any Sale and Leaseback Transaction
unless:
(i) the consideration received in such Sale and Leaseback
Transaction is at least equal to the Fair Market Value of the
property sold, as confirmed by an Officers Certificate,
(ii) prior to and immediately after giving effect to the
Attributable Debt in respect of such Sale and Leaseback
Transaction, Holdings and such Restricted Subsidiary comply with
the Limitation on Incurrence of Debt covenant
contained herein, and
(iii) at or after such time Holdings and such Restricted
Subsidiary also comply with the Limitation on Asset
Sales covenant contained herein to the extent that it
applies to such Sale and Leaseback Transaction.
Provision
of Financial Information
Whether or not required by the Commission, so long as any Notes
are outstanding, Holdings will furnish to the Holders of Notes,
or file electronically with the Commission through the
Commissions Next-Generation EDGAR System (or any successor
system), within the time periods specified in the
Commissions rules and regulations:
(1) all quarterly and annual financial information that
would be required to be contained in a filing with the
Commission on
Forms 10-Q
and 10-K if
Holdings were required to file such Forms, including a
67
Managements Discussion and Analysis of Financial
Condition and Results of Operations and, with respect to
the annual information only, a report on the annual financial
statements by Holdings certified independent
accountants; and
(2) all current reports that would be required to be filed
with the Commission on
Form 8-K
if Holdings were required to file such reports.
In addition, whether or not required by the Commission, Holdings
will file a copy of all of the information and reports referred
to in clauses (1) and (2) above with the Commission
for public availability within the time periods specified in the
Commissions rules and regulations (unless the Commission
will not accept such a filing) and make such information
available to prospective investors. In addition, Holdings, the
Issuer and the Subsidiary Guarantors have agreed that, for so
long as any Notes remain outstanding, they will furnish to the
Holders and to prospective investors, upon their request, the
information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act.
If Holdings or the Issuer has designated any Subsidiaries as
Unrestricted Subsidiaries, then the quarterly and annual
financial information required by the preceding paragraph shall
include a reasonably detailed presentation, either on the face
of the financial statements or in the footnotes thereto, and in
Managements Discussion and Analysis of Financial
Condition and Results of Operations, of the financial
condition and results of operations of Holdings and its
Restricted Subsidiaries separate from the financial condition
and results of operations of the Unrestricted Subsidiaries.
Note
Guarantees
On the Issue Date, each of the Guarantors guaranteed the Notes
in the manner and on the terms set forth in the Indenture.
If Holdings or any of its Restricted Subsidiaries acquires or
creates another Subsidiary after the Issue Date and such
Subsidiary Guarantees or Incurs any Debt under a Credit
Facility, then that newly acquired or created Subsidiary shall
become a Guarantor within 60 days of the date on which it
Guaranteed such other Debt; provided, that no
Unrestricted Subsidiary or Restricted Subsidiary that is a
Foreign Restricted Subsidiary shall be required to become a
Guarantor unless it provides a Guarantee of Debt under a Credit
Facility that is Incurred by Holdings or a Restricted Subsidiary
that is not a Foreign Restricted Subsidiary.
Each Note Guarantee by a Restricted Subsidiary is limited to an
amount not to exceed the maximum amount that can be guaranteed
by that Restricted Subsidiary without rendering the Note
Guarantee, as it relates to such Restricted Subsidiary, voidable
under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of
creditors generally.
Limitation
on Creation of Unrestricted Subsidiaries
Holdings or the Issuer may designate any Subsidiary of Holdings
(other than the Issuer) to be an Unrestricted
Subsidiary as provided below, in which event such
Subsidiary and each other Person that is then or thereafter
becomes a Subsidiary of such Subsidiary will be deemed to be an
Unrestricted Subsidiary.
Unrestricted Subsidiary means:
(1) any Subsidiary of Holdings (other than the Issuer)
designated as such by an Officers Certificate as set forth
below where neither Holdings nor any of its Restricted
Subsidiaries (i) provides credit support for, or Guarantee
of, any Debt of such Subsidiary or any Subsidiary of such
Subsidiary (including any undertaking, agreement or instrument
evidencing such Debt, but excluding in the case of a Receivables
Subsidiary any Standard Securitization Undertakings or
(ii) is directly or indirectly liable for any Debt of such
Subsidiary or any Subsidiary of such Subsidiary (except in the
case of a Receivables Subsidiary any Standard Securitization
Undertakings); and
(2) any Subsidiary of an Unrestricted Subsidiary.
68
Holdings or the Issuer may designate any Subsidiary (other than
the Issuer) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Interests of, or owns or holds any
Lien on any property of, any other Restricted Subsidiary of
Holdings, provided that either:
(x) the Subsidiary to be so designated has total assets of
$1,000 or less; or
(y) Holdings could make a Restricted Payment at the time of
designation in an amount equal to the greater of the Fair Market
Value or book value of such Subsidiary pursuant to the
Limitation on Restricted Payments
covenant and such amount is thereafter treated as a Restricted
Payment for the purpose of calculating the amount available for
Restricted Payments thereunder.
An Unrestricted Subsidiary may be designated as a Restricted
Subsidiary if (i) all the Debt of such Unrestricted
Subsidiary could be Incurred under the
Limitation on Incurrence of Debt
covenant and (ii) all the Liens on the property and assets
of such Unrestricted Subsidiary could be incurred pursuant to
the Limitation on Liens covenant.
Consolidation,
Merger, Conveyance, Transfer or Lease
The Issuer will not in any transaction or series of
transactions, consolidate with or merge into any other Person
(other than a merger of a Restricted Subsidiary into the Issuer
in which the Issuer is the continuing Person), or sell, assign,
convey, transfer, lease or otherwise dispose of all or
substantially all of the assets of the Issuer and its Restricted
Subsidiaries (determined on a consolidated basis), taken as a
whole, to any other Person, unless:
(i) either: (a) the Issuer shall be the continuing
Person or (b) the Person (if other than the Issuer) formed
by such consolidation or into which the Issuer is merged, or the
Person that acquires, by sale, assignment, conveyance, transfer,
lease or other disposition, all or substantially all of the
property and assets of the Issuer (such Person, the
Surviving Entity), (1) shall be a corporation,
partnership, limited liability company or similar entity
organized and validly existing under the laws of the United
States, any political subdivision thereof or any state thereof
or the District of Columbia and (2) shall expressly assume,
by a supplemental indenture, the due and punctual payment of all
amounts due in respect of the principal of (and premium, if any)
and interest on all the Notes and the performance of the
covenants and obligations of the Issuer under the Indenture;
provided that at any time the Issuer or its successor is not a
corporation, there shall be a co-issuer of the Notes that is a
corporation;
(ii) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without
limitation, any Debt Incurred or anticipated to be Incurred in
connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have
occurred and be continuing or would result therefrom;
(iii) immediately after giving effect to any such
transaction or series of transactions on a pro forma basis
(including, without limitation, any Debt Incurred or anticipated
to be Incurred in connection with or in respect of such
transaction or series of transactions) as if such transaction or
series of transactions had occurred on the first day of the
determination period, the Issuer (or the Surviving Entity if the
Issuer is not continuing) could Incur $1.00 of additional Debt
(other than Permitted Debt) under the provisions described in
the first paragraph of Limitation on
Incurrence of Debt; and
(iv) the Issuer delivers, or causes to be delivered, to the
Trustee, in form satisfactory to the Trustee, an Officers
Certificate and an opinion of counsel, each to the effect that
such consolidation, merger, sale, conveyance, assignment,
transfer, lease or other disposition complies with the
requirements of the Indenture.
Notwithstanding the foregoing, failure to satisfy the
requirements of the preceding clauses (ii) and
(iii) will not prohibit:
(a) a merger between the Issuer and a Restricted Subsidiary
that is a wholly owned Subsidiary of the Issuer; or
69
(b) a merger between the Issuer and an Affiliate
incorporated solely for the purpose of converting the Issuer
into a corporation organized under the laws of the United States
or any political subdivision or state thereof; so long as, in
each case, the amount of Debt of the Issuer and its Restricted
Subsidiaries is not increased thereby.
For all purposes of the Indenture and the Notes, Subsidiaries of
any Surviving Entity will, upon such transaction or series of
transactions, become Restricted Subsidiaries or Unrestricted
Subsidiaries as provided pursuant to the Indenture and all Debt,
and all Liens on property or assets, of the Surviving Entity and
its Subsidiaries that was not Debt, or were not Liens on
property or assets, of the Issuer and its Subsidiaries
immediately prior to such transaction or series of transactions
shall be deemed to have been Incurred upon such transaction or
series of transactions.
Upon any transaction or series of transactions that are of the
type described in, and are effected in accordance with,
conditions described in the immediately preceding paragraphs,
the Surviving Entity shall succeed to, and be substituted for,
and may exercise every right and power of, the Issuer, under the
Indenture with the same effect as if such Surviving Entity had
been named as the Issuer therein; and when a Surviving Person
duly assumes all of the obligations and covenants of the Issuer
pursuant to the Indenture and the Notes, except in the case of a
lease, the predecessor Person shall be relieved of all such
obligations.
Limitation
on Business Activities
Holdings will not, and will not permit any Restricted Subsidiary
to, engage in any business other than a Permitted Business.
Events of
Default
Each of the following is an Event of Default under
the Indenture:
(1) default in the payment in respect of the principal of
(or premium, if any, on) any Note when due and payable (whether
at Stated Maturity or upon repurchase, acceleration, optional
redemption or otherwise);
(2) default in the payment of any interest upon any Note
when it becomes due and payable, and continuance of such default
for a period of 30 days;
(3) failure to perform or comply with the Indenture
provisions described under Provision of
Financial Information and continuance of such failure to
perform or comply for a period of 120 days after written
notice thereof has been given to the Issuer by the Trustee or to
the Issuer and the Trustee by the Holders of at least 25% in
aggregate principal amount of the outstanding Notes;
(4) except as permitted by the Indenture, any Note
Guarantee of Holdings or any Significant Subsidiary (or any
group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary), shall for any reason cease
to be, or it shall be asserted by any Guarantor or the Issuer
not to be, in full force and effect and enforceable in
accordance with its terms;
(5) default in the performance, or breach, of any covenant
or agreement of Holdings or any Restricted Subsidiary in the
Indenture (other than a covenant or agreement a default in whose
performance or whose breach is specifically dealt with in
clauses (1), (2), (3) or (4) above), and continuance
of such default or breach for a period of 60 days after
written notice thereof has been given to the Issuer by the
Trustee or to the Issuer and the Trustee by the Holders of at
least 25% in aggregate principal amount of the outstanding Notes;
(6) a default or defaults under any bonds, debentures,
notes or other evidences of Debt (other than the Notes) by
Holdings or any Restricted Subsidiary having, individually or in
the aggregate, a principal or similar amount outstanding of at
least $50.0 million, whether such Debt now exists or shall
hereafter be created, which default or defaults either
(a) shall have resulted in the acceleration of the maturity
of such Debt prior to its express maturity or (b) shall
constitute a failure to pay principal of, or interest or
70
premium on, such Debt when due and payable after the expiration
of any applicable grace period with respect thereto;
(7) the entry against Holdings or any Restricted Subsidiary
of a final judgment(s) for the payment of money in an aggregate
amount in excess of $50.0 million (net of amounts covered
by (x) insurance for which the insurer thereof has been
notified of such claim and has not challenged such coverage or
(y) valid third party indemnifications for which the
indemnifying party thereof has been notified of such claim and
has not challenged such indemnification), by a court or courts
of competent jurisdiction, which judgment(s) remain
undischarged, unwaived, unstayed, unbonded or unsatisfied for a
period of 60 consecutive days; or
(8) certain events in bankruptcy, insolvency or
reorganization affecting Holdings, the Issuer or any Significant
Subsidiary (or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary).
If an Event of Default (other than an Event of Default specified
in clause (8) above with respect to Holdings or the Issuer)
occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% in aggregate
principal amount of the outstanding Notes may declare the
principal of the Notes and any accrued interest on the Notes to
be due and payable immediately by a notice in writing to the
Issuer (and to the Trustee if given by Holders);
provided, however, that after such acceleration,
but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of the
outstanding Notes may, under certain circumstances, rescind and
annul such acceleration if all Events of Default, other than the
nonpayment of accelerated principal of or interest on the Notes,
have been cured or waived as provided in the Indenture.
In the event of a declaration of acceleration of the Notes
solely because an Event of Default described in clause (6)
above has occurred and is continuing, the declaration of
acceleration of the Notes shall be automatically rescinded and
annulled if the event of default or payment default triggering
such Event of Default pursuant to clause (6) shall be
remedied or cured by Holdings or a Restricted Subsidiary of
Holdings or waived by the holders of the relevant Debt within 20
business days after the declaration of acceleration with respect
thereto and if the rescission and annulment of the acceleration
of the Notes would not conflict with any judgment or decree of a
court of competent jurisdiction obtained by the Trustee for the
payment of amounts due on the Notes.
If an Event of Default specified in clause (8) above occurs
with respect to Holdings or the Issuer, the principal of and any
accrued interest on the Notes then outstanding shall ipso
facto become immediately due and payable without any
declaration or other act on the part of the Trustee or any
Holder. For further information as to waiver of defaults, see
Amendment, Supplement and Waiver. The
Trustee may withhold from Holders notice of any Default (except
Default in payment of principal of, premium, if any, and
interest) if the Trustee determines that withholding notice is
in the interests of the Holders to do so.
No Holder of any Note will have any right to institute any
proceeding with respect to the Indenture or for any remedy
thereunder, unless (x) such Holder shall have previously
given to the Trustee written notice of a continuing Event of
Default, (y) the Holders of at least 25% in aggregate
principal amount of the outstanding Notes shall have made
written request to the Trustee, and provided indemnity
reasonably satisfactory to the Trustee, to institute such
proceeding as Trustee, and (z) the Trustee shall not have
received from the Holders of a majority in aggregate principal
amount of the outstanding Notes a direction inconsistent with
such request and shall have failed to institute such proceeding
within 60 days. Such limitations do not apply, however, to
a suit instituted by a Holder of a Note directly (as opposed to
through the Trustee) for enforcement of payment of the principal
of (and premium, if any) or interest on such Note on or after
the respective due dates expressed in such Note.
The Issuer will be required to furnish to the Trustee annually a
statement as to the performance of certain obligations under the
Indenture and as to any default in such performance. The Issuer
also is required to notify the Trustee if it becomes aware of
the occurrence of any Default or Event of Default.
71
Amendment,
Supplement and Waiver
Without the consent of any Holders, the Issuer, the Guarantors
and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental to the Indenture and
the Note Guarantees for any of the following purposes:
(1) to evidence the succession of a Person to the Issuer
and the assumption by any such successor of the covenants of the
Issuer in the Indenture and the Notes;
(2) to add to the covenants of Holdings for the benefit of
the Holders, or to surrender any right or power herein conferred
upon Holdings;
(3) to add additional Events of Default;
(4) to provide for uncertificated Notes in addition to or
in place of the certificated Notes;
(5) to evidence and provide for the acceptance of
appointment under the Indenture by a successor Trustee;
(6) to provide for or confirm the issuance of Additional
Notes in accordance with the terms of the Indenture;
(7) to add a Guarantor or to release a Guarantor in
accordance with the Indenture;
(8) to cure any ambiguity, defect, omission, mistake or
inconsistency;
(9) to make any other provisions with respect to matters or
questions arising under the Indenture, provided that such
actions pursuant to this clause (9) shall not adversely
affect the interests of the Holders in any material respect, as
determined in good faith by the Issuer;
(10) to conform the text of the Indenture or the Notes to
any provision of this Description of Notes to the
extent that the Trustee has received an Officers
Certificate stating that such text constitutes an unintended
conflict with the description of the corresponding provision in
this Description of Notes; or
(11) to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes, the Issuer,
the Guarantors and the Trustee may enter into an indenture or
indentures supplemental to the Indenture for the purpose of
adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or the Notes
or of modifying in any manner the rights of the Holders of the
Notes under the Indenture, including the definitions therein;
provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each
outstanding Note affected thereby:
(1) change the Stated Maturity of any Note or of any
installment of interest on any Note, or reduce the amount
payable in respect of the principal thereof or the rate of
interest thereon or any premium payable thereon, or reduce the
amount that would be due and payable on acceleration of the
maturity thereof, or change the place of payment where, or the
coin or currency in which, any Note or any premium or interest
thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated
Maturity thereof, or change the date on which any Notes may be
subject to redemption or reduce the Redemption Price
therefor,
(2) reduce the percentage in aggregate principal amount of
the outstanding Notes, the consent of whose Holders is required
for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain
provisions of the Indenture or certain defaults thereunder and
their consequences) provided for in the Indenture,
(3) modify the obligations of the Issuer to make an Offer
to Purchase upon a Change of Control if such modification was
done after the occurrence of such Change of Control,
72
(4) modify any provision of the Indenture affecting the
ranking of the Notes or any Note Guarantee in a manner adverse
to the Holders of the Notes,
(5) modify any provision specifying requirements to effect
waiver of defaults or certain covenants, except to increase any
such percentage required for such actions or to provide that
certain other provisions of the Indenture cannot be modified or
waived without the consent of the Holder of each outstanding
Note affected thereby, or
(6) release any Guarantees required to be maintained under
the Indenture (other than in accordance with the terms of the
Indenture).
The Holders of not less than a majority in aggregate principal
amount of the outstanding Notes may on behalf of the Holders of
all the Notes waive any past default under the Indenture and its
consequences, except a default:
(1) in any payment in respect of the principal of (or
premium, if any) or interest on any Notes (including any Note
which is required to have been purchased pursuant to an Offer to
Purchase which has been made by the Issuer), or
(2) in respect of a covenant or provision hereof which
under the Indenture cannot be modified or amended without the
consent of the Holder of each outstanding Note affected.
Satisfaction
and Discharge of the Indenture; Defeasance
The Issuer and the Guarantors may terminate the obligations
under the Indenture when:
(1) either: (A) all Notes theretofore authenticated
and delivered have been delivered to the Trustee for
cancellation, or (B) all such Notes not theretofore
delivered to the Trustee for cancellation (i) have become
due and payable or (ii) will become due and payable within
one year or are to be called for redemption within one year (a
Discharge) under irrevocable arrangements
satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of
the Issuer, and the Issuer has irrevocably deposited or caused
to be deposited with the Trustee funds in an amount sufficient
to pay and discharge the entire indebtedness on the Notes, not
theretofore delivered to the Trustee for cancellation, for
principal of, premium, if any, and interest to the Stated
Maturity or date of redemption;
(2) the Issuer has paid or caused to be paid all other sums
then due and payable under the Indenture by the Issuer;
(3) the Issuer has delivered irrevocable instructions to
the Trustee under the Indenture to apply the deposited money
toward the payment of the Notes at maturity or on the redemption
date, as the case may be; and
(4) the Issuer has delivered to the Trustee an
Officers Certificate and an opinion of counsel reasonably
acceptable to the Trustee, each to the effect that all
conditions precedent under the Indenture relating to the
Discharge have been complied with.
The Issuer may elect, at its option, to have its obligations
discharged with respect to the outstanding Notes and the
Indenture (defeasance). Such defeasance means
that the Issuer will be deemed to have paid and discharged the
entire indebtedness represented by the outstanding Notes and to
have terminated the Indenture, except for:
(1) the rights of Holders of such Notes to receive payments
in respect of the principal of and any premium and interest on
such Notes when payments are due,
(2) the Issuers obligations with respect to such
Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance
of an office or agency for payment and money for security
payments held in trust,
(3) the rights, powers, trusts, duties and immunities of
the Trustee,
73
(4) the Issuers right of optional redemption, and
(5) the defeasance provisions of the Indenture.
In addition, the Issuer may elect, at its option, to have its
obligations released with respect to certain covenants,
including, without limitation, its obligation to make Offers to
Purchase in connection with Asset Sales and any Change of
Control, in the Indenture (covenant
defeasance) and any omission to comply with such
obligation shall not constitute a Default or an Event of Default
with respect to the Notes. In the event covenant defeasance
occurs, certain events (not including non-payment and bankruptcy
and insolvency events) described under Events of
Default will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either defeasance or covenant defeasance
with respect to outstanding Notes:
(1) the Issuer must irrevocably have deposited or caused to
be deposited with the Trustee as trust funds in trust for the
purpose of making the following payments, specifically pledged
as security for, and dedicated solely to the benefits of the
Holders of such Notes: (A) money in an amount, or
(B) U.S. government obligations, which through the
scheduled payment of principal and interest in respect thereof
in accordance with their terms will provide, not later than the
due date of any payment, money in an amount or (C) a
combination thereof, in each case sufficient without
reinvestment, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee to pay and
discharge, the entire indebtedness in respect of the principal
of and premium, if any, and interest on such Notes on the Stated
Maturity thereof or (if the Issuer has made irrevocable
arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name and at the
expense of the Issuer) the redemption date thereof, as the case
may be, in accordance with the terms of the Indenture and such
Notes;
(2) in the case of defeasance, the Issuer shall have
delivered to the Trustee an opinion of counsel stating that
(A) the Issuer has received from, or there has been
published by, the Internal Revenue Service a ruling or
(B) since the date of the Indenture, there has been a
change in the applicable United States federal income tax law
(whether by statute or judicial precedent), in either case
(A) or (B) to the effect that, and based thereon such
opinion shall confirm that, the Holders of such Notes will not
recognize gain or loss for United States federal income tax
purposes as a result of the deposit, defeasance and discharge to
be effected with respect to such Notes and will be subject to
United States federal income tax on the same amount, in the same
manner and at the same times as would be the case if such
deposit, defeasance and discharge were not to occur;
(3) in the case of covenant defeasance, the Issuer shall
have delivered to the Trustee an opinion of counsel to the
effect that the Holders of such outstanding Notes will not
recognize gain or loss for United States federal income tax
purposes as a result of the deposit and covenant defeasance to
be effected with respect to such Notes and will be subject to
federal income tax on the same amount, in the same manner and at
the same times as would be the case if such deposit and covenant
defeasance were not to occur;
(4) no Default or Event of Default with respect to the
outstanding Notes shall have occurred and be continuing at the
time of such deposit after giving effect thereto (other than a
Default or Event of Default resulting from the borrowing of
funds to be applied to such deposit and the grant of any Lien to
secure such borrowing);
(5) such defeasance or covenant defeasance shall not cause
the Trustee to have a conflicting interest within the meaning of
the Trust Indenture Act (assuming all Notes are in default
within the meaning of such Act);
(6) such defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under, any
material agreement or material instrument (other than the
Indenture) to which Holdings or the Issuer is a party or by
which Holdings or the Issuer is bound; and
74
(7) the Issuer shall have delivered to the Trustee an
Officers Certificate and an opinion of counsel, each
stating that all conditions precedent with respect to such
defeasance or covenant defeasance have been complied with.
Notwithstanding the foregoing, the opinion of counsel required
by clause (2) above with respect to a defeasance need not
to be delivered if all Notes not theretofore delivered to the
Trustee for cancellation (x) have become due and payable,
or (y) will become due and payable at Stated Maturity
within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee in the
name, and at the expense, of the Issuer.
The
Trustee
The Bank of New York Mellon Trust Company, N.A., the
Trustee under the Indenture, is the initial paying agent and
registrar for the Notes. The Trustee from time to time may
extend credit to the Issuer in the normal course of business.
Except during the continuance of an Event of Default, the
Trustee will perform only such duties as are specifically set
forth in the Indenture. During the continuance of an Event of
Default that has not been cured or waived, the Trustee will
exercise such of the rights and powers vested in it by the
Indenture and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such persons own affairs.
The Indenture and the Trust Indenture Act contain certain
limitations on the rights of the Trustee, should it become a
creditor of the Issuer, to obtain payment of claims in certain
cases or to realize on certain property received in respect of
any such claim as security or otherwise. The Trustee is
permitted to engage in other transactions; however, if it
acquires any conflicting interest (as defined in the
Trust Indenture Act) it must eliminate such conflict within
90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the outstanding
Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the
Trustee, subject to certain exceptions. The Indenture provides
that in case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested
in it by the Indenture, and use the same degree of care and
skill in their exercise, as a prudent person would exercise or
use under the circumstances in the conduct of such persons
own affairs. Subject to such provisions, the Trustee shall be
under no obligation to exercise any of the rights or powers
vested in it by the Indenture at the request or direction of any
of the Holders pursuant to the Indenture, unless such Holders
shall have provided to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs,
expenses and liabilities which might be incurred by it in
compliance with such request or direction.
No recourse may, to the full extent permitted by applicable law,
be taken, directly or indirectly, with respect to the
obligations of the Issuer or the Guarantors on the Notes or
under the Indenture or any related documents, any certificate or
other writing delivered in connection therewith, against
(i) the Trustee in its individual capacity, or
(ii) any partner, owner, beneficiary, agent, officer,
director, employee, agent, successor or assign of the Trustee,
each in its individual capacity, or (iii) any holder of
equity in the Trustee.
No
Personal Liability of Stockholders, Partners, Officers or
Directors
No director, officer, employee, stockholder, general or limited
partner or incorporator, past, present or future, of Holdings or
any of its Subsidiaries, as such or in such capacity, shall have
any personal liability for any obligations of the Issuer under
the Notes, or any Guarantor under any Note Guarantee or the
Indenture by reason of his, her or its status as such director,
officer, employee, stockholder, general or limited partner or
incorporator. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Notes.
Governing
Law
The Indenture and the Notes are governed by, and will be
construed in accordance with, the laws of the State of New York.
75
Certain
Definitions
Set forth below is a summary of certain of the defined terms
used in the Indenture. Reference is made to the Indenture for
the full definition of all such terms, as well as any
capitalized term used herein for which no definition is provided.
Acquired Debt means Debt (1) of a Person
(including an Unrestricted Subsidiary) existing at the time such
Person becomes a Restricted Subsidiary or (2) assumed in
connection with the acquisition of assets from such Person.
Acquired Debt shall be deemed to have been Incurred, with
respect to clause (1) of the preceding sentence, on the
date such Person becomes a Restricted Subsidiary and, with
respect to clause (2) of the preceding sentence, on the
date of consummation of such acquisition of assets.
Additional Interest means all additional
interest owing on the Notes pursuant to the Registration Rights
Agreement.
Affiliate of any Person means any other
Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such 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 that correspond to the
foregoing. For purposes of the Limitation on Transactions
with Affiliates covenant, any Person directly or
indirectly owning 15% or more of the of the total voting power
of the Voting Interests of Holdings will be deemed an Affiliate.
Applicable Premium means, with respect to any
Note on any redemption date, the greater of:
(1) 1.0% of the principal amount of the Note; or
(2) the excess of:
(a) the present value at such redemption date of
(i) the redemption price of the Note at October 1,
2013 (such redemption price being set forth in the table
appearing above under the caption Optional
Redemption), plus (ii) all required interest
payments due on the Note through October 1, 2013 (excluding
accrued and unpaid interest due on the Note to the redemption
date), computed at a discount on the basis of semi-annual
compounding using a discount rate equal to the Treasury Rate as
of such redemption date plus 50 basis points; over
(b) the principal amount of such Note.
Asset Acquisition means:
(a) an Investment by Holdings or any Restricted Subsidiary
in any other Person pursuant to which such Person shall become a
Restricted Subsidiary, or shall be merged with or into Holdings
or any Restricted Subsidiary; or
(b) the acquisition by Holdings or any Restricted
Subsidiary of the assets of any Person which constitute all or
substantially all of the assets of such Person, any division or
line of business of such Person or any other properties or
assets of such Person other than in the ordinary course of
business.
Asset Sale means any transfer, conveyance,
sale, lease or other disposition (including, without limitation,
dispositions pursuant to any consolidation or merger) by
Holdings or any of its Restricted Subsidiaries to any Person in
any single transaction or series of transactions of:
(i) Capital Interests in another Person (other than
directors qualifying shares or shares or interests
required to be held by foreign nationals pursuant to local law);
(ii) any other property or assets (other than in the normal
course of business, including any sale or other disposition of
obsolete or permanently retired property);
76
provided, however, that the term Asset Sale
shall exclude:
(a) any asset disposition permitted by the provisions
described under Consolidation, Merger, Conveyance,
Transfer or Lease that constitutes a disposition of all or
substantially all of the assets of the Issuer and its Restricted
Subsidiaries taken as a whole;
(b) any transfer, conveyance, sale, lease or other
disposition of property or assets, the gross proceeds of which
(exclusive of indemnities) do not exceed in any one or related
series of transactions $10.0 million;
(c) sales or other dispositions of cash or Eligible Cash
Equivalents;
(d) sales of interests in Unrestricted Subsidiaries;
(e) the sale and leaseback of any assets within
90 days of the acquisition thereof;
(f) the disposition of assets that, in the good faith
judgment of the Issuer, are no longer used or useful in the
business of such entity;
(g) a Restricted Payment or Permitted Investment that is
otherwise permitted by the Indenture;
(h) any trade-in of equipment in exchange for other
equipment; provided that in the good faith judgment of
the Issuer, Holdings or such Restricted Subsidiary receives
equipment having a Fair Market Value equal to or greater than
the equipment being traded in;
(i) the concurrent purchase and sale or exchange of Related
Business Assets or a combination of Related Business Assets
between Holdings or any of its Restricted Subsidiaries and
another person to the extent that the Related Business Assets
received by Holdings or its Restricted Subsidiaries are of
equivalent or greater market value than the Related Business
Assets transferred;
(j) any Liens permitted by the Indenture;
(k) leases, subleases, licenses and sublicenses of assets
in the ordinary course of business that do not interfere in any
material respect with the business of Holdings and its
Restricted Subsidiaries taken as a whole;
(l) any disposition by a Subsidiary to Holdings or by
Holdings or a Subsidiary to a Restricted Subsidiary;
(m) dispositions or forgiveness of accounts receivable in
connection with the collection or compromise thereof in the
ordinary course of business;
(n) any transfer of accounts receivable, or a fractional
undivided interest therein, by a Receivable Subsidiary in a
Qualified Receivables Transaction;
(o) the unwinding of any Hedging Obligation or obligation
under any Swap Contract;
(p) the abandonment or other disposition of intellectual
property that is no longer economically practicable to maintain
or useful in the conduct of the business of Holdings and its
Restricted Subsidiaries taken as a whole;
(q) any exchange of property pursuant to Section 1031
of the Code for use in a Permitted Business;
(r) the issuance of Capital Interests by a Restricted
Subsidiary in which the percentage interest (direct and
indirect) in the Capital Interests of such Person owned by
Holdings and its Restricted Subsidiaries after giving effect to
such issuance, is at least equal to the percentage interest
prior to such issuance;
(s) any disposition of assets resulting from a casualty
event of the taking thereof by any Person pursuant to the power
of eminent domain, condemnation or otherwise, or pursuant to a
sale thereof to a purchaser with such power under threat of such
a taking;
77
(t) any disposition of assets to a customer pursuant to an
agreement in existence on the Issue Date; provided that
the aggregate gross proceeds of all such dispositions made after
the Issue Date does not exceed $75.0 million;
(u) sales, transfers
and/or other
dispositions of property by Holdings and its Restricted
Subsidiaries to a Governmental Authority in connection with the
Incurrence of IRB Lease Obligations; or
(v) sales of accounts receivable to a Receivable Subsidiary
pursuant to a Qualified Receivables Transaction for the Fair
Market Value thereof; including cash or other financial
accommodation, such as the provision of letters of credit by
such Receivable Subsidiary on behalf of or for the benefit of
the transferor of such accounts receivable, in an amount at
least equal to 75% of the Fair Market Value thereof (for the
purposes of this clause (v), Purchase Money Notes will be deemed
to be cash).
For purposes of this definition, any series of related
transactions that, if effected as a single transaction, would
constitute an Asset Sale, shall be deemed to be a single Asset
Sale effected when the last such transaction which is a part
thereof is effected.
Attributable Debt in respect of a Sale and
Leaseback Transaction means, at the time of determination, the
present value (discounted at the rate of interest implicit in
such transaction) of the total obligations of the lessee for
rental payments during the remaining term of the lease included
in such Sale and Leaseback Transaction (including any period for
which such lease has been or may be extended); provided
that if such Sale and Leaseback Transaction results in a
Capital Lease Obligation, the amount of Debt represented thereby
will be determined in accordance with the definition of
Capital Lease Obligation.
Average Life means, as of any date of
determination, with respect to any Debt, the quotient obtained
by dividing (i) the sum of the products of (x) the
number of years (calculated to the nearest one-twelfth) from the
date of determination to the dates of each successive scheduled
principal payment (including any sinking fund or mandatory
redemption payment requirements) of such Debt multiplied by
(y) the aggregate amount of scheduled principal payments by
(ii) the then outstanding principal amount of such Debt.
Board of Directors means (i) with
respect to a corporation, the board of directors of such
corporation or any duly authorized committee thereof; and
(ii) with respect to any other entity, the board of
directors or similar body of the general partner or managers of
such entity or any duly authorized committee thereof.
Capital Interests in any Person means any and
all shares, interests (including Preferred Interests),
participations or other equivalents in the equity interest
(however designated) in such Person and any rights (other than
Debt securities convertible into an equity interest), warrants
or options to acquire an equity interest in such Person.
Capital Lease Obligation means any obligation
of a Person under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP; and the
amount of Debt represented by such obligation shall be the
capitalized amount of such obligations determined in accordance
with GAAP; and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
Change of Control means:
(1) any person or group (as such
terms are used in Sections 13(d) and 14(d) of the Exchange
Act) other than the Sponsor, is or becomes the beneficial
owner (as such term is used 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 Interests in
Holdings at a time that the Sponsor is not the beneficial owner
(as so defined) of more than 50% of the total voting power of
the Voting Interests of Holdings;
(2) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of
Directors of Holdings (together with any new directors whose
election by the Board of Directors or whose nomination for
election by the equityholders of Holdings was approved by a vote
of a majority of the directors of Holdings then still in office
who were either directors at the
78
beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of Holdings Board of Directors then
in office; provided that a Change of Control shall not be
deemed to have occurred under this clause (2) if and for so
long as the Sponsor is the beneficial owner (as defined in
clause (1)) of more than 50% of the total voting power of the
Voting Interests of Holdings;
(3) Holdings sells, conveys, transfers or leases (either in
one transaction or a series of related transactions) all or
substantially all of its assets to a Person other than
(x) a Restricted Subsidiary of Holdings or (y) the
Issuer;
(4) Holdings consolidates with, or merges with or into, any
Person, or any Person consolidates with, or merges with or into,
Holdings, in any such event pursuant to a transaction in which
any of the outstanding Voting Interests of Holdings or such
other Person are converted into, or exchanged for, cash,
securities or other property, other than any such transaction
where Voting Interests of Holdings outstanding immediately prior
to such transaction are converted into, or exchanged for, Voting
Interests (other than Redeemable Capital Interests and Preferred
Interests) of the surviving or transferee Person constituting
50% or more of the total voting power of the outstanding shares
of such Voting Interests of such surviving or transferee Person
immediately after giving effect to such issuance;
(5) the adoption of a plan relating to Holdings
liquidation or dissolution; or
(6) Holdings ceases to own 100% of the Capital Interests of
the Issuer.
Code means the Internal Revenue Code of 1986,
as amended from time to time and the regulations promulgated
thereunder.
Common Interests of any Person means Capital
Interests in such Person that do not rank prior, as to the
payment of dividends or as to the distribution of assets upon
any voluntary or involuntary liquidation, dissolution or winding
up of such Person, to Capital Interests of any other class in
such Person.
Consolidated Cash Flow Available for Fixed
Charges means, with respect to any Person for any
period:
(i) the sum of, without duplication, the amounts for such
period, taken as a single accounting period, of (in the cases of
clauses (b) through (i) inclusive, to the extent
Consolidated Net Income of such Person has been reduced thereby):
(a) Consolidated Net Income;
(b) Consolidated Non-cash Charges (provided that if
Consolidated Non-cash Charges for such period includes any such
accrual or reserve that represents an accrual or reserve for
potential cash items in any future period, the cash payment in
respect thereof in such future period shall reduce Consolidated
Cash Flow Available for Fixed Charges in such future period to
such extent);
(c) Consolidated Interest Expense to the extent the same
was deducted in computing Consolidated Net Income;
(d) Consolidated Income Tax Expense;
(e) restructuring expenses;
(f) any expenses or charges related to any equity offering,
Permitted Investment, recapitalization or Incurrence of Debt
permitted to be made under the Indenture (whether or not
successful) or related to this offering of the Notes;
(g) the amount of any interest expense attributable to
minority equity interests of third parties in any non-wholly
owned Subsidiary to the extent deducted in such period in
computing Consolidated Net Income;
(h) any net loss from discontinued operations; and
79
(i) any costs or expenses incurred by Holdings or a
Restricted Subsidiary pursuant to any management equity plan or
stock option plan or any other management or employee benefit
plan or agreement, any stock subscription or shareholder
agreement, to the extent that such costs or expenses are funded
with cash proceeds contributed to the capital of Holdings or net
cash proceeds of an issuance of Capital Interests of Holdings
(other than Redeemable Capital Interests or Preferred
Interests); less
(ii) (x) net income from discontinued operations and
(y) without duplication of any amounts already excluded
from Consolidated Net Income pursuant to clause
(A)(i) of the definition thereof, the amount of extraordinary,
non-recurring or unusual gains.
Consolidated Fixed Charge Coverage Ratio
means, with respect to any Person, the ratio of the aggregate
amount of Consolidated Cash Flow Available for Fixed Charges of
such Person for the four full fiscal quarters, treated as one
period, for which financial information in respect thereof is
available immediately preceding the date of the transaction (the
Transaction Date) giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio (such
four full fiscal quarter period being referred to herein as the
Four-Quarter Period) to the aggregate amount
of Consolidated Fixed Charges of such Person for the
Four-Quarter Period. In addition to and without limitation of
the foregoing, for purposes of this definition,
Consolidated Cash Flow Available for Fixed Charges
and Consolidated Fixed Charges shall be calculated
after giving effect on a pro forma basis for the period
of such calculation (i) to the elimination or reduction, as
the case may be, of the cost of any compensation, remuneration
or other benefit paid or provided to any employee, consultant,
Affiliate, equity owner of the entity involved in any Asset
Acquisition to the extent such costs are eliminated or reduced
(or public announcement has been made of the intent to eliminate
or reduce such costs) prior to the date of such calculation and
not replaced; (ii) to any Asset Sales or other dispositions
or Asset Acquisitions, Investments, mergers, consolidations and
discontinued operations (as determined in accordance with GAAP)
occurring during the Four-Quarter Period or any time subsequent
to the last day of the Four-Quarter Period and on or prior to
the Transaction Date, as if such Asset Sale or other disposition
or Asset Acquisition (including the Incurrence or assumption of
any such Acquired Debt), investment, merger, consolidation or
disposed operation occurred on the first day of the Four-Quarter
Period; and (iii) to any Incurrence or repayment of any
Debt of such Person or any of its Restricted Subsidiaries (and
the application of the proceeds thereof) giving rise to the need
to make such calculation and any Incurrence or repayment of
other Debt (and the application of the proceeds thereof), other
than the Incurrence or repayment of Debt Incurred under the
revolving portion of a Credit Facility, occurring during the
Four-Quarter Period. For purposes of this definition, pro
forma calculations shall be made in accordance with
Article 11 of
Regulation S-X
promulgated under the Securities Act.
Furthermore, in calculating Consolidated Fixed
Charges for purposes of determining the denominator (but
not the numerator) of this Consolidated Fixed Charge
Coverage Ratio:
(i) interest on outstanding Debt determined on a
fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest
on such Debt in effect on the Transaction Date;
(ii) if interest on any Debt actually Incurred on the
Transaction Date may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed
to have been in effect during the Four Quarter Period; and
(iii) notwithstanding clause (i) or (ii) above,
interest on Debt determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to
Hedging Obligations, shall be deemed to accrue at the rate per
annum resulting after giving effect to the operation of such
agreements.
If such Person or any of its Restricted Subsidiaries directly or
indirectly Incurs Debt by virtue of a Guarantee of the Debt of a
third Person, the above clause shall give effect to the
Incurrence of such Guaranteed Debt as if such Person or such
Subsidiary had directly Incurred or otherwise assumed such
Guaranteed Debt.
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Consolidated Fixed Charges means, with
respect to any Person for any period, the sum of, without
duplication, the amounts for such period of:
(i) Consolidated Interest Expense; and
(ii) all dividends and other distributions paid during such
period in respect of Redeemable Capital Interests and Preferred
Interests of such Person and its Restricted Subsidiaries (other
than dividends paid in Qualified Capital Interests and excluding
items eliminated in consolidation).
Consolidated Income Tax Expense means, with
respect to any Person for any period, the provision for federal,
state, local and foreign income taxes of such Person and its
Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP paid or accrued
during such period, including any penalties and interest related
to such taxes or arising from any tax examinations, to the
extent the same were deducted in computing Consolidated Net
Income.
Consolidated Interest Expense means, with
respect to any Person for any period, without duplication, the
sum of:
(i) the total interest expense of such Person and its
Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without
limitation:
(a) any amortization of debt discount;
(b) the net cost under any Hedging Obligation or Swap
Contract in respect of interest rate protection (including any
amortization of discounts);
(c) the interest portion of any deferred payment obligation;
(d) all commissions, discounts and other fees and charges
owed with respect to financing activities or similar
activities; and
(e) all accrued interest;
(ii) the interest component of Capital Lease Obligations
paid, accrued
and/or
scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period determined on a
consolidated basis in accordance with GAAP; and
(iii) all capitalized interest of such Person and its
Restricted Subsidiaries for such period;
less interest income of such Person and its Restricted
Subsidiaries for such period; provided, however,
that Consolidated Interest Expense will exclude (I) the
amortization or write-off of debt issuance costs and deferred
financing fees, commissions, fees and expenses and (II) any
expensing of interim loan commitment and other financing fees.
Consolidated Net Income means, with respect
to any Person, for any period, the consolidated net income (or
loss) of such Person and its Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted, to the
extent included in calculating such net income, by:
(A) excluding, without duplication
(i) all extraordinary gains or losses (net of fees and
expense relating to the transaction giving rise thereto),
income, expenses or charges;
(ii) the portion of net income of such Person and its
Restricted Subsidiaries allocable to minority interest in
unconsolidated Persons or Investments in Unrestricted
Subsidiaries to the extent that cash dividends or distributions
have not actually been received by such Person or one of its
Restricted Subsidiaries; provided that for the avoidance of
doubt, Consolidated Net Income shall be increased in amounts
equal to the amounts of cash actually received;
(iii) gains or losses in respect of any Asset Sales by such
Person or one of its Restricted Subsidiaries (net of fees and
expenses relating to the transaction giving rise thereto), on an
after-tax basis;
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(iv) the net income (loss) from any disposed or
discontinued operations or any net gains or losses on disposed
or discontinued operations, on an after-tax basis;
(v) solely for purposes of determining the amount available
for Restricted Payments under clause (c) of the first
paragraph of Certain Covenants Limitation on
Restricted Payments, the net income of any Restricted
Subsidiary (other than a Guarantor) of such Person to the extent
that the declaration of dividends or similar distributions by
that Restricted Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulations applicable to
that Restricted Subsidiary or its stockholders; provided that
for the avoidance of doubt, Consolidated Net Income shall be
increased in amounts equal to the amounts of cash actually
received;
(vi) any gain or loss realized as a result of the
cumulative effect of a change in accounting principles;
(vii) any fees and expenses paid in connection with the
issuance of the Notes;
(viii) non-cash compensation expense Incurred with any
issuance of equity interests to an employee, officer or director
of such Person or any Restricted Subsidiary;
(ix) any net after-tax gains or losses attributable to the
early extinguishment or conversion of Debt;
(x) any non-cash impairment charges or asset write-off or
write-down resulting from the application of Statement of
Financial Accounting Standards No. 142 or Statement of
Financial Accounting Standards No. 144, and the
amortization of intangibles arising pursuant to Statement of
Financial Accounting Standards No. 141 or any related
subsequent Statement of Financial Accounting Standards;
(xi) non-cash gains, losses, income and expenses resulting
from fair value accounting required by Statement of Financial
Accounting Standards No. 133 or any related subsequent
Statement of Financial Accounting Standards;
(xii) accruals and reserves that are established within
twelve months after the closing of any acquisition that are so
required to be established as a result of such acquisition in
accordance with GAAP (provided that if any such accruals or
reserves represents an accrual or reserve for potential cash
items in any future period, the cash payment in respect thereof
in such future period shall reduce Consolidated Net Income in
such future period to such extent);
(xiii) any fees, expenses, charges or Integration Costs
incurred during such period, or any amortization thereof for
such period, in connection with any acquisition, Investment,
Asset Sale, disposition, Incurrence, repayment or
recapitalization of Debt (including such fees, expenses or
charges related to any Credit Facility), issuance of Capital
Interests, refinancing transaction or amendment or modification
of any debt instrument, and including, in each case, any such
transaction undertaken but not completed, and any charges or
non-recurring merger or acquisition costs incurred during such
period as a result of any such transaction, in each case whether
or not successful;
(xiv) any net unrealized gain or loss (after any offset)
resulting from currency translation gains or losses related to
currency remeasurements of Debt (including any net gain or loss
resulting from obligations under Hedging Obligations for
currency exchange risk) and any foreign currency translation
gains or losses;
(xv) any accruals and reserves that are established for
expenses and losses, in respect of equity-based awards
compensation expense (provided that if any such non-cash charges
represent an accrual or reserve for potential cash items in any
future period, the cash payment in respect thereof in such
future period shall reduce Consolidated Net Income in such
future period to such extent, and excluding amortization of a
prepaid cash item that was paid in a prior period);
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(xvi) any expenses, charges or losses that are covered by
indemnification or other reimbursement provisions in connection
with any Permitted Investment or any sale, conveyance, transfer
or other disposition of assets permitted under the Indenture, to
the extent actually reimbursed, or, so long as the Issuer has
made a determination that a reasonable basis exists for
indemnification or reimbursement and only to the extent that
such amount is in fact indemnified or reimbursed within
365 days of such determination (with a deduction in the
applicable future period for any amount so added back to the
extent not so indemnified or reimbursed within such
365 days); and
(xvii) to the extent covered by insurance and actually
reimbursed, or, so long as the Issuer has made a determination
that there exists reasonable evidence that such amount will in
fact be reimbursed by the insurer and only to the extent that
such amount is in fact reimbursed within 365 days of the
date of such determination (with a deduction in the applicable
future period for any amount so added back to the extent not so
reimbursed within such 365 days), expenses, charges or
losses with respect to liability or casualty events or business
interruption; and
(B) including, without duplication, dividends and
distributions actually received in immediately available funds
by Holdings or a Restricted Subsidiary thereof from joint
ventures and other Persons that are not wholly-owned
Subsidiaries in which Holdings or any of its Restricted
Subsidiaries holds an Investment.
Consolidated Non-cash Charges means, with
respect to any Person for any period, the aggregate
depreciation, amortization (including amortization of goodwill,
other intangibles, deferred financing fees, debt issuance costs,
commissions, fees and expenses) and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP.
Consolidated Secured Leverage Ratio means,
with respect to any Person, the ratio of the aggregate amount of
all Debt secured by Liens granted by such Person and its
Restricted Subsidiaries at the end of the most recent fiscal
period, for which financial information in respect thereof is
available immediately preceding the date of the transaction (the
Transaction Date) giving rise to the need to
calculate the Consolidated Secured Leverage Ratio to the
aggregate amount of Consolidated Cash Flow Available for Fixed
Charges of such Person for the four full fiscal quarters,
treated as one period, for which financial information in
respect thereof is available immediately preceding the
Transaction Date (such four full fiscal quarter period being
referred to herein as the Four Quarter
Period). In addition to and without limitation of the
foregoing, for purposes of this definition, this ratio shall be
calculated after giving effect (i) to the cost of any
compensation, remuneration or other benefit paid or provided to
any employee, consultant, Affiliate, equity owner of the entity
involved in any Asset Acquisition to the extent such costs are
eliminated or reduced (or public announcement has been made of
the intent to eliminate or reduce such costs) prior to the date
of such calculation and not replaced; (ii) on a pro
forma basis for the period of such calculation, to any Asset
Sales or other dispositions or Asset Acquisitions, investments,
mergers, consolidations and discontinued operations (as
determined in accordance with GAAP) occurring during the
Four-Quarter Period or any time subsequent to the last day of
the Four-Quarter Period and on or prior to the Transaction Date,
as if such Asset Sale or other disposition or Asset Acquisition
(including the Incurrence or assumption of any such Acquired
Debt), investment, merger, consolidation or disposed operation
occurred on the first day of the Four-Quarter Period and
(iii) on a pro forma basis for the period of such
calculation, to any incurrence or repayment of any Debt of such
Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to
make such calculation and any incurrence or repayment of other
Debt (and the application of the proceeds thereof), other than
the incurrence or repayment of Debt Incurred under the revolving
portion of the Credit Facility, occurring during the
Four-Quarter Period or any time subsequent to the last day of
the Four-Quarter Period and on or prior to the Transaction Date,
in each case, as if such incurrence or repayment occurred on the
first day of the Four-Quarter Period. For purposes of this
definition, pro forma calculations shall be made in
accordance with Article 11 of
Regulation S-X
promulgated under the Securities Act.
Credit Agreement means the Second Amended and
Restated Credit Agreement, dated as of November 27, 2006,
among the Issuer, Holdings, the other guarantors named therein
and Bank of America, N.A., as
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successor administrative agent and collateral agent, and the
other agents and lenders named therein, together with all
related notes, letters of credit, collateral documents,
guarantees, and any other related agreements and instruments
executed and delivered in connection therewith, in each case as
amended, modified, supplemented, restated, refinanced, refunded
or replaced in whole or in part from time to time prior to or
after the Issue Date including by or pursuant to any agreement
or instrument that extends the maturity of any Debt thereunder,
or increases the amount of available borrowings thereunder
(provided that such increase in borrowings is permitted
under clause (i) of the definition of the term
Permitted Debt), or adds Subsidiaries of Holdings as
additional borrowers or guarantors thereunder, in each case with
respect to such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender,
group of lenders, purchasers or debt holders.
Credit Facilities means one or more
(i) credit facilities (including the Credit Agreement) with
banks or other lenders providing for revolving loans or term
loans or the issuance of letters of credit or bankers
acceptances; (ii) note purchase agreements and indentures
providing for the sale of debt securities and (iii) any
agreement that Refinances any Debt Incurred under any agreement
described in clause (i) or (ii) or this clause (iii),
including in each case any successor or replacement agreement or
agreements or indentures.
Debt means at any time (without duplication),
with respect to any Person, whether recourse is to all or a
portion of the assets of such Person, or non-recourse, the
following: (i) all indebtedness of such Person for money
borrowed or for the deferred purchase price of property,
excluding any trade payables or other current liabilities
incurred in the normal course of business; (ii) all
obligations of such Person evidenced by bonds, debentures,
notes, or other similar instruments; (iii) all
reimbursement obligations of such Person with respect to letters
of credit (other than letters of credit that are secured by cash
or Eligible Cash Equivalents), bankers acceptances or
similar facilities (excluding obligations in respect of letters
of credit or bankers acceptances issued in respect of
trade payables) issued for the account of such Person;
provided that such obligations shall not constitute Debt
except to the extent drawn and not repaid within five business
days; (iv) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect
to property or assets acquired by such Person; (v) all
Capital Lease Obligations of such Person; (vi) the maximum
fixed redemption or repurchase price of Redeemable Capital
Interests in such Person or Preferred Interests in Restricted
Subsidiaries of such Person at the time of determination;
(vii) any Swap Contracts and Hedging Obligations of such
Person at the time of determination; (viii) Attributable
Debt with respect to any Sale and Leaseback Transaction to which
such Person is a party; and (ix) all obligations of the
types referred to in clauses (i) through (viii) of
this definition of another Person, the payment of which, in
either case, (A) such Person has Guaranteed or (B) is
secured by (or the holder of such Debt or the recipient of such
dividends or other distributions has an existing right, whether
contingent or otherwise, to be secured by) any Lien upon the
property or other assets of such Person, even though such Person
has not assumed or become liable for the payment of such Debt.
For purposes of the foregoing: (a) the maximum fixed
repurchase price of any Redeemable Capital Interests or
Preferred Interests that do not have a fixed repurchase price
shall be calculated in accordance with the terms of such
Redeemable Capital Interests or Preferred Interests as if such
Redeemable Capital Interests or Preferred Interests were
repurchased on any date on which Debt shall be required to be
determined pursuant to the Indenture; provided,
however, that, if such Redeemable Capital Interests or
Preferred Interests are not then permitted to be repurchased,
the repurchase price shall be the book value of such Redeemable
Capital Interests or Preferred Interests; (b) the amount
outstanding at any time of any Debt issued with original issue
discount is the principal amount of such Debt less the remaining
unamortized portion of the original issue discount of such Debt
at such time as determined in conformity with GAAP, but such
Debt shall be deemed Incurred only as of the date of original
issuance thereof; (c) the amount of any Debt described in
clause (vii) is the net amount payable (after giving effect
to permitted set off) if such Swap Contracts or Hedging
Obligations are terminated at that time due to default of such
Person; (d) the amount of any Debt described in clause
(ix)(A) above shall be the maximum liability under any such
Guarantee; (e) the amount of any Debt described in clause
(ix)(B) above shall be the lesser of (I) the maximum amount
of the obligations so secured and (II) the Fair Market
Value of such property or other assets; (f) interest, fees,
premium, and expenses and additional payments, if any, will not
constitute Debt; (g) amounts outstanding under any
Qualified Receivables transaction shall constitute Debt;
(h) Debt shall not include the pledge by Holdings or any of
its Restricted Subsidiaries of Capital Interests of a
Receivables
84
Subsidiary to secure Non-Recourse Receivable Subsidiary
Indebtedness; (i) Debt shall not include the pledge by
Holdings or any of its Restricted Subsidiaries of Capital
Interests of an Unrestricted Subsidiary to secure Debt of an
Unrestricted Subsidiary; and (j) Debt shall not include an
obligation to repay advances or prepayments made to Holdings or
a Restricted Subsidiary by a customer thereof under contracts
entered into in the ordinary course of business. In no event
shall non-contractual obligations or liabilities in respect of
any Capital Interests constitute Debt under this definition.
Notwithstanding the foregoing, in connection with the purchase
by Holdings or any Restricted Subsidiary of any business, the
term Debt will exclude (x) customary
indemnification obligations and (y) post-closing payment
adjustments to which the seller may become entitled to the
extent such payment is determined by a final closing balance
sheet or such payment is otherwise contingent; provided,
however, that, at the time of closing, the amount of any
such payment is not determinable and, to the extent such payment
thereafter becomes fixed and determined, the amount is paid
within 60 days thereafter.
The amount of Debt of any Person at any date shall be the
outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, only
upon the occurrence of the contingency giving rise to the
obligations, of any contingent obligations at such date;
provided, however, that in the case of Debt sold
at a discount, the amount of such Debt at any time will be the
accreted value thereof at such time. If such Person or any of
its Restricted Subsidiaries directly or indirectly Guarantees
Debt of a third Person, the amount of Debt of such Person shall
give effect to the Incurrence of such Guaranteed Debt as if such
Person or such Subsidiary had directly Incurred or otherwise
assumed such Guaranteed Debt.
Default means any event that is, or after
notice or passage of time, or both, would be, an Event of
Default.
Designated Non-cash Consideration means the
Fair Market Value of non-cash consideration received by Holdings
or a Restricted Subsidiary in connection with an Asset Sale that
is so designated as Designated Non-cash Consideration pursuant
to an Officers Certificate, setting forth the basis of
such valuation less the amount of cash or Cash Equivalents
received in connection with a subsequent sale of or collection
on such Designated Non-cash Consideration.
Eligible Bank means a bank or trust company
that (i) is licensed, chartered or organized and existing
under the laws of the United States or Canada, or any state,
territory, province or possession thereof, including the United
States branch of any foreign bank and (ii) as of the time
of the making or acquisition of an Investment in such bank or
trust company, has combined capital and surplus in excess of
$500.0 million.
Eligible Cash Equivalents means any of the
following Investments: (i) securities issued or directly
and fully guaranteed or insured by the United States or any
agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support
thereof) maturing not more than one year after the date of
acquisition; (ii) time deposits in and certificates of
deposit of any Eligible Bank, provided that such
Investments have a maturity date not more than two years after
date of acquisition and that the Average Life of all such
Investments is one year or less from the respective dates of
acquisition; (iii) repurchase obligations with a term of
not more than 180 days for underlying securities of the
types described in clause (i) above entered into with any
Eligible Bank; (iv) direct obligations issued by any state
of the United States or any political subdivision or public
instrumentality thereof, provided that such Investments
mature, or are subject to tender at the option of the holder
thereof, within one year after the date of acquisition and, at
the time of acquisition, have a rating of at least
A-2 from
S&P or
P-2 from
Moodys (or an equivalent rating by any other nationally
recognized rating agency); (v) commercial paper of any
Person other than an Affiliate of Holdings and other than
structured investment vehicles, provided that such
Investments have a rating of at least
A-2 from
S&P or
P-2 from
Moodys (or an equivalent rating by any other nationally
recognized rating agency) and mature within one year after the
date of acquisition; (vi) overnight and demand deposits in
and bankers acceptances of any Eligible Bank and demand
deposits in any bank or trust company to the extent insured by
the Federal Deposit Insurance Corporation against the Bank
Insurance Fund; (vii) money market funds substantially all
of the assets of which comprise Investments of the types
described in clauses (i) through (vi); and (viii) with
respect to Foreign Restricted Subsidiaries, Investments made
locally of a type comparable to those referred to in
clauses (i) through (vi) above or funds equivalent to
those referred to in clause (vii) above.
85
Exchange Act means the Securities Exchange
Act of 1934, as amended.
Excluded Contributions means the net cash
proceeds received by the Issuer after the Issue Date from
contributions to its common equity capital (other than by virtue
of (i) the issuance of Capital Interests of Holdings to a
Restricted Subsidiary of the Issuer, or to any management equity
plan or stock option plan or any other management or employee
benefit plan or agreement of Holdings or any Restricted
Subsidiary (y) the issuance of Redeemable Capital Interests
or Preferred Interests of Holdings); provided, however
that (i) such net cash proceeds will be designated by
the Issuer as Excluded Contributions in an
Officers Certificate delivered to the Trustee and the net
cash proceeds so designated will be excluded from the
calculation set forth in clause (c) of the first paragraph
of the Limitation on Restricted
Payments covenant.
Expiration Date has the meaning set forth in
the definition of Offer to Purchase.
Fair Market Value means, with respect to the
consideration received or paid in any transaction or series of
transactions, the fair market value thereof as determined in
good faith by the Issuer. In the case of a transaction between
Holdings, the Issuer or a Restricted Subsidiary, on the one
hand, and a Receivable Subsidiary, on the other hand, if the
Issuer determines in its sole discretion that such determination
is appropriate, a determination as to Fair Market Value may be
made at the commencement of the transaction and be applicable to
all dealings between the Receivable Subsidiary and Holdings, the
Issuer or such Restricted Subsidiary during the course of such
transaction.
Foreign Restricted Subsidiary means any
Restricted Subsidiary other than a Restricted Subsidiary
incorporated or otherwise organized or existing under the laws
of any state of the United States or the District of Columbia.
Four-Quarter Period has the meaning set forth
in the definition of Consolidated Fixed Charge Coverage
Ratio.
GAAP means generally accepted accounting
principles in the United States, consistently applied, as set
forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements (including the
Accounting Standards Codification) of the Financial Accounting
Standards Board, or in such other statements by such other
entity as may be approved by a significant segment of the
accounting profession of the United States.
Governmental Authority means any Federal,
state, local or foreign court, political subdivision,
municipality or governmental agency, authority, instrumentality
or regulatory body.
Guarantee means, as applied to any Debt of
another Person, (i) a guarantee (other than by endorsement
of negotiable instruments for collection in the normal course of
business), direct or indirect, in any manner, of any part or all
of such Debt, (ii) any direct or indirect obligation,
contingent or otherwise, of a Person guaranteeing or having the
effect of guaranteeing the Debt of any other Person in any
manner and (iii) an agreement of a Person, direct or
indirect, contingent or otherwise, the practical effect of which
is to assure in any way the payment (or payment of damages in
the event of non-payment) of all or any part of such Debt of
another Person (and Guaranteed and
Guaranteeing shall have meanings that
correspond to the foregoing).
Guarantor means any Person that executes a
Note Guarantee in accordance with the provisions of the
Indenture and such Persons successors and assigns.
Hedging Obligations of any Person means the
obligations of such Person pursuant to any interest rate
agreement, currency agreement or commodity agreement.
Holder means a Person in whose name a Note is
registered in the security register.
Incur means, with respect to any Debt or
other obligation of any Person, to create, issue, incur (by
conversion, exchange or otherwise), assume, Guarantee or
otherwise become liable in respect of such Debt or other
obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Debt or other obligation on the balance
sheet of such Person. Debt otherwise Incurred by a Person before
it becomes a Subsidiary of Holdings shall be deemed to be
Incurred at the time at which such Person becomes a Subsidiary
of Holdings. Incurrence,
Incurred, Incurrable and
Incurring shall have meanings that correspond
to
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the foregoing. A Guarantee by Holdings or a Restricted
Subsidiary of Debt Incurred by Holdings or a Restricted
Subsidiary, as applicable, shall not be a separate Incurrence of
Debt. In addition, the following shall not be deemed a separate
Incurrence of Debt:
(1) amortization of debt discount or accretion of principal
with respect to a non-interest bearing or other discount
security;
(2) the payment of regularly scheduled interest in the form
of additional Debt of the same instrument or the payment of
regularly scheduled dividends on Capital Interests in the form
of additional Capital Interests of the same class and with the
same terms;
(3) the obligation to pay a premium in respect of Debt
arising in connection with the issuance of a notice of
redemption or making of a mandatory offer to purchase such
Debt; and
(4) unrealized losses or charges in respect of Hedging
Obligations or obligations under Swap Contracts.
Initial Purchasers means Banc of America
Securities LLC, Credit Suisse Securities (USA) LLC, Morgan
Stanley & Co. Incorporated, Barclays Capital Inc.,
Mitsubishi UFJ Securities (USA), Inc., RBC Capital Markets
Corporation, Scotia Capital (USA) Inc. and such other initial
purchasers party to the purchase agreement entered into in
connection with the offer and sale of the Notes on the Issue
Date and any similar purchase agreement in connection with any
Additional Notes.
Integration Costs means, with respect to any
acquisition, all costs relating to the integration of the
acquired business or operations into those of Holdings or any
Restricted Subsidiary thereof, including labor costs, consulting
fees, travel costs and any other expenses relating to the
integration process.
Investment by any Person means any direct or
indirect loan, advance, guarantee for the benefit of (or other
extension of credit) or capital contribution to (by means of any
transfer of cash or other property or assets to another Person
or any other payments for property or services for the account
or use of another Person) another Person, including, without
limitation, the following: (i) the purchase or acquisition
of any Capital Interest or other evidence of beneficial
ownership in another Person; (ii) the purchase, acquisition
or Guarantee of the Debt of another Person; and (iii) the
purchase or acquisition of the business or assets of another
Person substantially as an entirety but shall exclude:
(a) accounts receivable and other extensions of trade
credit arising in the normal course of business; (b) the
acquisition of property and assets from suppliers and other
vendors in the normal course of business; (c) prepaid
expenses and workers compensation, utility, lease and
similar deposits, in the normal course of business; and
(d) negotiable instruments held for collection and
endorsements for deposit or collection in the ordinary course of
business.
Investment Grade Rating designates a rating
of BBB- or higher by S&P or Baa3 or higher by Moodys
or the equivalent of such ratings by S&P or Moodys.
In the event that the Issuer shall select any other Rating
Agency, the equivalent of such ratings by such Rating Agency
shall be used.
IRB Lease Obligations means Capital Lease
Obligations owed to a Governmental Authority in connection with
the leasing of property that is purchased by such Governmental
Authority and financed with the proceeds of an issuance of
industrial revenue bonds issued by such Governmental Authority
to Holdings or a Restricted Subsidiary; provided that on
or prior to the date of Incurrence of such Capital Lease
Obligations, the Issuer shall have delivered an Officers
Certificate to the Trustee stating that the Issuer has confirmed
with its independent auditors that such Capital Lease Obligation
shall not be required under GAAP (as in effect at the time any
such IRB Lease Obligations are incurred) to appear on the face
of Holdings consolidated balance sheet as debt.
Issue Date means September 30, 2009.
Lien means, with respect to any property or
other asset, any mortgage, deed of trust, deed to secure debt,
pledge, hypothecation, assignment, deposit arrangement, security
interest, lien (statutory or otherwise), charge, easement,
encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on or
with respect to such property or other asset (including, without
limitation,
87
any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).
Moodys means Moodys Investors
Service, Inc. and any successor to its rating agency business.
Net Cash Proceeds means, with respect to
Asset Sales of any Person, cash and Eligible Cash Equivalents
received, net of: (i) all reasonable out-of-pocket costs
and expenses of such Person incurred in connection with such a
sale, including, without limitation, all legal, accounting,
title and recording tax expenses, commissions and other fees and
expenses incurred and all federal, state, foreign and local
taxes arising in connection with such an Asset Sale that are
paid or required to be accrued as a liability under GAAP by such
Person; (ii) all payments made by such Person on any Debt
that is secured by such properties or other assets in accordance
with the terms of any Lien upon or with respect to such
properties or other assets or that must, by the terms of such
Lien or such Debt, or in order to obtain a necessary consent to
such transaction or by applicable law, be repaid to any other
Person (other than Holdings or a Restricted Subsidiary thereof)
in connection with such Asset Sale; and (iii) all
contractually required distributions and other payments made to
minority interest holders in Restricted Subsidiaries of such
Person as a result of such transaction; provided,
however, that: (a) in the event that any
consideration for an Asset Sale (which would otherwise
constitute Net Cash Proceeds) is required by (I) contract
to be held in escrow pending determination of whether a purchase
price adjustment will be made or (II) GAAP to be reserved
against other liabilities in connection with such Asset Sale,
such consideration (or any portion thereof) shall become Net
Cash Proceeds only at such time as it is released to such Person
from such reserve or escrow or otherwise; and (b) any
non-cash consideration received in connection with any
transaction, which is subsequently converted to cash, shall
become Net Cash Proceeds only at such time as it is so converted.
Non-Recourse Receivable Subsidiary
Indebtedness has the meaning set forth in the
definition of Receivable Subsidiary.
Obligations means any principal, premium,
interest (including any interest accruing subsequent to the
filing of a petition in bankruptcy, reorganization or similar
proceeding at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed
claim under applicable state, federal or foreign law),
penalties, fees, indemnifications, reimbursements (including
reimbursement obligations with respect to letters of credit and
bankers acceptances), damages and other liabilities, and
guarantees of payment of such principal, interest, penalties,
fees, indemnifications, reimbursements, damages and other
liabilities, payable under the documentation governing any Debt.
Offer has the meaning set forth in the
definition of Offer to Purchase.
Offer to Purchase means a written offer (the
Offer) sent by the Issuer by first class
mail, postage prepaid, to each Holder at his address appearing
in the security register on the date of the Offer, offering to
purchase up to the aggregate principal amount of Notes set forth
in such Offer at the purchase price set forth in such Offer (as
determined pursuant to the Indenture). Unless otherwise required
by applicable law, the offer shall specify an expiration date
(the Expiration Date) of the Offer to
Purchase which shall be, subject to any contrary requirements of
applicable law, not less than 30 days or more than
60 days after the date of mailing of such Offer and a
settlement date (the Purchase Date) for
purchase of Notes within five business days after the Expiration
Date. The Issuer shall notify the Trustee at least 10 days
(or such shorter period as is acceptable to the Trustee) prior
to the mailing of the Offer of the Issuers obligation to
make an Offer to Purchase, and the Offer shall be mailed by the
Issuer or, at the Issuers request, by the Trustee in the
name and at the expense of the Issuer. The Offer shall contain
all instructions and materials necessary to enable such Holders
to tender Notes pursuant to the Offer to Purchase. The Offer
shall also state:
(1) the Section of the Indenture pursuant to which the
Offer to Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Notes
offered to be purchased pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount
has been determined pursuant to Indenture covenants requiring
the Offer to Purchase) (the Purchase Amount);
88
(4) the purchase price to be paid by the Issuer for each
$2,000 principal amount of Notes (and integral multiples of
$1,000 in excess thereof) accepted for payment (as specified
pursuant to the Indenture) (the Purchase
Price);
(5) that the Holder may tender all or any portion of the
Notes registered in the name of such Holder and that any portion
of a Note tendered must be tendered in a minimum amount of
$2,000 principal amount (and integral multiples of $1,000 in
excess thereof);
(6) the place or places where Notes are to be surrendered
for tender pursuant to the Offer to Purchase, if applicable;
(7) that, unless the Issuer defaults in making such
purchase, any Note accepted for purchase pursuant to the Offer
to Purchase will cease to accrue interest on and after the
Purchase Date, but that any Note not tendered or tendered but
not purchased by the Issuer pursuant to the Offer to Purchase
will continue to accrue interest at the same rate;
(8) that, on the Purchase Date, the Purchase Price will
become due and payable upon each Note accepted for payment
pursuant to the Offer to Purchase;
(9) that each Holder electing to tender a Note pursuant to
the Offer to Purchase will be required to surrender such Note or
cause such Note to be surrendered at the place or places set
forth in the Offer prior to the close of business on the
Expiration Date (such Note being, if the Issuer or the Trustee
so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Issuer and
the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any
portion of Notes tendered if the Issuer (or its paying agent)
receives, not later than the close of business on the Expiration
Date, a facsimile transmission or letter setting forth the name
of the Holder, the aggregate principal amount of the Notes the
Holder tendered, the certificate number of the Note the Holder
tendered and a statement that such Holder is withdrawing all or
a portion of his tender and specifying the portion of the tender
that is being withdrawn;
(11) that (a) if Notes having an aggregate principal
amount less than or equal to the Purchase Amount are duly
tendered and not withdrawn pursuant to the Offer to Purchase,
the Issuer shall purchase all such Notes and (b) if Notes
having an aggregate principal amount in excess of the Purchase
Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, the Issuer shall purchase Notes having an aggregate
principal amount equal to the Purchase Amount on a pro rata
basis (with such adjustments as may be deemed appropriate so
that only Notes in denominations of $2,000 principal amount or
integral multiples of $1,000 in excess thereof shall be
purchased); and
(12) if applicable, that, in the case of any Holder whose
Note is purchased only in part, the Issuer shall execute, and
the Trustee shall authenticate and deliver to the Holder of such
Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder, in the
aggregate principal amount equal to and in exchange for the
unpurchased portion of the aggregate principal amount of the
Notes so tendered.
Officers Certificate means a
certificate signed by two officers of the Issuer or a Guarantor,
as applicable, one of whom must be the principal executive
officer, the principal financial officer or the principal
accounting officer of the Issuer or such Guarantor, as
applicable.
Pari Passu Debt means the Notes and any Debt
which ranks pari passu in right of payment to the Notes.
Permitted Business means any business similar
in nature to any business conducted by Holdings and the
Restricted Subsidiaries on the Issue Date and any business
reasonably ancillary, incidental, complementary or related to,
or a reasonable extension, development or expansion of, the
business conducted by Holdings and the Restricted Subsidiaries
on the Issue Date, in each case, as determined in good faith by
the Issuer.
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Permitted Debt means
(a) Debt Incurred pursuant to Credit Facilities (excluding
Debt referenced in clause (b) or (c) below) in an
aggregate principal amount at any one time outstanding not to
exceed (x) $1,350.0 million minus (y)
(A) any amounts Incurred and outstanding pursuant to a
Qualified Receivables Transaction permitted under
clause (n) below and (B) with respect to
clause (x) above any amount used to permanently repay such
Obligations (or permanently reduce commitments with respect
thereto) pursuant to the Limitation on Asset Sales
covenant;
(b) Debt under the Notes issued on the Issue Date (and any
Exchange Notes pursuant to the Registration Rights Agreement);
(c) Guarantees of the Notes (and any Exchange Notes
pursuant to the Registration Rights Agreement);
(d) Debt of Holdings or any Restricted Subsidiary
outstanding on the Issue Date (other than clause (a),
(b) or (c) above);
(e) Guarantees Incurred by Holdings of Debt of a Restricted
Subsidiary otherwise permitted to be incurred under the
Indenture;
(f) Guarantees by any Restricted Subsidiary of Debt of
Holdings or any other Restricted Subsidiary, including
Guarantees by any Restricted Subsidiary of Debt under the Credit
Agreement, provided that (i) the Debt being
Guaranteed is Permitted Debt or is otherwise Incurred in
accordance with the Limitation on Incurrence of Debt
covenant and (ii) such Guarantees are subordinated to the
Notes to the same extent, if any, as the Debt being Guaranteed;
(g) Debt incurred in respect of workers compensation
claims and self-insurance obligations, and, for the avoidance of
doubt, indemnity, bid, performance, warranty, release, appeal,
surety and similar bonds, letters of credit for operating
purposes and completion guarantees provided or incurred
(including Guarantees thereof) by Holdings or a Restricted
Subsidiary in the ordinary course of business;
(h) Debt under Swap Contracts and Hedging Obligations
incurred in the ordinary course of business and not for
speculative purposes;
(i) Debt owed by Holdings to any Restricted Subsidiary, or
by any Restricted Subsidiary to Holdings or to any other
Restricted Subsidiary, provided that if for any reason
such Debt ceases to be held by Holdings or a Restricted
Subsidiary, as applicable, such Debt shall cease to be Permitted
Debt under this clause (i) and shall be deemed Incurred as
Debt of Holdings for purposes of the Indenture;
(j) (i) Debt of Holdings, the Issuer or any Restricted
Subsidiary constituting IRB Lease Obligations and any
Refinancing Debt that Refinances any such Debt and
(ii) other Debt of Holdings, the Issuer or any Restricted
Subsidiary pursuant to Capital Lease Obligations, Synthetic
Lease Obligations and Purchase Money Debt and any Refinancing
Debt that Refinances any Debt Incurred pursuant to this clause
(j)(ii), provided that the aggregate principal amount of
all Debt Incurred under this clause (j)(ii) and outstanding at
any time may not exceed $200.0 million in the aggregate;
(k) Debt arising from agreements of Holdings or a
Restricted Subsidiary providing for indemnification,
contribution, earnout, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection
with the acquisition or disposition of any business, assets or
Capital Interests of a Restricted Subsidiary otherwise permitted
under the Indenture;
(l) Debt arising by virtue of the issuance by any of the
Holdings Restricted Subsidiaries to Holdings or to any of
its Restricted Subsidiaries of shares of Redeemable Capital
Interests or Preferred Interests; provided,
however, that:
(i) any subsequent issuance or transfer of Redeemable
Capital Interests or Preferred Interests that results in any
such Redeemable Capital Interests or Preferred Interests being
held by a Person other than Holdings or a Restricted
Subsidiary; and
90
(ii) any sale or other transfer of any such Redeemable
Capital Interests or Preferred Interests to a Person that is not
either Holdings or a Restricted Subsidiary;
shall be deemed, in each case, to constitute an Incurrence of
Debt that was not permitted by this clause (l);
(m) Debt arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of
business; provided, however, that such Debt is
extinguished within five business days of Incurrence;
(n) Purchase Money Notes Incurred by any Receivable
Subsidiary that is a Restricted Subsidiary in a Qualified
Receivables Transaction and Non-Recourse Receivable Subsidiary
Indebtedness;
(o) Refinancing Debt that Refinances Debt Incurred pursuant
to the provisions described in the first paragraph under the
Limitation on Incurrence of Debt covenant or Debt
Incurred pursuant to clauses (b), (d) or this
clause (o) of this definition of Permitted Debt;
(p) Debt of Foreign Restricted Subsidiaries in an aggregate
principal amount not to exceed $200.0 million at any time
outstanding; and
(q) Debt of Holdings or any Restricted Subsidiary not
otherwise permitted pursuant to this definition, in an aggregate
principal amount not to exceed $100.0 million at any time
outstanding.
Permitted Investments means:
(a) Investments in existence on the Issue Date;
(b) Investments required pursuant to any agreement or
obligation of Holdings or a Restricted Subsidiary, in effect on
the Issue Date, to make such Investments;
(c) Investments in cash and Eligible Cash Equivalents;
(d) Investments in property and other assets, owned or used
by Holdings or any Restricted Subsidiary in the normal course of
business;
(e) Investments by Holdings or any of its Restricted
Subsidiaries in Holdings or any Restricted Subsidiary;
(f) Investments by Holdings or any Restricted Subsidiary in
a Person, if as a result of such Investment (A) such Person
becomes a Restricted Subsidiary or (B) such Person is
merged, consolidated or amalgamated with or into, or transfers
or conveys substantially all of its assets to, or is liquidated
or wound-up
into, Holdings or a Restricted Subsidiary;
(g) Hedging Obligations and Investments made pursuant to
Swap Contracts;
(h) receivables owing to Holdings or any of its
Subsidiaries and advances to suppliers, in each case if created,
acquired or made in the ordinary course of business and payable
or dischargeable in accordance with customary trade terms;
(i) any Investment acquired by Holdings or any Restricted
Subsidiary (i) in exchange for any other Investment or
accounts receivable held by Holdings or a Restricted Subsidiary
in connection with or as a result of a bankruptcy, workout,
reorganization or recapitalization of the Person in which such
other Investment is made or which is the obligor with respect to
such accounts receivable, or (ii) as a result of a
foreclosure by Holdings or a Restricted Subsidiary with respect
to any secured Investment or other transfer of title with
respect to any secured Investment in default or (iii) in
compromise or resolution of any litigation, arbitration or other
disputes with the obligor on an account receivable or any
Persons that are not Affiliates of Holdings;
(j) Investments by Holdings or any Restricted Subsidiary
not otherwise permitted under this definition, in an aggregate
amount not to exceed $150.0 million at any one time
outstanding;
91
(k) loans and advances to officers, directors and employees
of Holdings and Subsidiaries in an aggregate amount not to
exceed $15.0 million in the aggregate at any one time
outstanding, for travel, entertainment, relocation and analogous
ordinary business purposes;
(l) Investments the payment for which consists solely of
Capital Interests of Holdings;
(m) any Investment in any Person to the extent such
Investment represents the non-cash portion of the consideration
received in connection with an Asset Sale consummated in
compliance with the covenant described under
Certain Covenants Limitation on
Asset Sales or any other disposition of Property not
constituting an Asset Sale;
(n) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in
the ordinary course of business;
(o) guarantees by Holdings or any Restricted Subsidiary of
Debt of Holdings or a Restricted Subsidiary (other than a
Receivables Subsidiary) of Debt otherwise permitted by the
covenant described hereunder Certain
Covenants Limitation on Incurrence of Debt;
(p) any Investment by Holdings or any Restricted Subsidiary
in a Receivable Subsidiary or any Investment by a Receivable
Subsidiary in any other Person in connection with a Qualified
Receivables Transaction, so long as any Investment in a
Receivable Subsidiary is in the form of a Purchase Money Note or
an Investment in Capital Interests; and
(q) Investments in joint ventures having an aggregate fair
market value, taken together with all other Investments made
pursuant to this clause (q) that are at that time
outstanding, not to exceed $75.0 million.
Permitted Liens means:
(a) Liens existing at the Issue Date;
(b) Liens that secure (A) Credit Facilities incurred
pursuant to clause (a) of the definition of Permitted
Debt
and/or the
provisions described in the first paragraph of Certain
Covenants Limitation on Incurrence of Debt in
an aggregate principal amount not to exceed the greater of (x)
(1) $1,350.0 million minus (2) any amounts
Incurred and outstanding pursuant to a Qualified Receivables
Transaction permitted under clause (n) of the definition of
Permitted Debt and (y) an amount that does not
cause the Consolidated Secured Leverage Ratio to exceed 2.75 to
1.00 and (B) fees, expenses and other amounts payable under
Credit Facilities or payable pursuant to cash management
agreements or agreements with respect to similar banking
services;
(c) any Lien for taxes, assessments or governmental charges
or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided that any
reserve or other appropriate provision as is required in
conformity with GAAP has been made therefor;
(d) any Lien imposed by law, such as carriers,
warehousemens, suppliers, landlords and
mechanics Liens, in each case, incurred in the ordinary
course of business;
(e) survey exceptions, encumbrances, easements or
reservations of, or rights of others for, licenses,
rights-of-way, sewers, electric lines, telegraph and telephone
lines and other similar purposes, or zoning or other similar
restrictions as to the use of real properties or Liens
incidental to the conduct of the business of such Person or to
the ownership of its properties which do not individually or in
the aggregate materially adversely affect the value of Holdings
or its Subsidiaries, taken as a whole, or materially impair the
operation of the business of Holdings and its Subsidiaries,
taken as a whole;
(f) pledges or deposits (i) in connection with
workers compensation, unemployment insurance and other
types of statutory obligations or the requirements of any
official body; (ii) to secure the performance of tenders,
bids, surety or performance bonds, leases, purchase,
construction, sales or servicing contracts
92
(including utility contracts) and other similar obligations
Incurred in the normal course of business; (iii) to obtain
or secure obligations with respect to letters of credit,
Guarantees, bonds or other sureties or assurances given in
connection with the activities described in clauses (i) and
(ii) above, in each case not Incurred or made in connection
with the borrowing of money, the obtaining of advances or credit
or the payment of the deferred purchase price of property or
services; or (iv) arising in connection with any attachment
pursuant to a judgment, unless such Liens shall not be satisfied
or discharged or stayed pending appeal within 60 days after
the entry thereof or the expiration of any such stay;
(g) Liens on property or assets of a Person existing at the
time such Person is merged with or into or consolidated with
Holdings or a Restricted Subsidiary, or becomes a Restricted
Subsidiary (and not created or Incurred in anticipation of such
transaction), provided that such Liens are not extended
to the property and assets of Holdings and its Restricted
Subsidiaries other than the property or assets acquired;
(h) Liens securing Debt of a Restricted Subsidiary owed to
and held by Holdings or a Restricted Subsidiary thereof;
(i) Liens to secure any permitted extension, renewal,
refinancing or refunding (or successive extensions, renewals,
refinancings or refundings), in whole or in part, of any Debt
secured by Liens referred to in clauses (a), (b), (g) and
(u) hereof; provided that such Liens do not extend
to any other property or assets and the principal amount of the
obligations secured by such Liens is not increased;
(j) Liens in favor of customs or revenue authorities
arising as a matter of law to secure payment of custom duties in
connection with the importation of goods incurred in the
ordinary course of business;
(k) Liens on the Capital Interests of an Unrestricted
Subsidiary to secure Debt of an Unrestricted Subsidiary;
(l) Liens to secure Capital Lease Obligations, Synthetic
Lease Obligations and Purchase Money Debt permitted to be
incurred pursuant to clause (j) of the definition of
Permitted Debt; provided that such Liens do
not extend to or cover any assets other than such assets
acquired or constructed after the Issue Date with the proceeds
of such Capital Lease Obligation, Synthetic Lease Obligation or
Purchase Money Debt;
(m) Liens in favor of the Issuer or any Guarantor;
(n) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Persons
obligation in respect of bankers acceptances issued or
created in the ordinary course of business for the account of
such Person to facilitate the purchase, shipment, or storage of
such inventory or other goods;
(o) Liens on property or shares of Capital Interests of
another Person at the time such other Person becomes a
Subsidiary of such Person; provided, however, that
(i) the Liens may not extend to any other property owned by
such Person or any of its Restricted Subsidiaries (other than
assets and property affixed or appurtenant thereto) and
(ii) such Liens are not created or incurred in connection
with, or in contemplation of, such other Person becoming such a
Restricted Subsidiary;
(p) Liens (i) that are contractual rights of set-off
(A) relating to the establishment of depository relations
with banks not given in connection with the issuance of Debt,
(B) relating to pooled deposit or sweep accounts of
Holdings or any of its Restricted Subsidiaries to permit
satisfaction of overdraft or similar obligations and other cash
management activities incurred in the ordinary course of
business of Holdings and or any of its Restricted Subsidiaries
or (C) relating to purchase orders and other agreements
entered into with customers of Holdings or any of its Restricted
Subsidiaries in the ordinary course of business, (ii) in
favor of a collection bank arising under
Section 4-210
of the Uniform Commercial Code on items in the course of
collection, (iii) encumbering reasonable customary initial
deposits and margin deposits and attaching to commodity trading
accounts or other brokerage accounts incurred in the ordinary
course of business, and (iv) in favor of banking
institutions arising as a matter of law or pursuant to customary
account agreements encumbering deposits (including the right of
set-off) and which are within the general parameters customary
in the banking industry;
93
(q) Liens securing judgments for the payment of money not
constituting an Event of Default under clause (7) under the
caption Events of Default;
(r) leases, subleases, licenses or sublicenses granted in
the ordinary course of business which do not materially
interfere with the ordinary conduct of the business of Holdings
and its Restricted Subsidiaries taken as a whole;
(s) any interest of title of an owner of equipment or
inventory on loan or consignment to Holdings or any of its
Restricted Subsidiaries and Liens arising from Uniform
Commercial Code financing statement or similar filings regarding
operating leases entered into by Holdings or any Restricted
Subsidiary in the ordinary course of business;
(t) deposits in the ordinary course of business to secure
liability to insurance carriers;
(u) Liens securing the Notes and the Note Guarantees;
(v) Liens on the Capital Interests of a Receivables
Subsidiary and accounts receivable and related assets described
in the definition of Qualified Receivables Transaction, in each
case, incurred in connection with a Qualified Receivables
Transaction;
(w) Liens securing Hedging Obligations and obligations
under Swap Contracts so long as such Hedging Obligations or
obligations under such Swap Contracts are permitted to be
Incurred under the Indenture;
(x) options, put and call arrangements, rights of first
refusal and similar rights relating to Investments in joint
ventures, limited liability companies, partnerships and the like
permitted to be made under the Indenture;
(y) Liens attaching to earnest money deposits (or
equivalent deposits otherwise named) made in connection with
proposed acquisitions in an amount not to exceed
$5.0 million;
(z) (i) set-off rights not otherwise set forth in
clause (r) above, or (ii) Liens arising in connection
with repurchase agreements that constitute Investments;
(aa) Liens securing Debt of Foreign Restricted Subsidiaries
on assets of Foreign Restricted Subsidiaries and Incurred
pursuant to clause (p) of the definition of Permitted
Debt;
(bb) Liens deemed to exist in connection with Investments
in repurchase agreements that constitute Permitted Investments,
provided that such Liens do not extend to any assets
other than those assets that are the subject of such repurchase
agreement;
(cc) Liens on assets directly related to a Sale and
Leaseback Transaction to secure related Attributable Debt;
(dd) Liens representing the right of customers and
suppliers to purchase or repurchase assets from Holdings or a
Restricted Subsidiary under contracts entered into in the
ordinary course of business; and
(ee) Liens not otherwise permitted under the Indenture in
an aggregate amount not to exceed $150.0 million.
Person means any individual, corporation,
limited liability company, partnership, joint venture, trust,
unincorporated organization or government or any agency or
political subdivision thereof.
Preferred Interests, as applied to the
Capital Interests in any Person, means Capital Interests in such
Person of any class or classes (however designated) that rank
prior, as to the payment of dividends or as to the distribution
of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Common
Interests in such Person.
Purchase Amount has the meaning set forth in
the definition of Offer to Purchase.
Purchase Date has the meaning set forth in
the definition of Offer to Purchase.
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Purchase Money Debt means Debt
(i) Incurred to finance the purchase or construction
(including additions and improvements thereto) of any assets
(other than Capital Interests) of such Person or any Restricted
Subsidiary; and
(ii) that is secured by a Lien on such assets where the
lenders sole security is to the assets so purchased or
constructed; and
in either case that does not exceed 100% of the cost and to the
extent the purchase or construction prices for such assets are
or should be included in addition to property, plant or
equipment in accordance with GAAP.
Purchase Money Note means a promissory note
of a Receivable Subsidiary issued to Holdings or any Restricted
Subsidiary, which note must be repaid from cash available to the
Receivable Subsidiary, other than amounts required to be
established as reserves pursuant to agreements, amounts paid to
investors in respect of interest, principal and other amounts
owing to such investors and amounts paid in connection with the
purchase of newly generated receivables. The repayment of a
Purchase Money Note may be subordinated to the repayment of
other liabilities of the Receivable Subsidiary on terms
determined in good faith by Holdings to be substantially
consistent with market practice in connection with Qualified
Receivables Transactions.
Purchase Price has the meaning set forth in
the definition of Offer to Purchase.
Qualified Capital Interests in any Person
means a class of Capital Interests other than Redeemable Capital
Interests.
Qualified Equity Offering means an
underwritten public equity offering of Qualified Capital
Interests pursuant to an effective registration statement under
the Securities Act yielding gross proceeds to Holdings (and the
net proceeds of which is contributed to the capital of the
Issuer) of at least $25.0 million, other than (x) any
such public sale to an entity that is an Affiliate of Holdings
and (y) any public offerings registered on
Form S-8.
Qualified Receivables Transaction means any
transaction or series of transactions entered into by Holdings
or any of its Restricted Subsidiaries pursuant to which Holdings
or such Restricted Subsidiary transfers to (a) a Receivable
Subsidiary (in the case of a transfer by Holdings or any of its
Restricted Subsidiaries) or (b) any other Person (in the
case of a transfer by a Receivable Subsidiary), or grants a
security interest in, any accounts receivable (whether now
existing or arising in the future) of Holdings or any of its
Restricted Subsidiaries, and any assets related thereto,
including, without limitation, all collateral securing such
accounts receivable, all contracts and all Guarantees or other
obligations in respect of such accounts receivable, proceeds of
such accounts receivable and other assets which are customarily
transferred or in respect of which security interests are
customarily granted in connection with an accounts receivable
financing transaction; provided such transaction is on
market terms as determined in good faith by the Issuer at the
time Holdings or such Restricted Subsidiary enters into such
transaction.
Rating Agencies means Moodys and
S&P or if Moodys or S&P or both shall not make a
rating on the Notes publicly available, a nationally recognized
statistical rating agency or agencies, as the case may be,
selected by Holdings which shall be substituted for Moodys
or S&P or both, as the case may be.
Receivable Subsidiary means a Subsidiary of
Holdings:
(1) that is formed solely for the purpose of, and that
engages in no activities other than activities in connection
with, financing accounts receivable of Holdings
and/or its
Restricted Subsidiaries, including providing letters of credit
on behalf of or for the benefit of Holdings
and/or its
Restricted Subsidiaries;
(2) that is designated by the Board of Directors as a
Receivable Subsidiary pursuant to an Officers Certificate
that is delivered to the Trustee;
(3) that is either (a) a Restricted Subsidiary or
(b) an Unrestricted Subsidiary designated in accordance
with the covenant described under Certain
Covenants Limitation on Creation of Unrestricted
Subsidiaries;
95
(4) no portion of the Debt or any other obligation
(contingent or otherwise) of which (a) is at any time
Guaranteed by Holdings or any Restricted Subsidiary (excluding
Guarantees of obligations (other than any Guarantee of Debt)
pursuant to Standard Securitization Undertakings), (b) is
at any time recourse to or obligates Holdings or any Restricted
Subsidiary in any way, other than pursuant to Standard
Securitization Undertakings or (c) subjects any asset of
Holdings or any other Restricted Subsidiary of Holdings,
directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard
Securitization Undertakings (such Debt, Non-Recourse
Receivable Subsidiary Indebtedness);
(5) with which neither Holdings nor any Restricted
Subsidiary has any material contract, agreement, arrangement or
understanding other than (a) contracts, agreements,
arrangements and understandings entered into in the ordinary
course of business on terms no less favorable to Holdings or
such Restricted Subsidiary than those that might be obtained at
the time from Persons that are not Affiliates of Holdings in
connection with a Qualified Receivables Transaction as
determined in good faith by the Issuer, (b) fees payable in
the ordinary course of business in connection with servicing
accounts receivable in connection with such a Qualified
Receivables Transaction as determined in good faith by the
Issuer and (c) any Purchase Money Note issued by such
Receivable Subsidiary to Holdings or a Restricted Subsidiary or
any letters of credit provided by such Receivable Subsidiary on
behalf of or for the benefit of Holdings or any Restricted
Subsidiary; and
(6) with respect to which neither Holdings nor any other
Restricted Subsidiary has any obligation (a) to subscribe
for additional shares of Capital Interests therein or make any
additional capital contribution or similar payment or transfer
thereto except in connection with a Qualified Receivables
Transaction or (b) to maintain or preserve the solvency or
any balance sheet term, financial condition, level of income or
results of operations thereof.
Redeemable Capital Interests in any Person
means any equity security of such Person that by its terms (or
by terms of any security into which it is convertible or for
which it is exchangeable), or otherwise (including the passage
of time or the happening of an event), is required to be
redeemed, is redeemable at the option of the holder thereof in
whole or in part (including by operation of a sinking fund), or
is convertible or exchangeable for Debt of such Person at the
option of the holder thereof, in whole or in part, at any time
prior to the Stated Maturity of the Notes; provided that
only the portion of such equity security which is required to be
redeemed, is so convertible or exchangeable or is so redeemable
at the option of the holder thereof before such date will be
deemed to be Redeemable Capital Interests. Notwithstanding the
preceding sentence, any equity security that would constitute
Redeemable Capital Interests solely because the holders of the
equity security have the right to require Holdings or a
Restricted Subsidiary to repurchase such equity security upon
the occurrence of a Change of Control or an Asset Sale will not
constitute Redeemable Capital Interests if the terms of such
equity security provide that Holdings or such Restricted
Subsidiary may not repurchase or redeem any such equity security
pursuant to such provisions unless such repurchase or redemption
complies with the covenant described above under the caption
Certain Covenants Limitation on
Restricted Payments. The amount of Redeemable Capital
Interests deemed to be outstanding at any time for purposes of
the Indenture will be the maximum amount that Holdings and its
Restricted Subsidiaries may become obligated to pay upon the
maturity of, or pursuant to any mandatory redemption provisions
of, such Redeemable Capital Interests or portion thereof,
exclusive of accrued dividends.
Redemption Price, when used with respect
to any Note to be redeemed, means the price at which it is to be
redeemed pursuant to the Indenture.
Refinance means, in respect of any Debt, to
refinance, extend, renew, refund, replace, repay, prepay,
purchase, redeem, defease or retire, or to issue other Debt in
exchange or replacement for, such Debt.
Refinanced and Refinancing
shall have correlative meanings.
Refinancing Debt means Debt that refunds,
refinances, renews, replaces or extends any Debt permitted to be
Incurred by Holdings or any Restricted Subsidiary pursuant to
the terms of the Indenture, whether involving the same or any
other lender or creditor or group of lenders or creditors, but
only to the extent that
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(i) the Refinancing Debt is subordinated to the Notes to at
least the same extent as the Debt being Refinanced, if such Debt
was subordinated to the Notes,
(ii) the Refinancing Debt is scheduled to mature either
(a) no earlier than the Debt being refinanced or
(b) at least 91 days after the maturity date of the
Notes,
(iii) the Refinancing Debt has an Average Life at the time
such Refinancing Debt is Incurred that is equal to or greater
than the Average Life of the Debt being Refinanced,
(iv) such Refinancing Debt is in an aggregate principal
amount that is less than or equal to the sum of (a) the
aggregate principal or accreted amount then outstanding under
the Debt being Refinanced, (b) the amount of accrued and
unpaid interest, if any, and premiums owed, if any, not in
excess of preexisting prepayment provisions on such Debt being
Refinanced and (c) the amount of reasonable and customary
fees, expenses and costs related to the Incurrence of such
Refinancing Debt, and
(v) Debt of the Issuer or a Guarantor may not be used to
Refinance any Debt of any Person that is not the Issuer or a
Guarantor.
Registration Rights Agreement means the
Registration Rights Agreement, to be dated the date of the
Indenture, among the Issuer, the Guarantors and the Initial
Purchasers and any similar agreement entered into in connection
with any Additional Notes.
Related Business Assets means assets (other
than cash or Eligible Cash Equivalents) used or useful in a
Permitted Business, provided that any assets received by
Holdings or a Restricted Subsidiary in exchange for assets
transferred by Holdings or a Restricted Subsidiary shall not be
deemed to be Related Business Assets if they consist of
securities of a Person, unless upon receipt of the securities of
such Person, such Person would become a Restricted Subsidiary.
Restricted Payment is defined to mean any of
the following:
(a) any dividend or other distribution declared and paid on
the Capital Interests in Holdings or on the Capital Interests in
any Restricted Subsidiary of Holdings that are held by, or
declared and paid to, any Person other than Holdings or a
Restricted Subsidiary of Holdings (other than
(i) dividends, distributions or payments made solely in
Qualified Capital Interests in Holdings and
(ii) dividends or distributions payable to Holdings or a
Restricted Subsidiary of Holdings or to other holders of Capital
Interests of a Restricted Subsidiary on a pro rata basis);
(b) any payment made by Holdings or any of its Restricted
Subsidiaries to purchase, redeem, acquire or retire any Capital
Interests in Holdings (including the conversion into, or
exchange for, Debt, of any Capital Interests) other than any
such Capital Interests owned by Holdings or any Restricted
Subsidiary (other than a payment made solely in Qualified
Capital Interests in Holdings);
(c) any payment made by Holdings or any of its Restricted
Subsidiaries (other than a payment made solely in Qualified
Capital Interests in Holdings) to redeem, repurchase, defease
(including an in substance or legal defeasance) or otherwise
acquire or retire for value (including pursuant to mandatory
repurchase covenants), prior to any scheduled maturity,
scheduled sinking fund or mandatory redemption payment, Debt of
Holdings, the Issuer or any Subsidiary Guarantor that is
subordinate in right of payment to the Notes or Note Guarantees
(excluding any Debt owed to Holdings or any Restricted
Subsidiary); except payments of principal and interest in
anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case, within one year of
the due date thereof;
(d) any Investment by Holdings or a Restricted Subsidiary
in any Person, other than a Permitted Investment; and
(e) any designation of a Restricted Subsidiary as an
Unrestricted Subsidiary.
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Restricted Subsidiary means any Subsidiary
that has not been designated as an Unrestricted
Subsidiary in accordance with the Indenture. Unless
otherwise indicated, when used herein the term Restricted
Subsidiary shall refer to a Restricted Subsidiary of
Holdings.
S&P means Standard &
Poors, a division of The McGraw-Hill Companies, Inc., and
any successor to its rating agency business.
Sale and Leaseback Transaction means any
direct or indirect arrangement pursuant to which property is
sold or transferred by Holdings or a Restricted Subsidiary and
is thereafter leased back as a capital lease by Holdings or a
Restricted Subsidiary.
Significant Subsidiary has the meaning set
forth in
Rule 1-02
of
Regulation S-X
under the Securities Act and Exchange Act, but shall not include
any Unrestricted Subsidiary.
Sponsor means Onex Partners LP, Onex
Corporation and their respective Affiliates other than portfolio
operating companies of any of the foregoing.
Standard Securitization Undertakings means
representations, warranties, covenants, indemnities and other
provisions of agreements entered into by Holdings or any
Restricted Subsidiary which are reasonably customary in an
accounts receivable securitization transaction as determined in
good faith by the Issuer, including Guarantees by Holdings or
any Restricted Subsidiary of any of the foregoing obligations of
Holdings or a Restricted Subsidiary.
Stated Maturity, when used with respect to
(i) any Note or any installment of interest thereon, means
the date specified in such Note as the fixed date on which the
principal amount of such Note or such installment of interest is
due and payable and (ii) any other Debt or any installment
of interest thereon or principal thereof, means the date
specified in the instrument governing such Debt as the fixed
date on which the principal of such Debt or such installment is
due and payable.
Subsidiary of a Person means a corporation,
partnership, joint venture, limited liability company or other
business entity of which a majority of the shares of securities
or other interests having ordinary voting power for the election
of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a
contingency) are at the time beneficially owned, or the
management of which is otherwise controlled, directly, or
indirectly through one or more intermediaries, or both, by such
Person. Unless otherwise indicated, when used herein the term
Subsidiary shall refer to a Subsidiary of Holdings.
Subsidiary Guarantor means each Subsidiary of
Holdings that is a Guarantor.
Swap Contract means (a) any and all rate
swap transactions, basis swaps, credit derivative transactions,
forward rate transactions, commodity swaps, commodity options,
forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or
forward bond or forward bond price or forward bond index
transactions, interest rate options, forward foreign exchange
transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate
swap transactions, currency options, spot contracts, or any
other similar transactions or any combination of any of the
foregoing (including, without limitation, any fuel price caps
and fuel price collar or floor agreements and similar agreements
or arrangements designed to protect against or manage
fluctuations in fuel prices and any options to enter into any of
the foregoing), whether or not any such transaction is governed
by or subject to any master agreement, and (b) any and all
transactions of any kind, and the related confirmations, which
are subject to the terms and conditions of, or governed by, any
form of master agreement published by the International Swaps
and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any
such master agreement, together with any related schedules, a
Master Agreement), including any such
obligations or liabilities under any Master Agreement.
Synthetic Lease Obligations means any
monetary obligation of a Person under (i) a so-called
synthetic, off-balance sheet or tax retention lease, or
(ii) an agreement for the use or possession of property
(including Sale and Leaseback Transactions), in each case,
creating obligations that do not appear on the balance sheet of
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such Person but which, upon the application of any bankruptcy or
insolvency laws to such Person, would be characterized as the
indebtedness of such Person (without regard to accounting
treatment).
Treasury Rate means, as of any redemption
date, the yield to maturity as of such redemption date of United
States Treasury securities with a constant maturity (as compiled
and published in the most recent Federal Reserve Statistical
Release H.15 (519) that has become publicly available at
least two business days prior to the redemption date (or, if
such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to
the period from the redemption date to October 1, 2013;
provided, however, that if the period from the
redemption date to October 1, 2013 is less than one year,
the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year
will be used.
Voting Interests means, with respect to any
Person, securities of any class or classes of Capital Interests
in such Person entitling the holders thereof generally to vote
on the election of members of the Board of Directors or
comparable body of such Person.
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BOOK-ENTRY;
DELIVERY AND FORM
The
Global Notes
We will initially issue the Exchange Notes in the form of one or
more registered notes in global form, without interest coupons
(collectively, the Global Notes). The Global Notes
will be deposited with, or on behalf of, DTC and registered in
the name of Cede & Co. as nominee of DTC, or will
remain in the custody of the trustee pursuant to the FAST
Balance Certificate between DTC and the trustee. Except as set
forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of
DTC or its nominee. You may hold your beneficial interests in a
Global Note directly through DTC if you have an account with DTC
or indirectly through organizations which have accounts with
DTC. Beneficial interest in a Global Note may not be exchanged
for notes in physical, certificated form (Certificated
Notes) except in the limited circumstances described
below. All interests in a Global Note may be subject to the
procedures and requirements of DTC.
Exchange
Among the Global Notes
Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an
interest on another Global Note will, upon transfer, cease to be
an interest in such Global Notes and become an interest on the
other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for
as long as it remains such an interest.
Certain
Book-Entry Procedures for the Global Notes
The descriptions of the operations and procedures of DTC set
forth below are provided solely as a matter of convenience.
These operations and procedures are solely within the control of
the respective settlement systems and are subject to change by
them from time to time. We do not take any responsibility for
these operations or procedures, and investors are urged to
contact the system or its participants directly to discuss these
matter.
DTC has advised us as follows: DTC is a limited
purpose trust company organized under the laws of the State of
New York, a member of the Federal Reserve System, a
clearing corporation within the meaning of the
Uniform Commercial Code and a Clearing Agency
registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities of institutions
that have accounts with the DTC (collectively, the
participants) and to facilitate the clearance and
settlement of securities transactions amongst its participants
in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. Participants
include securities brokers and dealers (including the initial
purchasers under the purchase agreement), banks, trust
companies, clearing corporations and certain other
organizations. Indirect access to DTCs book-entry system
is also available to others such as banks, brokers, dealers and
trust companies (collectively, the indirect
participants) that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
Investors who are not participants may beneficially own
securities held by or on behalf of DTC only through participants
or indirect participants.
We expect that pursuant to procedures established by DTC, upon
the deposit of a Global Note with DTC, DTC will credit, on its
book-entry registration and transfer system, the amount
represented by such Global Note to the accounts of participants.
The accounts to be credited shall be designated by the
purchasers. Ownership of beneficial interests in a Global Note
will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial
interests in a Global Note will be shown on, and the transfer of
those ownership interests will be effected only through, records
maintained by DTC (with respect to participants
interests), the participants and the indirect participants (with
respect to the owners of beneficial interests in the Global Note
other than participants).
The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such
securities in definitive form. Accordingly, the ability to
transfer interests in the Exchange Notes
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represented by a Global Note to such persons may be limited. In
addition, because DTC can act on behalf of its participants, who
in turn act on behalf of persons who hold interest through
participants, the ability of a person having an interest in
Exchange Notes represented by a Global Note to pledge or
transfer such interest to persons or entities that do not
participate in DTCs system, or to otherwise take actions
in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC, or its nominee, is the registered holder and
owner of the Global Notes, DTC or such nominee, as the case may
be, will be considered the sole legal owner and holder of the
Exchange Notes evidenced by the Global Note for all purposes
under the indenture. Except as set forth below, as an owner of a
beneficial interest in a Global Note, you will not be entitled
to have the Exchange Note represented by such Global Note
registered in your name, will not receive or be entitled to
receive physical delivery of Certificated Notes and will not be
considered to be the owner or holder thereof under the indenture
for any purpose, including with respect to giving direction,
instruction or approval to the Trustee thereunder. Accordingly,
each holder owning a beneficial interest in a Global Note must
rely on the procedures of DTC and, if such holder is not a
participant or indirect participant, on the procedures of the
participant through which such holder owns its interest, to
exercise any rights of a holder of Exchange Notes under the
indenture or such Global Note. We understand that under existing
industry practice, in the event an owner of a beneficial
interest in a Global Note desires to take any action that DTC,
as the holder of such Global Note, is entitled to take, DTC
would authorize the participants to take such action, and the
participants would authorize beneficial owners owning through
such participants to take such action or would otherwise act
upon the instructions of beneficial owners owning through them.
Neither we nor the trustee will have any responsibility or
liability for any aspect of the records relating to or payments
made on account of Exchange Notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to such
notes.
We will make payments of principal of, premium, if any, and
interest on Exchange Notes represented by a Global Note
registered in the name of and held by DTC or its nominee on the
applicable record date to or at the direction of DTC or its
nominee, as the case may be, as the registered owner and holder
of the Global Notes representing such Exchange Notes under the
indenture. Under the terms of the indenture, we and the trustee
may treat the persons in whose names the Exchange Notes,
including the Global Notes, are registered as the owners thereof
for the purpose of receiving payment thereon and for any and all
other purposes whatsoever. We expect that DTC or its nominee,
upon receipt of any payment of principal of, premium, if any, or
interest on the Exchange Notes will credit participants
accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such
Exchange Notes, as shown on the records of DTC or its nominee.
We also expect that payments by participants or indirect
participants to owners of beneficial interests in a Global Note
held through such participants or indirect participants be
governed by standing instructions and customary practices and
will be the responsibility of such participants or indirect
participants. We will not have any responsibility or liability
for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in the Global Notes
or for other aspects of the relationship between DTC and its
participants or indirect participants or the participants or
indirect participants and the owners of beneficial interests in
a Global Note owning through such participants.
Transfers between participants in DTC will be effected in
accordance with DTCs procedures, and will be settled in
same-day
funds.
Certificated
Notes
Subject to certain conditions, the Exchange Notes represented by
the Global Note are exchangeable for Certificated Notes in
definitive form of like tenor only if:
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DTC notifies us that it is unwilling or unable to continue to
act as a depositary or DTC ceases to be a clearing agency
registered under the Exchange Act for the Global Notes and, in
either case, a qualified successor depositary for the Global
Notes is not appointed within 90 days of such notice or
cessation;
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we, in our discretion, at any time notify the trustee that we
elect to cause the issuance of the Certificated Notes in
exchange for all or any part of the notes represented by a
Global Note of Global Notes; or
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a default entitling the holders of the notes to accelerate the
maturity thereof has occurred and is continuing and the
registrar has received a request from DTC.
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In the event of any of the foregoing, DTC shall surrender such
Global Note or Global Notes to the trustee for cancellation and
we shall execute, and the trustee shall authenticate and
deliver, Certificated Notes in exchange for such Global Note or
Global Notes. Upon any such issuance, the trustee is required to
register such Certificate Notes in the name of such person or
persons (or nominees of any thereof) and cause the same to be
delivered thereto.
Neither we nor the trustee shall be liable for any delay by DTC
or any participant or indirect participant in identifying the
beneficial owners of the related Exchange Notes and each such
person may conclusively rely on, and shall be protected in
relying on, instructions from DTC for all purposes (including
with respect to the registration and delivery, and the
respective principal amounts, of the Exchange Notes to be
issued).
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MATERIAL
U.S. FEDERAL INCOME TAX CONSIDERATIONS
This summary of U.S. federal income tax considerations
set forth in this prospectus is not intended or written to be
legal or tax advice to any person, and is not intended or
written to be used, and cannot be used, by any person for the
purpose of avoiding any tax-related penalties that may be
imposed on such person. Each person considering an investment in
the Exchange Notes should seek advice based on such
persons particular circumstances from an independent tax
advisor.
The following is a summary of certain material U.S. federal
income tax considerations of the purchase, ownership and
disposition of the notes and where applicable, specifically the
Exchange Notes. This summary is based upon provisions of the
Internal Revenue Code of 1986, or the Code, applicable
regulations, administrative rulings and judicial decisions in
effect as of the date of this prospectus, any of which may
subsequently be changed, possibly retroactively, or interpreted
differently by the Internal Revenue Service, or the IRS, so as
to result in U.S. federal income tax consequences different
from those discussed below. Except where noted, this summary
deals only with a note held as a capital asset by a beneficial
owner who purchased the note on original issuance at the first
price at which a substantial portion of the notes are sold for
cash to persons other than bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers, which we refer to as the
issue price, or an Exchange Note received in an
exchange for such note. This summary does not address all
aspects of U.S. federal income taxes and does not deal with
all tax consequences that may be relevant to holders in light of
their personal circumstances or particular situations, such as
tax consequences to:
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dealers in securities or currencies, financial institutions,
regulated investment companies, real estate investment trusts,
tax-exempt entities, insurance companies and traders in
securities that elect to use a mark-to-market method of
accounting for their securities;
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persons holding the notes as a part of a hedging, integrated,
conversion or constructive sale transaction or a straddle;
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U.S. holders, as defined below, whose functional currency
is not the U.S. dollar;
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certain former citizens or residents of the United States;
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taxpayers subject to the alternative minimum tax; or
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tax exempt organizations.
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Moreover, this discussion does not address any
non-U.S. federal
income tax consequences, including any state, local or foreign
tax, or any estate or gift tax. If you are considering
exchanging your outstanding Original Notes for the Exchange
Notes, you should consult your tax advisors concerning the
U.S. federal income tax consequences to you in light of
your own specific situation, as well as consequences arising
under the laws of any other taxing jurisdiction.
In this discussion, we use the term U.S. holder
to refer to a beneficial owner of notes that is, for
U.S. federal income tax purposes:
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an individual citizen or resident of the United States;
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