Capitalization
The following table sets forth our cash, cash equivalents and short-term and long-term investments and current portion of our indebtedness and our capitalization as of December 31, 2016:
|
|
on an as adjusted basis to give effect to this offering (but not the application of the net proceeds therefrom), after deducting underwriting discounts and
commissions and estimated offering expenses; and
|
|
|
on a pro forma as adjusted basis to give further effect to: (1) the Term B-2 Loan Borrowings and the payment of related fees and expenses; (2) the
Equity Offering, after deducting underwriting discounts and commissions and estimated offering expenses (assuming no exercise of the underwriters option to purchase additional shares of our common stock); and (3) the Acquisition and the
payment of related transaction fees and expenses.
|
You should read this table in conjunction with the section Managements
Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes from our Annual Report on Form 10-K for the year ended December 31, 2016 incorporated by reference in
this prospectus supplement and the accompanying prospectus and with Unaudited pro forma condensed combined financial information included in this prospectus supplement.
S-23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
(dollars in thousands)
|
|
Actual
|
|
|
As adjusted
|
|
|
Pro forma
as adjusted
|
|
Cash, cash equivalents and short-term and long-term investments
|
|
$
|
761,927
|
|
|
$
|
1,994,768
|
|
|
$
|
1,228,701
|
|
|
|
|
|
|
Restricted cash
|
|
$
|
24,771
|
|
|
$
|
24,771
|
|
|
$
|
24,771
|
|
|
|
|
|
|
Current portion of capital lease and other financing obligations
|
|
$
|
101,046
|
|
|
$
|
101,046
|
|
|
$
|
102,669
|
|
|
|
|
|
|
Current portion of mortgage and loans payable
|
|
$
|
67,928
|
|
|
$
|
67,928
|
|
|
$
|
67,928
|
|
|
|
|
|
|
Term B-2 Loan Borrowings (current portion)(1):
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7,894
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease and other financing obligations
|
|
$
|
1,410,742
|
|
|
$
|
1,410,742
|
|
|
$
|
1,428,914
|
|
Mortgage and loans payable
|
|
|
1,369,087
|
|
|
|
1,369,087
|
|
|
|
1,369,087
|
|
4.875% senior notes due 2020, net
|
|
|
496,897
|
|
|
|
496,897
|
|
|
|
496,897
|
|
5.375% senior notes due 2023, net
|
|
|
991,518
|
|
|
|
991,518
|
|
|
|
991,518
|
|
5.375% senior notes due 2022, net
|
|
|
742,840
|
|
|
|
742,840
|
|
|
|
742,840
|
|
5.750% senior notes due 2025, net
|
|
|
494,627
|
|
|
|
494,627
|
|
|
|
494,627
|
|
5.875% senior notes due 2026, net
|
|
|
1,084,888
|
|
|
|
1,084,888
|
|
|
|
1,084,888
|
|
5.375% senior notes due 2027 offered hereby
|
|
|
|
|
|
|
1,232,841
|
|
|
|
1,232,841
|
|
Term B-2 Loan Borrowings, net(1)
|
|
|
|
|
|
|
|
|
|
|
1,030,924
|
|
|
|
|
|
|
Total long-term debt
|
|
|
6,590,599
|
|
|
|
7,823,440
|
|
|
|
8,872,536
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value per share; 100,000,000 shares authorized, actual, as adjusted and pro forma as adjusted; no shares issued
and outstanding, actual, as adjusted and pro forma as adjusted
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value per share; 300,000,000 shares authorized, actual, as adjusted and pro forma as adjusted; 71,817,430 shares
issued and 71,409,015 shares outstanding, actual and as adjusted; and 77,095,208 shares issued and 76,686,793 shares outstanding, pro forma as adjusted
|
|
|
72
|
|
|
|
72
|
|
|
|
77
|
|
Additional paid-in capital
|
|
|
7,413,519
|
|
|
|
7,413,519
|
|
|
|
9,262,504
|
|
Treasury stock
|
|
|
(147,559
|
)
|
|
|
(147,559)
|
|
|
|
(147,559)
|
|
Accumulated dividends
|
|
|
(1,969,645
|
)
|
|
|
(1,969,645)
|
|
|
|
(1,969,645)
|
|
Accumulated other comprehensive loss
|
|
|
(949,142
|
)
|
|
|
(949,142)
|
|
|
|
(949,142)
|
|
Retained earnings (accumulated deficit)
|
|
|
18,584
|
|
|
|
18,584
|
|
|
|
(33,117)
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
4,365,829
|
|
|
|
4,365,829
|
|
|
|
6,163,118
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
10,956,428
|
|
|
$
|
12,189,269
|
|
|
$
|
15,035,654
|
|
|
|
|
|
Debt is presented net of issuance costs and unamortized discounts.
(1)
|
|
Term B-2 Loan Borrowings are denominated in Euros. Assumes December 31, 2016 exchange rate.
|
S-24
Unaudited pro forma condensed combined financial information
The following unaudited pro forma condensed combined financial statements of Equinix, Inc. (Equinix or the Company) are presented to
illustrate the estimated effects of (i) the pending acquisition of the colocation services business (the Selected Sites of Verizons Colocation and Data Center Interconnect Operations or the Selected Verizon Data Center
Business) at 24 data center sites, consisting of 29 data center buildings, from Verizon Communications Inc. (the Acquisition) for a cash purchase price of $3.6 billion; (ii) the issuance of one or more series of unsecured
senior notes in the aggregate principal amount of $1.125 billion, (iii) the issuance of $1.750 billion of the Companys common stock in a public offering, (iv) the borrowing of the
1.0 billion Term
B-2
Loan on January 6, 2017 (clauses (ii), (iii), and
(iv) referred to as the Financings), and (v) the acquisition of Telecity Group Limited, formerly Telecity Group plc, (TelecityGroup) that was completed on January 15, 2016 (the TelecityGroup
Acquisition). On March 8, 2017, the Company entered into an agreement pursuant to which it expects to issue and sell $1.250 billion aggregate principal amount of unsecured senior notes, rather than the $1.125 billion aggregate principal amount
assumed in these unaudited pro forma condensed combined financial statements. On March 8, 2017, the Company entered into an agreement pursuant to which it expects to issue and sell $1.900 billion of the Companys common stock, assuming no
exercise of the underwriters option to purchase additional shares of the Companys common stock in connection therewith, rather than the $1.750 billion amount assumed in these unaudited pro forma condensed combined financial
statements. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016 combines the historical consolidated statement of operations of the Company and the statement of net revenues and direct
expenses of the Selected Sites of Verizons Colocation and Data Center Interconnect Operations, giving effect to the Acquisition, the Financings and the TelecityGroup Acquisition as if they had been completed on January 1, 2016. The
unaudited pro forma condensed combined balance sheet as of December 31, 2016, combines the historical consolidated balance sheets of Equinix and the statement of assets acquired and liabilities assumed of the Selected Sites of Verizons
Colocation and Data Center Interconnect Operations, giving effect to the Acquisition and the Financings as if they had occurred on December 31, 2016. The pro forma financial information is based in part on certain assumptions regarding the
foregoing transactions that we believe are factually supportable and are expected to have a continuing impact on our consolidated results. For purposes of the unaudited pro forma condensed combined financial statements, certain statement of
operations and certain balance sheet reclassifications and adjustments have been made to the historical abbreviated financial statements of the Selected Sites of Verizons Colocation and Data Center Interconnect Operations in order to conform
to the Companys statements of operations and balance sheet presentation. The unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined
financial statements. In addition, the unaudited pro forma condensed combined financial information was based on, and should be read in conjunction with, the following historical financial statements and accompanying notes:
|
|
Equinixs Annual Report on Form 10-K for the year ended December 31, 2016 filed February 27, 2017, including exhibits thereto, which describes the proposed
acquisition of the Selected Verizon Data Center Business, which is incorporated by reference in this prospectus supplement;
|
|
|
Audited consolidated financial statements of Equinix as of and for the year ended December 31, 2016, which are included in Equinixs Annual Report on
Form
10-K
for the year ended December 31, 2016 filed on February 27, 2017, which is incorporated by reference in this prospectus supplement;
|
|
|
The section titled Managements Discussion and Analysis of Financial Condition and Results of Operations in Equinixs Annual Report on Form
10-K
for the year ended December 31, 2016 filed on February 27, 2017, which is incorporated by reference in this prospectus supplement;
|
S-25
|
|
Audited statements of assets acquired and liabilities assumed of the Selected Sites of Verizons Colocation and Data Center Interconnect Operations as of
December 31, 2016 and 2015 and the related statements of net revenues and direct expenses for each of the three years in the period ended December 31, 2016, which are attached as Exhibit 99.1 to Equinixs Current Report on Form
8-K/A
filed on March 7, 2017, which is incorporated by reference in this prospectus supplement; and
|
|
|
Audited consolidated balance sheets of Telecity Group Limited (formerly Telecity Group plc) as of December 31, 2015 and 2014 and the related consolidated
statements of income, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flow for each of the three years in the period ended December 31, 2015, which are attached
as Exhibit 99.2 to Equinixs Current Report on Form
8-K/A
filed on March 7, 2017, which is incorporated by reference in this prospectus supplement.
|
The unaudited pro forma condensed combined financial statements have been prepared by Equinix, as the acquirer, using the acquisition method of accounting in
accordance with U.S. Generally Accepted Accounting Principles (GAAP). The acquisition method of accounting is dependent upon certain valuation and other studies that have yet to progress to a stage where there is sufficient information
for a definitive measurement. Before the Acquisition is completed, there are limitations regarding what Equinix can learn about the Selected Verizon Data Center Business. The assets and liabilities of the Selected Verizon Data Center Business have
been measured based on various preliminary estimates using assumptions that Equinix believes are reasonable based on information that is currently available to Equinix. The preliminary purchase price allocation for the Selected Verizon Data Center
Business is subject to revision as a more detailed analysis is completed and additional information on the fair value of the Selected Verizon Data Center Business assets and liabilities becomes available. The final allocation of the purchase
price, which will be based upon actual tangible and intangible assets acquired as well as liabilities assumed, will be determined after the completion of the Acquisition, and could differ materially from the unaudited pro forma condensed combined
financial statements presented here. Any change in the fair value of the net assets of the Selected Verizon Data Center Business will change the amount of the purchase price allocable to goodwill. Additionally, changes in the Selected Verizon Data
Center Business working capital, including the results of operations from December 31, 2016 through the date the Acquisition is completed, will change the amount of goodwill recorded. The pro forma adjustments are preliminary and have
been made solely for the purpose of providing unaudited pro forma condensed combined financial statements prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC).
The unaudited pro forma condensed combined financial statements make certain assumptions regarding the amount and terms, including assumed pricing of common stock
and interest rates for debt, of the Financings to be put into place in connection with the Acquisition, other than the borrowing of the Term
B-2
Loan. The actual amounts and terms of such Financings may differ
from that reflected herein.
The unaudited pro forma condensed combined financial information has been presented for information purposes only. The
unaudited pro forma condensed combined financial information does not purport to represent the actual results of operations that Equinix and the Selected Verizon Data Center Business would have achieved had the Acquisition, the Financings and the
TelecityGroup Acquisition occurred on the dates indicated above, and is not intended to project the future results of operations that the combined company may achieve after the Acquisition. The unaudited pro forma condensed combined statement of
operations does not reflect any potential cost savings that may be realized as a result of the Acquisition and also does not reflect any restructuring, acquisition or integration-related costs. No historical transactions between Equinix and the
Selected Verizon Data Center Business during the periods presented in the unaudited pro forma condensed combined financial statements have been identified at this time.
S-26
Unaudited pro forma condensed combined
balance sheet
as of December 31, 2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro forma
|
|
|
|
Equinix
|
|
|
Selected
Verizon Data
Center
Business
|
|
|
Pro forma
adjustments
|
|
|
Combined
|
|
|
|
|
|
|
(Note 2)
|
|
|
(Note 6)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
748,476
|
|
|
$
|
|
|
|
$
|
197,155
|
(a)
|
|
$
|
945,631
|
|
Short-term investments
|
|
|
3,409
|
|
|
|
|
|
|
|
|
|
|
|
3,409
|
|
Accounts receivable, net
|
|
|
396,245
|
|
|
|
|
|
|
|
|
|
|
|
396,245
|
|
Current portion of restricted cash
|
|
|
15,065
|
|
|
|
|
|
|
|
|
|
|
|
15,065
|
|
Other current assets
|
|
|
304,331
|
|
|
|
53
|
|
|
|
(9,680
|
)(b)
|
|
|
294,704
|
|
|
|
|
|
|
Total current assets
|
|
|
1,467,526
|
|
|
|
53
|
|
|
|
187,475
|
|
|
|
1,655,054
|
|
Long-term investments
|
|
|
10,042
|
|
|
|
|
|
|
|
|
|
|
|
10,042
|
|
Property, plant and equipment, net
|
|
|
7,199,210
|
|
|
|
838,378
|
|
|
|
140,494
|
(c)
|
|
|
8,178,082
|
|
Goodwill
|
|
|
2,986,064
|
|
|
|
|
|
|
|
1,897,758
|
(d)
|
|
|
4,883,822
|
|
Intangible assets, net
|
|
|
719,231
|
|
|
|
|
|
|
|
779,800
|
(e)
|
|
|
1,499,031
|
|
Other assets
|
|
|
226,298
|
|
|
|
661
|
|
|
|
|
|
|
|
226,959
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,608,371
|
|
|
$
|
839,092
|
|
|
$
|
3,005,527
|
|
|
$
|
16,452,990
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
581,739
|
|
|
$
|
3,877
|
|
|
$
|
(11,854
|
)(f)
|
|
$
|
573,762
|
|
Accrued property, plant and equipment
|
|
|
144,842
|
|
|
|
|
|
|
|
|
|
|
|
144,842
|
|
Current portion of capital lease and other financing obligations
|
|
|
101,046
|
|
|
|
372
|
|
|
|
1,251
|
(g)
|
|
|
102,669
|
|
Current portion of mortgage and loans payable
|
|
|
67,928
|
|
|
|
|
|
|
|
7,894
|
(h)
|
|
|
75,822
|
|
Other current liabilities
|
|
|
133,140
|
|
|
|
8,139
|
|
|
|
(2,675
|
)(i)
|
|
|
138,604
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,028,695
|
|
|
|
12,388
|
|
|
|
(5,384
|
)
|
|
|
1,035,699
|
|
Capital lease and other financing obligations, less current portion
|
|
|
1,410,742
|
|
|
|
6,801
|
|
|
|
11,371
|
(j)
|
|
|
1,428,914
|
|
Mortgage and loans payable, less current portion
|
|
|
1,369,087
|
|
|
|
|
|
|
|
1,030,924
|
(h)
|
|
|
2,400,011
|
|
Senior notes
|
|
|
3,810,770
|
|
|
|
|
|
|
|
1,109,247
|
(k)
|
|
|
4,920,017
|
|
Other liabilities
|
|
|
623,248
|
|
|
|
9,485
|
|
|
|
18,523
|
(l)
|
|
|
651,256
|
|
|
|
|
|
|
Total liabilities
|
|
|
8,242,542
|
|
|
|
28,674
|
|
|
|
2,164,681
|
|
|
|
10,435,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired net assets and liabilities
|
|
|
|
|
|
$
|
810,418
|
|
|
|
(810,418
|
)(m)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
4,365,829
|
|
|
|
|
|
|
|
1,651,264
|
(n)
|
|
|
6,017,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
12,608,371
|
|
|
|
|
|
|
$
|
3,005,527
|
|
|
$
|
16,452,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
S-27
Unaudited pro forma condensed combined
statement of operations
for the year ended December 31, 2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
|
Pro forma
|
|
|
|
Equinix
|
|
|
Selected
Verizon Data
Center
Business
|
|
|
Pro forma
adjustments
|
|
|
Combined
|
|
|
|
|
|
|
(Note 3)
|
|
|
(Note 6)
|
|
|
|
|
Revenues
|
|
$
|
3,611,989
|
|
|
$
|
451,962
|
|
|
$
|
13,272
|
(o)
|
|
$
|
4,077,223
|
|
|
|
|
|
|
Costs and operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
1,820,870
|
|
|
|
207,477
|
|
|
|
29,013
|
(p)
|
|
|
2,057,360
|
|
Sales and marketing
|
|
|
438,742
|
|
|
|
16,302
|
|
|
|
54,212
|
(q)
|
|
|
509,256
|
|
General and administrative
|
|
|
694,561
|
|
|
|
24,453
|
|
|
|
3,713
|
(r)
|
|
|
722,727
|
|
Acquisition costs
|
|
|
64,195
|
|
|
|
|
|
|
|
(50,054
|
)(s)
|
|
|
14,141
|
|
Impairment charges
|
|
|
7,698
|
|
|
|
|
|
|
|
|
|
|
|
7,698
|
|
Gain on asset sales
|
|
|
(32,816
|
)
|
|
|
|
|
|
|
|
|
|
|
(32,816
|
)
|
|
|
|
|
|
Total costs and operating expenses
|
|
|
2,993,250
|
|
|
|
248,232
|
|
|
|
36,884
|
|
|
|
3,278,366
|
|
|
|
|
|
|
Income from operations
|
|
|
618,739
|
|
|
$
|
203,730
|
|
|
|
(23,612
|
)
|
|
|
798,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
3,476
|
|
|
|
|
|
|
|
|
|
|
|
3,476
|
|
Interest expense
|
|
|
(392,156
|
)
|
|
|
|
|
|
|
(98,248
|
)(t)
|
|
|
(490,404
|
)
|
Other expense
|
|
|
(57,924
|
)
|
|
|
|
|
|
|
|
|
|
|
(57,924
|
)
|
Loss on debt extinguishment
|
|
|
(12,276
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
159,859
|
|
|
|
|
|
|
|
(121,860
|
)
|
|
|
241,729
|
|
Income tax expense
|
|
|
(45,451
|
)
|
|
|
|
|
|
|
(7,104
|
)(u)
|
|
|
(52,555
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
|
114,408
|
|
|
|
|
|
|
|
(128,964
|
)
|
|
|
189,174
|
|
Net income from discontinued operations, net of tax
|
|
|
12,392
|
|
|
|
|
|
|
|
|
|
|
|
12,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
126,800
|
|
|
|
|
|
|
$
|
(128,964
|
)
|
|
$
|
201,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (EPS):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS from continuing operations
|
|
$
|
1.63
|
|
|
|
|
|
|
|
|
|
|
$
|
2.53
|
|
Basic EPS from discontinued operations
|
|
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
$
|
1.81
|
|
|
|
|
|
|
|
|
|
|
$
|
2.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares -basic
|
|
|
70,117
|
|
|
|
|
|
|
|
4,658
|
(v)
|
|
|
74,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from continuing operations
|
|
$
|
1.62
|
|
|
|
|
|
|
|
|
|
|
$
|
2.51
|
|
Diluted EPS from discontinued operations
|
|
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
1.79
|
|
|
|
|
|
|
|
|
|
|
$
|
2.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares -diluted
|
|
|
70,816
|
|
|
|
|
|
|
|
4,658
|
(v)
|
|
|
75,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
S-28
Notes to unaudited pro forma condensed combined financial information
1. Description of the transaction and basis of pro forma presentation
On December 6, 2016, the Company announced that it had entered into a definitive agreement to purchase the colocation service business of Verizon Communications Inc. (Verizon) at 24 data center
sites (the Selected Sites of Verizons Colocation and Data Center Interconnect Operations or the Selected Verizon Data Center Business) for $3.6 billion, subject to certain adjustments, in an all cash transaction.
The Selected Verizon Data Center Business includes real property interests in 29 data center buildings across 15 metro areas located in the United States, Brazil and Colombia. The Company anticipates completing the acquisition of the Selected
Verizon Data Center Business (the Acquisition) by
mid-2017,
subject to the satisfaction of closing conditions.
The colocation service business at the selected data centers to be acquired currently includes services provided to Verizon under arrangements that will be terminated at the closing of the Acquisition. The Company
and Verizon have agreed to enter into agreements at the closing of the Acquisition pursuant to which the Company will provide space and services to Verizon at the acquired data centers. As the terms and conditions of these arrangements are subject
to further negotiation, finalization and approval, financial results from these arrangements are not included in the abbreviated financial statements of the Selected Sites of Verizons Colocation and Data Center Interconnect Operations and are
not reflected in these unaudited pro forma condensed combined financial statements. Also, for the preparation of these unaudited pro forma condensed combined financial conditions, the Company excluded these potential arrangements from the
preliminary fair valuation of the intangible assets, and the excess of the purchase price of $3.6 billion over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. As these arrangements are finalized and
more information becomes available at the closing of the Acquisition, the fair value of the intangible assets and the amount allocated to goodwill, as well as the financial results, will be materially different from the pro forma adjustments
presented here.
The unaudited pro forma condensed combined balance sheet as of December 31, 2016 was prepared by combining the historical
consolidated balance sheet data as of December 31, 2016 for Equinix and the statement of assets acquired and liabilities assumed of the Selected Sites of Verizons Colocation and Data Center Interconnect Operations as of December 31,
2016, as adjusted, to comply with the Companys accounting policies, as if the Acquisition and the Financings (see Note 5) had been consummated on that date. In addition to the adjustments, certain balance sheet reclassifications have also been
reflected in order to conform the Selected Sites of Verizons Colocation and Data Center Interconnect Operations statement of assets acquired and liabilities assumed to the Companys balance sheet presentation. Refer to Note 2 for a
discussion of these adjustments.
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016 combines
the results of operations of Equinix and the statement of net revenues and direct expenses of the Selected Sites of Verizons Colocation and Data Center Interconnect Operations as if the Acquisition, the Financings (see Note 5), and the
TelecityGroup Acquisition had been consummated on January 1, 2016. Certain statement of operations reclassifications have also been reflected in order to conform to the Companys statement of operations presentation. Refer to Note 3 for a
discussion of these accounting policy and reclassification adjustments.
The historical consolidated financial information has been adjusted in the
accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events that are (i) directly attributable to the Acquisition, the Financings and the TelecityGroup Acquisition that was completed on
January 15, 2016, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statement of operations, expected to have a continuing impact on the consolidated results.
S-29
The acquisition method of accounting, based on Accounting Standards Codification Topic (ASC) 805,
Business Combinations, uses the fair value concepts defined in ASC 820, Fair Value Measurement (ASC 820). Fair value is defined in ASC 820 as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. This is an exit price concept for the valuation of an asset or liability. Market participants are assumed to be buyers or sellers in the most
advantageous market for the asset or liability. Fair value measurement for an asset assumes the highest and best use by these market participants, and as a result, assets may be required to be recorded which are not intended to be used or sold
and/or to value assets at a fair value measurement that do not reflect managements intended use for those assets. Fair value measurements can be highly subjective and it is possible the application of reasonable judgment could develop
different assumptions resulting in a range of alternative estimates using the same facts and circumstances.
ASC 805 requires, among other things, that
assets acquired and liabilities assumed in a business combination be recognized at fair value as of the acquisition date. As of the date of this filing the accompanying unaudited pro forma purchase price allocation is preliminary and is subject to
further adjustments as additional information becomes available and as additional analyses are performed.
S-30
2. Selected Sites of Verizons Colocation and Data Center Interconnect Operations statement of assets
acquired and liabilities assumed
The following schedule summarizes the necessary material adjustments to conform the Selected Sites of
Verizons Colocation and Data Center Interconnect Operations statement of assets acquired and liabilities assumed to the basis of presentation of Equinixs consolidated balance sheet as of December 31, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected
Verizon
Data
Center
Business
|
|
|
Adjustments
|
|
|
Selected
Verizon
Data Center
Business
after
adjustments
|
|
|
|
|
|
Assets acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
12,196
|
|
|
$
|
(12,196
|
)(a)
|
|
$
|
|
|
Prepaid customer installations
|
|
|
2,378
|
|
|
|
(2,378
|
)(b)
|
|
|
|
|
Other current assets
|
|
|
53
|
|
|
|
|
|
|
|
53
|
|
|
|
|
|
|
Total current assets
|
|
|
14,627
|
|
|
|
(14,574
|
)
|
|
|
53
|
|
Plant, property and equipment, net
|
|
|
834,084
|
|
|
|
4,294
|
(b)
|
|
|
838,378
|
|
Prepaid customer installations
|
|
|
1,471
|
|
|
|
(1,471
|
)(b)
|
|
|
|
|
Lease deposits
|
|
|
648
|
|
|
|
(648
|
)(c)
|
|
|
|
|
Other
non-current
assets
|
|
|
458
|
|
|
|
203
|
(b)(c)(d)
|
|
|
661
|
|
|
|
|
|
|
Total assets acquired
|
|
$
|
851,288
|
|
|
$
|
(12,196
|
)
|
|
$
|
839,092
|
|
|
|
|
|
|
|
|
|
|
Liabilities assumed
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued property taxes
|
|
$
|
3,877
|
|
|
$
|
(3,877
|
)(e)
|
|
$
|
|
|
Deferred rent
|
|
|
297
|
|
|
|
(297
|
)(f)
|
|
|
|
|
Lease obligation
|
|
|
372
|
|
|
|
|
|
|
|
372
|
|
Advance billings
|
|
|
20,038
|
|
|
|
(20,038
|
)(g)
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
|
|
|
|
3,877
|
(e)
|
|
|
3,877
|
|
Other current liabilities
|
|
|
|
|
|
|
8,139
|
(a)(f)(g)(h)
|
|
|
8,139
|
|
|
|
|
|
|
Total current liabilities
|
|
|
24,584
|
|
|
|
(12,196
|
)
|
|
|
12,388
|
|
Deferred rent
|
|
|
1,009
|
|
|
|
(1,009
|
)(i)
|
|
|
|
|
Lease obligation
|
|
|
6,801
|
|
|
|
|
|
|
|
6,801
|
|
Advanced billings
|
|
|
1,723
|
|
|
|
(1,723
|
)(j)
|
|
|
|
|
Asset retirement obligations
|
|
|
6,753
|
|
|
|
(6,753
|
)(k)
|
|
|
|
|
Other liabilities
|
|
|
|
|
|
|
9,485
|
(i)(j)(k)(l)
|
|
|
9,485
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
40,870
|
|
|
|
(12,196
|
)
|
|
|
28,674
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
810,418
|
|
|
$
|
|
|
|
$
|
810,418
|
|
|
|
|
|
|
(a)
|
|
Reclassifies $12.2 million of advanced billings to offset accounts receivable to conform to the Companys accounting policy and financial statement presentation.
|
S-31
(b)
|
|
Reclassifies the following items to plant, property and equipment, net to conform to the Companys financial statement presentation (in thousands):
|
|
|
|
|
|
Prepaid customer installations (current portion)
|
|
$
|
2,378
|
|
Prepaid customer installations
(non-current
portion)
|
|
|
1,471
|
|
Capitalized software included in other
non-current
assets
|
|
|
445
|
|
|
|
|
|
|
Total plant, property and equipment, net adjustments
|
|
$
|
4,294
|
|
|
|
(c)
|
|
Reclassifies $0.6 million
of lease deposits to other
non-current
assets to conform to the Companys financial statement
presentation.
|
(d)
|
|
Reflects the following reclassification adjustments (in thousands):
|
|
|
|
|
|
Lease deposits
|
|
$
|
648
|
|
Capitalized software included in other
non-current
assets
|
|
|
(445
|
)
|
|
|
|
|
|
Total other
non-current
assets adjustments
|
|
$
|
203
|
|
|
|
(e)
|
|
Reclassifies $3.9 million of accrued property taxes to accounts payable and accrued expenses to conform to the Companys financial statement presentation.
|
(f)
|
|
Reclassifies $0.3 million of deferred rent to other current liabilities to conform to the Companys financial statement presentation.
|
(g)
|
|
Reclassifies $20.0 million of advanced billings and deferred revenue to other current liabilities to conform to the Companys financial statement presentation.
|
(h)
|
|
Reflects the following reclassification adjustments (in thousands):
|
|
|
|
|
|
Deferred rent
|
|
$
|
297
|
|
Accounts receivable
|
|
|
(12,196
|
)
|
Advanced billings (current portion)
|
|
|
20,038
|
|
|
|
|
|
|
Total other current liabilities adjustments
|
|
$
|
8,139
|
|
|
|
The reclassification of the advanced billings of $12.2 million represents the offset to the accounts receivable to conform to
the Companys accounting policy and financial statement presentation. As a result of the reclassification, the advanced billings and deferred revenue is $7.8 million.
(i)
|
|
Reclassifies $1.0 million of deferred rent to other liabilities to conform to the Companys financial statement presentation.
|
(j)
|
|
Reclassifies $1.7 million of advanced billings to other liabilities to conform to the Companys financial statement presentation.
|
(k)
|
|
Reclassifies $6.8 million of asset retirement obligations to other liabilities to conform to the Companys financial statement presentation.
|
(l)
|
|
Reflects the following reclassification adjustments (in thousands):
|
|
|
|
|
|
Deferred rent
|
|
$
|
1,009
|
|
Advanced billings
(non-current
portion)
|
|
|
1,723
|
|
Asset retirement obligations
|
|
|
6,753
|
|
|
|
|
|
|
Total other liabilities adjustments
|
|
$
|
9,485
|
|
|
|
S-32
3. Selected Sites of Verizons Colocation and Data Center Interconnect Operations statement of net
revenues and direct expenses
The following schedule summarizes the necessary material adjustments to conform the Selected Verizon Data Center
Business statement of net revenues and direct expenses to the basis of presentation of Equinixs consolidated statement of operations for the year ended December 31, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected
Verizon
Data
Center
Business
|
|
|
Adjustments
|
|
|
Selected
Verizon
Data Center
Business
after
adjustments
|
|
|
|
|
|
Net revenues
|
|
$
|
451,962
|
|
|
$
|
|
|
|
$
|
451,962
|
|
|
|
|
|
Direct expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services (exclusive of items shown below)
|
|
|
135,764
|
|
|
|
71,713
|
(m)
|
|
|
207,477
|
|
Selling, general and administrative expense
|
|
|
40,755
|
|
|
|
(40,755
|
)(n)
|
|
|
|
|
Depreciation expense
|
|
|
71,713
|
|
|
|
(71,713
|
)(m)
|
|
|
|
|
Sales and marketing
|
|
|
|
|
|
|
16,302
|
(n)
|
|
|
16,302
|
|
General and administrative
|
|
|
|
|
|
|
24,453
|
(n)
|
|
|
24,453
|
|
|
|
|
|
|
Total direct expenses
|
|
|
248,232
|
|
|
|
|
|
|
|
248,232
|
|
|
|
|
|
|
Net revenues less direct expenses
|
|
$
|
203,730
|
|
|
$
|
|
|
|
$
|
203,730
|
|
|
|
|
|
(m)
|
|
Reclassifies $71.7 million of depreciation expense to cost of services to conform to the Companys financial statement presentation.
|
(n)
|
|
Reclassifies $16.3 million of selling, general, and administrative expense to sales and marketing expense and $24.5 million of selling, general, and administrative
expense to general and administrative expense to conform to the Companys financial statement presentation.
|
S-33
4. Purchase priceSelected Verizon Data Center Business
The Acquisition represents a total value of approximately $3.6 billion. Under the acquisition method of accounting, the total estimated purchase price is
allocated to the Selected Verizon Data Center Business assets and liabilities based upon their estimated fair value as of the date of completion of the Acquisition. Based upon the estimated purchase price and the preliminary valuation, the
preliminary purchase price allocation, which is subject to change based on Equinixs final analysis is as follows (in thousands):
|
|
|
|
|
Preliminary purchase price allocation
|
|
|
|
|
Other current assets
|
|
$
|
53
|
|
Property, plant and equipment
|
|
|
978,872
|
|
Goodwill
|
|
|
1,897,758
|
|
|
|
Intangible assets:
|
|
|
|
|
Customer relationships
|
|
|
779,800
|
(a)
|
Other assets
|
|
|
661
|
|
|
|
|
|
|
Total assets acquired
|
|
|
3,657,144
|
|
Accounts payable and accrued expense
|
|
|
(3,877
|
)
|
Current portion of capital lease and other financing lease obligations
|
|
|
(1,623
|
)
|
Other current liabilities
|
|
|
(5,464
|
)
|
Capital leases and other financing obligations, less current portion
|
|
|
(18,172
|
)
|
Other liabilities
|
|
|
(28,008
|
)
|
|
|
|
|
|
|
|
$
|
3,600,000
|
|
|
|
|
|
(a)
|
|
A preliminary estimate of $0.8 billion has been allocated to customer relationships with third parties with an estimated useful life of 15 years.
|
A preliminary estimate of $1.9 billion has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net
tangible and intangible assets acquired. The preliminary purchase price allocation for the Acquisition is subject to revision as more detailed analysis is completed and additional information on the fair values of the Selected Verizon Data Center
Business assets and liabilities becomes available. Any changes in the fair value of the net assets of the Selected Verizon Data Center Business will change the amount of the purchase price allocable to goodwill. The final allocation of the
purchase price, which will be based upon actual tangible and intangible assets acquired as well as liabilities assumed, will be determined after the completion of the Acquisition, and will differ materially from the unaudited pro forma condensed
combined financial statements presented here. See Note 1 for more discussion about some of the arrangements, subject to further negotiation, finalization and approval, that will have a material impact to the purchase price allocation presented
above.
5. Selected Verizon Data Center Business acquisition financings
Concurrently, and in connection with entering into the acquisition agreement with Verizon, Equinix entered into a commitment letter (the Commitment Letter), dated December 6, 2016, with JPMorgan
Chase Bank, N.A., Bank of America, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the Commitment Parties), pursuant to which the Commitment Parties committed to provide a senior unsecured bridge facility in
aggregate principal amount of $2.0 billion for the purposes of funding (i) a portion of the cash consideration for the Acquisition and (ii) the fees and expenses incurred in connection with the Acquisition.
The financing commitments of the Commitment Parties are subject to various conditions set forth in the Commitment Letter. The Company intends to obtain permanent
financing prior to the closing of the Acquisition
S-34
to replace the Commitment Letter and intends to then terminate the Commitment Letter. For purposes of the unaudited pro forma condensed combined financial statements, Equinix has assumed the
permanent financing for the Acquisition will consist of:
|
|
The full amount of the
1.0 billion Term
B-2
Loan was borrowed on January 6, 2017 which translated to US$1.0525 billion. The Term
B-2
Loan will bear interest at an index rate based on EURIBOR plus a margin
of 3.25%. No original issue discount is applicable to the Term
B-2
Loan. The Term
B-2
Loan must be repaid in equal quarterly installments of 0.25% of the original
principal amount of the Term
B-2
Loan, with the remaining amount outstanding to be repaid in full on the seventh anniversary of the funding date of the Term
B-2
Loan.
|
|
|
An assumed $1,125.0 million aggregate principal amount of
10-year
fixed rate senior notes with an assumed interest
rate of 5.375%. For the purpose of these unaudited pro forma condensed combined financial statements, the debt issuance costs related to the senior notes are assumed to be approximately $15.8 million and will be amortized to interest expense
using the effective interest method over the
10-year
terms of the notes.
|
|
|
The sale of 4.7 million shares of Equinix common stock at a price of $375.69 per share, the NASDAQ Global Select Market closing price of Equinix common
stock on March 3, 2017, resulting in estimated proceeds of $1,750.0 million before deducting estimated discounts and commissions and expenses, and excluding any shares that may be issued if the underwriters exercise their option to
purchase additional shares of common stock. For the purpose of these unaudited pro forma condensed combined financial statements, transaction costs are assumed to be $47.0 million. If the underwriters exercise their option to purchase an
additional 15% of the equity offering in full, the Company would issue an additional 0.7 million shares of Equinix common stock at an estimated price of $375.69 per share and receive additional estimated proceeds of $262.5 million before
transaction costs of approximately $7.0 million. If the common stock offering increases by 25%, the Company would issue an additional 1.2 million shares of Equinix common stock at an estimated price of $375.69 per share and receive
additional estimated proceeds of $437.5 million before transaction costs of approximately $11.6 million.
|
The final structure
and terms of the Financings, other than the borrowing of the Term
B-2
Loan, will be subject to market conditions and may change materially from the assumptions described above. Changes in the assumptions
described above would result in changes to various components of the unaudited pro forma condensed combined balance sheet, including cash and cash equivalents, long-term debt and additional
paid-in
capital,
and various components of the unaudited pro forma condensed combined statements of income, including interest expense, earnings per share and weighted-average shares outstanding. Depending upon the nature of the changes, the impact on the unaudited
pro forma condensed combined financial statements could be material.
6. Pro forma adjustments
The accompanying unaudited pro forma condensed combined financial statements have been prepared as if the transactions described above were completed on
December 31, 2016 for balance sheet purposes and as of January 1, 2016 for statement of operations purposes.
S-35
The unaudited pro forma condensed combined balance sheet gives effect to the following pro forma adjustments:
(a)
|
|
Represents the following adjustments to cash and cash equivalents (in thousands):
|
|
|
|
|
|
Purchase price of the Acquisition to be paid in cash
|
|
$
|
(3,600,000
|
)
|
Proceeds from Term
B-2
Loan, net of offering costs
|
|
|
1,038,818
|
|
Proceeds from senior notes, net of offering costs
|
|
|
1,109,247
|
|
Proceeds from equity offering, net of offering costs
|
|
|
1,702,965
|
|
Estimated acquisition transaction costs
|
|
|
(43,875
|
)
|
Estimated commitment fees
|
|
|
(10,000
|
)
|
|
|
|
|
|
Total cash and cash equivalent adjustments
|
|
$
|
197,155
|
|
|
|
|
|
(b)
|
|
Represents reversals of bridge loan commitment fees and accrued debt issuance costs related to Term
B-2
Loan in other current assets (in
thousands):
|
|
|
|
|
|
Reversal of accrued debt issuance costs related to Term
B-2
Loan
|
|
$
|
(1,854
|
)
|
Reversal of bridge loan commitment fees
|
|
|
(7,826
|
)
|
|
|
|
|
|
Total other current asset adjustments
|
|
$
|
(9,680
|
)
|
|
|
|
|
(c)
|
|
Represents a fair value adjustment of $140.5 million to property, plant and equipment, net.
|
(d)
|
|
Represents the following adjustments in goodwill (in thousands):
|
|
|
|
|
|
Goodwill from the Acquisition
|
|
$
|
1,880,972
|
|
Deferred tax liabilities resulting from the Acquisition
|
|
|
16,786
|
|
|
|
|
|
|
Total goodwill adjustments
|
|
$
|
1,897,758
|
|
|
|
|
|
(e)
|
|
Represents a fair value adjustment of $0.8 billion to intangible assets resulting from the Acquisition.
|
(f)
|
|
Represents the following adjustments in accounts payable and accrued expenses (in thousands):
|
|
|
|
|
|
Reversal of accrued debt issuance costs related to Term
B-2
Loan
|
|
$
|
(1,854
|
)
|
Reversal of accrued bridge loan commitment fees
|
|
|
(10,000
|
)
|
|
|
|
|
|
Total accounts payable and accrued expenses adjustments
|
|
$
|
(11,854
|
)
|
|
|
|
|
(g)
|
|
Represents a fair value adjustment of $1.3 million to capital lease and other financing obligations, current portion.
|
(h)
|
|
Represents the net proceeds from Term
B-2
Loan of $1.0 billion, including $7.9 million of current portion of mortgage and loans
payable and $1.0 billion of
non-current
portion of mortgage and loans payable, net of debt issuance costs. See Note 5.
|
(i)
|
|
Represents the following adjustments to other current liabilities (in thousands):
|
|
|
|
|
|
Fair value adjustment relating to deferred revenues
|
|
$
|
(2,378
|
)
|
Fair value adjustment relating to deferred rent
|
|
|
(297
|
)
|
|
|
|
|
|
Total other current liability adjustments
|
|
$
|
(2,675
|
)
|
|
|
|
|
(j)
|
|
Represents a fair value adjustment of $11.4 million to capital lease and other financing lease obligations.
|
S-36
(k)
|
|
Represents the proceeds from senior notes of $1.1 billion, net of debt issuance costs. See Note 5.
|
(l)
|
|
Represents the following adjustments to the Selected Verizon Data Center Business other liabilities (in thousands):
|
|
|
|
|
|
Fair value adjustment relating to asset retirement obligations
|
|
$
|
(826
|
)
|
Fair value adjustment relating to deferred revenues
|
|
|
(1,471
|
)
|
Fair value adjustment relating to deferred rent
|
|
|
(1,009
|
)
|
Unfavorable leasehold interest
|
|
|
5,043
|
|
Deferred tax liabilities as a result of purchase price allocation
|
|
|
16,786
|
|
|
|
|
|
|
Total other liabilities adjustments
|
|
$
|
18,523
|
|
|
|
|
|
(m)
|
|
Represents the elimination of the Selected Verizon Data Center Business acquired net assets and liabilities.
|
(n)
|
|
Represents the following adjustments in shareholders equity (in thousands):
|
|
|
|
|
|
Proceeds from equity offering
|
|
$
|
1,750,000
|
|
Estimated offering costs related to equity offering
|
|
|
(47,035
|
)
|
Estimated acquisition transaction costs
|
|
|
(43,875
|
)
|
Reversal of bridge loan commitment fees
|
|
|
2,174
|
|
Estimated commitment fees
|
|
|
(10,000
|
)
|
|
|
|
|
|
Total shareholders equity adjustments
|
|
$
|
1,651,264
|
|
|
|
|
|
The unaudited pro forma condensed combined statement of operations gives effect to the following pro forma adjustments:
(o)
|
|
Represents the following adjustments to revenues (in thousands):
|
|
|
|
|
|
Revenue adjustment in connection with TelecityGroup acquisition
|
|
$
|
16,666
|
|
Revenue adjustment related to deferred installation revenues
|
|
|
(3,394
|
)
|
|
|
|
|
|
Total revenue adjustments
|
|
$
|
13,272
|
|
|
|
|
|
The adjustment of $16.7 million to revenues is for the purpose of presenting a full-year result of operations for
TelecityGroup, which was acquired by Equinix on January 15, 2016. The revenue adjustment of $3.4 million is to reflect purchase accounting adjustment in connection with the deferred installation revenues.
(p)
|
|
Represents the following adjustments to cost of revenues (in thousands):
|
|
|
|
|
|
Depreciation adjustment in connection with fair value of property, plant and equipment
|
|
$
|
18,842
|
|
Lease expense adjustments relating to capital lease and financing obligations
|
|
|
(1,798
|
)
|
Cost of revenues adjustment in connection with TelecityGroup acquisition
|
|
|
11,969
|
|
|
|
|
|
|
Total cost of revenues adjustments
|
|
$
|
29,013
|
|
|
|
|
|
The net depreciation adjustment of $18.8 million is in connection with the fair value adjustment to the Selected Verizon Data
Center Business property, plant and equipment. The property, plant and equipment are depreciated based on an estimated weighted average useful life of 18 years. The adjustment of $12.0 million to cost of revenues is for the purpose of
presenting a full-year result of operations for TelecityGroup, which was acquired by Equinix on January 15, 2016.
S-37
(q)
|
|
Represents the following reclassification adjustments to sales and marketing adjustments (in thousands):
|
|
|
|
|
|
Amortization adjustment in connection with fair value of intangible assets
|
|
$
|
51,987
|
|
Sales and marketing adjustment in connection with TelecityGroup acquisition
|
|
|
2,225
|
|
|
|
|
|
|
Total sales and marketing adjustments
|
|
$
|
54,212
|
|
|
|
|
|
The amortization adjustment of $52.0 million is in connection with the fair value of the acquired intangible assets. Customer
relationships with third parties are amortized based on estimated useful life of 15 years. The adjustment of $2.2 million to sales and marketing is for the purpose of presenting a full-year result of operations for TelecityGroup, which was
acquired by Equinix on January 15, 2016.
(r)
|
|
Represents general and administrative adjustment of $3.7 million for purpose of presenting a full-year result of operations for TelecityGroup, which was acquired by Equinix
on January 15, 2016.
|
(s)
|
|
Reflects the elimination of
non-recurring
transaction costs of $7.6 million and $42.5 million incurred during the year ended
December 31, 2016 that are directly related to the Acquisition and the TelecityGroup Acquisition, respectively.
|
(t)
|
|
Reflects the additional interest expense associated with the senior notes offering and Term
B-2
Loan, the reversal of commitment fees
relating to the bridge loan and the interest expense adjustments relating to capital lease and financing obligations (in thousands):
|
|
|
|
|
|
Interest expense and amortization of debt issuance costs associated with senior notes as if they were
issued on January 1, 2016
|
|
$
|
(62,034
|
)
|
Interest expense and amortization of debt issuance costs associated with Term
B-2
loan as if they
were borrowed on January 1, 2016
|
|
|
(38,015
|
)
|
Reversal of commitment fees relating to the Commitment Letter
|
|
|
2,174
|
|
Interest expense adjustments relating to capital lease and financing obligations
|
|
|
(373
|
)
|
|
|
|
|
|
Total interest expense adjustments
|
|
$
|
(98,248
|
)
|
|
|
|
|
A 1/8% increase or decrease in interest rates would result in a change in interest expense of approximately $2.8 million for
the year ended December 31, 2016.
If the principal amount of the senior notes offering discussed in Note 5 increases or decreases by 15% or 25%,
the Company would increase or decrease the borrowings by $168.8 million or $281.3 million, respectively, and the Companys interest expense for the first year would be adjusted as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Increase or (decrease) of the
principal amount of the senior notes
offering
|
|
Principal amount
of senior notes
|
|
|
Senior notes, net of
debt issuance costs
|
|
|
Interest expense
|
|
|
Impact to interest
expense assuming
1/8% increase
or
decrease of interest
rate
|
|
As presented
|
|
$
|
1,125,000
|
|
|
$
|
1,109,247
|
|
|
$
|
62,034
|
|
|
$
|
1,406
|
|
15%
|
|
|
1,293,750
|
|
|
|
1,276,099
|
|
|
|
71,293
|
|
|
|
1,617
|
|
25%
|
|
|
1,406,250
|
|
|
|
1,387,333
|
|
|
|
77,466
|
|
|
|
1,758
|
|
(15)%
|
|
|
956,250
|
|
|
|
942,396
|
|
|
|
52,775
|
|
|
|
1,195
|
|
(25)%
|
|
|
843,750
|
|
|
|
831,162
|
|
|
|
46,602
|
|
|
|
1,055
|
|
|
|
|
|
(u)
|
|
Reflects an income tax impact of pro forma adjustments of $7.1 million. The Company assumed a blended income tax rate of 9% for the year ended
December 31, 2016 when estimating the tax impact of the
|
S-38
|
Acquisition, representing the federal, state and foreign statutory rates. The effective tax rate of the combined company could be significantly different depending upon post-acquisition
activities of the combined company.
|
(v)
|
|
Reflects adjustment to the weighted-average shares outstanding for purposes of calculating basic and diluted earnings per share (EPS). Reflects the issuance of
4.7 million shares of common stock in connection with the Financings (see Note 5). Only common shares issued which are directly attributable to the Financings are included in the calculation of basic and diluted pro forma earnings per share. If
the common stock offering discussed in Note 5 increases or decreases by 15% or 25%, the Company would increase or decrease the issuance of common stock by 0.7 million shares, or 1.2 million shares, respectively, and the Companys pro
forma basic and diluted earnings per share would be adjusted as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended
December 31, 2016
|
|
(shares in thousands)
|
|
% Increase
|
|
|
Basic
|
|
|
Diluted
|
|
Weighted-average shares
|
|
|
As presented
|
|
|
|
74,775
|
|
|
|
75,474
|
|
Earnings per share
|
|
|
As presented
|
|
|
$
|
2.70
|
|
|
$
|
2.67
|
|
Weighted-average shares
|
|
|
15%
|
|
|
|
75,474
|
|
|
|
76,173
|
|
Earnings per share
|
|
|
15%
|
|
|
$
|
2.67
|
|
|
$
|
2.65
|
|
Weighted-average shares
|
|
|
25%
|
|
|
|
75,940
|
|
|
|
76,639
|
|
Earnings per share
|
|
|
25%
|
|
|
$
|
2.65
|
|
|
$
|
2.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended
December 31, 2016
|
|
(shares in thousands)
|
|
% Decrease
|
|
|
Basic
|
|
|
Diluted
|
|
Weighted-average shares
|
|
|
15%
|
|
|
|
74,076
|
|
|
|
74,775
|
|
Earnings per share
|
|
|
15%
|
|
|
$
|
2.72
|
|
|
$
|
2.70
|
|
Weighted-average shares
|
|
|
25%
|
|
|
|
73,610
|
|
|
|
74,309
|
|
Earnings per share
|
|
|
25%
|
|
|
$
|
2.74
|
|
|
$
|
2.71
|
|
|
|
S-39
Description of notes
This section describes the 5.375% senior notes due 2027 (the notes) that will be issued by the Company. The Company will issue the notes under a supplemental indenture (the
Supplemental
Indenture
) to that certain base indenture, dated as of November 20, 2014 (together with the Supplemental Indenture, the
Indenture
), between itself and U.S. Bank National Association, as Trustee (the
Trustee
). The following is a summary of the material provisions of the Indenture. The Indenture will comply with the Trust Indenture Act of 1939. The terms of the notes include those stated in the Indenture and those made part of
the Indenture by reference to certain provisions of the Trust Indenture Act. You can find definitions of certain capitalized terms used in this description under Certain definitions.
For purposes of this section, references to the
Company
include only Equinix, Inc. and not its subsidiaries. You are encouraged to read the
Indenture because it, and not this description, defines your rights as a holder of the notes. Copies of the Indenture are available upon request to the Company at the address indicated under Where you can find more information in this
prospectus supplement.
The Company will issue the notes in fully registered form in minimum denominations of $2,000 and integral multiples of $1,000 in
excess thereof. The Trustee will initially act as Paying Agent and Registrar for the notes. The notes may be presented for registration or transfer and exchange at the offices of the Registrar. The Company may change any Paying Agent and Registrar
without notice to holders of the notes (the
Holders
). The Company will pay principal (and premium, if any) on the notes at the Trustees corporate trust office. At the Companys option, interest may be paid at the
Trustees corporate trust office or by check mailed to the registered address of Holders.
Principal, maturity and interest
The Company is issuing $1,250 million aggregate principal amount of notes in this offering and, subject to compliance with the limitations described under
Certain covenantsLimitation on incurrence of additional Indebtedness, may issue an unlimited principal amount of additional notes at later dates under the same Indenture as the notes (the
Additional Notes
).
Any Additional Notes that the Company issues in the future will be identical in all respects to the notes and will be treated as a single class for all purposes under the Indenture with the notes offered hereby, except that such Additional Notes
will have different issuance dates and may have different issuance prices; provided that if any such Additional Notes are not fungible with the notes offered hereby for U.S. federal income tax purposes, such Additional Notes will have one or more
separate CUSIP numbers. Unless the context requires otherwise, references to notes for all purposes of the Indenture and this Description of notes include any Additional Notes that are actually issued.
The notes will mature on May 15, 2027.
Interest on the notes
will accrue at a rate of 5.375% per annum. Interest on the notes will be payable semiannually in arrears on May 15 and November 15 of each year commencing on May 15, 2017. The Company will pay interest to those persons who were
holders of record on the May 1 or November 1 immediately preceding each interest payment date. Interest on the notes will accrue from the date of original issuance or, if interest has already been paid, from the date it was most recently
paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.
The notes will not be entitled to the benefit of any
mandatory sinking fund.
S-40
Ranking
The
notes will be general senior obligations of the Company. The Holders right to payment under these notes will be:
|
|
effectively subordinated to all of the existing and any future secured indebtedness of the Company, including debt outstanding under any Bank Facility or secured
by any mortgage, to the extent of the assets securing such debt;
|
|
|
structurally subordinated to any existing and future indebtedness and other liabilities (including trade payables) of any Subsidiaries of the Company;
|
|
|
equal in right of payment to all existing and any future senior indebtedness of the Company; and
|
|
|
senior in right of payment to any existing and future subordinated indebtedness of the Company.
|
At December 31, 2016, after giving effect to the Term B-2 Loan Borrowings and this offering,
|
|
the Company would have had total consolidated indebtedness of approximately $9.1 billion, approximately $2.1 billion of which would have represented
secured indebtedness, which excludes approximately $1.5 billion of capital lease and other financing obligations;
|
|
|
if the Company borrowed all of the approximately $1.4 billion available under its revolving credit facility (including the exercise in full of the Companys
right to increase its size subject to certain conditions), $1.4 billion of such borrowings would have been secured indebtedness; and
|
|
|
the Subsidiaries of the Company would have had approximately $1.8 billion of indebtedness which includes $1.4 billion of capital lease and other financing
obligations (excluding trade payables and intercompany items and liabilities of a type not required to be reflected on a balance sheet of such Subsidiaries in accordance with GAAP), all of which would have been structurally senior to the notes.
|
Special mandatory redemption
We intend to use the net proceeds from this offering to finance in part the Acquisition purchase price and related transaction fees and expenses and for general
corporate purposes, which may include repayment of indebtedness, capital expenditures, working capital and acquisitions of complementary businesses or assets, as described under the heading Use of proceeds. If the Acquisition is not
completed on or prior to December 6, 2017, or if, prior to such date, the Transaction Agreement is terminated (each, a
Special Mandatory Redemption Event
), the provisions set forth below will be applicable.
Upon the occurrence of a Special Mandatory Redemption Event, the notes will be redeemed in whole at a special mandatory redemption price (the
Special
Mandatory Redemption Price
) equal to 100% of the aggregate principal amount of the notes, plus accrued and unpaid interest on the principal amount of the notes to, but not including, the Special Mandatory Redemption Date (as defined
below).
Upon the occurrence of a Special Mandatory Redemption Event, the Company will promptly (but in no event later than 5 business days following
such Special Mandatory Redemption Event) notify the Trustee in writing of such event, and the Trustee will, no later than 5 business days following receipt of such notice from the Company, notify the Holders (such date of notification to the
Holders, the
Redemption Notice Date
), that the notes will be redeemed on the 30th day following the Redemption Notice Date (such date, the
Special Mandatory Redemption Date
), in each case in accordance with the
applicable provisions of the Indenture. The Trustee, upon receipt of the notice specified above, on the Redemption Notice Date will notify each Holder in
S-41
accordance with the applicable provisions of the Indenture that all of the outstanding notes will be redeemed at the Special Mandatory Redemption Price on the Special Mandatory Redemption Date
automatically and without any further action by the Holders of the notes. At or prior to 12:00 p.m. (New York City time) on the business day immediately preceding the Special Mandatory Redemption Date, the Company will irrevocably deposit with the
Trustee funds sufficient to pay the Special Mandatory Redemption Price for the notes (the
Special Mandatory Redemption Payment
). If such deposit is made as provided above, the notes will cease to bear interest on and after the
Special Mandatory Redemption Date.
If a Special Mandatory Redemption Event occurs, there can be no assurance that the Company will have sufficient funds
available to pay the Special Mandatory Redemption Price with respect to the notes on the Special Mandatory Redemption Date. In the event the Company is required to make the Special Mandatory Redemption Payment, the Company expects that it would seek
third-party financing to the extent it does not have sufficient funds available to meet its redemption obligations. However, there can be no assurance that the Company would be able to obtain such financing. In addition, there can be no assurance
that the Company would be able to obtain the consents necessary to make the Special Mandatory Redemption Payment from the lenders under agreements governing outstanding Indebtedness that may in the future prohibit the Special Mandatory Redemption
Payment. The failure to make a Special Mandatory Redemption Payment if and when required would constitute an Event of Default under the Indenture. See Risk FactorsWe may not be able to redeem the notes upon a Special Mandatory Redemption
Event.
Optional redemption
Other than as
described in Special mandatory redemption and as set forth below, the notes are not redeemable prior to maturity.
At any time prior to
May 15, 2020, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of the notes (calculated giving effect to any issuance of Additional Notes) outstanding under the Supplemental Indenture, at a
redemption price equal to 105.375% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that
(1) at least 65% of the aggregate principal amount of the notes (calculated giving effect to any issuance of Additional Notes) issued
under the Supplemental Indenture remains outstanding immediately after the occurrence of such redemption (excluding notes held by the Company and its subsidiaries); and
(2) the redemption must occur within 90 days of the date of the closing of such Equity Offering.
On or after
May 15, 2022, the Company may redeem all or a part of the notes, on any one or more occasions, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon, if any, to, but not
including, the applicable redemption date, if redeemed during the twelve-month period beginning on May 15 of each of the years indicated below:
|
|
|
|
|
|
|
Redemption
price of the
notes
|
|
2022
|
|
|
102.688%
|
|
2023
|
|
|
101.792%
|
|
2024
|
|
|
100.896%
|
|
2025 and thereafter
|
|
|
100.000%
|
|
|
|
At any time prior to May 15, 2022, the Company may also redeem all or a part of the notes at a redemption price equal to 100%
of the principal amount of notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest, if any, to, but not including, the date of redemption (the
Redemption Date
), subject to the
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rights of Holders of record of notes on the relevant record date to receive interest due on the relevant interest payment date.
Selection and notice of redemption
In the event that the Company chooses to redeem less than all of the notes,
selection of the notes for redemption will be made by the Trustee:
1. in compliance with the requirements of the principal national
securities exchange, if any, on which the notes are listed; or
2. if the notes are not listed on a national securities exchange, on a
pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; subject in each case to DTC procedures.
No notes of a principal
amount of $2,000 or less shall be redeemed in part. Notice of redemption will be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each Holder of notes to be redeemed at its registered address,
provided
that, if the redemption notice is issued in connection with a defeasance of the notes or satisfaction and discharge of the Indenture governing the notes, the notice of redemption may be delivered more than 60 calendar days before the
date of redemption. If any note is to be redeemed in part only, then the notice of redemption that relates to such note must state the portion of the principal amount thereof to be redeemed. A new note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon cancellation of the original note (or appropriate adjustments to the amount and beneficial interests in a global note will be made). On and after the redemption date, interest
will cease to accrue on notes or portions thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the applicable redemption price. Any redemption or notice of redemption may, at our
discretion, be subject to one or more conditions precedent.
Mandatory redemption; offers to purchase; open market purchases
Other than as described in Special mandatory redemption, we are not required to make any mandatory redemption or sinking fund payments with
respect to the notes. However, under certain circumstances, we may be required to offer to purchase notes as described under Change of control and Certain covenants Limitation on asset sales. We may at any
time and from time to time purchase notes in the open market or otherwise, subject to compliance with applicable securities laws.
Holding company
structure
The Company is a holding company for its Subsidiaries. Substantially all of the Companys operations are conducted through its
Subsidiaries and the Company derives substantially all its revenues from its Subsidiaries, and substantially all of its operating assets are owned by its Subsidiaries. Accordingly, the Company is dependent upon the distribution of the earnings of
its Subsidiaries, whether in the form of dividends, advances or payments on account of intercompany obligations, to service its debt obligations. In addition, the claims of the Holders are subject to the prior payment of all liabilities (whether or
not for borrowed money) and to any preferred stock interest of such Restricted Subsidiaries. There can be no assurance that, after providing for all prior claims, there would be sufficient assets available from the Company and its Subsidiaries to
satisfy the claims of the Holders of notes. See Risk FactorsOur subsidiaries will not guarantee the notes. We depend in large part on the cash flow from our subsidiaries to meet our obligations, and your claims will be subordinated to
all of the creditors of these subsidiaries.
Guarantees
On the Issue Date, the notes will not be guaranteed by any of the Companys Subsidiaries. To the extent that, in the future, any Domestic Restricted Subsidiary of the Company becomes a Guarantor pursuant to
the
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Subsidiary guarantees covenant, such Guarantor will unconditionally, jointly and severally guarantee the Companys obligations under the Indenture and the notes on a senior
unsecured basis. The obligations of each Guarantor under its Guarantee will be limited as necessary to prevent the Guarantee from constituting a fraudulent conveyance or fraudulent transfer under applicable law.
Change of control
Upon the occurrence of a Change of
Control, unless the Company or a third party has previously or concurrently mailed a redemption notice with respect to all outstanding notes as described under Special mandatory redemption or Optional redemption,
the Company will be required to make an offer to purchase each Holders notes pursuant to the offer described below (the
Change of Control Offer
), at a purchase price equal to 101% of the principal amount thereof plus accrued
and unpaid interest to the date of purchase.
Within 30 days following the date upon which the Change of Control occurred, the Company must send, or
cause the Trustee to send, by first class mail, a notice to each Holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. Such notice shall state, among other things, the purchase date, which must be no
earlier than 30 days nor later than 60 days after the date such notice is mailed, other than as may be required by law (the
Change of Control Payment Date
). Holders electing to have a note purchased pursuant to a Change of Control
Offer will be required to surrender the note, with the form entitled Option of Holder to Elect Purchase on the reverse of the note completed and specifying the portion (equal to $2,000 and integral multiples of $1,000 in excess thereof)
of such Holders notes that it agrees to sell to the Company pursuant to the Change of Control Offer, to the Paying Agent at the address specified in the notice prior to the close of business on the third business day prior to the Change of
Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the
purchase price for all the notes that might be delivered by Holders seeking to accept the Change of Control Offer. In the event the Company is required to purchase outstanding notes pursuant to a Change of Control Offer, the Company expects that it
would seek third-party financing to the extent it does not have available funds to meet its purchase obligations. However, there can be no assurance that the Company would be able to obtain such financing. In addition, there can be no assurance that
the Company would be able to obtain the consents necessary to consummate a Change of Control Offer from the lenders under agreements governing outstanding Indebtedness that may in the future prohibit the Change of Control Offer. The failure to
consummate a Change of Control Offer would constitute an Event of Default under the Indenture. See Risk FactorsWe may not be able to repurchase the notes upon a Change of Control for more information.
One of the events that constitutes a Change of Control under the Indenture is the disposition of all or substantially all of the Companys assets.
This term 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, if Holders of the notes assert that the Company is required to make a Change of Control
Offer and the Company elects to contest such assertion, there is uncertainty as to how a court interpreting New York law would interpret the term. Neither the Board of Directors of the Company nor the Trustee may waive the covenant of the Company to
make a Change of Control Offer following a Change of Control. Restrictions in the Indenture described herein on the ability of the Company and its Subsidiaries to incur additional Indebtedness, to grant Liens on the property of the Company and the
Restricted Subsidiaries and to make Restricted Payments may also make more difficult or discourage a takeover of the Company, whether favored or opposed by the management or stockholders of the Company. There can be no assurance that the Company or
the acquiring party will have sufficient financial resources to effect a Change of Control Offer. Such restrictions may, in certain circumstances, make more difficult or discourage any leveraged buyout of the Company or any of its Subsidiaries by
their respective management. However, the Indenture may not afford the Holders protection in all circumstances from the adverse aspects of a highly leveraged transaction, reorganization, amalgamation, restructuring, merger or similar transaction.
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The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the
Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all notes validly tendered and not withdrawn
under such Change of Control Offer. The Company (or a third party) may make a Change of Control Offer in advance of, and conditioned upon, any Change of Control.
The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with
the repurchase of notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Change of Control provisions of the Indenture by virtue thereof.
Certain covenants
The Indenture will contain, among others, the following covenants:
Suspension of covenants.
During any period of time
that: (i) the notes have Investment Grade Ratings from at least two Rating Agencies and (ii) no Default or Event of 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
), the Company and its Restricted Subsidiaries will not be subject to the following provisions of the Indenture:
(1) Limitation on incurrence of additional indebtedness;
(2) Limitation on restricted payments;
(3) Limitation on asset
sales;
(4) Limitation on dividend and other payment restrictions affecting subsidiaries;
(5) Limitation on preferred stock of domestic restricted subsidiaries;
(6) clause 2 of the first paragraph of Consolidation, merger and sale of assets;
(7) Limitations on transactions with affiliates; and
(8) Subsidiary guarantees
(collectively, the
Suspended Covenants
). Upon the
occurrence of a Covenant Suspension Event, the Guarantees, if any, of any Guarantors will also be suspended as of such date (the
Suspension Date
). In the event that the Company and the Restricted Subsidiaries are not subject to
the Suspended Covenants for any period of time as a result of the foregoing, and on any subsequent date (the
Reversion Date
) one or more of the Rating Agencies withdraw their Investment Grade Rating or downgrade the rating
assigned to the notes below an Investment Grade Rating such that the notes do not have Investment Grade Ratings from at least two Rating Agencies, then the Company and the Restricted Subsidiaries will thereafter again be subject to the Suspended
Covenants with respect to future events and the Guarantees, if any, of any Guarantors will be reinstated if such Guarantees are then required by the terms of the Indenture. The period of time between the Suspension Date and the Reversion Date is
referred to in this description as the
Suspension Period
. Notwithstanding that the Suspended Covenants may be reinstated, no Default or Event of Default will be deemed to have occurred as a result of a failure to comply with the
Suspended Covenants during the Suspension Period (or upon termination of the Suspension Period or after that time based solely on events that occurred during the Suspension Period).
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On the Reversion Date, all Indebtedness incurred, or Disqualified Capital Stock or Preferred Stock issued, during the
Suspension Period will be classified as having been incurred or issued pursuant to paragraph (a) of Limitation on incurrence of additional indebtedness below or one of the clauses set forth in paragraph (b) of
Limitation on incurrence of additional indebtedness below (to the extent such Indebtedness or Disqualified Capital Stock or Preferred Stock would be permitted to be incurred or issued thereunder as of the Reversion Date and after
giving effect to Indebtedness incurred or issued prior to the Suspension Period and outstanding on the Reversion Date). To the extent such Indebtedness or Disqualified Capital Stock or Preferred Stock would not be so permitted to be incurred or
issued pursuant to paragraph (a) or (b) of Limitation on incurrence of additional indebtedness, such Indebtedness or Disqualified Capital Stock or Preferred Stock will be deemed to have been outstanding on the Issue Date,
so that it is classified as permitted under clause (3) of paragraph (b) of Limitation on incurrence of additional indebtedness. Calculations made after the Reversion Date of the amount available to be made as Restricted
Payments under Limitation on restricted payments will be made as though the covenant described under Limitation on restricted payments had been in effect since the Issue Date and throughout the Suspension Period.
Accordingly, Restricted Payments made during the Suspension Period will reduce the amount available to be made as Restricted Payments under the first paragraph of Limitation on restricted payments. As described above, however, no
Default or Event of Default will be deemed to have occurred on the Reversion Date as a result of any actions taken by the Company or its Restricted Subsidiaries during the Suspension Period.
Limitation on incurrence of additional indebtedness.
(a) The Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively,
incur
)
any Indebtedness (other than Permitted Indebtedness); provided that if no Default or Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, the Company or any of its
Restricted Subsidiaries may incur Indebtedness if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof (or, in the case of Designated Revolving Commitments, on the date such Designated Revolving
Commitments are designated as such (but only to the extent and so long as so designated) after giving
pro forma
effect to the incurrence of the entire committed amount of Indebtedness designated thereunder, in which case such designated
amount under such Designated Revolving Commitments may thereafter be borrowed, repaid and reborrowed, in whole or in part, from time to time, without further compliance with any limitation on the incurrence of additional indebtedness set forth in
this section titled Limitation on incurrence of additional indebtedness), the Consolidated Fixed Charge Coverage Ratio of the Company would have been greater than 2.0 to 1.0;
provided
that the amount of Indebtedness that may be
incurred and Disqualified Capital Stock or Preferred Stock that may be issued pursuant to the foregoing by any Restricted Subsidiaries that are not Guarantors (other than borrowings under a Bank Facility which is secured by Liens incurred pursuant
to clause 2(a) of the Limitation on liens covenant) shall not exceed $1,500.0 million at any one time outstanding.
(b) The foregoing
will not apply to (collectively,
Permitted Indebtedness
):
1. Indebtedness under the notes (other than any Additional
Notes) issued on the Issue Date;
2. Indebtedness incurred pursuant to any Bank Facility in an aggregate principal amount at any one time
outstanding not to exceed $3,500.0 million;
3. other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the
Issue Date (other than Indebtedness under clauses 1, 2 or 19 of this paragraph (b)) reduced by the amount of any scheduled amortization payments, mandatory prepayments when actually paid, conversions or permanent reductions thereof;
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4. Interest Swap Obligations of the Company or any Restricted Subsidiary of the Company covering
Indebtedness of the Company or any of its Restricted Subsidiaries;
provided
that such Interest Swap Obligations are entered into to protect the Company and its Restricted Subsidiaries from fluctuations in interest rates on its outstanding
Indebtedness incurred without violation of the Indenture to the extent the notional principal amount of such Interest Swap Obligation does not, at the time of the incurrence thereof, exceed the principal amount of the Indebtedness to which such
Interest Swap Obligation relates;
5. Indebtedness under Currency Agreements;
provided
that in the case of Currency Agreements
which relate to Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company and its Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
6. Indebtedness of a Restricted Subsidiary of the Company owing to and held by the
Company or a Wholly Owned Restricted Subsidiary of the Company for so long as such Indebtedness is held by the Company or a Wholly Owned Restricted Subsidiary of the Company or the holder of a Lien permitted under the Indenture, in each case subject
to no Lien held by a Person other than the Company or a Wholly Owned Restricted Subsidiary of the Company or the holder of a Lien permitted under the Indenture; provided that if as of any date any Person other than the Company or a Wholly Owned
Restricted Subsidiary of the Company or the holder of a Lien permitted under the Indenture owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness under this clause 6 by the issuer of such Indebtedness;
7. Indebtedness of the Company owing to and held by a
Wholly Owned Restricted Subsidiary of the Company for so long as such Indebtedness is held by a Wholly Owned Restricted Subsidiary of the Company or the holder of a Lien permitted under the Indenture, in each case subject to no Lien other than a
Lien permitted under the Indenture;
provided
that if as of any date any Person other than a Wholly Owned Restricted Subsidiary of the Company or the holder of a Lien permitted under the Indenture owns or holds any such Indebtedness or any
Person holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness under this clause 7 by the Company;
8. Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in
the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within five business days of incurrence;
9. Indebtedness of the Company or any of its Restricted Subsidiaries in respect of performance bonds, bankers acceptances, workers
compensation claims, surety, bid, appeal or similar bonds, completion guarantees, payment obligations in connection with self-insurance or similar obligations, and bank overdrafts (and letters of credit in respect thereof) in the ordinary course of
business;
10. Indebtedness represented by Capitalized Lease Obligations of the Company and its Restricted Subsidiaries not to exceed
(together with any Refinancing Indebtedness with respect thereto) 20.0% of Total Assets at any one time outstanding;
11. Indebtedness
represented by mortgage financings and Purchase Money Indebtedness of the Company and its Restricted Subsidiaries not to exceed (together with any Refinancing Indebtedness with respect thereto) 20.0% of Total Assets at any one time outstanding;
12. Refinancing Indebtedness;
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13. Indebtedness of the Company or any Restricted Subsidiary consisting of earn-out
obligations, guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets (including Capital Stock);
14. Indebtedness incurred by the Company or any of the Restricted Subsidiaries in respect of letters of credit, bank guarantees or similar
instruments issued or created in the ordinary course of business, including in respect of health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to
reimbursement-type obligations regarding workers compensation claims; provided that any reimbursement obligations in respect thereof are reimbursed within 60 days following the incurrence thereof;
15. Indebtedness in respect of Sale and Leaseback Transactions in an aggregate amount not to exceed the greater of $750.0 million and 5.0% of Total
Assets at any one time outstanding;
16. Acquired Indebtedness, if on the date that such Indebtedness is incurred, after giving pro forma
effect thereto, (A) the Company or such Restricted Subsidiary, as the case may be, shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the first paragraph above under this covenant,
or (B) the Consolidated Fixed Charge Coverage Ratio of the Company would be no less than the Consolidated Fixed Charge Coverage Ratio of the Company immediately prior to the date such Indebtedness is incurred;
17. Additional Indebtedness of the Company and its Restricted Subsidiaries in an aggregate principal amount (or accreted value) not to exceed the
greater of $750.0 million and 5.0% of Total Assets at any one time outstanding (which amounts may, but need not, be incurred in whole or in part under the Bank Facility); provided that the amount of Indebtedness that may be incurred pursuant to this
clause 17 by any Restricted Subsidiaries (other than borrowings under a Bank Facility which is secured by Liens incurred pursuant to clause 2(a) of the Limitation on liens covenant) that are not Guarantors shall not exceed $250.0
million at any one time outstanding;
18. Indebtedness represented by guarantees by the Company or its Restricted Subsidiaries of
Indebtedness otherwise permitted to be incurred under the Indenture; provided that, in the case of a guarantee by a Restricted Subsidiary, such Restricted Subsidiary complies with the Subsidiary guarantees covenant to the extent
applicable; and
19. Permitted Foreign Subsidiary Debt.
(c) For purposes of determining compliance with this Limitation on incurrence of additional indebtedness covenant, in the event that all or a portion of an item of Indebtedness meets the criteria of
more than one of the categories of Permitted Indebtedness described in clauses 1 through 19 of paragraph (b) above or is entitled to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of such covenant, the Company
shall, in its sole discretion, classify (or later reclassify) such item of Indebtedness, in whole or in part, in any manner that complies with this covenant; provided that all Indebtedness outstanding under the Bank Facility up to the maximum amount
permitted under clause 2 of paragraph (b) above shall be deemed to have been incurred pursuant to clause 2 of paragraph (b). Accrual of interest, whether payable in cash or in kind, accretion or amortization of original issue discount, imputed
interest, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Capital Stock in the form of additional shares of the same class of Disqualified Capital
Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Preferred Stock of a Restricted Subsidiary or Disqualified Capital Stock, as applicable, for purposes of this Limitation on incurrence of additional
indebtedness covenant.
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(d) In addition, the Company will not, and will not permit any Restricted Subsidiary that becomes a Guarantor to,
directly or indirectly, incur any Indebtedness which by its terms (or by the terms of any agreement governing such Indebtedness) is expressly subordinated in right of payment to any other Indebtedness of the Company or such Guarantor, as the case
may be, unless such Indebtedness is also by its terms (or by the terms of any agreement governing such Indebtedness) made expressly subordinate to the notes or the applicable Guarantee, as the case may be, to the same extent and in the same manner
as such Indebtedness is subordinated to other Indebtedness of the Company or such Guarantor, as the case may be. For purposes of the foregoing, no Indebtedness will be deemed to be subordinated in right of payment to any other Indebtedness of the
Company or any Guarantor solely by virtue of such Indebtedness being unsecured or by virtue of the fact that the holders of such Indebtedness have entered into one or more intercreditor agreements giving one or more of such holders priority over the
other holders in the collateral held by them.
(e) For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence
of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term
debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is Refinancing Indebtedness incurred to Refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the
applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long
as the principal amount of such Refinancing Indebtedness does not exceed the principal amount of such Indebtedness being Refinanced. Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that may be incurred
pursuant to this covenant will not be deemed to be exceeded with respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange rates of currencies.
Limitation on restricted payments.
The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly:
1. declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company) on
or in respect of shares of the Companys Capital Stock to holders of such Capital Stock;
2. purchase, redeem or otherwise acquire
or retire for value any Capital Stock of the Company;
3. make any principal payment on, purchase, defease, redeem, prepay, decrease or
otherwise acquire or retire for value, earlier than one year prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Indebtedness; or
4. make any Investment (other than Permitted Investments)
(each of the foregoing actions set forth in clauses 1, 2, 3 and 4 being referred to as a
Restricted Payment
); if at the time of such Restricted Payment or immediately after giving effect thereto,
(i) a Default or an Event of Default shall have occurred and be continuing;
(ii) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the first
paragraph under the Limitation on incurrence of additional indebtedness covenant; or
(iii) the aggregate amount of
Restricted Payments (including such proposed Restricted Payment) made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair
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market value of such property as determined in good faith by the Board of Directors of the Company) shall exceed the sum of:
(v) an amount equal to the Companys Consolidated EBITDA for the period from January 1, 2013 to the end of the Companys most
recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment (the
Basket Period
) less the product of 1.4 times the Companys Consolidated Interest Expense for the Basket
Period; plus
(w) 100% of the aggregate net cash proceeds received by the Company from any Person (other than a Subsidiary of the
Company) from the issuance and sale subsequent to January 1, 2013 and on or prior to the date the Restricted Payment occurs (the
Reference Date
) of Qualified Capital Stock of the Company or warrants, options or other rights
to acquire Qualified Capital Stock of the Company (but excluding any debt security that is convertible into, or exchangeable for, Qualified Capital Stock, until such debt security has been converted into, or exchanged for, Qualified Capital Stock);
plus
(x) without duplication of any amounts included in clause (iii)(w) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Companys Capital Stock subsequent to March 5, 2013 and on or prior to the Reference Date (excluding, in the case of clauses (iii)(w) and (y), any net cash proceeds from any equity
offering to the extent used to redeem the notes in compliance with the provisions set forth under Optional redemption); plus:
(y) without duplication, the sum of:
1. the aggregate amount returned in cash on or with respect to
Investments (other than Permitted Investments) made subsequent to March 5, 2013 whether through interest payments, principal payments, dividends or other distributions or payments;
2. the net cash proceeds received by the Company or any of its Restricted Subsidiaries from the disposition of all or any portion of such
Investments (other than to a Subsidiary of the Company);
3. upon redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary
(except to the extent the Investment constituted a Permitted Investment), the fair market value of such Subsidiary as of the date of such redesignation; and
4. net cash dividends or other net cash distributions paid to the Company or any Restricted Subsidiary of the Company from any Unrestricted Subsidiaries of the Company; plus:
(z) $225.0 million;
provided
that the sum of
clauses 1, 2, 3 and 4 above shall not exceed the aggregate amount of all such Investments made subsequent to March 5, 2013.
As of December 31,
2016, the Company could have made in excess of $3.97 billion in Restricted Payments while remaining in compliance with the limitations on Restricted Payments set forth above, which amount does not include the availability of certain other exceptions
and permitted payments that are available to the Company, particularly in some cases for dividends it expects to continue to make as a REIT.
Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit:
1. the payment of any dividend within 60 days after the date of declaration of such dividend if the dividend would have been permitted on the date
of declaration;
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2. the acquisition of any shares of Capital Stock of the Company, either (i) solely in exchange
for shares of Qualified Capital Stock of the Company or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company;
3. the acquisition of any Subordinated Indebtedness either (i) solely in exchange for shares of Qualified Capital Stock of the
Company, or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of (a) shares of Qualified Capital Stock of the Company or (b) Refinancing Indebtedness;
4. repurchases by the Company of Common Stock of the Company from officers, directors and employees of the Company or any of its
Subsidiaries or their authorized representatives upon the death, disability or termination of employment of such employees or termination of their seat on the board of the Company in an aggregate amount not to exceed $10.0 million in any calendar
year;
5. repurchases of Capital Stock deemed to occur upon the exercise of stock options or warrants if such Capital Stock represents a
portion of the exercise price and related statutory withholding taxes of such options or warrants;
6. payments of dividends on
Disqualified Capital Stock or Preferred Stock of any Restricted Subsidiary, the incurrence or issuance of which was permitted by the Indenture;
7. cash payments in lieu of the issuance of fractional shares in connection with (i) the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of the Company or
(ii) a merger, consolidation, amalgamation or other combination involving the Company or any of its Subsidiaries;
8. the retirement
of any shares of Disqualified Capital Stock of the Company by conversion into, or by exchange for, shares of Disqualified Capital Stock of the Company or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary
of the Company) or other shares of Disqualified Capital Stock of the Company;
9. in the event of a Change of Control, and if no Default
or Event of Default shall have occurred and be continuing, the payment, purchase, redemption, defeasance or other acquisition or retirement of Subordinated Indebtedness of the Company or any Guarantor, in each case at a purchase price not greater
than 101% of the principal amount of such Subordinated Indebtedness, plus accrued and unpaid interest thereon; provided that prior to such payment, purchase, redemption, defeasance or other acquisition or retirement, the Company (or a third party to
the extent permitted by the Indenture) has made a Change of Control Offer with respect to the notes offered hereby as a result of such Change of Control and has repurchased all notes validly tendered and not withdrawn in connection with such Change
of Control Offer;
10. in the event of an Asset Sale that requires the Company to offer to repurchase notes pursuant to the covenant
described under Limitation on asset sales, and if no Default or Event of Default shall have occurred and be continuing, the payment, purchase, redemption, defeasance or other acquisition or retirement of Subordinated Indebtedness of the
Company or any Guarantor, in each case at a purchase price not greater than 100% of the principal amount of such Subordinated Indebtedness, plus accrued and unpaid interest thereon; provided that (A) prior to such payment, purchase, redemption,
defeasance or other acquisition or retirement, the Company has made an offer with respect to the notes offered hereby pursuant to the provisions of the covenant described under Limitation on asset sales and has repurchased all notes
validly tendered and not withdrawn in connection with such offer and (B) the aggregate amount of all such payments, purchases, redemptions, defeasances or other acquisitions or
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retirements of all such Subordinated Indebtedness may not exceed the amount of the Net Cash Proceeds Amount remaining after the Company has complied with clause 3 of the covenant described under
Limitation on asset sales; and
11. other Restricted Payments in an aggregate amount not to exceed $1,000.0 million after the
Issue Date.
In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (iii) of the
immediately preceding paragraph, amounts expended pursuant to clauses 1 and 4 shall be included in such calculation.
Notwithstanding the foregoing, the
Company may declare or pay any dividend or make any distribution on or in respect of shares of the Companys Capital Stock to holders of such Capital Stock, so long as (A)(1) such dividend or distribution is intended to be part of a
distribution of the Companys earnings and profits to satisfy Section 857(a)(2) of the Code or (2) the Company believes in good faith that it qualifies as a real estate investment trust under Section 856 of the Code
and that the declaration or payment of such dividend or making of such distribution is necessary either to maintain the Companys status as a REIT for any calendar year or, with respect to any calendar year in which the Company intends to
qualify as a REIT, to enable the Company to avoid payment of any tax for any calendar year that would otherwise be required and could be avoided by reason of paying such dividend or making such distribution by the Company to such holders, with such
dividend to be paid or distribution to be made as and when determined by the Company, whether during or after the end of the relevant calendar year, and (B) no Default or Event of Default shall have occurred and be continuing. In determining
the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (iii) of the first paragraph above under the caption Limitation on restricted payments, amounts expended pursuant to
clause (A)(2) above shall be included in such calculation.
Limitation on asset sales
. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, consummate an Asset Sale unless:
1. the Company or such Restricted
Subsidiary, as the case may be, receives consideration therefor at the time of such Asset Sale at least equal to the fair market value at the time of such Asset Sale of the property, assets or stock sold or otherwise disposed of (as determined in
good faith by the Companys Board of Directors);
2. at least 75% of the consideration received by the Company or the Restricted
Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash, Cash Equivalents and/or Replacement Assets (as defined) and is received at the time of such disposition; provided that, for purposes of this clause 2, (a) the
amount of any liabilities (as shown on the Companys or such Restricted Subsidiarys most recent balance sheet) of the Company or any such Restricted Subsidiary (other than liabilities that are by their terms subordinated in right of
payment to the notes or any Guarantee of a Guarantor) that are assumed by the transferee of any such assets, (b) the fair market value of any securities or other assets received by the Company or any such Restricted Subsidiary in exchange for
any such assets that are converted into cash or Cash Equivalents within 360 days after such Asset Sale and (c) any Designated Non-cash Consideration received by the Company or any of its Restricted Subsidiaries in such Asset Sale having an
aggregate fair market value, taken together with all other Designated Non-cash Consideration received pursuant to this subclause (c) that is at that time outstanding, not to exceed the greater of 2.0% of Total Assets and $100.0 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), in each case
shall be deemed to be cash for purposes of this provision; and
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3. upon the consummation of an Asset Sale, the Company shall apply, or cause such Restricted
Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of receipt thereof either:
(a) to permanently
reduce Indebtedness under a Bank Facility or to permanently repay any secured Indebtedness (other than Subordinated Indebtedness) of the Company or any Restricted Subsidiary or any Indebtedness of any Restricted Subsidiary that is not a Guarantor;
(b) to make an investment in properties and assets (including Capital Stock) that replace the properties and assets that were the
subject of such Asset Sale or in properties and assets that will be used in the business of the Company and its Restricted Subsidiaries as existing on the Issue Date or in businesses reasonably related thereto (
Replacement
Assets
);
(c) to repay other Pari Passu Indebtedness; provided that the Company shall also equally and ratably reduce
Indebtedness under the notes by making an offer (in accordance with the procedures set forth below for a Net Proceeds Offer) to all Holders to purchase the pro rata principal amount of notes, in each case at a purchase price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest to the repurchase date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date); and/or
(d) a combination of prepayment and investment permitted by the foregoing clauses (a)(c);
provided
that in the case of an investment in Replacement Assets pursuant to clause (b) or (d) above, a binding commitment shall be treated as a
permitted application of the Net Cash Proceeds from the date of such commitment and, in the event such binding commitment is later cancelled or terminated for any reason before such Net Cash Proceeds are so applied, the Company or such Restricted
Subsidiary enters into another binding commitment within 180 days of such cancellation or termination of the prior binding commitment.
Pending the final
application of such Net Cash Proceeds, the Company may temporarily reduce borrowings under the Bank Facility or any other revolving credit facility or otherwise invest the Net Cash Proceeds in any manner not prohibited by the Indenture. On the 361st
day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses 3(a)(d) of the
preceding paragraph (each, a
Net Proceeds Offer Trigger Date
), such aggregate amount of Net Cash Proceeds (rounded down to the nearest $1,000) that has not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses 3(a)(d) of the preceding paragraph or the last provision of this paragraph (each a
Net Proceeds Offer Amount
) shall be applied by the Company or such Restricted Subsidiary to make an offer to
purchase (the
Net Proceeds Offer
) to all Holders of the notes and, to the extent required by the terms of any Pari Passu Indebtedness, to all holders of Pari Passu Indebtedness, on a date (the
Net Proceeds Offer
Payment Date
) not less than 30 nor more than 60 days following the applicable Net Proceeds Offer Trigger Date, from all Holders of the notes (and holders of any such Pari Passu Indebtedness) on a pro rata basis, the maximum amount of the
notes and Pari Passu Indebtedness equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the notes and Pari Passu Indebtedness to be purchased, plus accrued and unpaid interest thereon, if any, to the date of
purchase; provided that if at any time any non-cash consideration received by the Company or any Restricted Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this
covenant.
The Company may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $100.0
million resulting from one or more Asset Sales (at which time, the entire
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unutilized Net Proceeds Offer Amount, and not just the amount in excess of $100.0 million, shall be applied as required pursuant to this covenant).
In the event of the transfer of substantially all (but not all) of the property and assets of the Company and its Restricted Subsidiaries as an entirety to a Person
in a transaction permitted under Merger, consolidation and sale of assets, which transaction does not constitute a Change of Control, the successor corporation shall be deemed to have sold the properties and assets of the Company
and its Restricted Subsidiaries not so transferred for purposes of this covenant, and shall comply with the provisions of this covenant with respect to such deemed sale as if it were an Asset Sale. In addition, the fair market value of such
properties and assets of the Company or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this covenant.
Each Net Proceeds Offer will be mailed to the record Holders of the notes as shown on the register of Holders of the notes within 25 days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee,
and shall comply with the procedures set forth in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders of the notes may elect to tender their notes in whole or in part (in minimum amounts of $2,000 and integral multiples of $1,000
in excess thereof) in exchange for cash. To the extent such Holders properly tender notes and holders of Pari Passu Indebtedness properly tender such Pari Passu Indebtedness in an amount exceeding the Net Proceeds Offer Amount, the tendered notes
and Pari Passu Indebtedness will be purchased on a pro rata basis based on the aggregate amount of notes and Pari Passu Indebtedness tendered (and the Trustee shall select the tendered notes of tendering Holders on a pro rata basis based on the
amount of notes and Pari Passu Indebtedness tendered). A Net Proceeds Offer shall remain open for a period of 20 business days or such longer or shorter period as may be required or permitted, respectively, by law. If any Net Cash Proceeds remain
after the consummation of any Net Proceeds Offer, the Company may use those Net Cash Proceeds for any purpose not otherwise prohibited by the Indenture. Upon completion of each Net Proceeds Offer, the amount of Net Cash Proceeds will be reset at
zero.
The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the repurchase of notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions
of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Asset Sale provisions of the Indenture by virtue thereof.
Limitation on dividend and other payment restrictions affecting subsidiaries
. The Company will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to:
1. pay dividends or make any other distributions on or in respect of its Capital Stock;
2. make loans or advances to the Company or any other Restricted Subsidiary or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or
3. transfer any of its property or assets to the Company or any other Restricted
Subsidiary of the Company, except in each case for such encumbrances or restrictions existing under or by reason of:
(a) applicable law,
rule, regulation or order;
(b) the Indenture, the notes and any Guarantees;
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(c) customary non-assignment provisions of any contract or any lease, license or sublicense governing
a leasehold interest of any Restricted Subsidiary of the Company;
(d) any instrument governing Acquired Indebtedness, which encumbrance
or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired;
(e) agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date;
(f) the Bank Facility, an agreement governing other Pari Passu Indebtedness permitted to be incurred under the Indenture or, with respect to a Restricted Subsidiary, an agreement evidencing Indebtedness incurred
not in violation of the Indenture; provided that, with respect to any agreement governing such other Pari Passu Indebtedness or other Indebtedness, as the case may be, the provisions relating to such encumbrance or restriction are no less favorable
to the Company or Restricted Subsidiary, as the case may be, in any material respect as determined by the Board of Directors of the Company in its reasonable and good faith judgment than the provisions contained in the Bank Facility, in the case of
such other Pari Passu Indebtedness, and the agreements of such Restricted Subsidiary, in the case of such other Indebtedness, in each case as in effect on the Issue Date;
(g) restrictions on the transfer of assets subject to any Lien permitted under the Indenture imposed by the holder of such Lien;
(h) restrictions imposed by any agreement to sell assets or Capital Stock permitted under the Indenture to any Person pending the closing of such sale;
(i) such encumbrances or restrictions being binding on a Restricted Subsidiary at such time as such Restricted Subsidiary first becomes a Restricted
Subsidiary, provided that such encumbrances or restrictions are not entered into solely in contemplation of such Person becoming a Restricted Subsidiary;
(j) customary provisions in joint venture agreements and other similar agreements (in each case relating solely to the respective joint venture or similar entity or the equity interests therein) entered into in the
ordinary course of business;
(k) any amendment to or Refinancing of the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clauses (b), (d), (e) and (f) above; provided that the provisions relating to such encumbrance or restriction contained in any such agreement, taken as a whole, are no less favorable to the Company in any material
respect as determined by the Board of Directors of the Company in their reasonable and good faith judgment than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clauses (b), (d), (e) and
(f);
(l) customary restrictions on leases, subleases, licenses, sublicenses or asset sale agreements otherwise permitted hereby;
(m) restrictions imposed on cash or other deposits or net worth imposed by customers or required by insurance, surety or bonding
companies, in each case, entered into in the ordinary course of business; and
(n) encumbrances and restrictions applicable only to
Restricted Subsidiaries of the Company that are not Domestic Restricted Subsidiaries.
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Limitation on preferred stock of domestic restricted subsidiaries.
The Company will not
permit any of its Domestic Restricted Subsidiaries that are not Guarantors to issue any Preferred Stock (other than to the Company or to a Wholly Owned Restricted Subsidiary of the Company) or permit any Person (other than the Company or a Wholly
Owned Restricted Subsidiary of the Company) to own any Preferred Stock of any Domestic Restricted Subsidiary of the Company that is not a Guarantor.
Limitation on liens.
The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly,
create, incur, assume or permit or suffer to exist any Liens of any kind against or upon any property or assets of the Company or any of its Restricted Subsidiaries whether owned on the Issue Date or acquired after the Issue Date, or any proceeds
therefrom, or assign or otherwise convey any right to receive income or profits therefrom unless:
1. in the case of Liens securing
Subordinated Indebtedness, the notes or any Guarantee, as the case may be, are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens; and
2. in all other cases, the notes or any Guarantee, as the case may be, are equally and ratably secured, except for:
(a) Liens securing borrowings under a Bank Facility in an amount not to exceed the greater of (x) the amount permitted to be incurred pursuant
to and in compliance with clause (b)2 of the covenant Limitation on incurrence of additional indebtedness and (y) such amount that at the time of incurrence (or, in the case of Designated Revolving Commitments, on the date
such Designated Revolving Commitments are designated as such (but only to the extent and so long as so designated) after giving pro forma effect to the incurrence of the entire amount of Indebtedness designated thereunder, in which case such
designated amount under such Designated Revolving Commitments may thereafter be borrowed, repaid and reborrowed, in whole or in part, from time to time, without further compliance with any limitations on Liens set forth in this subsection titled
Limitation on Liens) and after giving pro forma effect to any such Lien and obligations secured thereunder (including the use of proceeds thereof) the Company and its Restricted Subsidiaries shall have a Secured Leverage Ratio less than
or equal to 2.25 to 1.0;
(b) Liens existing as of the Issue Date to the extent and in the manner such Liens are in effect on the Issue
Date;
(c) Liens securing the Companys and its Restricted Subsidiaries Obligations under any hedge facility permitted under
the Indenture to be entered into by the Company and its Restricted Subsidiaries;
(d) Liens securing the notes and any Guarantees;
(e) Liens in favor of the Company or a Wholly Owned Restricted Subsidiary of the Company on assets of any Restricted Subsidiary of the
Company;
(f) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in accordance with the provisions of the Indenture; provided that such Liens: (i) are no less favorable to the Holders in any material respect and are not more favorable to the
lienholders in any material respect with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced as determined by the Board of Directors of the Company in its reasonable and good faith judgment; and (ii) do not
extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so Refinanced; and
(g) Permitted Liens.
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With respect to any Lien securing Indebtedness that was permitted to secure such Indebtedness at the time of the
incurrence of such Indebtedness, such Lien shall also be permitted to secure any Increased Amount of such Indebtedness. The
Increased Amount
of any Indebtedness shall mean any increase in the amount of such Indebtedness in
connection with any accrual of interest, whether payable in cash or in kind, accretion or amortization of original issue discount, imputed interest, the payment of interest in the form of additional Indebtedness with the same terms or the payment of
dividends on Disqualified Capital Stock in the form of additional shares of the same class, and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in the exchange rate of currencies or increases in the value of
property securing Indebtedness described in clause (e) of the covenant Limitation on incurrence of additional indebtedness.
Consolidation, merger and sale of assets
.
The Company will not, in a single transaction or series of related transactions,
consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or
substantially all of the Companys assets (determined on a consolidated basis for the Company and the Companys Restricted Subsidiaries) whether as an entirety or substantially as an entirety to any Person unless:
1. either:
(a) the Company shall be
the surviving or continuing corporation; or
(b) the Person (if other than the Company) formed by such consolidation or into which the
Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and of the Companys Restricted Subsidiaries substantially as an entirety (the
Surviving Entity
);
(x) shall be an entity organized and validly existing under the laws of the United States or any
State thereof or the District of Columbia; provided that in the case where the Surviving Entity is not a corporation, a co-obligor of the notes is a corporation; and
(y) shall expressly assume, by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if
any, and interest on all of the notes and the performance of every covenant of the notes and the Indenture on the part of the Company to be performed or observed;
2. immediately after giving effect to such transaction and the assumption contemplated by clause 1(b)(y) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), (A) the Company or such Surviving Entity, as the case may be, shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the
first paragraph of the Limitation on incurrence of additional indebtedness covenant or (B) the applicable Consolidated Fixed Charge Coverage Ratio of the Company or the Person formed by or surviving any such consolidation or merger
(if other than the Company) would be no less than the applicable Consolidated Fixed Charge Coverage Ratio of the Company immediately prior to such transaction;
3. immediately before and immediately after giving effect to such transaction and the assumption contemplated by clause 1(b)(y) above (including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and
4. the Company or the Surviving Entity shall have delivered to the Trustee an officers certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease,
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conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture complies with the applicable provisions of the
Indenture and that all conditions precedent in the Indenture relating to such transaction have been satisfied.
For purposes of the foregoing, the
transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of the Company, in a single or a series of related
transactions, which properties and assets, if held by the Company instead of such Restricted Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the Company.
Notwithstanding the foregoing clauses 1, 2 and 3, but subject to the
proviso in subclause (x) of clause 1(b), the Company may merge with (a) any of its Wholly Owned Restricted Subsidiaries or (b) an Affiliate that is a Person that has no material assets or liabilities and which was organized solely for
the purpose of reorganizing the Company in another jurisdiction.
For the avoidance of doubt, nothing in this covenant shall prevent the Company or any
Restricted Subsidiary from consummating the Company Conversion.
The Indenture will provide that upon any consolidation, combination or merger or any
transfer of all or substantially all of the assets of the Company in accordance with the foregoing in which the Company is not the continuing corporation, the successor Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture and the notes with the same effect as if such surviving entity had been named as
such and all financial information and reports required by the Indenture shall be provided by and for such surviving entity.
To the extent that the
notes are guaranteed by one or more Guarantors pursuant to the Subsidiary guarantees covenant, such Guarantors will be subject to similar provisions relating to the consolidation, merger or sale of assets of such Guarantors.
Limitations on transactions with affiliates.
(a) The
Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an
Affiliate Transaction
), having a value greater than $50.0 million other than (x) Affiliate Transactions
permitted under paragraph (b) below and (y) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arms-length basis from a Person
that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $200.0 million shall be approved by the Board of Directors of the Company or such Restricted Subsidiary, as the case may
be, such approval to be evidenced by a Board Resolution stating that such Board of Directors has determined that such transaction complies with the foregoing provisions. If the Company or any Restricted Subsidiary of the Company enters into an
Affiliate Transaction (or a series of related Affiliate Transactions related to a common plan) that involves an aggregate fair market value of more than $200.0 million, the Company or such Restricted Subsidiary, as the case may be, shall, prior to
the consummation thereof, obtain a
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favorable opinion as to the fairness of such transaction or series of related transactions to the Company or the relevant Restricted Subsidiary, as the case may be, from a financial point of
view, from an Independent Financial Advisor and file the same with the Trustee.
(b)
|
|
The restrictions set forth in this covenant shall not apply to:
|
1. loans, advances and payments of reasonable fees and compensation paid (whether in cash or the issuance of Capital Stock of the Company) to and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Restricted Subsidiary of the Company in the ordinary course of business or as determined in good faith by the Companys Board of Directors or senior management;
2. transactions exclusively between or among the Company and any of its Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries, provided that such transactions are not otherwise prohibited by the Indenture;
3. any agreement as in effect as of the
Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement, taken as a whole, is not
materially more disadvantageous to the Holders than the original agreement as in effect on the Issue Date;
4. any transaction on
arms-length terms with any non-Affiliate that becomes an Affiliate as a result of such transaction;
5. any employment, consulting
and severance arrangements entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business;
6. the
issuance and sale of Qualified Capital Stock;
7. Permitted Investments and Restricted Payments permitted by the Indenture; and
8. the payment of customary fees and reasonable out-of-pocket costs to, and indemnities provided on behalf of, directors, officers and
employees of the Company and the Restricted Subsidiaries in the ordinary course of business to the extent attributable to the ownership or operation of the Company and the Restricted Subsidiaries.
Subsidiary guarantees.
If any existing or future Domestic Restricted Subsidiary shall, after the Issue Date, guarantee any Public Debt
Securities, then the Company shall cause such Domestic Restricted Subsidiary to:
1. execute and deliver to the Trustee a supplemental
indenture in form reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Companys obligations under the notes and the Indenture on the terms set forth in the Indenture;
and
2. deliver to the Trustee an officers certificate and an opinion of counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and constitutes a legal, valid, binding and enforceable obligation of such Restricted Subsidiary.
Thereafter, such Domestic Restricted Subsidiary shall be a Guarantor for all purposes of the Indenture until such Domestic Restricted Subsidiary is released from its Guarantee as provided in the Indenture.
Conduct of business.
The Company and its Restricted Subsidiaries will not engage in any businesses that are not the same,
similar, ancillary, complementary or reasonably related to the businesses in which the Company and its Restricted Subsidiaries are engaged on the Issue Date, except to an extent that so doing would not be material to the Company and its Restricted
Subsidiaries, taken as a whole.
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Payments for consent.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the
notes unless such consideration is offered to be paid and is paid to all Holders of the notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.
Reports to holders.
Whether or not the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company must provide the Trustee and, upon request, to any Holder of the notes within fifteen (15) business days after filing, or in the event no such filing is required, within fifteen (15) business days after the end of the time
periods specified in those sections with:
(1) all quarterly and annual financial information that would be required to be contained in a
filing with the United States Securities and Exchange Commission (the
Commission
) on Forms 10-Q and 10-K if the Company were required to file such forms, including a Managements Discussion and Analysis of Financial
Condition and Results of Operations and, with respect to the annual financial statements only, a report thereon by the Companys certified independent accountants, and
(2) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports;
provided
that the foregoing delivery requirements shall be deemed satisfied if the foregoing materials are available on the Commissions
EDGAR system or on the Companys website within the applicable time period.
In addition, whether or not required by the Commission, the Company
will, if the Commission will accept the filing, file a copy of all of the information and reports referred to in clauses (1) and (2) with the Commission for public availability within the time periods specified in the Commissions
rules and regulations. In addition, the Company will make the information and reports available to securities analysts and prospective investors upon request. If the Company had any Unrestricted Subsidiaries during the relevant period, the Company
will also provide to the Trustee and, upon request, to any Holder of the notes, information sufficient to ascertain the financial condition and results of operations of the Company and its Restricted Subsidiaries, excluding in all respects the
Unrestricted Subsidiaries.
Notwithstanding anything to the contrary herein, the Company will not be deemed to have failed to comply with any of its
obligations hereunder for purposes of clause (3) under Events of default until 90 days after the date any report hereunder is due to be delivered to the Trustee.
Events of default
The following events are defined in the Indenture as
Events of
Default
:
(1) the failure to pay interest on any notes when the same becomes due and payable and the default continues
for a period of 30 days;
(2) the failure to pay the principal on any notes, when such principal becomes due and payable, at maturity,
upon redemption or otherwise (including the failure to make a payment to purchase notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) on the date specified for such payment in the applicable offer to purchase or on the
Special Mandatory Redemption Date, as applicable;
(3) a default in the observance or performance of any other covenant or agreement
contained in the Indenture which default continues for a period of 60 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of
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at least 25% of the outstanding principal amount of the notes (except in the case of a default with respect to the Merger, consolidation and sale of assets covenant, which will
constitute an Event of Default with such notice requirement but without such passage of time requirement);
(4) the failure to pay at
final maturity (giving effect to any applicable grace periods and any extensions thereof) the stated principal amount of any Indebtedness of the Company or any Restricted Subsidiary of the Company, or the acceleration of the final stated maturity of
any such Indebtedness (which acceleration is not rescinded, annulled or otherwise cured within 30 days of receipt by the Company or such Restricted Subsidiary of notice of any such acceleration) if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final stated maturity or which has been so accelerated (in each case with respect to which the 30-day period described above
has passed), equals $350.0 million or more at any time;
(5) one or more judgments in an aggregate amount in excess of $350.0 million
shall have been rendered against the Company or any of its Restricted Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable;
(6) certain events of bankruptcy affecting the Company or any of its Material Subsidiaries; or
(7) any Guarantee of a Guarantor that is a Material Subsidiary (or group of Guarantors that would constitute a Material Subsidiary) or any material
provision thereof ceases to be in full force and effect or any Guarantee of a Guarantor is declared to be null and void and unenforceable or any Guarantee of a Guarantor is found to be invalid or any Guarantor denies its liability under its
Guarantee (other than by reason of release of a Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of
Default specified in clause (6) above with respect to the Company) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding notes may declare the principal of and accrued interest on all the
notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a notice of acceleration, and the same shall become immediately due and payable.
If an Event of Default specified in clause (6) above with respect to the Company occurs and is continuing, then all unpaid principal of, and premium, if any,
and accrued and unpaid interest on all of the outstanding notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.
The Indenture will provide that, at any time after a declaration of acceleration with respect to the notes as described in the preceding paragraphs, the Holders of
a majority in principal amount of the notes may rescind and cancel such declaration and its consequences:
1. if the rescission would not
conflict with any judgment or decree;
2. if all existing Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of the acceleration; to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid;
3. if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances; and
4. in the event of the cure or waiver of an Event of Default of the type described in clause
(6) of the description above of Events of Default, the Trustee shall have received an officers certificate and an
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opinion of counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto.
The Holders of a majority in principal amount of the notes may waive any existing Default or Event of Default under the Indenture, and its consequences, except a
default in the payment of the principal of or interest on any notes.
Holders of the notes may not enforce the Indenture or the notes except as provided
in the Indenture and under the Trust Indenture Act. Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request,
order or direction of any of the Holders, unless such Holders have offered to the Trustee indemnity satisfactory to the Trustee. Subject to all provisions of the Indenture and applicable law, the Holders of a majority in aggregate principal amount
of the then outstanding notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers certificate to the Trustee promptly upon any such officer obtaining knowledge of any
Default or Event of Default (provided that such officers shall provide such certification at least annually whether or not they know of any Default or Event of Default) that has occurred and, if applicable, describe such Default or Event of Default
and the status thereof.
No personal liability of directors, officers, employees and stockholders
No past, present or future director, officer, employee, incorporator, agent, stockholder or Affiliate of the Company, as such, shall have any liability for any
obligations of the Company under the notes or under the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. No past, present or future director, officer, employee, incorporator, agent, stockholder
or Affiliate of any of the Guarantors, as such, shall have any liability for any obligations of the Guarantors under any Guarantees or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each
Holder of notes by accepting a note waives and releases all such liabilities. The waiver and release are part of the consideration for the issuance of the notes and any Guarantees. Such waiver may not be effective to waive liabilities under federal
securities law, and it is the view of the Commission that such a waiver is against public policy.
Legal defeasance and covenant defeasance
The Company may, at its option and at any time, elect to have its obligations and the obligations of the Guarantors discharged with respect to the
outstanding notes (
Legal Defeasance
). Such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding notes, except for:
1. the rights of Holders to receive payments in respect of the principal of, premium, if any, and interest on the applicable notes when such payments are due;
2. the Companys obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payments;
3. the rights, powers, trust, duties and immunities of the Trustee and the
Companys obligations in connection therewith; and
4. the Legal Defeasance provisions of the Indenture.
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In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released
with respect to certain covenants that are described in the Indenture (
Covenant Defeasance
) and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the notes.
In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, reorganization and insolvency events) described under Events of default will no longer constitute an Event of Default
with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
1. the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable U.S.
government obligations, rated AAA or better by S&P and Aaa by Moodys, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal
of, premium, if any, and interest on the notes on the stated date for payment thereof or on the applicable redemption date, as the case may be;
2. in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that:
(a) the Company 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 federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, beneficial owners of the notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;
3. in the case
of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that beneficial owners of the notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
4. no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or an Event of
Default resulting from the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowings);
5. such
Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Indenture (other than a Default or an Event of Default resulting from the borrowing of funds to be applied to such deposit and
the grant of any Lien securing such borrowings) or any other material agreement or instrument to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound;
6. the Company shall have delivered to the Trustee an officers certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others;
7. the Company shall have delivered to the Trustee an officers certificate and an opinion of counsel, which opinion may be subject to
customary assumptions and exclusions, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with;
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8. the Company shall have delivered to the Trustee an opinion of counsel to the effect that assuming
no intervening bankruptcy of the Company between the date of deposit and the 124th day following the date of deposit and that no Holder is an insider of the Company, after the 124th day following the date of deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors rights generally; and
9. certain other customary conditions precedent are satisfied.
Notwithstanding the foregoing, the opinion of counsel
required by clause 2 above with respect to a Legal Defeasance need not be delivered if all notes not theretofore delivered to the Trustee for cancellation (1) have become due and payable or (2) will become due and payable on the maturity
date or a redemption date within one year under arrangements reasonably satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company.
Satisfaction and discharge
The Indenture will be discharged
and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the notes, as expressly provided for in the Indenture) as to all outstanding notes when:
1. either:
(a) all the notes
theretofore authenticated and delivered (except lost, stolen or destroyed notes which have been replaced or paid and notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation; or
(b) all notes not
theretofore delivered to the Trustee for cancellation (1) have become due and payable or (2) will become due and payable within one year, or are to be called for redemption within one year, under arrangements reasonably satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company 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 on the notes to the date of maturity or redemption, as the case may be, together with irrevocable
instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be;
2. the Company has paid all other sums payable under the Indenture by the Company with respect to the notes; and
3. the Company has delivered to the Trustee an officers certificate and an opinion of counsel, which opinion may be subject to customary assumptions and exclusions, stating that all conditions precedent under
the Indenture relating to the satisfaction and discharge of the Indenture have been complied with.
Modification of the indenture
Except as provided in the next two succeeding paragraphs, the Company and the Trustee with the consent of the holders of at least a majority in aggregate principal
amount of the notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for the notes) may amend the Indenture, the notes or any Guarantees and the holders of at least a majority in aggregate principal
amount of the notes
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outstanding may waive any past default or compliance with any provisions of the Indenture, the notes or any Guarantees.
Without the consent of each holder of an outstanding note, no amendment or waiver may:
1. reduce the amount of notes whose Holders must consent to an amendment;
2. reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any notes;
3. reduce the principal of or change or have the effect of changing the fixed maturity of any notes, or change the date on which any notes may be subject to redemption or reduce the redemption price therefor, other
than prior to the Companys obligation to purchase notes under provisions relating to the Companys obligation to make and consummate a Change of Control Offer in the event of a Change of Control or to make and consummate a Net Proceeds
Offer with respect to any Asset Sale;
4. make any notes payable in money other than that stated in the notes;
5. make any change in provisions of the Indenture protecting the right of each Holder to receive payment of principal of and interest on such note
on or after the due date thereof or to bring suit to enforce such payment (except a rescission of acceleration of the notes by the Holders of at least a majority in aggregate principal amount of the notes and a waiver of the payment default that
resulted from such acceleration), or permitting Holders of a majority in principal amount of notes to waive Defaults or Events of Default;
6. after the Companys obligation to purchase notes arises thereunder, amend, change or modify in any material respect the obligation of the
Company to make and consummate a Change of Control Offer in the event of a Change of Control or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated or, after such Change of Control has occurred or such
Asset Sale has been consummated, modify any of the provisions or definitions with respect thereto;
7. modify or change any provision of
the Indenture or the related definitions affecting the ranking of the notes or any Guarantee in a manner which adversely affects the Holders;
8. release any Guarantor that is a Material Subsidiary from any of its obligations under its Guarantee or the Indenture otherwise than in accordance with the terms of the Indenture; or
9. modify or change the amendment provisions of the notes or the Indenture.
The Indenture and the notes may be amended by the Company and the Trustee without the consent of any holder of the notes to:
1. cure any ambiguity, defect or inconsistency;
2. provide for the assumption by a Surviving Entity
of the obligations of the Company under the Indenture;
3. provide for uncertificated notes in addition to or in place of certificated
notes;
4. add Guarantees with respect to the notes or confirm and evidence the release, termination or discharge of any security or
Guarantee when such release, termination or discharge is permitted by the Indenture;
5. secure the notes, add to the covenants of the
Company for the benefit of the holders of the notes or surrender any right or power conferred upon the Company;
6. make any change that
does not adversely affect the rights of any holder of the notes;
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7. comply with any requirement of the Commission in connection with the qualification of the Indenture
under the Trust Indenture Act;
8. provide for the issuance of Additional Notes in accordance with the Indenture;
9. evidence and provide for the acceptance of appointment by a successor Trustee;
10. conform the text of the Indenture or the notes to any provision of this Description of notes to the extent that such provision in
this Description of notes was intended to be a recitation of a provision of the Indenture or the notes; or
11. make any
amendment to the provisions of the Indenture relating to the transfer and legending of the notes as permitted by the Indenture, including, without limitation to facilitate the issuance and administration of the notes; provided that
(i) compliance with the Indenture as so amended would not result in the notes being transferred in violation of the Securities Act or any applicable securities law and (ii) such amendment does not materially and adversely affect the rights
of Holders to transfer the notes.
The consent of the holders of the notes is not necessary to approve the particular form of any proposed amendment. It
is sufficient if such consent approves the substance of the proposed amendment.
Governing law
The Indenture will provide that it, the notes and any Guarantees will be governed by, and construed in accordance with, the laws of the State of New York but
without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby.
The trustee
The Indenture will provide that, except during the continuance of an Event of Default, the Trustee
will perform only such duties as are specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it by the Indenture, and use the same degree of care and skill in
its exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of
the Trust Indenture Act contain certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payments of claims in certain cases or to realize on certain property received in respect of any such claim as
security or otherwise. Subject to the Trust Indenture Act, the Trustee will be permitted to engage in other transactions; provided that if the Trustee acquires any conflicting interest as described in the Trust Indenture Act, it must eliminate such
conflict or resign.
Board action
Any action
required or permitted to be taken by the Board of Directors of the Company pursuant to the terms of the Indenture may be taken by a duly constituted committee of the Board of Directors of the Company.
Book-entry system and form of notes
The notes will be
issued in the form of one or more fully registered global notes without coupons that will be deposited with The Depository Trust Company, New York, New York (
DTC
), and registered in the name of its nominee, Cede & Co.
This means that the Company will not issue certificates to each owner of notes. The global notes will be issued to DTC, which will keep a computerized record of its participants (for example, your broker)
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whose clients have purchased the notes. The participant will then keep a record of its clients who purchased the notes. Unless it is exchanged in whole or in part for a certificated note, a
global note may not be transferred, except that DTC, its nominees, and their successors may transfer a global note as a whole to one another.
DTC has provided the following information to us. DTC, the worlds largest securities depositary, is a:
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limited-purpose trust company organized under the New York Banking Law;
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banking organization within the meaning of the New York Banking Law;
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member of the U.S. Federal Reserve System;
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clearing corporation within the meaning of the New York Uniform Commercial Code; and
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clearing agency registered under the provisions of Section 17A of the Exchange Act.
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DTC holds and provides asset servicing for over 3.6 million of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market
instruments (from over 100 countries) that its direct participants deposit with DTC. DTC also facilitates the post-trade settlement among direct participants of sales and other securities transactions in deposited securities, through electronic
computerized book-entry transfers and pledges between direct participants accounts.
This eliminates the need for physical movement of securities
certificates. Direct participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust &
Clearing Corporation (
DTCC
). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by users of its
regulated subsidiaries. Access to DTCs book-entry system is also available to indirect participants such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly. DTC has Standard & Poors highest rating: AAA. The rules applicable to DTC and its direct and indirect participants are on file with the Commission.
Principal and interest payments on global notes registered in the name of DTCs nominee will be made in immediately available funds to DTCs nominee as
the registered owner of the global notes. We and the Trustee will treat DTCs nominee as the owner of the global notes for all other purposes as well. Accordingly, we, the Trustee and any paying agent will have no direct responsibility or
liability to pay amounts due on the global notes to owners of beneficial interests in the global notes. DTCs practice is to credit direct participants accounts upon receipt of any payment of principal or interest on the payment date in
accordance with their respective holdings of beneficial interests in the global notes as shown on DTCs records. Payments by direct and indirect participants to owners of beneficial interests in the global notes will be governed by standing
instructions and customary practices. These payments will be the responsibility of the direct and indirect participants and not of DTC, the Trustee or us, subject to any statutory or regulatory requirements as may be in effect from time to time.
Notes that are represented by a global note will be exchangeable for certificated notes with the same terms in authorized denominations only if:
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DTC notifies the Company that it is unwilling or unable to continue as depositary;
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DTC ceases to be a registered clearing agency and a successor depositary is not appointed by the Company within 120 days;
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the Company determines not to require all of the notes to be represented by a global note and notifies the Trustee of that decision; or
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there has occurred and is continuing a Default or an Event of Default, and DTC notifies the Trustee of its desire to exchange the global notes for certificated
notes.
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The information in this section concerning DTC and DTCs book-entry system has been obtained from sources that we
believe to be reliable, but we take no responsibility for the accuracy thereof.
Same day settlement and payment
The underwriters will make settlement for the notes in immediately available funds. The Company will make all payments of principal and interest in respect of the
notes in immediately available funds. The notes will trade in DTCs Same-Day Funds Settlement System until maturity or until the notes are issued in certificated form, and secondary market trading activity in the notes will therefore be
required by DTC to settle in immediately available funds. We expect that secondary trading in certificated securities, if any, will also be settled in immediately available funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the notes.
Certain definitions
Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms, as well as any other terms used herein for which no
definition is provided.
Acquired Indebtedness
means Indebtedness of a Person or any of its Subsidiaries existing at the time such
Person becomes a Restricted Subsidiary of the Company or at the time it merges or consolidates with or into the Company or any of its Subsidiaries or that is assumed in connection with the acquisition of assets from such Person, in each case whether
or not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition, merger or consolidation.
Affiliate
means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. The term control means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the terms
controlling
and
controlled
have meanings correlative of the foregoing.
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; and
(2) the excess of:
(a) the present value at such Redemption Date of (i) the redemption price of the note at May 15, 2022 (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 May 15, 2022 (excluding accrued but unpaid interest, if any, to, but not
including, the Redemption Date), computed using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over
(b) the principal amount of the note, if greater.
Asset Acquisition
means (1) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of the Company, or (2) the acquisition by the Company or any
Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) that constitute all or substantially all
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of the assets of such Person or comprises 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 direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the Company or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company or a Wholly Owned Restricted Subsidiary of
the Company of: (1) any Capital Stock of any Restricted Subsidiary of the Company; or (2) any other property or assets of the Company or any Restricted Subsidiary of the Company (other than Capital Stock or Indebtedness of any Unrestricted
Subsidiary) other than in the ordinary course of business; provided that asset sales or other dispositions shall not include: (a) a transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $50.0 million; (b) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under
Merger, consolidation and sale of
assets; (c) any Restricted Payment permitted by the Limitation on restricted payments covenant or that constitutes a Permitted Investment; (d) the sale or discount, in each case without recourse, of accounts receivable
arising in the ordinary course of business, but only in connection with the compromise or collection thereof; (e) disposals or replacements of obsolete or worn-out equipment; (f) the grant of Liens not prohibited by the Indenture;
(g) the licensing of intellectual property; (h) dispositions of accounts receivable to local distribution companies under guaranteed receivables agreements entered into in the ordinary course of business; (i) the sale of inventory,
receivables and other current assets in the ordinary course of business; (j) Sale and Leaseback Transactions permitted under clause 15 of the definition of
Permitted Indebtedness
; (k) the disposition of cash or Cash
Equivalents in the ordinary course of business; and (l) any disposition by a Restricted Subsidiary to the Company or by the Company or its Restricted Subsidiary to a Restricted Subsidiary.
Attributable Debt
means, in respect of a Sale and Leaseback Transaction, the present value, discounted at the interest rate implicit in the Sale
and Leaseback Transaction, of the total obligations of the lessee for rental payments during the remaining term of the lease in the Sale and Leaseback Transaction.
Bank Facility
means any credit agreement, including the Credit Agreement dated December 17, 2014, among Bank of America, N.A., Equinix, Inc. and the guarantors party thereto, as amended on
April 30, 2015, December 8, 2015, and December 22, 2016, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including one or more credit agreements, loan agreements or similar agreements or indentures extending the maturity of, refinancing, replacing
or otherwise restructuring (including increasing the amount of available borrowings thereunder or adding Restricted Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such
agreement or agreements or any successor or replacement agreement or agreements and whether by the same or any other agent, holders, lender or group of lenders.
Board of Directors
means, as to any Person, the board of directors (or similar governing body) of such Person or any duly authorized committee thereof.
Board Resolution
means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to
have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.
Capital Stock
means:
1. with respect to any Person that is a corporation, any and
all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of
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Common Stock and Preferred Stock of such Person, and all options, warrants or other rights to purchase or acquire any of the foregoing; and
2. with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person, and all
options, warrants or other rights to purchase or acquire any of the foregoing.
Capitalized Lease Obligations
means, as to any Person,
the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
Cash Equivalents
means:
(a) debt securities denominated in euro, pounds sterling or U.S. dollars to be issued or directly and fully guaranteed or insured by the government
of a Participating Member State, the U.K. or the U.S., as applicable, where the debt securities have not more than twelve months to final maturity and are not convertible into any other form of security;
(b) commercial paper denominated in euro, pounds sterling or U.S. dollars maturing no more than one year from the date of creation thereof and, at
the time of acquisition, having a rating of at least P1 from Moodys and A1 from S&P;
(c) certificates of deposit denominated
in euro, pounds sterling or U.S. dollars having not more than twelve months to maturity issued by a bank or financial institution incorporated or having a branch in a Participating Member State in the United Kingdom or the United States, provided
that the bank is rated P1 by Moodys or A1 by S&P;
(d) any cash deposit denominated in euro, pounds sterling or U.S. dollars
with any commercial bank or other financial institution, in each case whose long term unsecured, unsubordinated debt rating is at least A3 by Moodys or A-by S&P;
(e) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any bank or financial institution meeting the
qualifications specified in clause (d) above; and
(f) investments in money market funds which invest substantially all their assets
in securities of the types described in clauses (a) through (e) above.
Change of Control
means the occurrence of one or
more of the following events:
1. any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of
all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a
Group
), together with any Affiliates thereof (whether or not otherwise in
compliance with the provisions of the Indenture);
2. the approval by the holders of Capital Stock of the Company of any plan or proposal
for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of the Indenture); or
3.
any Person or Group shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company.
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For the avoidance of doubt, the consummation of the Company Conversion shall not constitute a
Change of
Control
.
Code
means the Internal Revenue Code of 1986, as amended.
Common Stock
of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Persons common
stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock.
Company Conversion
means the actions taken by the Company and its Subsidiaries in connection with Companys qualification as a REIT, including without limitation, (y) separating from
time to time all or a portion of its United States and international businesses into, as defined by the Code, taxable REIT subsidiaries (
TRS
) and/or qualified REIT subsidiaries (
QRS
) (it being understood that
any such TRS and/or QRS shall remain Restricted Subsidiaries and/or Guarantors, as applicable, as prior to the Company Conversion) and (z) amending its charter to impose ownership limitations on the Companys Capital Stock directly or
indirectly by merging into a Wholly Owned Restricted Subsidiary of the Company.
Consolidated Depreciation, Amortization and Accretion
Expense
means with respect to any Person for any period, the total amount of depreciation and amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a
prior period) and accretion expense, including the amortization of deferred financing fees or costs of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.
Consolidated EBITDA
means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period:
(a) increased (without duplication) by the following, in each case to the extent deducted in determining Consolidated Net Income for such period:
(1) provision for taxes based on income or profits or capital, including, without limitation, federal, state, franchise and similar
taxes and foreign withholding taxes (including any levy, impost, deduction, charge, rate, duty, compulsory loan or withholding which is levied or imposed by a governmental agency, and any related interest, penalty, charge, fee or other amount) of
such Person paid or accrued during such period deducted (and not added back) in computing Consolidated Net Income; plus
(2) Consolidated
Interest Expense of such Person for such period to the extent the same were deducted (and not added back) in calculating such Consolidated Net Income; plus
(3) Consolidated Depreciation, Amortization and Accretion Expense of such Person for such period to the extent that the same were deducted (and not added back) in computing Consolidated Net Income; plus
(4) any expenses or charges (other than depreciation or amortization expense) related to any Equity Offering or the incurrence of Indebtedness
permitted to be incurred in accordance with the Indenture (including a refinancing thereof) (whether or not successful), in each case, deducted (and not added back) in computing Consolidated Net Income; plus
(5) any other Non-cash Charges, including any provisions, provision increases, write-offs or write-downs reducing Consolidated Net Income for such
period (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
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respect thereof in such future period shall be subtracted from Consolidated EBITDA to such extent), and excluding amortization of a prepaid cash item that was paid in a prior period; plus
(6) any costs or expenses incurred by the Company or a Restricted Subsidiary pursuant to any management equity plan or stock option plan
or any other management or employee benefit plan or agreement or any stock subscription or stockholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Company or net cash proceeds
of an issuance of Equity Interest of the Company (other than Disqualified Capital Stock); plus
(7) cash receipts (or any netting
arrangements resulting in reduced cash expenditures) not representing Consolidated EBITDA or Consolidated Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of Consolidated EBITDA pursuant
to clause (b) below for any previous period and not added back; plus
(8) any net loss from disposed or discontinued operations;
plus
(9) any net unrealized loss (after any offset) resulting in such period from obligations under any Currency Agreements and the
application of FASB Accounting Standards Codification (
ASC
) 815;
provided
that to the extent any such Currency Agreement relates to items included in the preparation of the income statement (as opposed to the balance sheet,
as reasonably determined by the Company), the realized loss on a Currency Agreement shall be included to the extent the amount of such hedge gain or loss was excluded in a prior period; plus
(10) any net unrealized loss (after any offset) resulting in such period from (A) currency translation or exchange losses including those
(x) related to currency remeasurements of Indebtedness and (y) resulting from hedge agreements for currency exchange risk and (B) changes in the fair value of Indebtedness resulting from changes in interest rates; plus
(11) the amount of any minority interest expense (less the amount of any cash dividends paid in such period to holders of such minority interests);
plus
(12) the amount of any costs and expenses associated with the Company Conversion, including, without limitation, planning and
advisory costs related to the foregoing; and
(b) decreased (without duplication) by the following, in each case to the extent included
in determining Consolidated Net Income for such period:
(1) non-cash gains increasing Consolidated Net Income of such Person for such
period, excluding any non-cash gains to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced Consolidated EBITDA in any prior period and any non-cash gains with respect to cash actually received in a
prior period so long as such cash did not increase Consolidated EBITDA in such prior period;
(2) any net gain from disposed or
discontinued operations;
(3) any net unrealized gain (after any offset) resulting in such period from obligations under any Currency
Agreements and the application of ASC 815; provided that to the extent any such Currency Agreement relates to items included in the preparation of the income statement (as opposed to the balance sheet, as reasonably determined by the Company), the
realized gain on a Currency Agreement shall be included to the extent the amount of such hedge gain or loss was excluded in a prior period; plus
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(4) any net unrealized gains (after any offset) resulting in such period from (A) currency
translation or exchange gains including those (x) related to currency remeasurements of Indebtedness and (y) resulting from hedge agreements for currency exchange risk and (B) changes in the fair value of Indebtedness resulting from
changes in interest rates.
Consolidated Fixed Charge Coverage Ratio
means, with respect to any Person, the ratio of Consolidated
EBITDA of such Person during the four full fiscal quarters (the
Four Quarter Period
) ending prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio for which financial
statements are available (the
Transaction Date
) to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition,
Consolidated EBITDA
and
Consolidated Fixed Charges
shall be calculated after giving effect on a
pro forma
basis for the period of such calculation to:
1. the incurrence or repayment of any Indebtedness or the designation or elimination (including by de-designation) of any Designated Revolving
Commitments 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 Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to
the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment of Indebtedness or designation or elimination (including by de-designation) of Designated Revolving Commitments, as the case may be
(and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period and in the case of Designated Revolving Commitments, as if Indebtedness in the full amount of any undrawn Designated Revolving Commitments had been
incurred throughout such period); and
2. any asset sales or other dispositions or Asset Acquisitions (including, without limitation, any
Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (including any pro forma expense and cost reductions calculated on a basis consistent with Regulation S-X promulgated under the Exchange Act) attributable
to the assets which are the subject of the Asset Acquisition or asset sale or other disposition during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such asset sale or other disposition or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such
Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary
of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating
Consolidated Fixed
Charges
for purposes of determining the denominator (but not the numerator) of this
Consolidated Fixed Charge Coverage Ratio
:
1. interest on outstanding Indebtedness or on borrowings deemed to have been incurred under Designated Revolving Commitments determined on a fluctuating basis as of the Transaction Date and which will continue to
be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness or borrowings deemed to have been incurred under Designated Revolving Commitments in effect on the Transaction
Date; and
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2. notwithstanding clause 1 above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements.
Consolidated Fixed Charges
means, with respect to any Person for any period, the sum, without duplication, of:
1. Consolidated Interest Expense; plus
2. the product of (x) the amount of all dividend payments on any series of Preferred Stock of such Person and, to the extent permitted under the Indenture, its Restricted Subsidiaries (other than dividends
paid in Qualified Capital Stock and other than dividends paid by a Restricted Subsidiary of such Person to such Person or to a Wholly Owned Restricted Subsidiary of such Person) paid, accrued or scheduled to be paid or accrued during such period
times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local income tax rate of such Person, expressed as a decimal.
Consolidated Interest Expense
means, with respect to any Person for any period, the sum of, without duplication:
1. the aggregate of the interest expense of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including without limitation:
(a) any amortization of debt discount and the amortization or write-off of deferred
financing costs, including commitment fees;
(b) the net costs under Interest Swap Obligations;
(c) all capitalized interest;
(d)
non-cash interest expense (other than non-cash interest on any convertible or exchangeable debt issued by the Company that exists by virtue of the bifurcation of the debt and equity components of such convertible or exchangeable notes and the
application of ASC 470-20 (or related accounting pronouncement(s)));
(e) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers acceptance financing;
(f) dividends with respect to Disqualified Capital Stock;
(g) dividends with respect to Preferred Stock of Restricted Subsidiaries of such Person;
(h) imputed interest with respect to Sale and Leaseback Transactions; and
(i) the interest portion of any deferred payment obligation; plus
2. the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP; less
3. interest income for such period.
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Consolidated Net Income
means, with respect to any Person, for any period, the aggregate net income
(or loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom (without duplication):
1. any after tax effect of extraordinary, non-recurring or unusual gains or losses (including all fees and expenses relating thereto) or expenses
(including relating to the Transaction);
2. any net after tax gains or losses on disposal of disposed, abandoned or discontinued
operations;
3. any after tax effect of gains or losses (including all fees and expenses relating thereto) attributable to sale,
transfer, license, lease or other disposition of assets or abandonments or the sale, transfer or other disposition of any Equity Interest of any Person other than in the normal course of business;
4. the net income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity
method of accounting, except to the extent of cash dividends or distributions paid to the Company or to a Restricted Subsidiary of the Company by such Person;
5. any after tax effect of income (loss) from the early extinguishment of (1) Indebtedness, (2) obligations under any Currency Agreement or (3) other derivative instruments;
6. any impairment charge or asset write-off or write-down, including impairment charges or asset write-offs or write-downs related to intangible
assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP;
7. any non-cash compensation charge or expense including any such charge arising from the grants of stock appreciation or similar rights, stock
options, restricted stock or other rights;
8. any fees and expenses incurred during such period, or any amortization thereof for such
period, in connection with any issuance or repayment of Indebtedness, issuance of Equity Interests, refinancing transaction, amendment or modification of any debt instrument;
9. income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued);
10. in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Persons assets, any
earnings of the successor entity prior to such consolidation, merger or transfer of assets;
11. the net income (but not loss) of any
Restricted Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is restricted by contract, operation of law or otherwise; and
12. acquisition-related costs resulting from the application of ASC 805.
In addition, to the extent not already included in the Consolidated Net Income of such Person and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing, but without duplication,
Consolidated Net Income shall include the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any
Permitted Investment or any sale, conveyance, transfer or other disposition of assets permitted under the Indenture (in each case, whether or not non-recurring).
Notwithstanding the foregoing, for the purpose of the covenant Limitation on restricted payments only (other than clause (iii)(z) of the Limitation on restricted payments covenant), there
shall be excluded from
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Consolidated Net Income any income arising from any sale or other disposition of Investments (other than Permitted Investments) made by the Company and its Restricted Subsidiaries, any
repurchases and redemptions of Investments (other than Permitted Investments) from the Company and its Restricted Subsidiaries, any repayments of loans and advances which constitute Investments (other than Permitted Investments) by the Company or
any of its Restricted Subsidiaries, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the amount of Restricted Payments
permitted under clause (iii)(z) of the Limitation on restricted payments covenant.
Currency Agreement
means any foreign
exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company against fluctuations in currency values.
Default
means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of
Default.
Designated Non-cash Consideration
means the fair market value of non-cash consideration received by the Company or any
Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an officers certificate, setting forth the basis of such valuation, executed by the principal financial officer of
the Company, less the amount of cash and Cash Equivalents received in connection with a subsequent sale of or collection on such Designated Non-cash Consideration.
Designated Revolving Commitments
means the amount or amounts of any commitments to make loans or extend credit on a revolving basis to the Company or any of its Restricted Subsidiaries by any
Person other than the Company or any of its Restricted Subsidiaries that has or have been designated (but only to the extent so designated) in an officers certificate delivered to the Trustee as
Designated Revolving
Commitments
until such time as the Company subsequently delivers an officers certificate to the Trustee to the effect that the amount or amounts of such commitments shall no longer constitute
Designated Revolving
Commitments
.
Disqualified Capital Stock
means that portion of any Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event (other than an event which would constitute a Change of Control or an Asset Sale), matures or is
mandatorily redeemable pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control or an Asset Sale), in each case, on or prior to
the final maturity date of the notes.
Domestic Restricted Subsidiary
means a Restricted Subsidiary incorporated or otherwise
organized under the laws of the United States, any State thereof or the District of Columbia.
Equity Interests
means Capital Stock
and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.
Equity Offering
means any public or private sale of Common Stock or Preferred Stock of the Company (excluding Disqualified Stock), other than:
(a) public offerings with respect to the Companys or any direct or indirect parent companys Common Stock registered on Form S-4 or Form
S-8 (or similar forms under non-U.S. law);
(b) issuances to any Subsidiary of the Company;
(c) issuances pursuant to the exercise of options or warrants outstanding on the date hereof;
(d) issuances upon conversion of securities convertible into Common Stock outstanding on the date hereof;
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(e) issuances in connection with an acquisition of property in a transaction entered into on an
arms-length basis; and
(f) issuances pursuant to employee stock plans.
Exchange Act
means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.
fair market value
means, with respect to any asset or property, the price which could be negotiated in an arms-length, free market transaction, for cash, between a willing seller and a
willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of the Company or any duly appointed officer of the Company or a Restricted
Subsidiary, as applicable, acting reasonably and in good faith and, in respect of any asset or property with a fair market value in excess of $50.0 million, shall be determined by the Board of Directors of the Company and shall be evidenced by a
Board Resolution of the Board of Directors of the Company delivered to the Trustee.
Fitch
means Fitch Ratings Inc., or any successor
to the rating agency business thereof.
Foreign Restricted Subsidiary
means a Restricted Subsidiary that is not incorporated or
otherwise organized under the laws of the United States, any State thereof or the District of Columbia.
GAAP
means generally accepted
accounting principles set forth in the statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United
States, which are in effect as of July 11, 2011.
Guarantee
means a guarantee of the notes by a Guarantor.
Guarantor
means each of the Companys Domestic Restricted Subsidiaries that in the future executes a supplemental indenture in which such
Domestic Restricted Subsidiary agrees to be bound by the terms of the Indenture as a Guarantor; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Guarantee is released in
accordance with the terms of the Indenture.
Indebtedness
means with respect to any Person, without duplication:
(1) all Obligations of such Person for borrowed money;
(2) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;
(3) all Capitalized Lease Obligations and all Attributable Debt of such Person;
(4) all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all
Obligations under any title retention agreement (but excluding (i) trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 120 days or more or are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and (ii) any earn-out obligation until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP);
(5) all Obligations for the reimbursement of any obligor on any letter of credit, bankers acceptance or similar credit transaction (other than
obligations with respect to letters of credit (A) securing Obligations (other than Obligations described in (1)-(4) above) entered into the ordinary course of business of such Person to the extent such letters of credit are not drawn upon
or, if and to the extent drawn upon, such drawing is reimbursed no later than the fifth business day following receipt by such Person of a demand for reimbursement following payment on the letter of credit) or (B) that are otherwise cash
collateralized;
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(6) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses
(1) through (5) above and clause (8) below;
(7) all Obligations of any other Person of the type referred to in clauses
(1) through (6) that are secured by any Lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so
secured;
(8) all Obligations under Currency Agreements and Interest Swap Obligations of such Person;
(9) all Disqualified Capital Stock issued by such Person or Preferred Stock issued by such Persons non-Domestic Restricted Subsidiaries which
are not Guarantors with the amount of Indebtedness represented by such Disqualified Capital Stock or Preferred Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but
excluding accrued dividends, if any; and
(10) the aggregate amount of Designated Revolving Commitments in effect on such date.
For purposes hereof, the
maximum fixed repurchase price
of any Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if
such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock.
Independent Financial Advisor
means a firm: (1) that does not, and whose directors, officers and employees or Affiliates do not,
have a direct or indirect financial interest in the Company; and (2) that, in the judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged.
Interest Swap Obligations
means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly,
such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements.
Investment
means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by, any other Person.
Investment
shall exclude extensions of trade credit by the Company and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company
or such Restricted Subsidiary, as the case may be, and, in the case of the Company and its Restricted Subsidiaries, intercompany loans, advances or Indebtedness having a term not exceeding 364 days and made in the ordinary course of business
consistent with past practice. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale
or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Common Stock of such Restricted Subsidiary
not sold or disposed of. The amount of any Investment outstanding at any time shall be the original cost of such Investment, reduced by any dividend, distribution, interest payment, return of capital, repayment or other amount received in cash by
the Company or a restricted subsidiary in respect of such Investment.
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Investment Grade Rating
means a rating equal to or higher than Baa3 (or equivalent) by
Moodys, BBB-(or equivalent) by S&P, BBB- (or equivalent) by Fitch, or an equivalent rating by any other Rating Agency.
Issue
Date
means March 22, 2017.
Lien
means any lien, mortgage, deed of trust, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest); provided, that, in any event and not in limitation of the foregoing, a
lease shall not be deemed to be a Lien if such lease is classified as an operating lease under GAAP.
Material Subsidiary
means a
significant subsidiary
as defined in Rule 1-02(w) of Regulation S-X under the Securities Act.
Moodys
means
Moodys Investors Service, Inc., or any successor to the rating agency business thereof.
Net Cash Proceeds
means, with respect
to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment
constituting interest) received by the Company or any of its Restricted Subsidiaries from such Asset Sale net of:
1. reasonable
out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions);
2. taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements;
3. repayment of Indebtedness (other than Indebtedness under the Bank Facility) that is secured by the property or assets that are the subject of
such Asset Sale; and
4. appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale.
Net Income
means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends or
distributions.
Non-cash Charges
means, with respect to any Person, (a) losses on asset sales, disposals or abandonments,
(b) any impairment charge or asset write-off related to intangible assets, longlived assets, and investments in debt and equity securities pursuant to GAAP, (c) all losses from investments recorded using the equity method,
(d) stock-based awards compensation expense, and (e) other non-cash charges (provided that if any non-cash charges referred to in this clause (e) represent an accrual or reserve for potential cash items in any future period, the cash
payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period).
Obligations
means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
Pari Passu Indebtedness
means any Indebtedness of the Company
or any Guarantor that ranks pari passu in right of payment with the notes or any Guarantee of such Guarantor, as applicable.
Participating
Member State
means each state, so described in any European Monetary Union legislation, which was a participating member state on December 31, 2003.
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Permitted Foreign Subsidiary Debt
means an amount of Indebtedness of up to the greater of
(x) $1,250.0 million and (y) 7.5% of Total Assets at any one time outstanding incurred by one or more of the Companys Foreign Restricted Subsidiaries.
Permitted Investments
means:
(1) Investments by the Company or any Restricted
Subsidiary of the Company in any Person that is or will become immediately after such Investment a Restricted Subsidiary of the Company or that will merge or consolidate into the Company or a Restricted Subsidiary of the Company and other
Investments to the extent constituting intercompany Indebtedness permitted under clause 6 or 7 of the definition of
Permitted Indebtedness
;
(2) Investments in the Company by any Restricted Subsidiary of the Company; provided that any Indebtedness evidencing such Investment and held by a Restricted Subsidiary that is not a Wholly Owned Restricted
Subsidiary that is a Guarantor is unsecured and subordinated, pursuant to a written agreement, to the Companys obligations under the notes and the Indenture;
(3) Investments in cash and Cash Equivalents;
(4) loans and advances to employees, directors and
officers of the Company and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of $5.0 million at any one time outstanding;
(5) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Companys or its Restricted Subsidiaries
businesses and otherwise in compliance with the Indenture;
(6) additional Investments (other than any Investments in any direct or
indirect parent company of the Company) not to exceed 15.0% of Total Assets at any one time outstanding;
(7) Investments in securities
of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers or in good faith settlement of delinquent obligations of such trade
creditors or customers;
(8) Investments made by the Company or its Restricted Subsidiaries as a result of consideration received in
connection with an Asset Sale made in compliance with the Limitation on asset sales covenant;
(9) Investments resulting from
the creation of Liens on the assets of the Company or any of its Restricted Subsidiaries in compliance with the Limitation on liens covenant;
(10) Investments represented by guarantees that are otherwise permitted under the Indenture;
(11)
Investments the payment for which is Qualified Capital Stock of the Company;
(12) Investments existing as of the Issue Date, and any
extension, modification or renewal of any such Investments, but only to the extent not involving additional advances, contributions or other Investments of cash or other assets or other increases thereof (other than as a result of the accrual or
accretion of interest or original issue discount or the issuance of pay-in-kind securities), in each case, pursuant to the terms of such Investment as in effect on the Issue Date;
(13) Investments in Permitted Joint Ventures, not to exceed 15.0% of Total Assets at any one time outstanding;
(14) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;
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(15) lease, utility and other similar deposits in the ordinary course of business;
(16) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments; and
(17) capped call(s), call spread(s) or bond hedge and warrant transaction(s)
entered into by the Company concurrently with the issuance of convertible or exchangeable debt to hedge the Companys stock price risk with respect to such debt that are deemed necessary or advisable to effect such hedge in the good faith
judgment of the Board of Directors of the Company.
Permitted Joint Venture
means any Person owned 50% or more by the Company and/or
any of its Restricted Subsidiaries if (A) such Person is engaged in a business related to that of the Company or any Restricted Subsidiary and (B) the Company or any of its Restricted Subsidiaries has the right to appoint at least half of
the Board of Directors of such Person.
Permitted Liens
means the following types of Liens:
(1) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP;
(2) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof;
(3) Liens incurred or deposits made in the ordinary course of business in connection with workers compensation, unemployment insurance and other types of social security, including any Lien securing letters
of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);
(4) judgment Liens not
giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which
such proceedings may be initiated shall not have expired;
(5) easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries;
(6) any interest or title of a lessor under any Capitalized Lease Obligation; provided that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease
Obligation (other than other property that is subject to a separate lease from such lessor or any of its Affiliates);
(7) Liens securing
Purchase Money Indebtedness incurred in the ordinary course of business; provided that (a) such Purchase Money Indebtedness shall not exceed the purchase price or other cost of such property or equipment and shall not be secured by any property
or equipment of the Company or any Restricted Subsidiary of the Company other than the property and equipment so acquired or other property that was acquired from such seller or any of its Affiliates with the proceeds of Purchase Money Indebtedness
and (b) the Lien securing such Purchase Money Indebtedness shall be created within 360 days of such acquisition;
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(8) Liens upon specific items of inventory or other goods and proceeds of any Person securing such
Persons obligations in respect of bankers acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(9) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(10) Liens securing Interest Swap Obligations which Interest Swap Obligations
relate to Indebtedness that is otherwise permitted under the Indenture;
(11) Liens securing Indebtedness under Currency Agreements;
(12) Liens securing Acquired Indebtedness incurred in accordance with the
Limitation on incurrence of additional
indebtedness
covenant; provided that
(a) such Liens secured such Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary
of the Company; and
(b) such Liens do not extend to or cover any property or assets of the Company or of any of its Restricted
Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Restricted Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company;
(13) Liens on assets of a Restricted Subsidiary of the Company that is not a Guarantor to secure Indebtedness of such Restricted Subsidiary that is otherwise permitted under the Indenture;
(14) leases, subleases, licenses and sublicenses granted to others that do not materially interfere with the ordinary course of business of the
Company and its Restricted Subsidiaries;
(15) bankers Liens, rights of setoff and similar Liens with respect to cash and Cash
Equivalents on deposit in one or more bank accounts in the ordinary course of business;
(16) Liens arising from filing Uniform
Commercial Code financing statements regarding leases;
(17) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payments of customs duties in connection with the importation of goods;
(18) Liens (a) on inventory held by and granted
to a local distribution company in the ordinary course of business and (b) in accounts purchased and collected by and granted to a local distribution company that has agreed to make payments to the Company or any of its Restricted Subsidiaries
for such amounts in the ordinary course of business;
(19) Liens securing obligations of a Foreign Restricted Subsidiary in an aggregate
amount not to exceed the greater of $1,250.0 million and 7.5% of Total Assets at any time outstanding;
(20) Liens securing Indebtedness
in respect of Sale and Leaseback Transactions permitted pursuant to clause 15 of the definition of
Permitted Indebtedness
;
(21) Liens securing Indebtedness incurred pursuant to clause 17 of the definition of
Permitted Indebtedness
;
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(22) Liens securing Indebtedness in respect of mortgage financings incurred pursuant to clause 11 of
the definition of
Permitted Indebtedness
; and
(23) Liens with respect to obligations (including Indebtedness) of the
Company or any of its Restricted Subsidiaries otherwise permitted under the Indenture that do not exceed 20.0% of Total Assets at any one time outstanding.
Person
means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof.
Preferred Stock
of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
Public Debt Securities
means any debt securities of the Company
or any Domestic Restricted Subsidiary that (a) are or become registered with the Commission (whether pursuant to a registration statement under the Securities Act or otherwise pursuant to the Exchange Act) and/ or (b) contain or require
the Company or such Domestic Restricted Subsidiary to provide financial information substantially consistent with the financial information required by Regulation S-K and S-X promulgated under the Securities Act and Exchange Act.
Purchase Money Indebtedness
means Indebtedness of the Company and its Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of installation, construction or improvement, of property or equipment.
Qualified Capital Stock
means any Capital Stock that is not Disqualified Capital Stock.
Rating Agency
means (1) each of Fitch, Moodys and S&P and (2) if Fitch, Moodys or S&P ceases to rate the notes for reasons outside of the Companys control, a
nationally recognized statistical rating organization as such term is defined in Section 3(a)(62) of the Exchange Act selected by the Company as a replacement agency for Fitch, Moodys or S&P, as the case may be.
Refinance
means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or
retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part.
Refinanced
and
Refinancing
shall have correlative meanings.
Refinancing Indebtedness
means any Refinancing or successive Refinancings by the Company or any Restricted Subsidiary of the Company of
Indebtedness incurred in accordance with the Limitation on incurrence of additional indebtedness covenant (other than pursuant to clauses 2, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14, 15, 17 or 19 of the definition of
Permitted
Indebtedness
), in each case that does not:
(1) result in an increase in the aggregate principal amount of Indebtedness of such
Person as of the date of such proposed Refinancing (plus the amount of all accrued interest and any premium required to be paid under the terms of the instrument governing such Indebtedness and plus the amount of reasonable fees and expenses
incurred by the Company in connection with such Refinancing); or
(2) create Indebtedness with: (a) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced; or (b) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided that (x) if such Indebtedness
being Refinanced is Indebtedness solely of the Company (and is not otherwise guaranteed by a Restricted Subsidiary of the Company), then such Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if such Indebtedness
being Refinanced is subordinate or junior to the notes or any Guarantee, then such Refinancing Indebtedness shall be subordinate to the notes or such Guarantee, as the case may be, at least to the same extent and in the same manner as the
Indebtedness being Refinanced; provided, that the net
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proceeds of any Refinancing Indebtedness are applied to such Refinancing or successive Refinancing within 90 days of the date on which such Refinancing Indebtedness is incurred.
REIT
means a
real estate investment trust
as defined and taxed under Sections 856-860 of the Code.
Restricted Subsidiary
of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary.
S&P
means Standard & Poors Ratings Group, Inc., or any successor to the rating agency business thereof.
Sale and Leaseback Transaction
means any direct or indirect arrangement with any Person or to which any such Person is a party,
providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such Property.
Secured Indebtedness
means any Indebtedness secured by a Lien on any assets of the Company or any of its Restricted Subsidiaries.
Secured Leverage Ratio
as of any date of determination means the ratio of (x) the aggregate amount of consolidated Secured Indebtedness of the Company and its Restricted Subsidiaries as of
such date of determination to (y) Consolidated EBITDA for the Companys four most recent fiscal quarters for which internal financial statements are available preceding such date of determination, in each case with such
pro forma
adjustments to Consolidated EBITDA as are appropriate and consistent with the
pro forma
adjustment provision set forth in the definition of
Consolidated Fixed Charge Coverage Ratio
.
Securities Act
means the Securities Act of 1933, as amended from time to time, and any successor statute.
Subordinated Indebtedness
means Indebtedness of the Company or any Guarantor that is subordinated or junior in right of payment to the notes or
any Guarantee of such Guarantor, as the case may be.
Subsidiary
, with respect to any Person, means:
(1) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors
under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person; or
(2) any other Person of which at
least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person.
Total
Assets
means, at the time of determination, the total consolidated assets of the Company and its Subsidiaries, as shown on the most recent balance sheet of the Company.
Treasury Rate
means, as of any Redemption Date, the weekly average rounded to the nearest 1/100th of a percentage point (for the most recently completed week for which such information is
available as of the date that is two business days prior to such Redemption Date) of the yield to maturity of United States Treasury securities with a constant maturity (as compiled and published in Federal Reserve Statistical Release H.15 with
respect to each applicable day during such week (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 May 15, 2022; provided,
however, that if the period from the Redemption Date to May 15, 2022 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.
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Unrestricted Subsidiary
of any Person means:
(1) any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of
Directors of such Person in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that:
(1) the Company certifies to the Trustee that such designation complies with the Limitation on restricted payments covenant; and
(2) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries.
For purposes of making the determination of whether any such designation of a Subsidiary as an Unrestricted Subsidiary complies with the
Limitation on restricted payments covenant, the portion of the fair market value of the net assets of such Subsidiary of the Company at the time that such Subsidiary is designated as an Unrestricted Subsidiary that is represented by the
interest of the Company and its Restricted Subsidiaries in such Subsidiary, in each case as determined in good faith by the Board of Directors of the Company, shall be deemed to be an Investment. Such designation will be permitted only if such
Investment would be permitted at such time under the Limitation on restricted payments covenant.
The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if:
(1) immediately after giving effect to such designation, the Company is
able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the Limitation on incurrence of additional indebtedness covenant; and
(2) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an officers certificate certifying that such
designation complied with the foregoing provisions.
Weighted Average Life to Maturity
means, when applied to any Indebtedness at any
date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date
and the making of such payment.
Wholly Owned Restricted Subsidiary
means a Restricted Subsidiary, all of the Capital Stock of which
(other than directors qualifying shares) is owned by the Company or another Wholly Owned Restricted Subsidiary.
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Material U.S. federal income tax consequences
The following are the material U.S. federal income tax consequences of ownership and disposition of the notes. This discussion applies only to notes that are:
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held by those initial holders who purchased such notes in this offering at the issue price, which will equal the first price to the public (not
including bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) at which a substantial amount of the notes is sold for money; and
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held as capital assets.
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This discussion does
not describe all of the tax consequences that may be relevant to a holder in light of the holders particular circumstances, including alternative minimum tax or Medicare contribution tax consequences, or tax consequences applicable to holders
subject to special rules, such as:
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certain financial institutions;
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persons holding notes as part of a hedge, straddle, integrated transaction or similar transaction;
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U.S. Holders (as defined below) whose functional currency is not the U.S. dollar;
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partnerships or other entities classified as partnerships for U.S. federal income tax purposes; or
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If an entity or
arrangement that is classified as a partnership for U.S. federal income tax purposes holds notes, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership.
Partnerships holding notes and partners in such partnerships should consult their tax advisors as to their particular U.S. federal income tax consequences of holding and disposing of the notes.
This summary is based on the Internal Revenue Code of 1986, as amended, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury
Regulations, changes to any of which subsequent to the date of this prospectus supplement may affect the tax consequences described herein. Persons considering the purchase of notes are urged to consult their tax advisors with regard to the
application of the U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.
Tax consequences to U.S. Holders
As used herein, the term U.S. Holder means a beneficial owner of
a note 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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a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of
Columbia; or
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an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
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The term U.S. Holder also includes certain former citizens and residents of the United States.
Potential contingent payment debt treatment.
Under certain circumstances, Equinix may pay holders amounts in excess of the stated interest and principal payable on the notes. For
instance, Equinix would be required to
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offer to repurchase notes in the circumstances described under Description of notesChange of control, and Equinix will redeem notes in the circumstances described under
Description of notesSpecial mandatory redemption. Although the issue is not free from doubt, Equinix intends to take the position that the possibility of such payments does not result in the notes being treated as contingent
payment debt instruments under the applicable Treasury Regulations. Equinixs position is not binding on the Internal Revenue Service (the IRS). If the IRS successfully takes a contrary position, U.S. Holders would be required to
treat any gain recognized on the sale or other disposition of the notes as ordinary income rather than as capital gain. Furthermore, U.S. Holders would be required to accrue interest income on a constant-yield basis at an assumed yield determined at
the time of issuance of the notes, with adjustments to such accruals when any contingent payments are made that differ from the payments calculated based on the assumed yield. U.S. Holders should consult their tax advisors regarding the tax
consequences of the notes being treated as contingent payment debt instruments. The remainder of this discussion assumes that the notes are not treated as contingent payment debt instruments.
Payments of interest.
Stated interest paid on a note will be taxable to a U.S. Holder as ordinary interest income at the time it accrues or is received in accordance with the U.S.
Holders method of accounting for U.S. federal income tax purposes. It is expected, and therefore this discussion assumes, that the notes will be issued without original issue discount for U.S. federal income tax purposes. If, however, the
notes principal amount exceeds the issue price by more than a de minimis amount, as determined under applicable Treasury Regulations, a U.S. Holder will be required to include such excess in income as original issue discount, as it accrues, in
accordance with a constant-yield method based on a compounding of interest before the receipt of cash payments attributable to this income.
Sale,
exchange, redemption, retirement or other disposition of the notes.
Upon the sale, exchange, redemption, retirement or other disposition of a note, a U.S. Holder will generally recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange, redemption, retirement or other disposition of the note and the U.S. Holders tax basis in the note. For these purposes, the amount realized does not include any amount attributable
to accrued stated interest. Amounts attributable to accrued stated interest are treated as interest as described under Payments of interest above. A U.S. Holders tax basis in a note generally is the cost paid for the note.
Gain or loss realized on the sale, exchange, redemption, retirement or other disposition of a note will generally be capital gain or loss and will be long-term capital gain or loss if at the time of sale, exchange, redemption, retirement or
disposition the note has been held for more than one year. Long-term capital gains recognized by non-corporate U.S. Holders are subject to reduced tax rates. The deductibility of capital losses may be subject to limitations.
Backup withholding and information reporting.
Information returns will generally be filed with the IRS in connection with payments on
the notes and the proceeds from a sale, exchange, redemption, retirement or other disposition of the notes. A U.S. Holder will be subject to backup withholding on these payments if the U.S. Holder fails to provide its taxpayer identification number
to the applicable withholding agent and comply with certain certification procedures or otherwise establish an exemption from backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit
against the U.S. Holders U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.
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Tax consequences to Non-U.S. Holders
As used herein, the term Non-U.S. Holder means a beneficial owner of a note that is, for U.S. federal income tax purposes:
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a nonresident alien individual;
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a foreign corporation; or
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a foreign estate or trust.
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Non-U.S.
Holder
does not include a nonresident alien individual present in the United States for 183 days or more in the taxable year of disposition of the notes. Such a holder is urged to consult his or her own tax advisor regarding the U.S.
federal income tax consequences of the sale, exchange or other disposition of the notes.
Potential contingent payment debt
treatment.
As described in more detail above under Tax consequences to U.S. HoldersPotential contingent payment debt treatment, Equinix intends to take the position that the possibility of making payments
in excess of the stated interest and principal payable on the notes under certain circumstances does not result in the notes being treated as contingent payment debt instruments. The remainder of this discussion assumes that the notes are not
treated as contingent payment debt instruments.
Payments on the notes.
Subject to the discussions below concerning backup
withholding and FATCA, payments of principal, interest and premium (if any) on the notes by Equinix or any paying agent to a Non-U.S. Holder will not be subject to U.S. federal withholding tax, provided that, in the case of interest,
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the Non-U.S. Holder does not own, actually or constructively, 10 percent or more of the total combined voting power of all classes of stock of Equinix entitled
to vote and is not a controlled foreign corporation related, directly or indirectly, to Equinix through stock ownership; and
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the beneficial owner of the note certifies on a properly executed IRS Form W-8BEN or Form W8BEN-E, under penalties of perjury, that it is not a United States
person.
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If a Non-U.S. Holder of a note is engaged in a trade or business in the United States, and if interest on the note is
effectively connected with the conduct of this trade or business, the Non-U.S. Holder, although exempt from the withholding tax discussed in the preceding paragraph, will generally be taxed in the same manner as a U.S. Holder (see Tax
consequences to U.S. Holders above), except that the Non-U.S. Holder will be required to provide a properly executed IRS Form W-8ECI in order to claim an exemption from the withholding tax discussed in the preceding paragraph. Non-U.S. Holders
are urged to consult their own tax advisors regarding whether an applicable income tax treaty provides for a different result and regarding other U.S. tax consequences of the ownership and disposition of notes, including the possible imposition of a
branch profits tax at a rate of 30% (or a lower treaty rate) on its effectively connected earnings and profits attributable to its notes.
Sale,
exchange or other disposition of notes.
Subject to the discussions below under Backup withholding and information reporting and FATCA, a Non-U.S. Holder generally will not be subject to U.S.
federal income or withholding tax on gain recognized on a sale or other disposition of notes (other than with respect to amounts attributable to accrued interest which will be subject to tax in the manner described above), unless the gain is
effectively connected with the conduct of a trade or business of the Non-U.S. Holder in the United States, subject to an applicable income tax treaty providing otherwise.
If a Non-U.S. Holder is engaged in a trade or business in the United States and gain recognized by the Non-U.S. Holder on a sale or other disposition of notes is effectively connected with a conduct of such trade
or business, the Non-U.S. Holder will generally be taxed in the same manner as a U.S. Holder (see Tax consequences to U.S.
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Holders above), subject to an applicable income tax treaty providing otherwise. Non-U.S. Holders whose gain from dispositions of notes may be effectively connected with the conduct of a
trade or business in the United States are urged to consult their own tax advisors with respect to the U.S. tax consequences of the ownership and disposition of notes, including the possible imposition of an additional branch profits tax imposed at
a rate of 30% (or a lower treaty rate).
Backup withholding and information reporting.
Information returns will be filed
with the IRS in connection with payments on the notes. Unless the Non-U.S. Holder complies with certification procedures to establish that it is not a United States person, information returns may be filed with the IRS in connection with the
proceeds from a sale or other disposition of the notes and the Non-U.S. Holder may be subject to backup withholding on payments on the notes or on the proceeds from a sale or other disposition of the notes. Compliance with the certification
procedures required to claim the exemption from withholding tax on interest described above will satisfy the certification requirements necessary to avoid backup withholding as well. The amount of any backup withholding from a payment to a Non-U.S.
Holder will be allowed as a credit against the Non-U.S. Holders U.S. federal income tax liability and may entitle the Non-U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.
FATCA
Provisions commonly referred to as FATCA
impose U.S. federal withholding of 30% on payments of interest on the notes and, for dispositions after December 31, 2018, gross proceeds from the disposition of the notes to foreign financial institutions (which is broadly defined
for this purpose and in general includes investment vehicles) and certain other non-U.S. entities (whether such foreign financial institutions or other non-U.S. entities are beneficial owners or intermediaries) unless various U.S. information
reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with those entities) have been satisfied, or an exemption applies. If FATCA withholding is imposed, a beneficial owner that is not
a foreign financial institution generally will be entitled to a refund of any amounts withheld by filing a U.S. federal income tax return (which may entail significant administrative burden). Prospective investors should consult their tax advisors
regarding the effects of FATCA on their investment in the notes.
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