Note 1Basis of presentation
The historical
consolidated financial statements of Catalent and the historical financial statements of Paragon were each prepared in accordance with accounting principles generally accepted in the United States of America and are shown in U.S. dollars.
As Paragons pre-Merger fiscal year of December 31 differed from Catalents fiscal year of
June 30, in order for the pro forma results to be comparable to Catalents, the amounts in the Paragon statement of operations for the period from July 1, 2018 (the beginning of Catalents fiscal year) to May 17, 2019 (the
date of the Merger) were calculated as follows:
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(in millions)
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Three months
ended
March 31,
2019
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+
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Year ended
December 31,
2018
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-
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Six months
ended
June 30,
2018
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=
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Nine months
ended
March 31,
2019
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+
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Period from
April 1,
2019 to
May 17,
2019
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=
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Period from
July 1,
2018 to
May 17,
2019
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Net revenue
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$
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34.1
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$
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101.1
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$
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42.9
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$
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92.3
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$
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34.1
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$
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126.4
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Cost of sales
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19.6
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71.7
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30.6
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60.7
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14.8
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75.5
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Gross margins
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14.5
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29.4
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12.3
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31.6
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19.3
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50.9
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Selling, general and administrative
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7.3
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16.0
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6.8
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16.5
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5.7
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22.2
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Impairment charges and (gain) loss on sale of assets
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Restructuring and other
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Operating earnings
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7.2
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13.4
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5.5
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15.1
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13.6
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28.7
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Other (income)/expense, net
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3.2
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7.7
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4.7
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6.2
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58.9
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65.1
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Earnings from operations before income taxes
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4.0
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5.7
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0.8
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8.9
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(45.3
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)
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(36.4
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)
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Income tax expense/(benefit)
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0.9
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(5.7
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)
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(4.8
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(11.3
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(16.1
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Net earnings
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$
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3.1
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$
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11.4
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$
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0.8
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$
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13.7
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$
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(34.0
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$
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(20.3
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Note 2Financing Transactions and USD 2027 Notes offering adjustments
As described earlier in this section, the Company financed the Closing Payment and related fees and expenses with the net proceeds of the Financing Transactions.
Net proceeds from the Preferred Stock Issuance approximated $646.3 million. Net proceeds from the Incremental Dollar Term Loans approximated $932.0 million, of which $632.0 million was used to finance a portion of the Closing Payment.
The Company used the gross proceeds of $500.0 million from the offering of the USD 2027 Notes to (i) repay in full the outstanding borrowings
under the 2024 USD Term Loans of $479.0 million, plus accrued and unpaid
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interest, (ii) pay fees and expenses of the offering of $9.4 million, and (iii) provide cash on its balance sheet of $11.6 million. See Note 4(b) below.
Note 3Conforming accounting policies
Effective
July 1, 2018, the Company adopted Financial Accounting Standards Board Accounting Standards Update 2014-09, Revenue from Contracts with Customers, which was codified as Accounting Standards
Codification 606 (ASC 606), using the modified retrospective approach applied to contracts that were not completed as of the effective date.
Prior to the Merger, Paragon was not required to adopt ASC 606 until January 1, 2019. However, as a result of the Merger and for purposes of preparing the unaudited pro forma condensed combined statement of
operations, adjustments to Paragons results are included as if it had adopted ASC 606 effective July 1, 2018 to conform to the Companys adoption date. Paragons deemed adoption of ASC 606 as of July 1, 2018 resulted in
decreases in net revenue and cost of sales of $5.6 million and $5.0 million, respectively, which are reflected in the unaudited pro forma condensed combined statement of operations. See Note 4(g) below.
Note 4Pro forma adjustments
The adjustments described
below are alphabetically identified in the footnotes of the unaudited pro forma condensed combined statement of operations. This note should be read in conjunction with Note 1Basis of Presentation, Note 2Financing Transactions and
Offering Adjustments, and Note 3Conforming Accounting Policies.
(a)
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Represents reclassifications to conform Paragons results to the Companys basis of presentation for its audited consolidated statement of operations, which have no
effect on the net earnings of Paragon and relate to other (income)/expense of $6.3 million, which were reclassified as follows:
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i.
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$4.5 million was reclassified to interest expense, net; and
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ii.
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$1.8 million was reclassified to selling, general, and administrative expenses.
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(b)
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Represents the adjustments to interest expense totaling $31.9 million in connection with the Incremental Dollar Term Loans, the
non-cash amortization of the initial discount, debt issuance and other associated finance costs, the offering of the USD 2027 Notes, and the related repayment of the 2024 USD Term Loans, calculated as follows:
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i.
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An increase of $27.3 million related to interest on the Incremental Dollar Term Loans;
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ii.
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An increase of $2.3 million related to the amortization of an aggregate $13.1 million of original issue discount and debt issuance costs incurred in connection with the
Incremental Dollar Term Loans;
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iii.
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An increase of $22.3 million related to interest on the proceeds raised by the offering of the USD 2027 Notes; and
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iv.
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A decrease of $20.0 million related to the elimination of interest on the 2024 USD Term Loans.
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(c)
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Represents expense from amortizing intangible assets resulting from the Merger. The intangible assets include commercial customer relationships with an estimated
useful life of 15 years, development customer relationships with an estimated useful life of 11 years, and trade names with an estimated useful life of 5 years, which are being amortized on a straight-line basis. The estimated useful life was
determined based on a review of the period over which economic benefit is estimated to be generated as well as
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additional factors. Factors considered include contractual life, the period over which a majority of cash flow is expected to be generated, and managements view based on historical
experience with similar assets. Total pro forma amortization expense recorded for the year ended June 30, 2019 was $25.4 million. A 10% increase/decrease in the estimated fair value of intangibles will increase/decrease amortization by
$2.5 million for the year ended June 30, 2019.
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(d)
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Represents a net adjustment to depreciation expense of $0.7 million related to the preliminary estimated fair value of the property, plant, and equipment acquired in the
Merger representing an increase of $0.5 million and $0.2 million to cost of sales and selling, general, and administrative expenses, respectively.
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(e)
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Represents the elimination of interest expense due to the paydown of Paragons indebtedness upon the Merger of $2.5 million, which is assumed to occur on July 1, 2018.
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(f)
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Represents adjustments to amortization expense and interest expense as a result of adjusting the historical book value of Paragons capital leases to the preliminary
estimated fair value, calculated as:
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i.
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An increase to cost of sales of $0.5 million;
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ii.
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An increase to selling, general, and administrative expenses of $0.2 million; and
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iii.
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An increase to interest expense, net of $1.5 million.
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(g)
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Represents the impact of Paragons deemed adoption of ASC 606 as of July 1, 2018, resulting in a decrease in net revenue and cost of sales of $5.6 million and
$5.0 million, respectively.
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(h)
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Represents an adjustment to stock-based compensation expense of $9.2 million related to the incremental expense directly attributable to the Merger that is expected to have
a recurring impact over four years and Catalent nonrecurring transaction costs of $(10.0) million directly attributable to the Transactions, which have been eliminated.
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(i)
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Represents Paragon nonrecurring transaction costs of $(56.7) million directly attributable to the Transactions, which have been eliminated.
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(j)
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Represents an adjustment to income tax expense/(benefit) of $(0.2) million resulting from tax-affecting the pro forma adjustments at the
Companys U.S. statutory tax rate of 25%, which includes the federal tax rate of 21% and state-blended rate of 4%. No further pro forma adjustment was made to this pro forma income tax benefit which reflects a release of a tax valuation
allowance by Paragon which is not directly related to the Merger or the Financing Transactions. The reversal of the valuation allowance and its impact on the effective tax rate is not considered to be representative of the income taxes of the
combined organization on a go-forward basis.
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(k)
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Basic and diluted net earnings per share (EPS) are each calculated using the two-class method by dividing adjusted pro forma
net earnings by the weighted average shares outstanding and diluted weighted average shares outstanding. Pro forma net earnings are adjusted for the Series A Preferred Stock cumulative dividend and are divided by the weighted average shares of
Common Stock outstanding (without assuming conversion of the Series A Preferred Stock) for purposes of calculating basic EPS. For diluted EPS, the denominator includes the weighted average number of basic shares of Common Stock and the number of
additional shares of Common Stock that would have been outstanding if the potential shares of Common Stock that were dilutive had been issued, and is calculated using either the two-class, treasury stock or if-converted method, whichever is more dilutive. In computing diluted EPS, the average stock price for the period is used in determining the number of shares of Common Stock assumed to be purchased from the exercise
of stock options or warrants. Diluted EPS excludes all potentially dilutive shares to the extent their effect would be anti-dilutive.
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S-31
Material U.S. federal income and estate tax consequences to non-U.S. holders of our common stock
The following is a summary of the material U.S. federal income and estate tax
consequences to a non-U.S. holder (as defined below) of the ownership and disposition of our common stock as of the date hereof, but does not purport to be a complete analysis of all potential tax
consequences. Except where noted, this summary deals only with common stock that is held as a capital asset (i.e., generally, an asset held for investment purposes).
A non-U.S. holder means a beneficial owner of our common stock that is not for U.S. federal income tax purposes any of the following:
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an individual citizen or resident of the United States;
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a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States,
any state thereof or the District of Columbia;
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an entity or arrangement treated as a partnership for U.S. federal income tax purposes;
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an estate if its income is subject to U.S. federal income taxation regardless of its source; or
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a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to
control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person (within the meaning of the Code).
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This summary is based upon provisions of the Internal Revenue Code of 1986, as amended (the Code), and U.S. Treasury regulations, administrative
rulings, and judicial decisions as of the date hereof. Subsequent developments in U.S. federal income or estate tax law, including changes in law or differing interpretations, which may be applied retroactively, could alter the U.S. federal income
and estate tax consequences of owning and disposing of our common stock as described in this summary. There can be no assurance that the IRS will not take a contrary position with respect to one or more of the tax consequences described herein and
we have not obtained, nor do we intend to obtain, a ruling from the IRS with respect to the U.S. federal income or estate tax consequences of the ownership or disposition of our common stock. This summary does not address all aspects of U.S. federal
income and estate taxes and does not deal with other U.S. federal tax laws (including the Medicare tax on certain investment income) or any foreign, state, local, or other tax considerations that may be relevant to
non-U.S. holders in light of their particular circumstances. In addition, this summary does not represent a detailed description of the U.S. federal income tax consequences applicable to you if you are subject
to special treatment under the U.S. federal income tax laws, including, but not limited to, a holder that is a partnership or other pass-through entity for U.S. federal income tax purposes, a non-U.S. holder
that is a bank, financial institution, insurance company, tax-exempt or government organization, pension plan, broker, dealer or trader in stocks, securities or currencies, U.S. expatriate, long-term resident
of the United States, person subject to the alternative minimum tax, controlled foreign corporation, corporation that accumulates earnings to avoid U.S. federal income tax, tax-qualified retirement plan,
passive foreign investment company, a non-U.S. holder holding our common stock as part of a conversion, constructive sale, wash sale or other integrated transaction or a hedge, straddle, synthetic security or
other risk reduction strategy, a non-U.S. holder that holds or receives our common stock pursuant to the exercise of any employee stock option or otherwise as compensation, a
non-U.S. holder that is deemed to sell our common stock under the constructive sale provisions of the Code, a non-U.S. holder that at any time owns, directly, indirectly
or constructively, 5% or more of our outstanding common stock, or an accrual method taxpayer for U.S. federal income tax purposes required to accelerate the recognition of any item of gross income with respect to our common stock as a result
S-32
of such income being recognized on an applicable financial statement. We cannot assure you that a change in law will not alter significantly the tax considerations that we describe in this
summary.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a
partner of a partnership generally will depend upon the status of the partner, the activities of the partnership, and certain determinations made at the partner level. If you are a partnership, or a partner of a partnership, holding our common
stock, you should consult your tax advisors.
If you are considering the purchase of our common stock, you should consult your own tax advisors
concerning the particular U.S. federal income and estate tax consequences to you of the ownership and disposition of our common stock, as well as the consequences to you arising under the laws of any other taxing jurisdiction or any applicable
income tax treaty.
Dividends
Distributions of
cash or property that we pay on our common stock (if any) will be treated as taxable dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax
principles). If the amount of a distribution exceeds our current and accumulated earnings and profits, such excess will be allocated ratably among each share of common stock with respect to which the distribution is paid and will be treated first as
a tax-free return of capital to the extent of the non-U.S. holders adjusted tax basis in our common stock, and thereafter will be treated as capital gain from a
sale or other disposition of our common stock as described below in Gain on disposition of common stock. Your adjusted tax basis in your shares of our common stock generally is the purchase price of the shares, reduced (but not
below zero) by any such tax-free returns of capital. Subject to the discussions of backup withholding and additional withholding requirements below, dividends paid to a
non-U.S. holder of our common stock generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However,
dividends that are effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, if required by an applicable income tax treaty, are attributable to a U.S.
permanent establishment of the non-U.S. holder) generally are not subject to U.S. federal withholding tax, provided certain certification and disclosure requirements are satisfied. Instead, such dividends
generally are subject to U.S. federal income tax on a net income basis in the same manner as if the non-U.S. holder were a United States person as defined under the Code. Any such effectively connected
dividends received by a non-U.S. holder treated as a corporation for U.S. federal income tax purposes may be subject to an additional branch profits tax on its effectively connected earnings and
profits at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
A non-U.S.
holder of our common stock who wishes to claim the benefit of an applicable income tax treaty rate or avoid backup withholding, as discussed below, for dividends will be required (a) to complete the applicable Internal Revenue Service
(IRS) Form W-8 and certify under penalty of perjury that such holder is not a United States person as defined under the Code and is eligible for treaty benefits or (b) if our common stock is
held through certain foreign intermediaries, to satisfy the relevant certification requirements of applicable U.S. Treasury regulations. Special rules apply to partnerships and other pass-through entities and these certification and disclosure
requirements also may apply to beneficial owners of partnerships and other pass-through entities that hold our common stock.
The certifications
described above must be provided to the applicable withholding agent prior to the payment of dividends and must be updated periodically. A non-U.S. holder of our common stock eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. holders should consult their own
S-33
tax advisors regarding their eligibility for benefits under a relevant income tax treaty and the manner of claiming such benefits.
The foregoing discussion is subject to the discussions below under Information reporting and backup withholding and Additional withholding requirements.
Gain on disposition of common stock
Subject to the
discussions of backup withholding and additional withholding requirements below, any gain realized on the sale, exchange, or other taxable disposition of our common stock by a non-U.S. holder generally will
not be subject to U.S. federal income tax unless:
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the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required
by an applicable income tax treaty, is attributable to a permanent establishment or fixed base of the non-U.S. holder in the United States);
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the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that
disposition, and certain other conditions are met; or
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we are or have been a United States real property holding corporation for U.S. federal income tax purposes at any time during the shorter of
(i) the five-year period ending on the date of disposition and (ii) the period that the non-U.S. holder held our common stock.
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A non-U.S. holder described in the first bullet point immediately above generally will be subject to tax on the net gain
derived from the sale under regular graduated U.S. federal income tax rates applicable to such holder if it were a United States person as defined under the Code. In addition, if a non-U.S. holder described in
the first bullet point immediately above is a corporation for U.S. federal income tax purposes, it may be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits or at such lower rate as may be specified by
an applicable income tax treaty.
An individual non-U.S. holder described in the second bullet point immediately
above generally will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States.
We believe we are not and do not anticipate becoming a United States real property holding corporation for U.S. federal income tax purposes. However,
because the determination of whether we are a United States real property holding corporation is made from time to time and depends on the relative fair market value of our assets, there can be no assurance in this regard. Generally, a
corporation is a United States real property holding corporation if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market values of its worldwide (domestic and
foreign) real property interests and its other assets used or held for use in a trade or business (all as determined for U.S. federal income tax purposes). For this purpose, real property interests include land, improvements, and associated personal
property. If we are or become a United States real property holding corporation, so long as our common stock continues to be regularly traded on an established securities market (within the meaning of applicable U.S. Treasury
regulations), only a non-U.S. holder who holds or held directly, indirectly, or constructively (at any time during the shorter of the five year period preceding the date of disposition or the holders
holding period) more than 5% of our common stock will be subject to U.S. federal income tax on the disposition of our common stock in the same manner as gain that is effectively connected with a trade or business of the non-U.S. holder in the United States, except that the branch profits tax generally will not apply. However, no assurance can be provided that our common stock will be regularly traded on an established securities
market for purposes of the rules described above. Non-U.S. holders should consult their own tax advisors regarding the possible
S-34
adverse U.S. federal income tax consequences to them if we are, or were to become, a United States real property holding corporation.
The foregoing discussion is subject to the discussions below under Information reporting and backup withholding and Additional withholding requirements.
Federal estate tax
Common stock owned (or treated as owned)
by an individual who is not a U.S. citizen or resident (as specially defined for U.S. federal estate tax purposes) at the time of death will be included in such holders gross estate for U.S. federal estate tax purposes, and may be subject to
U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise.
Information reporting and backup withholding
The applicable withholding agent generally will be required to report annually to the IRS and to each non-U.S. holder the
amount of dividends on our common stock paid to such non-U.S. holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns
reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions of an applicable treaty or agreement.
A non-U.S. holder will be subject to backup withholding (currently at a rate of 24%) for dividends paid to such
holder unless such holder certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that such holder is a United States person as defined
under the Code) on a properly executed IRS Form W-8, or such holder otherwise establishes an exemption.
Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale of our common stock within the United States or
conducted through certain U.S.-related financial intermediaries, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or
reason to know that the beneficial owner is a United States person as defined under the Code), or such owner otherwise establishes an exemption.
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holders U.S. federal income tax liability provided
the required information is timely furnished to the IRS.
Non-U.S. holders should consult their own tax advisors
regarding the application of information reporting and backup withholding in their particular circumstances, including the procedure for claiming any applicable exemption.
Additional withholding requirements
The Foreign Account Tax Compliance Act and related Treasury guidance
(commonly referred to as FATCA) impose U.S. federal withholding tax at a rate of 30% on payments to certain foreign entities of (i) U.S.-source dividends (including dividends paid (and constructive dividends deemed paid) on our
common stock) and (ii) the gross proceeds from the sale or other disposition of property that produces U.S.-source dividends (including sales or other dispositions of our common stock). Under recently proposed U.S. Treasury regulations that may
be relied upon pending finalization, the withholding tax on gross proceeds would be eliminated and, consequently, FATCA withholding on gross proceeds is not currently expected to apply. This withholding tax applies to a foreign entity, whether
acting as a beneficial owner or an intermediary, unless such foreign entity
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complies with (i) certain information reporting requirements regarding its U.S. account holders and/or its U.S. owners and (ii) certain withholding obligations regarding certain
payments to its account holders and certain other persons, or in each case, such foreign entity otherwise qualifies for an exemption. Accordingly, the entity through which a non-U.S. holder holds its common
stock will affect the determination of whether such withholding is required. A payee that is a foreign financial institution located in a jurisdiction that has an intergovernmental agreement with the United States governing FATCA may be subject to
different rules. Non-U.S. holders are encouraged to consult their tax advisors regarding FATCA.
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Underwriting (Conflicts of interest)
J.P. Morgan Securities LLC and UBS Securities LLC are acting as the underwriters for this offering (collectively, the underwriters). Under the terms and
subject to the conditions in an underwriting agreement, dated the date of this prospectus supplement, between us and the underwriters, J.P. Morgan Securities LLC has agreed to purchase 5,912,162 shares of our common stock and UBS Securities LLC has
agreed to purchase 2,533,784 shares of our common stock.
The underwriters are offering the shares of common stock subject to their acceptance of the
shares from us. The underwriting agreement provides that the obligations of the underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus supplement are subject to the approval of certain legal matters by
their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus supplement if any such shares are taken. The underwriting agreement also provides that, if
an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated. However, the underwriters are not required to take or pay for the
shares covered by the underwriters option to purchase additional shares described below.
The underwriters are purchasing the shares of common
stock from us at a price of $58.58 per share (representing $494.8 million of proceeds (or $569.0 million of proceeds if the underwriters option to purchase additional shares as described below is exercised in full), in each case, before
estimated offering expenses). The underwriters may offer the shares of common stock from time to time to purchasers directly or through agents, or through brokers in brokerage transactions on the NYSE, in the over-the-counter market, or to dealers in negotiated transactions, or in a combination of such methods of sale or otherwise, at a fixed price or prices, which may be changed, or at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at negotiated prices. The underwriters may effect such transactions by selling shares of common stock to or through dealers, and such dealers may receive compensation in the
form of discounts, concessions or commissions from the underwriters and/or purchasers of shares of common stock for whom they may act as agents or to whom they may sell as principal. The difference between the price at which the underwriters
purchase shares and the price at which the underwriters sell shares may be deemed underwriting compensation. Sales of shares made outside of the United States may be made by affiliates of the underwriters. The offering of the shares by the
underwriters is subject to receipt and acceptance and subject to the underwriters right to reject any order in whole or in part.
We have granted
to the underwriters an option, exercisable for 30 days from the date of this prospectus supplement, to purchase up to 1,266,891 additional shares of common stock at a price of $58.58 per share. To the extent the option is exercised, each underwriter
will become obligated, subject to certain conditions contained in the underwriting agreement, to purchase about the same percentage of the additional shares of common stock as the number set forth above bears to the total number of shares of common
stock to be sold in this offering.
The estimated offering expenses payable by us, exclusive of the underwriting discount referred to above, are $0.9
million.
Our common stock is listed on the NYSE under the symbol CTLT.
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We and all directors and executive officers have agreed that, without the prior written consent of J.P. Morgan
Securities LLC, we and they will not, during the period ending 30 days (and in the case of the Company, 45 days) after the date of this prospectus supplement (the restricted period):
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offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale, or otherwise dispose of any shares of our common stock, including but
not limited to any options or warrants to purchase shares of common stock or any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or any such substantially similar securities; or
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enter into any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of such
persons shares even if such shares would be disposed by someone other than such person; whether any such transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise. We have also
agreed not to file, or publicly disclose the intention to file, any registration statement with the SEC relating to the offering of any securities that are substantially similar to the shares (except for any registration statement on Form S-8, or any amendment thereto, to register shares issuable upon exercise of awards granted pursuant to the terms of any employee equity incentive plan) including but not limited to any options or warrants to
purchase shares of common stock or any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or any such substantially similar securities.
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The restrictions described in the immediately preceding paragraph do not apply to:
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the sale of shares pursuant to the underwriting agreement; or
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the issuance by us of shares of common stock or any such substantially similar securities to be issued upon the conversion or exchange of convertible or
exchangeable securities outstanding as of the date of this prospectus supplement of which J.P. Morgan Securities LLC has been advised in writing; or
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the issuance by us of shares or any such substantially similar securities pursuant to employee incentive plans existing as of the date of the underwriting
agreement (including, for the avoidance of doubt, the 2018 Omnibus Incentive Plan); or
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the issuance by us of up to 5% of the outstanding shares of the common stock or any such substantially similar securities in connection with the acquisition of,
a joint venture with or a merger with, another company, and the filing of a registration statement with respect thereto; or
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the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act, provided that no transfer occurs
under such plan during the restricted period and no public announcement or filing shall be required or voluntarily made by any person in connection therewith other than general disclosure in our periodic reports to the effect that our directors and
officers may enter into such trading plans from time to time, except that our executive officers may transfer or sell shares pursuant to trading plans that are entered into and in existence prior to this offering; provided, that (x) any such
pre-existing trading plan may not be amended or modified during the restricted period, and (y) in the case of any such transfer or sale under only such pre-existing trading plans, any public reports or
filings (including filings under Section 16(a) of the Exchange Act) that shall be required to be made or voluntarily made shall clearly indicate in the footnotes that such sale was made pursuant to a
pre-existing trading plan established pursuant to Rule 10b5-1 under the Exchange Act; or
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the transfer by a security holder of shares of common stock or any securities convertible into, exchangeable for, exercisable for, or that represent the right to
receive common stock (i) by will or intestacy, (ii) as a bona fide gift or gifts, (iii) to any trust, partnership, limited liability company, or other entity for the direct or
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indirect benefit of such holder or the immediate family of such holder (for purposes of this subclause (iii), immediate family shall mean any relationship by blood, current or former
marriage or adoption, not more remote than first cousin), (iv) to any immediate family member or other dependent, (v) to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses
(i) through (iv) above, (vi) pursuant to an order of a court or regulatory agency, (vii) from an executive officer to us upon death, disability, or termination of employment of such executive officer, (viii) in connection
with transactions by any person other than us relating to common stock acquired in open market transactions after the completion of the offering, provided that in the case of this clause (viii) no public reports or filings (including filings
under Section 16(a) of the Exchange Act) reporting a reduction in beneficial ownership of the common stock shall be required or shall be voluntarily made during the restricted period or any extension thereof, (ix) to us (1) pursuant
to the exercise, in each case on a cashless or net exercise basis, of any option to purchase shares of common stock granted by us pursuant to any employee benefit plans or arrangements described herein, where any shares of
common stock received by such person upon any such exercise will be subject to the terms of the lock-up agreement, or (2) for the purpose of satisfying any withholding taxes (including estimated taxes)
due as a result of the exercise of any option to purchase shares of common stock or the vesting of any restricted stock awards granted by us pursuant to employee benefit plans or arrangements described herein, in each case on a cashless
or net exercise basis, where any shares of common stock received by such holder upon any such exercise or vesting will be subject to the terms of the lock-up agreement, and/or (x) with the
prior written consent of J.P. Morgan Securities LLC; provided that: (1) in the case of each transfer or distribution (a) pursuant to clauses (ii) through (v) and clause (vii) above, each donee, trustee, distributee or
transferee, as the case may be, agrees to be bound in writing by the restrictions set forth herein; and (b) pursuant to clauses (i) through (v) and clause (vii) above, any such transfer or distribution shall not involve a disposition
for value, other than with respect to any such transfer or distribution for which the transferor or distributor receives (x) equity interests of such transferee or (y) such transferees interests in the transferor; and (2) in the
case of each transfer or distribution (a) pursuant to clauses (i) through (v) and clause (ix) above, if any public reports or filings (including filings under Section 16(a) of the Exchange Act) reporting a reduction in beneficial
ownership of common stock shall be required or shall be voluntarily made during the restricted period or any extension thereof (a) such holder will provide J.P. Morgan Securities LLC prior written notice informing them of such report or filing
and (b) pursuant to (x) clauses (ii) through (v) and clause (ix) above, such report or filing shall disclose that such donee, trustee, distributee or transferee, as the case may be, agrees to be bound in writing by the
restrictions set forth herein, and (y) clause (ix) above, such report or filing shall clearly indicate in the footnotes thereto that such sale or withholding was solely pursuant to the circumstances described in clause (ix) above; or
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the exercise of any option or warrant to acquire common stock or the conversion or exchange of any security that is convertible into or exchangeable for common
stock, provided any shares of stock received by such holder upon any such exercise, conversion, or exchange will be subject to the terms of the lock-up agreement.
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J.P. Morgan Securities LLC in its sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at
any time with or without notice.
In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize,
maintain or otherwise affect the price of the common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short
position is no greater than the number of shares available for purchase by the underwriters under the option. The underwriters can close out a covered short sale by exercising the option or purchasing shares in the open market. In determining the
source of shares to close out a covered short sale,
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the underwriters will consider, among other things, the open market price of shares compared to the price available under the option. The underwriters may also sell shares in excess of the
option, creating a naked short position. The underwriters may close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid for, and
purchase, shares of common stock in the open market to stabilize the price of the common stock.
The underwriters have advised us that, pursuant to
Regulation M under the Securities Act of 1933, they may also engage in other activities that stabilize, maintain, or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of
the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount
received by them. These activities may raise or maintain the market price of the common stock above independent market levels or prevent or retard a decline in the market price of the common stock, and, as a result, the price of the common stock may
be higher than the price that otherwise might exist in the open market. The underwriters are not required to engage in these activities and may end any of these activities at any time. The underwriters may carry out these transactions on the NYSE,
in the over-the-counter market, or otherwise.
In connection with the
offering of the shares of our common stock, J.P. Morgan Securities LLC or any person acting for it may effect transactions with a view to supporting the market price of the shares of our common stock at a level higher than that which might otherwise
prevail for a limited period after the issue date. However, there may be no obligation on the stabilizing manager or any of its agents to do this. Such stabilizing, if commenced, may be discontinued at any time, and must be brought to an end after a
limited period.
We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
A prospectus supplement in electronic format may be made available on websites maintained by one or more underwriters participating in this offering.
The underwriters may agree to allocate a number of shares of common stock for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters which may make internet distributions on the same basis as
other allocations.
Other relationships
The
underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment
research, principal investment, hedging, financing, and brokerage activities. The underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking
services for us, for which they received or will receive customary fees and expenses.
The underwriters and/or their respective affiliates are agents
and/or lenders under our senior secured credit facilities, for which they have received in the past, and expect to receive in the future, customary compensation in connection therewith. In addition, JPMorgan Chase Bank, N.A., an affiliate of J.P.
Morgan Securities LLC, an underwriter of this offering, has made a commitment to us under the Commitment Letter with respect to the Incremental Commitment. The Incremental Commitment will be reduced on a dollar-for-dollar basis by the gross proceeds we receive on or after the date of the Commitment Letter and on or prior to the funding of the Incremental Commitment or the termination thereof of any debt
securities issued by us, incremental
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commitments under our senior secured credit facilities, or issuance of shares of common stock by Catalent, Inc., including this offering of shares of common stock or pursuant to any of the
potential future financing transactions described under SummaryRecent developmentsPotential future financing transactions. See SummaryRecent developmentsDebt commitment letter.
In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of
investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short
positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendations or publish or express
independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.
Conflicts of interest
Certain affiliates of J.P. Morgan
Securities LLC and UBS Securities LLC, the underwriters, are revolving lenders under our Revolving Credit Facility and, as such, will each receive a portion of the net proceeds from this offering that are used to repay the outstanding borrowings
under the Revolving Credit Facility. As a result of the intended use of proceeds, such affiliate of J.P. Morgan Securities LLC may receive in excess of 5% of the net proceeds from this offering. The receipt of at least 5% of the net proceeds of this
offering by any underwriter (or its affiliates) would be considered a conflict of interest under FINRA Rule 5121. As such, this offering is being con-ducted in compliance with FINRA Rule 5121,
which requires prominent disclosure of the nature of the conflict of interest in the prospectus supplement for the public offering. Pursuant to Rule 5121(a)(1)(B), the appointment of a qualified independent underwriter is not necessary in connection
with this offering as a bona fide public market exists in the shares of common stock, as that term is defined in the rule. See Use of proceeds.
Selling restrictions
Canada
The shares of our common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument
45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103
Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares of our common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of
applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or
damages if this prospectus supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation
of the purchasers province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchasers province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this
offering.
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European Economic Area
In relation to each Member State of the European Economic Area and the United Kingdom (each a Relevant State), no share of our common stock has been offered or will be offered pursuant to this offering
to the public in that Relevant State prior to the publication of a prospectus in relation to the shares of our common stock, which prospectus has been approved by the competent authority in that Relevant State or, where appropriate, approved in
another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation), except that offers of shares of our common stock may be made to the public in that Relevant State at any time
under the following exemptions under the Prospectus Regulation:
(a)
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to any legal entity that is a qualified investor as defined under the Prospectus Regulation;
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(b)
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to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the underwriters
for any such offer; or
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(c)
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in any other circumstance falling within Article 1(4) of the Prospectus Regulation,
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provided that no such offer of shares of our common stock shall require the Issuer or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus
pursuant to Article 23 of the Prospectus Regulation.
For the purposes of this provision, (1) the expression an offer to the public in
relation to any share of our common stock in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any share of our common stock to be offered so as to enable an investor to
decide to purchase or subscribe for any share of our common stock, and (2) the expression Prospectus Regulation means Regulation (EU) 2017/1129.
The selling restriction set forth in this Selling restrictionsEuropean Economic Area is in addition to any other selling restriction set out below that may be applicable.
United Kingdom
This prospectus supplement is for
distribution only to persons who (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the Financial
Promotion Order), (ii) are persons falling within Article 49(2)(a) to (d) (high net worth companies, unincorporated associations etc) of the Financial Promotion Order, (iii) are outside the United Kingdom, or (iv) are
persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities may otherwise lawfully be
communicated or caused to be communicated (all such persons together being referred to as relevant persons). This prospectus supplement and the accompanying prospectus is directed only at relevant persons and must not be acted on or
relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons.
Hong Kong
The shares may not be offered or sold by
means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to professional investors within the
meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a prospectus within the meaning of the Companies
Ordinance (Cap. 32, Laws of Hong Kong), and no
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advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere),
which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of
only to persons outside Hong Kong or only to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Singapore
This prospectus has not been registered as
a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or
distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274
of the Securities and Futures Act, Chapter 289 of Singapore (the SFA), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or
(iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed
or purchased under Section 275 of the SFA by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or
more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of
shares and debentures of that corporation or the beneficiaries rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the shares under Section 275 except: (1) to
an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is
given for the transfer; or (3) by operation of law.
Solely for the purposes of its obligations pursuant to sections 309B(1)(a) and 309B(1)(c) of
the Securities and Futures Act (Chapter 289 of Singapore) (the SFA), we have determined, and hereby notify all relevant persons (as defined in Section 309A of the SFA) that the shares of common stock are prescribed capital
markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of
Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial
Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person
resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except
pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.
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Switzerland
The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (SIX) or on any other stock exchange or regulated trading facility in Switzerland. This document
has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or
the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made
publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, us, or the shares have
been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA
(FINMA), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (CISA). The investor protection afforded to acquirers of interests in collective investment
schemes under the CISA does not extend to acquirers of shares.
Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (DFSA). This
prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any
documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be
illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized
financial advisor.
Australia
No
placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (ASIC), in relation to the offering. This prospectus does not constitute
a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the Corporations Act), and does not purport to include the information required for a prospectus, product disclosure statement or
other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons (the Exempt
Investors) who are sophisticated investors (within the meaning of section 708(8) of the Corporations Act), professional investors (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to
one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure
to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the
Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
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This prospectus contains general information only and does not take account of the investment objectives, financial
situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is
appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
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Legal matters
The validity of the shares of common stock will be passed upon for us by Fried, Frank, Harris, Shriver & Jacobson LLP, New York, New York. Certain legal matters in connection with the offering will be
passed upon for the underwriters by Cahill Gordon & Reindel LLP, New York, New York.