e424b5
The information in
this preliminary prospectus supplement is not complete and may
be changed. This preliminary prospectus supplement and the
accompanying prospectus are not an offer to sell these
securities and we are not soliciting offers to buy these
securities in any state where such offer or sale is not
permitted.
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Filed
Pursuant to Rule 424(b)(5)
Registration No. 333-162856
Subject
to Completion, Dated September 10, 2010
Preliminary Prospectus Supplement
(To Prospectus dated November 13, 2009)
$320,000,000
PolyOne Corporation
% Senior
Notes due 2020
We will pay interest on the notes
on
and
of each year, beginning
on ,
2011. The notes will mature
on ,
2020.
We may redeem the notes, in whole or in part, at any time and
from time to time on or
after ,
2015 at the redemption prices set forth in this prospectus
supplement, plus accrued and unpaid interest. In addition, prior
to ,
2013, we, on one or more occasions, may redeem up to 35% of the
aggregate principal amount of the notes from the proceeds of
certain equity offerings at the redemption price
of %, plus accrued and unpaid
interest. We may also redeem any of the notes, in whole or in
part, at any time and from time to time prior
to ,
2015 at a price equal to 100% of the principal amount of notes,
plus a make-whole premium described in this prospectus
supplement, plus accrued and unpaid interest.
The notes will be unsecured and will rank equally with our
existing and future unsubordinated indebtedness. The notes will
be effectively junior to our future secured indebtedness to the
extent of the assets securing that indebtedness. The notes will
not be guaranteed by any of our subsidiaries and will therefore
be effectively subordinated to all liabilities, including trade
payables, of our subsidiaries.
For a more detailed description of the notes, see
Description of Notes beginning on
page S-28.
Investing in the notes involves risks. See Risk
Factors beginning on
page S-17.
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Per Note
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Total
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Public offering price (1)
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$
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$
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Underwriting discount
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$
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$
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Proceeds, before expenses, to us
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$
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$
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(1)
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Plus accrued interest, if any, from September ,
2010, if settlement occurs after that date.
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Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities
or passed upon the adequacy or accuracy of this prospectus
supplement and the accompanying prospectus. Any representation
to the contrary is a criminal offense.
The underwriters expect to deliver the notes to purchasers on
September , 2010.
Joint Book-Running Managers
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BofA
Merrill Lynch |
Morgan Stanley |
Wells Fargo Securities |
Co-Managers
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BB&T Capital
Markets
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KeyBanc Capital
Markets
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PNC Capital
Markets LLC
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US Bancorp
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September , 2010
TABLE OF
CONTENTS
Prospectus
Supplement
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S-ii
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S-ii
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S-1
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S-17
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S-21
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S-23
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S-23
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S-24
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S-25
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S-28
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S-82
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S-86
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S-88
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S-92
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S-92
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Prospectus
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3
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28
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You should rely only on information contained or incorporated by
reference into this prospectus supplement, in the accompanying
prospectus or in any free writing prospectus that we may provide
to you. We have not, and the underwriters have not, authorized
anyone to provide you with different information. If anyone
provides you with different or inconsistent information, you
should not rely on it. You should not assume that the
information contained in this prospectus supplement, the
accompanying prospectus or any document incorporated by
reference or any free writing prospectus is accurate as of any
date, other than the date mentioned on the cover page of these
documents.
Neither we nor the underwriters are making an offer to sell or
seeking an offer to buy the securities covered by this
prospectus supplement in any jurisdiction where the offer or
sale is not permitted.
ABOUT
THIS PROSPECTUS SUPPLEMENT
We provide information to you about this offering in two
separate documents. The accompanying prospectus provides general
information, some of which may not apply to this offering. This
prospectus supplement describes the specific details regarding
this offering and certain other matters relating to us and our
financial condition. Additional information is incorporated by
reference in this prospectus supplement. If information in this
prospectus supplement is inconsistent with the accompanying
prospectus, you should rely on this prospectus supplement.
Before you invest in our notes, you should read the registration
statement to which this document forms a part and this document,
including the documents incorporated by reference herein.
References in this prospectus to the terms we,
us, PolyOne or the Company
or other similar terms mean PolyOne Corporation and its
consolidated subsidiaries, unless we state otherwise or the
context indicates otherwise.
For definitions of EBITDA and Adjusted EBITDA, reconciliations
of EBITDA to net income, Adjusted EBITDA to net income and
EBITDA on a segment basis to segment operating income and a
discussion of EBITDA and Adjusted EBITDA as performance
measures, see footnote (1) to Prospectus Supplement
SummarySummary Historical Financial Data in this
prospectus supplement.
WHERE YOU
CAN FIND MORE INFORMATION
We are subject to the informational reporting requirements of
the Securities Exchange Act of 1934. We file reports, proxy
statements and other information with the SEC. Our SEC filings
are available over the Internet at the SECs website at
http://www.sec.gov.
You may read and copy any reports, statements and other
information filed by us at the SECs Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549.
Please call
1-800-SEC-0330
for further information on the Public Reference Room. You may
also inspect our SEC reports and other information at the New
York Stock Exchange, 20 Broad Street, New York, New York
10005, or at our website at
http://www.polyone.com.
The information contained on or accessible through our website
is not a part of this prospectus supplement or the accompanying
prospectus, other than the documents that we file with the SEC
that are incorporated by reference into this prospectus
supplement or the accompanying prospectus.
INFORMATION
WE INCORPORATE BY REFERENCE
The SEC allows us to incorporate by reference into
this prospectus supplement and the accompanying prospectus the
information in documents we file with it, which means that we
can disclose important information to you by referring you to
those documents. The information incorporated by reference is
considered to be a part of this prospectus supplement and the
accompanying prospectus, and information that we file later with
the SEC will automatically update and supersede this
information. Any statement contained in any document
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of
this prospectus supplement and the accompanying prospectus to
the extent that a statement contained in or omitted from this
prospectus supplement or the accompanying prospectus, or in any
other subsequently filed document which also is or is deemed to
be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to
constitute a part of this prospectus supplement or the
accompanying prospectus.
S-ii
We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act until the completion of
the offering of securities described in this prospectus:
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our Annual Report on
Form 10-K
for the year ended December 31, 2009;
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our Quarterly Reports on
Form 10-Q
for the quarterly periods ended March 31, 2010 and
June 30, 2010; and
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our Current Reports on
Form 8-K
filed with the SEC on May 13, 2010, July 9, 2010 and
September 10, 2010.
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Our Current Report on
Form 8-K
filed with the SEC on September 10, 2010 updates the
financial information in our Annual Report on
Form 10-K
for the year ended December 31, 2009 to reflect
retrospective application of our change in accounting principle
regarding
first-in-first-out,
or FIFO, inventory accounting and our new segment reporting
structure. Each section of the Annual Report on
Form 10-K
for the year ended December 31, 2009 affected by these
changes, namely, Item 1Business,
Item 6Selected Financial Data,
Item 7Managements Discussion and Analysis of
Financial Condition and Results of Operations and
Item 8Financial Statements and Supplementary Data,
has been updated to reflect these changes. Except to the extent
relating to the updating of our financial statements and other
financial information described above, the financial statements
and other disclosures in such
Form 8-K
do not reflect any events that have occurred after the filing of
the Annual Report on
Form 10-K
for the year ended December 31, 2009 with the SEC on
February 18, 2010.
We will not, however, incorporate by reference in this
prospectus supplement and the accompanying prospectus any
documents or portions thereof that are not deemed
filed with the SEC, including any information
furnished pursuant to Item 2.02 or Item 7.01 of our
Current Reports on
Form 8-K
unless, and except to the extent, specified in such current
reports.
We will provide you with a copy of any of these filings (other
than an exhibit to these filings, unless the exhibit is
specifically incorporated by reference into the filing
requested) at no cost, if you submit a request to us by writing
or telephoning us at the following address and telephone number:
PolyOne
Corporation
33587 Walker Road
Avon Lake, Ohio 44012
(440) 930-1000
Attn: Secretary
S-iii
PROSPECTUS
SUPPLEMENT SUMMARY
This summary highlights selected information about us. It may
not contain all the information that may be important to you in
deciding whether to invest in the notes. You should read this
entire prospectus supplement and the accompanying prospectus,
together with the information incorporated by reference.
PolyOne
Corporation
We are a premier provider of specialized polymer materials,
services and solutions with operations in thermoplastic
compounds, specialty polymer services formulations, color and
additive systems, thermoplastic resin distribution and specialty
polyvinyl chloride, or PVC, resins. We also have two equity
investments: SunBelt Chlor-Alkali Partnership, or SunBelt, a
manufacturer of caustic soda and chlorine, and BayOne Urethane
Systems, L.L.C., or BayOne, a formulator of polyurethane
compounds. We provide value to our customers through our ability
to link our knowledge of polymers and formulation technology
with our manufacturing and supply chain processes to provide an
essential link between large chemical producers (our raw
material suppliers) and designers, assemblers and processors of
plastics (our customers). We believe that we are positioned to
benefit from several recent customer needs and trends,
including: large chemical producers are increasingly outsourcing
less-than-railcar
business; polymer and additive producers need multiple channels
to market; processors continue to outsource compounding; and
international companies need suppliers with global reach. Our
goal is to provide our customers with specialized material and
service solutions through our global reach and product
platforms, low-cost manufacturing operations, a fully integrated
information technology network, broad market knowledge and raw
material procurement leverage. Our primary end markets include
appliances, building materials, consumer, electrical and
electronics, healthcare, industrial, packaging, transportation
and wire and cable. For the twelve months ended June 30,
2010, we had sales of $2.4 billion, net income of
$133.2 million and Adjusted EBITDA of $187.7 million.
In fiscal year 2009, 39% of our revenues were outside of the
United States.
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2009 Revenues by
Geography
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2009 Revenues by
Market
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During the first quarter of 2010, we announced our new global
organizational structure, which consists of five reportable
segments: Global Color, Additives and Inks; Global Specialty
Engineered Materials; Performance Products and Solutions;
PolyOne Distribution; and SunBelt Joint Venture. In addition, we
refer to our two specialty businesses, Global Specialty
Engineered Materials and Global Color, Additives and Inks, as
our Specialty Platform. We believe this global organizational
structure will create value for our customers by delivering
consistent service and quality, superior technology, and
innovative solutions, coupled with a strong connection to local
culture, customs and languages of our customers. The financial
statements contained in our Current Report on
Form 8-K
filed with the SEC on September 10, 2010, which is
incorporated by reference into this prospectus supplement,
reflect our new segment reporting structure.
Global
Color, Additives and Inks
Global Color, Additives and Inks is a leading provider of
specialized color and additive concentrates as well as inks and
latexes. Color and additive products include an innovative array
of colors, special effects and performance-enhancing and
eco-friendly solutions. When combined with non pre-colored base
resins, our
S-1
colorants help customers achieve a wide array of specialized
colors and effects that are targeted at the demands of
todays highly design-oriented consumer and industrial end
markets. Our additive masterbatches encompass a wide variety of
performance enhancing characteristics and are commonly
categorized by the function that they perform, such as UV
stabilization, anti-static, chemical blowing, antioxidant and
lubricant and processing enhancement. Our colorant and additives
masterbatches are used in a broad range of plastics, including
those used in food and medical packaging, transportation,
building products, pipe and wire and cable markets. We also
provide custom-formulated liquid systems that meet a variety of
customer needs and chemistries, including vinyl, natural rubber
and latex, polyurethane and silicone. Products include
proprietary inks and latexes for diversified markets including
recreational and athletic apparel, construction and filtration,
outdoor furniture and healthcare. In addition, we have a 50%
interest in BayOne, a joint venture between PolyOne and Bayer
Corporation, which sells liquid polyurethane systems into many
of the same markets. For the twelve months ended June 30,
2010, the Global Color, Additives and Inks segment had sales of
$506.0 million (36.4% U.S. and 63.6%
Non-U.S.),
operating income of $38.1 million and EBITDA of
$53.8 million.
Global
Specialty Engineered Materials
Global Specialty Engineered Materials is a leading provider of
custom plastic compounding services and solutions for processors
of thermoplastic materials across a wide variety of markets and
end-use applications. Our product portfolio, which we believe to
be one of the most diverse in our industry, includes standard
and custom formulated high-performance polymer compounds that
are manufactured using thermoplastic compounds and elastomers,
which are then combined with advanced polymer additive,
reinforcement, filler, colorant
and/or
biomaterial technologies. This segment includes
GLS Corporation, or GLS, which we acquired in 2008. We
believe GLS offers the broadest range of soft-touch
thermoplastic elastomers, or TPEs, in the industry. Our
compounding expertise enables us to expand the performance range
and structural properties of traditional engineering-grade
thermoplastic resins. Our product development and application
reach is further enhanced by the capabilities of our Engineered
Materials Solutions Centers in the United States, Germany, and
China, which produce and evaluate prototype and sample parts to
help assess end-use performance and guide product development.
Our manufacturing capabilities are targeted at meeting our
customers demand for speed, flexibility and critical
quality. For the twelve months ended June 30, 2010, the
Global Specialty Engineered Materials segment had sales of
$473.9 million (35.8% U.S. and 64.2%
Non-U.S.),
operating income of $40.6 million and EBITDA of
$54.1 million.
Performance
Products and Solutions
Performance Products and Solutions is an industry leader
offering an array of products and services for vinyl molding and
extrusion processors principally in North America. Our product
offerings include vinyl compounds, vinyl resins and specialty
coating materials based largely on vinyl. We believe that Geon
is the leading North American vinyl compounder, and the Geon
name carries strong brand recognition. These products are sold
to manufacturers of plastic parts and consumer-oriented
products. We also offer a wide range of services including
materials testing and component analysis, custom compound
development, colorant and additive services, design assistance,
structural analyses, process simulations and extruder screw
design. Vinyl is utilized across a broad range of applications
in building and construction, wire and cable, consumer and
recreation markets, transportation, packaging and healthcare.
This operating segment also includes Producer Services, which
offers custom compounding services to resin producers and
processors that design and develop their own compound and
masterbatch recipes. As a strategic and integrated supply chain
partner, Producer Services offers resin producers a way to
develop custom products for niche markets by using our
compounding expertise and multiple manufacturing platforms. For
the twelve months ended June 30, 2010, the Performance
Products and Solutions segment had sales of $740.8 million,
operating income of $49.3 million and EBITDA of
$69.8 million.
S-2
PolyOne
Distribution
Our PolyOne Distribution business distributes more than 3,500
grades of engineering and commodity grade resins, including
PolyOne-produced compounds, to the North American market. These
products are sold to over 5,000 custom injection molders and
extruders who, in turn, convert them into plastic parts that are
sold to end-users in a wide range of industries. Representing
over 20 major suppliers including Bayer AG, The Dow Chemical
Company, Eastman Chemical Company, E.I. du Pont de
Nemours & Company, or DuPont, and Lanxess AG, we offer
our customers a broad product portfolio,
just-in-time
delivery from multiple stocking locations and local technical
support. Our distribution segment consistently demonstrates
exemplary customer service and on-time delivery, which we
believe has resulted in our recent expanded distribution
agreements with several valued suppliers including BASF SE,
DuPont and Ineos ABS Ltd. In 2009, DuPont Engineering Polymers
named PolyOne Distribution as its primary distributor for
thermoplastic products in North America. Our focus on the
healthcare end market, which now accounts for approximately 17%
of PolyOne Distributions sales, has also been instrumental
in securing new business for our distribution segment. In June
2010, we reached an agreement to distribute Dow Corning silicone
elastomer products to health care device manufacturers in North
America. For the twelve months ended June 30, 2010, the
PolyOne Distribution segment had sales of $810.4 million,
operating income of $36.2 million and EBITDA of
$37.5 million.
SunBelt
Joint Venture
Our SunBelt Joint Venture segment consists entirely of our 50%
equity interest in SunBelt. SunBelt, a producer of chlorine and
caustic soda, is a joint venture with Olin Corporation. In 2009,
SunBelt had production capacity of approximately 320 thousand
tons of chlorine and 358 thousand tons of caustic soda. Most of
the chlorine manufactured by SunBelt is used to produce PVC
resin. Caustic soda is sold on the merchant market to customers
in the pulp and paper, chemical, building and construction and
consumer products industries. For the twelve months ended
June 30, 2010, we recognized equity income of
$15.8 million from the SunBelt joint venture.
OxyVinyls LP, or OxyVinyls, a former 24% owned affiliate,
purchases chlorine from SunBelt under an agreement that expires
in 2094. The agreement requires OxyVinyls to purchase a minimum
of 250 thousand tons of chlorine per year.
Industry
Overview
Polymers are a class of organic materials that are generally
produced by converting natural gas or crude oil derivatives into
monomers, such as ethylene, propylene, vinyl chloride and
styrene. These monomers are then polymerized into chains called
polymers, or plastic resin, in its most basic form. Large
petrochemical companies, including some in the petroleum
industry, produce a majority of the monomers and base resins.
Monomers make up the majority of the variable cost of
manufacturing the base resin. As a result, the cost of a base
resin tends to move in tandem with the industry market prices
for monomers and the cost of raw materials and energy used
during production. Through our equity interest in SunBelt, we
realize a portion of the economic benefits of a base resin
producer for PVC resin, one of our major raw materials.
Thermoplastic polymers make up a substantial majority of the
resin market and are characterized by their ability to be
reshaped repeatedly into new forms after heat and pressure are
applied. The major types of thermoplastics include polyethylene,
PVC, polypropylene, polystyrene and polyester. Thermoplastic
resins are found in a number of end market use products and in a
variety of markets, including packaging, building and
construction, wire and cable, transportation, medical, furniture
and furnishings, durable goods, institutional products,
electrical and electronics, adhesives, inks and coatings.
Various additives can be combined with a base resin to provide
it with greater versatility and performance. These combinations
are known as plastic compounds. Plastic compounds offer
advantages compared to traditional materials that include
processability, weight reduction, chemical resistance, flame
retardance and lower cost. Plastics have a reputation for
durability, aesthetics, ease of handling and recyclability.
S-3
Business
Strategies
We intend to strengthen our position as a leading global polymer
services provider through the following four pillar strategy:
Specialization: Specialization differentiates
our value-creating offerings from simple material supply by
delivering customers the service, technology and innovation they
demand. We believe that customers are willing to pay a premium
for innovative product solutions customized for their needs and
timely delivery of their orders. We leverage our in-depth
knowledge of polymers, formulations, polymer processing and the
voice of the customer to continuously evolve our portfolio of
products and solutions. We measure our success in this regard
with a Specialty Platform Vitality Index. The Vitality Index
measures the percentage of Specialty Platform sales derived from
products introduced in the last five years, which have higher
margins than older products. Below are charts that illustrate
our recent progress:
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Specialty Platform
Vitality Index Progression
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Specialty Platform
Gross Margin %
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In addition to organically advancing our portfolio of new and
innovative products, we have continued to reposition our
portfolio of businesses through acquisitions and divestitures.
Since 2007, we have divested our equity investments in
OxyVinyls, Geon Polimeros Andinos and OSullivan Films,
which were more commodity in nature and non-core to our
strategy. In January 2008, we acquired GLS, a global developer
of TPE compounds, which we believe offers the broadest range of
soft-touch TPE materials in the industry. In December 2009, we
acquired New England Urethane, or NEU. NEU is a specialty
healthcare engineered materials producer that provides high
performance engineered thermoplastics, services and solutions to
the healthcare market and expands our product offering in this
attractive end market. Overall for PolyOne, our sales to the
healthcare market have increased by 45% since 2006 and
represented approximately 8% of our 2009 sales.
We intend to continue to grow our Specialty Platform through
acquisitions. We are currently in discussions with a number of
third parties in connection with the potential acquisition of
businesses that we would add to our Specialty Platform. The
current proposed aggregate purchase price for these businesses
is approximately $100 million, which we would expect to
fund with cash on hand. Although we have entered into
exclusivity arrangements with the proposed sellers of these
businesses, we have not entered into any definitive agreements
for the purchase of any of these businesses. Accordingly, there
can be no assurance that we will successfully complete all or
any of these or other proposed acquisitions, on the currently
proposed terms or at all.
Our transformation towards a specialty focus has resulted in a
significant increase in operating income from our Specialty
Platform since 2005. Operating income from our Global Specialty
Engineered
S-4
Materials segment and our Global Color, Additives and Inks
segment, which are the two components of our Specialty Platform,
increased from $0.4 million and $4.3 million,
respectively, in 2005, to $20.6 million and
$25.2 million, respectively, in 2009. Our long-term goal is
to achieve at least a 50% contribution to operating income from
specialty businesses.
Globalization: Globalization takes us into
high-growth markets to which our customers are migrating and
positions us to serve them with consistent standards of
performance everywhere in the world. In the first quarter of
2010, we announced the restructuring of our Specialty Platform
to globalize our Specialty Engineered Materials and Specialty
Color, Additives and Inks segments, which were previously run on
a regional basis. This new orientation leverages our global
presence and allows us to more effectively serve our customer
base, which demands the same level of consistency of innovation,
service, and quality worldwide. We have a strong foothold in
China with eight plants, two plants in Eastern Europe and a new
plant in India as well as sales offices in Japan and the
Republic of Korea. Our Asian operations include eight
manufacturing plants and eleven sales offices and technical
centers. Asia is our highest growth geography in percentage
terms. Asia experienced sales growth of 44% in the first half of
2010 compared to the same period in 2009. We intend to continue
aligning our specialized product offerings and geographic
footprint through organic growth or acquisitions in high-growth
regions such as Latin America and the Middle East. We generated
34.8% of our total revenue and 63.9% of our Specialty Platform
revenue outside of the United States for the twelve-month period
ended June 30, 2010.
Commercial Excellence: Commercial excellence
governs our activities in the marketplace and is a point of
substantial competitive differentiation. Over the last three
years, we have invested heavily in training our commercial
resources to move away from selling volume towards selling
value. For example, through the use of our proprietary Economic
Value Estimator (EVE) tool, we can communicate the economic
value of our products and services by illustrating how our
products increase customers sales or reduce their total
cost of production. We have also recently launched a
cross-selling initiative in which sales personnel from our
different segments are working together to identify
opportunities to provide a more complete package of services and
solutions to our customers. An example of the successful
application of both our EVE tool and cross-selling initiative
was the combining of our color masterbatch technology with our
vinyl compounding knowledge to create a specialty vinyl compound
possessing metallic sheen enabling customers to eliminate costly
painting operations from their production processes. This new
product allowed us to expand our relationship with an existing
customer by providing a more specialized value-creating product.
Operational Excellence: Operational
excellence empowers us to respond to the needs of the customer
with a relentless focus on continuously improving our production
processes and logistics, resulting in improved customer response
time, lower working capital and more efficient utilization of
raw materials and plant and equipment. We are continuously
refining our culture of lean manufacturing and Lean Six Sigma,
or
S-5
LSS, production to minimize waste and lead times while
maintaining optimal resource utilization and excellent customer
delivery. We currently have over 165 LSS projects ongoing
across all functional areas of the Company. In January 2010, the
International Quality and Productivity Center awarded PolyOne
its prestigious Process Excellence award in recognition of the
best
start-up
program for Lean Six Sigma deployment in 2009. Since its
implementation, LSS has contributed to an increase in gross
margin from 10.7% in 2008 to 17.4% in the six months ending
June 30, 2010, and we will continue to target a one
percentage point improvement in gross margin per year through at
least 2011. We have also reduced working capital as a percentage
of sales from 15.4% in 2008 to 8.9% in the six months ending
June 30, 2010 while achieving a 92% on-time delivery
percentage, measured from customer request date. Currently,
approximately 22% of active PolyOne associates are trained in
LSS, with approximately 1% certified as Black Belts. Our
operational excellence initiatives and restructuring programs
helped drive record net cash provided by operating activities of
$229.7 million in fiscal year 2009.
Competitive
Strengths
Proven Management Team: We began to assemble
a new management team in 2006 and completed the process over the
following two years. Together, we have developed a new strategy
to change our culture from selling volume to providing
value-added solutions. The strategy was formalized into our
current four pillar approach of Specialization, Globalization,
Commercial Excellence and Operational Excellence. We have
reorganized the business as a global entity and are focused on
migrating a larger portion of the portfolio to specialty
solutions. Our current senior management team has prior
experience with some of the worlds leading companies,
including Ecolab, Nalco, General Electric, 3M, Air Products,
H.B. Fuller and SPX Corporation, and is responsible for the
performance to date as a result of focusing the business on
specialty products and profitability, instilling a greater sense
of urgency and accountability, and the implementation of working
capital improvements, restructuring initiatives and LSS.
Technology Innovator: Through our
comprehensive design and customer-centric support services, we
work directly with customers to customize and efficiently
deliver the appropriate polymer compound to meet specific
end-use applications. In addition, we leverage our global
research and development capabilities and market knowledge to
create new generations of products and services. We are
accelerating our research and development efforts to support
regional customer needs while leveraging the knowledge across
our global footprint. Through our Vitality Index, we track the
percentage of sales derived from products sold by our Specialty
Platform introduced in the last five years. Gross margins from
these new products are higher than products that have been in
the market for over five years, reflecting the importance and
value of new specialty products to our customers. Some examples
of innovative new products driving the improvement in the
Vitality Index and the overall performance of the Specialty
Platform are TPEs for a variety of soft-touch consumer product
applications and flame-retardant wire and cable solutions for
use in alternative energy applications. We achieved a Vitality
Index record of 40% in the first six months of 2010, compared to
20% in 2006. In addition to our existing products, we are
managing a broad innovation pipeline consisting of approximately
125 new projects in thermoplastic polymer compounds and color
concentrates, thermoset elastomer compounds, liquid polymer
systems and additives, which will allow us to deliver
technology-based solutions to meet the specifications of future
customers. We believe that this makes us a preferred supplier to
customers that have needs for diversified and customized
products.
Positioned To Benefit From New Consumer and Regulatory
Trends: PolyOne is uniquely positioned to benefit
from new trends in home construction and auto manufacturing and
new government regulation. In the residential housing sector,
consumers are demanding less expensive homes that use more
economical materials, such as our specialty vinyl resin. In a
similar fashion, vehicle manufacturers are working quickly with
suppliers to find ways to remove weight and improve fuel
efficiency as a result of Corporate Average Fuel Economy
regulations. Our specialty compounds continue to be one of the
critical solutions in allowing manufacturers to use less metal,
resulting in lighter weight components. In addition to changes
in consumer trends, new regulations from the U.S. Food and
Drug Administration, or FDA, and the U.S. Consumer Products
Safety Improvement Act, the European Unions Registration,
Evaluation, Authorization and
S-6
Restriction of Chemical Substances and Restriction of Hazardous
Substances directives have led to changes in material
requirements or restrictions, which increase demand for the
development of specialized replacement materials. For example,
our customers are reacting to recent consumer sentiment around
the use of bisphenol-A, or BPA, in bottles and beverage
containers, leading to increased demand for BPA-free baby and
child products. With our Eastman
Tritantm
compounds, we are responding with BPA-free alternatives that are
also FDA-compliant in applications such as infant care
sippy cups, houseware drinking sets and sports
bottles.
Global Presence: We believe the scope of our
customer, end market and geographic diversification adds
consistency and stability to our free cash flow. We have 47
manufacturing sites and 11 distribution facilities across North
America, Europe and Asia, offering more than 35,000 products in
over 100 countries. We believe that our global presence reduces
the risk associated with local market trends and events on our
overall performance. We also believe that the recent
restructuring of our Specialty Platform to create globally,
rather than regionally, focused business units strengthens our
ability to provide innovative products and services with greater
quality and consistency to our global and regional customers and
markets. During the twelve-month period ended June 30,
2010, 63.9% of our Specialty Platform sales were outside the
United States.
Strong Customer Relationships Across Diverse End
Markets: We have a customized approach to
developing innovative and responsible solutions that help our
customers differentiate their products, enter new markets, win
new business, solve manufacturing challenges, meet unique
material needs, reduce operating costs, eliminate waste and meet
sustainability goals. We believe that this approach has led to
strong customer relationships. In 2009, we served over 10,000
customers globally covering a broad range of industries,
including appliance, building materials, consumer, electrical
and electronics, healthcare, industrial, packaging, textiles,
transportation and wire and cable, with no customer accounting
for more than 3% of revenue. Our recent acquisitions of GLS and
NEU complement our existing customer base with added focus on
the healthcare, consumer non-durables and packaging sectors and
also reposition our expanding portfolio into higher value, less
cyclical end markets.
Reduced Cost Structure to Provide Leverage During Cyclical
Recovery: We believe that we are well-positioned to
benefit from a cyclical recovery in our end markets. Through
restructuring activities such as headcount reduction and
facility rationalization, we achieved annualized run-rate cost
savings of $60 million during the third quarter of 2009,
resulting in a significantly lower cost base. Our lower cost
structure allowed us to increase profitability and free cash
flow during the challenging economic conditions of 2009. As a
result, we believe we can drive profit margin expansion as
volumes recover from the unsustainably low levels in the housing
and auto end markets.
Recent
Developments
Inventory Accounting Change: We have changed
our inventory accounting method from a
last-in-first-out,
or LIFO, basis to a
first-in-first-out,
or FIFO, basis in support of the global realignment of our
businesses units. Certain U.S. businesses previously used
the LIFO methodology. We elected this change in accounting
principle during the first quarter of 2010. The change in
accounting principle is required to be reported through
retrospective application of historical results in future
quarterly and annual reports filed with the SEC to conform to
current period presentation. Our Current Report on
Form 8-K
filed with the SEC on September 10, 2010, which is
incorporated by reference into this prospectus supplement,
updates the financial information in our Annual Report on
Form 10-K
for the year ended December 31, 2009 to reflect
retrospective application of our change in accounting principle
regarding FIFO inventory accounting and our new segment
reporting structure.
Repayment of Credit Facility: On July 7,
2010, we fully repaid $40.0 million of outstanding
borrowings under and terminated our credit agreement, dated
January 3, 2008, with Citicorp USA, Inc. The credit
agreement provided for an unsecured revolving and letter of
credit facility with total commitments of up to
$40.0 million and was scheduled to expire on March 20,
2011.
S-7
Tender
Offer
Concurrently with this offering, we are conducting an offer to
purchase any and all of our 8.875% senior notes due 2012,
which we refer to as the 2012 senior notes. As of
September 10, 2010, $280.0 million aggregate principal
amount of our 2012 senior notes were outstanding. The tender
offer is not conditioned upon any minimum amount of notes being
tendered. The tender offer is conditioned upon the completion of
this offering, as well as other conditions.
Information
About PolyOne
We are an Ohio corporation formed on August 31, 2000 by the
consolidation of The Geon Company and M.A. Hanna Company. Our
principal executive office is located at 33587 Walker Road, Avon
Lake, Ohio and our telephone number is
(440) 930-1000.
Our common shares are listed on the NYSE under the symbol
POL. Our website address is www.polyone.com. The
information contained on or accessible through our website is
not a part of this prospectus supplement or the accompanying
prospectus, other than the documents that we file with the SEC
that are incorporated by reference into this prospectus
supplement or the accompanying prospectus.
S-8
THE
OFFERING
The following summary is provided solely for your convenience
and is not intended to be complete. You should read the full
text and more specific details contained elsewhere in this
prospectus supplement. For a more detailed description of the
notes, see Description of Notes.
|
|
|
Issuer |
|
PolyOne Corporation |
|
Notes Offered |
|
$320,000,000 aggregate principal amount
of % senior notes due 2020. |
|
Maturity Date |
|
,
2020. |
|
Interest Payment Dates |
|
The notes will bear interest at the rate
of % per year, payable
semi-annually in cash, in arrears
on
and
of each year, commencing
on ,
2011. |
|
Ranking |
|
The notes will be our senior unsecured obligations and will not
be guaranteed by any of our subsidiaries. However, if certain of
our domestic subsidiaries incur certain debt, such subsidiaries
will also have to guarantee the notes. Accordingly, the notes
will: |
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|
rank equally in right of payment
with all of our existing and future senior debt;
|
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|
rank senior in right of payment to
all of our existing and future debt that is by its terms
expressly subordinated to the notes;
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|
be effectively subordinated to all
of our future secured debt, including secured debt under our
credit facility, to the extent of the assets securing such debt;
and
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be structurally junior to all of
our future debt and other liabilities of any non-guarantor
subsidiaries.
|
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|
As of June 30, 2010, after giving effect to this offering
and the use of the estimated net proceeds therefrom and the July
2010 repayment of all amounts outstanding under our credit
facility, we would have had total debt of approximately
$ million, none of which
would have been secured debt. |
|
|
|
As of June 30, 2010, after giving effect to this offering
and the use of the estimated net proceeds therefrom, our
subsidiaries would have had total debt and other liabilities of
approximately $179.2 million. |
|
Optional Redemption |
|
We may redeem the notes, in whole or in part, at any time and
from time to time on or
after ,
2015 at the redemption prices described under Description
of NotesOptional Redemption, plus accrued and unpaid
interest. |
S-9
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|
In addition, prior
to ,
2013, we on one or more occasions may redeem up to 35% of the
aggregate principal amount of the notes from the proceeds of
certain equity offerings at the redemption price
of %, plus accrued and unpaid
interest. |
|
|
|
We may also redeem any of the notes, in whole or in part, at any
time and from time to time prior
to ,
2015 at a price equal to 100% of the principal amount of notes,
plus a make-whole premium described under Description of
NotesOptional Redemption, plus accrued and unpaid
interest. |
|
Change of Control |
|
If we experience certain kinds of changes of control of our
company, we must give holders the opportunity to sell their
notes to us at 101% of their principal amount, plus accrued and
unpaid interest. See Description of NotesChange of
Control. |
|
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|
We might not be able to pay the required price for notes
presented to us at the time of a change of control because: |
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|
we might not have enough funds at
the time; or
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|
the terms of our other debt may
prevent us from paying for the notes.
|
|
Covenants |
|
The covenants contained in the indenture will, among other
things, limit our ability and the ability of our restricted
subsidiaries to: |
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|
incur more debt;
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|
pay dividends and make
distributions or repurchase shares;
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make investments;
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create liens;
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|
enter into restrictions on the
ability of our restricted subsidiaries to make distributions,
loans or advances to us;
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sell assets;
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engage in certain types of
transactions with affiliates;
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engage in certain sale and
leaseback transactions; and
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merge or consolidate with other
companies or sell substantially all of our assets.
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|
These covenants are subject to a number of important exceptions,
limitations and qualifications that are described under
Description of Notes. |
|
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|
During any period in which we achieve an investment grade rating
for the notes from both Moodys Investors Service, Inc., or |
S-10
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|
Moodys, and Standard & Poors Ratings
Services, or S&P, and in which no default or event of
default has occurred and is continuing under the indenture, most
of these covenants will be suspended. However, those covenants
will apply and the suspension period will no longer be in effect
if and when the notes cease to have investment grade ratings by
both Moodys and S&P. |
|
Use of Proceeds |
|
We estimate that our net proceeds from this offering will be
approximately $ million, after
deducting underwriting discounts and our estimated expenses
related to this offering. We intend to use the net proceeds of
this offering to fund the repurchase of our 2012 senior notes in
the tender offer, including the payment of accrued interest and
any applicable tender premiums. We intend to use any remaining
net proceeds from this offering for other general corporate
purposes, including, without limitation, to repay debt and to
contribute to our pension plan. See Use of Proceeds. |
|
Risk Factors |
|
See Risk Factors and other information included or
incorporated by reference into this prospectus supplement and
the accompanying prospectus for a discussion of factors you
should carefully consider before investing in the notes. |
S-11
SUMMARY
HISTORICAL FINANCIAL DATA
The following table presents selected financial and other data
about us for the most recent three fiscal years, the six-month
periods ended June 30, 2009 and 2010 and the twelve months
ended June 30, 2010. We have derived the following
financial data as of December 31, 2008 and 2009 and for the
years ended December 31, 2007, 2008 and 2009 from our
audited consolidated financial statements incorporated by
reference into this prospectus supplement. We have derived the
balance sheet data as of December 31, 2007 from our audited
consolidated financial statements not incorporated by reference
into this prospectus supplement. The financial data as of
June 30, 2010 and for the six months ended June 30,
2009 and 2010 are derived from our unaudited financial
statements incorporated by reference into this prospectus
supplement. The balance sheet data as of June 30, 2009 are
derived from our unaudited financial statements not incorporated
by reference into this prospectus supplement. The results of
operations and cash flow data for the twelve months ended
June 30, 2010 were derived from the financial statements
for the twelve months ended December 31, 2009 and the six
months ended June 30, 2010 and 2009 as listed above.
Financial data for the years ended December 31, 2007, 2008
and 2009 and for the six months ended June 30, 2009 have
been adjusted to reflect retrospective application of our change
in accounting principle regarding FIFO inventory accounting. The
unaudited condensed consolidated financial statements have been
prepared on the same basis as the audited financial statements
and include all adjustments, consisting of only normal,
recurring adjustments necessary for the fair presentation of the
information set forth therein. The results for the six months
ended June 30, 2010 are not necessarily indicative of the
results that may be expected for the full year. The historical
results included below and elsewhere in this prospectus
supplement are not necessarily indicative of our future
performance. Prospective investors should read the summary
historical financial data in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated
financial statements, the related notes and other financial
information incorporated by reference into this prospectus
supplement.
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|
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|
|
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Twelve Months
|
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|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
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Ended June 30,
|
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|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
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Consolidated statements of operations data:
|
Sales
|
|
|
$2,642.7
|
|
|
|
$2,738.7
|
|
|
|
$2,060.7
|
|
|
|
$959.9
|
|
|
|
$1,323.3
|
|
|
|
$2,424.1
|
|
Cost of sales
|
|
|
2,371.8
|
|
|
|
2,446.7
|
|
|
|
1,738.5
|
|
|
|
828.2
|
|
|
|
1,093.1
|
|
|
|
2,003.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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Gross margin
|
|
|
270.9
|
|
|
|
292.0
|
|
|
|
322.2
|
|
|
|
131.7
|
|
|
|
230.2
|
|
|
|
420.7
|
|
Selling and administrative
|
|
|
254.8
|
|
|
|
287.1
|
|
|
|
272.3
|
|
|
|
147.3
|
|
|
|
146.9
|
|
|
|
271.9
|
|
Impairment of goodwill
|
|
|
|
|
|
|
170.0
|
|
|
|
5.0
|
|
|
|
5.0
|
|
|
|
|
|
|
|
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Income from equity affiliates
|
|
|
27.7
|
|
|
|
31.2
|
|
|
|
35.2
|
|
|
|
23.4
|
|
|
|
9.3
|
|
|
|
21.1
|
|
|
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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Operating income (loss)
|
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|
43.8
|
|
|
|
(133.9
|
)
|
|
|
80.1
|
|
|
|
2.8
|
|
|
|
92.6
|
|
|
|
169.9
|
|
Interest expense, net
|
|
|
(46.9
|
)
|
|
|
(37.2
|
)
|
|
|
(34.3
|
)
|
|
|
(17.6
|
)
|
|
|
(15.7
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)
|
|
|
(32.4
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)
|
Premium on early extinguishment of long-term debt
|
|
|
(12.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other expense, net
|
|
|
(6.6
|
)
|
|
|
(4.6
|
)
|
|
|
(9.6
|
)
|
|
|
(7.3
|
)
|
|
|
(1.9
|
)
|
|
|
(4.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Income (loss) before income taxes
|
|
|
(22.5
|
)
|
|
|
(175.7
|
)
|
|
|
36.2
|
|
|
|
(22.1
|
)
|
|
|
75.0
|
|
|
|
133.3
|
|
Income tax benefit (expense)
|
|
|
40.3
|
|
|
|
(84.5
|
)
|
|
|
13.3
|
|
|
|
2.5
|
|
|
|
(10.9
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net income (loss)
|
|
|
$17.8
|
|
|
|
$(260.2
|
)
|
|
|
$49.5
|
|
|
|
$(19.6
|
)
|
|
|
$64.1
|
|
|
|
$133.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
S-12
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
|
|
|
|
Year Ended December 31,
|
|
|
Six Months Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Balance sheet data (as of period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Cash and cash equivalents
|
|
|
$79.4
|
|
|
|
$44.3
|
|
|
|
$222.7
|
|
|
|
$182.3
|
|
|
|
$241.1
|
|
|
|
$241.1
|
|
Current assets
|
|
|
713.5
|
|
|
|
567.5
|
|
|
|
718.8
|
|
|
|
665.2
|
|
|
|
857.5
|
|
|
|
857.5
|
|
Property, net
|
|
|
449.7
|
|
|
|
432.0
|
|
|
|
392.4
|
|
|
|
408.8
|
|
|
|
363.7
|
|
|
|
363.7
|
|
Goodwill and other intangibles
|
|
|
295.5
|
|
|
|
233.0
|
|
|
|
235.2
|
|
|
|
226.5
|
|
|
|
233.2
|
|
|
|
233.2
|
|
Total assets
|
|
|
1,612.7
|
|
|
|
1,320.1
|
|
|
|
1,416.0
|
|
|
|
1,391.4
|
|
|
|
1,531.0
|
|
|
|
1,531.0
|
|
Current liabilities
|
|
|
373.6
|
|
|
|
304.2
|
|
|
|
375.7
|
|
|
|
393.8
|
|
|
|
501.7
|
|
|
|
501.7
|
|
Total debt
|
|
|
336.7
|
|
|
|
434.3
|
|
|
|
409.6
|
|
|
|
450.7
|
|
|
|
389.8
|
|
|
|
389.8
|
|
Shareholders equity
|
|
|
$679.1
|
|
|
|
$218.3
|
|
|
|
$357.7
|
|
|
|
$223.7
|
|
|
|
$407.5
|
|
|
|
$407.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
|
|
|
Year Ended December 31,
|
|
Six Months Ended June 30,
|
|
Ended June 30,
|
|
|
2007
|
|
2008
|
|
2009
|
|
2009
|
|
2010
|
|
2010
|
|
|
(In millions)
|
|
Other financial data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
$67.2
|
|
|
|
$72.5
|
|
|
|
$229.7
|
|
|
|
$134.6
|
|
|
|
$41.2
|
|
|
|
$136.3
|
|
Net cash provided (used) by investing activities
|
|
|
215.3
|
|
|
|
(193.5
|
)
|
|
|
(26.2
|
)
|
|
|
(12.2
|
)
|
|
|
(3.1
|
)
|
|
|
(17.1
|
)
|
Net cash (used) provided by financing activities
|
|
|
(275.9
|
)
|
|
|
88.0
|
|
|
|
(25.7
|
)
|
|
|
15.1
|
|
|
|
(18.4
|
)
|
|
|
(59.2
|
)
|
EBITDA (1)
|
|
|
$81.8
|
|
|
|
$(70.5
|
)
|
|
|
$135.3
|
|
|
|
$29.5
|
|
|
|
$118.5
|
|
|
|
$224.3
|
|
Adjusted EBITDA (1)
|
|
|
$167.3
|
|
|
|
$153.2
|
|
|
|
$122.3
|
|
|
|
$45.3
|
|
|
|
$110.7
|
|
|
|
$187.7
|
|
Capital expenditures
|
|
|
$43.4
|
|
|
|
$42.5
|
|
|
|
$31.7
|
|
|
|
$12.2
|
|
|
|
$10.9
|
|
|
|
$30.4
|
|
Ratio of earnings to fixed charges (2)
|
|
|
|
|
|
|
|
|
|
|
1.8
|
x
|
|
|
|
|
|
|
4.4
|
x
|
|
|
4.1x
|
|
|
|
|
(1) |
|
EBITDA is defined as net income (loss) attributable to PolyOne
Corporation plus interest expense, income tax expense (benefit)
and depreciation and amortization. EBITDA is not a recognized
term under U.S. GAAP and does not purport to be an
alternative to net income (loss) as an indicator of operating
performance or to cash flows from operating activities as a
measure of liquidity. In addition, Adjusted EBITDA does not
reflect the impact of earnings or charges resulting from matters
that we may consider not to be indicative of our ongoing
operations. However, these are expenses or charges that may
recur, vary greatly and are difficult to predict. These expenses
or charges can represent the effect of long-term strategies as
opposed to short-term results. In addition, certain of these
expenses or charges can represent the reduction of cash that
could be used for other corporate purposes. We believe that
EBITDA and Adjusted EBITDA are financial measures that provide
investors with additional information to measure our performance
and evaluate our ability to service our debt, while minimizing
the differences from depreciation policies, financial coverage
and tax strategies. |
S-13
The tables below present the reconciliation from net income to
EBITDA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
|
|
|
|
Six Months Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Net income
|
|
|
$(19.6
|
)
|
|
|
$64.1
|
|
|
|
$133.2
|
|
Income tax expense (benefit)
|
|
|
(2.5
|
)
|
|
|
10.9
|
|
|
|
0.1
|
|
Interest expense, net
|
|
|
17.6
|
|
|
|
15.7
|
|
|
|
32.4
|
|
Depreciation and amortization
|
|
|
34.0
|
|
|
|
27.8
|
|
|
|
58.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
$29.5
|
|
|
|
$118.5
|
|
|
|
$224.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In millions)
|
|
|
Net income
|
|
|
$17.8
|
|
|
|
$(260.2
|
)
|
|
|
$49.5
|
|
Income tax expense (benefit)
|
|
|
(40.3
|
)
|
|
|
84.5
|
|
|
|
(13.3
|
)
|
Interest expense, net
|
|
|
46.9
|
|
|
|
37.2
|
|
|
|
34.3
|
|
Depreciation and amortization
|
|
|
57.4
|
|
|
|
68.0
|
|
|
|
64.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
$81.8
|
|
|
|
$(70.5
|
)
|
|
|
$135.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tables below present the reconciliations from EBITDA to
Adjusted EBITDA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
|
|
|
|
Six Months Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
EBITDA
|
|
|
$29.5
|
|
|
|
$118.5
|
|
|
|
$224.3
|
|
Charges to environmental remediation (a)
|
|
|
2.9
|
|
|
|
6.3
|
|
|
|
15.1
|
|
Reimbursement of previously incurred environmental costs (b)
|
|
|
|
|
|
|
(14.4
|
)
|
|
|
(38.3
|
)
|
Employee separation and plant phaseout costs (c)
|
|
|
13.1
|
|
|
|
0.6
|
|
|
|
14.7
|
|
Accelerated depreciation included in plant phaseout
costs (d)
|
|
|
(5.4
|
)
|
|
|
(0.2
|
)
|
|
|
(3.4
|
)
|
Legal (e)
|
|
|
0.2
|
|
|
|
0.3
|
|
|
|
0.4
|
|
Adjustment to impairment of goodwill (f)
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
Curtailment and other postemployment benefit gain (g)
|
|
|
|
|
|
|
|
|
|
|
(21.9
|
)
|
Gain on sale and (charges) related to investment in equity
affiliates (h)
|
|
|
|
|
|
|
|
|
|
|
(2.8
|
)
|
Gain on sale of investment in OSullivan Films (i)
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
$45.3
|
|
|
|
$110.7
|
|
|
|
$187.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(In millions)
|
|
|
EBITDA
|
|
|
$81.8
|
|
|
|
$(70.5
|
)
|
|
|
$135.3
|
|
Charges to environmental remediation (a)
|
|
|
48.8
|
|
|
|
15.6
|
|
|
|
11.7
|
|
Reimbursement of previously incurred environmental costs (b)
|
|
|
|
|
|
|
|
|
|
|
(23.9
|
)
|
Employee separation and plant phaseout costs (c)
|
|
|
2.2
|
|
|
|
39.7
|
|
|
|
27.2
|
|
Accelerated depreciation included in plant phaseout
costs (d)
|
|
|
|
|
|
|
(6.9
|
)
|
|
|
(8.6
|
)
|
Legal (e)
|
|
|
2.4
|
|
|
|
|
|
|
|
0.3
|
|
Adjustment to impairment of goodwill (f)
|
|
|
|
|
|
|
170.0
|
|
|
|
5.0
|
|
Curtailment and other postemployment benefit gain (g)
|
|
|
|
|
|
|
|
|
|
|
(21.9
|
)
|
Gain on sale and (charges) related to investment in equity
affiliates (h)
|
|
|
16.8
|
|
|
|
4.7
|
|
|
|
(2.8
|
)
|
Impairment of other intangibles and investments (j)
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
Impairment of available for sale security (k)
|
|
|
|
|
|
|
0.6
|
|
|
|
|
|
Premium on early extinguishment of long-term debt (l)
|
|
|
12.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
$167.3
|
|
|
|
$153.2
|
|
|
|
$122.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
In 2007, our accrual for costs related to future remediation at
inactive or formerly owned sites was adjusted based on a U.S.
District Courts rulings on several motions in the case of
Westlake Vinyls, Inc. v. Goodrich Corporation et al. and a
settlement agreement entered into in connection with the case,
which requires us to pay remediation costs related to the
Calvert City facility. |
|
(b) |
|
In 2009, we received $23.9 million from our former parent
company, as partial reimbursement for certain previously
incurred environmental remediation costs. In the second quarter
of 2010, we received an additional $14.4 million. |
|
(c) |
|
In 2008, we announced the restructuring of certain manufacturing
assets, primarily in North America. In January 2009, we
announced the initiation of further cost saving measures that
included eliminating certain positions, implementing reduced
work schedules, closing a facility and idling certain other
capacity. |
|
(d) |
|
Adjustment is to exclude charges for accelerated depreciation
and amortization included in Employee separation and plant
phaseout costs, which are also reflected in the
Depreciation and amortization amounts included in EBITDA. |
|
(e) |
|
In 2007, we recorded $2.4 million related to the settlement
of a non-environmental legal dispute. |
|
(f) |
|
In 2008, we recognized a non-cash goodwill impairment charge of
$170.0 million related to reporting units within the
Performance Products and Solutions segment. In 2009, we
increased our estimated year-end goodwill impairment charge of
$170.0 million by $5.0 million. |
|
(g) |
|
In 2009, we amended certain of our post-retirement healthcare
plans whereby benefits to be paid under these plans will be
phased out through 2012, resulting in a curtailment gain of
$21.1 million. We also recorded curtailment gains totaling
approximately $0.8 million related to other employee
benefit plans. |
|
(h) |
|
In 2009, we sold our 50% interest in Geon Polimeros Andinos, or
GPA, resulting in a pre-tax gain of approximately
$2.8 million. In 2008, we recorded $2.6 million
related to our proportionate share of the write-down of certain
assets by GPA and a $2.1 million charge related to an
impairment of our investment in this equity affiliate. In 2007,
we recorded an impairment of $14.8 million to our 24%
equity investment in OxyVinyls as the carrying value was higher
than the fair value and the decrease was determined to be an
other than temporary decline in value. In 2007, we also recorded
$1.6 million related to our proportionate share of the
write-down of certain assets by GPA. |
S-15
|
|
|
(i) |
|
In the first quarter of 2010, we sold our remaining cost basis
investment in OSullivan Films, resulting in a gain of
$0.4 million. |
|
(j) |
|
In 2007, we recorded an impairment of the carrying value of
certain patents and technology agreements and investments of
$2.5 million. |
|
(k) |
|
In 2008, we recorded an impairment charge of $0.6 million
related to one of our cost basis investments, as the decline in
fair value was determined to be
other-than-temporary. |
|
|
|
(l) |
|
In 2007, we paid a premium of $12.8 million to repurchase
$241.4 million of our 10.625% senior notes. |
Segment EBITDA is defined as segment operating income (loss)
plus depreciation and amortization. Segment EBITDA is not a
recognized term under U.S. GAAP and does not purport to be
an alternative to operating income (loss) as an indicator of
operating performance or to cash flows from operating activities
as a measure of liquidity. We believe that segment EBITDA is a
financial measure that provides investors with additional
information to measure our performance. The table below presents
the reconciliations from segment operating income to segment
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
Twelve Months
|
|
|
|
December 31,
|
|
|
Six Months Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Global Specialty Engineered Materials
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
$20.6
|
|
|
|
$4.2
|
|
|
|
$24.2
|
|
|
|
$40.6
|
|
Depreciation and amortization
|
|
|
13.2
|
|
|
|
6.5
|
|
|
|
6.8
|
|
|
|
13.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
$33.8
|
|
|
|
$10.7
|
|
|
|
$31.0
|
|
|
|
$54.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Color, Additives and Inks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
$25.2
|
|
|
|
$7.6
|
|
|
|
$20.5
|
|
|
|
$38.1
|
|
Depreciation and amortization
|
|
|
15.8
|
|
|
|
8.0
|
|
|
|
7.9
|
|
|
|
15.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
$41.0
|
|
|
|
$15.6
|
|
|
|
$28.4
|
|
|
|
$53.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Products and Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
$33.1
|
|
|
|
$13.5
|
|
|
|
$29.7
|
|
|
|
$49.3
|
|
Depreciation and amortization
|
|
|
22.3
|
|
|
|
11.5
|
|
|
|
9.7
|
|
|
|
20.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
$55.4
|
|
|
|
$25.0
|
|
|
|
$39.4
|
|
|
|
$69.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PolyOne Distribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
$24.8
|
|
|
|
$8.8
|
|
|
|
$20.2
|
|
|
|
$36.2
|
|
Depreciation and amortization
|
|
|
1.3
|
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
$26.1
|
|
|
|
$9.4
|
|
|
|
$20.8
|
|
|
|
$37.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
For purposes of computing the ratio of earnings to fixed
charges, earnings consist of income (loss) before income taxes
and discontinued operations and exclude income (loss) from
equity affiliates and minority interest and capitalized
interest, but include dividends received from equity affiliates,
fixed charges and amortization of previously capitalized
interest. Fixed charges consist of interest expensed and
capitalized, amortized premiums, discounts and capitalized
expenses related to indebtedness, a portion of rental expense
representing an interest factor and interest expense relating to
guaranteed debt of our equity affiliates. Earnings for 2007,
2008 and the six-month period ended June 30, 2009 were
insufficient to cover fixed charges by $12.5 million,
$173.8 million and $31.3 million, respectively.
Accordingly, no such ratio is presented for such periods. |
S-16
RISK
FACTORS
An investment in the notes involves risk. Prior to making a
decision about investing in our notes, and in consultation with
your own financial and legal advisors, you should carefully
consider the following risk factors, as well as the risk factors
discussed in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, which are
incorporated herein by reference. You should also refer to the
other information in this prospectus supplement and the
accompanying prospectus, including our financial statements and
the related notes incorporated by reference in this prospectus
supplement. Additional risks and uncertainties that are not yet
identified may also materially harm our business, operating
results and financial condition.
Risks
Relating to Our Debt, Including the Notes
Our
high level of debt could impair our financial health and prevent
us from fulfilling our obligations under the
notes.
As of June 30, 2010, after giving effect to the issuance of
the notes offered hereby and the application of the net proceeds
as described herein and the July 2010 repayment of all amounts
outstanding under our credit facility, we would have had total
indebtedness of approximately $ million.
Our high level of debt and our debt service obligations could:
|
|
|
|
|
make it more difficult for us to satisfy our obligations with
respect to the notes;
|
|
|
|
reduce the amount of money available to finance our operations,
capital expenditures and other activities;
|
|
|
|
increase our vulnerability to economic downturns and industry
conditions;
|
|
|
|
limit our flexibility in responding to changing business and
economic conditions, including increased competition and demand
for new products and services;
|
|
|
|
place us at a disadvantage when compared to our competitors that
have less debt; and
|
|
|
|
limit our ability to borrow additional funds.
|
We and our subsidiaries may be able to incur substantial
additional indebtedness in the future. Although the indenture
governing the notes will contain restrictions on the incurrence
of additional indebtedness, these restrictions are subject to a
number of significant qualifications and exceptions and, under
certain circumstances, the amount of indebtedness that could be
incurred in compliance with these restrictions could be
substantial. As of June 30, 2010, we had
$153.6 million in available capacity to be drawn from
existing capital resources. If new debt is added to our and our
subsidiaries existing debt levels, the risks associated
with such debt that we currently face would increase. In
addition, the indenture governing the notes will not prevent us
from incurring obligations that do not constitute indebtedness
under that agreement.
Holders
of any future secured debt would be paid first and would receive
payments from assets used as security before you receive
payments if we were to become insolvent.
The notes will not be secured by any of our assets or the assets
of our subsidiaries. The indenture governing the notes will
permit, and the indentures governing our other outstanding notes
and our guarantee of the SunBelt notes do permit, us to incur
secured debt up to specified limits. If we were to become
insolvent, holders of any future secured debt would be paid
first and would receive payments from the assets used as
security before you receive any payments. You may therefore not
be fully repaid if we become insolvent. See Description of
Other Debt.
S-17
We may
be unable to generate sufficient cash to service all of our
indebtedness, including the notes, and meet our other ongoing
liquidity needs and may be forced to take other actions to
satisfy our obligations under our indebtedness, which may be
unsuccessful.
Our ability to make scheduled payments or to refinance our debt
obligations, including the notes, and to fund our planned
capital expenditures and other ongoing liquidity needs depends
on our financial and operating performance, which is subject to
prevailing economic and competitive conditions and to certain
financial, business and other factors beyond our control. We
cannot assure you that our business will generate sufficient
cash flow from operations or that borrowings will be available
to us to pay the principal, premium, if any, and interest on our
indebtedness or to fund our other liquidity needs. We may need
to refinance all or a portion of our debt, including the notes,
on or before maturity. We may be unable to refinance any of our
debt on commercially reasonable terms or at all.
If our cash flows and capital resources are insufficient to fund
our debt service obligations, we may be forced to reduce or
delay investments and capital expenditures or to sell assets,
seek additional capital or restructure or refinance our
indebtedness, including the notes. Our ability to restructure or
refinance our debt will depend on the condition of the capital
markets and our financial condition at such time. Any
refinancing of our debt could be at higher interest rates and
may require us to comply with more onerous covenants, which
could further restrict our business operations. The terms of
existing or future debt instruments and the indenture governing
the notes may restrict us from adopting some of these
alternatives. In addition, any failure to make payments of
interest and principal on our outstanding indebtedness on a
timely basis would likely result in a reduction of our credit
rating, which could harm our ability to incur additional
indebtedness. These alternative measures may not be successful
and may not permit us to meet our scheduled debt service
obligations.
The
terms of our debt impose restrictions on our
operations.
The indenture governing the notes will include a number of
significant restrictive covenants. These covenants could
adversely affect us by limiting our ability to plan for or react
to market conditions or to meet our capital needs. These
covenants will, among other things, restrict our ability to:
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incur more debt;
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pay dividends and make distributions or repurchase shares;
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make investments;
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create liens;
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enter into restrictions on the ability of our restricted
subsidiaries to make distributions, loans or advances to us;
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sell assets;
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enter into certain types of transactions with affiliates;
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engage in certain sale and leaseback transactions; and
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merge or consolidate with other companies or sell substantially
all of our assets.
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In addition, our debt agreements require us to comply with
various covenants. A breach of any of these covenants could
result in an event of default under one or more of these
agreements that, if not cured or waived, could give the holders
of the defaulted debt the right to terminate commitments to lend
and cause all
S-18
amounts outstanding with respect to the debt to be due and
payable immediately. Acceleration of any of our debt could
result in cross defaults under our other debt instruments. Our
assets and cash flow may be insufficient to fully repay
borrowings under all of our outstanding debt instruments if some
or all of these instruments are accelerated upon an event of
default, which could force us into bankruptcy or liquidation. In
such an event, we may be unable to repay our obligations under
the notes. In addition, in some instances, this would create an
event of default under the indenture governing the notes.
The
notes are not guaranteed and will therefore be structurally
junior to the existing and future liabilities of our
subsidiaries, and we may not have access to the cash flow and
other assets of our subsidiaries that we may need to make
payment on the notes.
A significant portion of our operations are conducted by our
subsidiaries. Our cash flows and our ability to service our
indebtedness, including our ability to pay the interest on and
principal of the notes when due, will be dependent upon cash
dividends and other distributions or other transfers from our
subsidiaries. Dividends, loans and advances to PolyOne
Corporation from some of its subsidiaries may be restricted by
applicable requirements of agreements, corporate statutes,
foreign capital transfer restrictions and prohibitions on
fraudulent or preferential conveyances. Our subsidiaries are
separate and distinct legal entities from us and have no
obligation to pay any amounts due on the notes or to provide us
with funds to meet our payment obligations on the notes. Our
right to receive any assets of any of our subsidiaries upon
their bankruptcy, liquidation or reorganization, and therefore
the right of the holders of the notes to participate in those
assets, will be effectively subordinated to the claims of that
subsidiarys creditors, including trade creditors. In
addition, even if we are a creditor of any of our subsidiaries,
our rights as a creditor would be subordinate to any security
interest in the assets of those subsidiaries and any
indebtedness of those subsidiaries senior to that held by us. As
a result, the notes will also be structurally subordinated to
all the liabilities of our subsidiaries, including trade
payables. As of June 30, 2010, our subsidiaries had
approximately $0.4 million of debt. In addition, the
indenture also permits us to make substantial additional
investments in and loans to our subsidiaries. Our subsidiaries
generated 34% of our consolidated revenues in the twelve-month
period ended June 30, 2010.
Key
terms of the notes will be suspended if the notes achieve
investment grade ratings.
Most of the restrictive covenants in the indenture governing the
notes will not apply during any period in which the notes have
investment grade ratings from both Moodys and S&P and
in which no default or event of default has occurred. Ratings
are given by these rating agencies based upon analyses that
include many subjective factors. We cannot assure you that the
notes will achieve or maintain investment grade ratings, nor can
we assure you that investment grade ratings, if granted, will
reflect all of the factors that would be important to holders of
the notes.
We may
be unable to repurchase notes in the event of a change of
control as required by the indenture.
Upon the occurrence of certain kinds of change of control events
specified in the indenture, you will have the right, as a holder
of the notes, to require us to repurchase all of your notes at a
repurchase price equal to 101% of their principal amount, plus
accrued and unpaid interest, if any, to the date of repurchase.
Any change of control also would constitute a default under our
receivables sale facility. Therefore, upon the occurrence of a
change of control, the lenders under our receivables sale
facility would have the right to accelerate their loans, and if
so accelerated, we would be required to pay all of our
outstanding obligations under such facility. We may not be able
to pay you the required price for your notes at that time
because we may not have available funds to pay the repurchase
price. In addition, the terms of other existing or future debt
may prevent us from paying you. There can be no assurance that
we would be able to repay such other debt or obtain consents
from the holders of such other debt to repurchase these notes.
Any requirement to offer to purchase any outstanding notes may
result in us having to refinance our outstanding indebtedness,
which we may not be able to do. In addition, even if we were
able to refinance our outstanding indebtedness, such financing
may be on terms unfavorable to us.
S-19
An
active trading market for the notes may not
develop.
There is no existing market for the notes and we do not intend
to apply for listing of the notes on any securities exchange or
any automated quotation system. Accordingly, there can be no
assurance that a trading market for the notes will ever develop
or will be maintained. Further, there can be no assurance as to
the liquidity of any market that may develop for the notes, your
ability to sell your notes or the price at which you will be
able to sell your notes. Future trading prices of the notes will
depend on many factors, including prevailing interest rates, our
financial condition and results of operations, the then-current
ratings assigned to the notes and the market for similar debt
securities. Any trading market that develops would be affected
by many factors independent of and in addition to the foregoing,
including:
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the time remaining to the maturity of the notes;
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the outstanding amount of the notes;
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the terms related to optional redemption of the notes; and
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the level, direction and volatility of market interest rates
generally.
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S-20
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
In this prospectus supplement and the accompanying prospectus,
including the documents incorporated by reference, statements
that are not reported financial results or other historical
information are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements give current expectations or
forecasts of future events and are not guarantees of future
performance. They are based on managements expectations
that involve a number of business risks and uncertainties, any
of which could cause actual results to differ materially from
those expressed in or implied by the forward-looking statements.
You can identify these statements by the fact that they do not
relate strictly to historic or current facts. They use words
such as anticipate, estimate,
expect, project, intend,
plan, believe and other words and terms
of similar meaning in connection with any discussion of future
operating or financial performance
and/or
sales. In particular, these include statements relating to
future actions; prospective changes in raw material costs,
product pricing or product demand; future performance; results
of current and anticipated market conditions and market
strategies; sales efforts; expenses; the outcome of
contingencies such as legal proceedings; and financial results.
Factors that could cause actual results to differ materially
include, but are not limited to:
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the effect on foreign operations of currency fluctuations,
tariffs and other political, economic and regulatory risks;
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changes in polymer consumption growth rates where we conduct
business;
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changes in global industry capacity or in the rate at which
anticipated changes in industry capacity come online in the
polyvinyl chloride, chlor alkali, vinyl chloride monomer or
other industries in which we participate;
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fluctuations in raw material prices, quality and supply and in
energy prices and supply;
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production outages or material costs associated with scheduled
or unscheduled maintenance programs;
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unanticipated developments that could occur with respect to
contingencies such as litigation and environmental matters,
including any developments that would require any increase in
our costs
and/or
reserves for such contingencies;
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an inability to achieve or delays in achieving or achievement of
less than the anticipated financial benefit from initiatives
related to working capital reductions, cost reductions and
employee productivity goals and our new global organization
structure;
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an inability to raise or sustain prices for products or services;
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an inability to maintain appropriate relations with unions and
employees;
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the speed and extent of an economic recovery, including the
recovery of the housing and chlor-alkali markets;
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the financial condition of our customers, including the ability
of customers (especially those that may be highly leveraged and
those with inadequate liquidity) to maintain their credit
availability;
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disruptions, uncertainty or volatility in the credit markets
that may limit our access to capital;
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other factors affecting our business beyond our control,
including, without limitation, changes in the general economy,
changes in interest rates and changes in the rate of
inflation; and
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the risk factors referred to or described in the Risk
Factors section of this prospectus supplement.
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S-21
We cannot guarantee that any forward-looking statement will be
realized, although we believe we have been prudent in our plans
and assumptions. Achievement of future results is subject to
risks, uncertainties and inaccurate assumptions. Should known or
unknown risks or uncertainties materialize, or should underlying
assumptions prove inaccurate, actual results could vary
materially from those anticipated, estimated or projected.
Investors should bear this in mind as they consider
forward-looking statements. We undertake no obligation to
publicly update forward-looking statements, whether as a result
of new information, future events or otherwise, except as
otherwise required by law. You are advised, however, to consult
any further disclosures we make on related subjects in our
reports on
Forms 10-Q,
8-K and
10-K
furnished to the SEC. You should understand that it is not
possible to predict or identify all risk factors. Consequently,
you should not consider any such list to be a complete set of
all potential risks or uncertainties.
S-22
USE OF
PROCEEDS
We estimate that the net proceeds from this offering will be
approximately $ million,
after deducting underwriting discounts and our estimated
expenses related to this offering.
Concurrently with this offering, we are conducting an offer to
purchase any and all of our 2012 senior notes. As of
September 10, 2010, $280.0 million aggregate principal
amount of our 2012 senior notes were outstanding. The tender
offer is not conditioned upon any minimum amount of notes being
tendered. The tender offer is conditioned upon the completion of
this offering, as well as other conditions.
We intend to use the net proceeds of this offering to fund the
repurchase of our 2012 senior notes in the tender offer,
including the payment of accrued interest and any applicable
tender premiums. We intend to use any remaining net proceeds of
this offering for general corporate purposes, including, without
limitation, to repay debt and to contribute to our pension plan.
Pending final use, we may invest the net proceeds from this
offering in short-term, investment grade, interest-bearing
securities.
RATIO OF
EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of consolidated
earnings to fixed charges for the periods presented:
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Six Months
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Ended
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Year Ended December 31,
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June 30,
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2005
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2006
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2007
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2008
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2009
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2010
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Ratio of earnings to fixed charges
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1.9
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x
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2.2
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x
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(1)
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(1)
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1.8
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x
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4.4x
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(1) |
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Earnings for 2007 and 2008 were insufficient to cover fixed
charges by $12.5 million and $173.8 million,
respectively. Accordingly, no such ratio is presented for such
periods. |
For purposes of computing the ratio of earnings to fixed
charges, earnings consist of income (loss) before income taxes
and discontinued operations and exclude income (loss) from
equity affiliates and minority interest and capitalized
interest, but include dividends received from equity affiliates,
fixed charges and amortization of previously capitalized
interest. Fixed charges consist of interest expensed and
capitalized, amortized premiums, discounts and capitalized
expenses related to indebtedness, a portion of rental expense
representing an interest factor and interest expense relating to
guaranteed debt of our equity affiliates.
S-23
CAPITALIZATION
The following table sets forth our unaudited cash and cash
equivalents and consolidated capitalization as of June 30,
2010:
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on an actual basis; and
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on an as adjusted basis to give effect to (1) the issuance
of $320 million of notes in this offering and the
application of estimated net proceeds therefrom as described
under Use of Proceeds (assuming that all of our 2012
senior notes are tendered and purchased in the tender offer) and
(2) the repayment of $40 million of borrowings under
our credit facility on July 7, 2010 with cash on hand.
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The tender offer for our 2012 senior notes is conditioned upon
the completion of this offering, as well as other conditions. We
cannot assure you that we will complete this offering or the
tender offer.
You should read this table in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated
financial statements, the related notes and other financial
information contained in our Current Report on
Form 8-K
filed with the SEC on September 10, 2010 and our Quarterly
Report on
Form 10-Q
for the quarterly period ended June 30, 2010, each of which
is incorporated into this prospectus supplement and the
accompanying prospectus.
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As of June 30, 2010
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Actual
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As Adjusted
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(dollars in millions)
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Cash and cash equivalents
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$241.1
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$
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Debt (1):
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Short-term debt
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$0.4
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$0.4
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6.58% medium-term notes due 2011
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19.8
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19.8
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Credit facility borrowings
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40.0
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8.875% senior notes due 2012
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279.6
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7.500% debentures due 2015
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50.0
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50.0
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Senior notes offered hereby
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320.0
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389.8
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390.2
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Shareholders equity (2)
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407.5
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407.5
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Total capitalization
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$797.3
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$797.7
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(1) |
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Does not include the guarantee of $48.8 million of
SunBelts notes due 2017. |
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Does not include the impact of charges related to the tender
premiums and deferred financing charges in connection with the
repurchases of our outstanding 2012 senior notes pursuant to the
tender offer. |
S-24
DESCRIPTION
OF OTHER DEBT
Guarantee
and Agreement
We entered into a definitive guarantee and agreement with
Citicorp USA, Inc., KeyBank National Association and National
City Bank on June 6, 2006. Under this guarantee and
agreement, we guarantee the treasury management and banking
services provided to us and our subsidiaries, such as subsidiary
borrowings, interest rate swaps, foreign currency forwards,
letters of credit, credit card programs and bank overdrafts.
This guarantee is secured by our inventories located in the
United States.
Other
Debt
As of June 30, 2010, we had an aggregate of
$350.0 million of debt securities outstanding. The specific
amounts, maturity and interest rates of these debt securities
are set forth in the following table.
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Principal
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Carrying
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Amount
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Amount (1)
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Maturity
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(dollars in millions)
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7.500% debentures due 2015
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$50.0
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$50.0
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December 15, 2015
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8.875% senior notes due 2012
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280.0
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279.6
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May 1, 2012
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6.58% medium-term notes due 2011
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20.0
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19.8
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February 23, 2011
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Total
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$350.0
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$349.4
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Includes the net effect of interest swap agreements and original
issue discount. |
7.500% Debentures
The 7.500% debentures were issued under an indenture, dated
as of December 1, 1995. These senior debt securities are
our direct, unsecured obligations and are not guaranteed by any
of our subsidiaries. The indenture does not directly limit the
amount of other debt that may be incurred by us or our
subsidiaries. Subject to several enumerated exceptions, the
indenture prohibits us and our subsidiaries from securing any
debt with any property or assets without providing that the
7.500% debentures shall be secured equally and ratably with
the secured debt for so long as the secured debt remains secured
except to the extent the amount of the secured debt, along with
the value of permitted sale and lease-back transactions, does
not exceed 5% of our consolidated tangible assets, as defined in
the indenture. The indenture also contains prohibitions against
sale and lease-back transactions.
8.875% Senior
Notes due 2012
The 2012 senior notes are issued under our indenture, dated as
of April 23, 2002, as supplemented by a supplemental
indenture, dated April 10, 2008. These senior debt
securities are our direct, unsecured obligations and are not
guaranteed by any of our subsidiaries. The indenture does not
directly limit the amount of other debt that may be incurred by
us or our subsidiaries. Subject to several enumerated
exceptions, the indenture prohibits us and our subsidiaries from
securing any debt with any property or assets without providing
that the 2012 senior notes shall be secured equally and ratably
with the secured debt for so long as the secured debt remains
secured except to the extent the amount of the secured debt,
along with the value of permitted sale and lease-back
transactions, does not exceed 10% of our consolidated tangible
assets, as defined in the indenture. The indenture also contains
prohibitions against sale and lease-back transactions. We have
launched an offer to purchase all such notes and we intend to
purchase all notes tendered in such offer.
S-25
6.58%
Medium-Term Notes due 2011
The 2011 medium-term notes are issued under our indenture, dated
as of November 9, 1996. These senior debt securities are
our direct, unsecured obligations and are not guaranteed by any
of our subsidiaries. The indenture does not directly limit the
amount of other debt that may be incurred by us or our
subsidiaries. Subject to several enumerated exceptions, the
indenture prohibits us and our subsidiaries from securing any
obligation with any principal property or shares of capital
stock or debt of certain of our subsidiaries without providing
that the 2011 medium-term notes shall be contemporaneously
secured equally and ratably except to the extent the amount of
the secured obligation, along with the value of permitted sale
and lease-back transactions, does not exceed 10% of our total
consolidated stockholders equity, as defined in the
indenture. The indenture also contains prohibitions against sale
and lease-back transactions.
Receivables
Sale Facility
We are a party to a second amended and restated receivables
purchase agreement, dated as of June 26, 2007, with PolyOne
Funding Corporation, as seller, Citicorp USA, Inc., as agent,
National City Business Credit, Inc., as syndication agent, and
the banks and other financial institutions party thereto, as
initial purchaser, which governs our receivables sale facility.
The receivables sale facility allows us to sell accounts
receivable and realize proceeds of up to $175.0 million.
However, the maximum amount of proceeds that we may receive is
limited to 85% of the amount of eligible domestic accounts
receivable. The purchasers will purchase an undivided interest
in the designated pool of accounts receivable. We retain
servicing responsibilities on these accounts receivable. The
receivables sale facility makes available up to
$40.0 million for the issuance of standby letters of credit.
On July 13, 2007, we entered into a Canadian Receivables
Purchase Agreement with PolyOne Funding Canada Corporation, or
PFCC, as seller, Citicorp, as administrative agent, National
City Business Credit, Inc., as syndication agent, and the banks
and other financial institutions party thereto, as initial
purchaser. Under the agreement, from time to time, PolyOne
Canada Inc. will sell its Canadian receivables to PFCC, which
will then sell interests in the receivables to the banks and
other financial institutions party to the Canadian Receivables
Purchase Agreement on the terms and subject to the conditions of
the agreement. The Canadian Receivables Purchase Agreement
provides up to $25.0 million in funding, based on
availability of eligible trade accounts receivable and other
customary factors. The Canadian Receivables Purchase Agreement
contains the same covenants and events of default as our
receivables sale facility.
Yield and
Fees
The purchasers under our receivables sale facility are entitled
to receive a yield, at our option, at either an alternate base
rate or a LIBOR rate, in each case plus an applicable margin.
The alternate base rate is a fluctuating rate equal to the
highest of (1) Citicorps base rate, (2) a
three-month certificate of deposit rate plus 0.5% and
(3) the Federal Funds Effective Rate plus 0.5%. The
applicable margin is based on the average monthly excess
availability under the facility and will vary from 0.250% to
0.750% for an alternate base rate yield and from 1.250% to
1.750% for a LIBOR rate yield.
Our receivables sale facility requires us to pay the purchasers
a monthly unused commitment fee based on the average monthly
excess availability under the facility. The rate of this fee
varies from 0.250% to 0.375% based on the average monthly excess
availability under the facility.
We are also required to pay the purchasers and Citicorp a letter
of credit fee based on the average monthly excess availability
under the facility. The rate of the fee payable to the
purchasers varies and is based on the applicable letter of
credit margin and the average daily letter of credit undrawn
amounts under the facility.
S-26
Covenants
Our receivables sale facility contains affirmative and negative
covenants customary for such financings, including, but not
limited to, covenants limiting our ability to:
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extend, amend or modify the terms of accounts receivable;
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change our credit and collection policy in respect of accounts
receivable;
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change payment instructions in respect of accounts receivable;
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sell assets;
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pay dividends on or purchase or redeem our capital stock;
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prepay, redeem and repurchase debt;
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make capital expenditures; and
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enter into certain types of transactions with affiliates.
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Our receivables sale facility also requires us to maintain a
minimum fixed charge coverage ratio (defined as Adjusted EBITDA
less capital expenditures, divided by interest expense and
scheduled debt repayments for the next four quarters) of at
least 1 to 1 when average excess availability under the facility
is $40.0 million or less.
Default
Our receivables sale facility contains events of default
customary for such financings, including, but not limited to:
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nonpayment of principal, interest or fees;
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violations of other covenants;
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inaccuracies of representations and warranties;
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cross-defaults to other debt;
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events of bankruptcy and insolvency;
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failure to maintain the accounts receivable pool at a specified
level;
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the occurrence of a change of control; and
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the occurrence of a material adverse change.
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SunBelt
Guarantee
We guarantee $48.8 million aggregate principal amount of
SunBelts senior secured notes due 2017, which were issued
by SunBelt in connection with the construction of a chlor-alkali
facility in McIntosh, Alabama. The guarantee subjects us to
substantially the same covenants as the indentures governing our
other notes.
S-27
DESCRIPTION
OF NOTES
The following description of the particular terms of the debt
securities offered hereby (referred to in this Description of
Notes as the Notes) supplements, and to the extent
inconsistent therewith replaces, the description of the general
terms and provisions of the debt securities set forth under the
caption Description of Debt Securities in the
accompanying prospectus, to which reference is hereby made.
PolyOne Corporation (the Company) will issue
the Notes under an indenture, as supplemented by a supplemental
indenture, which supplemental indenture will restate in the
entirety the terms of the indenture as supplemented by the
supplemental indenture, each dated as of the closing date of
this offering (together, the Indenture),
between itself and Wells Fargo Bank, N.A., as Trustee (the
Trustee). For purposes of this section of
this prospectus supplement, references to the
Company, we, us,
our or similar terms shall mean PolyOne Corporation,
without its subsidiaries.
The statements under this caption relating to the Indenture and
the Notes are summaries and are not a complete description
thereof, and where reference is made to particular provisions,
such provisions, including the definitions of certain terms, are
qualified in their entirety by reference to all of the
provisions of the Indenture and the Notes and those terms made
part of the Indenture by the Trust Indenture Act of 1939,
as amended (the Trust Indenture Act).
The definitions of certain capitalized terms used in the
following summary are set forth below under Certain
Definitions. For more information on how you can obtain a
copy of the Indenture, see Where You Can Find More
Information and Information We Incorporate By
Reference.
General
The initial offering of the Notes will be for $320,000,000 in
aggregate principal amount
of % senior notes due 2020.
The Company may issue additional notes (the Additional
Notes) under the Indenture, subject to the limitations
described below under the covenant Limitation on
Incurrence of Debt. The Notes and any Additional Notes
subsequently issued under the Indenture would be treated as a
single class for all purposes of the Indenture, including,
without limitation, waivers, amendments, redemptions and offers
to purchase.
Principal,
Maturity and Interest
Interest on the Notes will be payable
at % per annum. Interest on the
Notes will be payable semi-annually in cash in arrears
on
and ,
commencing
on ,
2011. The Company will make each interest payment to the Holders
of record of the Notes on the immediately
preceding
and .
Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid,
from and including the Issue Date. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months.
Principal of and premium, if any, and interest on the Notes will
be payable, and the Notes will be exchangeable and transferable,
at the office or agency of the Company maintained for such
purposes, which, initially, will be the corporate trust
operations office of the Trustee located at 608 Second Avenue
South, N9303-121, Minneapolis, Minnesota 55479, Attention:
Corporate Trust Operations; provided, however, that
payment of interest may be made at the option of the Company by
check mailed to the Person entitled thereto as shown on the
security register. The Notes will be issued only in fully
registered form without coupons, in denominations of $2,000 and
any integral multiple of $1,000 in excess thereof. No service
charge will be made for any registration of transfer, exchange
or redemption of Notes, except in certain circumstances for any
tax or other governmental charge that may be imposed in
connection therewith.
S-28
Ranking
Ranking
of the Notes
The Notes will be general unsecured obligations of the Company.
As a result, the Notes will rank:
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equally in right of payment with all existing and future senior
Debt of the Company;
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senior in right of payment to all existing and future Debt of
the Company that is by its terms expressly subordinated to the
Notes;
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effectively subordinated to secured Debt of the Company to the
extent of the assets securing such Debt; and
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structurally junior to any Debt and other liabilities of any
non-Guarantor Subsidiaries.
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As of June 30, 2010, after giving effect to this offering
and the use of the estimated net proceeds therefrom, the Company
would have had total debt of approximately
$ million, approximately
$ million of senior debt
outstanding (excluding the $48.8 million of notes due 2017
Guaranteed under the SunBelt Guarantee), none of which would
have been secured debt.
None of the Companys Subsidiaries will initially Guarantee
the Notes and will in the future Guarantee the Notes only in
those limited circumstances described under Note
Guarantees. Claims of creditors of non-Guarantor
Subsidiaries, including trade creditors, secured creditors and
creditors holding Debt and Guarantees issued by those
Subsidiaries, and claims of preferred stockholders (if any) of
those Subsidiaries generally will have priority with respect to
the assets and earnings of those Subsidiaries over the claims of
creditors of the Company, including Holders of the Notes. The
non-Guarantor Subsidiaries generated approximately 34% of our
total revenues for the 12-month period ended June 30, 2010.
In addition, these
non-Guarantor
Subsidiaries (excluding PolyOne Funding Corporation) held
approximately 43% of our total assets as of June 30, 2010.
As of June 30, 2010, after giving effect to this offering
and the use of estimated net proceeds therefrom, the
Companys Subsidiaries would have had total Debt and other
liabilities of approximately $179.2 million.
As of the Issue Date, all of the Companys Subsidiaries
will be Restricted Subsidiaries. However, under the
circumstances described below under the caption
Certain CovenantsLimitation on Creation of
Unrestricted Subsidiaries, the Company will be permitted
to designate certain of its Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be
subject to any of the restrictive covenants in the Indenture.
Further, Unrestricted Subsidiaries will not Guarantee the Notes.
Sinking
Fund
There are no mandatory sinking fund payment obligations with
respect to the Notes.
Paying
Agent and Registrar for the Notes
The Trustee will initially act as paying agent and registrar.
The Company may change the paying agent or registrar without
prior notice to the Holders of the Notes, and the Company or any
of its Subsidiaries may act as paying agent or registrar.
Transfer
and Exchange
A Holder may transfer or exchange Notes in accordance with the
provisions of the Indenture. The registrar and the Trustee may
require a Holder, among other things, to furnish appropriate
endorsements and
S-29
transfer documents in connection with a transfer of Notes.
Holders will be required to pay all taxes due on transfer. The
Company will not be required to transfer or exchange any Note
selected for redemption. Also, the Company will not be required
to transfer or exchange any Note for a period of 15 days
before a selection of Notes to be redeemed.
Optional
Redemption
The Notes are subject to redemption, at the option of the
Company, in whole or in part, at any time and from time to time
on or
after ,
2015 upon not less than 30 nor more than 60 days
notice at the following Redemption Prices (expressed as
percentages of the principal amount to be redeemed) set forth
below, plus accrued and unpaid interest, if any, to, but
not including, the redemption date (subject to the right of
Holders of record on the relevant regular record date to receive
interest due on an interest payment date that is on or prior to
the redemption date), if redeemed during the 12-month period
beginning
on
of the years indicated below:
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Year
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Redemption Price
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2015
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%
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2016
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%
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2017
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%
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2018 and thereafter
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100.000
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%
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In addition to the optional redemption provisions of the Notes
in accordance with the provisions of the preceding paragraph,
prior
to ,
2013, the Company on one or more occasions may, with the net
proceeds of one or more Qualified Equity Offerings, redeem up to
35% of the aggregate principal amount of the outstanding Notes
(including Additional Notes) at a Redemption Price equal
to % of the principal amount
thereof, plus accrued and unpaid interest thereon, if
any, to the date of redemption (subject to the right of Holders
of record on the relevant regular record date to receive
interest due on an interest payment date that is on or prior to
the redemption date); provided that at least 65% of the
principal amount of Notes then outstanding (including Additional
Notes) remains outstanding immediately after the occurrence of
any such redemption (excluding Notes held by the Company or its
Subsidiaries) and that any such redemption occurs within
90 days following the closing of any such Qualified Equity
Offering.
At any time prior
to ,
2015, the Company may redeem all or part of the Notes at a
redemption price equal to the sum of (i) 100% of the
principal amount thereof, plus (ii) the Applicable
Premium as of the date of redemption, plus
(iii) accrued and unpaid interest, if any, to the date
of redemption (subject to the rights of Holders of record on the
relevant regular record date to receive interest due on an
interest payment date that is on or prior to the redemption
date).
If less than all of the Notes are to be redeemed, the Trustee
will select the Notes or portions thereof to be redeemed by lot,
pro rata or by any other method the Trustee shall deem fair and
appropriate (subject to The Depository Trust Company,
Euroclear
and/or
Clearstream procedures as applicable).
No Notes of $2,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail (and, to the
extent permitted by applicable procedures or regulations,
electronically) at least 30 days before the redemption date
to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice
of redemption that relates to that Note shall state the portion
of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion of the original
Note will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption
become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions
of them called for redemption.
S-30
The Company may at any time, and from time to time, purchase
Notes in the open market or otherwise, subject to compliance
with applicable securities laws.
Change of
Control
Upon the occurrence of a Change of Control or, at the
Companys option, prior to the consummation of a Change of
Control but after it is publicly announced, unless the Company
has exercised its right to redeem all of the Notes as described
under Optional Redemption, the Company will make an
Offer to Purchase to the Holders of all of the outstanding Notes
(with a copy to the Trustee) at a Purchase Price in cash equal
to 101% of the principal amount tendered, together with accrued
interest, if any, to but not including the Purchase Date. For
purposes of the foregoing, an Offer to Purchase shall be deemed
to have been made if (i) within 60 days following the
date of the consummation of a transaction or series of
transactions that constitutes a Change of Control, the Company
commences an Offer to Purchase for all outstanding Notes at the
Purchase Price (provided that the running of such 60-day
period shall be suspended, for up to a maximum of 30 days,
during any period when the commencement of such Offer to
Purchase is delayed or suspended by reason of any courts
or governmental authoritys review of or ruling on any
materials being employed by the Company to effect such Offer to
Purchase, so long as the Company has used and continues to use
its commercially reasonable efforts to make and conclude such
Offer to Purchase promptly) and (ii) all Notes properly
tendered pursuant to the Offer to Purchase are purchased on the
terms of such Offer to Purchase.
The phrase all or substantially all, as used in the
definition of Change of Control, has not been
interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a
consequence, in the event the Holders of the Notes elected to
exercise their rights under the Indenture and the Company elects
to contest such election, there could be no assurance how a
court interpreting New York law would interpret such phrase. As
a result, it may be unclear as to whether a Change of Control
has occurred and whether a Holder of Notes may require the
Company to make an Offer to Purchase the Notes as described
above. In addition, Holders of Notes may not be entitled to
require the Company to repurchase their Notes in certain
circumstances involving a significant change in the composition
of the Board of Directors of the Company, including in
connection with a proxy contest, where the Companys Board
of Directors does not endorse a dissident slate of directors but
approves them for purposes of the Indenture.
The provisions of the Indenture may not afford Holders
protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction
affecting the Company that may adversely affect Holders, if such
transaction is not the type of transaction included within the
definition of Change of Control. A transaction involving the
management of the Company or its Affiliates, or a transaction
involving a recapitalization of the Company, will result in a
Change of Control only if it is the type of transaction
specified in such definition. The definition of Change of
Control may be amended or modified prior to a Change of Control
with the written consent of a majority in aggregate principal
amount of outstanding Notes. See Amendment,
Supplement and Waiver.
The Company will be required to comply with the requirements of
Rule 14e-1 under the Exchange Act and any other applicable
securities laws or regulations in connection with any repurchase
of the Notes as described above. To the extent that the
provisions of any securities laws or regulations conflict with
the Change of Control provisions of the Indenture, the Company
will comply with the applicable securities laws and regulations
and will be deemed to have complied with its obligations under
the Change of Control provisions of the Indenture by virtue of
such compliance.
The Company will not be required to make an Offer to Purchase
upon a Change of Control if (i) a third party makes such
Offer to Purchase contemporaneously with or upon a Change of
Control in the manner, at the times and otherwise in compliance
with the requirements of the Indenture and purchases all Notes
validly tendered and not withdrawn under such Offer to Purchase
or (ii) a notice of redemption has been given pursuant to
the Indenture as described above under the caption
Optional Redemption.
S-31
The Companys ability to pay cash to the Holders of Notes
upon a Change of Control may be limited by the Companys
then existing financial resources. Further, the agreements
governing the Companys other Debt contain, and future
agreements of the Company may contain, prohibitions of certain
events, including events that would constitute a Change of
Control. If the exercise by the Holders of Notes of their right
to require the Company to repurchase the Notes upon a Change of
Control occurred at the same time as a change of control event
under one or more of the Companys other debt agreements,
the Companys ability to pay cash to the Holders of Notes
pursuant to an Offer to Purchase may be further limited by the
Companys then existing financial resources. See Risk
FactorsRisks Relating to Our Debt, Including the
Notes.
Even if sufficient funds were otherwise available, the terms of
Credit Facilities (and other Debt) may prohibit the
Companys prepayment of Notes before their scheduled
maturity. Consequently, if the Company is not able to prepay the
Credit Facilities or other Debt containing such restrictions or
obtain requisite consents from the lenders under the Credit
Facilities or the holders of such other Debt, the Company will
be unable to fulfill its repurchase obligations upon a Change of
Control, resulting in a Default under the Indenture.
In addition, an Offer to Purchase may be made in advance of a
Change of Control, conditional upon such Change of Control, if a
definitive agreement is in place for the Change of Control at
the time of launching the Offer to Purchase.
Certain
Covenants
Changes
in Covenants When Notes Rated Investment Grade
Set forth below are certain covenants to be contained in the
Indenture. If on any date following the date of the Indenture:
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(a)
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the Notes are rated Baa3 or higher by Moodys and BBB- or
higher by S&P (or, if either such entity ceases to rate the
Notes for reasons outside of the control of the Company, the
equivalent investment grade credit rating from any other
nationally recognized statistical rating
organization within the meaning of Section 3(a)(62)
under the Exchange Act selected by the Company as a replacement
agency); and
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(b)
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no Default or Event of Default shall have occurred and be
continuing;
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then, beginning on that date and subject to the provisions of
the following paragraph, the covenants specifically listed under
the following captions in this prospectus supplement will be
suspended:
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Limitation on Incurrence of Debt;
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Limitation on Restricted Payments;
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Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries;
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Limitation on Asset Sales;
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Limitation on Transactions with Affiliates;
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Limitation on Sale and Leaseback Transactions;
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Limitation on Creation of Unrestricted
Subsidiaries;
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S-32
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clause (iii) of the first paragraph of
Consolidation, Merger, Conveyance, Transfer or
Lease; and
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Limitation on Business Activities.
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During any period that the foregoing covenants have been
suspended, the Companys Board of Directors may not
designate any of its Subsidiaries as Unrestricted Subsidiaries
unless such designation would have been permitted pursuant to
the covenant under the caption Limitation on
Creation of Unrestricted Subsidiaries if a suspension
period had not been in effect at such time.
Upon the occurrence of a covenant suspension event as described
above, the amount of Net Cash Proceeds shall be set at zero.
Notwithstanding the foregoing, if the rating assigned by either
such rating agency should subsequently decline and the Notes are
not rated Baa3 or higher by Moodys and BBB- or higher by
S&P (or, if either such entity ceases to rate the Notes for
reasons outside of the control of the Company, the equivalent
investment grade credit rating from any other nationally
recognized statistical rating organization within the
meaning of Section 3(a)(62) under the Exchange Act,
selected by the Company as a replacement agency), the foregoing
covenants will be reinstated as of and from the date of such
rating decline. Calculations under the reinstated
Restricted Payments covenant will be made as if the
Restricted Payments covenant had been in effect
since the date of the Indenture, except that no Default will be
deemed to have occurred solely by reason of a Restricted Payment
made while that covenant was suspended. Debt Incurred during any
suspension period will be classified initially to have been
Incurred pursuant to clause (ii) of the definition of
Permitted Debt. Notwithstanding that the suspended
covenants may be reinstated, no Default will be deemed to have
occurred as a result of a failure to comply with such suspended
covenants during any suspension period (or upon termination of
any covenant suspension period or after that time based solely
on events that occurred during the suspension period). There can
be no assurance that the Notes will ever achieve an investment
grade rating or that any such rating will be maintained.
Limitation
on Incurrence of Debt
The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Debt (including Acquired Debt);
provided that the Company and any of its Restricted
Subsidiaries may Incur Debt (including Acquired Debt) if,
immediately after giving effect to the Incurrence of such Debt
and the receipt and application of the proceeds therefrom,
(a) the Consolidated Fixed Charge Coverage Ratio of the
Company and its Restricted Subsidiaries, determined on a pro
forma basis as if any such Debt (including any other Debt,
other than Debt Incurred under the revolving portion of a Credit
Facility, being Incurred contemporaneously), and any other Debt
Incurred since the beginning of the Four Quarter Period (as
defined in the definition of Consolidated Fixed Charge
Coverage Ratio) had been Incurred and the proceeds thereof
had been applied at the beginning of the Four Quarter Period,
and any other Debt repaid (other than Debt Incurred under the
revolving portion of a Credit Facility) since the beginning of
the Four Quarter Period had been repaid at the beginning of the
Four Quarter Period, would be greater than 2.00 to 1.00 and
(b) no Default or Event of Default shall have occurred and
be continuing at the time or as a consequence of the Incurrence
of such Debt.
If, during the Four Quarter Period or subsequent thereto and
prior to the date of determination, the Company or any of its
Restricted Subsidiaries, or any Person that subsequently became
a Restricted Subsidiary or was merged with or into the Company
or any of its Restricted Subsidiaries, shall have engaged in any
Asset Sale or Asset Acquisition, Investments, mergers,
consolidations, discontinued operations (as determined in
accordance with GAAP) or shall have designated any Restricted
Subsidiary to be an Unrestricted Subsidiary or any Unrestricted
Subsidiary to be a Restricted Subsidiary, Consolidated Cash Flow
Available for Fixed Charges and Consolidated Interest Expense
for the Four Quarter Period shall be calculated on a pro
forma basis giving effect to such Asset Sale or Asset
Acquisition, Investments, mergers, consolidations, discontinued
operations or designation, as the case may be, and the
application of any proceeds therefrom as if such Asset
S-33
Sale or Asset Acquisition, Investments, mergers, consolidations,
discontinued operations or designation had occurred on the first
day of the Four Quarter Period.
If the Debt which is the subject of a determination under this
provision is Acquired Debt, or Debt Incurred in connection with
the simultaneous acquisition of any Person, business, property
or assets, or Debt of an Unrestricted Subsidiary being
designated as a Restricted Subsidiary, then such ratio shall be
determined by giving effect (on a pro forma basis, as if
the transaction had occurred at the beginning of the Four
Quarter Period) to (x) the Incurrence of such Acquired Debt
or such other Debt by the Company or any of its Restricted
Subsidiaries and (y) the inclusion, in Consolidated Cash
Flow Available for Fixed Charges, of the Consolidated Cash Flow
Available for Fixed Charges of the acquired Person, business,
property or assets or redesignated Subsidiary.
Notwithstanding the first paragraph above, the Company and its
Restricted Subsidiaries may Incur Permitted Debt.
For purposes of determining any particular amount of Debt under
this Limitation on Incurrence of Debt covenant,
(x) Debt Incurred under the Credit Agreement and
outstanding on the Issue Date shall at all times be treated as
Incurred pursuant to clause (i) of the definition of
Permitted Debt and (y) Guarantees, Liens or
obligations with respect to letters of credit supporting Debt
otherwise included in the determination of such particular
amount shall not be included. For purposes of determining any
particular amount of Debt under this Limitation on
Incurrence of Debt covenant, if obligations in respect of
letters of credit are Incurred pursuant to the Credit Facilities
and are being treated as Incurred pursuant to clause (i) of
the definition of Permitted Debt and the letters of credit
relate to other Debt, then such other Debt shall not be deemed
to have been Incurred. For purposes of determining compliance
with this Limitation on Incurrence of Debt covenant,
in the event that an item of Debt meets the criteria of more
than one of the types of Debt described above, including
categories of Permitted Debt and under part (a) in the
first paragraph of this Limitation on Incurrence of
Debt covenant, the Company, in its sole discretion, may
classify and divide, and from time to time may reclassify and
redivide, all or any portion of such item of Debt. For purposes
of determining compliance of any
non-U.S. dollar-denominated Debt with this covenant, the
amount outstanding under U.S. dollar-equivalent principal
amount of Debt denominated in a foreign currency shall at all
times be calculated based on the relevant currency exchange rate
in effect on the date such Debt was Incurred, in the case of the
term Debt, or first committed, in the cases of the revolving
credit Debt; provided, however, that if such Debt
is Incurred to refinance other Debt denominated in the same or
different currency, and such refinancing would cause the
applicable U.S. dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in
effect on the date of such refinancing, such
U.S. dollar-denominated restriction shall be deemed not to
have been exceeded so long as the principal amount of such
Refinancing Debt does not exceed the principal amount of such
Debt being refinanced.
The Company and any Guarantor will not Incur any Debt that
pursuant to its terms is subordinate or junior in right of
payment to any Debt unless such Debt is subordinated in right of
payment to the Notes and the applicable Note Guarantee to the
same extent; provided that Debt will not be considered
subordinate or junior in right of payment to any other Debt
solely by virtue of being unsecured or secured to a greater or
lesser extent or with greater or lower priority or by virtue of
structural subordination.
Limitation
on Restricted Payments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted
Payment unless, at the time of and after giving effect to the
proposed Restricted Payment:
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(a)
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no Default in the payment in respect of principal or interest or
Event of Default shall have occurred and be continuing or will
occur as a consequence thereof;
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S-34
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(b)
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after giving effect to such Restricted Payment on a pro forma
basis, the Company would be permitted to Incur at least
$1.00 of additional Debt (other than Permitted Debt) pursuant to
the provisions described in the first paragraph under the
Limitation on Incurrence of Debt covenant; and
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(c)
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after giving effect to such Restricted Payment on a pro forma
basis, the aggregate amount expended or declared for all
Restricted Payments made on or after the Issue Date (excluding
Restricted Payments permitted by clauses (ii) through
(ix) of the next succeeding paragraph), shall not exceed
the sum (without duplication) of
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(1)
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50% of the Consolidated Net Income (or, if Consolidated Net
Income shall be a deficit, minus 100% of such deficit) of the
Company accrued on a cumulative basis during the period (taken
as one accounting period) from January 1, 2010 and ending
on the last day of the fiscal quarter immediately preceding the
date of such proposed Restricted Payment, plus
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(2)
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100% of the aggregate net proceeds (including the Fair Market
Value of property other than cash) received by the Company
subsequent to the Issue Date either (i) as a contribution
to its common equity capital or (ii) from the issuance and
sale (other than to a Subsidiary) of its Qualified Capital
Interests, including Qualified Capital Interests issued upon the
conversion or exchange of Debt or Redeemable Capital Interests
of the Company, and from the exercise of options, warrants or
other rights to purchase such Qualified Capital Interests (other
than, in each case, Capital Interests or Debt sold to a
Subsidiary of the Company), plus
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(3)
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to the extent not otherwise included in the calculation of
Consolidated Net Income of the Company for such period, 100% of
the net reduction in Investments (other than Permitted
Investments and Investments made pursuant to clause (x) of
the next paragraph of this covenant) in any Person other than
the Company or a Restricted Subsidiary resulting from dividends,
repayment of loans or advances or other transfers of assets, in
each case to the Company or any Restricted Subsidiary,
plus
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(4)
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to the extent that any Investment (other than Permitted
Investments or Investments in Unrestricted Subsidiaries) that
was made on and after the Issue Date is sold for cash or
otherwise disposed of, liquidated or repaid for cash or other
assets, the lesser of (i) the initial amount of such
Investment, or (ii) to the extent not otherwise included in
the calculation of Consolidated Net Income of the Company for
such period, the net cash return of capital or net Fair Market
Value of return of capital with respect to such Investment, less
the cost of any such disposition or liquidation, plus
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(5)
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to the extent that any Unrestricted Subsidiary of the Company
designated as such on and after the Issue Date is redesignated
as a Restricted Subsidiary or merged or consolidated with or
into the Company or a Restricted Subsidiary, the lesser of
(i) the Fair Market Value of the Companys Investment
in such Subsidiary as of the date of such redesignation or
(ii) such Fair Market Value as of the date on which such
Subsidiary was originally designated as an Unrestricted
Subsidiary, plus
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(6)
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100% of any dividends or interest payments received by the
Company or a Restricted Subsidiary on and after the Issue Date
from an Unrestricted Subsidiary or other Investment (other than
a Permitted Investment), to the extent such dividends or
interest payments were not otherwise included in the calculation
of Consolidated Net Income of the Company for such period.
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S-35
Notwithstanding whether the foregoing provisions would prohibit
the Company and its Restricted Subsidiaries from making a
Restricted Payment, the Company and its Restricted Subsidiaries
may make the following Restricted Payments:
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(i)
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the payment of any dividend on Capital Interests in the Company
or a Restricted Subsidiary within 60 days after declaration
thereof if at the declaration date such payment was permitted by
the foregoing provisions of this covenant;
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(ii)
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the purchase, repurchase, redemption, defeasance or other
acquisition or retirement of any Qualified Capital Interests of
the Company by conversion into, or by or in exchange for,
Qualified Capital Interests, or out of net cash proceeds of the
substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of other Qualified Capital Interests
of the Company; provided that the amount of any net
proceeds that are utilized for such Restricted Payment will be
excluded from clause (c)(2) of the preceding paragraph;
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(iii)
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the retirement of any shares of Redeemable Capital Interests by
conversion into, or by exchange for, shares of Redeemable
Capital Interests, or out of the net proceeds of the
substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Redeemable Capital Interests;
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(iv)
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the redemption, defeasance, repurchase or acquisition or
retirement for value of any Debt of the Company or a Guarantor
that is subordinate in right of payment to the Notes or the
applicable Note Guarantee out of the net cash proceeds of a
substantially concurrent issue and sale (other than to a
Subsidiary of the Company) of (x) new subordinated Debt of
the Company or such Guarantor, as the case may be, Incurred in
accordance with the Indenture or (y) of Qualified Capital
Interests of the Company; provided that the amount of any
net proceeds that are utilized for such Restricted Payment will
be excluded from clause (c)(2) of the preceding paragraph;
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(v)
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the purchase, redemption, retirement or other acquisition for
value of Capital Interests in the Company or any direct or
indirect parent of the Company (or any payments to a direct or
indirect parent company of the Company for the purposes of
permitting any such repurchase) held by employees or former
employees of the Company or any Restricted Subsidiary (or their
estates or beneficiaries under their estates) upon death,
disability, retirement or termination of employment or
alteration of employment status or pursuant to the terms of any
agreement under which such Capital Interests were issued;
provided that the aggregate cash consideration paid for
such purchase, redemption, retirement or other acquisition of
such Capital Interests does not exceed $5.0 million in any
calendar year; provided, further, that any unused amounts
in any calendar year may be carried forward to one or more
future periods subject to a maximum aggregate amount of
repurchases made pursuant to this clause (v) not to exceed
$10.0 million in any calendar year; provided,
however, that such amount in any calendar year may be
increased by an amount not to exceed (A) the cash proceeds
received by the Company or any of its Restricted Subsidiaries
from the sale of Qualified Capital Interests of the Company or
any direct or indirect parent company of the Company (to the
extent contributed to the Company) to employees of the Company
and its Restricted Subsidiaries that occurs after the Issue
Date; provided, however, that the amount of such cash
proceeds utilized for any such repurchase, retirement, other
acquisition or dividend will not increase the amount available
for Restricted Payments under clause (c) of the first
paragraph of this covenant; plus (B) the cash
proceeds of key man life insurance policies received by the
Company and its Restricted Subsidiaries after the Issue Date
(provided, however, that the Company may elect to apply
all or any portion of the aggregate increase contemplated by the
proviso of this clause (v) in any calendar year and, to the
extent any payment described under this clause (v) is made
by delivery of Debt and not in cash, such payment shall be
deemed to occur only when, and to the extent, the obligor on
such Debt makes payments with respect to such Debt);
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S-36
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(vi)
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the repurchase of Capital Interests deemed to occur
(A) upon the exercise of stock options, warrants or similar
rights to the extent such Capital Interests represent a portion
of the exercise price of those stock options or warrants,
(B) as a result of common shares utilized to satisfy tax
withholding obligations upon exercise of stock options or
vesting of other equity awards or (C) upon the cancellation
of stock options, warrants or other equity awards;
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(vii)
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cash payments in lieu of issuance of fractional shares in
connection with the exercise of warrants, options or other
securities convertible into or exchangeable for the Capital
Interests of the Company or a Restricted Subsidiary;
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(viii)
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the declaration and payment of dividends to holders of any class
or series of Redeemable Capital Interests of the Company or any
Restricted Subsidiary issued or Incurred in compliance with the
covenant described above under Limitation on
Incurrence of Debt to the extent such dividends are
included in the definition of Consolidated Fixed Charges;
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(ix)
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purchase or acquire shares of the Companys Capital
Interests in open-market purchases for matching contributions to
any employees of the Company or its Subsidiaries pursuant to any
employee stock purchase plan, deferred compensation plan or
other benefit plan;
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(x)
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to the extent no Default in any payment in respect of principal
or interest under the Notes or Event of Default has occurred and
is continuing or will occur as a consequence thereof, upon the
occurrence of a Change of Control or an Asset Sale, the
defeasance, redemption, repurchase or other acquisition of any
subordinated Debt pursuant to provisions substantially similar
to those described under Change of Control and
Limitation on Asset Sales at a Purchase Price
not greater than 101% of the principal amount thereof (in the
case of a Change of Control) or at a percentage of the principal
amount thereof not higher than the principal amount applicable
to the Notes (in the case of an Asset Sale), plus any
accrued and unpaid interest thereon; provided that prior
to or contemporaneously with such defeasance, redemption,
repurchase or other acquisition, the Company has made an Offer
to Purchase with respect to the Notes and has repurchased all
Notes validly tendered for payment and not withdrawn in
connection therewith;
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(xi)
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to the extent no Default in any payment in respect of principal
or interest under the Notes or the Credit Agreement or Event of
Default has occurred and is continuing or will occur as a
consequence thereof, other Restricted Payments not in excess of
the greater of (x) $35.0 million and (y) 2.5% of
Consolidated Total Assets (in each case to the extent not
otherwise included in Consolidated Net Income net of, with
respect to any Restricted Payment that constitutes an Investment
in any particular Person made in reliance on this clause, the
return thereon received after the Issue Date as a result of any
sale for cash or Cash Equivalents, repayment, redemption,
liquidating distribution or other realization for cash or Cash
Equivalents, not to exceed the amount of Investments made after
the Issue Date in such Person in reliance on this
clause); and
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(xii)
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purchase, repurchase, redeem, acquire or retire for nominal
value common stock or preferred stock purchase rights in each
case issued in connection with any shareholder rights plan that
may be adopted by the Company.
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If the Company makes a Restricted Payment which, at the time of
the making of such Restricted Payment, in the good faith
determination of the Company, would be permitted under the
requirements of the Indenture, such Restricted Payment shall be
deemed to have been made in compliance with the Indenture
notwithstanding any subsequent adjustment made in good faith to
the Companys financial statements affecting Consolidated
Net Income.
S-37
If any Person in which an Investment is made, which Investment
constitutes a Restricted Payment when made, thereafter becomes a
Restricted Subsidiary in accordance with the Indenture, all such
Investments previously made in such Person shall no longer be
counted as Restricted Payments for purposes of calculating the
aggregate amount of Restricted Payments pursuant to
clause (c) of the first paragraph under this
Limitation on Restricted Payments covenant, in each
case to the extent such Investments would otherwise be so
counted.
If the Company or a Restricted Subsidiary transfers, conveys,
sells, leases or otherwise disposes of an Investment in
accordance with the Limitation on Asset Sales
covenant, which Investment was originally included in the
aggregate amount expended or declared for all Restricted
Payments pursuant to clause (c) of the definition of
Restricted Payments, the aggregate amount expended
or declared for all Restricted Payments shall be reduced by the
lesser of (i) the net cash proceeds from the transfer,
conveyance, sale, lease or other disposition of such Investment
or (ii) the amount of the original Investment, in each
case, to the extent originally included in the aggregate amount
expended or declared for all Restricted Payments pursuant to
clause (c) of the definition of Restricted
Payments.
For purposes of this covenant, if a particular Restricted
Payment involves a non-cash payment, including a distribution of
assets, then such Restricted Payment shall be deemed to be an
amount equal to the cash portion of such Restricted Payment, if
any, plus an amount equal to the Fair Market Value of the
non-cash
portion of such Restricted Payment.
Limitation
on Liens
The Company will not, and will not permit any of its Restricted
Subsidiaries, directly or indirectly, to enter into, create,
incur, assume or suffer to exist any Liens of any kind (other
than Permitted Liens) (the Initial Liens), on
or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or
profits therefrom, which Liens secure Debt, without securing the
Notes and all other amounts due under the Indenture equally and
ratably with (or prior to) the Debt secured by such Lien until
such time as such Debt is no longer secured by such Lien;
provided that if the Debt so secured is subordinated by
its terms to the Notes or a Note Guarantee, the Lien securing
such Debt will also be so subordinated by its terms to the Notes
and the applicable Note Guarantee at least to the same extent.
Any Lien created for the benefit of the Holders of the Notes
pursuant to the foregoing sentence shall provide by its terms
that such Lien shall be automatically and unconditionally
released and discharged upon the release and discharge of the
Initial Lien.
Limitation
on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, cause or suffer to
exist or become effective or enter into any encumbrance or
restriction on the ability of any Restricted Subsidiary to
(i) pay dividends or make any other distributions on its
Capital Interests owned by the Company or any Restricted
Subsidiary or pay any Debt or other obligation owed to the
Company or any Restricted Subsidiary, (ii) make loans or
advances to the Company or any Restricted Subsidiary thereof or
(iii) transfer any of its property or assets to the Company
or any Restricted Subsidiary.
However, the preceding restrictions will not apply to the
following encumbrances or restrictions existing under or by
reason of:
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(a)
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any encumbrance or restriction in existence on the Issue Date,
including those required by the Credit Agreement or by any other
agreement or documents entered into in connection with the
Credit Agreement and any amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements, or refinancings, of any of the foregoing
agreements or documents, provided that the amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings, in the good faith
judgment of the
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S-38
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Company, are not materially more restrictive, taken as a whole,
with respect to such dividend or other payment restrictions than
those contained in these agreements on the Issue Date or
refinancings thereof;
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(b)
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any encumbrance or restriction pursuant to an agreement relating
to an acquisition of property, so long as the encumbrances or
restrictions in any such agreement relate solely to the property
so acquired (and are not or were not created in anticipation of
or in connection with the acquisition thereof);
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(c)
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any encumbrance or restriction which exists with respect to a
Person that becomes a Restricted Subsidiary or merges with or
into a Restricted Subsidiary of the Company on or after the
Issue Date, which is in existence at the time such Person
becomes a Restricted Subsidiary, but not created in connection
with or in anticipation of such Person becoming a Restricted
Subsidiary, and which is not applicable to any Person or the
property or assets of any Person other than such Person or the
property or assets of such Person becoming a Restricted
Subsidiary;
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(d)
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any instrument governing Debt or Capital Interests of a Person
acquired by the Company or any of the Restricted Subsidiaries as
in effect at the time of such acquisition (except to the extent
such Debt or Capital Interests was incurred in connection with
or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in
the case of Debt, such Debt was permitted by the terms of the
Indenture to be Incurred;
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(e)
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any encumbrance or restriction under the Indenture, the Notes
and any Note Guarantees;
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(f)
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any encumbrance or restriction pursuant to an agreement
effecting a permitted renewal, refunding, replacement,
refinancing or extension of Debt issued pursuant to an agreement
containing any encumbrance or restriction referred to in the
foregoing clauses (a) through (e), so long as the
encumbrances and restrictions contained in any such renewal,
refunding, replacement, refinancing or extension agreement are
no less favorable in any material respect to the Holders than
the encumbrances and restrictions contained in the agreements
governing the Debt being renewed, refunded, replaced, refinanced
or extended in the good faith judgment of the Company;
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(g)
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customary provisions restricting subletting or assignment of any
lease, contract, or license of the Company or any Restricted
Subsidiary or provisions in agreements that restrict the
assignment of such agreement or any rights thereunder;
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(h)
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any encumbrance or restriction by reason of applicable law,
rule, regulation, order, license, permit or similar restriction;
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(i)
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any encumbrance or restriction under the sale of assets or
Capital Interests, including, without limitation, any agreement
for the sale or other disposition of a Subsidiary that restricts
distributions by that Subsidiary pending its sale or other
disposition;
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(j)
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restrictions on cash and other deposits or net worth imposed by
customers under contracts entered into the ordinary course of
business;
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(k)
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customary provisions with respect to the disposition or
distribution of assets or property in joint venture agreements,
asset sale agreements, stock sale agreements, sale leaseback
agreements and other similar agreements;
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S-39
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(l)
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purchase money obligations (including Capital Lease Obligations)
for property acquired in the ordinary course of business that
impose restrictions on that property so acquired of the nature
described in clause (iii) of the first paragraph hereof;
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(m)
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Liens securing Debt otherwise permitted to be Incurred under the
Indenture, including the provisions of the covenant described
above under the caption Limitation on Liens
that limit the right of the debtor to dispose of the assets
subject to such Liens;
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(n)
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any Non-Recourse Receivable Subsidiary Indebtedness or other
contractual requirements of a Receivable Subsidiary that is a
Restricted Subsidiary in connection with a Qualified Receivables
Transaction; provided that such restrictions apply only
to such Receivable Subsidiary or the receivables and related
assets described in the definition of Qualified Receivables
Transaction which are subject to such Qualified Receivables
Transaction;
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(o)
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any other agreement governing Debt entered into after the Issue
Date that contains encumbrances and restrictions that are not
materially more restrictive with respect to any Restricted
Subsidiary than those in effect on the Issue Date with respect
to that Restricted Subsidiary pursuant to agreements in effect
on the Issue Date; and
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(p)
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existing under any agreement relating to Debt Incurred by
Foreign Subsidiaries permitted to be Incurred pursuant to the
covenant Limitation on Incurrence of Debt above and
Refinancing Debt in respect thereof; provided that such
restrictions are customary for a financing of such type and
apply only to the Persons Incurring such Debt (including
Guarantees thereof) and their Subsidiaries.
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Nothing contained in this Limitation on Dividend and Other
Payment Restrictions Affecting Restricted Subsidiaries
covenant shall prevent the Company or any Restricted Subsidiary
from (i) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in the Limitation on
Liens covenant or (ii) restricting the sale or other
disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Debt of the Company or any
of its Restricted Subsidiaries Incurred in accordance with the
Limitation on Incurrence of Debt and Limitation on Liens
covenants in the Indenture.
Limitation
on Asset Sales
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
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(1)
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the Company (or the applicable Restricted Subsidiary, as the
case may be) receives consideration at the time of the Asset
Sale at least equal to the Fair Market Value of the assets or
Capital Interests issued or sold or otherwise disposed
of; and
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(2)
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at least 75% of the consideration received in the Asset Sale by
the Company or such Restricted Subsidiary is in the form of cash
or Eligible Cash Equivalents. For purposes of this clause (2),
each of the following will be deemed to be cash:
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(a)
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any liabilities, as shown on the most recent consolidated
balance sheet of the Company or any Restricted Subsidiary (other
than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any Note Guarantee), or any
Guarantees of Debt (including without limitation the SunBelt
Guarantee) of Persons other than the Company or its Restricted
Subsidiaries, that are assumed (contractually or otherwise) by
the person acquiring such assets to the extent that the Company
and its Restricted Subsidiaries have no further liability with
respect to such liabilities;
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S-40
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(b)
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any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee
that are converted by the Company or such Restricted Subsidiary
into cash within 180 days of their receipt to the extent of
the cash received in that conversion;
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(c)
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any stock or assets of the kind referred to in clauses (ii)
or (iv) of the next paragraph of this covenant; and
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(d)
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any Designated Non-Cash Consideration received by the Company or
its Restricted Subsidiary in such Asset Sale having an aggregate
Fair Market Value, taken together with all other Designated
Non-Cash Consideration received pursuant to this clause (d)
that is at that time outstanding in the aggregate, not to exceed
the greater of (i) $35 million and (ii) 2.5% of
the Companys Consolidated Total Assets, in each case 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 measured at the time received
and without giving effect to subsequent changes in value.
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Within 365 days after the receipt of any Net Cash Proceeds
from an Asset Sale, the Company (or the applicable Restricted
Subsidiary, as the case may be) may apply such Net Cash Proceeds
at its option:
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(i)
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to permanently repay Debt and, if the Obligation repaid is
revolving credit Debt, to correspondingly reduce commitments
with respect thereto (A) under the Credit Facilities,
(B) other Debt outstanding on the Issue Date (other than
Debt subordinated by its terms to the Notes) with a Stated
Maturity priority to the maturity of the Notes and (C) Debt
of any Restricted Subsidiary that is not a Guarantor of the
Notes;
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(ii)
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to acquire all or substantially all of the assets of, or any
Capital Interests of, another Permitted Business, if, after
giving effect to any such acquisition of Capital Interests, the
Permitted Business is or becomes a Restricted Subsidiary of the
Company;
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(iii)
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to make a capital expenditure in or that is used or useful in a
Permitted Business or to make expenditures for maintenance,
repair or improvement of existing properties and assets in
accordance with the provisions of the Indenture;
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(iv)
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to acquire other assets (other than inventory) that are used or
useful in a Permitted Business;
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(v)
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to repay or repurchase Debt secured by the assets of the Company
or any Restricted Subsidiaries; or
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(vi)
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any combination of the foregoing;
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In addition to the foregoing, any acquisition of the type
described in clauses (ii) or (iv)
and/or any
capital expenditure described in clause (iii), in each case made
within 180 days prior to an Asset Sale, shall be deemed to
satisfy this paragraph with respect to the application of the
Net Cash Proceeds from such Asset Sale.
Any Net Cash Proceeds from Asset Sales that are not applied or
invested as provided in the preceding paragraph of this covenant
or that is not segregated from the general funds of the Company
for investment as permitted by the foregoing clauses (ii),
(iii) and (iv) in respect of a project that shall have
been commenced, and for which binding contractual commitments
have been entered into, prior to the end of such 365-day period
and that shall not have been completed or abandoned shall
constitute Excess Proceeds; provided,
however, that the amount of any Net Cash Proceeds that cease
to be so segregated as contemplated above and any Net Cash
Proceeds that are segregated in respect of a project that is
abandoned or completed shall also
S-41
constitute Excess Proceeds at the time any such Net
Cash Proceeds cease to be so segregated or at the time the
relevant project is so abandoned or completed, as applicable;
provided further, however, that the amount of any Net
Cash Proceeds that continues to be segregated for investment and
that is not actually reinvested within 540 days from the
date of the receipt of such Net Cash Proceeds shall also
constitute Excess Proceeds.
When the aggregate amount of Excess Proceeds exceeds
$35.0 million, the Company will (and at any time the
Company may), within 30 days, make an Offer to Purchase to
all Holders of Notes and to all holders of other Debt ranking
pari passu with the Notes containing provisions similar
to those set forth in the Indenture with respect to assets
sales, equal to the Excess Proceeds. The offer price in any
Offer to Purchase will be equal to 100% of the principal amount
plus accrued and unpaid interest to the date of purchase,
and will be payable in cash. If any Excess Proceeds remain after
consummation of an Offer to Purchase, the Company may use those
funds for any purpose not otherwise prohibited by the Indenture
and they will no longer constitute Excess Proceeds. If the
aggregate principal amount of Notes and other pari passu
debt tendered into such Offer to Purchase exceeds the amount
of Excess Proceeds, the Trustee will select the Notes to be
purchased on a pro rata basis among each series (subject to The
Depository Trust Company, Euroclear
and/or
Clearstream procedures as applicable). Upon completion of each
Offer to Purchase, the amount of Excess Proceeds will be reset
at zero. Pending the final application of any Net Cash Proceeds,
the Company may temporarily reduce revolving credit borrowings
or otherwise invest the Net Cash Proceeds in any manner that is
not prohibited by the Indenture.
The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other applicable securities laws
and regulations thereunder to the extent those laws and
regulations are applicable in connection with each repurchase of
Notes pursuant to an Offer to Purchase. To the extent that the
provisions of any securities laws or regulations conflict with
the Asset Sale provisions of the Indenture, the Company will
comply with the applicable securities laws and regulations and
will be deemed to have complied with its obligations under the
Asset Sale provisions of the Indenture by virtue of such
compliance.
Limitation
on Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any payment to, or
sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets
from, or enter into or make or amend any transaction or series
of related transactions, contract, agreement, loan, advance or
guarantee with, or for the benefit of, any Affiliate of the
Company (each of the foregoing, an Affiliate
Transaction) involving aggregate consideration in
excess of $5.0 million, unless:
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(i)
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such Affiliate Transaction is on terms that are not materially
less favorable to the Company or the relevant Subsidiary than
those that could reasonably be expected to have been obtained in
a comparable arms-length transaction by the Company or
such Subsidiary with an unaffiliated party; and
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(ii)
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with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $15.0 million, the Company delivers to the
Trustee a resolution adopted in good faith by the majority of
the Board of Directors of the Company approving such Affiliate
Transaction and set forth in an Officers Certificate
certifying that such Affiliate Transaction complies with
clause (i) above; and
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(iii)
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with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $25.0 million, the Company must obtain and
deliver to the Trustee a written opinion of a nationally
recognized investment banking, accounting or appraisal firm
stating that the transaction is fair to the Company or such
Restricted Subsidiary, as the case may be, from a financial
point of view.
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S-42
The foregoing limitations do not limit, and shall not apply to:
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(1)
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Restricted Payments that are permitted by the provisions of the
Indenture described above under Limitation on
Restricted Payments and Permitted Investments permitted
under the Indenture;
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(2)
|
the payment of reasonable and customary compensation and
indemnities and other benefits to members of the Board of
Directors of the Company or a Restricted Subsidiary who are
outside directors;
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(3)
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the payment of reasonable and customary compensation (including
awards or grants in cash or securities and other payments) and
other benefits (including retirement, health, option, deferred
compensation and other benefit plans) and indemnities to
officers and employees of the Company or any Restricted
Subsidiary as determined by the Board of Directors thereof in
good faith;
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(4)
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transactions between or among the Company
and/or its
Restricted Subsidiaries;
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(5)
|
any agreement or arrangement as in effect on the Issue Date and
any amendment or modification thereto so long as such amendment
or modification is not more disadvantageous to the Holders of
the Notes in any material respect;
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(6)
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any contribution of capital to the Company;
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(7)
|
transactions permitted by, and complying with, the provisions of
the Indenture described below under Consolidation,
Merger, Conveyance, Transfer or Lease;
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(8)
|
any transaction with a joint venture, partnership, limited
liability company or other entity that would constitute an
Affiliate Transaction solely because the Company or a Restricted
Subsidiary owns an equity interest in such joint venture,
partnership, limited liability company or other entity;
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(9)
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transactions with customers, clients, suppliers or purchasers or
sellers of goods or services, in each case, in the ordinary
course of business and on terms that are not materially less
favorable to the Company or such Restricted Subsidiary, as the
case may be, as determined in good faith by the Company, than
those that could reasonably be expected to be obtained in a
comparable arms-length transaction with a Person that is
not an Affiliate of the Company;
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(10)
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transactions effected as part of a Qualified Receivables
Transaction;
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(11)
|
loans (or Guarantees of third-party loans) and advances to
officers, directors and employees of the Company and
Subsidiaries in an aggregate amount not to exceed
$10.0 million at any one time outstanding for travel,
entertainment, relocation and analogous ordinary business
purposes; and
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(12)
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the issuance or sale of any Capital Stock (other than
Disqualified Capital Stock) of the Company.
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S-43
Limitation
on Sale and Leaseback Transactions
The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into any Sale and Leaseback Transaction
unless:
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(i)
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the consideration received in such Sale and Leaseback
Transaction is at least equal to the Fair Market Value of the
property sold,
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(ii)
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prior to and after giving effect to the Attributable Debt in
respect of such Sale and Leaseback Transaction, the Company and
such Restricted Subsidiary comply with the Limitation on
Incurrence of Debt covenant contained herein, and
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(iii)
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at or after such time the Company and such Restricted Subsidiary
also comply with the Limitation on Asset Sales
covenant contained herein, if applicable.
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Provision
of Financial Information
Whether or not required by the rules or regulations of the
Commission, so long as any Notes are outstanding, the Company
will furnish to the Trustee and the Holders of Notes, or file
electronically with the Commission through the Commissions
Electronic Data Gathering, Analysis and Retrieval System (or any
successor system), within the time periods specified in the
Commissions rules and regulations (after giving effect to
any grace period provided by
Rule 12b-25
under the Exchange Act):
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(1)
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all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on
Forms 10-Q
and 10-K if
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 information only, a report on the annual financial
statements by the Companys certified independent
accountants; and
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(2)
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all current reports that would be required to be filed (as
opposed to furnished) with the Commission on
Form 8-K
if the Company were required to file such reports.
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In addition, whether or not required by the Commission, the
Company will file a copy of all of the information and reports
referred to in clauses (1) and (2) above with the
Commission for public availability within the time periods
specified in the Commissions rules and regulations (after
giving effect to any grace period provided by
Rule 12b-25
under the Exchange Act) (unless the Commission will not accept
such a filing) and make such information available to
prospective investors.
If the Company has designated any of its Subsidiaries (other
than a Receivables Subsidiary) as Unrestricted Subsidiaries,
then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed
presentation, either on the face of the financial statements or
in the footnotes thereto, and in Managements
Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of
operations of the Company and its Restricted Subsidiaries
separate from the financial condition and results of operations
of the Unrestricted Subsidiaries of the Company.
Note
Guarantees
The Company will not permit any Restricted Subsidiary (other
than a Foreign Subsidiary or a Receivable Subsidiary) to Incur
any Debt (other than (A) Debt Incurred pursuant to clauses
(iv), (v), (viii), (ix), (x), (xi), (xii), (xiii), (xiv), (xvi),
(xviii), (xix) and (xx) (in the case of clause (xx), such
Refinancing Debt only with respect to such foregoing clauses of
the definition of Permitted Debt) of the definition
of Permitted Debt and (B) other Debt having an
aggregate principal amount for all non-Guarantors (other than
S-44
Foreign Subsidiaries or Receivable Subsidiaries) not in excess
of $35.0 million at any one time outstanding; provided
that, in the case of clause (B), at the time of, and after
giving effect to, the Incurrence of such Debt the Company could
Incur $1.00 of additional Debt (other than Permitted Debt) under
the provisions described in the first paragraph of
Limitation on Incurrence of Debt) unless
such Restricted Subsidiary simultaneously executes and delivers
a supplemental indenture to the Indenture providing for a
Guarantee of the payment of the Notes by such Restricted
Subsidiary (a Note Guarantee); provided
that any Subsidiary that is an Immaterial Subsidiary shall
not be required to become a Guarantor only if such Subsidiary
continues to constitute an Immaterial Subsidiary.
If the Guaranteed Debt is subordinated in right of payment to
the Notes, pursuant to a written agreement to that effect, the
Guarantee of such Guaranteed Debt must be subordinated in right
of payment to the Note Guarantee to at least the extent that the
Guaranteed Debt is subordinated to the Notes.
Any Note Guarantee will be a senior Obligation of that Guarantor
and will rank equally with all senior unsecured Obligations of
such Guarantor and will be effectively subordinated to any
secured Debt to the extent of the assets securing such Debt.
A Note Guarantee will terminate upon:
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(1)
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a sale or other disposition (including by way of consolidation
or merger) of the Guarantor or the sale or disposition of all or
substantially all the assets of the Guarantor (other than to the
Company or a Subsidiary or an Affiliate) otherwise permitted by
the Indenture;
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(2)
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the applicable Guarantors becoming an Unrestricted
Subsidiary in accordance with the terms of the Indenture; or
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(3)
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the release or discharge of the Guarantee or security that
enabled the creation of the Note Guarantee and all other
Guarantees of Debt of the Company by such Guarantor; provided
that no Default or Event of Default has occurred and is
continuing or would result therefrom.
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In the case of any Guarantor which is a Foreign Holdco, recourse
on its Note Guarantee will extend to all of such Foreign
Holdcos assets except that, with respect to such Foreign
Holdcos assets consisting of any Capital Interests in any
CFC, such recourse will not extend to more than 65% of the total
voting power of all classes of stock entitled to
vote within the meaning of Treasury
Regulation Section 1.956-2(c)(2)
(promulgated under the Code) of any such CFC owned directly by
such Foreign Holdco. Each Note Guarantee by a Restricted
Subsidiary will be limited to an amount not to exceed the
maximum amount that can be Guaranteed by that Restricted
Subsidiary without rendering the Guarantee, as it relates to
such Restricted Subsidiary, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. We
cannot assure you that this limitation will protect the Note
Guarantees from fraudulent transfer challenges or, if it does,
that the remaining amount due and collectible under the Note
Guarantees would suffice, if necessary, to pay the Notes in full
when due. In a recent Florida bankruptcy case, this kind of
provision was found to be unenforceable and, as a result, the
subsidiary guarantees in that case were found to be fraudulent
conveyances. We do not know if that case will be followed if
there is litigation on this point under the Indenture. However,
if it is followed, the risk that the Note Guarantees will be
found to be fraudulent conveyances will be significantly
increased.
Limitation
on Creation of Unrestricted Subsidiaries
The Company may designate any Subsidiary of the Company to be an
Unrestricted Subsidiary as provided below, in which
event such Subsidiary and each other Person that is then or
thereafter becomes a Subsidiary of such Subsidiary will be
deemed to be an Unrestricted Subsidiary.
S-45
Unrestricted
Subsidiary means:
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(1)
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any Subsidiary designated as such by an Officers
Certificate as set forth below where neither the Company nor any
of its Restricted Subsidiaries (i) provides credit support
for, or Guarantee of, any Debt of such Subsidiary or any
Subsidiary of such Subsidiary (including any undertaking,
agreement or instrument evidencing such Debt, but excluding in
the case of a Receivables Subsidiary any Standard Securitization
Undertakings and further excluding other Debt under which the
lender has recourse to the Company or any Restricted Subsidiary
or to any of their assets that does not exceed
$15.0 million in the aggregate), provided that the
Company or any Restricted Subsidiary may pledge Capital
Interests or Property of any Unrestricted Subsidiary on a
non-recourse basis as long as the pledgee has no claim
whatsoever against the Company or any Restricted Subsidiary
other than to obtain that pledged Capital Interests or Property,
or (ii) is directly or indirectly liable for any Debt of
such Subsidiary or any Subsidiary of such Subsidiary (except in
the case of a Receivables Subsidiary any Standard Securitization
Undertakings); and
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(2)
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any Subsidiary of an Unrestricted Subsidiary.
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The Company may designate any Subsidiary to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Interests of,
or owns or holds any Lien on any property of, any other
Restricted Subsidiary of the Company, provided that
either:
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(x)
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the Subsidiary to be so designated has total assets of $1,000 or
less; or
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(y)
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the Company could make a Restricted Payment at the time of
designation in an amount equal to the Fair Market Value of such
Subsidiary pursuant to the Limitation on Restricted
Payments covenant and such amount is thereafter treated as
a Restricted Payment for the purpose of calculating the amount
available for Restricted Payments thereunder.
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An Unrestricted Subsidiary may be designated as a Restricted
Subsidiary if (i) all the Debt of such Unrestricted
Subsidiary could be Incurred under the Limitation on
Incurrence of Debt covenant and (ii) all the Liens on
the property and assets of such Unrestricted Subsidiary could be
incurred pursuant to the Limitation on Liens
covenant.
Consolidation,
Merger, Conveyance, Transfer or Lease
The following provisions will apply to the Notes in lieu of the
provisions described in the accompanying prospectus under
Description of Debt SecuritiesConsolidation, Merger
and Sale of Assets.
The Company will not in any transaction or series of
transactions, consolidate with or merge into any other Person
(other than a merger of a Restricted Subsidiary into the Company
in which the Company is the continuing Person or the merger of a
Restricted Subsidiary into or with another Restricted Subsidiary
or another Person that as a result of such transaction becomes
or merges into a Restricted Subsidiary), or sell, assign,
convey, transfer, lease or otherwise dispose of all or
substantially all of the assets of the Company and its
Restricted Subsidiaries (determined on a consolidated basis),
taken as a whole, to any other Person, unless:
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(i)
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either: (a) the Company shall be the continuing Person or
(b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged, or the Person
that acquires, by sale, assignment, conveyance, transfer, lease
or other disposition, all or substantially all of the property
and assets of the Company (such Person, the Surviving
Entity), (1) shall be a corporation, partnership,
limited liability company or similar entity organized and
validly existing under the laws of the United States, any
political subdivision thereof or any state thereof or the
District of Columbia and (2) shall expressly assume, by a
supplemental indenture, the due and punctual payment of all
amounts due in respect of the
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S-46
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principal of (and premium, if any) and interest on all the Notes
and the performance of the covenants and obligations of the
Company under the Indenture; provided that at any time
the Company or its successor is not a corporation, there shall
be a co-issuer of the Notes that is a corporation;
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(ii)
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immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without
limitation, any Debt Incurred or anticipated to be Incurred in
connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have
occurred and be continuing or would result therefrom;
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(iii)
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immediately after giving effect to any such transaction or
series of transactions on a pro forma basis (including,
without limitation, any Debt Incurred or anticipated to be
Incurred in connection with or in respect of such transaction or
series of transactions) as if such transaction or series of
transactions had occurred on the first day of the determination
period, the Company (or the Surviving Entity if the Company is
not continuing) could Incur $1.00 of additional Debt (other than
Permitted Debt) under the provisions described in the first
paragraph of Limitation on Incurrence of Debt
or the Fixed Charge Coverage Ratio would not be less than
immediately prior to such transaction or series of
transactions; and
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(iv)
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the Company delivers, or causes to be delivered, to the Trustee,
in form satisfactory to the Trustee, an Officers
Certificate and an opinion of counsel, each stating that such
consolidation, merger, sale, conveyance, assignment, transfer,
lease or other disposition complies with the requirements of the
Indenture.
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Notwithstanding the foregoing, failure to satisfy the
requirements of the preceding clauses (ii) and
(iii) will not prohibit:
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(a)
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a merger between the Company and a Restricted Subsidiary that is
a wholly owned Subsidiary of the Company; or
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(b)
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a merger between the Company and an Affiliate solely for the
purpose of converting the Company into a corporation organized
under the laws of the United States or any political subdivision
or state thereof so long as the amount of Debt of the Company
and its Restricted Subsidiaries is not increased thereby.
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For all purposes of the Indenture and the Notes, Subsidiaries of
any Surviving Entity will, upon such transaction or series of
transactions, become Restricted Subsidiaries or Unrestricted
Subsidiaries as provided pursuant to the Indenture and all Debt,
and all Liens on property or assets, of the Surviving Entity and
its Subsidiaries that was not Debt, or were not Liens on
property or assets, of the Company and its Subsidiaries
immediately prior to such transaction or series of transactions
shall be deemed to have been Incurred upon such transaction or
series of transactions.
Upon any transaction or series of transactions that are of the
type described in, and are effected in accordance with,
conditions described in the immediately preceding paragraphs,
the Surviving Entity shall succeed to, and be substituted for,
and may exercise every right and power of, the Company, under
the Indenture with the same effect as if such Surviving Entity
had been named as the Company therein; and when a Surviving
Person duly assumes all of the obligations and covenants of the
Company pursuant to the Indenture and the Notes, except in the
case of a lease, the predecessor Person shall be relieved of all
such obligations.
S-47
Limitation
on Business Activities
The Company will not, and will not permit any Restricted
Subsidiary to, engage in any business other than a Permitted
Business.
Events of
Default
The following provisions will apply to the Notes in lieu of the
provisions described in the accompanying prospectus under
Description of Debt SecuritiesEvents of
Default.
Each of the following is an Event of Default under
the Indenture:
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(1)
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default in the payment in respect of the principal of (or
premium, if any, on) any Note when due and payable (whether at
Stated Maturity or upon repurchase, acceleration, optional
redemption or otherwise);
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(2)
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default in the payment of any interest upon any Note when it
becomes due and payable, and continuance of such default for a
period of 30 days;
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(3)
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failure to perform or comply with the Indenture provisions
described under Provision of Financial
Information and continuance of such failure to perform or
comply for a period of 120 days after written notice
thereof has been given to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the outstanding Notes;
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(4)
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except as permitted by the Indenture, any Note Guarantee of any
Significant Subsidiary (or any group of Restricted Subsidiaries
that, taken together, would constitute a Significant
Subsidiary), shall for any reason cease to be, or it shall be
asserted by any Guarantor or the Company not to be, in full
force and effect and enforceable in accordance with its terms;
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(5)
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default in the performance, or breach, of any covenant or
agreement of the Company or any Guarantor in the Indenture
(other than a covenant or agreement a default in whose
performance or whose breach is specifically dealt with in
clauses (1), (2), (3) or (4) above), and continuance
of such default or breach for a period of 60 days after
written notice thereof has been given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at
least 25% in aggregate principal amount of the outstanding Notes;
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(6)
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a default or defaults under any bonds, debentures, notes or
other evidences of Debt (other than the Notes) by the Company or
any Restricted Subsidiary having, individually or in the
aggregate, a principal or similar amount outstanding of at least
$40.0 million, whether such Debt now exists or shall
hereafter be created, which default or defaults shall have
resulted in the acceleration of the maturity of such Debt prior
to its express maturity or shall constitute a failure to pay at
least $40.0 million of such Debt when due and payable after
the expiration of any applicable grace period with respect
thereto;
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(7)
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the entry against the Company or any Restricted Subsidiary that
is a Significant Subsidiary of a final judgment or final
judgments for the payment of money in an aggregate amount in
excess of $40.0 million (net of any amounts covered by
insurance where coverage has not been disclaimed or denied), by
a court or courts of competent jurisdiction, which judgment or
judgments remain undischarged, unwaived, unstayed, unbonded or
unsatisfied for a period of 60 consecutive days; or
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S-48
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(8)
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certain events in bankruptcy, insolvency or reorganization
affecting the Company or any Significant Subsidiary (or any
group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary).
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If an Event of Default (other than an Event of Default specified
in clause (8) above with respect to the Company) occurs and
is continuing, then and in every such case the Trustee or the
Holders of not less than 25% in aggregate principal amount of
the outstanding Notes may declare the principal of the Notes and
any accrued interest on the Notes to be due and payable
immediately by a notice in writing to the Company (and to the
Trustee if given by Holders); provided, however, that
after such acceleration, but before a judgment or decree based
on acceleration, the Holders of a majority in aggregate
principal amount of the outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all Events
of Default, other than the nonpayment of accelerated principal
of or interest on the Notes, have been cured or waived as
provided in the Indenture.
In the event of a declaration of acceleration of the Notes
solely because an Event of Default described in clause (6)
above has occurred and is continuing, the declaration of
acceleration of the Notes shall be automatically rescinded and
annulled if the event of default or payment default triggering
such Event of Default pursuant to clause (6) shall be
remedied or cured by the Company or a Restricted Subsidiary of
the Company or waived by the holders of the relevant Debt within
20 business days after the declaration of acceleration with
respect thereto and if the rescission and annulment of the
acceleration of the Notes would not conflict with any judgment
or decree of a court of competent jurisdiction obtained by the
Trustee for the payment of amounts due on the Notes.
If an Event of Default specified in clause (8) above occurs
with respect to the Company, the principal of and any accrued
interest on the Notes then outstanding shall ipso facto
become immediately due and payable without any declaration
or other act on the part of the Trustee or any Holder. For
further information as to waiver of defaults, see
Amendment, Supplement and Waiver. The Trustee
may withhold from Holders notice of any Default (except Default
in payment of principal of, premium, if any, and interest) if
the Trustee determines that withholding notice is in the
interests of the Holders to do so.
No Holder of any Note will have any right to institute any
proceeding with respect to the Indenture or for any remedy
thereunder, unless such Holder shall have previously given to
the Trustee written notice of a continuing Event of Default and
unless also the Holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request
to the Trustee, and provided indemnity reasonably satisfactory
to the Trustee, to institute such proceeding as Trustee, and the
Trustee shall not have received from the Holders of a majority
in aggregate principal amount of the outstanding Notes a
direction inconsistent with such request and shall have failed
to institute such proceeding within 60 days. Such
limitations do not apply, however, to a suit instituted by a
Holder of a Note directly (as opposed to through the Trustee)
for enforcement of payment of the principal of (and premium, if
any) or interest on such Note on or after the respective due
dates expressed in such Note.
The Company will be required to furnish to the Trustee annually
a statement as to the performance of certain obligations under
the Indenture and as to any default in such performance. The
Company also is required to notify the Trustee if it becomes
aware of the occurrence of any Default or Event of Default that
has not been cured.
Amendment,
Supplement and Waiver
The following provisions will apply to the Notes in lieu of the
provisions described in the accompanying prospectus under
Description of Debt SecuritiesModification and
Waiver.
Without the consent of any Holders, the Company, any Guarantors
(except that any existing Guarantors need not execute a
supplemental indenture entered into pursuant to clause (7)
below) and the
S-49
Trustee, at any time and from time to time, may enter into one
or more indentures supplemental to the Indenture and any Note
Guarantees for any of the following purposes:
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(1)
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to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the
Company in the Indenture, any Note Guarantees and the Notes;
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(2)
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to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred
upon the Company;
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(3)
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to add additional Events of Default;
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(4)
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to provide for uncertificated Notes in addition to or in place
of the certificated Notes;
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(5)
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to evidence and provide for the acceptance of appointment under
the Indenture by a successor Trustee;
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(6)
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to provide for or confirm the issuance of Additional Notes in
accordance with the terms of the Indenture;
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(7)
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to add a Guarantor or to release a Guarantor in accordance with
the Indenture, or to modify the Indenture in connection with the
addition of any Guarantor and Note Guarantee;
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(8)
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to cure any ambiguity, defect, omission, mistake or
inconsistency;
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(9)
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to make any other provisions with respect to matters or
questions arising under the Indenture, provided that such
actions pursuant to this clause (9) shall not adversely
affect the legal interests of the Holders in any material
respect, as determined in good faith by the Board of Directors
of the Company;
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(10)
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to conform the text of the Indenture or the Notes to any
provision of this Description of Notes to the extent
that the Trustee has received an Officers Certificate
stating that such text constitutes an unintended conflict with
the description of the corresponding provision in this
Description of Notes; or
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(11)
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to effect or maintain the qualification of the Indenture under
the Trust Indenture Act.
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With the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes, the
Company, any Guarantors and the Trustee may enter into an
indenture or indentures supplemental to the Indenture for the
purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or the Notes
or of modifying in any manner the rights of the Holders of the
Notes under the Indenture, including the definitions therein;
provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each outstanding
Note affected thereby:
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(1)
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change the Stated Maturity of any Note or of any installment of
interest on any Note, or reduce the amount payable in respect of
the principal thereof or the rate of interest thereon or any
premium payable thereon, or reduce the amount that would be due
and payable on acceleration of the maturity thereof, or the coin
or currency in which, any Note or any premium or interest
thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated
Maturity thereof, or change the date on which any Notes may be
subject to redemption or reduce the Redemption Price
therefore;
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S-50
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(2)
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reduce the percentage in aggregate principal amount of the
outstanding Notes, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders
is required for any waiver (of compliance with certain
provisions of the Indenture or certain defaults thereunder and
their consequences) provided for in the Indenture;
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(3)
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modify the obligations of the Company to make Offers to Purchase
upon a Change of Control or from the Excess Proceeds of Asset
Sales after the occurrence of such Change of Control or such
Asset Sale;
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(4)
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modify or change any provision of the Indenture affecting the
ranking of the Notes or any Note Guarantee in an manner adverse
to the Holders of the Notes;
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(5)
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modify any of the provisions of this paragraph or provisions
relating to waiver of defaults or certain covenants, except to
increase any such percentage required for such actions or to
provide that certain other provisions of the Indenture cannot be
modified or waived without the consent of the Holder of each
outstanding Note affected thereby; or
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(6)
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release any Note Guarantees required to be maintained under the
Indenture (other than in accordance with the terms of the
Indenture).
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The Holders of not less than a majority in aggregate principal
amount of the outstanding Notes may on behalf of the Holders of
all the Notes waive any past Default under the Indenture and its
consequences, except a Default:
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(1)
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in any payment in respect of the principal of (or premium, if
any) or interest on any Notes (including any Note which is
required to have been purchased pursuant to an Offer to Purchase
which has been made by the Company), or
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(2)
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in respect of a covenant or provision hereof which under the
Indenture cannot be modified or amended without the consent of
the Holder of each outstanding Note affected.
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Satisfaction
and Discharge of the Indenture
The Company and any Guarantors may terminate the obligations
under the Indenture when:
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(1)
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either: (A) all Notes theretofore authenticated and
delivered have been delivered to the Trustee for cancellation,
or (B) all such Notes not theretofore delivered to the
Trustee for cancellation (i) have become due and payable or
(ii) will become due and payable within one year or are to
be called for redemption within one year (a
Discharge) under irrevocable arrangements
satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of
the 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 to the Stated
Maturity or date of redemption;
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(2)
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the Company has paid or caused to be paid all other sums then
due and payable under the Indenture by the Company;
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(3)
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the deposit will not result in a breach or violation of, or
constitute a default under, any other material instrument to
which the Company or any Guarantor is a party or by which the
Company or any Guarantor is bound;
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S-51
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(4)
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the Company has delivered irrevocable instructions to the
Trustee under the Indenture to apply the deposited money toward
the payment of the Notes at maturity or on the redemption date,
as the case may be; and
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(5)
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the Company has delivered to the Trustee an Officers
Certificate and an opinion of counsel reasonably acceptable to
the Trustee, each stating that all conditions precedent under
the Indenture relating to the Discharge have been complied with.
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Defeasance
The following provisions will apply to the Notes in lieu of the
provisions described in the accompanying prospectus under
Description of Debt Securities and Certain Covenants in
Certain Circumstances.
The Company may elect, at its option, to have its obligations
discharged with respect to the outstanding Notes
(defeasance). Such defeasance means that the
Company will be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, except for:
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(1)
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the rights of Holders of such Notes to receive payments in
respect of the principal of and any premium and interest on such
Notes when payments are due,
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(2)
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the Companys obligations with respect to such Notes
concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance
of an office or agency for payment and money for security
payments held in trust,
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(3)
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the rights, powers, trusts, duties and immunities of the Trustee,
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(4)
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the Companys right of optional redemption, and
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(5)
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the defeasance provisions of the Indenture.
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In addition, the Company may elect, at its option, to have its
obligations released with respect to certain covenants,
including, without limitation, their obligation to make Offers
to Purchase in connection with Asset Sales and any Change of
Control, in the Indenture (covenant
defeasance) and any omission to comply with such
obligation shall not constitute a Default or an Event of Default
with respect to the Notes. In the event covenant defeasance
occurs, certain events (not including non-payment, bankruptcy
and insolvency events) described under Events of
Default will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either defeasance or covenant defeasance
with respect to outstanding Notes:
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(1)
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the Company must irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the
purpose of making the following payments, specifically pledged
as security for, and dedicated solely to the benefits of the
Holders of such Notes: (A) money in an amount,
(B) U.S. government obligations, which through the
scheduled payment of principal and interest in respect thereof
in accordance with their terms will provide, not later than the
due date of any payment, money in an amount or (C) a
combination thereof, in each case sufficient without
reinvestment, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee to pay and
discharge, the entire indebtedness in respect of the principal
of and premium, if any, and interest on such Notes on the Stated
Maturity thereof or (if the Company has made irrevocable
arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name and at the
expense of the Company) the
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S-52
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redemption date thereof, as the case may be, in accordance with
the terms of the Indenture and such Notes;
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(2)
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in the case of defeasance, the Company shall have delivered to
the Trustee an opinion of counsel stating 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 United
States federal income tax law, in either case (A) or
(B) to the effect that, and based thereon such opinion
shall confirm that, the Holders of such Notes will not recognize
gain or loss for United States federal income tax purposes as a
result of the deposit, defeasance and discharge to be effected
with respect to such Notes and will be subject to United States
federal income tax on the same amount, in the same manner and at
the same times as would be the case if such deposit, defeasance
and discharge were not to occur;
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(3)
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in the case of covenant defeasance, the Company shall have
delivered to the Trustee an opinion of counsel to the effect
that the Holders of such outstanding Notes will not recognize
gain or loss for United States federal income tax purposes as a
result of the deposit and covenant defeasance to be effected
with respect to such Notes and will be subject to federal income
tax on the same amount, in the same manner and at the same times
as would be the case if such deposit and covenant defeasance
were not to occur;
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(4)
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no Default or Event of Default with respect to the outstanding
Notes shall have occurred and be continuing at the time of such
deposit after giving effect thereto (other than a Default or
Event of Default resulting from the borrowing of funds to be
applied to such deposit and the grant of any Lien to secure such
borrowing);
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(5)
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such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the
Trust Indenture Act (assuming all Notes are in default
within the meaning of such Act);
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(6)
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such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any
material agreement or material instrument (other than the
Indenture) to which the Company is a party or by which the
Company is bound; and
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(7)
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the Company shall have delivered to the Trustee an
Officers Certificate and an opinion of counsel, each
stating that all conditions precedent with respect to such
defeasance or covenant defeasance have been complied with.
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Notwithstanding the foregoing, the opinion of counsel required
by clause (2) above with respect to a defeasance need not
to be delivered if all Notes not therefore delivered to the
Trustee for cancellation (x) have become due and payable,
or (y) will become due and payable at Stated Maturity
within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee in the
name, and at the expense, of the Company.
In the event of a defeasance or a Discharge, a Holder whose
taxable year straddles the deposit of funds and the distribution
in redemption to such Holder would be subject to tax on any gain
(whether characterized as capital gain or market discount) in
the year of deposit rather than in the year of receipt. In
connection with a Discharge, in the event the Company becomes
insolvent within the applicable preference period after the date
of deposit, monies held for the payment of the Notes may be part
of the bankruptcy estate of the Company, disbursement of such
monies may be subject to the automatic stay of the bankruptcy
code and monies disbursed to Holders may be subject to
disgorgement in favor of the Companys estate. Similar
results may apply upon the insolvency of the Company during the
applicable preference period following the deposit of monies in
connection with defeasance.
S-53
The
Trustee
The Trustee from time to time may extend credit to the Company
in the normal course of business. Except during the continuance
of an Event of Default, the Trustee will perform only such
duties as are specifically set forth in the Indenture. During
the continuance of an Event of Default that has not been cured
or waived, the Trustee will exercise such of the rights and
powers vested in it by the Indenture and use the same degree of
care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such
persons own affairs.
The Indenture and the Trust Indenture Act contain certain
limitations on the rights of the Trustee, should it become a
creditor of the Company, to obtain payment of claims in certain
cases or to realize on certain property received in respect of
any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it
acquires any conflicting interest (as defined in the
Trust Indenture Act) it must eliminate such conflict within
90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the outstanding
Notes will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the
Trustee, subject to certain exceptions. The Indenture provides
that in case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested
in it by the Indenture, and use the same degree of care and
skill in their exercise, as a prudent person would exercise or
use under the circumstances in the conduct of such persons
own affairs. Subject to such provisions, the Trustee shall be
under no obligation to exercise any of the rights or powers
vested in it by the Indenture at the request or direction of any
of the Holders pursuant to the Indenture, unless such Holders
shall have provided to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs,
expenses and liabilities which might be incurred by it in
compliance with such request or direction.
No recourse may, to the full extent permitted by applicable law,
be taken, directly or indirectly, with respect to the
obligations of the Company or the Guarantors on the Notes or
under the Indenture or any related documents, any certificate or
other writing delivered in connection therewith, against
(i) the Trustee in its individual capacity, (ii) any
partner, owner, beneficiary, agent, officer, director, employee,
agent, successor or assign of the Trustee, each in its
individual capacity, or (iii) any holder of equity in the
Trustee.
No
Personal Liability of Shareholders, Partners, Officers or
Directors
No director, officer, employee, shareholder, Affiliate, general
or limited partner or incorporator, past, present or future, of
the Company or any of its Subsidiaries, as such or in such
capacity, shall have any personal liability for any obligations
of the Company under the Notes, any Note Guarantee or the
Indenture by reason of his, her or its status as such director,
officer, employee, shareholder, Affiliate, general or limited
partner or incorporator. Each Holder of Notes by accepting a
Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the
Notes.
Governing
Law
The Indenture, the Notes and any Note Guarantees will be
governed by, and will be construed in accordance with, the laws
of the State of New York.
Certain
Definitions
Set forth below is a summary of certain of the defined terms
used in the Indenture. Reference is made to the Indenture for
the full definition of all such terms, as well as any
capitalized term used herein for which no definition is
provided. Where a definition below differs from the same
definition in the accompanying prospectus under
Description of Debt SecuritiesCertain Defined
Terms, the definition below will apply to the Notes in
lieu thereof.
S-54
Acquired Debt means Debt (1) of a Person
(including an Unrestricted Subsidiary) existing at the time such
Person becomes a Restricted Subsidiary or (2) assumed in
connection with the acquisition of assets from such Person.
Acquired Debt shall be deemed to have been Incurred, with
respect to clause (1) of the preceding sentence, on the
date such Person becomes a Restricted Subsidiary and, with
respect to clause (2) of the preceding sentence, on the
date of consummation of such acquisition of assets.
Affiliate of any Person means any other
Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such Person. For
the purposes of this definition, control when used
with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract
or otherwise; and the terms controlling and
controlled have meanings that correspond to the
foregoing.
Applicable Premium means, with respect to a
Note at any date of redemption, the greater of (i) 1.0% of
the principal amount of such Note and (ii) the excess of
(A) the present value at such date of redemption of
(1) the redemption price of such Note
at ,
2015 (such redemption price being described under
Optional Redemption) plus (2) all
remaining required interest payments due on such Note
through ,
2015 (excluding accrued but unpaid interest to the date of
redemption), computed using a discount rate equal to the
Treasury Rate plus 50 basis points, over (B) the
principal amount of such Note.
Asset Acquisition means:
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(a)
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an Investment by the Company or any Restricted Subsidiary in any
other Person pursuant to which such Person shall become a
Restricted Subsidiary, or shall be merged with or into the
Company or any Restricted Subsidiary; or
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(b)
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the acquisition by the Company or any Restricted Subsidiary of
the assets of any Person which constitute all or substantially
all of the assets of such Person, any division or line of
business of such Person or any other properties or assets of
such Person other than in the ordinary course of business and
consistent with past practices.
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Asset Sale means any transfer, conveyance,
sale, lease or other disposition (including, without limitation,
dispositions pursuant to any consolidation or merger) by the
Company or any of its Restricted Subsidiaries to any Person
(other than to the Company or one or more of its Restricted
Subsidiaries) in any single transaction or series of
transactions of:
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(i)
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Capital Interests in a Restricted Subsidiary (other than
directors qualifying shares or shares or interests
required to be held by foreign nationals pursuant to local law);
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(ii)
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any other property or assets (other than in the normal course of
business, including any sale or other disposition of obsolete or
permanently retired equipment);
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provided, however, that the term Asset Sale
shall exclude:
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(a)
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any asset disposition permitted by the provisions described
under Consolidation, Merger, Conveyance, Lease or
Transfer that constitutes a disposition of all or
substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole;
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(b)
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any transfer, conveyance, sale, lease or other disposition of
property or assets, the gross proceeds of which (exclusive of
indemnities) do not exceed in any one or related series of
transactions $10.0 million;
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(c)
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sales or other dispositions of cash or Eligible Cash Equivalents;
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S-55
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(d)
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sales of interests in or assets of Unrestricted Subsidiaries;
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(e)
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the sale and leaseback of any assets within 90 days of the
acquisition thereof;
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(f)
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the disposition of assets that, in the good faith judgment of
the Company, are no longer used or useful in the business of
such entity;
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(g)
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a Restricted Payment or Permitted Investment that is otherwise
permitted by the Indenture;
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(h)
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any trade-in of equipment in exchange for other equipment;
provided that, in the good faith judgment of the Company,
the Company or such Restricted Subsidiary receives equipment
having a Fair Market Value equal to or greater than the
equipment being traded in;
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(i)
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the concurrent purchase and sale or exchange of Related Business
Assets or a combination of Related Business Assets between the
Company or any of its Restricted Subsidiaries and another person
to the extent that the Related Business Assets received by the
Company or its Restricted Subsidiaries are of equivalent or
greater Fair Market Value than the Related Business Assets
transferred;
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(j)
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the creation of a Lien (but not the sale or other disposition of
the property subject to such Lien);
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(k)
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leases or subleases in the ordinary course of business to third
persons not interfering in any material respect with the
business of the Company or any of its Restricted Subsidiaries
and otherwise in accordance with the provisions of the Indenture;
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(l)
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any disposition by a Subsidiary to the Company or by the Company
or a Subsidiary to a Restricted Subsidiary;
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(m)
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dispositions of accounts receivable in connection with the
collection or compromise thereof in the ordinary course of
business and consistent with past practice;
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(n)
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licensing or sublicensing of intellectual property or other
general intangibles in accordance with industry practice in the
ordinary course of business;
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(o)
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any transfer of accounts receivable, or a fractional undivided
interest therein, by a Receivable Subsidiary in a Qualified
Receivables Transaction;
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(p)
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any release of any intangible claims or rights in connection
with a lawsuit, dispute or other controversy;
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(q)
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sales of accounts receivable to a Receivable Subsidiary pursuant
to a Qualified Receivables Transaction for the Fair Market Value
thereof; including cash or other financial accommodation, such
as the provision of letters of credit by such Receivable
Subsidiary on behalf of or for the benefit of the transferor of
such accounts receivable (for the purposes of this clause (q),
Purchase Money Notes will be deemed to be cash); or
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(r)
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foreclosures on assets to the extent they would not otherwise
result in a Default or Event of Default.
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For purposes of this definition, any series of related
transactions that, if effected as a single transaction, would
constitute an Asset Sale shall be deemed to be a single Asset
Sale effected when the last such transaction which is a part
thereof is effected.
S-56
Attributable Debt in respect of a Sale and
Leaseback Transaction means, at the time of determination, the
present value (discounted at the rate of interest implicit in
such transaction) of the total obligations of the lessee for
rental payments during the remaining term of the lease included
in such Sale and Leaseback Transaction (including any period for
which such lease has been extended).
Average Life means, as of any date of
determination, with respect to any Debt, the quotient obtained
by dividing (i) the sum of the products of
(x) the number of years from the date of determination to
the dates of each successive scheduled principal payment
(including any sinking fund or mandatory redemption payment
requirements) of such Debt multiplied by (y) the
amount of such principal payment by (ii) the sum of all
such principal payments.
Board of Directors means (i) with
respect to the Company or any Restricted Subsidiary, its board
of directors or any duly authorized committee thereof;
(ii) with respect to a corporation, the board of directors
of such corporation or any duly authorized committee thereof;
and (iii) with respect to any other entity, the board of
directors or similar body of the general partner or managers of
such entity or any duly authorized committee thereof.
Capital Interests in any Person means any and
all shares, interests (including Preferred Interests),
participations or other equivalents in the equity interest
(however designated) in such Person and any rights (other than
Debt securities convertible into an equity interest), warrants
or options to acquire an equity interest in such Person.
Capital Lease Obligations means any
obligation of a Person under a lease that is required to be
capitalized for financial reporting purposes in accordance with
GAAP; and the amount of Debt represented by such obligation
shall be the capitalized amount of such obligations determined
in accordance with GAAP; and the Stated Maturity thereof shall
be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
CFC means a Person that is a controlled
foreign corporation under Section 957 of the Code.
Change of Control means:
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(1)
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the Company becomes aware (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act,
proxy, vote, written notice or otherwise) that any
person or group (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act) is or
becomes the ultimate beneficial owner (as such term
is used in
Rules 13d-3
and 13d-5
under the Exchange Act, except that for purposes of this
clause (1) such person or group shall be deemed to have
beneficial ownership of all shares that any such
person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the Voting Interests
in the Company,
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(2)
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during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors
of the Company (together with any new directors whose election
by the Board of Directors or whose nomination for election by
the equityholders of the Company was approved by a vote of a
majority of the directors of the Company then still in office
who were either directors at the beginning of such period or
whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
Companys Board of Directors then in office, or
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(3)
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the Company sells, conveys, transfers or leases (either in one
transaction or a series of related transactions) all or
substantially all of its assets to, or merges or consolidates
with, a Person other than a Restricted Subsidiary of the
Company, other than a merger or consolidation where
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S-57
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(A) the Voting Interests of the Company outstanding
immediately prior to such transaction are converted into or
exchanged for Voting Interests of the surviving or transferee
Person constituting a majority of the outstanding Voting
Interests of such surviving or transferee Person (immediately
after giving effect to such issuance) and (B) immediately
after such transaction, no person or
group (as such terms are used in Section 13(d)
and 14(d) of the Exchange Act) becomes, directly or indirectly,
the beneficial owner of 50% or more of the voting power of the
Voting Interests of the surviving or transferee Person.
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Code means the Internal Revenue Code of 1986,
as amended from time to time and the regulations promulgated
thereunder.
Common Interests of any Person means Capital
Interests in such Person that do not rank prior, as to the
payment of dividends or as to the distribution of assets upon
any voluntary or involuntary liquidation, dissolution or winding
up of such Person, to Capital Interests of any other class in
such Person.
Company means PolyOne Corporation and any
successor thereto.
Consolidated Cash Flow Available for Fixed
Charges means, with respect to any Person for any
period:
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(i)
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the sum of, without duplication, the amounts for such period,
taken as a single accounting period, of:
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(a)
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Consolidated Net Income;
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(b)
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Consolidated Non-cash Charges;
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(c)
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Consolidated Interest Expense to the extent the same was
deducted in computing Consolidated Net Income;
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(d)
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Consolidated Income Tax Expense;
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(e)
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any expenses or charges related to any equity offering,
Permitted Investment, recapitalization or Incurrence of Debt
permitted to be made under the Indenture (whether or not
successful) or related to this offering of the Notes;
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(f)
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the amount of any interest expense attributable to minority
equity interests of third parties in any non-wholly owned
Subsidiary to the extent deducted in such period in computing
Consolidated Net Income;
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(g)
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any net loss from discontinued operations; and
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(h)
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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, any stock subscription or shareholder agreement, to
the extent that such costs or expenses are funded with cash
proceeds contributed to the capital of the Company or net cash
proceeds of an issuance of Capital Interests of the Company
(other than Redeemable Capital Interests); less
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(ii)
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(x) net income from discontinued operations and
(y) non-cash items increasing Consolidated Net Income for
such period, other than the accrual of revenue in the ordinary
course of business.
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S-58
Consolidated Fixed Charge Coverage Ratio
means, with respect to any Person, the ratio of the aggregate
amount of Consolidated Cash Flow Available for Fixed Charges of
such Person for the four full fiscal quarters, treated as one
period, for which financial information in respect thereof is
available immediately preceding the date of the transaction (the
Transaction Date) giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio (such
four full fiscal quarter period being referred to herein as the
Four Quarter Period) to the aggregate amount
of Consolidated Fixed Charges of such Person for the
Four-Quarter Period. In addition to and without limitation of
the foregoing, for purposes of this definition,
Consolidated Cash Flow Available for Fixed Charges
and Consolidated Fixed Charges shall be calculated
after giving effect (i) to the cost of any compensation,
remuneration or other benefit paid or provided to any employee,
consultant, Affiliate, equity owner of the entity involved in
any Asset Acquisition to the extent such costs are eliminated or
reduced (or public announcement has been made of the intent to
eliminate or reduce such costs) prior to the date of such
calculation and not replaced; and (ii) on a pro forma
basis for the period of such calculation, to any Asset Sales
or other dispositions or Asset Acquisitions, Investments,
mergers, consolidations, discontinued operations (as determined
in accordance with GAAP) or designations of any Restricted
Subsidiary as an Unrestricted Subsidiary or any Unrestricted
Subsidiary as a Restricted Subsidiary occurring during the
Four-Quarter Period or any time subsequent to the last day of
the Four-Quarter Period and on or prior to the Transaction Date,
as if such Asset Sale or other disposition or Asset Acquisition
(including the Incurrence or assumption of any such Acquired
Debt), Investment, merger, consolidation, disposed operation or
designation occurred on the first day of the Four-Quarter
Period. For purposes of this definition, pro forma
calculations shall be made in accordance with
Article 11 of Regulation S X promulgated under the
Securities Act, except that such pro forma calculations
may also include operating expense reductions for such period
resulting from the Asset Sale or other disposition or Asset
Acquisition, investment, merger, consolidation or discontinued
operation (as determined in accordance with GAAP) for which
pro forma effect is being given (A) that have been
realized or (B) for which steps have been taken or are
reasonably expected to be taken within six (6) months of
the date of such transaction and are supportable and
quantifiable and, in each case, including, but not limited to,
(a) reduction in personnel expenses, (b) reduction of
costs related to administrative functions, (c) reduction of
costs related to leased or owned properties and
(d) reductions from the consolidation of operations and
streamlining of corporate overhead, provided that, in
either case, such adjustments are set forth in an Officers
Certificate signed by the Companys chief financial or
similar officer that states (i) the amount of such
adjustment or adjustments and (ii) that such adjustment or
adjustments are based on the reasonable good faith belief of the
Officers executing such Officers Certificate at the time
of such execution.
Furthermore, in calculating Consolidated Fixed
Charges for purposes of determining the denominator (but
not the numerator) of this Consolidated Fixed Charge
Coverage Ratio:
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(i)
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interest on outstanding Debt determined on a fluctuating basis
as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed
rate per annum equal to the rate of interest on such Debt in
effect on the Transaction Date; and
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(ii)
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if interest on any Debt actually Incurred on the Transaction
Date may optionally be determined at an interest rate based upon
a factor of a prime or similar rate, a eurocurrency interbank
offered rate, or other rates, then the interest rate in effect
on the Transaction Date will be deemed to have been in effect
during the Four Quarter Period.
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If such Person or any of its Restricted Subsidiaries directly or
indirectly Guarantees Debt of a third Person, the above clause
shall give effect to the Incurrence of such Guaranteed Debt as
if such Person or such Subsidiary had directly Incurred or
otherwise assumed such Guaranteed Debt.
Consolidated Fixed Charges means, with
respect to any Person for any period, the sum of, without
duplication, the amounts for such period of:
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(i)
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Consolidated Interest Expense; and
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S-59
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(ii)
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the product of (a) all cash dividends and other
distributions paid or accrued during such period in respect of
Redeemable Capital Interests of such Person and its Restricted
Subsidiaries (other than dividends paid in Qualified Capital
Interests), times (b) a fraction, the numerator of
which is one and the denominator of which is one minus
the then current combined federal, state and local statutory
tax rate of such Person, expressed as a decimal.
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Consolidated Income Tax Expense means, with
respect to any Person for any period the provision for federal,
state, local and foreign income taxes of such Person and its
Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP paid or accrued
during such period, including any penalties and interest related
to such taxes or arising from any tax examinations, to the
extent the same were deducted in computing Consolidated Net
Income.
Consolidated Interest Expense means, with
respect to any Person for any period, without duplication, the
sum of:
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(i)
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the total interest expense of such Person and its Restricted
Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation:
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(a)
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any amortization of debt discount;
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(b)
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the net cost under any Hedging Obligation or Swap Contract in
respect of interest rate protection (including any amortization
of discounts);
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(c)
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the interest portion of any deferred payment obligation;
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(d)
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all commissions, discounts and other fees and charges owed with
respect to Qualified Receivables Transactions (to the extent
payable by the Company and its Restricted Subsidiaries to any
Person other than the Company or a Restricted Subsidiary) and
letters of credit and bankers acceptance
financings; and
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(e)
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all accrued interest;
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(ii)
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the interest component of Capital Lease Obligations paid,
accrued
and/or
scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period determined on a
consolidated basis in accordance with GAAP; and
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(iii)
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all capitalized interest of such Person and its Restricted
Subsidiaries for such period; less interest income of such
Person and its Restricted Subsidiaries for such period;
provided, however, that Consolidated Interest Expense
will exclude (I) the amortization or write-off of debt
issuance costs and deferred financing fees, commissions, fees
and expenses, (II) any expensing of interim loan commitment
and other financing fees and (III) non-cash interest on any
convertible or exchangeable notes that exists by virtue of the
bifurcation of the debt and equity components of convertible or
exchangeable notes and the application FSP APB
14-1 or any
similar provision.
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Consolidated Net Income means, with respect
to any Person, for any period, the consolidated net income (or
loss) of such Person and its Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted, to the
extent included in calculating such net income, by:
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(A)
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excluding, without duplication
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(i)
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all extraordinary gains or losses (net of fees and expense
relating to the transaction giving rise thereto), income,
expenses or charges;
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(ii)
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the portion of net income of such Person and its Restricted
Subsidiaries allocable to minority interest in unconsolidated
Persons or Investments in Unrestricted Subsidiaries to the
extent that cash dividends or distributions have not actually
been received by such Person or one of its Restricted
Subsidiaries; provided that, for the avoidance of doubt,
Consolidated Net Income shall be increased in amounts equal to
the amounts of cash actually received;
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(iii)
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gains or losses in respect of any Asset Sales by such Person or
one of its Restricted Subsidiaries (net of fees and expenses
relating to the transaction giving rise thereto), on an
after-tax basis;
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(iv)
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the net income (loss) from any disposed or discontinued
operations or any net gains or losses on disposed or
discontinued operations, on an after-tax basis;
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(v)
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solely for purposes of determining the amount available for
Restricted Payments under clause (c) of the first paragraph
of Certain CovenantsLimitation on Restricted
Payments, the net income of any Restricted Subsidiary
(other than a Guarantor) or such Person to the extent that the
declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulations applicable to
that Restricted Subsidiary or its stockholders; provided
that for the avoidance of doubt, Consolidated Net Income shall
be increased in amounts equal to the amounts of cash actually
received;
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(vi)
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any gain or loss realized as a result of the cumulative effect
of a change in accounting principles;
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(vii)
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any fees and expenses paid in connection with the issuance of
the Notes;
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(viii)
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non-cash compensation expense Incurred with any issuance of
equity interests to an employee of such Person or any Restricted
Subsidiary;
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(ix)
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any net after-tax gains or losses attributable to the early
extinguishment or conversion of Debt;
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(x)
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any non-cash impairment charges or asset write-off or write-down
resulting from the application of Statement of Financial
Accounting Standards No. 142 or Statement of Financial
Accounting Standards No. 144, and the amortization of
intangibles arising pursuant to Statement of Financial
Accounting Standards No. 141 or any related subsequent
Statement of Financial Accounting Standards or Accounting
Standards Codification;
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(xi)
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non-cash gains, losses, income and expenses resulting from fair
value accounting required by Statement of Financial Accounting
Standards No. 133 or any related subsequent Statement of
Financial Accounting Standards or Accounting Standards
Codification;
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(xii)
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accruals and reserves that are established within twelve
(12) months after the closing of any acquisition that are
so required to be established as a result of such acquisition in
accordance with GAAP not to exceed $10.0 million in any
calendar year;
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(xiii)
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any fees, expenses, charges or Integration Costs incurred during
such period, or any amortization thereof for such period, in
connection with any acquisition, Investment, Asset Sale,
disposition, Incurrence or repayment of Debt (including such
fees, expenses
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S-61
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or charges related to any Credit Facility), issuance of Capital
Interests, refinancing transaction or amendment or modification
of any debt instrument, and including, in each case, any such
transaction undertaken but not completed, and any charges or
non-recurring merger or acquisition costs incurred during such
period as a result of any such transaction, in each case whether
or not successful;
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(xiv)
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any net unrealized gain or loss (after any offset) resulting
from currency translation gains or losses related to currency
remeasurements of Debt (including any net gain or loss resulting
from obligations under Hedging Obligations for currency exchange
risk) and any foreign currency translation gains or losses;
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(xv)
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any accruals and reserves that are established for expenses and
losses, in respect of equity based awards compensation expense
(provided that if any such non-cash charges represent an
accrual or reserve for potential cash items in any future
period, the cash payment in respect thereof in such future
period shall reduce Consolidated Net Income to such extent, and
excluding amortization of a prepaid cash item that was paid in a
prior period);
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(xvi)
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any expenses, charges or losses that are covered by
indemnification or other reimbursement provisions in connection
with any Permitted Investment or any sale, conveyance, transfer
or other disposition of assets permitted under the Indenture, to
the extent actually reimbursed, or, so long as the Company has
made a determination that a reasonable basis exists for
indemnification or reimbursement and only to the extent that
such amount is in fact indemnified or reimbursed within
365 days of such determination (with a deduction in the
applicable future period for any amount so added back to the
extent not so indemnified or reimbursed within such
365 days); and
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(xvii)
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to the extent covered by insurance and actually reimbursed, or,
so long as the Company has made a determination that there
exists reasonable evidence that such amount will in fact be
reimbursed by the insurer and only to the extent that such
amount is in fact reimbursed within 365 days of the date of
such determination (with a deduction in the applicable future
period for any amount so added back to the extent not so
reimbursed within such 365 days), expenses, charges or
losses with respect to liability or casualty events or business
interruption; and
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(B)
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including, without duplication, dividends and distributions from
joint ventures actually received in cash by the Company.
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Consolidated Non-cash Charges means, with
respect to any Person for any period, the aggregate
depreciation, amortization (including amortization of goodwill,
other intangibles, deferred financing fees, debt issuance costs,
commissions, fees and expenses) and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP (excluding any such charges constituting
an extraordinary item or loss and excluding any such charges
constituting an extraordinary item or loss or any charge which
requires an accrual of or a reserve for cash charges for any
future period).
Consolidated Secured Leverage Ratio means,
with respect to any Person, the ratio of the aggregate amount of
all Debt secured by Liens of such Person and its Restricted
Subsidiaries at the end of the most recent fiscal period for
which financial information in respect thereof is available
immediately preceding the date of the transaction (the
Transaction Date) giving rise to the need to
calculate the Consolidated Secured Leverage Ratio to the
aggregate amount of Consolidated Cash Flow Available for Fixed
Charges of such Person for the four full fiscal quarters,
treated as one period, for which financial information in
respect thereof is available immediately preceding the
Transaction Date (such four full fiscal quarter period being
referred to herein as the Four Quarter
Period). In addition to and without limitation of the
foregoing, this ratio shall be
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calculated after giving effect (i) to the cost of any
compensation, remuneration or other benefit paid or provided to
any employee, consultant, Affiliate, equity owner of the entity
involved in any Asset Acquisition to the extent such costs are
eliminated or reduced (or public announcement has been made of
the intent to eliminate or reduce such costs) prior to the date
of such calculation and not replaced; and (ii) on a pro
forma basis for the period of such calculation, to any Asset
Sales or other dispositions or Asset Acquisitions, Investments,
mergers, consolidations, discontinued operations (as determined
in accordance with GAAP) or designations of any Restricted
Subsidiary as an Unrestricted Subsidiary or any Unrestricted
Subsidiary as a Restricted Subsidiary occurring during the Four
Quarter Period or any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as
if such Asset Sale or other disposition or Asset Acquisition
(including the Incurrence or assumption of any such Acquired
Debt), Investment, merger, consolidation, disposed operation or
designation occurred on the first day of the Four Quarter
Period. For purposes of this definition, pro forma
calculations shall be made in accordance with
Article 11 of Regulation S X promulgated under the
Securities Act, except that such pro forma calculations
may also include operating expense reductions for such period
resulting from the Asset Sale or other disposition or Asset
Acquisition, investment, merger, consolidation or discontinued
operation (as determined in accordance with GAAP) for which
pro forma effect is being given (A) that have been
realized or (B) for which steps have been taken or are
reasonably expected to be taken within six (6) months of
the date of such transaction and are supportable and
quantifiable and, in each case, including, but not limited to,
(a) reduction in personnel expenses, (b) reduction of
costs related to administrative functions, (c) reduction of
costs related to leased or owned properties and
(d) reductions from the consolidation of operations and
streamlining of corporate overhead, provided that, in
either case, such adjustments are set forth in an Officers
Certificate signed by the Companys chief financial or
similar officer that states (i) the amount of such
adjustment or adjustments and (ii) that such adjustment or
adjustments are based on the reasonable good faith belief of the
Officers executing such Officers Certificate at the time
of such execution.
Consolidated Total Assets of any Person as of
any date means the total assets of such Person and its
Restricted Subsidiaries as of the most recent fiscal quarter end
for which an internal consolidated balance sheet of such Person
and its Subsidiaries is available, all calculated on a
consolidated basis in accordance with GAAP.
Credit Agreement means the Companys
credit agreement, dated as of January 3, 2008, by and among
the Company, the lenders party thereto, Citicorp USA, Inc., as
administrative agent and as issuing bank, and The Bank of New
York, as paying agent, together with all related notes, letters
of credit, collateral documents, guarantees, and any other
related agreements and instruments executed and delivered in
connection therewith, in each case as amended, modified,
supplemented, restated, refinanced, refunded or replaced in
whole or in part (including by sales of debt securities) from
time to time including by or pursuant to any agreement or
instrument (including an indenture) that extends the maturity of
any Debt thereunder, or increases the amount of available
borrowings thereunder (provided that such increase in
borrowings is permitted under clause (i) or (xv) of
the definition of the term Permitted Debt), or adds
Subsidiaries of the Company as additional borrowers or
guarantors thereunder, in each case with respect to such
agreement or any successor or replacement agreement and whether
by the same or any other agent, lender, group of lenders,
purchasers or debt holders.
Credit Facilities means one or more credit
facilities (including the Credit Agreement), commercial paper
facilities or indentures, in each case with banks or other
lenders, investors or a trustee providing for revolving loans,
term loans, the issuance of letters of credit or bankers
acceptances, receivables financings or the issuance of debt
securities.
Debt means at any time (without duplication),
with respect to any Person, whether recourse is to all or a
portion of the assets of such Person, or non-recourse, the
following: (i) all indebtedness of such Person for money
borrowed or for the deferred purchase price of property,
excluding any trade payables or other current liabilities
incurred in the normal course of business; (ii) all
obligations of such Person evidenced by bonds, debentures,
notes, or other similar instruments; (iii) all
reimbursement obligations of such Person with
S-63
respect to letters of credit (other than letters of credit that
are secured by cash or Eligible Cash Equivalents), bankers
acceptances or similar facilities (excluding obligations in
respect of letters of credit or bankers acceptances issued
in respect of trade payables) issued for the account of such
Person; provided that such obligations shall not
constitute Debt except to the extent drawn and not repaid within
five business days; (iv) all indebtedness created or
arising under any conditional sale or other title retention
agreement with respect to property or assets acquired by such
Person; (v) all Capital Lease Obligations of such Person;
(vi) the maximum fixed redemption or repurchase price of
Redeemable Capital Interests in such Person at the time of
determination; (vii) any Swap Contracts and Hedging
Obligations of such Person at the time of determination;
(viii) Attributable Debt with respect to any Sale and
Leaseback Transaction to which such Person is a party; and
(ix) all obligations of the types referred to in
clauses (i) through (viii) of this definition of
another Person, the payment of which, in either case,
(A) such Person has Guaranteed or (B) is secured by
(or the holder of such Debt or the recipient of such dividends
or other distributions has an existing right, whether contingent
or otherwise, to be secured by) any Lien upon the property or
other assets of such Person, even though such Person has not
assumed or become liable for the payment of such Debt. For
purposes of the foregoing: (a) the maximum fixed repurchase
price of any Redeemable Capital Interests that do not have a
fixed repurchase price shall be calculated in accordance with
the terms of such Redeemable Capital Interests as if such
Redeemable Capital Interests were repurchased on any date on
which Debt shall be required to be determined pursuant to the
Indenture; provided, however, that, if such Redeemable
Capital Interests are not then permitted to be repurchased, the
repurchase price shall be the book value of such Redeemable
Capital Interests; (b) the amount outstanding at any time
of any Debt issued with original issue discount shall be the
principal amount of such Debt less the remaining unamortized
portion of the original issue discount of such Debt at such time
as determined in conformity with GAAP, but such Debt shall be
deemed Incurred only as of the date of original issuance
thereof; (c) the amount of any Debt described in
clause (vii) is the net amount payable (after giving effect
to permitted set off) if such Swap Contracts or Hedging
Obligations are terminated at that time due to default of such
Person; (d) the amount of any Debt described in clause
(ix)(A) above shall be the maximum liability under any such
Guarantee; (e) the amount of any Debt described in clause
(ix)(B) above shall be the lesser of (I) the maximum amount
of the obligations so secured and (II) the Fair Market
Value of such property or other assets; and (f) interest,
fees, premium, and expenses and additional payments, if any,
will not constitute Debt. For purposes of determining any
particular amount of Debt, Guarantees, Liens, obligations with
respect to letters of credit and other obligations supporting
Debt otherwise included in the determination of a particular
amount will not be included.
Notwithstanding the foregoing, the term Debt will
exclude (a) any endorsements for collection or deposits in
the ordinary course of business, (b) any realization of a
Permitted Lien, (c) Debt that has been defeased or
satisfied in accordance with the terms of the documents
governing such Debt, and (d) in connection with the
purchase by the Company or any Restricted Subsidiary of any
business, (x) customary indemnification obligations and
(y) post-closing payment adjustments to which the seller
may become entitled to the extent such payment is determined by
a final closing balance sheet or such payment is otherwise
contingent; provided, however, that, at the time of
closing, the amount of any such payment is not determinable and,
to the extent such payment thereafter becomes fixed and
determined, the amount is paid within 60 days thereafter.
The amount of Debt of any Person at any date shall be the
outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, only
upon the occurrence of the contingency giving rise to the
obligations, of any contingent obligations at such date;
provided, however, that in the case of Debt sold at a
discount, the amount of such Debt at any time will be the
accreted value thereof at such time. If such Person or any of
its Restricted Subsidiaries directly or indirectly Guarantees
Debt of a third Person, the amount of Debt of such Person shall
give effect to the Incurrence of such Guaranteed Debt as if such
Person or such Subsidiary had directly Incurred or otherwise
assumed such Guaranteed Debt.
Default means any event that is, or after
notice or passage of time, or both, would be, an Event of
Default.
S-64
Designated Non-cash Consideration means the
Fair Market Value of non-cash consideration received by the
Company or one of its Restricted Subsidiaries in connection with
an Asset Sale that is so designated as Designated Non-cash
Consideration pursuant to an Officers Certificate,
setting forth the basis of such valuation, less the amount of
cash or Eligible Cash Equivalents received in connection with a
subsequent sale of such Designated Non-cash Consideration.
Eligible Bank means a bank or trust company
that (i) is licensed, chartered or organized and existing
under the laws of the United States of America or Canada, or any
state, territory, province or possession thereof, (ii) as
of the time of the making or acquisition of an Investment in
such bank or trust company, has combined capital and surplus in
excess of $500.0 million and (iii) the senior Debt of
which is rated at least A-2 by Moodys or at
least A by S&P.
Eligible Cash Equivalents means any of the
following Investments: (i) securities issued or directly
and fully guaranteed or insured by the United States or any
agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support
thereof) maturing not more than one year after the date of
acquisition; (ii) time deposits in and certificates of
deposit of any Eligible Bank, provided that such
Investments have a maturity date not more than two years after
date of acquisition and that the Average Life of all such
Investments is one year or less from the respective dates of
acquisition; (iii) repurchase obligations with a term of
not more than 180 days for underlying securities of the
types described in clause (i) above entered into with any
Eligible Bank; (iv) direct obligations issued by any state
of the United States or any political subdivision or public
instrumentality thereof, provided that such Investments
mature, or are subject to tender at the option of the holder
thereof, within 365 days after the date of acquisition and,
at the time of acquisition, have a rating of at least A from
S&P or A-2 from Moodys (or an equivalent rating by
any other nationally recognized rating agency);
(v) commercial paper of any Person other than an Affiliate
of the Company and other than structured investment vehicles,
provided that such Investments have one of the two
highest ratings obtainable from either S&P or Moodys
and mature within 180 days after the date of acquisition;
(vi) overnight and demand deposits in and bankers
acceptances of any Eligible Bank and demand deposits in any bank
or trust company to the extent insured by the Federal Deposit
Insurance Corporation against the Bank Insurance Fund;
(vii) money market funds substantially all of the assets of
which comprise Investments of the types described in
clauses (i) through (vi); and (viii) instruments
equivalent to those referred to in clauses (i) through
(vi) above or funds equivalent to those referred to in
clause (vii) above denominated in U.S. dollars, Euros
or any other foreign currency comparable in credit quality and
tenor to those referred to in such clauses and customarily used
by corporations for cash management purposes in jurisdictions
outside the United States to the extent reasonably required in
connection with any business conducted by any Restricted
Subsidiary organized in such jurisdiction, all as determined in
good faith by the Company.
Exchange Act means the Securities Exchange
Act of 1934, as amended.
Expiration Date has the meaning set forth in
the definition of Offer to Purchase.
Fair Market Value means, with respect to the
consideration received or paid in any transaction or series of
transactions, the fair market value thereof as determined in
good faith by the Company. In the case of a transaction between
the Company or a Restricted Subsidiary, on the one hand, and a
Receivable Subsidiary, on the other hand, if the Company
determines in its sole discretion that such determination is
appropriate, a determination as to Fair Market Value may be made
at the commencement of the transaction and be applicable to all
dealings between the Receivable Subsidiary and the Company or
such Restricted Subsidiary during the course of such transaction.
Foreign Holdco means PolyOne LLC and any
other Subsidiary substantially all business and purpose of which
is the holding of stock of Subsidiaries that are CFCs
which shall be disclosed in writing by the Company to the
Trustee as being a Foreign Holdco from time to time
after the Issue Date and which, in all cases, do not engage in
any business or activity other than: (a) the ownership of
CFCs, (b) maintaining its
S-65
corporate existence, (c) participating in tax, accounting
and other administrative activities as the parent of a CFC,
(d) the execution and delivery of any agreements or other
documents related to or entered into in connection with any
Credit Facilities or the performance of its obligations under
any such agreement or documents, (e) the execution and
delivery of the Indenture and the Note Guarantee to which it is
a party and the performance of its obligations thereunder,
(f) in the case of PolyOne LLC and any other Foreign Holdco
existing on the Issue Date the continuation of activities being
conducted by them on the Issue Date so long as there is no
material change in the nature or material increase in the
relative quantity of such activities thereafter and
(g) activities incidental to the businesses or activities
described in clauses (a) through (f) of this
definition.
Foreign Subsidiary means any Restricted
Subsidiary of the Company that is (1) a controlled
foreign corporation under Section 957 of the Code or
(2) a Subsidiary of an entity described in the preceding
clause (1).
Four Quarter Period has the meaning set forth
in the definition of Consolidated Fixed Charge Coverage Ratio.
GAAP means generally accepted accounting
principles in the United States, consistently applied, as set
forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements 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 the Issue Date.
Guarantee means, as applied to any Debt of
another Person, (i) a guarantee (other than by endorsement
of negotiable instruments for collection in the normal course of
business), direct or indirect, in any manner, of any part or all
of such Debt, (ii) any direct or indirect obligation,
contingent or otherwise, of a Person guaranteeing or having the
effect of guaranteeing the Debt of any other Person in any
manner and (iii) an agreement of a Person, direct or
indirect, contingent or otherwise, the practical effect of which
is to assure in any way the payment (or payment of damages in
the event of non-payment) of all or any part of such Debt of
another Person (and Guaranteed and
Guaranteeing shall have meanings that
correspond to the foregoing); provided, however, that the
term Guarantee shall not include a contractual
commitment by one Person to invest in another Person for so long
as such Investment is reasonably expected to constitute a
Permitted Investment.
Guarantor means any Person that executes a
Note Guarantee in accordance with the provisions of the
Indenture and their respective successors and assigns.
Hedging Obligations of any Person means the
obligations of such Person pursuant to any interest rate
agreement, currency agreement or commodity agreement, excluding
commodity agreements relating to raw materials used in the
ordinary course of the Companys business.
Holder means a Person in whose name a Note is
registered in the security register.
Immaterial Subsidiary means as of any date of
determination, any Subsidiary that, together with its
Subsidiaries on a consolidated basis, during the twelve months
preceding such date of determination accounts for (or to which
may be attributed) 2.5% or less of the net income or assets
(determined on a consolidated basis) of the Company and its
Subsidiaries; provided that the aggregate consolidated
income or assets for all Immaterial Subsidiaries shall not at
any time exceed 5.0% of the total net income or assets of the
Company and its Subsidiaries.
Incur means, with respect to any Debt or
other obligation of any Person, to create, issue, incur (by
conversion, exchange or otherwise), assume, Guarantee or
otherwise become liable in respect of such Debt or other
obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Debt or other
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obligation on the balance sheet of such Person; provided,
however, that a change in GAAP or an interpretation
thereunder that results in an obligation of such Person that
exists at such time becoming Debt shall not be deemed an
Incurrence of such Debt. Debt otherwise Incurred by a Person
before it becomes a Subsidiary of the Company shall be deemed to
be Incurred at the time at which such Person becomes a
Subsidiary of the Company. Incurrence,
Incurred, Incurrable and
Incurring shall have meanings that correspond
to the foregoing. A Guarantee by the Company or a Restricted
Subsidiary of Debt Incurred by the Company or a Restricted
Subsidiary, as applicable, shall not be a separate Incurrence of
Debt. In addition, the following shall not be deemed a separate
Incurrence of Debt:
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(1)
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amortization of debt discount or accretion of principal with
respect to a non-interest bearing or other discount security;
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(2)
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the payment of regularly scheduled interest in the form of
additional Debt of the same instrument or the payment of
regularly scheduled dividends on Capital Interests in the form
of additional Capital Interests of the same class and with the
same terms;
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(3)
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the obligation to pay a premium in respect of Debt arising in
connection with the issuance of a notice of redemption or making
of a mandatory offer to purchase such Debt; and
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(4)
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unrealized losses or charges in respect of Hedging Obligations.
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Integration Costs means, with respect to any
acquisition, all costs relating to the integration of the
acquired business or operations into the Companys,
including labor costs, consulting fees, travel costs and any
other expenses relating to the integration process.
Investment by any Person means any direct or
indirect loan, advance, guarantee for the benefit of (or other
extension of credit) or capital contribution to (by means of any
transfer of cash or other property or assets to another Person
or any other payments for property or services for the account
or use of another Person) another Person, including, without
limitation, the following: (i) the purchase or acquisition
of any Capital Interest or other evidence of beneficial
ownership in another Person; (ii) the purchase, acquisition
or Guarantee of the Debt of another Person; and (iii) the
purchase or acquisition of the business or assets of another
Person substantially as an entirety, but shall exclude:
(a) accounts receivable and other extensions of trade
credit in accordance with the Companys customary
practices; (b) the acquisition of property and assets from
suppliers and other vendors in the normal course of business;
and (c) prepaid expenses and workers compensation,
utility, lease and similar deposits in the normal course of
business.
Issue Date means the date of original
issuance of the Notes under the Indenture.
Lien means, with respect to any property or
other asset, any mortgage, deed of trust, deed to secure debt,
pledge, hypothecation, assignment, deposit arrangement, security
interest, lien (statutory or otherwise), charge, easement,
encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on or
with respect to such property or other asset (including, without
limitation, any conditional sale or other title retention
agreement having substantially the same economic effect as any
of the foregoing).
Moodys means Moodys Investors
Service, Inc. and any successor to its rating agency business.
Net Cash Proceeds means, with respect to
Asset Sales of any Person, cash and Eligible Cash Equivalents
received, net of: (i) all reasonable out-of-pocket costs
and expenses of such Person incurred in connection with such a
sale, including, without limitation, all legal, accounting,
title and recording tax expenses, commissions and other fees and
expenses incurred and all federal, state, foreign and local
taxes arising in connection with such an Asset Sale that are
paid or required to be accrued as a liability under GAAP by such
Person; (ii) all payments made by such Person on any Debt
that is secured by such properties
S-67
or other assets in accordance with the terms of any Lien upon or
with respect to such properties or other assets or that must, by
the terms of such Lien or such Debt, or in order to obtain a
necessary consent to such transaction or by applicable law, be
repaid to any other Person (other than the Company or a
Restricted Subsidiary thereof) in connection with such Asset
Sale; (iii) all contractually required distributions and
other payments made to minority interest holders in Restricted
Subsidiaries of such Person as a result of such transaction;
(iv) the deduction of appropriate amounts provided by the
seller as a reserve, in accordance with GAAP, against any
liabilities associated with the property disposed of in such
Asset Sale and retained by the Company or any Restricted
Subsidiary 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; and (v) payments of unassumed liabilities (not
constituting Debt) relating to the property sold at the time of,
or within 30 days after, the date of such sale;
provided, however, that: (a) in the event that any
consideration for an Asset Sale (which would otherwise
constitute Net Cash Proceeds) is required by (I) contract
to be held in escrow pending determination of whether a purchase
price adjustment will be made or (II) GAAP to be reserved
against other liabilities in connection with such Asset Sale,
such consideration (or any portion thereof) shall become Net
Cash Proceeds only at such time as it is released to such Person
from escrow or otherwise; and (b) any
non-cash
consideration received in connection with any transaction
subsequently converted to cash shall become Net Cash Proceeds
only at such time as it is so converted.
Non-Recourse Receivable Subsidiary
Indebtedness has the meaning set forth in the
definition of Receivable Subsidiary.
Obligations means any principal, premium,
interest (including any interest accruing subsequent to the
filing of a petition in bankruptcy, reorganization or similar
proceeding at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed
claim under applicable state, federal or foreign law),
penalties, fees, indemnifications, reimbursements (including
reimbursement obligations with respect to letters of credit and
bankers acceptances), damages and other liabilities, and
guarantees of payment of such principal, interest, penalties,
fees, indemnifications, reimbursements, damages and other
liabilities, payable under the documentation governing any Debt.
Offer has the meaning set forth in the
definition of Offer to Purchase.
Offer to Purchase means a written offer (the
Offer) sent by the Company, with a copy to
the Trustee, by first class mail, postage prepaid, to each
Holder at its address appearing in the security register on the
date of the Offer, offering to purchase up to the aggregate
principal amount of Notes set forth in such Offer at the
purchase price set forth in such Offer (as determined pursuant
to the Indenture). Unless otherwise required by applicable law,
the offer shall specify an expiration date (the
Expiration Date) of the Offer to Purchase
which shall be, subject to any contrary requirements of
applicable law, not less than 30 days or more than
60 days after the date of mailing of such Offer and a
settlement date (the Purchase Date) for
purchase of Notes within five business days after the Expiration
Date and, in connection with a Change of Control, such Purchase
Date may be no earlier than the date of the consummation of the
Change of Control. The Company shall notify the Trustee at least
15 days (or such shorter period as is acceptable to the
Trustee) prior to the mailing of the Offer of the Companys
obligation to make an Offer to Purchase, and the Offer shall be
mailed by the Company or, at the Companys request, by the
Trustee in the name and at the expense of the Company. The Offer
shall contain all instructions and materials necessary to enable
such Holders to tender Notes pursuant to the Offer to Purchase.
The Offer shall also state:
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(1)
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the section of the Indenture pursuant to which the Offer to
Purchase is being made;
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(2)
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the Expiration Date and the Purchase Date;
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(3)
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the aggregate principal amount of the outstanding Notes offered
to be purchased pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which such amount has been
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S-68
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determined pursuant to Indenture covenants requiring the Offer
to Purchase) (the Purchase Amount);
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(4)
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the purchase price to be paid by the Company for each $2,000
principal amount of Notes (and integral multiples of $1,000 in
excess thereof) accepted for payment (as specified pursuant to
the Indenture) (the Purchase Price);
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(5)
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that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a
Note tendered must be tendered in a minimum amount of $2,000
principal amount (and integral multiples of $1,000 in excess
thereof);
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(6)
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the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase, if applicable;
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(7)
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that, unless the Company defaults in making such purchase, any
Note accepted for purchase pursuant to the Offer to Purchase
will cease to accrue interest on and after the Purchase Date,
but that any Note not tendered or tendered but not purchased by
the Company pursuant to the Offer to Purchase will continue to
accrue interest at the same rate;
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(8)
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that, on the Purchase Date, the Purchase Price will become due
and payable upon each Note accepted for payment pursuant to the
Offer to Purchase;
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(9)
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that each Holder electing to tender a Note pursuant to the Offer
to Purchase will be required to surrender such Note or cause
such Note to be surrendered at the place or places set forth in
the Offer prior to the close of business on the Expiration Date
(such Note being, if the Company or the Trustee so requires,
duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee
duly executed by, the Holder thereof or his attorney duly
authorized in writing);
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(10)
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that Holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or its paying agent) receives,
not later than the close of business on the Expiration Date, a
facsimile transmission or letter setting forth the name of the
Holder, the aggregate principal amount of the Notes the Holder
tendered, the certificate number of the Note the Holder tendered
and a statement that such Holder is withdrawing all or a portion
of his tender;
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(11)
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that (a) if Notes having an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall
purchase all such Notes and (b) if Notes having an
aggregate principal amount in excess of the Purchase Amount are
tendered and not withdrawn pursuant to the Offer to Purchase,
the Company shall purchase Notes having an aggregate principal
amount equal to the Purchase Amount on a pro rata basis
(with such adjustments as may be deemed appropriate so that only
Notes in denominations of $2,000 principal amount or integral
multiples of $1,000 in excess thereof shall be
purchased); and
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(12)
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if applicable, that, in the case of any Holder whose Note is
purchased only in part, the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such
Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder, in the
aggregate principal amount equal to and in exchange for the
unpurchased portion of the aggregate principal amount of the
Notes so tendered.
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Officers Certificate means a
certificate signed by the chairman of the board, the chief
executive officer, the president, the chief operating officer,
the chief financial officer, the treasurer, any assistant
treasurer, the controller, the secretary or any vice president.
S-69
Permitted Business means any business similar
in nature to any business conducted by the Company and the
Restricted Subsidiaries on the Issue Date and any business
reasonably ancillary, incidental, complementary or related to,
or a reasonable extension, development or expansion of, the
business conducted by the Company and the Restricted
Subsidiaries on the Issue Date, in each case, as determined in
good faith by the Company.
Permitted Debt means
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(i)
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Debt Incurred pursuant to any Credit Facilities in an aggregate
principal amount at any one time outstanding not to exceed
(x) the greater of (A) $325.0 million less any
amount used to permanently repay Obligations (or permanently
reduce revolving commitments) under such Credit Facilities
pursuant to the Limitation on Asset Sales covenant
and (B) the sum of (1) 50% of the book value of the
inventory of the Company and its Restricted Subsidiaries and
(2) 75% of the accounts receivable of the Company and its
Restricted Subsidiaries, in each case determined on a
consolidated basis as of the most recently ended fiscal quarter
of the Company for which financial information in respect
thereof is available minus (y), without duplication, any amounts
Incurred and outstanding pursuant to a Qualified Receivables
Transaction permitted under clause (xvi) below;
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(ii)
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Debt under the Notes issued on the Issue Date and contribution,
indemnification and reimbursement obligations owed by the
Company or any Guarantor to any of the other of them in respect
of amounts paid or payable on such Notes;
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(iii)
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Guarantees of the Notes;
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(iv)
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Debt of the Company or any Restricted Subsidiary outstanding on
the Issue Date (other than (A) clauses (i), (ii) or
(iii) above and (B) Debt being repaid with the
proceeds of this offering);
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(v)
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Debt owed to and held by the Company or a Restricted Subsidiary;
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(vi)
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Guarantees Incurred by the Company of Debt of a Restricted
Subsidiary otherwise permitted to be incurred under the
Indenture;
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(vii)
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Guarantees by any Restricted Subsidiary of Debt of the Company
or any Restricted Subsidiary, including Guarantees by any
Restricted Subsidiary of Debt under the Credit Agreement,
provided that (a) such Debt is Permitted Debt or is
otherwise Incurred in accordance with the Limitation on
Incurrence of Debt covenant and (b) such Guarantees
are subordinated to the Notes to the same extent as the Debt
being Guaranteed;
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(viii)
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Debt incurred in respect of workers compensation claims
and
self-insurance
obligations, and, for the avoidance of doubt, indemnity, bid,
performance, warranty, release, appeal, surety and similar
bonds, standby letters of credit, letters of credit for
operating purposes and completion guarantees provided or
incurred (including Guarantees thereof) by the Company or a
Restricted Subsidiary in the ordinary course of business;
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(ix)
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Debt under Swap Contracts and Hedging Obligations;
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(x)
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Debt owed by the Company to any Restricted Subsidiary, or by any
Restricted Subsidiary to the Company or to any other Restricted
Subsidiary, provided that if for any reason such Debt
ceases to be held by the Company or a Restricted Subsidiary, as
applicable, such Debt shall cease to be Permitted Debt and shall
be deemed Incurred as Debt of the Company for purposes of the
Indenture;
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S-70
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(xi)
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Debt of the Company or any Restricted Subsidiary pursuant to
Capital Lease Obligations, Synthetic Lease Obligations and
Purchase Money Debt, provided that the aggregate
principal amount of such Debt outstanding at any time may not
exceed the greater of (x) $125.0 million in the
aggregate and (y) 7.5% of Consolidated Total Assets;
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(xii)
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Debt arising from agreements of the Company or a Restricted
Subsidiary providing for indemnification, contribution, earnout,
adjustment of purchase price or similar obligations, in each
case, incurred or assumed in connection with the acquisition or
disposition of any business, assets or Capital Interests of a
Restricted Subsidiary otherwise permitted under the Indenture;
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(xiii)
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the issuance by any of the Companys Restricted
Subsidiaries to the Company or to any of its Restricted
Subsidiaries of shares of Preferred Interests; provided,
however, that:
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(a)
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any subsequent issuance or transfer of Capital Interests that
results in any such Preferred Interests being held by a Person
other than the Company or a Restricted Subsidiary; and
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(b)
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any sale or other transfer of any such Preferred Interests to a
Person that is not either the Company or a Restricted Subsidiary
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shall be deemed, in each case, to constitute an issuance of such
Preferred Interests by such Restricted Subsidiary that was not
permitted by this clause (xiii);
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(xiv)
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Debt arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn
against insufficient funds in the ordinary course of business;
provided, however, that such Debt is extinguished within
five business days of Incurrence;
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(xv)
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Debt of the Company or any Restricted Subsidiary not otherwise
permitted pursuant to this definition, in an aggregate principal
amount not to exceed $50.0 million at any one time
outstanding;
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(xvi)
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Purchase Money Notes Incurred by any Receivable Subsidiary that
is a Restricted Subsidiary in a Qualified Receivables
Transaction and
Non-Recourse
Receivable Subsidiary Indebtedness;
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(xvii)
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Debt of the Company to the extent the net proceeds thereof are
promptly deposited to defease the Notes under
Defeasance as described above;
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(xviii)
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Guarantees in the ordinary course of business of the obligations
of suppliers, customers, franchisees and licensees of the
Company or any of its Restricted Subsidiaries;
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(xix)
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Debt consisting of
take-or-pay
obligations on customary business terms contained in supply
agreements entered into in the ordinary course of
business; and
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(xx)
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Refinancing Debt.
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Notwithstanding anything herein to the contrary, Debt permitted
under clauses (i), (xi) and (xv) of this definition of
Permitted Debt shall not constitute
Refinancing Debt under clause (xx) of this
definition of Permitted Debt.
S-71
Permitted Investments means:
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(a)
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Investments in existence on the Issue Date and any extensions or
replacements thereof on terms no less favorable and in amounts
no greater than exist on the Issue Date;
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(b)
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Investments in cash and Eligible Cash Equivalents;
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(c)
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Investments in property and other assets owned or used by the
Company or any Restricted Subsidiary in the normal course of
business;
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(d)
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prepaid expenses, negotiable instruments held for collection,
lease, utility, workers compensation, performance and
other similar deposits provided to third parties in the ordinary
course of business;
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(e)
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Investments by the Company or any of its Restricted Subsidiaries
in the Company or any Restricted Subsidiary;
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(f)
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Investments by the Company or any Restricted Subsidiary in a
Person, if as a result of such Investment (A) such Person
becomes a Restricted Subsidiary or (B) such Person is
merged, consolidated or amalgamated with or into, or transfers
or conveys substantially all of its assets to, or is liquidated
or wound-up into, the Company or a Restricted Subsidiary;
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(g)
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Swap Contracts and Hedging Obligations;
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(h)
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receivables owing to the Company or any of its Subsidiaries and
advances to suppliers, in each case if created, acquired or made
in the ordinary course of business and payable or dischargeable
in accordance with customary trade terms;
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(i)
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Investments received in settlement of obligations owed to the
Company or any Restricted Subsidiary and as a result of
bankruptcy or insolvency proceedings or upon the foreclosure or
enforcement of any Lien in favor of the Company or any
Restricted Subsidiary;
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(j)
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Investments by the Company or any Restricted Subsidiary not
otherwise permitted under this definition, in an aggregate
amount not to exceed the greater of (x) $75.0 million
and (y) 5.0% of Consolidated Total Assets at any one time
outstanding;
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(k)
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loans (and Guarantees of third-party loans) and advances to
officers, directors and employees of the Company and
Subsidiaries in an aggregate amount not to exceed
$10.0 million in the aggregate at any one time outstanding,
for travel, entertainment, relocation and analogous ordinary
business purposes;
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(l)
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Investments the payment for which consists solely of Capital
Interests of the Company;
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(m)
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any Investment in any Person to the extent such Investment
represents the non-cash portion of the consideration received in
connection with an Asset Sale consummated in compliance with the
covenant described under Certain
CovenantsLimitation on Asset Sales or any other
disposition of Property not constituting an Asset Sale;
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(n)
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payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated
as expenses for accounting purposes and that are made in the
ordinary course of business and consistent with past practice;
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S-72
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(o)
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Guarantees by the Company or any Restricted Subsidiary of Debt
of the Company or a Restricted Subsidiary (other than a
Receivables Subsidiary) of Debt otherwise permitted by the
covenant described hereunder Certain
CovenantsLimitation on Incurrence of Debt;
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(p)
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any Investment by the Company or any Restricted Subsidiary in a
Receivable Subsidiary or any Investment by a Receivable
Subsidiary in any other Person in connection with a Qualified
Receivables Transaction, so long as any Investment in a
Receivable Subsidiary is in the form of a Purchase Money Note or
an Investment in Capital Interests;
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(q)
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loans or advances to customers or suppliers in the ordinary
course of business; and
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(r)
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Investments in any Person made in exchange for, out of the net
cash proceeds of the substantially concurrent sale of, Capital
Interests of the Company (other than Redeemable Capital
Interests).
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Permitted Liens means:
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(a)
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Liens existing at the Issue Date (other than Liens securing the
Credit Agreement);
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(b)
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Liens that secure (A) Credit Facilities incurred pursuant
to clause (i) of the definition of Permitted
Debt
and/or the
provisions described in the first paragraph of Certain
CovenantsLimitation on Incurrence of Debt in an
aggregate principal amount not to exceed the greater of
(x) the greater of (A) $325.0 million and
(B) the sum of (1) 50% of the book value of the
inventory of the Company and its Restricted Subsidiaries and
(2) 75% of the accounts receivable of the Company and its
Restricted Subsidiaries, in each case determined on a
consolidated basis as of the most recently ended fiscal quarter
of the Company for which financial information in respect
thereof is available, and (y) an amount that does not cause
the Consolidated Secured Leverage Ratio to exceed 2.0 to 1.0,
(B) Hedging Obligations and Swap Contracts relating to such
Credit Facilities and permitted under the agreements related
thereto and (C) fees, expenses and other amounts payable
under such Credit Facilities or payable pursuant to cash
management agreements or agreements with respect to similar
banking services relating to such Credit Facilities and
permitted under the agreements related thereto;
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(c)
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any Lien for taxes or assessments or other governmental charges
or levies not then due and payable (or which, if due and
payable, are being contested in good faith and for which
adequate reserves are being maintained, to the extent required
by GAAP);
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(d)
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any warehousemens, materialmens, landlords or
other similar Liens arising by law for sums not then due and
payable (or which, if due and payable, are being contested in
good faith and with respect to which adequate reserves are being
maintained, to the extent required by GAAP);
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(e)
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survey exceptions, encumbrances, easements or reservations of,
or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other similar restrictions as to the use
of real properties or Liens incidental to the conduct of the
business of such Person or to the ownership of its properties
which do not individually or in the aggregate materially
adversely affect the value of the Company or materially impair
the operation of the business of such Person;
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(f)
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pledges or deposits (i) in connection with workers
compensation, unemployment insurance and other types of
statutory obligations or the requirements of any official body;
(ii) to secure the performance of tenders, bids, surety or
performance bonds, leases, purchase, construction, sales or
servicing contracts (including utility contracts) and other
similar obligations Incurred
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S-73
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in the normal course of business consistent with industry
practice; (iii) to obtain or secure obligations with
respect to letters of credit, Guarantees, bonds or other
sureties or assurances given in connection with the activities
described in clauses (i) and (ii) above, in each case
not Incurred or made in connection with the borrowing of money,
the obtaining of advances or credit or the payment of the
deferred purchase price of property or services or imposed by
ERISA or the Code in connection with a plan (as
defined in ERISA); or (iv) arising in connection with any
attachment unless such Liens shall not be satisfied or
discharged or stayed pending appeal within 60 days after
the entry thereof or the expiration of any such stay;
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(g)
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Liens on property or assets existing at the time of acquisition
thereof; provided that such Liens are not extended to the
property and assets of the Company and its Restricted
Subsidiaries other than the property or assets acquired;
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(h)
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Liens on property or assets of a Person existing at the time
such Person is merged with or into or consolidated with the
Company or a Restricted Subsidiary, or becomes a Restricted
Subsidiary (and not created or Incurred in anticipation of such
transaction); provided that such Liens are not extended
to the property and assets of the Company and its Restricted
Subsidiaries other than the property or assets acquired;
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(i)
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Liens securing Debt of a Restricted Subsidiary owed to and held
by the Company or a Restricted Subsidiary thereof;
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(j)
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for the avoidance of doubt, other Liens (not securing Debt)
incidental to the conduct of the business of the Company or any
of its Restricted Subsidiaries, as the case may be, or the
ownership of their assets which do not individually or in the
aggregate materially adversely affect the value of the Company
or materially impair the operation of the business of the
Company or its Restricted Subsidiaries;
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(k)
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Liens in favor of customs or revenue authorities arising as a
matter of law to secure payment of custom duties in connection
with the importation of goods incurred in the ordinary course of
business;
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(l)
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licenses of intellectual property granted in the ordinary course
of business;
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(m)
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Liens to secure Capital Lease Obligations, Synthetic Lease
Obligations and Purchase Money Debt permitted to be incurred
pursuant to clause (xi) of the definition of
Permitted Debt; provided that such Liens do
not extend to or cover any assets other than such assets
acquired or constructed after the Issue Date with the proceeds
of such Capital Lease Obligation, Synthetic Lease Obligation or
Purchase Money Debt;
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(n)
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Liens in favor of the Company or any Guarantor;
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(o)
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Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Persons obligation in
respect of bankers acceptances issued or created in the
ordinary course of business for the account of such Person to
facilitate the purchase, shipment, or storage of such inventory
or other goods;
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(p)
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Liens securing Debt Incurred to finance the construction,
purchase or lease of, or repairs, improvements or additions to,
property, plant or equipment of such Person; provided,
however, that the Lien may not extend to any property owned
by such Person or any of its Restricted Subsidiaries at the time
the Lien is Incurred (other than assets and property affixed or
appurtenant thereto and any proceeds thereof), and the Debt
(other than any interest thereon) secured by the Lien may not be
Incurred more than 180 days after the later of the
acquisition,
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S-74
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completion of construction, repair, improvement, addition or
commencement of full operation of the property subject to the
Lien;
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(q)
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Liens on property or shares of Capital Interests of another
Person at the time such other Person becomes a Subsidiary of
such Person; provided, however, that (i) the Liens
may not extend to any other property owned by such Person or any
of its Restricted Subsidiaries (other than assets and property
affixed or appurtenant thereto and any proceeds thereof) and
(ii) such Liens are not created or incurred in connection
with, or in contemplation of, such other Person becoming such a
Restricted Subsidiary;
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(r)
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Liens (i) that are contractual rights of set-off
(A) relating to the establishment of depository relations
with banks not given in connection with the issuance of Debt,
(B) relating to pooled deposit or sweep accounts of the
Company or any of its Restricted Subsidiaries to permit
satisfaction of overdraft or similar obligations and other cash
management activities incurred in the ordinary course of
business of the Company and or any of its Restricted
Subsidiaries or (C) relating to purchase orders and other
agreements entered into with customers of the Company or any of
its Restricted Subsidiaries in the ordinary course of business
and (ii) of a collection bank arising under
Section 4-210 of the Uniform Commercial Code on items in
the course of collection, (Y) encumbering reasonable
customary initial deposits and margin deposits and attaching to
commodity trading accounts or other brokerage accounts incurred
in the ordinary course of business, and (Z) in favor of
banking institutions arising as a matter of law or pursuant to
customary account agreements encumbering deposits (including the
right of set-off) and which are within the general parameters
customary in the banking industry;
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(s)
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Liens created by or resulting from any litigation or other
proceedings which is being contested in good faith by
appropriate proceedings, including Liens arising out of
judgments or awards against the Company or any Restricted
Subsidiary with respect to which the Company or such Restricted
Subsidiary is in good faith prosecuting an appeal or proceedings
for review or for which the time to make an appeal has not yet
expired; or final unappealable judgment Liens which are
satisfied within 15 days of the date of judgment; or Liens
Incurred by the Company or any Restricted Subsidiary for the
purpose of obtaining a stay or discharge in the course of any
litigation or other proceeding to which the Company or such
Restricted Subsidiary is a party;
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(t)
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leases, subleases, licenses or sublicenses granted to others in
the ordinary course of business which do not materially
interfere with the ordinary conduct of the business of the
Company or any Restricted Subsidiaries and do not secure any
Debt;
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(u)
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any interest of title of an owner of equipment or inventory on
loan or consignment to the Company or any of its Restricted
Subsidiaries and Liens arising from Uniform Commercial Code
financing statement filings regarding operating leases entered
into by the Company or any Restricted Subsidiary in the ordinary
course of business;
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(v)
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deposits in the ordinary course of business to secure liability
to insurance carriers;
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(w)
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Liens securing the Notes and the Note Guarantees;
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(x)
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Liens on the Capital Interests of a Receivables Subsidiary and
accounts receivable and related assets described in the
definition of Qualified Receivables Transaction, in each case,
incurred in connection with a Qualified Receivables Transaction;
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(y)
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Liens securing Hedging Obligations and Swap Contracts so long as
any related Debt is permitted to be Incurred under the Indenture;
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S-75
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(z)
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options, put and call arrangements, rights of first refusal and
similar rights relating to Investments in joint ventures,
partnerships and the like permitted to be made under the
Indenture;
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(aa)
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Liens attaching to earnest money deposits (or equivalent
deposits otherwise named) made in connection with proposed
acquisitions in an amount not to exceed $5.0 million;
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(bb)
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(i) set-off rights not otherwise set forth in
clause (r) above, or (ii) Liens arising in connection
with repurchase agreements that constitute Investments;
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(cc)
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Liens not otherwise permitted under the Indenture in an
aggregate amount not to exceed $50.0 million;
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(dd)
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Liens on property or assets of the Company or any Restricted
Subsidiary in favor of the United States of America, any state
thereof or any instrumentality of either to secure certain
payments pursuant to any contract or statute; and
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(ee)
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Liens to secure any permitted extension, renewal, refinancing or
refunding (or successive extensions, renewals, refinancings or
refundings), in whole or in part, of any Debt secured by Liens
referred to above; provided that such Liens do not extend
to any other property or assets and the principal amount of the
obligations secured by such Liens is not increased.
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Person means any individual, corporation,
limited liability company, partnership, joint venture, trust,
unincorporated organization or government or any agency or
political subdivision thereof.
Preferred Interests, as applied to the
Capital Interests in any Person, means Capital Interests in such
Person of any class or classes (however designated) that rank
prior, as to the payment of dividends or as to the distribution
of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Common
Interests in such Person.
Purchase Amount has the meaning set forth in
the definition of Offer to Purchase.
Purchase Date has the meaning set forth in
the definition of Offer to Purchase.
Purchase Money Debt means Debt
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(i)
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Incurred to finance the purchase or construction (including
additions and improvements thereto) of any assets (other than
Capital Interests) of such Person or any Restricted
Subsidiary; and
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(ii)
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that is secured by a Lien on such assets where the lenders
sole security is to the assets so purchased or
constructed; and
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in either case that does not exceed 100% of the cost and to the
extent the purchase or construction prices for such assets are
or should be included in addition to property, plant or
equipment in accordance with GAAP.
Purchase Money Note means a promissory note
of a Receivable Subsidiary to the Company or any Restricted
Subsidiary, which note must be repaid from cash available to the
Receivable Subsidiary, other than amounts required to be
established as reserves pursuant to agreements, amounts paid to
investors in respect of interest, principal and other amounts
owing to such investors and amounts paid in connection with the
purchase of newly generated receivables. The repayment of a
Purchase Money Note may be subordinated to the repayment of
other liabilities of the Receivable Subsidiary on terms
determined in good faith by the Company to be substantially
consistent with market practice in connection with Qualified
Receivables Transactions.
S-76
Purchase Price has the meaning set forth in
the definition of Offer to Purchase.
Qualified Capital Interests in any Person
means a class of Capital Interests other than Redeemable Capital
Interests.
Qualified Equity Offering means (i) an
underwritten public equity offering of Qualified Capital
Interests pursuant to an effective registration statement under
the Securities Act yielding gross proceeds to either of the
Company, or any direct or indirect parent company of the
Company, of at least $25.0 million or (ii) a private
equity offering of Qualified Capital Interests of the Company,
or any direct or indirect parent company of the Company, other
than (x) any such public or private sale to an entity that
is an Affiliate of the Company and (y) any public offerings
registered on Form S-8; provided that, in the case
of an offering or sale by a direct or indirect parent company of
the Company, such parent company contributes to the capital of
the Company the portion of the net cash proceeds of such
offering or sale necessary to pay the aggregate
Redemption Price (plus accrued interest to the redemption
date) of the Notes to be redeemed pursuant to the provisions
described under the second paragraph of Optional
Redemption.
Qualified Receivables Transaction means any
transaction or series of transactions entered into by the
Company or any of its Restricted Subsidiaries pursuant to which
the Company or such Restricted Subsidiary transfers to
(a) a Receivable Subsidiary (in the case of a transfer by
the Company or any of its Restricted Subsidiaries) or
(b) any other Person (in the case of a transfer by a
Receivable Subsidiary), or grants a security interest in, any
accounts receivable (whether now existing or arising in the
future) of the Company or any of its Restricted Subsidiaries,
and any assets related thereto, including, without limitation,
all collateral securing such accounts receivable, all contracts
and all Guarantees or other obligations in respect of such
accounts receivable, proceeds of such accounts receivable and
other assets which are customarily transferred or in respect of
which security interests are customarily granted in connection
with an accounts receivable financing transaction; provided
such transaction is on market terms as determined in good
faith by the Company at the time the Company or such Restricted
Subsidiary enters into such transaction.
Receivable Subsidiary means a Subsidiary of
the Company:
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(1)
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that is formed solely for the purpose of, and that engages in no
activities other than activities in connection with, financing
accounts receivable of the Company
and/or its
Restricted Subsidiaries; provided that accounts
receivable includes providing letters of credit on behalf
of or for the benefit of the Company
and/or its
Restricted Subsidiaries;
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(2)
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that is designated by the Board of Directors as a Receivable
Subsidiary pursuant to an Officers Certificate that is
delivered to the Trustee;
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(3)
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that is either (a) a Restricted Subsidiary or (b) an
Unrestricted Subsidiary designated in accordance with the
covenant described under Certain
CovenantsLimitation on Creation of Unrestricted
Subsidiaries;
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(4)
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no portion of the Debt or any other obligation (contingent or
otherwise) of which (a) is at any time Guaranteed by the
Company or any Restricted Subsidiary (excluding Guarantees of
obligations (other than any Guarantee of Debt) pursuant to
Standard Securitization Undertakings), (b) is at any time
recourse to or obligates the Company or any Restricted
Subsidiary in any way, other than pursuant to Standard
Securitization Undertakings or (c) subjects any asset of
the Company or any other Restricted Subsidiary of the Company,
directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard
Securitization Undertakings (such Debt, Non-Recourse
Receivable Subsidiary Indebtedness);
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(5)
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with which neither the Company nor any Restricted Subsidiary has
any material contract, agreement, arrangement or understanding
other than (a) contracts, agreements, arrangements and
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S-77
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understandings entered into in the ordinary course of business
on terms no less favorable to the Company or such Restricted
Subsidiary than those that might reasonably be expected to be
obtained at the time from Persons that are not Affiliates of the
Company in connection with a Qualified Receivables Transaction
as determined in good faith by the Board of Directors of the
Company, (b) fees payable in the ordinary course of
business in connection with servicing accounts receivable in
connection with such a Qualified Receivables Transaction as
determined in good faith by the Board of Directors of the
Company and (c) any Purchase Money Note issued by such
Receivable Subsidiary to the Company or a Restricted Subsidiary
or any letters of credit provided by such Receivable Subsidiary
on behalf of or for the benefit of the Company or any Restricted
Subsidiary; and
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(6)
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with respect to which neither the Company nor any other
Restricted Subsidiary has any obligation (a) to subscribe
for additional shares of Capital Interests therein or make any
additional capital contribution or similar payment or transfer
thereto except in connection with a Qualified Receivables
Transaction or (b) to maintain or preserve the solvency or
any balance sheet term, financial condition, level of income or
results of operations thereof.
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Redeemable Capital Interests in any Person
means any equity security of such Person that by its terms (or
by terms of any security into which it is convertible or for
which it is exchangeable), or otherwise (including the passage
of time or the happening of an event), is required to be
redeemed, is redeemable at the option of the holder thereof in
whole or in part (including by operation of a sinking fund), or
is convertible or exchangeable for Debt of such Person at the
option of the holder thereof, in whole or in part, at any time
prior to the Stated Maturity of the Notes; provided that
only the portion of such equity security which is required to be
redeemed, is so convertible or exchangeable or is so redeemable
at the option of the holder thereof before such date will be
deemed to be Redeemable Capital Interests. Notwithstanding the
preceding sentence, any equity security that would constitute
Redeemable Capital Interests solely because the holders of the
equity security have the right to require the Company to
repurchase such equity security upon the occurrence of a Change
of Control or an Asset Sale will not constitute Redeemable
Capital Interests if the terms of such equity security provide
that the Company may not repurchase or redeem any such equity
security pursuant to such provisions unless such repurchase or
redemption complies with the covenant described above under the
caption Certain CovenantsLimitation on
Restricted Payments. The amount of Redeemable Capital
Interests deemed to be outstanding at any time for purposes of
the Indenture will be the maximum amount that the Company and
its Restricted Subsidiaries may become obligated to pay upon the
maturity of, or pursuant to any mandatory redemption provisions
of, such Redeemable Capital Interests or portion thereof,
exclusive of accrued dividends.
Redemption Price, when used with respect
to any Note to be redeemed, means the price at which it is to be
redeemed pursuant to the Indenture.
Refinancing Debt means Debt that refunds,
refinances, renews, replaces or extends any Debt permitted to be
Incurred by the Company or any Restricted Subsidiary pursuant to
the terms of the Indenture, whether involving the same or any
other lender or creditor or group of lenders or creditors, but
only to the extent that
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(i)
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the Refinancing Debt is subordinated to the Notes to at least
the same extent as the Debt being refunded, refinanced, renewed,
replaced or extended, if such Debt was subordinated to the Notes,
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(ii)
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the Refinancing Debt is scheduled to mature either (a) no
earlier than the Debt being refunded, refinanced, renewed,
replaced or extended or (b) at least 91 days after the
maturity date of the Notes,
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S-78
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(iii)
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the Refinancing Debt has an Average Life at the time such
Refinancing Debt is Incurred that is equal to or greater than
the Average Life of the Debt being refunded, refinanced,
renewed, replaced or extended,
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(iv)
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such Refinancing Debt is in an aggregate principal amount that
is less than or equal to the sum of (a) the aggregate
principal or accreted amount (in the case of any Debt issued
with original issue discount, as such) then outstanding under
the Debt being refunded, refinanced, renewed, replaced or
extended, (b) the amount of accrued and unpaid interest, if
any, and premiums owed, if any, not in excess of preexisting
prepayment provisions on such Debt being refunded, refinanced,
renewed, replaced or extended and (c) the amount of
reasonable and customary fees, expenses and costs related to the
Incurrence of such Refinancing Debt, and
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(v)
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such Refinancing Debt is Incurred by the same Person (or its
successor) that initially Incurred the Debt being refunded,
refinanced, renewed, replaced or extended, except that the
Company may Incur Refinancing Debt to refund, refinance, renew,
replace or extend Debt of any Restricted Subsidiary of the
Company.
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Related Business Assets means assets (other
than cash or Eligible Cash Equivalents) used or useful in a
Permitted Business; provided that any assets received by the
Company or a Restricted Subsidiary in exchange for assets
transferred by the Company or a Restricted Subsidiary shall not
be deemed to be Related Business Assets if they consist of
securities of a Person unless, upon receipt of the securities of
such Person, such Person would become a Restricted Subsidiary.
Restricted Payment is defined to mean any of
the following:
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(a)
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any dividend or other distribution declared and paid on the
Capital Interests in the Company or on the Capital Interests in
any Restricted Subsidiary of the Company that are held by, or
declared and paid to, any Person other than the Company or a
Restricted Subsidiary of the Company (other than
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(i)
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dividends, distributions or payments made solely in Qualified
Capital Interests in the Company and
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(ii)
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dividends or distributions payable to the Company or a
Restricted Subsidiary of the Company or to other holders of
Capital Interests of a Restricted Subsidiary on a pro rata
basis);
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(b)
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any payment made by the Company or any of its Restricted
Subsidiaries to purchase, redeem, acquire or retire any Capital
Interests in the Company (including the conversion into, or
exchange for, Debt, of any Capital Interests) other than any
such Capital Interests owned by the Company or any Restricted
Subsidiary (other than a payment made solely in Qualified
Capital Interests in the Company);
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(c)
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any payment made by the Company or any of its Restricted
Subsidiaries (other than a payment made solely in Qualified
Capital Interests in the Company) to redeem, repurchase, defease
(including an in substance or legal defeasance) or otherwise
acquire or retire for value (including pursuant to mandatory
repurchase covenants), prior to any scheduled maturity,
scheduled sinking fund or mandatory redemption payment, Debt of
the Company or any Guarantor that is subordinate in right of
payment to the Notes or Note Guarantees (excluding any Debt owed
to the Company or any Restricted Subsidiary); except payments of
principal and interest in anticipation of satisfying a sinking
fund obligation, principal installment or final maturity, in
each case, within one year of the due date thereof;
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S-79
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(d)
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any Investment by the Company or a Restricted Subsidiary in any
Person, other than a Permitted Investment; and
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(e)
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any designation of a Restricted Subsidiary as an Unrestricted
Subsidiary.
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Restricted Subsidiary means any Subsidiary
that has not been designated as an Unrestricted
Subsidiary in accordance with the Indenture.
S&P means Standard &
Poors, a division of The McGraw-Hill Companies, Inc., and
any successor to its rating agency business.
Sale and Leaseback Transaction means any
direct or indirect arrangement pursuant to which property is
sold or transferred by the Company or a Restricted Subsidiary
and is thereafter leased back as a capital lease by the Company
or a Restricted Subsidiary.
Significant Subsidiary has the meaning set
forth in Rule 1-02 of Regulation S X under the
Securities and Exchange Act, but shall not include any
Unrestricted Subsidiary.
Standard Securitization Undertakings means
representations, warranties, covenants and indemnities entered
into by the Company or any Restricted Subsidiary which are
reasonably customary in an accounts receivable securitization
transaction as determined in good faith by the Company,
including Guarantees by the Company or any Restricted Subsidiary
of any of the foregoing obligations of the Company or a
Restricted Subsidiary.
Stated Maturity, when used with respect to
(i) any Note or any installment of interest thereon, means
the date specified in such Note as the fixed date on which the
principal amount of such Note or such installment of interest is
due and payable and (ii) any other Debt or any installment
of interest thereon, means the date specified in the instrument
governing such Debt as the fixed date on which the principal of
such Debt or such installment of interest is due and payable.
Subsidiary of a Person means a corporation,
partnership, joint venture, limited liability company or other
business entity of which a majority of the shares of securities
or other interests having ordinary voting power for the election
of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a
contingency) are at the time beneficially owned, or the
management of which is otherwise controlled, directly, or
indirectly through one or more intermediaries, or both, by such
Person.
SunBelt Guarantee means the Guarantee by the
Company of obligations under the Guaranteed Secured Senior Notes
due 2017, Series G of SunBelt Chlor Alkali Partnership
pursuant to a Guarantee dated December 22, 1997 by the
Company, as in effect on the Issue Date, terminating on
December 22, 2017 or satisfaction of such obligations,
whichever is earlier.
Swap Contract means (a) any and all rate
swap transactions, basis swaps, credit derivative transactions,
forward rate transactions, commodity swaps, commodity options,
forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or
forward bond or forward bond price or forward bond index
transactions, interest rate options, forward foreign exchange
transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate
swap transactions, currency options, spot contracts, or any
other similar transactions or any combination of any of the
foregoing (including, without limitation, any fuel price caps
and fuel price collar or floor agreements and similar agreements
or arrangements designed to protect against or manage
fluctuations in fuel prices and any options to enter into any of
the foregoing), whether or not any such transaction is governed
by or subject to any master agreement, and (b) any and all
transactions of any kind, and the related confirmations, which
are subject to the terms and conditions of, or governed by, any
form of master agreement
S-80
published by the International Swaps and Derivatives
Association, Inc., any International Foreign Exchange Master
Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a Master
Agreement), including any such obligations or liabilities
under any Master Agreement.
Synthetic Lease Obligations means any
monetary obligation of a Person under (i) a so-called
synthetic, off-balance sheet or tax retention lease, or
(ii) an agreement for the use or possession of property
(including Sale and Leaseback Transactions), in each case,
creating obligations that do not appear on the balance sheet of
such Person but which, upon the application of any bankruptcy or
insolvency laws to such Person, would be characterized as the
indebtedness of such Person (without regard to accounting
treatment).
Treasury Rate means the yield to maturity at
the time of computation of United States Treasury securities
with a constant maturity (as compiled and published in the most
recent Federal Reserve Statistical Release H.15 (519) which
has become publicly available at least two business days prior
to the date fixed for prepayment (or, if such Statistical
Release is no longer published, any publicly available source
for similar market data)) most nearly equal to the period from
the redemption date
to ,
2015; provided, however, that if the period from the
redemption date
to ,
2015 is not equal to the constant maturity of a United States
Treasury security for which a weekly average yield is given, the
Treasury Rate will be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for
which such yields are given, except that if the then remaining
term of the Notes
to ,
2015 is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant
maturity of one year will be used.
Voting Interests means, with respect to any
Person, securities of any class or classes of Capital Interests
in such Person entitling the holders thereof generally to vote
on the election of members of the Board of Directors or
comparable body of such Person.
S-81
MATERIAL
U.S. FEDERAL TAX CONSIDERATIONS
The following is a summary of the material United States federal
income and estate tax considerations relating to the
acquisition, ownership and disposition of the notes. It is not a
complete analysis of all the potential tax considerations
relating to the notes. This summary is based upon the provisions
of the Internal Revenue Code of 1986, as amended, or the Code,
Treasury Regulations promulgated under the Code, and currently
effective administrative rulings and judicial decisions, all
relating to the United States federal income tax treatment of
debt instruments as of the date hereof. These authorities may be
changed, perhaps with retroactive effect, so as to result in
United States federal income tax consequences different from
those set forth below.
This summary assumes that you purchased your outstanding notes
upon their initial issuance at their initial offering price and
you will hold your notes as capital assets for United States
federal income tax purposes. This summary does not address the
tax considerations arising under the laws of any foreign, state
or local jurisdiction. In addition, this discussion does not
address all tax considerations that may be applicable to
holders particular circumstances or to holders that may be
subject to special tax rules, such as, for example:
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holders subject to the alternative minimum tax;
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banks, insurance companies, or other financial institutions;
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tax-exempt organizations;
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dealers in securities or commodities;
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expatriates;
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traders in securities that elect to use a
mark-to-market
method of accounting for their securities holdings;
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U.S. Holders (as defined below) whose functional currency
is not the United States dollar;
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persons that will hold the notes as a position in a hedging
transaction, straddle, conversion transaction or other risk
reduction transaction;
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persons deemed to sell the notes under the constructive sale
provisions of the Code;
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partnerships or other pass-through entities; or
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holders whose income exceeds certain thresholds and are subject
to the 3.8% Medicare Tax on certain income.
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If a partnership or other entity treated as a partnership for
United States federal income tax purposes holds notes, the tax
treatment of a partner in the partnership will generally depend
upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership that will
hold notes, you should consult your tax advisor regarding the
tax consequences of holding the notes to you.
You are urged to consult your tax advisor with respect to the
application of United States federal and other applicable income
tax laws to your particular situation as well as any tax
consequences arising under the United States federal estate or
gift tax rules or under the laws of any state, local, foreign or
other taxing jurisdiction or under any applicable tax treaty.
S-82
Consequences
to U.S. Holders
The following is a summary of the general United States federal
income tax consequences that will apply to you if you are a
U.S. Holder of the notes. Certain consequences
to
Non-U.S. Holders
of the notes are described under Consequences to
Non-U.S. holders,
below. U.S. Holder means a beneficial owner of
a note that is, for United States federal income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation or other entity treated as a corporation for
United States federal income tax purposes created or organized
in or under the laws of the United States or any state thereof
or the District of Columbia;
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an estate the income of which is subject to United States
federal income taxation regardless of its source; or
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a trust that (1) is subject to the supervision of a court
within the United States and the control of one or more
U.S. persons or (2) has a valid election in effect
under applicable Treasury Regulations to be treated as a
U.S. person.
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Payments
of Interest
Stated interest on the notes will be taxable to you as ordinary
income at the time it is paid or accrued in accordance with your
method of accounting for United States federal income tax
purposes.
Disposition
of Notes
Upon the sale, exchange, redemption or other taxable disposition
of a note, you will recognize taxable gain or loss equal to the
difference between the amount realized on such disposition
(except to the extent any amount realized is attributable to
accrued but unpaid interest, which is taxed as ordinary income
to the extent not previously included in income) and your
adjusted tax basis in the note. A U.S. Holders
adjusted tax basis in a note generally will equal the cost of
the note to such holder.
Gain or loss recognized on the disposition of a note generally
will be capital gain or loss, and will be long-term capital gain
or loss if, at the time of such disposition, the
U.S. Holders holding period for the note is more than
12 months. Certain U.S. Holders, including
individuals, may be eligible for reduced rates of United States
federal income tax in respect of long-term capital gain. The
deductibility of capital losses by U.S. Holders is subject
to certain limitations.
Information
Reporting and Backup Withholding
In general, information reporting requirements will apply to
certain payments of principal, premium (if any) and interest on
and the proceeds of certain sales of notes unless you are an
exempt recipient. Backup withholding (currently at a rate of
28%) will apply to such payments if you fail to provide your
taxpayer identification number or certification of exempt status
or have been notified by the Internal Revenue Service, or IRS,
that payments to you are subject to backup withholding.
Any amounts withheld under the backup withholding rules will
generally be allowed as a refund or a credit against your United
States federal income tax liability provided that you furnish
the required information to the IRS on a timely basis.
S-83
Consequences
to Non-U.S.
Holders
As used in this prospectus supplement, the term
Non-U.S. Holder
means a beneficial owner of notes that is an individual,
corporation, estate or trust and is not a U.S. Holder as
defined above.
Payments
of Interest
Under United States federal income tax law, and subject to the
discussion of backup withholding below, if you are a
Non-U.S. Holder
of a note:
The withholding agent generally will not be required to deduct
United States withholding tax from payments of interest to you
if:
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1.
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you do not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock entitled
to vote; and
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2.
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you are not a controlled foreign corporation that is directly or
indirectly related to us through stock ownership; and
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3.
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you are not a bank whose receipt of interest on a note is
pursuant to a loan agreement entered into in the ordinary course
of business; and
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4.
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the withholding agent does not have actual knowledge or reason
to know that you are a United States person (within the meaning
of the Code); and
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you have furnished to the withholding agent an IRS
Form W-8BEN
or an acceptable substitute form upon which you certify, under
penalties of perjury, that you are a
non-United
States person;
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in the case of payments made outside the United States to you at
an offshore account (generally, an account maintained by you at
a bank or other financial institution at any location outside
the United States), you have furnished to the withholding agent
documentation that establishes your identity and your status as
a non-United
States person;
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the withholding agent has received a withholding certificate
(furnished on an appropriate IRS
Form W-8
or an acceptable substitute form or statement) from a person
claiming to be a (1) withholding foreign partnership,
(2) qualified intermediary, or (3) securities clearing
organization, bank or other financial institution that holds
customers securities in the ordinary course of its trade
or business, and such person is permitted to certify under
Treasury Regulations, and does certify, either that it assumes
primary withholding tax responsibility with respect to the
interest payment or has received an IRS
Form W-8BEN
(or acceptable substitute form) from you or from other holders
of notes on whose behalf it is receiving payment; or
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the withholding agent otherwise possesses documentation upon
which it may rely to treat the payment as made to a
non-United
States person in accordance with Treasury Regulations.
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If you cannot satisfy the requirements described above, payments
of interest made to you on the notes will generally be subject
to the 30% United States federal withholding of tax unless you
provide the withholding agent either with (1) a properly
executed IRS
Form W-8BEN
(or successor form) claiming an exemption from, or a reduction
of, withholding under the benefits of an applicable tax treaty
or (2) a properly executed IRS
Form W-8ECI
(or successor form) stating that interest paid on the note is
not subject to withholding of tax because the interest is
effectively connected with your conduct of a trade or business
in the
S-84
United States and, generally, in the case of an applicable tax
treaty, attributable to your permanent establishment in the
United States.
Disposition
of Notes
Generally, no deduction for any United States federal
withholding of tax will be made from any principal payments or
from gain that you realize on the sale, exchange or other
disposition of your note. In addition, a
Non-U.S. Holder
of a note will not be subject to United States federal income
tax on gain realized on the sale, exchange or other disposition
of such note, unless either: (1) that gain or income is
effectively connected with the conduct of a trade or business in
the United States by the
Non-U.S. Holder
or (2) 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. If you are described in
clause (1), see Income or Gain Effectively Connected with
a United States Trade or Business, below. If you are
described in clause (2), any gain realized from the sale,
redemption, exchange, retirement or other taxable disposition of
the notes will be subject to United States federal income tax at
a 30% rate, or lower applicable treaty rate, although the amount
of gain subject to tax may be offset by certain losses.
Income or
Gain Effectively Connected with a United States Trade or
Business
If any interest on the notes or gain from the sale, redemption,
exchange, retirement or other taxable disposition of the notes
is effectively connected with a United States trade or business
conducted by you and, generally, in the case of an applicable
tax treaty, attributable to your permanent establishment in the
United States, then the income or gain will be subject to United
States federal income tax at regular graduated income tax rates
and will not be subject to United States withholding of tax if
certain certification requirements are satisfied. You can
generally meet these certification requirements by providing a
properly executed IRS
Form W-8ECI
or appropriate substitute form to us or our paying agent. If you
are a corporation, the portion of your earnings and profits that
is effectively connected with your United States trade or
business and, generally, in the case of an applicable tax
treaty, attributable to your permanent establishment in the
United States may be subject to an additional branch profits tax
at a 30% rate, although an applicable tax treaty may provide for
a lower rate.
Backup
Withholding and Information Reporting
Generally, information returns will be filed with the IRS in
connection with payments on the notes. Information reporting may
be filed with the IRS in respect of payments on the notes and
proceeds from the sale or other disposition of the notes. You
may be subject to backup withholding of tax on these payments
unless you comply with certain certification procedures to
establish that you are not a United States person. The
certification procedures required to claim an 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
you will be allowed as a credit against your United States
federal income tax liability and may entitle you to a refund,
provided that the required information is timely furnished to
the IRS.
U.S.
Federal Estate Tax
Further, generally, a note held by an individual who at death is
not a citizen or resident of the United States should not
be includible in the individuals gross estate for United
States federal estate tax purposes if:
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the decedent did not actually or constructively own 10% or more
of the total combined voting power of all classes of our stock
entitled to vote at the time of death, and
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the income on the note would not have been, if received at the
time of death, effectively connected with a United States trade
or business of the decedent.
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CERTAIN
ERISA CONSIDERATIONS
The following summary regarding certain aspects of the United
States Employee Retirement Income Security Act of 1974, as
amended, or ERISA, and the Code is based on ERISA,
the Code, judicial decisions and United State Department of
Labor and IRS regulations and rulings that are in existence on
the date of this prospectus supplement. This summary is general
in nature and does not address every issue pertaining to ERISA
that may be applicable to us, the notes or a particular
investor. Accordingly, each prospective investor, including plan
fiduciaries, should consult with his, her or its own advisors or
counsel with respect to the advisability of an investment in the
notes, and potentially adverse consequences of such investment,
including, without limitation, certain ERISA-related issues that
affect or may affect the investor with respect to this
investment and the possible effects of changes in the applicable
laws.
ERISA and the Code impose certain requirements on employee
benefit plans that are subject to Title I of ERISA, plans
subject to Section 4975 of the Code and entities that are
deemed to hold the assets of such plans (each such employee
benefit plan, or plans or entity, a Plan) and on
those persons who are fiduciaries with respect to
Plans. A fiduciary of a Plan subject to Title I of ERISA
should consider whether an investment in the notes satisfies
ERISAs general fiduciary requirements, including, but not
limited to, the requirement of investment prudence and
diversification and the requirement that such a Plans
investments be made in accordance with the documents governing
the Plan.
An investor who is considering acquiring the notes with the
assets of a Plan must consider whether the acquisition and
holding of the notes will constitute or result in a non-exempt
prohibition transaction. Section 406 of ERISA and
Section 4975 of the Code prohibit certain transactions that
involve a Plan and a party in interest as defined in
Section 3(14) of ERISA or a disqualified person
as defined in Section 4975 of the Code with respect to such
Plan. Examples of such prohibited transactions include, but are
not limited to, (i) sales or exchanges of property (such as
the notes), or (ii) extensions of credit between a Plan and
a party in interest or disqualified person or (iii) the
transfer to, or use by or for the benefit of, a party in
interest or disqualified person, of any Plan assets. Such
parties in interest or disqualified persons could include,
without limitation, the Company, the underwriters, the trustee,
registrar and paying agent or any of their respective affiliates.
ERISA and the Code contain certain exemptions from the
prohibited transactions described above, and the Department of
Labor has issued several exemptions, although certain exemptions
do not provide relief from the prohibitions on self-dealing
contained in Section 406(b) of ERISA and
Sections 4975(c)(1)(E) and (F) of the Code. Such
exemptions include Section 408(b)(17) of ERISA and
Section 4975(d)(20) of the Code pertaining to certain
transactions with non-fiduciary service providers; Department of
Labor Prohibited Transaction Class Exemption (PTCE)
95-60,
applicable to transactions involving insurance company general
accounts;
PTCE 90-1,
regarding investments by insurance company pooled separate
accounts;
PTCE 91-38,
regarding investments by bank collective investment funds;
PTCE 84-14,
regarding investments effected by a qualified professional asset
manager; and
PTCE 96-23,
regarding investments effected by an in-house asset manager.
There can be no assurance that any of these exemptions or any
other exemption will be available with respect to notes. Any
particular transaction involving a party in interest or
disqualified person who engages in a non-exempt prohibited
transaction may be subject to excise taxes and other penalties
and liabilities under ERISA and the Code.
As a general rule, governmental plans, as defined in
Section 3(32) of ERISA (a Governmental Plan), a
church plan, as defined in Section 3(33) of ERISA, that has
not made an election under 410(d) of the Code (a Church
Plan) and
non-U.S. plans
are not subject to the requirements of ERISA or
Section 4975 of the Code. Accordingly, assets of such plans
generally may be invested in the notes without regard to the
fiduciary and prohibited transaction considerations under ERISA
and Section 4975 of the Code described above. However,
Governmental Plans, a Church Plans or
non-U.S. plans
may be subject to other United States federal, state, or local
laws or
non-U.S. laws
that regulate their investments (a Similar Law). A
fiduciary of
S-86
a Governmental Plan, a Church Plan or a
non-U.S. plan
should make its own determination as to the requirements, if
any, under any Similar Law applicable to the acquisition of the
notes.
By its purchase of any note, the purchaser thereof will be
deemed to have represented and warranted that either:
(i) no assets of a Plan, Governmental Plan, Church Plan or
non-U.S. plan
have been used to acquire such note or an interest therein or
(ii) the purchase and holding of such note or an interest
therein by such person do not constitute a non-exempt prohibited
transaction under ERISA or the Code or a violation of Similar
Law.
This offer is not a representation by us or the underwriters
that an acquisition of the notes meets all legal requirements
applicable to investments by Plans, Governmental Plans, Church
Plans or
non-U.S. plans
or that such an investment is appropriate for any particular
Plan, Governmental Plan, Church Plan or
non-U.S. plan.
S-87
UNDERWRITING
Banc of America Securities LLC, Morgan Stanley & Co.
Incorporated and Wells Fargo Securities, LLC are acting as
representatives of each of the underwriters named below. Subject
to the terms and conditions set forth in an underwriting
agreement among us and the underwriters, we have agreed to sell
to the underwriters, and each of the underwriters has agreed,
severally and not jointly, to purchase from us, the principal
amount of notes set forth opposite its name below.
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Principal
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Amount of
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Underwriter
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Notes
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Banc of America Securities LLC
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$
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Morgan Stanley & Co. Incorporated
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Wells Fargo Securities, LLC
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BB&T Capital Markets, a division of Scott &
Stringfellow, LLC
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KeyBanc Capital Markets Inc.
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PNC Capital Markets LLC
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U.S. Bancorp Investments, Inc.
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Total
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$
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320,000,000
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Subject to the terms and conditions set forth in the
underwriting agreement, the underwriters have agreed, severally
and not jointly, to purchase all of the notes sold under the
underwriting agreement if any of these notes are purchased. If
an underwriter defaults, the underwriting agreement provides
that the purchase commitments of the nondefaulting underwriters
may be increased or the underwriting agreement may be terminated.
We have agreed to indemnify the underwriters and their
controlling persons against certain liabilities in connection
with this offering, including liabilities under the Securities
Act, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.
The underwriters are offering the notes, subject to prior sale,
when, as and if issued to and accepted by them, subject to
approval of legal matters by their counsel, including the
validity of the notes, and other conditions contained in the
underwriting agreement, such as the receipt by the underwriters
of officers certificates and legal opinions. The
underwriters reserve the right to withdraw, cancel or modify
offers to the public and to reject orders in whole or in part.
The representatives have advised us that the underwriters
propose initially to offer the notes to the public at the public
offering price set forth on the cover page of this prospectus
supplement. After the initial offering, the public offering
price, concession or any other term of the offering may be
changed.
The expenses of the offering, not including the underwriting
discount, are estimated at $1.2 million and are payable by
us.
We have agreed that, without the consent of Banc of America
Securities LLC, Morgan Stanley & Co. Incorporated and
Wells Fargo Securities, LLC, we will not, during the period
ending 60 days after the date of this prospectus supplement
offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, or announce the offering of, any debt
securities issued or guaranteed by us and having a maturity of
more than one year from the date of issue.
The notes are a new issue of securities with no established
trading market. We do not intend to apply for listing of the
notes on any national securities exchange or for inclusion of
the notes on any automated dealer quotation system. We have been
advised by the underwriters that they presently intend to make a
S-88
market in the notes after completion of the offering. However,
they are under no obligation to do so and may discontinue any
market-making activities at any time without any notice. We
cannot assure the liquidity of the trading market for the notes
or that an active public market for the notes will develop. If
an active public trading market for the notes does not develop,
the market price and liquidity of the notes may be adversely
affected. If the notes are traded, they may trade at a discount
from their initial offering price, depending on prevailing
interest rates, the market for similar securities, our operating
performance and financial condition, general economic conditions
and other factors.
In connection with the offering, the underwriters may purchase
and sell the notes in the open market. These transactions may
include short sales and purchases on the open market to cover
positions created by short sales. Short sales involve the sale
by the underwriters of a greater principal amount of notes than
they are required to purchase in the offering. The underwriters
must close out any short position by purchasing notes in the
open market. A short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the notes in the open market after
pricing that could adversely affect investors who purchase in
the offering.
Similar to other purchase transactions, the underwriters
purchases to cover the syndicate short sales may have the effect
of raising or maintaining the market price of the notes or
preventing or retarding a decline in the market price of the
notes. As a result, the price of the notes may be higher than
the price that might otherwise exist in the open market.
Neither we nor any of the underwriters make any representation
or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of
the notes. In addition, neither we nor any of the underwriters
make any representation that the representatives will engage in
these transactions or that these transactions, once commenced,
will not be discontinued without notice.
From time to time, the underwriters and certain of their
affiliates have provided, and may in the future provide,
investment and commercial banking services, financial advisory
and other related services to us and our affiliates for which
they have in the past received, and may in the future receive,
customary fees. Wells Fargo Bank, N.A., an affiliate of Wells
Fargo Securities, LLC, also serves as trustee under the
indenture governing the notes offered hereby. The
representatives are also acting as dealer managers in our tender
offer for our 2012 senior notes.
We expect that delivery of the notes will be made against
payment therefor on or
about ,
2010, which will be
the
business day following the date hereof (this settlement cycle
being referred to as (T+ ). Under
Rule 15c6-1
of the Exchange Act, trades in the secondary market generally
are required to settle in three business days, unless the
parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade the notes on the date
hereof or the next
succeeding
business days will be required, by virtue of the fact that the
notes initially will settle in T+ , to specify an
alternative settlement cycle at the time of any such trade to
prevent a failed settlement and should consult their own advisor.
Notice to
Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
Relevant Member State), the underwriters have
represented and agreed that with effect from and including the
date on which the Prospectus Directive is implemented in that
Relevant Member State (the Relevant Implementation
Date) they have not made and will not make an offer of
notes to the public in that Relevant Member State prior to the
publication of a prospectus in relation to the notes which has
been approved by the competent authority in that Relevant Member
State or, where appropriate, approved in another Relevant Member
State and notified to the competent authority in that Relevant
Member State, all in accordance with the Prospectus Directive
except that, in accordance with the following exemptions
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under the Prospectus Directive, if they are implemented in such
Relevant Member State, the offer of notes is only being made:
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to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
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to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
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to fewer than 100 natural or legal persons (other than qualified
investors as defined below); or
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in any other circumstances falling within Article 3(2) of
the Prospectus Directive, provided that such offer will not
require the publication of a prospectus pursuant to
Article 3 of the Prospectus Directive or any measure
implementing the Prospectus Directive in that Relevant Member
State.
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Each purchaser of notes described in this prospectus located
within a Relevant Member State will be deemed to have
represented, acknowledged and agreed that it is a
qualified investor within the meaning of
Article 2(1)(e) of the Prospectus Directive.
For the purposes of this provision, the expression an
offer of notes to the public in relation to any
notes in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and the notes to be offered so as to enable an
investor to decide to purchase or subscribe the notes, as the
same may be varied in that Relevant Member State by any measure
implementing the Prospectus Directive in that Relevant Member
State and the expression Prospectus Directive means Directive
2003/71/EC and includes any relevant implementing measure in
each Relevant Member State.
Notice to
Prospective Investors in the United Kingdom
Each underwriter has severally represented and agreed that:
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it has not offered or sold and will not offer or sell the notes
to persons in the United Kingdom prior to this offering except
to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of
the Prospectus Rules produced by the United Kingdom Financial
Services Authority or the Financial Services and Markets Act
2000 (the FSMA);
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it has only communicated or caused to be communicated and will
only communicate or cause to be communicated an invitation or
inducement to engage in investment activity (within the meaning
of Section 21 of the FSMA) received by it in connection
with the issue or sale of the notes in circumstances in which
Section 21(1) of the FSMA does not apply to the
company; and
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it has complied and will comply with all applicable provisions
of the FSMA with respect to anything done by it in relation to
the notes in, from or otherwise involving the United Kingdom.
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Notice to
Prospective Investors in Switzerland
This document, as well as any other material relating to the
notes which are the subject of the offering contemplated by this
prospectus, do not constitute an issue prospectus pursuant to
Article 652a of the Swiss Code of Obligations. The notes
will not be listed on the SWX Swiss Exchange and, therefore, the
documents relating to the notes, including, but not limited to,
this document, do not claim to comply with the
S-90
disclosure standards of the listing rules of SWX Swiss Exchange
and corresponding prospectus schemes annexed to the listing
rules of the SWX Swiss Exchange. The notes are being offered in
Switzerland by way of a private placement, i.e. to a
small number of selected investors only, without any public
offer and only to investors who do not purchase the notes with
the intention to distribute them to the public. The investors
will be individually approached by us from time to time. This
document, as well as any other material relating to the notes,
is personal and confidential and does not constitute an offer to
any other person. This document may only be used by those
investors to whom it has been handed out in connection with the
offering described herein and may neither directly nor
indirectly be distributed or made available to other persons
without our express consent. It may not be used in connection
with any other offer and shall in particular not be copied
and/or
distributed to the public in (or from) Switzerland.
Notice to
Prospective Investors in the Dubai International Financial
Centre
This document relates to an exempt offer in accordance with the
Offered Securities Rules of the Dubai Financial Services
Authority. This document is intended for distribution only to
persons of a type specified in those rules. It must not be
delivered to, or relied on by, any other person. The Dubai
Financial Services Authority has no responsibility for reviewing
or verifying any documents in connection with exempt offers. The
Dubai Financial Services Authority has not approved this
document nor taken steps to verify the information set out in it
and has no responsibility for it. The notes which are the
subject of the offering contemplated by this prospectus may be
illiquid
and/or
subject to restrictions on their resale. Prospective purchasers
of the notes offered should conduct their own due diligence on
the notes. If you do not understand the contents of this
document you should consult an authorized financial adviser.
S-91
LEGAL
MATTERS
Jones Day will pass upon the validity of the notes. The
underwriters have been represented by Shearman &
Sterling LLP.
EXPERTS
The consolidated financial statements of PolyOne Corporation
appearing in PolyOnes Current Report on
Form 8-K,
dated September 10, 2010, as of December 31, 2009 and
2008 and for each of the three years in the period ended
December 31, 2009, and the effectiveness of PolyOne
Corporations internal control over financial reporting
appearing in PolyOnes Annual Report on
Form 10-K
as of December 31, 2009, have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon, included
therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in
reliance upon such reports given on the authority of such firm
as experts in accounting and auditing.
The financial statements of SunBelt Chlor Alkali Partnership
appearing in PolyOne Corporations Annual Report on
Form 10-K
for the year ended December 31, 2009 have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon, included
therein and herein incorporated by reference. Such financial
statements are incorporated herein by reference in reliance upon
such report given on the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of Oxy Vinyls LP for the
six months ended June 30, 2007 have been incorporated by
reference herein in reliance upon the report of KPMG LLP,
independent registered public accounting firm, incorporated by
reference herein and upon the authority of said firm as experts
in accounting and auditing.
S-92
Prospectus
$450,000,000
Common Shares
Preferred Shares
Depositary Shares
Warrants
Subscription Rights
Debt Securities
Units
We may offer and sell from time to time our common shares,
preferred shares, depositary shares, warrants, subscription
rights and debt securities, as well as units that include any of
these securities. We may sell any combination of these
securities in one or more offerings with an aggregate initial
offering price of $450,000,000 or the equivalent amount in other
currencies or currency units.
We will provide the specific terms of the securities to be
offered in one or more supplements to this prospectus. You
should read this prospectus and the applicable prospectus
supplement carefully before you invest in our securities. This
prospectus may not be used to offer and sell our securities
unless accompanied by a prospectus supplement describing the
method and terms of the offering of those offered securities.
We may sell the securities directly or to or through
underwriters or dealers, and also to other purchasers or through
agents. The names of any underwriters or agents that are
included in a sale of securities to you, and any applicable
commissions or discounts, will be stated in an accompanying
prospectus supplement. In addition, the underwriters, if any,
may over-allot a portion of the securities.
Investing in any of our securities involves risk. Please read
carefully the section entitled Risk Factors
beginning on page 4 of this prospectus.
Our common shares are listed on the New York Stock Exchange
under the symbol POL. None of the other securities
that we may offer under this prospectus are currently publicly
traded.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is November 13, 2009
TABLE OF
CONTENTS
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i
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement that we
filed with the SEC using a shelf registration
process. Under this shelf process, we may from time to time sell
any combination of the securities described in this prospectus
in one or more offerings with an aggregate initial offering
price of up to $450,000,000 or the equivalent amount in other
currencies or currency units.
This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will
provide a prospectus supplement that will contain specific
information about the terms of that offering. For a more
complete understanding of the offering of the securities, you
should refer to the registration statement, including its
exhibits. The prospectus supplement may also add, update or
change information contained in this prospectus. You should read
both this prospectus and any prospectus supplement together with
additional information under the heading Where You Can
Find More Information and Information We Incorporate
By Reference.
You should rely only on the information contained or
incorporated by reference in this prospectus and in any
prospectus supplement or in any free writing prospectus that we
may provide you. We have not authorized anyone to provide you
with different information. You should not assume that the
information contained in this prospectus, any prospectus
supplement, any document incorporated by reference or any free
writing prospectus is accurate as of any date, other than the
date mentioned on the cover page of these documents. We are not
making offers to sell the securities in any jurisdiction in
which an offer or solicitation is not authorized or in which the
person making such offer or solicitation is not qualified to do
so or to anyone to whom it is unlawful to make an offer or
solicitation.
References in this prospectus to the terms we,
us, PolyOne or the Company
or other similar terms mean PolyOne Corporation and its
consolidated subsidiaries, unless we state otherwise or the
context indicates otherwise.
WHERE YOU
CAN FIND MORE INFORMATION
We are subject to the informational reporting requirements of
the Securities Exchange Act of 1934. We file reports, proxy
statements and other information with the SEC. Our SEC filings
are available over the Internet at the SECs website at
http://www.sec.gov.
You may read and copy any reports, statements and other
information filed by us at the SECs Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549.
Please call
1-800-SEC-0330
for further information on the Public Reference Room. You may
also inspect our SEC reports and other information at the New
York Stock Exchange, 20 Broad Street, New York, New York
10005, or at our website at
http://www.polyone.com.
The information contained on or accessible through our website
is not a part of this prospectus, other than the documents that
we file with the SEC that are incorporated by reference into
this prospectus.
INFORMATION
WE INCORPORATE BY REFERENCE
The SEC allows us to incorporate by reference into
this prospectus the information in documents we file with it,
which means that we can disclose important information to you by
referring you to those documents. The information incorporated
by reference is considered to be a part of this prospectus, and
information that we file later with the SEC will automatically
update and supersede this information. Any statement contained
in any document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement
contained in or omitted from this prospectus or any accompanying
prospectus supplement, or in any other subsequently filed
document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of
this prospectus.
1
We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act until the completion of
the offering of securities described in this prospectus:
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our annual report on
Form 10-K
for the year ended December 31, 2008;
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our quarterly reports on
Form 10-Q
for the quarters ended March 31, 2009, June 30, 2009
and September 30, 2009;
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our current reports on
Form 8-K
filed on January 22, 2009; February 5, 2009;
July 17, 2009 and September 2, 2009; and
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the description of our capital stock set forth in our
Registration Statement on
Form 8-A
(File
No. 001-16091)
filed with the SEC on August 31, 2000, and all amendments
and reports filed for the purpose of updating that description.
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We will not, however, incorporate by reference in this
prospectus any documents or portions thereof that are not deemed
filed with the SEC, including any information
furnished pursuant to Item 2.02 or Item 7.01 of our
current reports on
Form 8-K
unless, and except to the extent, specified in such current
reports.
We will provide you with a copy of any of these filings (other
than an exhibit to these filings, unless the exhibit is
specifically incorporated by reference into the filing
requested) at no cost, if you submit a request to us by writing
or telephoning us at the following address and telephone number:
PolyOne
Corporation
33587 Walker Road
Avon Lake, Ohio 44012
(440) 930-1000
Attn: Secretary
2
THE
COMPANY
We are a premier provider of specialized polymer materials,
services and solutions with operations in thermoplastic
compounds, specialty polymer formulations, color and additive
systems, thermoplastic resin distribution and specialty
polyvinyl chloride resins. We also have two equity investments:
one in a manufacturer of caustic soda and chlorine and one in a
formulator of polyurethane compounds.
We provide value to our customers through our ability to link
our knowledge of polymers and formulation technology with our
manufacturing and supply chain processes to provide an essential
link between large chemical producers (our raw material
suppliers) and designers, assemblers and processors of plastics
(our customers). We believe that large chemical producers are
increasingly outsourcing
less-than-railcar
business; polymer and additive producers need multiple channels
to market; processors continue to outsource compounding; and
international companies need suppliers with global reach. Our
goal is to provide our customers with specialized material and
service solutions through our global reach, product platforms,
low-cost manufacturing operations, a fully integrated
information technology network, broad market knowledge and raw
material procurement leverage. Our end markets are primarily in
the building and construction materials, wire and cable,
transportation, durable goods, packaging, healthcare, electrical
and electronics, medical and telecommunications markets, as well
as many industrial applications.
PolyOne was formed on August 31, 2000 from the
consolidation of The Geon Company and M.A. Hanna. Geons
roots date back to 1927 when BFGoodrich scientist Waldo Semon
produced the first usable vinyl polymer. In 1948, BFGoodrich
created a vinyl plastic division that was subsequently spun off
through a public offering in 1993, creating Geon, a separate
publicly-held company. Hanna was formed in 1885 as a
privately-held company and became publicly-held in 1927. In the
mid-1980s, Hanna began to divest its historic mining and
shipping businesses to focus on polymers. Hanna purchased its
first polymer company in 1986 and completed its
26th polymer company acquisition in 2000.
Corporate
Information
We are incorporated in Ohio and our headquarters are located at
33587 Walker Road, Avon Lake, Ohio 44012. Our telephone number
is
(440) 930-1000.
Our website is
http://www.polyone.com.
The information accessible through our website is not part of
this prospectus, other than the documents that we file with the
SEC that are incorporated by reference into this prospectus.
3
RISK
FACTORS
Investing in our securities involves risk. Prior to making a
decision about investing in our securities, you should carefully
consider the specific factors discussed under the heading
Risk Factors in our most recent annual report on
Form 10-K
and in our most recent quarterly reports on
Form 10-Q,
which are incorporated herein by reference and may be amended,
supplemented or superseded from time to time by other reports we
file with the SEC in the future. The risks and uncertainties we
have described are not the only ones we face. Additional risks
and uncertainties not presently known to us or that we currently
deem immaterial may also affect our operations. If any of these
risks actually occurs, our business, results of operations and
financial condition could suffer. In that case, the trading
price of our securities could decline, and you could lose all or
a part of your investment.
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents incorporated by
reference, contains, and any prospectus supplement may contain,
statements that constitute forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements
may be identified by the use of predictive, future-tense or
forward-looking terminology, such as believes,
anticipates, expects,
estimates, intends, may,
will or similar terms. These statements speak only
as of the date of this prospectus, the date of the prospectus
supplement or the date of the document incorporated by
reference, as applicable, and we undertake no ongoing
obligation, other than that imposed by law, to update these
statements. These statements appear in a number of places in
this prospectus, including the documents incorporated by
reference, and relate to, among other things, our intent, belief
or current expectations with respect to: our future financial
condition, results of operations and prospects; our business and
growth strategies; and our financing plans and forecasts. You
are cautioned that any such forward-looking statements are not
guarantees of future performance and involve significant risks
and uncertainties, and that actual results may differ materially
from those contained in or implied by the forward-looking
statements as a result of various factors, some of which are
unknown, including, without limitation:
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the effect on foreign operations of currency fluctuations,
tariffs and other political, economic and regulatory risks;
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changes in polymer consumption growth rates in the markets where
we conduct business;
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changes in global industry capacity or in the rate at which
anticipated changes in industry capacity come online in the
polyvinyl chloride, chlor alkali, vinyl chloride monomer or
other industries in which we participate;
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fluctuations in raw material prices, quality and supply and in
energy prices and supply;
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production outages or material costs associated with scheduled
or unscheduled maintenance programs;
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unanticipated developments that could occur with respect to
contingencies such as litigation and environmental matters,
including any developments that would require any increase in
our costs
and/or
reserves for such contingencies;
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an inability to achieve or delays in achieving or achievement of
less than the anticipated financial benefit from initiatives
related to working capital reductions, cost reductions and
employee productivity goals;
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an inability to raise or sustain prices for products or services;
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an inability to maintain appropriate relations with unions and
employees;
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our ability to realize anticipated savings and operational
benefits from our realigning of assets, including those related
to closure of certain production facilities;
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the financial condition of our customers, including the ability
of customers (especially those that may be highly leveraged and
those with inadequate liquidity) to maintain their credit
availability;
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disruptions, uncertainty or volatility in the credit markets
that could adversely impact the availability of credit already
arranged and the availability and cost of credit in the
future; and
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other factors affecting our business beyond our control,
including, without limitation, changes in the general economy,
changes in interest rates and changes in the rate of inflation.
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These factors and the other risk factors described in this
prospectus and any accompanying prospectus supplement, including
the documents incorporated by reference, are not necessarily all
of the important factors that could cause actual results to
differ materially from those expressed in any of our
forward-looking statements. Other unknown or unpredictable
factors also could harm our results. Consequently, there can be
no assurance that the actual results or developments anticipated
by us will be realized or, even if substantially realized, that
they will have the expected consequences to or effects on us. We
cannot guarantee that any forward-looking statement will be
realized, although we believe we have been prudent in our plans
and assumptions. Achievement of future results is subject to
risks, uncertainties and inaccurate assumptions.
5
USE OF
PROCEEDS
Unless we inform you otherwise in the applicable prospectus
supplement, we expect to use the net proceeds from the sale of
securities for general corporate purposes. These purposes may
include, but are not limited to:
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reduction or refinancing of outstanding indebtedness or other
corporate obligations;
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capital expenditures; and
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acquisitions.
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Pending any specific application, we may initially invest funds
in short-term marketable securities or apply them to the
reduction of short-term indebtedness.
RATIO OF
EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of consolidated
earnings to fixed charges for the periods presented:
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Nine Months
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Ended
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Year Ended December 31,
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September 30,
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2004
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2005
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2006
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2007
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2008
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2009
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Ratio of earnings to fixed charges
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1.3
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1.8
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2.3
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2.1x
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For purposes of computing the ratio of earnings to fixed
charges, earnings consist of income (loss) before income taxes
and discontinued operations and exclude income (loss) from
equity affiliates and minority interest and capitalized
interest, but include dividends received from equity affiliates,
fixed charges and amortization of previously capitalized
interest. Fixed charges consist of interest expensed and
capitalized, amortized premiums, discounts and capitalized
expenses related to indebtedness, a portion of rental expense
representing an interest factor and interest expense relating to
guaranteed debt of our equity affiliates. Earnings for 2007 and
2008 were insufficient to cover fixed charges by
$22.4 million and $169.2 million, respectively.
Accordingly, no such ratio is presented for such periods.
6
DESCRIPTION
OF CAPITAL STOCK
The following description is a general summary of the terms of
the capital stock that we may issue. The description below and
in any prospectus supplement does not include all of the terms
of the capital stock and should be read together with our
Amended and Restated Articles of Incorporation and Amended and
Restated Code of Regulations, copies of which have been filed
previously with the SEC. For more information on how you can
obtain copies of our Amended and Restated Articles of
Incorporation and Amended and Restated Code of Regulations, see
Where You Can Find More Information.
General
Our authorized capital stock consists of:
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400,000,000 common shares, and
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40,000,000 preferred shares.
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The holders of common shares are entitled to receive dividends
as may be declared from time to time by our Board of Directors
out of funds legally available for those dividends. The holders
of common shares will be entitled to one vote per share on all
matters submitted to a vote of shareholders. Holders of common
shares will be entitled to receive, upon any liquidation, all
remaining assets available for distribution to shareholders
after satisfaction of our liabilities and the preferential
rights of any preferred shares that may then be issued and
outstanding. The holders of common shares have no preemptive,
conversion or redemption rights.
We may issue one or more series of preferred shares as created
and authorized by our Board of Directors. The Board of Directors
will determine and the prospectus supplement relating to any
particular issuance of serial preferred shares will describe the
terms of those serial preferred shares, including, to the extent
applicable, the following:
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the number of shares to constitute each series and the name and
serial designation thereof;
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the annual dividend rate and dividend payment dates;
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whether dividends are to be cumulative or non-cumulative;
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whether any series will be subject to redemption, and, if so,
the manner of redemption and the redemption price;
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whether the shares of any series shall be subject to the
operation of a retirement, purchase or sinking fund;
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the terms, if any, upon which shares of any series shall be
convertible into, or exchangeable for, or shall have rights to
purchase or other privileges to acquire shares of any other
class or of any other series of the same or any other class;
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the limitations and restrictions, if any, to be effective while
any shares of any series are outstanding upon the payment of
dividends or other distributions on, and upon the purchase,
redemption or other acquisition of, the common shares or any
other series or class of our stock ranking junior to the shares
of any series;
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the conditions or restrictions, if any, upon creation of
indebtedness or issuance of any additional shares of any class
ranking on a parity with or prior to the shares of any
series; and
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the voting rights of any series, if any, which rights may be
full, limited or denied.
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Ohio
Takeover Legislation
Transactions Involving Interested
Shareholders. Section 1704.02 of the Ohio
Revised Code prohibits any Chapter 1704 transaction (as
defined below) for a period of three years from the date on
which a shareholder first becomes an interested shareholder
unless the directors of the corporation approved the transaction
prior to the shareholder becoming an interested shareholder or
approved the transaction pursuant to which the shareholder
became an interested shareholder.
A Chapter 1704 transaction is defined to
include a variety of transactions such as mergers,
consolidations, combinations or majority share acquisitions
between an Ohio corporation and an interested
shareholder or an affiliate of an interested shareholder.
An interested shareholder is defined generally as any person
who, directly or indirectly, beneficially owns 10% or more of
the outstanding voting stock of the corporation. After such
three-year period, a Chapter 1704 transaction is prohibited
unless certain fair price provisions are complied with, the
directors of the corporation approved the purchase of shares
which made the shareholder an interested shareholder, or the
shareholders of the corporation approve the transaction by the
affirmative vote of two-thirds of the voting power of the
corporation or such other percentage set forth in the articles
of incorporation of the corporation provided that a majority of
the disinterested shareholders approve the transaction.
Control Share
Acquisitions. Section 1701.831 of the Ohio
Revised Code generally prohibits transactions pursuant to which
a person obtains one-fifth or more but less than one-third of
all the voting power of a corporation, one-third or more but
less than a majority of all of the voting power of a
corporation, or a majority or more of all the voting power of a
corporation (a control share acquisition), unless
the shareholders approve the transaction at a special meeting,
at which a quorum is present, by both the affirmative vote of a
majority of the voting power of the corporation and by the
affirmative vote of a majority of the voting power of the
corporation excluding the voting power of interested shares. A
corporation can provide in its articles of incorporation or
regulations that Section 1701.831 does not apply to control
share acquisitions of shares of such corporation. Neither our
articles nor our regulations contain any provisions to alter the
effect of 1701.831 of the Ohio Revised Code.
Cumulative
Voting
Under Ohio law, unless otherwise provided in a
corporations articles of incorporation, each shareholder
is entitled to cumulate such shareholders votes in the
election of directors if the shareholder gives notice to the
corporation. Our articles prohibit cumulative voting by
shareholders.
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DESCRIPTION
OF DEPOSITARY SHARES
General
We may offer depositary shares representing fractional preferred
shares of any series. The following description sets forth
certain general terms and provisions of the depositary shares
that we may offer pursuant to this prospectus. The particular
terms of the depositary shares, including the fraction of a
preferred share that such depositary share will represent, and
the extent, if any, to which the general terms and provisions
may apply to the depositary shares so offered will be described
in the applicable prospectus supplement.
The preferred shares represented by depositary shares will be
deposited under a depositary agreement between us and a bank or
trust company that meets certain requirements and is selected by
us, which we refer to as the bank depositary. Each owner of a
depositary share will be entitled to all the rights and
preferences of the preferred shares represented by the
depositary share. The depositary shares will be evidenced by
depositary receipts issued pursuant to the depositary agreement.
Depositary receipts will be distributed to those persons
purchasing the fractional preferred shares in accordance with
the terms of the offering. The deposit agreement will also
contain provisions relating to the manner in which any
subscription or similar rights we offer to holders of the
preferred shares will be made available to the holders of
depositary shares.
The following description is a general summary of some common
provisions of a depositary agreement and the related depositary
receipts. The description below and in any prospectus supplement
does not include all of the terms of the depositary agreement
and the related depositary receipts. Copies of the form of
depositary agreement and the depositary receipts relating to any
particular issue of depositary shares will be filed with the SEC
each time we issue depositary shares, and you should read those
documents for provisions that may be important to you. For more
information on how you can obtain copies of the forms of the
depositary agreement and the related depositary receipts, see
Where You Can Find More Information.
Dividends
and Other Distributions
If we pay a cash distribution or dividend on a series of
preferred shares represented by depositary shares, the bank
depositary will distribute these dividends to the record holders
of these depositary shares. If the distributions are in property
other than cash, the bank depositary will distribute the
property to the record holders of the depositary shares.
However, if the bank depositary determines that it is not
feasible to make the distribution of property, the bank
depositary may, with our approval, sell this property and
distribute the net proceeds from this sale to the record holders
of the depositary shares.
Redemption
of Depositary Shares
If we redeem a series of preferred shares represented by
depositary shares, the bank depositary will redeem the
depositary shares from the proceeds received by the bank
depositary in connection with the redemption. The redemption
price per depositary share will equal the applicable fraction of
the redemption price per share of the preferred shares. If fewer
than all the depositary shares are redeemed, the depositary
shares to be redeemed will be selected by lot or pro rata as the
bank depositary may determine.
Voting
the Preferred Shares
Upon receipt of notice of any meeting at which the holders of
the preferred shares represented by depositary shares are
entitled to vote, the bank depositary will mail the notice to
the record holders of the depositary shares relating to the
preferred shares. Each record holder of these depositary shares
on the record date (which will be the same date as the record
date for the preferred shares) may instruct the bank depositary
as to how to vote the preferred shares represented by this
holders depositary shares. The bank depositary will
endeavor, insofar as practicable, to vote the amount of the
preferred shares represented by such depositary shares in
accordance with these instructions, and we will take all action
which the bank depositary deems
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necessary in order to enable the bank depositary to do so. The
bank depositary will abstain from voting the preferred shares to
the extent it does not receive specific instructions from the
holders of depositary shares representing this preferred shares.
Amendment
and Termination of the Depositary Agreement
The form of depositary receipt evidencing the depositary shares
and any provision of the depositary agreement may be amended by
agreement between the bank depositary and us. However, any
amendment that materially and adversely alters the rights of the
holders of depositary shares will not be effective unless this
amendment has been approved by the holders of at least a
majority of the depositary shares then outstanding. The
depositary agreement may be terminated by the bank depositary or
us only if:
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all outstanding depositary shares have been redeemed; or
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there has been a final distribution in respect of the preferred
shares in connection with any liquidation, dissolution or
winding up of the Company and this distribution has been
distributed to the holders of depositary receipts.
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Charges
of Bank Depositary
We will pay all transfer and other taxes and governmental
charges arising solely from the existence of the depositary
arrangements. We will pay charges of the bank depositary in
connection with the initial deposit of the preferred shares and
any redemption of the preferred shares. Holders of depositary
receipts will pay other transfer and other taxes and
governmental charges and any other charges, including a fee for
the withdrawal of preferred shares upon surrender of depositary
receipts, as are expressly provided in the depositary agreement
to be for their accounts.
Withdrawal
of Preferred Shares
Except as may be provided otherwise in the applicable prospectus
supplement, upon surrender of depositary receipts at the
principal office of the bank depositary, subject to the terms of
the depositary agreement, the owner of the depositary shares may
demand delivery of the number of whole preferred shares and all
money and other property, if any, represented by those
depositary shares. Fractional preferred shares will not be
issued. If the depositary receipts delivered by the holder
evidence a number of depositary shares in excess of the number
of depositary shares representing the number of whole preferred
shares to be withdrawn, the bank depositary will deliver to this
holder at the same time a new depositary receipt evidencing the
excess number of depositary shares. Holders of preferred shares
thus withdrawn may not thereafter deposit those shares under the
depositary agreement or receive depositary receipts evidencing
depositary shares therefor.
Miscellaneous
The bank depositary will forward to holders of depositary
receipts all reports and communications from us that are
delivered to the bank depositary and that we are required to
furnish to the holders of preferred shares.
Neither the bank depositary nor we will be liable if we are
prevented or delayed by law or any circumstance beyond our
control in performing our obligations under the depositary
agreement. The obligations of the bank depositary and us under
the depositary agreement will be limited to performance in good
faith of our duties thereunder, and we will not be obligated to
prosecute or defend any legal proceeding in respect of any
depositary shares or preferred shares unless satisfactory
indemnity is furnished. We may rely upon written advice of
counsel or accountants, or upon information provided by persons
presenting preferred
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shares for deposit, holders of depositary receipts or other
persons believed to be competent and on documents believed to be
genuine.
Resignation
and Removal of Bank Depositary
The bank depositary may resign at any time by delivering to us
notice of its election to do so, and we may at any time remove
the bank depositary. Any such resignation or removal will take
effect upon the appointment of a successor bank depositary and
the successors acceptance of this appointment. The
successor bank depositary must be appointed within 60 days
after delivery of the notice of resignation or removal and must
be a bank or trust company meeting the requirements of the
depositary agreement.
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DESCRIPTION
OF WARRANTS
General
We may issue warrants for the purchase of common shares,
preferred shares, depositary shares or debt securities. The
following description sets forth certain general terms and
provisions of the warrants that we may offer pursuant to this
prospectus. The particular terms of the warrants and the extent,
if any, to which the general terms and provisions may apply to
the warrants so offered will be described in the applicable
prospectus supplement.
Warrants may be issued independently or together with other
securities and may be attached to or separate from any offered
securities. Each series of warrants will be issued under a
separate warrant agreement to be entered into between us and a
bank or trust company, as warrant agent. The warrant agent will
act solely as our agent in connection with the warrants and will
not have any obligation or relationship of agency or trust for
or with any holders or beneficial owners of warrants.
A copy of the forms of the warrant agreement and the warrant
certificate relating to any particular issue of warrants will be
filed with the SEC each time we issue warrants, and you should
read those documents for provisions that may be important to
you. For more information on how you can obtain copies of the
forms of the warrant agreement and the related warrant
certificate, see Where You Can Find More Information.
Debt
Warrants
The prospectus supplement relating to a particular issue of
warrants to issue debt securities will describe the terms of
those warrants, including the following:
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the title of the warrants;
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the offering price for the warrants, if any;
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the aggregate number of the warrants;
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the designation and terms of the debt securities purchasable
upon exercise of the warrants;
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if applicable, the designation and terms of the debt securities
that the warrants are issued with and the number of warrants
issued with each debt security;
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if applicable, the date from and after which the warrants and
any debt securities issued with them will be separately
transferable;
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the principal amount of debt securities that may be purchased
upon exercise of a warrant and the price at which the debt
securities may be purchased upon exercise;
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the dates on which the right to exercise the warrants will
commence and expire;
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if applicable, the minimum or maximum amount of the warrants
that may be exercised at any one time;
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whether the warrants represented by the warrant certificates or
debt securities that may be issued upon exercise of the warrants
will be issued in registered or bearer form;
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information relating to book-entry procedures, if any;
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the currency or currency units in which the offering price, if
any, and the exercise price are payable;
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if applicable, a discussion of material United States federal
income tax considerations;
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anti-dilution provisions of the warrants, if any;
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redemption or call provisions, if any, applicable to the
warrants;
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any additional terms of the warrants, including terms,
procedures and limitations relating to the exchange and exercise
of the warrants; and
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any other information we think is important about the warrants.
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Share
Warrants
The prospectus supplement relating to a particular issue of
warrants to issue common shares, preferred shares or depositary
shares will describe the terms of the common share warrants and
preferred share warrants, including the following:
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the title of the warrants;
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the offering price for the warrants, if any;
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the aggregate number of the warrants;
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the designation and terms of the common shares, preferred shares
or depositary shares that may be purchased upon exercise of the
warrants;
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if applicable, the designation and terms of the securities that
the warrants are issued with and the number of warrants issued
with each security;
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if applicable, the date from and after which the warrants and
any securities issued with the warrants will be separately
transferable;
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the number of common shares or preferred shares or depositary
shares that may be purchased upon exercise of a warrant and the
price at which the shares may be purchased upon exercise;
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the dates on which the right to exercise the warrants commence
and expire;
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if applicable, the minimum or maximum amount of the warrants
that may be exercised at any one time;
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the currency or currency units in which the offering price, if
any, and the exercise price are payable;
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if applicable, a discussion of material United States federal
income tax considerations;
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anti-dilution provisions of the warrants, if any;
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redemption or call provisions, if any, applicable to the
warrants;
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any additional terms of the warrants, including terms,
procedures and limitations relating to the exchange and exercise
of the warrants; and
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any other information we think is important about the warrants.
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Exercise
of Warrants
Each warrant will entitle the holder of the warrant to purchase
at the exercise price set forth in the applicable prospectus
supplement the common shares, preferred shares, depositary
shares or the principal amount of debt securities being offered.
Holders may exercise warrants at any time up to the close of
business on the expiration date set forth in the applicable
prospectus supplement. After the close of business on the
expiration date, unexercised warrants are void. Holders may
exercise warrants as set forth in the prospectus supplement
relating to the warrants being offered.
Until a holder exercises the warrants to purchase our common
shares, preferred shares, depositary shares or debt securities,
the holder will not have any rights as a holder of our common
shares, preferred shares, depositary shares or debt securities,
as the case may be, by virtue of ownership of warrants.
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DESCRIPTION
OF SUBSCRIPTION RIGHTS
We may issue to our shareholders subscription rights to purchase
our common shares, preferred shares, depositary shares or debt
securities. The following description sets forth certain general
terms and provisions of the subscription rights that we may
offer pursuant to this prospectus. The particular terms of the
subscription rights and the extent, if any, to which the general
terms and provisions may apply to the subscription rights so
offered will be described in the applicable prospectus
supplement.
Subscription rights may be issued independently or together with
any other security offered by this prospectus and may or may not
be transferable by the shareholder receiving the rights in the
rights offering. In connection with any rights offering, we may
enter into a standby underwriting agreement with one or more
underwriters pursuant to which the underwriter will purchase any
securities that remain unsubscribed for upon completion of the
rights offering, or offer these securities to other parties who
are not our shareholders. A copy of the form of subscription
rights certificate will be filed with the SEC each time we issue
subscription rights, and you should read that document for
provisions that may be important to you. For more information on
how you can obtain a copy of any subscription rights
certificate, see Where You Can Find More Information.
The applicable prospectus supplement relating to any
subscription rights will describe the terms of the offered
subscription rights, including, where applicable, the following:
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the exercise price for the subscription rights;
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the number of subscription rights issued to each shareholder;
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the extent to which the subscription rights are transferable;
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any other terms of the subscription rights, including terms,
procedures and limitations relating to the exchange and exercise
of the subscription rights;
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the date on which the right to exercise the subscription rights
will commence and the date on which the right will expire;
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the extent to which the subscription rights include an
over-subscription privilege with respect to unsubscribed
securities; and
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the material terms of any standby underwriting arrangement
entered into by us in connection with the subscription rights
offering.
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DESCRIPTION
OF DEBT SECURITIES
The following description sets forth certain general terms and
provisions of the debt securities that we may issue, which may
be issued as convertible or exchangeable debt securities. We
will set forth the particular terms of the debt securities we
offer in a prospectus supplement and the extent, if any, to
which the following general terms and provisions will apply to
particular debt securities.
The debt securities will be issued under an indenture to be
entered into between us and Wells Fargo Bank, N.A., as trustee.
The indenture, and any supplemental indentures thereto, will be
subject to, and governed by, the Trust Indenture Act of
1939, as amended. The following description of general terms and
provisions relating to the debt securities and the indenture
under which the debt securities will be issued is a summary only
and therefore is not complete and is subject to, and qualified
in its entirety by reference to, the terms and provisions of the
indenture. The form of the indenture has been filed with the SEC
as an exhibit to the registration statement, of which this
prospectus forms a part, and you should read the indenture for
provisions that may be important to you. For more information on
how you can obtain a copy of the form of the indenture, see
Where You Can Find More Information.
Capitalized terms used in this section and not defined herein
have the meanings specified in the indenture. When we refer to
PolyOne, we, our and
us in this section, we mean PolyOne Corporation
excluding, unless the context otherwise requires or as otherwise
expressly stated, its subsidiaries.
Unless otherwise specified in a prospectus supplement, the debt
securities will be our direct, unsecured obligations and will
rank equally with all of our other unsecured indebtedness.
General
The terms of each series of debt securities will be established
by or pursuant to a resolution of our Board of Directors and set
forth or determined in the manner provided in a resolution of
our Board of Directors, supplemental indenture or officers
certificate. The particular terms of each series of debt
securities will be described in a prospectus supplement relating
to such series (including any pricing supplement or term sheet).
We can issue an unlimited amount of debt securities under the
indenture that may be in one or more series. Debt securities may
differ between series in respect to any matter, but all series
of debt securities will be equally and ratably entitled to the
benefits of the indenture. We will set forth in a prospectus
supplement (including any pricing supplement or term sheet)
relating to any series of debt securities being offered, the
aggregate principal amount and the following terms of the debt
securities, if applicable:
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the title of the series of debt securities;
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the price or prices (expressed as a percentage of the principal
amount) at which the series of debt securities will be issued;
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any limit on the aggregate principal amount of the series of
debt securities;
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the date or dates on which the principal on the series of debt
securities is payable;
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the rate or rates (which may be fixed or variable) per annum, if
applicable, or the method used to determine such rate or rates
(including any commodity, commodity index, stock exchange index
or financial index) at which the series of debt securities will
bear interest, if any, the date or dates from which such
interest, if any, will accrue, the date or dates on which such
interest, if any, will commence and be payable and any regular
record date for the interest payable on any interest payment
date;
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the place or places where the principal of, premium and
interest, if any, on the series of debt securities will be
payable;
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if applicable, the period within which, the price at which and
the terms and conditions upon which the series of debt
securities may be redeemed;
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any obligation we may have to redeem or purchase the series of
debt securities pursuant to any sinking fund or analogous
provisions or at the option of a holder of the series of debt
securities;
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the dates, if any, on which and the price or prices at which we
will repurchase the series of debt securities at the option of
the holders of that series of debt securities and other detailed
terms and provisions of such repurchase obligations;
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the denominations in which the series of debt securities will be
issued, if other than denominations of $1,000 and any integral
multiple thereof;
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the form of the series of debt securities and whether the series
of debt securities will be issuable as global debt securities;
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the portion of principal amount of the series of debt securities
payable upon declaration of acceleration of the maturity date,
if other than the principal amount;
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the currency of denomination of the series of debt securities
and, if other than U.S. Dollars or the ECU, the agency
responsible for overseeing such currency;
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the designation of the currency, currencies or currency units in
which payment of principal of, premium and interest, if any, on
the series of debt securities will be made;
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if payments of principal of, premium or interest, if any, on the
series of debt securities will be made in one or more currencies
or currency units other than that or those in which the series
of debt securities are denominated, the manner in which the
exchange rate with respect to such payments will be determined;
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the manner in which the amounts of payment of principal of,
premium or interest on the series of debt securities will be
determined, if such amounts may be determined by reference to an
index based on a currency or currencies or by reference to a
commodity, commodity index, stock exchange index or financial
index;
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any provisions relating to any security provided for the series
of debt securities;
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any addition to or change in the Events of Default described in
this prospectus or in the indenture which applies to the series
of debt securities and any change in the right of the trustee or
the holders of the series of debt securities to declare the
principal amount thereof due and payable;
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any addition to or change in the covenants described in this
prospectus or in the indenture with respect to the series of
debt securities;
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any other terms of the series of debt securities (which may
supplement, modify or delete any provision of the indenture as
it applies to such series);
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any depositaries, interest rate calculation agents, exchange
rate calculation agents or other agents with respect to the
series of debt securities, if other than appointed in the
indenture;
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any provisions relating to conversion of the series of debt
securities; and
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whether the series of debt securities will be senior or
subordinated debt securities and a description of the
subordination thereof.
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In addition, the indenture does not limit our ability to issue
convertible or subordinated debt securities. Any conversion or
subordination provisions of a particular series of debt
securities will be set forth in the resolution of our Board of
Directors, the officers certificate or supplemental
indenture related to that series of debt securities and will be
described in the relevant prospectus supplement. Such terms may
include provisions for conversion, either mandatory, at the
option of the holder or at our option, in which case the number
of common shares or other securities to be received by the
holders of debt securities would be calculated as of a time and
in the manner stated in the prospectus supplement.
We may issue debt securities that provide for an amount less
than their stated principal amount to be due and payable upon
declaration of acceleration of their maturity pursuant to the
terms of the indenture. We will provide you with information on
the federal income tax considerations and other special
considerations applicable to any of these debt securities in the
applicable prospectus supplement.
If we denominate the purchase price of any of the debt
securities in a foreign currency or currencies or a foreign
currency unit or units, or if the principal of and any premium
and interest on any series of debt securities is payable in a
foreign currency or currencies or a foreign currency unit or
units, we will provide you with information on the restrictions,
elections, general tax considerations, specific terms and other
information with respect to that issue of debt securities and
such foreign currency or currencies or foreign currency unit or
units in the applicable prospectus supplement.
Transfer
and Exchange
Each debt security will be represented by either one or more
global securities registered in the name of The Depository
Trust Company, as Depositary (the Depositary),
or a nominee (we will refer to any debt security represented by
a global debt security as a book-entry debt
security), or a certificate issued in definitive
registered form (we will refer to any debt security represented
by a certificated security as a certificated debt
security) as set forth in the applicable prospectus
supplement. Except as set forth under the heading
Global Debt Securities and Book-Entry System
below, book-entry debt securities will not be issuable in
certificated form.
Certificated Debt Securities. You may transfer or
exchange certificated debt securities at any office we maintain
for this purpose in accordance with the terms of the indenture.
No service charge will be made for any transfer or exchange of
certificated debt securities, but we may require payment of a
sum sufficient to cover any tax or other governmental charge
payable in connection with a transfer or exchange.
You may effect the transfer of certificated debt securities and
the right to receive the principal of, premium and interest on
certificated debt securities only by surrendering the
certificate representing those certificated debt securities and
either reissuance by us or the trustee of the certificate to the
new holder or the issuance by us or the trustee of a new
certificate to the new holder.
Global Debt Securities and Book-Entry System. Each
global debt security representing book-entry debt securities
will be issued to the Depositary or a nominee of the Depositary
and registered in the name of the Depositary or a nominee of the
Depositary.
The Depositary has indicated it intends to follow the following
procedures with respect to book-entry debt securities.
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Ownership of beneficial interests in book-entry debt securities
will be limited to persons that have accounts with the
Depositary for the related global debt security
(participants) or persons that may hold interests
through participants. Upon the issuance of a global debt
security, the Depositary will credit, on its book-entry
registration and transfer system, the participants
accounts with the respective principal amounts of the book-entry
debt securities represented by such global debt security
beneficially owned by such participants. The accounts to be
credited will be designated by any dealers, underwriters or
agents participating in the distribution of the book-entry debt
securities. Ownership of book-entry debt securities will be
shown on, and the transfer of such ownership interests will be
effected only through, records maintained by the Depositary for
the related global debt security (with respect to interests of
participants) and on the records of participants (with respect
to interests of persons holding through participants). The laws
of some states may require that certain purchasers of securities
take physical delivery of such securities in definitive form.
These laws may impair the ability to own, transfer or pledge
beneficial interests in book-entry debt securities.
So long as the Depositary for a global debt security, or its
nominee, is the registered owner of that global debt security,
the Depositary or its nominee, as the case may be, will be
considered the sole owner or holder of the book-entry debt
securities represented by such global debt security for all
purposes under the indenture. Except as described below,
beneficial owners of book-entry debt securities will not be
entitled to have securities registered in their names, will not
receive or be entitled to receive physical delivery of a
certificate in definitive form representing securities and will
not be considered the owners or holders of those securities
under the indenture. Accordingly, each person beneficially
owning book-entry debt securities must rely on the procedures of
the Depositary for the related global debt security and, if such
person is not a participant, on the procedures of the
participant through which such person owns its interest, to
exercise any rights of a holder under the indenture.
We understand, however, that under existing industry practice,
the Depositary will authorize the persons on whose behalf it
holds a global debt security to exercise certain rights of
holders of debt securities, and the indenture provides that we,
the trustee and our respective agents will treat as the holder
of a debt security the persons specified in a written statement
of the Depositary with respect to such global debt security for
purposes of obtaining any consents, declarations, waivers or
directions required to be given by holders of the debt
securities pursuant to the indenture.
We will make payments of principal of, and premium and interest,
if any, on book-entry debt securities to the Depositary or its
nominee, as the case may be, as the registered holder of the
related global debt security. PolyOne Corporation, the trustee
and any other agent of ours or agent of the trustee will not
have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial
ownership interests in a global debt security or for
maintaining, supervising or reviewing any records relating to
beneficial ownership interests.
We expect that the Depositary, upon receipt of any payment of
principal of, premium or interest, if any, on a global debt
security, will immediately credit participants accounts
with payments in amounts proportionate to the respective amounts
of book-entry debt securities held by each participant as shown
on the records of such Depositary. We also expect that payments
by participants to owners of beneficial interests in book-entry
debt securities held through those participants will be governed
by standing customer instructions and customary practices, as is
now the case with the securities held for the accounts of
customers in bearer form or registered in street
name, and will be the responsibility of those participants.
We will issue certificated debt securities in exchange for each
global debt security only if (i) the Depositary notifies us
that it is unwilling or unable to continue as Depositary for
such global debt security or if at any time such Depositary
ceases to be a clearing agency registered under the Exchange
Act, and, in either case, we fail to appoint a successor
Depositary registered as a clearing agency under the Exchange
Act within 90 days of such event or (ii) we execute
and deliver to the trustee an officers certificate to the
effect that such global debt security shall be so exchangeable.
Any certificated debt securities issued in exchange for a global
debt security will be registered in such name or names as the
Depositary shall instruct the trustee. We expect
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that such instructions will be based upon directions received by
the Depositary from participants with respect to ownership of
book-entry debt securities relating to such global debt security.
We have obtained the foregoing information concerning the
Depositary and the Depositarys book-entry system from
sources we believe to be reliable, but we take no responsibility
for the accuracy of this information.
No
Protection In the Event of a Change of Control
Unless we state otherwise in the applicable prospectus
supplement, the debt securities will not contain any provisions
which may afford holders of the debt securities protection in
the event we have a change in control or in the event of a
highly leveraged transaction (whether or not such transaction
results in a change in control) that could adversely affect
holders of debt securities.
Covenants
We will set forth in the applicable prospectus supplement any
restrictive covenants applicable to any issue of debt securities.
Consolidation,
Merger and Sale of Assets
We may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all of our properties and
assets to, any person (a successor person) unless:
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we are the surviving corporation or the successor person (if
other than PolyOne) is a corporation organized and validly
existing under the laws of any U.S. domestic jurisdiction
and expressly assumes our obligations on the debt securities and
under the indenture;
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immediately after giving effect to the transaction, no Event of
Default, and no event which, after notice or lapse of time, or
both, would become an Event of Default, shall have occurred and
be continuing under the indenture; and
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certain other conditions are met.
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Notwithstanding the above, any subsidiary of PolyOne may
consolidate with, merge into or transfer all or part of its
properties to PolyOne.
Events of
Default
Event of Default means with respect to any
series of debt securities, any of the following events, unless
in the board resolution, supplemental indenture or
officers certificate, it is provided that such series of
debt securities shall not have the benefit of a particular Event
of Default:
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default in the payment of any interest upon any debt security of
that series when it becomes due and payable, and continuance of
that default for a period of 30 days (unless the entire
amount of the payment is deposited by us with the trustee or
with a paying agent prior to the expiration of such period of
30 days);
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default in the payment of principal of or premium on any debt
security of that series at maturity or which such principal
otherwise becomes due and payable;
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default in the performance or breach of any other covenant or
warranty by us in the indenture (other than a covenant or
warranty that has been included in the indenture solely for the
benefit
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of a series of debt securities other than that series), which
default continues uncured for a period of 60 days after
written notice thereof has been given, by registered or
certified mail, to us by the trustee or to us and the trustee by
the holders of at least 25% in principal amount of the
outstanding debt securities of that series, as provided in the
indenture;
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certain events of bankruptcy, insolvency or reorganization of
PolyOne; and
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any other Event of Default provided with respect to debt
securities of that series that is described in the applicable
board resolution, supplemental indenture or officers
certificate establishing such series of debt securities.
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No Event of Default with respect to a particular series of debt
securities (except as to certain events of bankruptcy,
insolvency or reorganization) necessarily constitutes an Event
of Default with respect to any other series of debt securities.
The occurrence of certain Events of Default or an acceleration
under the indenture may constitute an event of default under
certain of our other indebtedness outstanding from time to time.
If an Event of Default with respect to debt securities of any
series at the time outstanding occurs and is continuing, then
the trustee or the holders of not less than 25% in principal
amount of the outstanding debt securities of that series may, by
a notice in writing to us (and to the trustee if given by the
holders), declare to be due and payable immediately the
principal (or, if the debt securities of that series are
discount securities, that portion of the principal amount as may
be specified in the terms of that series) of and accrued and
unpaid interest, if any, on all debt securities of that series.
In the case of an Event of Default resulting from certain events
of bankruptcy, insolvency or reorganization, the principal (or
such specified amount) of and accrued and unpaid interest, if
any, on all outstanding debt securities will become and be
immediately due and payable without any declaration or other act
on the part of the trustee or any holder of outstanding debt
securities. At any time after a declaration of acceleration with
respect to debt securities of any series has been made, and
before a judgment or decree for payment of the money due has
been obtained by the trustee, the holders of a majority in
principal amount of the outstanding debt securities of that
series may rescind and annul the acceleration if all Events of
Default, other than the non-payment of accelerated principal and
interest, if any, with respect to debt securities of that
series, have been cured or waived as provided in the indenture.
We will describe in the prospectus supplement relating to any
series of debt securities that are discount securities the
particular provisions relating to acceleration of a portion of
the principal amount of such discount securities upon the
occurrence of an Event of Default.
The indenture provides that the trustee will be under no
obligation to exercise any of its rights or powers under the
indenture unless the trustee receives indemnity satisfactory to
it against any loss, liability or expense. Subject to certain
rights of the trustee, the holders of a majority in principal
amount of the outstanding debt securities of any series will
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, with respect to the debt securities of that series.
No holder of any debt security of any series will have any right
to institute any proceeding, judicial or otherwise, with respect
to the indenture or for the appointment of a receiver or
trustee, or for any remedy under the indenture, unless:
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that holder has previously given to the trustee written notice
of a continuing Event of Default with respect to debt securities
of that series; and
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the holders of not less than 25% in principal amount of the
outstanding debt securities of that series have made written
request, and offered reasonable indemnity, to the trustee to
institute the proceeding as trustee, and the trustee has not
received from the holders of a majority in principal
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amount of the outstanding debt securities of that series a
direction inconsistent with that request and has failed to
institute the proceeding within 60 days.
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Notwithstanding any other provision of the indenture, the holder
of any debt security will have an absolute and unconditional
right to receive payment of the principal of, premium and
interest, if any, on that debt security on or after the due
dates expressed in that debt security and to institute suit for
the enforcement of payment.
The indenture requires us, within 120 days after the end of
our fiscal year, to furnish to the trustee an officers
certificate as to compliance with the indenture. The indenture
provides that the trustee may withhold notice to the holders of
debt securities of any series of any event which, after notice
or lapse of time, or both, would become an Event of Default or
any Event of Default (except in payment of principal of, premium
or interest on any debt securities of that series) with respect
to debt securities of that series if it in good faith determines
that withholding notice is in the interest of the holders of
those debt securities.
Modification
and Waiver
We may modify and amend the indenture with the consent of the
holders of at least a majority in principal amount of the
outstanding debt securities of each series affected by the
modifications or amendments. We may not make any modification or
amendment without the consent of the holders of each affected
debt security then outstanding if that amendment will:
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reduce the principal amount of debt securities whose holders
must consent to an amendment, supplement or waiver;
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reduce the rate of or extend the time for payment of interest
(including default interest) on any debt security;
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reduce the principal of or premium on or change the stated
maturity date of any debt security or reduce the amount of, or
postpone the date fixed for, the payment of any sinking fund or
analogous obligation with respect to any series of debt
securities;
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reduce the principal amount of discount securities payable upon
acceleration of maturity;
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waive a default in the payment of the principal of, premium or
interest, if any, on any debt security (except a rescission of
acceleration of the debt securities of any series by the holders
of at least a majority in aggregate principal amount of the then
outstanding debt securities of that series and a waiver of the
payment default that resulted from such acceleration);
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make the principal of or premium or interest on any debt
security payable in currency other than that stated in the debt
security;
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make any change to certain provisions of the indenture relating
to, among other things, the right of holders of debt securities
to receive payment of the principal of, premium and interest on
those debt securities and to institute suit for the enforcement
of any such payment and to waivers or amendments; or
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waive a redemption payment, made at the option of PolyOne
Corporation, with respect to any debt security.
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Except for certain specified provisions, the holders of at least
a majority in principal amount of the outstanding debt
securities of any series may on behalf of the holders of all
debt securities of that series waive our compliance with
provisions of the indenture. The holders of a majority in
principal amount of the
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outstanding debt securities of any series may on behalf of the
holders of all the debt securities of such series waive any past
default under the indenture with respect to that series and its
consequences, except a default in the payment of the principal
of, premium or interest, if any, on any debt security of that
series; provided, however, that the holders of a majority in
principal amount of the outstanding debt securities of any
series may rescind an acceleration and its consequences,
including any related payment default that resulted from such
acceleration.
Defeasance
of Debt Securities and Certain Covenants in Certain
Circumstances
Legal Defeasance. The indenture provides that,
unless otherwise provided by the terms of the applicable series
of debt securities, we may be discharged from any and all
obligations in respect of the debt securities of any series
(except for certain obligations to register the transfer or
exchange of debt securities of such series, to replace stolen,
lost or mutilated debt securities of such series, and to
maintain paying agencies and certain provisions relating to the
treatment of funds held by paying agents). We will be so
discharged upon the deposit with the trustee, in trust, of money
and/or
U.S. Government Obligations or, in the case of debt
securities denominated in a single currency other than
U.S. dollars, Foreign Government Obligations, that, through
the payment of interest and principal in accordance with their
terms, will provide money in an amount sufficient in the opinion
of a nationally recognized firm of independent public
accountants to pay and discharge each installment of principal,
premium and interest on and any mandatory sinking fund payments
in respect of the debt securities of that series on the stated
maturity of those payments in accordance with the terms of the
indenture and those debt securities.
This discharge may occur only if, among other things, we have
delivered to the trustee an officers certificate and an
opinion of counsel stating that we have received from, or there
has been published by, the U.S. Internal Revenue Service a
ruling or, since the date of execution of the indenture, there
has been a change in the applicable U.S. federal income tax
law, in either case to the effect that, and based thereon such
opinion shall confirm that, the holders of the debt securities
of that series will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of the
deposit, defeasance and discharge and will be subject to
U.S. federal income tax on the same amounts and in the same
manner and at the same times as would have been the case if the
deposit, defeasance and discharge had not occurred.
Defeasance of Certain Covenants. The indenture
provides that, unless otherwise provided by the terms of the
applicable series of debt securities, upon compliance with
certain conditions:
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we may omit to comply with the covenant described under the
heading Consolidation, Merger and Sale of Assets and
certain other covenants set forth in the indenture, as well as
any additional covenants which may be described in the
applicable prospectus supplement; and
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any omission to comply with those covenants will not constitute
an event which, after notice or lapse of time, or both, would
become an Event of Default or an Event of Default with respect
to the debt securities of that series (covenant
defeasance).
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The conditions include:
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depositing with the trustee money
and/or
U.S. Government Obligations or, in the case of debt
securities denominated in a single currency other than
U.S. dollars, Foreign Government Obligations, that, through
the payment of interest and principal in accordance with their
terms, will provide money in an amount sufficient in the opinion
of a nationally recognized firm of independent public
accountants to pay and discharge each installment of principal
of, premium and interest on and any mandatory sinking fund
payments in respect of the debt securities of that series on the
stated maturity of those payments in accordance with the terms
of the indenture and those debt securities; and
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delivering to the trustee an opinion of counsel to the effect
that the holders of the debt securities of that series will not
recognize income, gain or loss for U.S. federal income tax
purposes as a result of the deposit and related covenant
defeasance and will be subject to U.S. federal income tax
on the same amounts and in the same manner and at the same times
as would have been the case if the deposit and related covenant
defeasance had not occurred.
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Covenant Defeasance and Events of Default. In the
event we exercise our option to effect covenant defeasance with
respect to any series of debt securities and the debt securities
of that series are declared due and payable because of the
occurrence of any Event of Default, the amount of money
and/or
U.S. Government Obligations or Foreign Government
Obligations on deposit with the trustee will be sufficient to
pay amounts due on the debt securities of that series at the
time of their stated maturity but may not be sufficient to pay
amounts due on the debt securities of that series at the time of
the acceleration resulting from the Event of Default. However,
we shall remain liable for those payments.
Certain
Defined Terms
Foreign Government Obligations means, with
respect to debt securities of any series that are denominated in
a currency other than U.S. dollars:
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direct obligations of the government that issued or caused to be
issued such currency for the payment of which obligations its
full faith and credit is pledged which are not callable or
redeemable at the option of the issuer thereof; or
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obligations of a person controlled or supervised by or acting as
an agency or instrumentality of that government the timely
payment of which is unconditionally guaranteed as a full faith
and credit obligation by that government,
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which, in either case are not callable or redeemable at the
option of the issuer thereof.
U.S. Government Obligations means debt
securities that are:
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direct obligations of The United States of America for the
payment of which its full faith an credit is pledged; or
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obligations of a person controlled or supervised by and acting
as an agency or instrumentality of The United States of America
the payment of which is unconditionally guaranteed as full faith
and credit obligation by The United States of America,
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which, in either case, are not callable or redeemable at the
option of the issuer itself and shall also include a depository
receipt issued by a bank or trust company as custodian with
respect to any such U.S. Government Obligation or a
specific payment of interest on or principal of any such
U.S. Government Obligation held by such custodian for the
account of the holder of a depository receipt. Except as
required by law, such custodian is not authorized to make any
deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation evidenced by such
depository receipt.
Governing
Law
The indenture and the debt securities will be governed by, and
construed in accordance with, the internal laws of the State of
New York.
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DESCRIPTION
OF UNITS
We may issue units comprising one or more securities described
in this prospectus in any combination. The following description
sets forth certain general terms and provisions of the units
that we may offer pursuant to this prospectus. The particular
terms of the units and the extent, if any, to which the general
terms and provisions may apply to the units so offered will be
described in the applicable prospectus supplement.
Each unit will be issued so that the holder of the unit also is
the holder of each security included in the unit. Thus, the unit
will have the rights and obligations of a holder of each
included security. Units will be issued pursuant to the terms of
a unit agreement, which may provide that the securities included
in the unit may not be held or transferred separately at any
time or at any time before a specified date. A copy of the forms
of the unit agreement and the unit certificate relating to any
particular issue of units will be filed with the SEC each time
we issue units, and you should read those documents for
provisions that may be important to you. For more information on
how you can obtain copies of the forms of the unit agreement and
the related unit certificate, see Where You Can Find More
Information.
The prospectus supplement relating to any particular issuance of
units will describe the terms of those units, including, to the
extent applicable, the following:
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the designation and terms of the units and the securities
comprising the units, including whether and under what
circumstances those securities may be held or transferred
separately;
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any provision for the issuance, payment, settlement, transfer or
exchange of the units or of the securities comprising the
units; and
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whether the units will be issued in fully registered or global
form.
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PLAN OF
DISTRIBUTION
We may sell the offered securities in and outside the United
States:
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through underwriters or dealers;
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directly to purchasers;
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in a rights offering;
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in at the market offerings, within the meaning of
Rule 415(a)(4) of the Securities Act, to or through a market
maker or into an existing trading market on an exchange or
otherwise;
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through agents; or
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through a combination of any of these methods.
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The prospectus supplement will include the following information:
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the terms of the offering;
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the names of any underwriters or agents;
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the name or names of any managing underwriter or underwriters;
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the purchase price or initial public offering price of the
securities;
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the net proceeds from the sale of the securities;
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any delayed delivery arrangements;
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any underwriting discounts, commissions and other items
constituting underwriters compensation;
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any discounts or concessions allowed or reallowed or paid to
dealers; and
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any commissions paid to agents.
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Sale
through Underwriters or Dealers
If underwriters are used in the sale, the underwriters will
acquire the securities for their own account. The underwriters
may resell the securities from time to time in one or more
transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the
time of sale. Underwriters may offer securities to the public
either through underwriting syndicates represented by one or
more managing underwriters or directly by one or more firms
acting as underwriters. Unless we inform you otherwise in the
prospectus supplement, the obligations of the underwriters to
purchase the securities will be subject to certain conditions,
and the underwriters will be obligated to purchase all the
offered securities if they purchase any of them. The
underwriters may change from time to time any initial public
offering price and any discounts or concessions allowed or
reallowed or paid to dealers.
If we offer securities in a subscription rights offering to our
existing security holders, we may enter into a standby
underwriting agreement with dealers, acting as standby
underwriters. We may pay the standby underwriters a commitment
fee for the securities they commit to purchase on a standby
basis. If we do not enter into a standby underwriting agreement,
we may retain a dealer-manager to manage a subscription rights
offering for us.
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During and after an offering through underwriters, the
underwriters may purchase and sell the securities in the open
market. These transactions may include overallotment and
stabilizing transactions and purchases to cover syndicate short
positions created in connection with the offering. The
underwriters may also impose a penalty bid, which means that
selling concessions allowed to syndicate members or other
broker-dealers for the offered securities sold for their account
may be reclaimed by the syndicate if the offered securities are
repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or
otherwise affect the market price of the offered securities,
which may be higher than the price that might otherwise prevail
in the open market. If commenced, the underwriters may
discontinue these activities at any time.
Some or all of the securities that we offer though this
prospectus may be new issues of securities with no established
trading market. Any underwriters to whom we sell our securities
for public offering and sale may make a market in those
securities, but they will not be obligated to do so and they may
discontinue any market making at any time without notice.
Accordingly, we cannot assure you of the liquidity of, or
continued trading markets for, any securities that we offer.
If dealers are used in the sale of securities, we will sell the
securities to them as principals. They may then resell those
securities to the public at varying prices determined by the
dealers at the time of resale. We will include in the prospectus
supplement the names of the dealers and the terms of the
transaction.
Direct
Sales and Sales through Agents
We may sell the securities directly. In this case, no
underwriters or agents would be involved. We may also sell the
securities through agents designated from time to time. In the
prospectus supplement, we will name any agent involved in the
offer or sale of the offered securities, and we will describe
any commissions payable to the agent. Unless we inform you
otherwise in the prospectus supplement, any agent will agree to
use its reasonable best efforts to solicit purchases for the
period of its appointment.
We may sell the securities directly to institutional investors
or others who may be deemed to be underwriters within the
meaning of the Securities Act with respect to any sale of those
securities. We will describe the terms of any sales of these
securities in the prospectus supplement.
Remarketing
Arrangements
Offered securities may also be offered and sold, if so indicated
in the applicable prospectus supplement, in connection with a
remarketing upon their purchase, in accordance with a redemption
or repayment pursuant to their terms, or otherwise, by one or
more remarketing firms, acting as principals for their own
accounts or as agents for us. Any remarketing firm will be
identified and the terms of its agreements, if any, with us and
its compensation will be described in the applicable prospectus
supplement.
Delayed
Delivery Contracts
If we so indicate in the prospectus supplement, we may authorize
agents, underwriters or dealers to solicit offers from certain
types of institutions to purchase securities from us at the
public offering price under delayed delivery contracts. These
contracts would provide for payment and delivery on a specified
date in the future. The contracts would be subject only to those
conditions described in the prospectus supplement. The
prospect