This document consists of two parts. The first part is this prospectus supplement, which describes certain matters relating to us and the
specific terms of this offering of notes and also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference in this prospectus supplement and the accompanying prospectus. The second part is
the accompanying prospectus, which gives more general information about securities we may offer from time to time.
We have not, and the
underwriters have not, authorized anyone to provide you with information other than that contained or incorporated by reference in this prospectus supplement and the accompanying prospectus or any free writing prospectus prepared by or on behalf of
us or to which we have referred you. Neither we nor the underwriters take any responsibility for, or provide any assurances as to the reliability of, any other information that others may give you. The information contained in this prospectus
supplement, the accompanying prospectus or any free writing prospectus prepared by or on behalf of us or to which we have referred you is accurate as of their respective dates. The information in documents incorporated by reference in this
prospectus supplement and the accompanying prospectus is accurate as of the respective dates of those documents. To the extent the information contained in this prospectus supplement differs or varies from the information contained in the
accompanying prospectus, the information in this prospectus supplement will control. To the extent the information contained in this prospectus supplement differs or varies from the information contained in a document we have incorporated by
reference into this prospectus supplement or the accompanying prospectus, you should rely on the information in the more recent document.
Before you decide to invest in the notes, you should carefully read this prospectus supplement, the accompanying prospectus, the registration
statement described in the accompanying prospectus (including the exhibits thereto) and the documents incorporated by reference into this prospectus supplement and the accompanying prospectus. The incorporated documents are described in this
prospectus supplement under the caption Incorporation of Certain Information by Reference.
We are not making offers to sell
the notes or soliciting offers to purchase the notes in any jurisdiction in which such 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.
We expect that delivery of the notes will be made to investors on or about March 25, 2014, which
will be the 4th business day following the date of this prospectus supplement (such settlement being referred to as T+4). Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended (the Exchange Act), trades in
the secondary market are required, subject to certain exceptions, to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to sell their notes before the third business day
prior to the delivery of the notes hereunder will be required, by virtue of the fact that the notes initially settle in T+4, to specify an alternate settlement arrangement at the time of any such trade to prevent a failed settlement. Those
purchasers should consult their advisors.
Unless otherwise stated or the context otherwise requires, as used in this prospectus
supplement, the words we, us, our or the company refer to Kennedy-Wilson Holdings, Inc. and its subsidiaries.
DESCRIPTION OF THE NOTES
In this description, the words we, us, our and Issuer refer to Kennedy-Wilson, Inc. and not to
any of its subsidiaries. Certain terms used in this description are defined under the subheading Certain Definitions.
We will issue the notes under an indenture (the
Base Indenture
), to be dated as of March 25, 2014, between us
and Wilmington Trust, National Association, as trustee (the
Trustee
), as supplemented by a supplemental indenture thereto (the
Supplemental Indenture
, and, together with the Base Indenture, the
Indenture
), to be dated as of March 25, 2014, among us, the Trustee and the initial Guarantors. The Notes will be a series of debt securities under the Base Indenture the terms of which will be established by the
Supplemental Indenture.
The following description of the particular terms of the Notes and the Guarantees supplements and, to the extent
inconsistent therewith, replaces the description of the general terms and provisions of the debt securities and the guarantees set forth in the accompanying prospectus, to which reference is hereby made. The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the
Trust Indenture Act
). The following description is only a summary of the material provisions of the Indenture. We
urge you to read the Indenture because it, not this description, defines your rights as holders of these Notes. You may request copies of the Indenture at our address set forth under the heading Where You Can Find More Information.
Brief Description of the Notes
These
Notes:
|
|
|
are unsecured senior obligations of the Issuer;
|
|
|
|
are senior in right of payment to all existing and any future Subordinated Obligations of the Issuer; and
|
|
|
|
will be guaranteed by Kennedy-Wilson Holdings, Inc. (
Parent
) and each Subsidiary Guarantor on a senior basis.
|
Principal, Maturity and Interest
The Issuer will initially issue Notes with a maximum aggregate principal amount of $300.0 million. The Issuer will issue the
Notes in denominations of $2,000 and integral multiples of $1,000 in excess thereof. The Notes will mature on April 1, 2024. Subject to our compliance with the covenant described under the subheading Certain
CovenantsLimitation on Indebtedness, we are permitted to issue more notes under the Indenture in an unlimited aggregate principal amount (the
Additional Notes
), provided that if the Additional Notes are not
fungible with the Notes for United States federal income tax purposes, the Additional Notes will have a separate CUSIP number. The Notes offered hereby and any Additional Notes subsequently issued under the Indenture will be treated as a single
series of Notes for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Holders of the Notes offered hereby and any Additional Notes subsequently issued under the Indenture will
vote as one class under the Indenture. Unless the context otherwise requires, for all purposes of the Indenture and this Description of the Notes, references to the Notes include any Additional Notes actually issued.
Interest on these Notes will accrue at the rate of 5.875% per annum and will be payable semi-annually in arrears on April 1 and
October 1 of each year, commencing on October 1, 2014. We will make each interest payment to the holders of record of these Notes on the immediately preceding March 15 and September 15, respectively.
S-34
Interest on these Notes will accrue from the date of original issuance or, if interest has
already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.
Optional Redemption
Except as set forth
below, we will not be entitled to redeem the Notes at our option.
On and after April 1, 2019, we will be entitled at our option to
redeem all or a portion of these Notes upon not less than 30 nor more than 60 days notice, at the redemption prices (expressed in percentages of principal amount on the redemption date), plus accrued and unpaid interest, if any, to, but
excluding, the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date), if redeemed during the 12-month period commencing on April 1 of the years set
forth below:
|
|
|
|
|
Period
|
|
Redemption Price
|
|
2019
|
|
|
102.938
|
%
|
2020
|
|
|
101.958
|
%
|
2021
|
|
|
100.979
|
%
|
2022 and thereafter
|
|
|
100.000
|
%
|
In addition, before April 1, 2017, we will be entitled at our option on one or more occasions to
redeem Notes (which includes Additional Notes, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Notes (which includes Additional Notes, if any) originally issued at a redemption price (expressed as
a percentage of principal amount ) of 105.875%, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, with an amount not to exceed the net cash proceeds from one or more Equity Offerings (provided that if the Equity
Offering is an offering by Parent, a portion of the Net Cash Proceeds thereof equal to the amount required to redeem any such Notes is contributed to the equity capital of the Issuer),
provided
that:
(1) at least 65% of such aggregate principal amount of Notes (which includes Additional Notes, if any) remains outstanding immediately after
the occurrence of each such redemption (other than Notes held, directly or indirectly, by the Issuer or its Affiliates); and
(2) each
such redemption occurs within 90 days after the date of the related Equity Offering.
Notice of any redemption upon any Equity Offering
may be given prior to the completion thereof, and any such redemption or notice, may, at the Issuers discretion, be subject to the completion of the related Equity Offering.
Prior to April 1, 2019, we will be entitled, at our option, to redeem all or a portion of the Notes at a redemption price equal to 100%
of the principal amount of the Notes plus the Applicable Premium as of, and accrued and unpaid interest, if any, to, the redemption date (subject to the right of holders on the relevant record date to receive interest due on the relevant interest
payment date). Notice of such redemption must be delivered electronically if held at DTC or mailed by first-class mail to each holders registered address, not less than 30 nor more than 60 days prior to the redemption date.
Applicable Premium
means with respect to a Note at any redemption date, as provided by the Issuer, the greater of
(1) 1.00% of the principal amount of such Note on such redemption date and (2) the excess of (A) the present value at such redemption date of (i) the redemption price of such Note on April 1, 2019 (such redemption price
being described in the second paragraph in this Optional Redemption section, exclusive of any accrued and unpaid interest) plus (ii) all required remaining scheduled interest payments due on such Note through April 1,
2019 (but excluding accrued and unpaid interest, if any, to the redemption date), computed using
S-35
a discount rate equal to the Adjusted Treasury Rate, over (B) the principal amount of such Note on such redemption date.
Adjusted Treasury Rate
means, with respect to any redemption date and as provided by the Issuer, (1) the yield, under
the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated H. 15(519) or any successor publication which is published weekly by the Board of
Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption Treasury Constant Maturities, for the maturity corresponding to the
Comparable Treasury Issue (if no maturity is within three months before or after April 1, 2019, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury
Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month) or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not
contain such yields, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, in
each case calculated on the third Business Day immediately preceding the date that the applicable redemption notice is first mailed or delivered electronically if held at DTC, in each case, plus 0.50%.
Comparable Treasury Issue
means the United States Treasury security selected by the Quotation Agent as having a maturity
comparable to the remaining term of the Notes from the redemption date to April 1, 2019, that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of
a maturity most nearly equal to April 1, 2019.
Comparable Treasury Price
means, with respect to any redemption
date, if clause (2) of the Adjusted Treasury Rate definition is applicable, the average of three, or such lesser number as is obtained by the Issuer, Reference Treasury Dealer Quotations for such redemption date.
Quotation Agent
means the Reference Treasury Dealer selected by the Issuer.
Reference Treasury Dealer
means each of (i) Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche
Bank Securities Inc. and (ii) a primary U.S. Government securities dealer in the United States selected by U.S. Bancorp Investments, Inc., and in each case the respective successors and assigns of the foregoing.
Reference Treasury Dealer Quotations
means with respect to each Reference Treasury Dealer and any redemption date, the
average, as determined by the Issuer, of the bid and asked prices for the Comparable Treasury Issue, expressed in each case as a percentage of its principal amount, quoted in writing to the Issuer by such Reference Treasury Dealer at 5:00 p.m., New
York City time, on the third Business Day immediately preceding date that the applicable redemption notice is first mailed or delivered electronically if held at DTC.
Selection and Notice of Redemption
If we are redeeming less than all the Notes at any time, the Trustee will select Notes on a pro rata basis, by lot or by such other method in
accordance with the procedures of DTC.
We will redeem Notes with principal amounts of $2,000 or less in whole and not in part. We will
cause notices of redemption to be delivered electronically if held at DTC or mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address.
If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount
thereof to be redeemed. We will issue a new Note in a principal amount equal to the unredeemed portion of the original Note 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-36
No Sinking Fund; Open Market Purchases
We are not required to make any sinking fund payments with respect to the Notes. However, under certain circumstances, we may be required to
offer to purchase Notes as described under the captions Fundamental Change and Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock. We may at any time and from time to time purchase Notes in
the open market or otherwise.
Guaranties
Parent and each Subsidiary Guarantor of the Issuer will jointly and severally guarantee, on a senior unsecured basis, our obligations under
the Indenture and the Notes. The obligations of each Subsidiary Guarantor under its Subsidiary Guaranty are designed to be limited as necessary to prevent such Subsidiary Guaranty from constituting a fraudulent conveyance under applicable law and,
therefore, will be expressly limited to the maximum amount that such Subsidiary Guaranty could guarantee without such Subsidiary Guaranty constituting a fraudulent conveyance. This limitation, however, may not be effective to prevent such Subsidiary
Guaranty from constituting a fraudulent conveyance. See Risk FactorsRisks Related to the NotesA subsidiary guarantee could be voided if it constitutes a fraudulent transfer under U.S. bankruptcy or similar state law, which would
prevent the holders of the Notes from relying on that subsidiary to satisfy claims.
If a Subsidiary Guaranty were rendered
voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the applicable Subsidiary Guarantor, and, depending on the amount of such indebtedness, a Subsidiary Guarantors
liability on its Subsidiary Guaranty could be reduced to zero. See Risk FactorsRisks Related to the NotesA subsidiary guarantee could be voided if it constitutes a fraudulent transfer under U.S. bankruptcy or similar state law,
which would prevent the holders of the Notes from relying on that subsidiary to satisfy claims.
The Subsidiary Guaranty of a
Subsidiary Guarantor will be deemed to be automatically and unconditionally released and discharged, without the need of any action on the part of such Subsidiary Guarantor or the Trustee or otherwise:
(1) upon the sale or other disposition (including by way of consolidation or merger) of such Subsidiary Guarantor (including, for the
avoidance of doubt, any transaction pursuant to which such Subsidiary Guarantor ceases to be a Subsidiary of the Issuer);
(2) upon the
sale or disposition of all or substantially all the assets of such Subsidiary Guarantor;
(3) upon the designation of such Subsidiary
Guarantor as an Unrestricted Subsidiary or a Non-Material Subsidiary pursuant to the terms of the Indenture;
(4) upon a legal defeasance
or satisfaction and discharge of the Notes, as provided under Defeasance and Satisfaction and Discharge; or
(5) as
described under Amendments and Waivers,
in the case of clause (1) or (2), other than to the Issuer or a Restricted Subsidiary and
as permitted by the Indenture.
Notwithstanding anything to the contrary in the Indenture, the Notes or the Guaranties, if the Issuer, due
to an error made in good faith, causes any Person to execute the Supplemental Indenture or any other supplement to the Base Indenture, or any other instrument, purporting to cause such Person to guarantee the Notes and become a Subsidiary Guarantor
and, at the time of such execution, such Person is not a domestic Subsidiary of the Issuer, then, notwithstanding such Supplemental Indenture or other supplement or instrument, the Subsidiary
S-37
Guaranty of such Person shall automatically, and without the need for any action on the part of the Issuer, such Person or the Trustee or otherwise, be null and void, with the same force and
effect as if such execution had never occurred. Without limiting the generality of the foregoing, the Issuer and such Person may nonetheless thereafter execute and deliver to the Trustee such instruments or other documents that shall memorialize the
nullification of such Subsidiary Guaranty.
Not all of our Subsidiaries will guarantee the notes. Also, the joint venture and fund
entities in which we have investments and their respective subsidiaries (which are not Subsidiaries of the Issuer as of the date of the Indenture) are not guarantors and are not subject to any of the obligations and covenants described hereunder. In
the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor Subsidiaries, the non-guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their
assets to us. For the years ended December 31, 2013 and 2012, the revenues of our non-guarantor subsidiaries constituted approximately 64% and 55%, respectively, of Kennedy-Wilson Holdings consolidated revenues, and the operating income
of our non-guarantor subsidiaries for those periods was approximately $3.6 million and $16.4 million, respectively. As of December 31, 2013, the total assets of those subsidiaries constituted approximately 45% of Kennedy-Wilson Holdings
consolidated total assets, and those subsidiaries had $328.0 million of secured non-recourse mortgage indebtedness (excluding debt discount), of which none has recourse to us. However, these figures are as of December 31, 2013 and do not
reflect transactions that we have entered into after that date or future transactions that we may enter into. Depending on the particular terms of any acquisition or other transaction that one or more of our subsidiaries may enter into, those
subsidiaries may not be required by the terms of the Indenture to guarantee the Notes. Accordingly, these figures may fluctuate from time to time, and these figures may increase or decrease materially in future periods. For example, the instruments
governing our acquisitions (such as the relevant loan agreement, or the terms of the relevant partnership agreement, limited liability company operating agreement or other governing document of the borrower, or any related joint venture agreement or
the terms of any relevant Co-investment Vehicle or separate account or investment program) may prohibit the relevant subsidiary from guaranteeing the Notes. In many such cases, the Indenture does not require our subsidiaries, including those
described above, to guarantee the Notes.
Ranking
The indebtedness evidenced by the Notes and the Guaranties will be senior unsecured obligations and will rank
pari passu
in
right of payment with all other unsecured Senior Indebtedness of the Issuer or the applicable Guarantor, as the case may be.
As of
December 31, 2013, on an as adjusted basis, after giving effect to the issuance and sale of $300.0 million aggregate principal amount of the Notes, after deducting underwriting discounts and commissions and estimated offering expenses to be
paid by us:
(a) the Issuers and the Guarantors Senior Indebtedness would have been approximately $779.4 million, of which:
(1) $74.4 million would have been secured Non-Recourse Indebtedness under mortgage loans;
(2) $705.0 million would have been unsecured Senior Indebtedness, consisting of the Notes offered hereby, $55.0 million of the
Issuers 7.75% Senior Notes due 2042 and $350.0 million of the Issuers 8.750% Senior Notes due 2019; and
(3)
the Issuer had $0.0 Indebtedness outstanding under the Credit Agreement and had $140.0 million of availability thereunder; and
(b)
the Issuer had $40.0 million of subordinated Indebtedness, consisting entirely of its Subordinated Debentures.
S-38
In addition, as of such date, the Issuer and the Subsidiary Guarantors would have had
$18.9 million aggregate principal amount of Guarantees that the Issuer and the Guarantors provided in connection with loans secured by assets held in various joint ventures and that are recourse to the Issuer and the Guarantors.
The Notes and the Guaranties are unsecured obligations of the Issuer and the Guarantors, as the case may be. Secured debt and other secured
obligations of the Issuer and the Guarantors will be effectively senior to the Notes and the Guaranties to the extent of the value of the assets securing such debt or other obligations. In addition, all Indebtedness and trade payables of
non-guarantor Subsidiaries will be effectively senior to the Notes and the Guaranties.
Not all of our subsidiaries will guarantee the
notes. See Risk FactorsRisks Related to the NotesThe notes will not be guaranteed by all of our subsidiaries.
Although the Indenture contains limitations on the amount of additional Indebtedness that the Issuer and the Restricted Subsidiaries may
incur, under certain circumstances the amount of such Indebtedness could be substantial and, subject to the limitations set forth in the covenants described under Certain CovenantsLimitation on Liens, such Indebtedness may be
secured Indebtedness. See Certain CovenantsLimitation on Indebtedness and Limitation on Liens.
Fundamental
Change
Upon the occurrence of a Fundamental Change, each noteholder shall have the right to require that the Issuer purchase such
noteholders Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
Within 30 days following any Fundamental
Change, unless we have exercised our option to redeem all the Notes as described under Optional Redemption, we will mail (or deliver electronically, if held at DTC) a notice to each noteholder with a copy to the Trustee (the
Fundamental Change Offer
) stating:
(1) that a Fundamental Change has occurred and that such
noteholder has the right to require us to purchase such noteholders Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase, plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of noteholders of record on the relevant record date to receive interest on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Fundamental Change (including information with respect to pro forma historical income,
cash flow and capitalization, in each case after giving effect to such Fundamental Change);
(3) the purchase date (which shall be no
earlier than 30 days nor later than 60 days from the date such notice is mailed); and
(4) the instructions, as determined by us,
consistent with the covenant described hereunder, that a noteholder must follow in order to have its Notes purchased.
We will not be
required to make a Fundamental Change Offer following a Fundamental Change if a third party makes the Fundamental Change Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a
Fundamental Change Offer made by us and purchases all Notes validly tendered and not withdrawn under such Fundamental Change Offer or if we have exercised our option to redeem all the Notes pursuant to the provisions described under
Optional Redemption.
S-39
We will comply, to the extent applicable, with the requirements of Section 14(e) of the
Exchange Act and any other securities laws or regulations in connection with the purchase of Notes as a result of a Fundamental Change. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the
covenant described hereunder, we will comply with the applicable securities laws and regulations and shall not be deemed to have breached our obligations under the covenant described hereunder by virtue of our compliance with such securities laws or
regulations.
The Fundamental Change purchase feature of the Notes may in certain circumstances make more difficult or discourage a sale
or takeover of the Issuer and, thus, the removal of incumbent management. The Fundamental Change purchase feature is a result of negotiations between the Issuer and the underwriters of the Notes. We have no present intention to engage in a
transaction involving a Change of Control and we do not foresee the occurrence of a Termination of Trading, although it is possible that, in the future, we could decide to engage in a transaction involving a Change of Control or a Termination of
Trading occurs. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture
or result in a Termination of Trading, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to Incur additional Indebtedness are
contained in the covenants described under Certain CovenantsLimitation on Indebtedness, and Limitation on Liens, which limitations may terminate as described under Defeasance and Satisfaction and
Discharge below. Such restrictions can only be waived with the consent of the holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenant, however, the Indenture will not
contain any covenants or provisions that may afford holders of the Notes protection in the event of a highly leveraged transaction.
Holders may not be entitled to require us to purchase their Notes in certain circumstances involving a significant change in the composition
of our Board of Directors, including in connection with a proxy contest where our Board of Directors does not approve a dissident slate of directors but approves them as continuing directors, even if our Board of Directors initially opposed the
directors.
The Credit Agreement provides that the occurrence of certain change of control events with respect to the Issuer would
constitute a default thereunder. Future indebtedness that we may incur may contain prohibitions on the occurrence of certain events that would constitute a Fundamental Change or require the purchase of such indebtedness upon a Fundamental Change.
Moreover, the exercise by the holders of their right to require us to purchase the Notes could cause a default under such indebtedness, even if the Fundamental Change itself does not, due to the financial effect of such purchase on us. Our ability
to pay cash to the holders of Notes following the occurrence of a Fundamental Change may be limited by our then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required
purchases. See Risk FactorsRisks Related to the NotesWe may not have the ability to raise the funds necessary to finance a fundamental change offer.
The occurrence of a Fundamental Change will also trigger a redemption right held by the holders of Parents Series A Preferred Stock and
Series B Preferred Stock under their respective certificates of designation. Pursuant to paragraph (a) and clause (11) of paragraph (b) under the covenant described under Certain CovenantsLimitation on Restricted
Payments, we may not make any Restricted Payment to redeem or repurchase Parents Series A Preferred Stock and Series B Preferred Stock, unless we have sufficient restricted payment capacity or we have previously made an offer to
noteholders to repurchase the Notes. If the noteholders, however, reject our Fundamental Change Offer or fail for any reason to tender all of their Notes, and the stockholders of Parents Series A Preferred Stock and Series B Preferred Stock
accept Parents offer to repurchase such shares of Series A Preferred Stock and Series B Preferred Stock, we may have to pay dividends or make other payments to Parent so that it can use cash to fund the repurchase or redemption of its Series A
Preferred Stock and Series B Preferred Stock. In the event this occurs, it may be more difficult for us to make scheduled payments on the untendered Notes. See Risk FactorsRisks Related to the NotesIn the event of a
S-40
change of control or termination of trading of our common stock, our Series A and Series B preferred stock will be redeemable at the option of the stockholders thereof.
Notwithstanding anything to the contrary herein, a Fundamental Change Offer 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 making of such Fundamental Change Offer.
The phrase all or substantially all, as used with respect to the assets of the Issuer in the definition of Change of
Control, is subject to interpretation under applicable state law, and its applicability in a given instance would depend upon the facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or
transfer of all or substantially all the assets of the Issuer has occurred in a particular instance, in which case a holders ability to obtain the benefit of these provisions could be unclear.
The provisions under the Indenture relative to our obligation to make an offer to purchase the Notes as a result of a Fundamental Change may
be waived or modified with the written consent of the holders of a majority in principal amount of the Notes.
For purposes
of this discussion of a repurchase of the Notes following a Fundamental Change
Change of Control
means the occurrence of any of the following:
(1) any person or group (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 35% (or, in the case of any Permitted Holder, 50%) of the total voting power of the Voting Stock of the Parent;
(2) individuals who on the Issue Date constituted the Board of Directors (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the Parent was approved by a vote of a majority of the directors of the Parent then still in office who were either directors on the Issue Date or whose election or nomination for
election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Parent then in office;
(3) the adoption of a plan relating to the liquidation or dissolution of the Parent;
(4) the merger or consolidation of the Parent with or into another Person or the merger of another Person with or into the Parent, or the sale
of all or substantially all the consolidated assets of Parent (but in any event, upon the sale of more than 35% of the consolidated assets of the Parent), to another Person, other than a transaction following which (A) in the case of a merger
or consolidation transaction, holders of securities that represented 100% of the Voting Stock of the Parent immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation
transaction) own, directly or indirectly, at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction immediately after such transaction and (B) in the case of a sale of assets
transaction, the transferee Person becomes the obligor in respect of the Notes and a Subsidiary of the transferor of such assets; or
(5)
the Parent ceases to own, directly, 100% of the Capital Stock of the Issuer.
For the avoidance of doubt, for purposes of determining
beneficial ownership under clause (1) above, no Permitted Holder shall be deemed to be a person or group (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) with Fairfax.
Fundamental Change
shall mean the occurrence of a Change of Control or a Termination of Trading.
S-41
Termination of Trading
shall mean the termination (but not the temporary
suspension) of trading of the Common Stock of Parent, which will be deemed to have occurred if the Common Stock or other securities into which the Parents Series A Preferred Stock and Series B Preferred Stock are convertible are not, or are
not permitted to be, listed for trading on the New York Stock Exchange or any other U.S. national securities exchange.
Certain Covenants
The indenture contains, among others, the covenants described below.
If on any date following the date of the Indenture:
(1) the notes are rated Baa3 or better by Moodys and BBB- or better by S&P (or, if either such entity ceases to rate the notes for
reasons outside of the control of the Issuer, the equivalent investment grade credit rating from any other nationally recognized statistical rating organization within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act
selected by the Issuer as a replacement agency); and
(2) no Default or Event of Default shall have occurred and be continuing,
then, beginning on that day and subject to the provisions of the following paragraph, the covenants described below will be suspended:
(1) Limitation on Indebtedness;
(2) Limitation on Restricted Payments;
(3) Limitation on Restrictions on Distributions from Restricted Subsidiaries;
(4) Limitation on Sales of Assets and Subsidiary Stock; and
(5) clause (3) of the covenant described below under the caption Merger and Consolidation.
Notwithstanding the foregoing, if the rating assigned by either such rating agency should subsequently decline to below Baa3 or BBB-,
respectively, then the foregoing covenants will be reinstituted as of and from the date of such rating decline. For the avoidance of doubt, calculations under the reinstated Limitation on Restricted Payments covenant will be made as if
such covenant had been in effect since April 1, 2011, except that no default will be deemed to have occurred solely by reason of a Restricted Payment made prior to the date of the Indenture or during the time such that covenant was suspended.
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 Indebtedness
(a)
The Issuer will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness;
provided, however
, that the Issuer and the Restricted Subsidiaries will be entitled to Incur Indebtedness (including
revolving credit Indebtedness) if, on the date of such Incurrence and after giving effect thereto, no Default has occurred and is continuing and the Maximum Balance Sheet Leverage Ratio is no greater than 1.5 to 1.0.
S-42
(b) Notwithstanding the foregoing paragraph (a), the Issuer and the Restricted Subsidiaries will
be entitled to Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred by the Issuer pursuant to any
Credit Facility (including the Credit Agreement);
provided, however
, that, immediately after giving effect to any such Incurrence, the aggregate principal amount of all Indebtedness Incurred under this clause (1) and then outstanding
does not exceed the greater of (x) $150.0 million and (y) 8.0% of Total Assets;
(2) Indebtedness owed to and
held by the Issuer or a Restricted Subsidiary;
provided, however
, that (A) any subsequent issuance or transfer of any Capital Stock which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent
transfer of such Indebtedness (other than to the Issuer or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the obligor thereon and (B) if the Issuer is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Notes;
(3) the Notes (other than any Additional Notes);
(4) Indebtedness of the Issuer and its Subsidiaries outstanding on the Issue Date (other than Indebtedness described in clause
(1), (2) or (3) of this covenant);
(5) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or
prior to the date on which such Subsidiary was acquired by the Issuer (other than Indebtedness Incurred in connection with, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Issuer);
provided, however
, at the time of such acquisition and after giving effect thereto, the aggregate principal amount of all Indebtedness Incurred
pursuant to this clause (5) and then outstanding does not exceed $25.0 million;
(6) Refinancing Indebtedness in
respect of Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (3), (4), (5), or this clause (6);
provided, however
, that to the extent such Refinancing Indebtedness directly or indirectly Refinances Indebtedness of a
Subsidiary Incurred pursuant to clause (5), such Refinancing Indebtedness shall be Incurred only by such Subsidiary;
(7)
Hedging Obligations of the Issuer or any Restricted Subsidiary entered into in the ordinary course of business and not for the purpose of speculation;
(8) obligations in respect of letters of credit, performance, bid and surety bonds, completion guarantees, budget guarantees,
payment obligations in connection with self-insurance or similar requirements provided by the Issuer or any Restricted Subsidiary in the ordinary course of business;
(9) Indebtedness 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 Indebtedness is extinguished within five Business Days of its Incurrence;
(10) Indebtedness with respect to workers compensation claims in the ordinary course of business;
(11) any Guarantee (including the Subsidiary Guaranties) by the Issuer or a Restricted Subsidiary of Indebtedness or other
obligations of the Issuer or any of its Restricted Subsidiaries so long as the Incurrence of such Indebtedness by the Issuer or such Restricted Subsidiary is permitted under the terms of the Indenture,
S-43
(12) Indebtedness arising from agreements providing for indemnification,
deposits, 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 a Subsidiary;
provided, however
, that (A) such Indebtedness is
not reflected on the balance sheet of the Issuer or any Restricted Subsidiary (contingent obligations referred to in a footnote or footnotes to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected
on such balance sheet for purposes of this clause (A)) and (B) in the case of a disposition, the maximum liability in respect of such Indebtedness shall at no time exceed the gross proceeds including noncash proceeds (the fair market value of
such noncash proceeds being determined at the time received and without giving effect to any subsequent changes in value) actually received by the Issuer or such Restricted Subsidiary in connection with such disposition;
(13) Non-Recourse Indebtedness, Permitted Non-Recourse Carve-Out Guarantees and Permitted Co-investments;
(14) Indebtedness constituting Subordinated Obligations, the net cash proceeds of which are used to purchase, repurchase,
redeem, defease or otherwise acquire or retire for value the Subordinated Debentures and with a Stated Maturity that is no earlier than 180 days after the Stated Maturity of the Notes; and
(15) Indebtedness of the Issuer or any Restricted Subsidiary (together with any refinancing thereof) in an aggregate principal
amount which, when taken together with all other Indebtedness of the Issuer and the Restricted Subsidiaries outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (14) above or paragraph (a)),
does not exceed the greater of (x) $37.5 million and (y) 2.0% of Total Assets.
(c) Notwithstanding the foregoing (except
to the extent provided in the foregoing clause (14)), none of the Issuer or any Subsidiary Guarantor will Incur any Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations of the Issuer or any Subsidiary Guarantor unless such Indebtedness shall be subordinated to the Notes or the applicable Subsidiary Guaranty to at least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this covenant: (1) any Indebtedness outstanding under the Credit Agreement on the Issue
Date will be treated as having been incurred on the Issue Date under clause (1) of paragraph (b) above; (2) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above,
the Issuer, in its sole discretion, will be permitted to classify all or a portion of such item of Indebtedness at the time of Incurrence, or later reclassify all or a portion of such item of Indebtedness, in one of the above clauses in any manner
that complies with the covenant; and (3) the Issuer will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described above. Notwithstanding the foregoing, Indebtedness incurred under the
Credit Agreement will be deemed to have been incurred under clause (1) of paragraph (b) above and the Issuer shall not be permitted to reclassify all or any portion of such Indebtedness. Indebtedness permitted by this covenant need not be
permitted solely by reference to one provision permitting such Indebtedness, but may be permitted in part by one such provision and in part by one or more other provisions of this covenant permitting such Indebtedness. For the avoidance of doubt,
the outstanding principal amount of any particular Indebtedness shall be counted only once and any obligations arising under any Guarantee, Lien, letter of credit or similar instrument supporting such Indebtedness shall not be double counted.
(e) For purposes of determining compliance with any U.S. dollar restriction on the Incurrence of Indebtedness where the Indebtedness Incurred
is denominated in a different currency, the amount of such Indebtedness will be the U.S. Dollar Equivalent determined on the date of the Incurrence of such Indebtedness,
provided, however,
that if any such Indebtedness denominated in a
different currency is subject to a Currency Agreement with respect to U.S. dollars covering all principal, premium, if any, and interest payable on such
S-44
Indebtedness, the amount of such Indebtedness expressed in U.S. dollars will be as provided in such Currency Agreement. The principal amount of any Refinancing Indebtedness Incurred in the same
currency as the Indebtedness being Refinanced will be the U.S. Dollar Equivalent of the Indebtedness Refinanced, except to the extent that (1) such U.S. Dollar Equivalent was determined based on a Currency Agreement, in which case the
Refinancing Indebtedness will be determined in accordance with the preceding sentence, and (2) the principal amount of the Refinancing Indebtedness exceeds the principal amount of the Indebtedness being Refinanced, in which case the
U.S. Dollar Equivalent of such excess will be determined on the date such Refinancing Indebtedness is Incurred.
(f) In no event
shall an Incurrence of Indebtedness made on the basis of consolidated financial statements prepared in good faith to be in accordance with GAAP be subject to rescission or constitute a Default by reason of any requisite subsequent restatement of
such financial statements that would have made such Incurrence prohibited at the time that it was made.
Limitation on Restricted Payments
(a) The Issuer will not, and will not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if
at the time the Issuer or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and
be continuing (or would result therefrom);
(2) the Issuer is not entitled to Incur an additional $1.00 of Indebtedness
pursuant to paragraph (a) of the covenant described under Limitation on Indebtedness; or
(3) the
aggregate amount of such Restricted Payment and all other Restricted Payments made on or after the Issue Date would exceed the sum of (without duplication):
(A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from April 1, 2011
to the end of the most recent fiscal quarter ended for which internal financial statements are available prior to the date of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); plus
(B) 100% of the aggregate Net Cash Proceeds received by the Issuer from the issuance or sale of its Capital Stock (other
than Disqualified Stock) subsequent to April 5, 2011 (other than an issuance or sale to a Subsidiary of the Issuer and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Issuer or any of its
Subsidiaries for the benefit of their employees) and 100% of any cash capital contribution received by the Issuer from its shareholders subsequent to the April 5, 2011; plus
(C) the amount by which Indebtedness of the Issuer is reduced on the Issuers balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Issuer) subsequent to April 5, 2011 of any Indebtedness of the Issuer convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Issuer (less the amount of any cash, or the
fair value of any other property, distributed by the Issuer upon such conversion or exchange); plus
(D) an amount equal
to the sum of the following since April 5, 2011: (x) the net reduction in the Investments (other than Permitted Investments) made by the Issuer or any Restricted Subsidiary in any Person resulting from repurchases, repayments or
redemptions of such Investments by such Person, payments of interest on Indebtedness, dividends, repayments of loans or advances, or proceeds realized on the sale of such Investment and proceeds representing the return of capital, in each case
received by the Issuer or any Restricted Subsidiary since the Issue Date, and (y) to the extent such Person is an Unrestricted Subsidiary,
S-45
the portion (proportionate to the Issuers equity interest in such Subsidiary) of the fair market value of the net assets of such Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary;
provided
,
however
, that the foregoing sum in this clause (D) shall not exceed, in the case of any such Person or Unrestricted Subsidiary, the amount of Investments (excluding
Permitted Investments) previously made (and treated as a Restricted Payment) by the Issuer or any Restricted Subsidiary in such Person or Unrestricted Subsidiary.
(b) The preceding provisions will not prohibit:
(1)(A) any Restricted Payment made out of the Net Cash Proceeds of the substantially concurrent sale of, or made by exchange
for, Capital Stock of the Issuer (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Issuer or an employee stock ownership plan or to a trust established by the Issuer or any of its Subsidiaries for the
benefit of their employees) subsequent to the Issue Date or (B) any Restricted Payment made out of a substantially concurrent cash capital contribution received by the Issuer from its shareholders subsequent to the Issue Date;
provided,
however
, that (i) such Restricted Payment shall be excluded in the calculation of the amount of Restricted Payments and (ii) the Net Cash Proceeds from such sale or such cash capital contribution (to the extent so used for such
Restricted Payment) shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations
of the Issuer or a Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Subordinated Obligations which is permitted to be Incurred pursuant to the covenant described under Limitation
on Indebtedness;
provided, however
, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments;
(3) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would
have complied with this covenant;
provided, however
, that such dividend shall be included in the calculation of the amount of Restricted Payments;
(4)(A) payments or distributions to employees of Parent, the Issuer or any Restricted Subsidiary pursuant to incentive plans
designed to pay employees amounts reflecting incentive compensation in recognition of performance thresholds achieved by such employees or (B) payments or distributions to employees of Parent, the Issuer or any Restricted Subsidiary of
co-investment return, carried interest or other form of incentive compensation or performance fees or any distribution of an equity interest in respect thereof, or any other incentive distributions from Investment
Subsidiaries or Co-investment Vehicles;
provided, however
, that such payments or distributions shall be excluded in the calculation of the amount of Restricted Payments;
(5) so long as no Default has occurred and is continuing, the repurchase or other acquisition of shares of Capital Stock of
Parent or the Issuer or any of the Issuers Subsidiaries from employees (including substantially full-time independent contractors), former employees, directors, former directors or consultants of the Issuer or any of its Subsidiaries (or
permitted transferees of such employees, former employees, directors, former directors or consultants), pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors of
Parent or its Subsidiaries under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such Capital Stock (including pursuant to any net exercise or net settlement provisions);
provided, however
,
that the aggregate amount of such repurchases and other acquisitions for cash shall not exceed the sum of (A) $10.0 million, (B) the Net Cash Proceeds from the sale of Capital Stock to members of management, consultants or directors of the
Issuer and its Subsidiaries that occurred or occurs after April 5, 2011 (to the extent the Net Cash Proceeds from the
S-46
sale of such Capital Stock have not otherwise been applied to the payment of Restricted Payments by virtue of clause (3)(B) of paragraph (a) above) and (C) the cash proceeds of any
key man life insurance policies that are used to make such repurchases;
provided further
,
however
, that (x) such repurchases and other acquisitions shall be excluded in the calculation of the amount of Restricted
Payments and (y) the Net Cash Proceeds from such sale shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above;
(6) dividends to Parent to be used by Parent solely to pay its franchise taxes and other fees required to maintain its
corporate existence and to pay for general corporate and overhead expenses (including salaries, insurance and other compensation of the employees) incurred by Parent in the ordinary course of its business;
provided, however
, that such
dividends shall not exceed $5.0 million in any calendar year;
provided further, however
, that such dividends shall be excluded in the calculation of the amount of Restricted Payments;
(7) so long as no Event of Default has occurred and is continuing, dividends or other payments to Parent to be used by Parent
to pay dividends to the holders of the Parents Series A Preferred Stock and Series B Preferred Stock issued and outstanding as of the Issue Date,
provided, however
, that the aggregate amount of such dividends or other payments shall not
exceed $8.5 million per year (
provided
that any unused amounts in any year continue to carry forward and increase such limit in each subsequent year);
provided further
,
however
, that such dividends or other payments shall be
excluded in the calculation of the amount of Restricted Payments;
(8) payments to Parent in respect of federal, state and
local taxes directly attributable to (or arising as a result of) the operations of the Issuer and its consolidated Subsidiaries;
provided, however
, that the amount of such payments in any fiscal year shall not exceed the amount that the
Issuer and its consolidated Subsidiaries would be required to pay in respect of federal, state and local taxes for such fiscal year were the Issuer to pay such taxes as a stand-alone taxpayer (whether or not all such amounts are actually used by
Parent for such purposes);
provided further
,
however
, that such payments shall be excluded in the calculation of the amount of Restricted Payments;
(9) Investments made pursuant to commitments to Invest if at the date such commitment was made, such Investment would have
complied with this covenant;
provided, however
, that such Investment shall be excluded in the calculation of the amount of Restricted Payments;
(10) upon the occurrence of a Change of Control (or similarly defined term in other Indebtedness) and within 90 days after
completion of the Fundamental Change Offer (including the purchase of all Notes tendered), any repayment, repurchase, redemption, defeasance or other acquisition or retirement for value of any Indebtedness of the Issuer or the Subsidiary Guarantors
that is contractually subordinated to the Notes or to any Subsidiary Guaranty that is required to be repurchased or redeemed pursuant to the terms thereof as a result of such Change of Control (or similarly defined term in other Indebtedness), at a
purchase price not greater than 101% of the outstanding principal amount or liquidation preference thereof (plus accrued and unpaid interest and liquidated damages, if any);
(11) upon the occurrence of a Fundamental Change (or similarly defined term in the certificates of designation of
Parents Series A Preferred Stock and Series B Preferred Stock) and within 90 days after completion of the Fundamental Change Offer (including the purchase of all Notes tendered), any repayment, repurchase, redemption, defeasance or other
acquisition or retirement for value of Parents Series A Preferred Stock and Series B Preferred Stock (or any dividend or other payment to Parent for such purpose) that is required to be repurchased or redeemed pursuant to the terms thereof as
a result of such Fundamental Change (or similarly defined term in the certificates of designation of Parents Series A Preferred Stock and Series B Preferred Stock), at a purchase price not greater than the respective
S-47
purchase prices specified in the certificates of designation of Parents Series A Preferred Stock and Series B Preferred Stock as in effect on the Issue Date;
(12) within 90 days after completion of any offer to repurchase Notes pursuant to Limitation on Sales of Assets
and Subsidiary Stock (including the purchase of all Notes tendered), any repayment, repurchase, redemption, defeasance or other acquisition or retirement for value of any Indebtedness of the Issuer or the Subsidiary Guarantors that is
contractually subordinated to the Notes or to any Subsidiary Guaranty that is required to be repurchased or redeemed pursuant to the terms thereof as a result of such Asset Disposition (or similarly defined term in other Indebtedness), at a purchase
price not greater than 100% of the outstanding principal amount or liquidation preference thereof (plus accrued and unpaid interest and liquidated damages, if any);
(13) the payment of any amounts in respect of Capital Stock by any Restricted Subsidiary organized as a partnership or a
limited liability company or other pass-through entity: (a) to the extent of capital contributions made to such Restricted Subsidiary (other than capital contributions made to such Restricted Subsidiary by the Issuer or any Restricted
Subsidiary), or (b) to the extent necessary for holders thereof to pay taxes with respect to the net income of such Restricted Subsidiary;
provided, however
, that except in the case of clause (b), no Default or Event of Default has
occurred and is continuing at the time of such Restricted Payment or would result therefrom;
provided, further, however
, such amounts shall be excluded in the calculation of the amount of Restricted Payments;
(14) the payment of any dividend or distributions by a Restricted Subsidiary of the Issuer to the holders of its Capital Stock
pursuant to the terms of the relevant partnership agreement, limited liability company operating agreement or other governing document of the Restricted Subsidiary;
provided, however
, that such amounts shall be excluded in the calculation of
the amount of Restricted Payments; and
(15) Restricted Payments in an aggregate amount which, when taken together with
all Restricted Payments made pursuant to this clause (15) which have not been repaid, does not exceed the greater of (x) $37.5 million and (y) 2.0% of Total Assets;
provided, however
, that (A) at the time of such
Restricted Payments, no Default shall have occurred and be continuing (or result therefrom) and (B) such Restricted Payments shall be excluded in the calculation of the amount of Restricted Payments.
In no event shall a Restricted Payment made on the basis of consolidated financial statements prepared in good faith to be in accordance with
GAAP be subject to rescission or constitute a Default by reason of any requisite subsequent restatement of such financial statements that would have made such Restricted Payment prohibited at the time that it was made.
For purposes of determining compliance with this covenant: (1) in the event that a Restricted Payment meets the criteria of more than one
of the types of Restricted Payments described in the sub-clauses to clause (b) above, the Issuer, in its sole discretion, will be permitted to classify all or a portion of such Restricted Payment at the time it is made, or later reclassify all
or a portion of such Restricted Payment, in one of the above sub-clauses in any manner that complies with the covenant; and (2) the Issuer will be entitled to divide and classify a Restricted Payment in more than one of the types of Restricted
Payments described in the sub-clauses to clause (b) above.
As of March 18, 2014, the sum of the amounts referred to in
paragraphs (A), (B), (C) and (D) of clause (a)(3) above was approximately $753.0 million.
Limitation on Restrictions on
Distributions from Restricted Subsidiaries
The Issuer will not, and will not permit any Restricted Subsidiary to, create or
otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted
S-48
Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock to the Issuer or a Restricted Subsidiary or pay any Indebtedness owed to the Issuer, (b) make any
loans or advances to the Issuer or (c) transfer any of its property or assets to the Issuer, except:
(1) with respect to clauses
(a), (b) and (c),
(A) any encumbrance or restriction pursuant to an agreement of the Issuer or any of its
Subsidiaries in effect at or entered into on the Issue Date;
(B) any encumbrance or restriction contained in the terms of
any agreement pursuant to which such Indebtedness was issued if (x) either (i) the encumbrance or restriction applies only in the event of and during the continuance of a payment default or a covenant default contained in such Indebtedness
or agreement or (ii) the Issuer determines at the time any such Indebtedness is Incurred (and at the time of any modification of the terms of any such encumbrance or restriction) that any such encumbrance or restriction will not materially
affect the Issuers ability to make principal or interest payments on the Notes and (y) the encumbrance or restriction is not materially more disadvantageous to the holders of the Notes than is customary in comparable financings or
agreements (as determined by the Board of Directors in good faith);
(C) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary was acquired by the Issuer (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired
by the Issuer) and outstanding on such date;
(D) any encumbrance or restriction pursuant to an agreement effecting a
Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (A), (B) or (C) of clause (1) of this covenant or this clause (D) or contained in any amendment to an agreement referred to in clause (A),
(B) or (C) of clause (1) of this covenant or this clause (D);
provided, however
, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are not
materially less favorable, taken as a whole, to the noteholders than encumbrances and restrictions with respect to such Restricted Subsidiary contained in such predecessor agreements;
(E) any encumbrance or restriction pursuant to customary restrictions on, or customary conditions to the payment of dividends
or other distributions on, equity interests owned by the Issuer or any Subsidiary in any joint venture or similar enterprise contained in the constitutive documents, including shareholders or similar agreements, of such joint venture or
enterprise, to the extent encumbrances or restrictions apply solely to the income of such joint venture or similar enterprise;
(F) any encumbrance or restriction pursuant to customary restrictions contained in (i) agreements governing any
Non-Recourse Indebtedness or Permitted Co-investments, or (ii) the terms of the relevant partnership agreement, limited liability company operating agreement or other governing document of the entity that is the borrower (or the direct parent
of the borrower) under any Non-Recourse Indebtedness or of any Co-investment Vehicle;
(G) any encumbrance or restriction
contained in the terms of any agreement governing Indebtedness directly or indirectly secured by real property or other related assets that are customary for real property financing transactions, such as cash collateral accounts or impounds or
reserves required for payment of taxes, insurance, security deposits, capital expenditures and repairs, interest and tenant improvements and leasing commissions; and
S-49
(H) any encumbrance or restriction pursuant to applicable law; and
(2) with respect to clause (c) only,
(A) any such encumbrance or restriction consisting of customary nonassignment provisions in leases governing leasehold
interests or licenses of intellectual property to the extent such provisions restrict the transfer of the lease or the property leased or licensed thereunder;
(B) restrictions contained in security agreements, mortgages or other agreements securing Indebtedness of a Restricted
Subsidiary or any agreement governing Non-Recourse Indebtedness to the extent such restrictions restrict the transfer of the property subject to such security agreements, mortgages or Non-Recourse Indebtedness;
(C) restrictions on the transfer of assets subject to any Lien permitted under the Indenture imposed by the holder of such
Lien;
(D) any restriction with respect to a Restricted Subsidiary or its assets imposed pursuant to an agreement entered
into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; and
(E) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually
or in the aggregate, detract from the value of the property or assets of the Issuer or any Restricted Subsidiary in a manner material to the Issuer and its Restricted Subsidiaries, taken as a whole.
Limitation on Sales of Assets and Subsidiary Stock
(a) The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Disposition unless:
(1) the Issuer or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal
to the fair market value (including as to the value of all noncash consideration), as determined in good faith by members of the Issuers senior management, of the shares and assets subject to such Asset Disposition;
(2) at least 75% of the consideration thereof received by the Issuer or such Restricted Subsidiary is in the form of cash or
cash equivalents, Temporary Cash Investments or Replacement Assets or a combination of cash and cash equivalents, Temporary Cash Investments, and Replacement Assets;
provided, however
, that with respect to the sale of one or more real estate
properties or related property, plant and equipment, or loans secured by real estate, up to 75% of the consideration may consist of Indebtedness of the purchaser of such real estate properties or related property, plant and equipment, or loans
secured by real estate, so long as such Indebtedness is secured by a first or second priority Lien on the real estate property or properties or related property, plant and equipment, or loans secured by real estate, sold;
(3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Issuer (or such Restricted
Subsidiary, as the case may be):
(A) first, to the extent the Issuer elects (or is required by the terms of any
Indebtedness), to prepay, repay, redeem or purchase secured Indebtedness of the Issuer or any Restricted Subsidiary or Indebtedness (other than Disqualified Stock) of any other Wholly Owned Subsidiary (in each case other than Indebtedness owed to
the Issuer or an Affiliate of
S-50
the Issuer) within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash;
(B) second, to the extent of the balance of such Net Available Cash after application in accordance with clause (A), to the
extent the Issuer elects, to make a capital expenditure or to acquire Replacement Assets within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; and
(C) third, to the extent of the Excess Proceeds (as defined below), to make an offer to the holders of the Notes (and to
holders of other Senior Indebtedness of the Issuer designated by the Issuer) to purchase Notes (and such other Senior Indebtedness of the Issuer) pursuant to and subject to the conditions contained in the Indenture;
provided
,
however
, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or
(C) above (excluding temporary reductions of revolving credit indebtedness made pursuant to the covenant described in the last sentence of the next paragraph), the Issuer or such Restricted Subsidiary shall permanently retire such Indebtedness
and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased;
provided further
,
however
, the Issuer will be deemed to have complied with
clause (B) above if and to the extent that, within 365 days after the later of the Asset Disposition or the receipt of Net Available Cash, the Issuer or any of its Restricted Subsidiaries has entered into and not abandoned or rejected a binding
agreement to make a capital expenditure or to acquire Replacement Assets, and that such capital expenditure or acquisition is thereafter completed within 180 days after the end of such 365-day period.
The Net Available Cash of an Asset Disposition not applied pursuant to clauses (3)(A) and (B) above constitute
Excess
Proceeds.
Excess Proceeds of less than $10.0 million will be carried forward and accumulated. When accumulated Excess Proceeds equal or exceed such amount, the Issuer must, within 30 days, make an offer to purchase the Notes, in
accordance with clause (3)(C) above. Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash shall be invested in Temporary Cash Investments or applied to temporarily reduce revolving credit indebtedness.
For the purposes of this covenant, the following are deemed to be cash or cash equivalents:
(1) the assumption of Indebtedness of the Issuer or any Restricted Subsidiary and the release of the Issuer or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition; and
(2) securities received
by the Issuer or any Restricted Subsidiary from the transferee that are converted by the Issuer or such Restricted Subsidiary into cash within 180 days of receipt.
(b) In the event of an Asset Disposition that requires the purchase of Notes (and other Senior Indebtedness of the Issuer) pursuant to clause
(a)(3)(C) above, the Issuer will purchase Notes tendered pursuant to an offer by the Issuer for the Notes (and such other Senior Indebtedness of the Issuer) at a purchase price of 100% of their principal amount (or, in the event such other Senior
Indebtedness of the Issuer was issued with significant original issue discount, 100% of the accreted value thereof), without premium, plus accrued but unpaid interest, if any, (or, in respect of such other Senior Indebtedness of the Issuer, such
lesser price, if any, as may be provided for by the terms of such Senior Indebtedness of the Issuer) in accordance with the procedures (including prorating in the event of oversubscription) set forth in the Indenture. If the aggregate purchase price
of the securities tendered exceeds the Net Available Cash allotted to their purchase, the Issuer will select the securities to be purchased on a pro rata basis but in round denominations, which in the case of the Notes will be denominations of
$2,000 principal amount or integral multiples of $1,000 greater thereof. The Issuer shall not be
S-51
required to make such an offer to purchase Notes (and other Senior Indebtedness of the Issuer) pursuant to this covenant if the Excess Proceeds are less than $5.0 million (which lesser amount
shall be carried forward for purposes of determining whether such an offer is required with respect to the Net Available Cash from any subsequent Asset Disposition).
(c) The Issuer will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the purchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Issuer will comply with the applicable
securities laws and regulations and will not be deemed to have breached its obligations under this clause by virtue of its compliance with such securities laws or regulations.
Limitation on Affiliate Transactions
(a) The Issuer will not, and will not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with, or for the benefit of, any Affiliate of the Issuer (an
Affiliate Transaction
) unless:
(1) the terms of the Affiliate Transaction are no less favorable to the Issuer or such Restricted Subsidiary than those that
could be obtained at the time of the Affiliate Transaction in arms-length dealings with a Person who is not an Affiliate;
(2) if such Affiliate Transaction involves an amount in excess of $25.0 million, the terms of the Affiliate Transaction
are set forth in writing and a majority of the directors of the Issuer disinterested with respect to such Affiliate Transaction have determined in good faith that the criteria set forth in clause (1) are satisfied and have approved the relevant
Affiliate Transaction as evidenced by a resolution of the Board of Directors; and
(3) if such Affiliate Transaction
involves an amount in excess of $50.0 million, the Board of Directors shall also have received a written opinion from an Independent Qualified Party to the effect that such Affiliate Transaction is fair, from a financial standpoint, to the
Issuer or the applicable Restricted Subsidiary or is not less favorable to the Issuer or the applicable Restricted Subsidiary than could reasonably be expected to be obtained at the time in an arms-length transaction with a Person who was not
an Affiliate.
(b) The provisions of the preceding paragraph (a) will not prohibit:
(1) any Investment or other Restricted Payment, in each case not prohibited pursuant to the covenant described under
Limitation on Restricted Payments;
(2) any issuance of securities, or other payments, awards or grants
in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors;
(3) loans or advances to employees or consultants in the ordinary course of business of the Issuer or its Restricted
Subsidiaries;
(4) the payment of reasonable fees and compensation to, or the provision of employee benefit arrangements
and indemnity for the benefit of, directors, officers, employees and consultants of the Issuer and its Restricted Subsidiaries in the ordinary course of business;
S-52
(5) any transaction between or among the Issuer, any Restricted Subsidiary, any
Co-investment Vehicle or joint venture or similar entity (including any separate account or investment program managed, operated or sponsored by an Investment Subsidiary) which would constitute an Affiliate Transaction solely because the Issuer or a
Restricted Subsidiary owns an equity interest in or otherwise controls such Restricted Subsidiary, Co-investment Vehicle, joint venture or similar entity (including any separate account or investment program managed, operated or sponsored by an
Investment Subsidiary);
(6) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Issuer or
Parent;
(7) the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of its obligations
under the terms of any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) or warrant agreement to which it is a party as of the Issue Date and any similar agreements which it may enter into
thereafter;
provided
,
however
, that the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement
entered into after the Issue Date shall only be permitted by this clause (7) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the noteholders in any material respect;
(8) any agreement as in effect on the Issue Date and described or incorporated by reference in this prospectus supplement or
the accompanying prospectus, or any renewals, extensions or amendments of any such agreement (so long as such renewals, extensions or amendments are not less favorable to the Issuer or the Restricted Subsidiaries) and the transactions evidenced
thereby;
(9) transactions with customers, clients, suppliers or purchasers or sellers of goods or services in each case
in the ordinary course of business and otherwise in compliance with the terms of the applicable Indenture which are fair to the Issuer or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors of the Issuer or the
senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; and
(10) the repurchase or other acquisition of the Parents warrants outstanding as of the Issue Date, pursuant to the terms
of a plan (or amendment thereto) approved by the Board of Directors of Parent.
Limitation on Liens
The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Lien (the
Initial Lien
) of any nature whatsoever on any of its properties (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, securing any Obligations, other than Permitted
Liens, without effectively providing that the Notes (or a Subsidiary Guaranty in the case of an Initial Lien of a Subsidiary Guarantor) shall be secured equally and ratably with (or, in the event the Lien related to Subordinated Obligations, prior
to) the Obligations so secured for so long as such Obligations are so secured. Any Lien created for the benefit of the holders of the Notes pursuant to the preceding 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 Sale/Leaseback Transactions
The Issuer will not, and will not permit any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any property
unless:
(1) the Issuer or such Restricted Subsidiary would be entitled to (A) Incur Indebtedness in an amount equal to the
Attributable Debt with respect to such Sale/Leaseback Transaction pursuant to the covenant
S-53
described under Limitation on Indebtedness and (B) create a Lien on such property securing such Attributable Debt without equally and ratably securing the Notes pursuant to
the covenant described under Limitation on Liens;
(2) the net proceeds received by the Issuer or any Restricted
Subsidiary in connection with such Sale/ Leaseback Transaction are at least equal to the fair value (as determined by the Board of Directors of the Issuer) of such property; and
(3) the Issuer applies the proceeds of such transaction in compliance with the covenant described under Limitation on Sales of
Assets and Subsidiary Stock.
Merger and Consolidation
The provisions described below apply to the Notes and the Guaranties in lieu of the provisions described in the accompanying prospectus under
the heading Description of Debt SecuritiesConsolidation, Merger and Sale of Assets. The provisions described below apply only to the Notes and the Guaranties and not to any other series of debt securities or related guaranties
issued pursuant to the Base Indenture.
The Issuer will not consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or a series of transactions, directly or indirectly, all or substantially all its assets to, any Person, unless:
(1) the
resulting, surviving or transferee Person (the
Successor Company
) shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor
Company (if not the Issuer) shall expressly assume, by an indenture supplemental thereto, executed and delivered to the Trustee, all the obligations of the Issuer under the Notes and the Indenture;
(2) immediately after giving pro forma effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor
Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing;
(3) immediately after giving pro forma effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under Limitation on Indebtedness; and
(4) the
Issuer shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture;
provided, however
, that clause (3) will not be applicable to (A) a Restricted Subsidiary consolidating with, merging into or transferring all
or part of its properties and assets to the Issuer or (B) the Issuer merging with an Affiliate of the Issuer solely for the purpose and with the sole effect of reincorporating the Issuer in another jurisdiction.
The Successor Company will be the successor to the Issuer and shall succeed to, and be substituted for, and may exercise every right and power
of, the Issuer under the Indenture, and the predecessor Issuer, except in the case of a lease, shall be released from the obligation to pay the principal of and interest on the Notes.
The Issuer will not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or a series of transactions, all or substantially all of its assets to any Person unless:
S-54
(1) except in the case of a Subsidiary Guarantor that has been disposed of in its entirety to
another Person (other than to the Issuer or an Affiliate of the Issuer), whether through a merger, consolidation or sale of Capital Stock or assets, if in connection therewith the Issuer provides an Officers Certificate to the Trustee stating
that the Issuer will comply with its obligations under the covenant described under Limitation on Sales of Assets and Subsidiary Stock in respect of such disposition, the resulting, surviving or transferee Person (if not such
Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United States of America, or any State thereof or the District of Columbia, and such Person
shall expressly assume, by a Guaranty Agreement, all the obligations of such Subsidiary, if any, under its Subsidiary Guaranty;
(2)
immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been
issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and
(3) the Issuer delivers to
the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such Guaranty Agreement, if any, complies with the Indenture.
Parent will not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or
substantially all of its assets to any Person unless:
(1) the resulting, surviving or transferee Person (if not Parent) shall be a Person
organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and such Person shall expressly assume, by a Guaranty Agreement, all the obligations of Parent, if any, under its Guaranty;
(2) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an
obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and
(3) the Issuer delivers to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger
or transfer and such Guaranty Agreement, if any, complies with the Indenture.
Future Guarantors
On the Issue Date, Parent and each of the Subsidiary Guarantors will execute and deliver the Supplemental Indenture agreeing to fully and
unconditionally Guarantee the Notes on an unsecured, senior basis. After the Issue Date, the Issuer will cause each domestic Restricted Subsidiary (other than (i) any Excluded Subsidiary and (ii) Restricted Subsidiary prohibited from
providing a Guarantee by any agreement governing Non-Recourse Indebtedness (or the terms of the relevant partnership agreement, limited liability company operating agreement or other governing document of the entity that is the borrower (or the
direct parent of the borrower) under any Non-Recourse Indebtedness), any joint venture agreement or the terms of any Co-investment Vehicle or any separate account or investment program managed, operated or sponsored by an Investment Subsidiary) to
execute and deliver to the Trustee a Guaranty Agreement pursuant to which such domestic Restricted Subsidiary will Guarantee payment of the Notes on the same terms and conditions as those set forth in the Indenture.
Not all of our subsidiaries that acquire properties or other assets in the future will become guarantors of the Notes. For example, the terms
of the Non-Recourse Indebtedness agreements, partnership agreements, limited liability company operating agreements, other governing documents, joint venture agreements, Co-investment Vehicles, separate accounts and investment programs referred to
above may prohibit the relevant subsidiary from guaranteeing the Notes. In many cases, the Indenture does not require these subsidiaries to
S-55
guarantee the Notes. Accordingly, noteholders will not have a direct claim against these subsidiaries for payments on the Notes. See Risk FactorsRisks Related to the NotesThe
notes will not be guaranteed by all of our subsidiaries.
SEC Reports
Notwithstanding that the Issuer may not be subject to the reporting requirements of Sections 13(a) or 15(d) of the Exchange Act, the
Issuer will file with the SEC and make available to the Trustee and noteholders and deliver a copy to the Trustee within 15 days after it files them with the SEC such annual reports and such information, documents and other reports as are specified
in Sections 13(a) and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such Sections, such information, documents and other reports to be so filed with the SEC at the times specified for the filings of such information,
documents and reports under such Sections;
provided
,
however
, that the Issuer shall not be so obligated to file such reports with the SEC if the SEC does not permit such filing, in which event the Issuer will make available such
information to noteholders and
deliver a copy to the Trustee within 15 days after the time the Issuer would be required to file such information with the SEC if it were subject to Sections 13(a) or 15(d) of the Exchange Act;
provided
further
,
however
, that (a) so long as Parent is the Guarantor of the Notes, the reports, information and other documents required to be filed and provided as described hereunder may, at the Issuers option, be filed by and be
those of Parent rather than the Issuer and (b) in the event that Parent conducts any business or holds any significant assets other than the capital stock of the Issuer at the time of filing and providing any such report, information or other
document containing financial statements of Parent,
Parent shall include in such report, information or other document summarized financial information (as defined in Rule 1-02(bb) of Regulation S-X promulgated by the SEC) with respect to the
Issuer;
provided further
,
however
, that in no event shall the Issuer or Parent be required to make available to the Trustee or noteholders any material for which the Issuer or Parent is seeking, or has received, confidential treatment
by the SEC, or any correspondence with the SEC or its staff. For purposes of this covenant, reports, information and documents publicly available on the SECs EDGAR system (or any successor thereto) shall be deemed to be available to the
Trustee and noteholders.
Defaults
The provisions described below apply to the Notes and the Guaranties in lieu of the provisions described in the accompanying prospectus under
the heading Description of Debt SecuritiesEvents of Default. The provisions described below apply only to the Notes and the Guaranties and not to any other series of debt securities or related guaranties issued pursuant to the Base
Indenture.
Each of the following is an Event of Default:
(1) a default in the payment of interest on the Notes when due, continued for 30 days;
(2) a default in the payment of principal of any Note when due at its Stated Maturity, upon redemption, upon required purchase, upon
declaration of acceleration or otherwise;
(3) the failure by the Issuer, Parent or any Subsidiary Guarantor to comply with its
obligations under Certain CovenantsMerger and Consolidation;
(4) the failure by the Issuer, Parent or any
Subsidiary Guarantor, as the case may be, to comply for 60 days after receipt of written notice with any of its agreements contained in the Indenture (other than any other agreement specifically referred to in any of the other clauses of this
definition of Event of Default), including its obligations in the covenants described above under Fundamental Change (other than a failure to purchase Notes), Certain CovenantsLimitation on Indebtedness,
Certain CovenantsLimitation on Restricted Payments, Certain CovenantsLimitation on Restrictions on Distributions from Restricted Subsidiaries, Certain CovenantsLimitation on Sales of
Assets and Subsidiary Stock (other than a failure to purchase
S-56
Notes), Certain CovenantsLimitation on Affiliate Transactions, Certain CovenantsLimitation on Liens, Certain CovenantsLimitation
on Sale/Leaseback Transactions or Certain CovenantsFuture Guarantors;
(5) the failure by the Issuer or
Parent, as the case may be, to comply for 180 days after receipt of written notice with any of its obligations in the covenant described above under Certain CovenantsSEC Reports (
provided
that, if applicable, failure
by the Issuer or Parent to comply with the provisions of Section 314(a) of the Trust Indenture Act will not in itself be deemed a Default or an Event of Default under the Indenture);
(6)(a) Indebtedness (other than Non-Recourse Indebtedness) of the Issuer, any Subsidiary Guarantor or any Significant Subsidiary is not paid
within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $30.0 million or (b) three or more unrelated instances
at any one time where Non-Recourse Indebtedness of the Issuer, any Subsidiary Guarantor or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default
and the aggregate amount of such Non-Recourse Indebtedness that remains unpaid or accelerated exceeds the greater of (i) $200.0 million and (ii) 10% of Total Assets (clauses (a) and (b), together, the
cross acceleration
provision
);
(7) certain events of bankruptcy, insolvency or reorganization of the Issuer, any Subsidiary Guarantor or any
Significant Subsidiary (the
bankruptcy provisions
);
(8) any final judgment or decree for the payment of money
(other than judgments which are covered by enforceable insurance policies issued by solvent carriers) in excess of $20.0 million is entered against the Issuer, any Subsidiary Guarantor or any Significant Subsidiary, remains outstanding for a period
of 60 consecutive days following such judgment becoming final and is not discharged, waived or stayed within 10 days after notice (the
judgment default provision
); or
(9) the Parent Guaranty or a Subsidiary Guaranty ceases to be in full force and effect (other than in accordance with the terms of such
Guaranty) or a Guarantor denies or disaffirms its obligations under its Guaranty.
However, a default under clause (4), (5) or
(8) will not constitute an Event of Default until the Trustee notifies the Issuer or the holders of 25% in principal amount of the outstanding Notes notify the Issuer with a copy to the Trustee of the default in writing and the Issuer does not
cure such default within the time specified after receipt of such notice. In the event of any Event of Default specified under clause (6), such Event of Default and all consequences thereof (excluding any resulting payment default, other than as a
result of acceleration of Notes) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the holders, if within 30 days after such Event of Default arose: (a) holders thereof have rescinded or waived the
acceleration, notice or action (as the case may be) giving rise to such Event of Default or (b) the default that is the basis for such Event of Default has been cured.
No Event of Default with respect to a particular series of debt securities under the Base Indenture (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 under the Base Indenture. The occurrence of certain Events of Default or an acceleration under the Indenture
may constitute an event of default under certain other indebtedness of the Issuer or its subsidiaries outstanding from time to time.
If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the outstanding
Notes may declare the principal of and accrued but unpaid interest, if any, on all the Notes to be due and payable. Upon such declaration, such principal and interest shall be due and payable immediately. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Issuer occurs and is continuing, the principal of and interest on all the Notes will
ipso facto
become and be
S-57
immediately due and payable without any declaration or other act on the part of the Trustee or any holders of the Notes. Under certain circumstances, the holders of a majority in principal
amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences.
In case an Event
of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the holders of the Notes unless such holders have offered to the Trustee
indemnity or security satisfactory to it against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no holder of a Note may pursue any remedy with respect to the
Indenture or the Notes unless:
(1) such holder has previously given the Trustee written notice that an Event of Default is continuing;
(2) holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy;
(3) such holders have offered the Trustee security or indemnity satisfactory to it against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and
(5) holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request
within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal amount of the outstanding Notes are
given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that
conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other holder of a Note or that would involve the Trustee in personal liability.
Notwithstanding anything to the contrary in the Indenture, holders of the Notes will have an absolute and unconditional right to receive
payment of the principal of, and interest on, the Notes on or after the due dates expressed in the Indenture and the Notes and to institute suit for the enforcement of payment.
If a Default occurs, is continuing and the Trustee has received notice thereof, the Trustee must mail to each holder of the Notes notice of
the Default within 90 days after the Trustee receives such notice. Except in the case of a Default in the payment of principal of or interest on any Note, the Trustee may withhold notice if and so long as a committee of its trust officers determines
that withholding notice is not opposed to the interest of the holders of the Notes. In addition, we are required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know
of any Default that occurred during the previous year. We are required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action we are
taking or propose to take in respect thereof.
As to the waiver of defaults, see Amendments and Waivers.
Amendments and Waivers
The Base
Indenture or any debt security (other than the Notes) of a series established pursuant to the Base Indenture may be amended in the manner set forth in the accompanying prospectus under the heading Description of Debt
SecuritiesModification and Waiver. However, an amendment to the Base Indenture, the Supplemental Indenture, the Notes or the Guaranties that amends, supplements or modifies the terms of the
S-58
Supplemental Indenture, the Notes or the Guaranties must satisfy the provisions described in this Amendments and Waivers section in lieu of the provisions described in the
accompanying prospectus under the heading Description of Debt SecuritiesModification and Waiver. The provisions described below apply only to the Notes and the Guaranties and not to any other series of debt securities or related
guaranties issued pursuant to the Base Indenture.
Subject to certain exceptions, the Indenture may be amended with the consent of the
holders of a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange for the Notes) and any past default or compliance with any provisions may also be waived with the
consent of the holders of a majority in principal amount of the Notes then outstanding. However, without the consent of each holder of an outstanding Note affected thereby, an amendment or waiver may not, among other things:
(1) reduce the amount of Notes whose holders must consent to an amendment;
(2) reduce the rate of or extend the time for payment of interest on any Note;
(3) reduce the principal of or extend the Stated Maturity of any Note;
(4) reduce the amount payable upon the redemption of any Note or change the time at which any Note may be redeemed as described under
Optional Redemption;
(5) make any Note payable in money other than that stated in the Notes;
(6) impair the right of any holder of the Notes to receive payment of principal of and interest on such holders Notes on or after the
due dates therefor or to institute suit for the enforcement of any payment on or with respect to such holders Notes;
(7) make any
change in the amendment provisions which require each holders consent or in the waiver provisions;
(8) make any change in the
ranking or priority of any Note or Guaranty that would adversely affect the noteholders; or
(9) voluntarily release a Subsidiary
Guarantor other than in accordance with the Indenture.
Notwithstanding the preceding, without the consent of any holder of the Notes, the
Issuer, Parent, the Subsidiary Guarantors and Trustee may amend the Indenture:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to provide for the assumption by a successor corporation of the obligations of the Issuer, Parent or any Subsidiary
Guarantor under the Indenture;
(3) to provide for uncertificated Notes in addition to or in place of certificated Notes (
provided
that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code);
(4) to add guarantees with
respect to the Notes, including any Subsidiary Guaranties, or to secure the Notes;
(5) to add to the covenants of the Issuer, Parent or
any Subsidiary Guarantor for the benefit of the holders of the Notes or to surrender any right or power conferred upon the Issuer, Parent or any Subsidiary Guarantor;
S-59
(6) to make any change that does not materially adversely affect the rights of any holder of the
Notes;
(7) to comply with any requirement of the SEC in connection with any required qualification of the Indenture under the Trust
Indenture Act;
(8) to conform the text of the Indenture, Guaranties or the Notes to any provision of this Description of the
Notes to the extent that such provision was intended to be a verbatim recitation of a provision of the Indenture, the Guaranties or the Notes as certified in an Officers Certificate delivered to the Trustee; or
(9) to amend the provisions of the Indenture relating to the transfer and legending of Notes;
provided, however
, that
(i) compliance with the Indenture as so amended would not result in Notes being transferred in violation of the Securities Act or any applicable securities law and (ii) such amendment does not materially and adversely affect the rights of
holders to transfer Notes, except as required by law.
Notwithstanding the foregoing, the lenders under the Credit Agreement have the
right to consent to any amendment, supplement or other modification of the Indenture or any other change relating to the Notes that occurs after the Issue Date if such amendments, supplements or changes would have a material adverse effect on the
Issuers ability to repay its obligations under the Credit Agreement.
The consent of the holders of the Notes is not necessary under
the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, we are required to deliver electronically, if held at DTC, or mail to holders of the
Notes a notice briefly describing such amendment. However, the failure to give such notice to all holders of the Notes, or any defect therein, will not impair or affect the validity of the amendment.
Neither the Issuer nor any Affiliate of the Issuer may, directly or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to all holders and is paid to all holders that
so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement.
Transfer
The Notes will be issued in registered form and will be transferable only upon the surrender of the Notes being transferred for
registration of transfer. We may require payment of a sum sufficient to cover any tax, assessment or other governmental charge payable in connection with certain transfers and exchanges.
Defeasance and Satisfaction and Discharge
The provisions described below apply to the Notes and the Guaranties in lieu of the provisions described in the accompanying prospectus under
the heading Description of Debt SecuritiesDefeasance of Debt Securities and Certain Covenants in Certain Circumstances. The provisions described below apply only to the Notes and the Guaranties and not to any other series of debt
securities or related guaranties issued pursuant to the Base Indenture.
At any time, we may terminate all our and each Guarantors
obligations with respect to the Notes or the Guaranties under the Notes, the Guaranties and the Indenture (
legal defeasance
), except for certain obligations, including those respecting the defeasance trust and obligations
to register the transfer or exchange of the Notes,
S-60
to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes.
In addition, at any time we may terminate our obligations under Fundamental Change and under the covenants described under
Certain Covenants (other than the covenant described under Merger and Consolidation), the operation of the cross acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries and the
judgment default provision described under Defaults above and the limitations contained in clause (3) of the first paragraph under Certain CovenantsMerger and Consolidation above and our
Guarantors obligations under the Guaranties and the Indenture (
covenant defeasance
).
We may exercise our
legal defeasance option notwithstanding our prior exercise of our covenant defeasance option. If we exercise our legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If we exercise
our covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (4), (5), (7), (8) (with respect only to Significant Subsidiaries) or (9) under Defaults above
or because of the failure of the Issuer to comply with clause (3) of the first paragraph under Certain CovenantsMerger and Consolidation above. If we exercise our legal defeasance option or our covenant defeasance
option, each Guarantor will be released from all of its obligations with respect to its Guaranty.
In order to exercise either of our
defeasance options, we must irrevocably deposit in trust (the
defeasance trust
) with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Notes to redemption or maturity, as the
case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that the beneficial owners of the Notes will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance and will be subject to federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable federal income tax law).
In addition, the Issuers obligations under the Notes and with respect to the Notes under the Indenture, and each Guarantors
obligations under its Guaranty, will terminate (a
satisfaction and discharge
), subject to certain limitations set forth in the Indenture, if:
(1) all Notes previously authenticated and delivered (other than (i) destroyed, lost or stolen Notes that have been replaced or
(ii) Notes that are paid or (iii) Notes for whose payment money or U.S. Government Obligations have been held in trust and then repaid to the Issuer in accordance with the Indenture) have been delivered to the Trustee for cancellation
and the Issuer has paid all sums payable by it under the Indenture; or
(2) (A) the Notes mature within 60 days, or all of them are to be
called for redemption within 60 days under arrangements satisfactory to the Trustee for giving the notice of redemption,
(B) the Issuer irrevocably deposits in trust with the Trustee, as trust funds solely for the benefit of the holders, money or
U.S. Government Obligations or a combination thereof sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certificate delivered to the Trustee, without consideration of any reinvestment,
to pay principal of and interest on the Notes to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder,
(C) no Default has occurred and is continuing on the date of the deposit,
(D) the deposit will not result in a breach or violation of, or constitute a default under, the Indenture or any other
agreement or instrument to which the Issuer is a party or by which it is bound, and
S-61
(E) the Issuer delivers to the Trustee an Officers Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent provided for in the Indenture relating to the satisfaction and discharge of this Indenture have been complied with.
Concerning the Trustee
Wilmington
Trust, National Association is to be the Trustee under the Indenture. We have appointed Wilmington Trust, National Association as Registrar and Paying Agent with regard to the Notes.
The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Issuer, to obtain payment
of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions;
provided
,
however
, if it acquires any
conflicting interest and the Notes are in default, it must either eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.
Subject to certain rights of the Trustee, 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 exercising any remedy available to the Trustee, subject to certain exceptions. If an Event of Default occurs (and is not cured), the Trustee will be required, in the exercise of its power, to
use the degree of care of a prudent person in the conduct of such persons affairs. The Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any holder of Notes, unless such holder
shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.
No Personal Liability of
Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator, member or stockholder or control person
of the Issuer, the Parent or any Subsidiary Guarantor will have any liability for any obligations of the Issuer, the Parent or any Subsidiary Guarantor under the Notes, any Guaranty or the Indenture or for any claim based on, in respect of, or by
reason of such obligations or their creation. Each holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver and release may not be
effective to waive liabilities under the U.S. federal securities laws, and it is the view of the SEC that such a waiver is against public policy.
Governing Law
The Indenture, the Notes
and the Guaranties, including any claim or controversy arising out of or relating to the Indenture, the Notes or the Guaranties, will be governed by the laws of the State of New York (without regard to the conflicts of laws provisions thereof, other
than Section 5-1401 of the General Obligations Law).
Certain Definitions
Affiliate
of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under
direct or indirect common control with such specified Person. For the purposes of this definition, control when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise; and the terms controlling and controlled have meanings correlative to the foregoing. For purposes of the covenants described under
Certain CovenantsLimitation on Restricted Payments, Certain CovenantsLimitation on Affiliate Transactions and Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock
only, Affiliate shall also mean any beneficial owner of Capital Stock representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Issuer or of rights or warrants to purchase such Capital Stock
(whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. Solely for purposes of the covenant described
S-62
under Certain CovenantsLimitation on Affiliate Transactions the term Affiliate shall be deemed to exclude Fairfax Financial Holdings Limited, a corporation
organized under the laws of Canada, or any subsidiary or affiliate thereof (collectively, Fairfax);
provided
,
however
, that Fairfax will be deemed to be an Affiliate of the Issuer for purposes of clause
(1) under paragraph (a) of Certain CovenantsLimitation on Affiliate Transactions and shall comply with the requirements set forth under such clause;
provided further
,
however
, that such requirements
shall be deemed to have been satisfied in respect of any agreement as in effect on the Issue Date or any renewals, extension or amendments of any such agreements (so long as such renewals, extensions or amendments are not less favorable to the
Issuer and its Restricted Subsidiaries) and the transactions evidenced thereby.
Asset Disposition
means any sale,
lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Issuer or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to
for the purposes of this definition as a disposition), of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other
than directors qualifying shares or shares required by applicable law to be held by a Person other than the Issuer or a Restricted Subsidiary);
(2) all or substantially all the assets of any division or line of business of the Issuer or any Restricted Subsidiary; or
(3) any other assets of the Issuer or any Restricted Subsidiary outside of the ordinary course of business of the Issuer or such Restricted
Subsidiary,
other than, in the case of clauses (1), (2) and (3) above,
(A) a disposition by a Restricted Subsidiary to the Issuer or by the Issuer or a Restricted Subsidiary to a Restricted Subsidiary;
(B) for purposes of the covenant described under Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock
only, a disposition that constitutes a Restricted Payment permitted by the covenant described under Certain CovenantsLimitation on Restricted Payments or a Permitted Investment;
(C) any sale of Capital Stock in, or Indebtedness or other securities of, an Unrestricted Subsidiary;
(D) a disposition of Temporary Cash Investments in the ordinary course of business;
(E) the disposition of property or assets that are obsolete, damaged or worn out;
(F) the lease or sublease of office space in the ordinary course of business;
(G) the sale of interests or investments in real estate or related assets and related personal property, or loans secured by real estate, in
each case by an Investment Subsidiary or Co-investment Vehicle; and
(H) a disposition of assets with a fair market value of less than
$5.0 million (a
de minimis disposition
);
provided
,
however
, that a disposition of all or substantially all the
assets of the Issuer and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption Fundamental Change and/or the provisions described above under the caption
Certain CovenantsMerger and Consolidation and not by the provisions described above under the caption Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock covenant.
Attributable Debt
in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Notes, compounded annually) of the total
S-63
obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/ Leaseback Transaction (including any period for which such lease has been extended);
provided
,
however
, that if such Sale/Leaseback Transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of Capital Lease
Obligation.
Average Life
means, as of the date of determination, with respect to any Indebtedness, the quotient
obtained by dividing:
(1) the sum of the products of the number of years from the date of determination to the dates of each successive
scheduled principal payment of or redemption or similar payment with respect to such Indebtedness multiplied by the amount of such payment by
(2) the sum of all such payments.
Bank Indebtedness
means all Obligations pursuant to the Credit Agreement.
Board of Directors
means the Board of Directors of the Issuer or any committee thereof duly authorized to act on behalf of
such Board.
Business Day
means each day other than a Saturday, Sunday or a day on which commercial banking
institutions are authorized or required by law to close in New York City or the place of payment.
Capital Lease
Obligation
means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the
capitalized amount of such obligation 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. For purposes of the covenant described under Certain CovenantsLimitation on Liens, a Capital Lease Obligation will be deemed to be secured by a Lien on the property being
leased. For the avoidance of doubt, Capital Lease Obligations will not include ground leases of real property entered into in the ordinary course of business of the Issuer or its Restricted Subsidiaries.
Capital Stock
of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) equity of such Person, whether outstanding at the Issue Date or issued thereafter, including any Preferred Stock, but excluding any debt securities convertible into such equity.
Code
means the Internal Revenue Code of 1986, as amended.
Co-investment Vehicle
shall mean an entity (other than a Restricted Subsidiary) formed for the purpose of investing
principally, directly or indirectly, in (i) real estate related assets (including Indebtedness primarily secured by real estate or equity interests in entities, directly or indirectly, primarily owning real estate or related assets) or
(ii) unsecured loans that are part of a loan pool, more than 90% of the aggregate principal balance of which falls within the preceding clause (i).
Common Stock
shall mean the common stock of Parent.
Consolidated Net Income
means, for any period, the net income or loss of the Issuer and its consolidated Subsidiaries for
such period determined on a consolidated basis in accordance with GAAP after net income or loss attributable to the noncontrolling interests and before preferred stock dividends and accretion of issuance costs, plus depreciation and amortization of
any real property (including furniture and equipment and other real estate assets);
provided
,
however
, that there shall be excluded:
S-64
(a) the income of any such consolidated subsidiary to the extent that the declaration or payment
of dividends or similar distributions by such consolidated subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, statute, rule or governmental regulation
applicable to such consolidated subsidiary,
(b) the net income or net loss of any Person, other than the Issuer or a Restricted
Subsidiary, except that, subject to the exclusion contained in clause (h) below, the aggregate amount of cash actually distributed by such Person to the Issuer or a Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in clause (a) above) shall be included in determining Consolidated Net Income,
(c) the income or loss of any person accrued prior to the date it becomes a consolidated subsidiary of the Issuer or is merged into or
consolidated with the Issuer or any of its consolidated subsidiaries or the date that such persons assets are acquired by the Issuer or any of its consolidated subsidiaries,
(d) any reduction for charges made in accordance with Financial Accounting Standard No. 141, 141R, 142 or 144 or any amendments or
successors thereto,
(e) all extraordinary gains and extraordinary losses and any gains or losses attributable to sales of assets out of
the ordinary course of business (for the avoidance of doubt, the sale of real estate and real estate related assets shall always be deemed to be in the ordinary course of business),
(f) any noncash compensation expense attributable to grants of stock options, restricted stock or similar rights to officers, directors and
employees of Parent, the Issuer or any of its consolidated Subsidiaries,
(g) any net noncash gain or loss resulting in such period from
Hedging Obligations incurred in the ordinary course of business and made in accordance with Financial Accounting Standards Codification Topic No. 815, and
(h) all gain or loss realized as a result of the cumulative effect of changes in accounting principles;
provided further
,
however
, that Consolidated Net Income for any period shall be increased (i) by cash received during such period by the
Issuer or any of its consolidated subsidiaries in respect of commissions receivable (net of related commissions payable to brokers) on transactions that were completed by any acquired business prior to the acquisition of such business and which
purchase accounting rules under GAAP would require to be recognized as an intangible asset purchased, (ii) increased, to the extent otherwise deducted in determining Consolidated Net Income for such period, by the amortization of intangibles
relating to purchase accounting in connection with any acquisition permitted by the Indenture and (iii) increased (or decreased, as the case may be), in connection with the sale of real estate during such period, to eliminate the effect of
purchase price allocations to such real estate resulting from the consummation of any acquisition permitted by the Indenture.
Credit Agreement
means the Revolving Loan Agreement among the Issuer, as borrower, Parent and certain Subsidiaries of the
Issuer, as guarantors, U.S. Bank National Association as the administrative agent and the lenders from time to time party thereto, together with the related documents thereto (including the term loans and revolving loans thereunder, any guarantees
and security documents), as amended, extended, renewed, restated, supplemented or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time, and any agreement
(and related document) governing Indebtedness, including an indenture, incurred to Refinance, in whole or in part, the borrowings and commitments then outstanding or permitted to be outstanding under such Revolving Loan Agreement or a successor
Credit Agreement.
Credit Facilities
means one or more debt facilities (including the Credit Agreement), commercial
paper facilities, securities purchase agreement, indenture or similar agreement, in each case, with banks or other
S-65
institutional lenders or investors providing for revolving loans, term loans, receivables financing (including through the sale of receivables to lenders or to special purpose entities formed to
borrow from lenders against such receivables), letters of credit or the issuance of securities, including any related notes, guarantees, collateral documents, instruments and agreement executed in connection therewith, and, in each case, as amended,
restated, replaced (whether upon or after termination or otherwise), refinanced, supplemented, modified or otherwise changed (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to
time.
Currency Agreement
means in respect of a Person any foreign exchange contract, currency swap agreement or other
similar agreement designed to protect such Person against fluctuations in currency values.
Default
means any event
which is, or after notice or passage of time or both would be, an Event of Default.
Disqualified Stock
means, with
respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event:
(1) matures (excluding any maturities as a result of an optional redemption by the issuer thereof) or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise;
(2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified
Stock; or
(3) is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part;
in each case on or prior to the first anniversary of the Stated Maturity of the Notes;
provided
,
however
, that if such Capital Stock
is issued to any employee or to any plan for the benefit of employees of Parent or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased
by the Parent or its Subsidiaries in order to satisfy obligations as a result of such employees death or disability;
provided further
,
however
, that any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock upon the occurrence of an asset sale, change of control or termination of trading occurring prior
to the first anniversary of the Stated Maturity of the Notes shall not constitute Disqualified Stock if:
(1) the asset
sale, change of control or termination of trading provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the Notes and described under
Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock and Fundamental Change; and
(2) any such requirement only becomes operative after compliance with such terms applicable to the Notes, including the purchase of any Notes
tendered pursuant thereto.
For the avoidance of doubt, the following shall not constitute Disqualified Stock:
(x) the Series A Preferred Stock and the Series B Preferred Stock outstanding on the Issue Date; and
(y) future issuances of Capital Stock having terms substantially similar to those of the Series A Preferred Stock and the Series B Preferred
Stock,
provided
that, the change of control or termination of trading provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the Notes and
described under Fundamental Change; and any such requirement
S-66
only becomes operative after compliance with such terms applicable to the Notes, including the purchase of any Notes tendered pursuant thereto.
The amount of any Disqualified Stock that does not have a fixed redemption, repayment or repurchase price will be calculated in
accordance with the terms of such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or repurchased on any date on which the amount of such Disqualified Stock is to be determined pursuant to the Indenture;
provided
,
however
, that if such Disqualified Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price will be the book value of such Disqualified Stock as
reflected in the most recent financial statements of such Person.
Effective Tangible Net Worth
means as of any
date of determination, stockholders equity of the Issuer and its Restricted Subsidiaries (excluding any amounts attributable to Disqualified Stock), less Intangible Assets.
Equity Offering
means any primary offering of Capital Stock of Parent or the Issuer (other than Disqualified Stock) to
Persons who are not Affiliates of Parent or the Issuer other than (1) public offerings with respect to the Parents Common Stock registered on Form S-8 and (2) issuances upon exercise of options by employees of the Parent or any of
its Restricted Subsidiaries.
Exchange Act
means the Securities Exchange Act of 1934, as amended.
Excluded Subsidiary
means (i) any Non-Material Subsidiary and (ii) any Restricted Subsidiary that is not a Wholly
Owned Subsidiary,
provided
that all such non-Wholly Owned Subsidiaries in this clause (ii) may not, in the aggregate at any time, have assets (attributable to the Issuers and its domestic Restricted Subsidiaries equity
interest in such entities) constituting more than 7.5% of the Issuers total assets on a consolidated basis based on the Issuers most recent internal financial statements.
GAAP
means generally accepted accounting principles in the United States of America as in effect from time to time,
provided, however, that GAAP shall mean the generally accepted accounting principles in the United States of America as in effect as of April 5, 2011 in the event of a change in GAAP after April 5, 2011 that would have a material adverse
(including, without limitation, the treatment of an operating lease as Indebtedness) or positive effect on the Issuer, including those set forth in:
(1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants;
(2) statements and pronouncements of the Financial Accounting Standards Board;
(3) such other statements by such other entity as approved by a significant segment of the accounting profession; and
(4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in
periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC.
Guarantee
means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness
of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership or other ownership arrangements, or by agreements to
S-67
keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or
(2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part);
provided
,
however
, that the term Guarantee shall not include
(i) endorsements for collection or deposit in the ordinary course of business, (ii) customary environmental indemnities and non-recourse carve-out guarantees (including Permitted Non-Recourse Carve-Out Guarantees) requested by lenders in
financing transactions secured by real property or loans secured by real estate, or (iii) completion and budget guarantees. The term Guarantee used as a verb has a corresponding meaning.
Guarantor
means Parent and/or a Subsidiary Guarantor.
Guaranty
means the Parent Guaranty and/or a Subsidiary Guaranty.
Guaranty Agreement
means the Indenture as of the Issue Date or any supplemental indenture, in a form satisfactory to the
Trustee, pursuant to which a Guarantor guarantees the Issuers obligations with respect to the Notes on the terms provided for in the Indenture.
Hedging Obligations
of any Person means the obligations of such Person pursuant to any Interest Rate Agreement, Currency
Agreement, commodity price protection or hedging agreement or other similar agreements.
The term
holder
or
noteholder
means the Person in whose name a Note is registered on the Registrars books.
Incur
means issue, assume, Guarantee, incur or otherwise become liable for;
provided
,
however
, that any
Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted
Subsidiary. The term
Incurrence
when used as a noun shall have a correlative meaning. Solely for purposes of determining compliance with Certain CovenantsLimitation on Indebtedness,
(1) amortization of debt discount or the accretion of principal with respect to a noninterest bearing or other discount security and (2) the payment of regularly scheduled interest in the form of additional Indebtedness of the same
instrument or the payment of regularly scheduled dividends on Capital Stock in the form of additional Capital Stock of the same class and with the same terms will not be deemed to be the Incurrence of Indebtedness.
Indebtedness
means, with respect to any Person on any date of determination (without duplication):
(1) the principal in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable, including, in each case, any premium on such indebtedness to the extent such premium has become due and payable;
(2) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such
Person;
(3) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations
of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business);
S-68
(4) all obligations of such Person for the reimbursement of any obligor on any letter of credit,
bankers acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course
of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the 20th Business Day following payment on the letter of credit);
(5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock of
such Person or, with respect to any Preferred Stock of any Subsidiary of such Person, the principal amount of such Preferred Stock to be determined in accordance with the Indenture (but excluding, in each case, any accrued dividends),
provided
that, provisions relating to waterfall priority returns, carried interest and tax allocations included in partnership agreements, shareholder agreements, limited liability company operating agreements or other constitutive documents
entered into in the ordinary course of business shall not constitute Preferred Stock of any Subsidiary of such Person;
(6) all
obligations of the type referred to in clauses (1) through (5) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee;
(7) all obligations of the type referred to in clauses (1) through
(6) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets and
the amount of the obligation so secured; and
(8) to the extent not otherwise included in this definition, Hedging Obligations of such
Person.
Notwithstanding the foregoing, in connection with the purchase by the Issuer or any Restricted Subsidiary of any business
or real property, the term Indebtedness will exclude 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 post-closing prorations or such
payment depends on the performance of such business after the closing;
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. Indebtedness of any Person shall include all Indebtedness of any partnership or other entity in which such Person is a general partner or other equity holder with unlimited liability other
than (x) Indebtedness which is non-recourse to such Person and its assets (other than pursuant to Permitted Non-Recourse Carve-Out Guarantees) and (y) if such Person is an Investment Subsidiary, the indebtedness of a related Co-investment
Vehicle.
The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the related contingency at such date;
provided
,
however
, that the principal amount of any
noninterest bearing or other discount security at any date will be the principal amount thereof that would be shown on a balance sheet of such Person dated such date prepared in accordance with GAAP.
For purposes of calculating the Maximum Balance Sheet Leverage Ratio under paragraph (a) of the covenant described under
Certain CovenantsLimitation on Indebtedness, the term Indebtedness shall exclude Hedging Obligations of the Issuer and its Restricted Subsidiaries.
Independent Qualified Party
means an investment banking firm, accounting firm or appraisal firm of national standing;
provided
,
however
, that such firm is not an Affiliate of the Issuer.
Intangible Assets
means, as of any
date of determination, intangible assets of the Issuer and its Restricted Subsidiaries under GAAP.
S-69
Interest Rate Agreement
means in respect of a Person any interest rate swap
agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect such Person against fluctuations in interest rates.
Investment
in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary
course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. Except as otherwise provided for
herein, the amount of an Investment shall be its fair market value at the time the Investment is made and without giving effect to subsequent changes in value. For the avoidance of doubt, leases to tenants in the ordinary course of business of the
Issuer or any Restricted Subsidiary shall not be deemed to constitute Investments.
For purposes of the definition of
Unrestricted Subsidiary, the definition of Restricted Payment and the covenant described under Certain CovenantsLimitation on Restricted Payments:
(1) Investment shall include the portion (proportionate to the Issuers equity interest in such Subsidiary) of the fair
market value of the net assets of any Subsidiary of the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however
, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer
shall be deemed to continue to have a permanent Investment in an Unrestricted Subsidiary equal to an amount (if positive) equal to (A) the Issuers Investment in such Subsidiary at the time of such redesignation
less (B) the portion (proportionate to the Issuers equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors.
Investment Subsidiary
shall mean (1) any
Subsidiary engaged principally in the business of directly or indirectly buying, holding, transferring or selling real estate related assets, including securities of companies engaged principally in such business (including, without limitation, Real
Estate Companies and Qualified REITs) and Indebtedness secured by real estate or equity interests in entities directly or indirectly owning real estate or related assets, or (2) any Subsidiary engaged principally in the business of investment
management, including investing in and/or managing Co-investment Vehicles. For the avoidance of doubt, an Investment Subsidiary may be a Restricted Subsidiary or an Unrestricted Subsidiary.
Issue Date
means the date on which the Notes offered pursuant to this prospectus supplement and the accompanying prospectus
are initially issued.
Lien
means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind
(including any conditional sale or other title retention agreement or lease in the nature thereof). For the avoidance of doubt, the grant by any Person of a non-exclusive license to use intellectual property owned by, licensed to, or developed by
such Person and such license activity shall not constitute a grant by such Person of a Lien on such intellectual property.
Maximum Balance Sheet Leverage Ratio
means as of any date of determination with respect to the Issuer and its Restricted
Subsidiaries, the ratio of total Indebtedness (excluding Non-Recourse Indebtedness) to Effective Tangible Net Worth, in each case as of the previous quarter end;
provided
,
however
, that:
(1) if the Issuer or any Restricted Subsidiary has issued any Indebtedness (including if the proceeds of such Indebtedness have been deposited
in an escrow account (as described in the definition of Refinancing
S-70
Indebtedness)) since the previous quarter end that remains outstanding or if the transaction giving rise to the need to calculate the Maximum Balance Sheet Leverage Ratio is an issuance of
Indebtedness, or both, the Maximum Balance Sheet Leverage Ratio shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been issued on the last day of the previous quarter, and
(2) if the Issuer or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness (including any
discharge of Indebtedness to occur upon release of such funds from any escrow account as referenced above) since the previous quarter end or if the transaction giving rise to the need to calculate Maximum Balance Sheet Leverage Ratio will include
the repayment, repurchase, defeasance or discharge of Indebtedness, or both, the Maximum Balance Sheet Leverage Ratio shall be calculated after giving effect on a pro forma basis to the discharge of such Indebtedness, as if such discharge had
occurred on the last day of the previous quarter.
For purposes of this definition, whenever pro forma effect is to be given to an
issuance of Indebtedness or the discharge of Indebtedness, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Issuer and in a manner that is consistent with Rule 11-02(b)(6) of
Regulation S-X promulgated by the SEC.
Solely for purposes of calculating the Maximum Balance Sheet Leverage Ratio under paragraph
(a) of the covenant described under Certain CovenantsLimitation on Indebtedness, the term Indebtedness shall exclude (i) Guarantees of Indebtedness of a Co-investment Vehicle or separate account or investment
program managed, operated or sponsored by an Investment Subsidiary in an amount not to exceed $50.0 million in the aggregate at any time outstanding and (ii) Permitted Non-Recourse Carve-Out Guarantees.
Moodys
means Moodys Investors Service, Inc.
Net Available Cash
from an Asset Disposition means cash payments received therefrom (including any cash payments received
by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form), in each case net of:
(1) all legal, accounting, investment banking and brokerage fees, title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon or other security agreement of any kind with respect to such assets, or which must, by applicable law, be repaid out of the proceeds from such Asset Disposition;
(3) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset
Disposition; and
(4) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Issuer or any Restricted Subsidiary after such Asset Disposition.
Net Cash Proceeds
, with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale
net of attorneys fees, accountants fees, underwriters or placement agents fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
S-71
Non-Material Subsidiaries
means all domestic Restricted Subsidiaries
designated as Non-Material Subsidiaries by the Issuer;
provided
that all such domestic Restricted Subsidiaries may not, in the aggregate at any time have assets (attributable to the Issuers and its domestic Restricted Subsidiaries
equity interest in such entities) constituting more than 3.75% of the Issuers total assets on a consolidated basis based on the Issuers most recent internal financial statements.
Non-Recourse Indebtedness
means Indebtedness (including any and all refinancings thereof that would meet the criteria set
forth below) of an Investment Subsidiary;
provided
,
however
, that (1) such Indebtedness is incurred solely in relation to the permitted investment activities (including investments in Permitted Mortgage Investments) or real estate
related activities of such Investment Subsidiary or a Co-investment Vehicle or a separate account or investment program managed, operated or sponsored by an Investment Subsidiary, and (2) such Indebtedness is not Guaranteed by, or otherwise
recourse to the Issuer or any Restricted Subsidiary (other than pursuant to a Permitted Non-Recourse Carve-Out Guarantee) other than the Investment Subsidiary that is the borrower;
provided, further
, that, if any such Indebtedness is
partially Guaranteed by or otherwise recourse to the Issuer or any Restricted Subsidiary (other than pursuant to a Permitted Non-Recourse Carve-Out Guarantee and other than with respect to the Investment Subsidiary that is the borrower) and
therefore does not meet the criteria set forth above, the portion of such Indebtedness that does meet the criteria set forth above shall be Non-Recourse Indebtedness hereunder.
Obligations
means with respect to any Indebtedness all obligations for principal, premium, interest, penalties, fees,
indemnifications, reimbursements and other amounts payable pursuant to the documentation governing such Indebtedness.
Officer
means the Chairman of the Board of Directors, the Chief Executive Officer, the President, the Chief Financial
Officer, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of Parent or the Issuer.
Officers Certificate
means a certificate signed on behalf of Parent or the Issuer, as the case may be, by an Officer
of Parent or the Issuer, respectively.
Opinion of Counsel
means a written opinion signed by legal counsel, who may be
an employee of or counsel to Parent or the Issuer, satisfactory to the Trustee.
Parent
means Kennedy-Wilson Holdings,
Inc., a Delaware corporation, and its successors.
Parent Guaranty
means the Guarantee by Parent of the Issuers
obligations with respect to the Notes contained in the Indenture.
Permitted Co-investment
means any Investment by the
Issuer or any of its Restricted Subsidiaries in, or any Guarantee by the Issuer or any of its Restricted Subsidiaries of the Indebtedness of, a Co-investment Vehicle or separate account or investment program managed, operated or sponsored by one or
more Investment Subsidiaries;
provided
,
however
, that if, and only if such Investment or Guarantee (other than a Permitted Non-Recourse Carve-Out Guarantee), as applicable, is in an amount greater than $50.0 million, then (i) such
Investment shall not be greater than 75% of the aggregate commitment (including both committed equity and Indebtedness) of such Co-investment Vehicle or separate account or investment program and (ii) such Guarantee (other than a Permitted
Non-Recourse Carve-Out Guarantee) shall not be greater than 75% of the aggregate committed Indebtedness of such Co-investment Vehicle or separate account or investment program;
provided further
,
however
, that the total amount of such
Guarantees (other than Permitted Non-Recourse Carve-Out Guarantees) shall not exceed $50.0 million in the aggregate at any time outstanding. For the avoidance of doubt, in determining committed equity and Indebtedness of a Co-investment Vehicle, or
separate account or investment program managed, operated or sponsored by one or more Investment Subsidiaries, the committed
S-72
equity and Indebtedness of such Co-investment Vehicle and its subsidiaries, taken as a whole, or such separate account or investment program, shall be counted.
Permitted Holders
means (1) William J. McMorrow, (2) any per Person both the Capital Stock and Voting Stock of
which (or in the case of a trust, the beneficial interests of which) are majority owned by William J. McMorrow or a family member of William J. McMorrow, and (3) any family member of William J. McMorrow, or the estate or heirs of William J.
McMorrow or any of his family members.
Permitted Investment
means an Investment by the Issuer or any Restricted
Subsidiary in:
(1) the Issuer, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted
Subsidiary;
provided, however
, that (A) the primary business of such Restricted Subsidiary is a Related Business and (B) such Restricted Subsidiary is not restricted from making dividends or similar distributions by contract,
operation of law or otherwise, other than restrictions on dividends or distributions permitted pursuant to the covenant described under Certain CovenantsLimitation on Restrictions on Distributions from Restricted
Subsidiaries;
(2) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Issuer or a Restricted Subsidiary (including any Investments acquired as a result of such merger, consolidation, transfer or conveyance to the extent that such Investments were not
made in contemplation of, and were in existence on the date of, such merger, consolidation, transfer or conveyance);
provided, however
, that such Persons primary business is a Related Business;
(3) Investments made by Parent or its Restricted Subsidiaries as a result of consideration received in connection with an Asset Disposition
made in compliance with the covenant described above under Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock or from any other disposition or transfer of assets not constituting an Asset Disposition;
(4) Investments represented by guarantees that are otherwise permitted by the Indenture;
(5) cash and Temporary Cash Investments;
(6) receivables owing to the Issuer or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Issuer or any such Restricted Subsidiary deems reasonable under the circumstances;
(7) payroll, travel, moving 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;
(8) loans or advances to employees or independent
contractors made in the ordinary course of business of the Issuer or such Restricted Subsidiary;
(9) stock, obligations or securities
received in settlement of debts created in the ordinary course of business and owing to the Issuer or any Restricted Subsidiary or in satisfaction of judgments;
(10) any Person where such Investment was acquired by the Issuer or any of its Restricted Subsidiaries (a) in exchange for any other
Investment or accounts receivable held by the Issuer or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or
(b) as a result of a foreclosure by the Issuer or any of its
S-73
Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
(11) Hedging Obligations entered into in the ordinary course of the Issuers or any Restricted Subsidiarys business and not for the
purpose of speculation;
(12) any Person to the extent such Investment exists on the Issue Date or replaces or refinances an Investment in
such Person existing on the Issue Date in an amount not exceeding the amount of the Investment being replaced or refinanced;
provided, however
, that the new Investment is on terms and conditions no less favorable than the Investment being
renewed or replaced;
(13) Investments in insurance on the life of any participant in any deferred compensation plan of the Issuer made in
the ordinary course of business;
(14) Permitted Co-investments; Permitted Non-Recourse Carve-Out Guarantees; Permitted Mortgage
Investments, Capital Stock of any Qualified REIT and Qualified Real Estate Securities;
(15) so long as no Default shall have occurred and
be continuing (or result therefrom), any Person in an aggregate amount which, when added together with the amount of all the Investments made pursuant to this clause (15) which at such time have not been repaid through repayments of loans or
advances or other transfers of assets, does not exceed the greater of (x) $30.0 million and (y) 1.75% of Total Assets, at any time outstanding (with the fair market value of each Investment being measured at the time made and without
giving effect to subsequent changes in value); and
(16) marketable securities of a Related Business or marketable securities where the
primary purpose of such Investment is to facilitate Related Business,
provided
that such marketable securities shall not, in the aggregate at any time, have a fair market (measured at the time made and without giving effect to subsequent
changes in value) that exceeds the greater of (x) $25.0 million and (y) 1.50% of Total Assets.
Permitted
Liens
means, with respect to any Person:
(1) pledges or deposits by such Person under workers compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts, including deposits under agreements that provide that such deposit constitutes liquidated damages upon breach of such agreement
(other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to
which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business;
(2) Liens imposed by law, such as carriers, warehousemens, landlords, mechanics, materialmens and
repairmens Liens and other similar Liens, in each case for sums not yet due and payable or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which
such Person shall then be proceeding with an appeal or other proceedings for review and Liens arising solely by virtue of any statutory or common law provision relating to bankers Liens, rights of setoff or similar rights and remedies as to
deposit accounts or other funds maintained with a creditor depository institution;
provided
,
however
, that (A) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by
the Issuer in excess of those set forth by regulations promulgated by the Federal Reserve Board and (B) such deposit account is not intended by the Issuer or any Restricted Subsidiary to provide collateral to the depository institution;
(3) Liens for taxes, fees, assessments or other governmental charges not yet subject to penalties for nonpayment or which are being contested
in good faith by appropriate proceedings;
(4) Liens in favor of issuers of surety bonds or letters of credit issued pursuant to the
request of and for the account of such Person in the ordinary course of its business;
provided
,
however
, that such letters of credit do not constitute Indebtedness;
S-74
(5) Liens to secure the performance of bids, trade contracts (other than for Indebtedness),
leases (other than Capital Lease Obligations and Attributable Debt), statutory obligations, appeal bonds, performance bonds, mechanics lien release bonds and other obligations of a like nature, in each case in the ordinary course of business;
(6) 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 conditions, covenants and restrictions, deed restrictions, zoning or other restrictions as to the use of real property or Liens incidental to the conduct of the business of such
Person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the
business of such Person;
(7) Liens securing Indebtedness (including Capital Lease Obligations and Attributable Debt) Incurred to finance
the construction, purchase or lease of, or repairs, improvements or additions to, property (real or personal, tangible or intangible), plant or equipment of such Person or a direct or indirect Subsidiary of such Person or an Investment of such
Person;
provided
,
however
, that the Lien may not extend to any other property (other than the relevant property, plant or equipment) 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 the Indebtedness (other than any interest thereon) secured by the Lien may not be Incurred more than 180 days after the later of the acquisition, completion of construction, repair,
improvement, addition or commencement of full operation of the property subject to the Lien;
(8) Liens arising out of judgments or awards
in respect of which the Issuer or any Restricted Subsidiary shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall be secured a subsisting stay of execution pending such appeal or proceedings;
provided
that the aggregate amount of all such judgments or awards (and any cash and the fair market value of any property subject to such Liens) does not exceed $10.0 million at any time outstanding;
(9) Liens existing on the Issue Date (other than the Liens securing Indebtedness pursuant to any Credit Facility);
(10) Liens on property (real or personal, tangible or intangible) or shares of Capital Stock of another Person at the time such other Person
becomes a Subsidiary of such Person;
provided
,
however
, that 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);
(11) Liens on property at the time such Person or any of its Subsidiaries acquires such property, including any acquisition by means of a
merger or consolidation with or into such Person or a Subsidiary of such Person;
provided
,
however
, that 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);
(12) Liens securing Indebtedness or other obligations of a Subsidiary of such Person owing to
such Person or a Subsidiary of such Person;
(13) Liens securing Hedging Obligations so long as such Hedging Obligations relate to
Indebtedness that is, and is permitted to be under the Indenture, secured by a Lien on the same properly securing such Hedging Obligations;
(14)(A) Liens securing Senior Indebtedness Incurred in compliance with the covenant described under Certain
CovenantsLimitation on Indebtedness in an aggregate amount not to exceed the amount of Indebtedness Incurred under clause (b)(1) of such covenant and then outstanding, and (B) Liens on Senior
S-75
Indebtedness securing any Refinancing (or successive Refinancings) as a whole, or in part, of any Indebtedness secured by Liens permitted by this clause (14);
(15) Liens on specific items of inventory or other goods of such Person securing such Persons obligations in respect of bankers
acceptances issued or created for the account of such Person solely to facilitate the purchase, shipment or storage of such inventory or other goods;
(16) Liens arising solely by virtue of any statutory or common law provision relating to bankers liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution;
provided
,
however
, that (A) such deposit account is not a dedicated cash collateral account and is not subject to
restrictions against access by the Issuer or any Subsidiary of the Issuer in excess of those set forth by regulations promulgated by the Board of Governors of the Federal Reserve System of the United States and (B) such deposit account is not
intended by the Issuer or any Subsidiary to provide collateral to such depository institution;
(17) Liens securing Non-Recourse
Indebtedness or guarantees (including Permitted Non-Recourse Carve-Out Guarantees) thereof (and Refinancings of any of the foregoing) on assets or Capital Stock of Restricted Subsidiaries formed solely for the purpose of, and which engage in no
business other than, any Related Business;
(18) Liens encumbering the assets of or secured by Permitted Mortgage Investments or
Co-investment Vehicles;
(19) Liens securing Indebtedness which, taken together with all other Indebtedness secured by Liens (excluding
Liens permitted by clauses (1) through (18) above or clause (20) below) at the time of determination, does not exceed the greater of (x) $37.5 million and (y) 2.0% of Total Assets; and
(20) Liens to secure any Refinancing (or successive Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien referred to
in the foregoing clause (7), (9), (10) or (11);
provided
,
however
, that:
(A) such new Lien shall be
limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and accessions to, such properly or proceeds or
distributions thereof); and
(B) the Indebtedness secured by such Lien at such time is not increased to any amount greater
than the sum of (x) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clause (7), (9), (10) or (11) at the time the original Lien became a Permitted Lien and (y) an amount
necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement.
Permitted Mortgage Investment
means any Investment in secured notes, mortgages, deeds of trust, collateralized mortgage
obligations, commercial mortgage-backed securities, other secured debt securities, secured debt derivatives or other secured debt instruments, so long as such Investment relates directly or indirectly to real property that constitutes or is used as
land, office, multifamily, residential, industrial, retail, hotel or mixed-use property.
Permitted Non-Recourse Carve-Out
Guarantees
means customary completion or budget guarantees, indemnities or other customary guarantees provided to lenders (including by means of separate indemnification agreements, carve-out guarantees or pledges of the equity interests
in the borrower or the parent of the borrower under Non-Recourse Indebtedness by the direct parent of the borrower (or the indirect parent of the borrower, provided that the pledgors only assets are direct or indirect equity interests of the
borrower) under such Non-
S-76
Recourse Indebtedness in order to secure such Non-Recourse Indebtedness) provided in the ordinary course of business and consistent with past practice by the Issuer or a Restricted Subsidiary in
financing transactions that are directly or indirectly secured by real property or other related assets (including Capital Stock) of a Restricted Subsidiary (including an Investment Subsidiary), Co-Investment Vehicle, joint venture, Unrestricted
Subsidiary or a separate account or investment program managed, operated or sponsored by an Investment Subsidiary and that may be full or partial recourse or non-recourse to the Restricted Subsidiary (including an Investment Subsidiary),
Co-Investment Vehicle, joint venture, Unrestricted Subsidiary or separate account or investment program managed, operated or sponsored by an Investment Subsidiary, in each case that is the borrower (or the direct or indirect parent of the borrower)
in such financing, but is non-recourse to Issuer or any other Restricted Subsidiary except for such customary completion or budget guarantees, indemnities or other customary guarantees (including by means of separate indemnification agreements or
carve-out guarantees) and except for pledges of the equity interests in the borrower or the parent of the borrower under Non-Recourse Indebtedness by the direct parent of the borrower (or the indirect parent of the borrower provided that the
pledgors only assets are direct or indirect equity interests of the borrower) under such Non-Recourse Indebtedness in order to secure such Non-Recourse Indebtedness.
Person
means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
Preferred Stock
as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such
Person.
The
principal
of a Note means the principal of the Note plus the premium, if any, payable on the Note
which is due or overdue or is to become due at the relevant time.
Qualified Real Estate Company
means any Real Estate
Company that is controlled, managed, operated or sponsored by the Issuer or any Restricted Subsidiary or any Real Estate Company into which Parent, the Issuer, or its Restricted Subsidiaries contributes or has contributed direct or indirect
interests in real estate and related assets in exchange for the Capital Stock of such Real Estate Company.
Qualified Real Estate
Securities
means any securities issued by a Qualified Real Estate Company.
Qualified REIT
means a domestic
or foreign REIT or its operating partnership subsidiary into which Parent, the Issuer or its Restricted Subsidiaries contribute direct or indirect interests in real estate and related assets in exchange for the Capital Stock of the REIT or its
operating partnership subsidiary.
Rating Agencies
means each of S&P and Moodys or any successor to the
respective rating agency business thereof;
provided
that if either of S&P or Moodys ceases to provide rating services to issuers or investors, the Issuer may select (as certified by a resolution of the Board of Directors) a
nationally recognized statistical rating organization (as defined in Section 3(a)(62) of the Exchange Act) as a replacement agency for either S&P or Moodys, as the case may be.
Real Estate Company
means any corporation, limited liability company, limited partnership or other entity, including REITs,
whether foreign or domestic, the primary object and purpose of which is the acquisition, disposition, management, development, promotion, sale, lease of, or investment in, real estate-related assets, including indebtedness secured by real
estate-related assets.
Refinance
means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay,
prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such indebtedness.
Refinanced
and
Refinancing
shall have correlative meanings.
Refinancing Indebtedness
means Indebtedness that Refinances any Indebtedness of the Issuer or any Restricted Subsidiary
existing on the Issue Date or Incurred in compliance with the Indenture, including Indebtedness that Refinances Refinancing Indebtedness;
provided
,
however
, that:
S-77
(1) such Refinancing Indebtedness has a Stated Maturity no earlier than the earlier of
(x) the Stated Maturity of the Indebtedness being Refinanced and (y) the 91st day after the maturity date of the Notes;
(2)
such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced;
(3) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the
Indebtedness being Refinanced; and
(4) if the Indebtedness being Refinanced is subordinated in right of payment to the Notes, such
Refinancing Indebtedness is subordinated in right of payment to the Notes at least to the same extent as the Indebtedness being Refinanced;
provided
further
,
however
, that Refinancing Indebtedness shall not include (A) Indebtedness of a Restricted Subsidiary that Refinances Indebtedness of the Issuer or (B) Indebtedness of the Issuer or a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary; and
provided further
,
however
, that to the extent any new Indebtedness to be applied to Refinance any Indebtedness of the Issuer or its Restricted Subsidiaries:
(x) is incurred in compliance with clauses (1), (2), (3) and (4) above and with the covenant described under
Certain CovenantsLimitation on Indebtedness,
(y) the net proceeds of which are deposited into an
escrow account at a bank or trust company which is organized under the laws of the United States of America, any State thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus
and undivided profits aggregating in excess of $50.0 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated A (or such similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Section 3(a)(62) of the Exchange Act) to be held in escrow for a period of not more than 90 days from the date of receipt of such net proceeds, and
(z) are to be held in such escrow account (together with any additional necessary funds) for the satisfaction and discharge,
defeasance or other extinguishment of the Indebtedness to be Refinanced in connection with its Stated Maturity or in connection with an irrevocable notice of redemption,
then such new Indebtedness shall be deemed to be Refinancing Indebtedness for the purposes of this definition, notwithstanding that such old
Indebtedness remains outstanding pending release of such funds from escrow.
Related Business
means any business in
which the Issuer was engaged on the Issue Date and any business related, ancillary or complementary to any business of the Issuer in which the Issuer was engaged on the Issue Date.
Replacement Assets
means (1) any property or other assets (other than Indebtedness and Capital Stock) used or useful
in a Related Business, (2) substantially all the assets of a Related Business or a majority of the Voting Stock of any Person engaged in a Related Business that will become on the date of acquisition thereof a Restricted Subsidiary,
(3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary that is engaged in a Related Business, (4) any Permitted Co-investment, (5) Capital Stock of any Qualified REIT, or
(6) Capital Stock of any Qualified Real Estate Company.
Restricted Payment
with respect to any Person means:
S-78
(1) the declaration or payment of any dividends or any other distributions of any sort in respect
of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its
Capital Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Issuer or a Restricted Subsidiary, and other than dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary in
accordance with its organizational documents to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation));
(2) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Issuer held by any Person or of any
Capital Stock of a Restricted Subsidiary held by any Affiliate of the Issuer (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Issuer that is not
Disqualified Stock);
(3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations of such Person, if such Person is the Issuer or a Subsidiary Guarantor (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase or other acquisition); or
(4) the making of any Investment (other than a Permitted Investment) in any Person.
Restricted Subsidiary
means any Subsidiary of the Issuer that is not an Unrestricted Subsidiary.
S&P
means Standard & Poors Ratings Group.
Sale/Leaseback Transaction
means an arrangement relating to property owned by the Issuer or a Restricted Subsidiary on the
Issue Date or thereafter acquired by the Issuer or a Restricted Subsidiary whereby the Issuer or a Restricted Subsidiary transfers such property to a Person and the Issuer of a Restricted Subsidiary leases it from such Person.
SEC
means the Securities and Exchange Commission.
Securities Act
means the Securities Act of 1933, as amended.
Senior Indebtedness
means with respect to any Person:
(1) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred; and
(2) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization
relating to such Person whether or not post-filing interest is allowed in such proceeding) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable,
unless, in the case of clauses (1) and (2), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the Notes or the Guaranty of such Person, as the case may be; provided, however, that Senior Indebtedness
shall not include:
(1) any obligation of such Person to any Subsidiary;
(2) any liability for federal, state, local or other taxes owed or owing by such Person;
S-79
(3) any accounts payable or other liability to trade creditors arising in the ordinary course of
business (including guarantees thereof or instruments evidencing such liabilities);
(4) any Indebtedness of such Person (and any accrued
and unpaid interest in respect thereof) which is subordinate or junior in any respect to any other Indebtedness or other obligation of such Person;
(5) any Capital Stock; or
(6)
that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of the Indenture;
provided
,
however
, that such Indebtedness shall be deemed not to have been Incurred in violation of the Indenture for purposes
of this clause (6) if (x) the holders of such Indebtedness or their representative or the Issuer shall have furnished to the Trustee an opinion of recognized independent legal counsel, unqualified in all material respects, addressed to the
Trustee (which legal counsel may, as to matters of fact, rely upon an Officers Certificate) to the effect that the Incurrence of such Indebtedness does not violate the provisions of the Indenture or (y) such Indebtedness consists of Bank
Indebtedness, and the holders of such Indebtedness or their agent or representative (1) had no actual knowledge at the time of the Incurrence that the Incurrence of such Indebtedness violated the Indenture and (2) shall have received an
Officers Certificate to the effect that the Incurrence of such Indebtedness does not violate the provisions of the Indenture.
Series A Preferred Stock
means the Parents 6.00% Series A Preferred Stock.
Series B Preferred Stock
means the Parents 6.452% Series B Preferred Stock.
Significant Subsidiary
means any Restricted Subsidiary that would be a Significant Subsidiary of the Issuer
within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.
Stated Maturity
means, with respect to
any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred).
Subordinated Debentures
means the Issuers junior subordinated debentures due 2037, outstanding on the Issue Date.
Subordinated Obligation
means, with respect to a Person, any Indebtedness of such Person (whether outstanding on the
Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Notes or a Guaranty of such Person, as the case may be, pursuant to a written agreement to that effect.
Subsidiary
means, with respect to any Person, any corporation, association, partnership or other business entity of which
more than 50% of the total voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by:
(1)
such Person;
(2) such Person and one or more Subsidiaries of such Person; or (3) one or more Subsidiaries of such Person,
and the accounts of which would be consolidated with those of such Person in its consolidated financial statements in accordance with GAAP, if such statements
were prepared as of such date.
Subsidiary Guarantor
means each Subsidiary of the Issuer that executed the Supplemental
Indenture as a guarantor on the Issue Date and each other Subsidiary of the Issuer that thereafter guarantees the Notes pursuant to the terms of the Indenture. The following Subsidiaries of the Issuer will execute the Supplemental
S-80
Indenture as Guarantors on the Issue Date: Kennedy-Wilson Properties, Ltd., a Delaware corporation; Kennedy-Wilson Property Services, Inc., a Delaware corporation; Kennedy-Wilson Property
Services II, Inc., a Delaware corporation; Kennedy Wilson Property Services III, L.P., a Delaware limited partnership; Kennedy-Wilson Property Equity, Inc., a Delaware corporation; Kennedy-Wilson Property Equity II, Inc., a Delaware corporation;
Kennedy-Wilson Property Special Equity, Inc., a Delaware corporation; Kennedy-Wilson Property Special Equity II, Inc., a Delaware corporation; Kennedy Wilson Property Special Equity III, LLC, a Delaware limited liability company; K-W Properties, a
California corporation; Kennedy Wilson Property Services III GP, LLC, a Delaware limited liability company; KW BASGF II Manager, LLC, a Delaware limited liability company; KWF Investors I, LLC, a Delaware limited liability company; KWF Investors II,
LLC, a Delaware limited liability company; KWF Investors III, LLC, a Delaware limited liability company; KWF Manager I, LLC, a Delaware limited liability company; KWF Manager II, LLC, a Delaware limited liability company; KWF Manager III, LLC, a
Delaware limited liability company; Kennedy Wilson Overseas Investments, Inc., a Delaware corporation; Fairways 340 Corp., a Delaware corporation; KWRichmond, LLC, a Delaware limited liability company; SG KW Venture I Manager LLC, a Delaware
limited liability company; KW Loan Partners I LLC, a Delaware limited liability company; KW Loan Partners II LLC, a California limited liability company; KW Summer House Manager, LLC, a Delaware limited liability company; KW Montclair, LLC, a
Delaware limited liability company; KW Blossom Hill Manager, LLC, a Delaware limited liability company; KW Serenade Manager, LLC, a Delaware limited liability company; K-W Santiago Inc., a California corporation; KW Redmond Manager, LLC, a Delaware
limited liability company; Dillingham Ranch Aina LLC, a Delaware limited liability company; 68-540 Farrington, LLC, a Delaware limited liability company; KW Dillingham Aina LLC, a Delaware limited liability company; Kennedy Wilson Fund Management
Group, LLC, a California limited liability company; Kennedy-Wilson International, a California corporation; Kennedy- Wilson Tech, Ltd., a California corporation; KWP Financial I, a California corporation; Kennedy-Wilson Properties, LTD., an Illinois
corporation; Kennedy Wilson Auction Group Inc., a California corporation; KWF Manager IV, LLC, a Delaware limited liability company; KWF Manager V, LLC, a Delaware limited liability company; KW Ireland, LLC, a Delaware limited liability company;
Kennedy Wilson Property Equity IV, LLC, a Delaware limited liability company; KW Builder Marketing Services, Inc., a California corporation, KW Fund IVKohanaiki, LLC, a Delaware limited liability company; KW Telstar Partners, LLC, a Delaware
limited liability company; KWF Investors IV, LLC, a Delaware limited liability company; KWF Investors V, LLC, a Delaware limited liability company; Meyers Research, LLC, a Delaware limited liability company; KW Armacost, LLC, a Delaware limited
liability company; Santa Maria Land Partners Manager, LLC, a Delaware limited liability company; KW Investment Adviser, LLC, a Delaware limited liability company; Kennedy-Wilson Capital, a California corporation; KW Captowers Partners, LLC, a
Delaware limited liability company; KW Four Points, LLC, a Delaware limited liability company; KW Loan Partners VII, LLC, a Delaware limited liability company; KWF Investors VII, LLC, a Delaware limited liability company; KWF Manager VII, LLC, a
Delaware limited liability company; KW Residential Capital, LLC, a Delaware limited liability company; KW Boise Plaza, LLC, a Delaware limited liability company; KW Loan Partners VIII, LLC, a Delaware limited liability company; Kennedy Wilson
Property Services IV, L.P., a Delaware limited partnership; Kennedy Wilson Property Services IV GP, LLC, a Delaware limited liability company; KW/CV Third-Pacific Manager, LLC, a Delaware limited liability company; KW EU Loan Partners II, LLC, a
Delaware limited liability company; KWF Investors VIII, LLC, a Delaware limited liability company; KWF Manager VIII, LLC, a Delaware limited liability company; KW 1200 Main, LLC, a Delaware limited liability company; KW Harrington LLC, a Delaware
limited liability company; KW 5200 Lankershim Manager, LLC, a Delaware limited liability company; KWF Manager X, LLC, a Delaware limited liability company; KWF Manager XI, LLC, a Delaware limited liability company; KWF Manager XII, LLC, a Delaware
limited liability company; KW Real Estate Venture XIII, LLC, a Delaware limited liability company; KWF Manager XIII, LLC, a Delaware limited liability company; KWF Manager XV, LLC, a Delaware limited liability company; KW EU Loan Partners III, LLC,
a Delaware limited liability company; KW EU Investors I, LLC, a Delaware limited liability company; KW Richfield Plaza, LLC, a Delaware limited liability company; KW Currier Square Shopping Center, LLC, a Delaware limited liability company; KW
Creekview Shopping Center, LLC, a Delaware limited liability company; KW Securities, LLC, a Delaware limited liability company; KW Victory Land Loan, LLC, a Delaware limited liability company; KW
S-81
Victory Plaza Loan, LLC, a Delaware limited liability company; Country Ridge IX, LLC, a Delaware limited liability company; and KW EU Investors VIII, LLC, a Delaware limited liability company.
Subsidiary Guaranty
means a Guarantee by a Subsidiary Guarantor of the Issuers obligations with respect to the
Notes.
Temporary Cash Investments
means any of the following:
(1) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States
of America or any agency thereof;
(2) investments in time deposit accounts, bankers acceptances, certificates of deposit and money
market deposits maturing within one year of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any State thereof or any foreign country recognized by the United States
of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50.0 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated A (or such similar
equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Section 3(a)(62) of the Exchange Act) or any money-market fund sponsored by a registered broker-dealer or mutual fund distributor;
(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above
and clauses (4) and (5) below entered into with a bank meeting the qualifications described in clause (2) above;
(4)
investments in commercial paper, maturing not more than one year from the date of creation thereof, issued by a corporation (other than an Affiliate of the Issuer) organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moodys or A-1 (or higher) according to S&P; and
(5) investments in securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by S&P or A by Moodys.
Total Assets
means, as of any date of determination, the total consolidated assets of the Issuer and its Restricted
Subsidiaries under GAAP, as of the end of the most recent completed fiscal quarter for which internal financial statements are available, calculated on a pro forma basis to give effect to any acquisition or disposition of assets, companies,
divisions, lines of businesses or operations by the Issuer and its Restricted Subsidiaries subsequent to the end of such fiscal quarter and on or prior to the date of determination.
Unrestricted Subsidiary
means:
(1) any Subsidiary of the Issuer that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in
the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of the Issuer (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the Subsidiary to
be so designated;
provided
,
however
, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such designation would be permitted under
the covenant described under Certain CovenantsLimitation on Restricted Payments.
The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided
,
however
, that immediately after giving effect to such designation (A) the Issuer could Incur $1.00 of
S-82
additional Indebtedness under paragraph (a) of the covenant described under Certain CovenantsLimitation on Indebtedness (irrespective of whether that covenant remains
in effect) and (B) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving
effect to such designation and an Officers Certificate certifying that such designation complied with the foregoing provisions.
U.S. Dollar Equivalent
means with respect to any monetary amount in a currency other than U.S. dollars, at any time for
determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable foreign currency as published in The
Wall Street Journal in the Exchange Rates column under the heading Currency Trading on the date two Business Days prior to such determination.
Except as described under Certain CovenantsLimitation on Indebtedness, whenever it is necessary to determine whether
the Issuer has complied with any covenant in the Indenture or a Default has occurred and an amount is expressed in a currency other than U.S. dollars, such amount will be treated as the U.S. Dollar Equivalent determined as of the date such
amount is initially determined in such currency.
U.S. Government Obligations
means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not
callable at the issuers option.
Voting Stock
of a Person means all classes of Capital Stock or other interests
(including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. For the avoidance of doubt, if the
capital structure of such Person includes both (x) capital or similar interests and (y) profit, promote or similar interests, then Voting Stock shall be deemed to refer only to such capital or similar interests and not to such
profit, promote or similar interests.
Wholly Owned Subsidiary
means a Restricted Subsidiary all the
Capital Stock of which (other than directors qualifying shares) is owned by the Issuer or one or more Wholly Owned Subsidiaries.
Book-Entry,
Delivery and Form
Except as set forth below, Notes will be issued in registered, global form in minimum denominations of $2,000 and
integral multiples of $1,000 in excess thereof. Notes will be issued at the closing of this offering only against payment in immediately available funds.
The Notes will initially be represented by one or more global notes in registered form without interest coupons (collectively,
the
Global Notes
). The Global Notes will be deposited upon issuance with the Trustee as custodian for The Depository Trust Company (
DTC
), and registered in the name of DTC or its nominee, in each
case for credit to an account of a direct or indirect participant in DTC as described below.
Except as set forth below, the
Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for Notes in certificated form except in the limited
circumstances described below. See Book-Entry, Delivery and FormExchange of Global Notes for Certificated Notes. Except in the limited circumstances described below, owners of beneficial interests in the Global Notes will not
be entitled to receive physical delivery of Notes in certificated form.
Transfers of beneficial interests in the Global Notes will be
subject to the applicable rules and procedures of DTC and its direct or indirect participants, which may change from time to time.
S-83
Depository Procedures
The following description of the operations and procedures of DTC are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems and are subject to changes by them. We take no responsibility for these operations and procedures and urge investors to contact the system or their participants directly
to discuss these matters.
DTC has advised us that DTC is a limited-purpose trust company created to hold securities for its participating
organizations (collectively, the
Participants
) and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants.
The Participants include securities brokers and dealers (including the underwriters of the Notes), banks, trust companies, clearing corporations and certain other organizations. Access to DTCs system is also available to other entities such as
banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the
Indirect Participants
). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised us that, pursuant to procedures established
by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of Participants designated by the underwriters of the Notes
with portions of the principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on, and
the transfer of ownership of these interests will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interests in
the Global Notes).
Investors in the Global Notes who are Participants in DTCs system may hold their interests therein directly
through DTC. Investors in the Global Notes who are not Participants may hold their interests therein indirectly through organizations that are Participants in such system. All interests in a Global Note may be subject to the procedures and
requirements of DTC. The laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such Persons will be
limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge such interests to Persons that do not
participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests.
Except as described below, owners of an interest in the Global Notes will not have Notes registered in their names, will not receive physical
delivery of Notes in certificated form and will not be considered the registered owners or holders thereof under the Indenture for any purpose.
Payments in respect of the principal of, and interest, if any, on a Global Note registered in the name of DTC or its nominee will be payable
to DTC in its capacity as the registered holder under the Indenture. Under the terms of the Indenture, the Issuer and the Trustee will treat the Persons in whose names the Notes, including the Global Notes, are registered as the owners of the Notes
for the purpose of receiving payments and for all other purposes. Consequently, none of the Issuer, the Trustee nor any agent of the Issuer or the Trustee has or will have any responsibility or liability for:
(1) any aspect of DTCs records or any Participants or Indirect Participants records relating to or payments made on account
of beneficial ownership interest in the Global Notes or for maintaining, supervising
S-84
or reviewing any of DTCs records or any Participants or Indirect Participants records relating to the beneficial ownership interests in the Global Notes; or
(2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants.
DTC has advised us that its current practice, upon receipt of any payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant Participant is credited with an amount
proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of Notes will be governed
by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee or the Issuer. Neither the Issuer nor the Trustee will be liable
for any delay by DTC or any of its Participants in identifying the beneficial owners of the Notes, and the Issuer and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes.
Transfers between Participants in DTC will be effected in accordance with DTCs procedures, and will be settled in same-day funds.
DTC has advised the Issuer that it will take any action permitted to be taken by a holder of Notes only at the direction of one or more
Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the Notes as to which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the right to exchange the Global Notes for legended Notes in certificated form, and to distribute such Notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among participants in DTC, DTC is
under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. None of the Issuer, the Guarantors, the Trustee or any of their respective agents will have any responsibility for the
performance by DTC or its direct or indirect participants of their respective obligations under the rules and procedures governing their operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for Certificated Notes if:
(1) DTC (a) notifies the Issuer that it is unwilling or unable to continue as depositary for the Global Notes and DTC fails to appoint a
successor depositary or (b) has ceased to be a clearing agency registered under the Exchange Act;
(2) the Issuer, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the Certificated Notes; or
(3) there has occurred and is
continuing a Default with respect to the Notes and the Trustee has received a request from DTC to issue certificated notes.
In addition,
beneficial interests in a Global Note may be exchanged for Certificated Notes under prior written notice given to the Trustee by or on behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes delivered in exchange for any
Global Note or beneficial interests in Global Notes will be
S-85
registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures).
Same Day Settlement and Payment
The Issuer will make payments in respect of the Notes represented by the Global Notes (including principal and interest, if any) by wire
transfer of immediately available funds to the accounts specified by the Global Note holder. The Issuer will make all payments of principal and interest, if any, with respect to Certificated Notes by wire transfer of immediately available funds to
the accounts specified by the holders of the Certificated Notes or, if no such account is specified, by mailing a check to each such holders registered address. The Notes represented by the Global Notes are expected to trade in DTCs
Same-Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by DTC to be settled in immediately available funds. The Issuer expects that secondary trading in any Certificated Notes
will also be settled in immediately available funds.
S-86