e424b5
The
information in this preliminary prospectus supplement is not
complete and may be changed. This preliminary prospectus
supplement and the accompanying prospectus are not an offer to
sell these securities and we are not soliciting offers to buy
these securities in any jurisdiction where the offer or sale is
not permitted.
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Filed Pursuant To
Rule 424(b)(5)
Registration No.
333-168324
SUBJECT
TO COMPLETION, DATED AUGUST 4, 2010
PRELIMINARY
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED JULY 27, 2010)
Ferro
Corporation
$250,000,000
% Senior
Notes due 2018
The notes will
mature
on ,
2018. Interest will accrue
from ,
2010 and the first interest payment date will
be ,
2011.
We may redeem some
or all of the notes at on or
after ,
2014 at the redemption prices set forth in this prospectus
supplement. We may redeem up to 35% of the aggregate principal
amount of the notes on or prior
to ,
2013 with the net proceeds from certain equity offerings. We may
also redeem some or all of the notes at any time prior
to ,
2014 at a redemption price equal to the make-whole amount set
forth in this prospectus supplement. In addition, if we undergo
a change of control, we may be required to offer to repurchase
the notes at the repurchase price set forth in this prospectus
supplement.
The notes will be
unsecured senior obligations, will rank equal in right of
payment to any of our existing or future senior unsecured debt,
and will rank senior to any of our subordinated debt. The notes
will not be guaranteed by any of our subsidiaries. The notes
will effectively rank junior to any of our secured debt to the
extent of the value of the assets securing such indebtedness,
and will be structurally subordinated to all liabilities of our
subsidiaries. For a more detailed description of the notes, see
Description of the Notes.
Investing in our
notes involves risks. See Risk Factors beginning on
page S-14
of this prospectus supplement and in our annual report on
Form 10-K
for the fiscal year ended December 31, 2009, which is
incorporated by reference herein. We urge you to carefully read
the Risk Factors section before you make your
investment decision.
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Per
Note
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Total
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Public Offering Price
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%
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$
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Underwriting Discount
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%
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$
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Proceeds to Ferro Corporation (Before Expenses)
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%
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$
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Interest on the
notes will accrue
from ,
2010 to the date of delivery.
Credit Suisse
expects to deliver the notes on or
about ,
2010, subject to conditions.
Neither the
Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these debt securities
or determined if this prospectus supplement or the prospectus to
which it relates is accurate or complete. Any representation to
the contrary is a criminal offense.
The notes will not
be listed on any securities exchange. Currently, there is no
public market for the notes.
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Credit
Suisse |
J.P. Morgan |
BofA Merrill Lynch |
Citi |
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PNC
Capital Markets LLC |
KeyBanc Capital Markets |
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Fifth
Third Securities, Inc. |
RBS |
TABLE OF
CONTENTS
PROSPECTUS
SUPPLEMENT
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Page
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S-ii
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S-ii
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S-ii
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S-iii
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S-1
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S-14
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S-24
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S-25
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S-26
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S-68
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S-74
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S-78
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PROSPECTUS
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S-i
ABOUT
THIS PROSPECTUS SUPPLEMENT
We provide information to you about this offering in two
separate documents. The accompanying prospectus provides general
information about us and the debt securities we may offer from
time to time. This prospectus supplement describes the specific
details regarding this offering. Generally, when we refer to the
prospectus, we are referring to both documents
combined. Additional information is incorporated by reference in
this prospectus supplement. If information in this prospectus
supplement is inconsistent with the accompanying prospectus, you
should rely on this prospectus supplement.
You should rely only on information contained or incorporated by
reference into this prospectus supplement, in the accompanying
prospectus and in any free writing prospectus that we may
provide to you. We have not, and the underwriters have not,
authorized anyone to provide you with different information. You
should not assume that the information contained in this
prospectus supplement, the accompanying prospectus, any free
writing prospectus or any document incorporated by reference is
accurate as of any date other than the date mentioned on the
cover page of these documents. This document may be used only
where it is legal to sell the notes. We are not, and the
underwriters are not, making offers to sell the notes in any
jurisdiction in which an offer or solicitation is not authorized
or in which the person making such offer or solicitation is not
qualified to do so or to anyone to whom it is unlawful to make
an offer or solicitation.
Before you invest in the notes, you should read the registration
statement to which this document forms a part, including the
documents incorporated by reference herein.
References in this prospectus supplement to the terms
we, us, our, the
Company or Ferro or other similar terms mean
Ferro Corporation and its consolidated subsidiaries, unless we
state otherwise or the context indicates otherwise.
WHERE YOU
CAN FIND MORE INFORMATION
We are subject to the informational reporting requirements of
the Securities Exchange Act of 1934, or the Exchange Act. We
file reports, proxy statements and other information with the
Securities and Exchange Commission, or the SEC. Our SEC filings
are available over the Internet at the SECs web site at
http://www.sec.gov.
You may read and copy any reports, statements and other
information filed by us at the SECs Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549.
Please call
1-800-SEC-0330
for further information on the Public Reference Room. You may
also inspect our SEC reports and other information at the New
York Stock Exchange, 20 Broad Street, New York, New York
10005, or at our web site at
http://www.ferro.com.
We do not intend for information contained on or accessible
through our web site to be part of this prospectus supplement or
the accompanying prospectus, other than documents that we file
with the SEC that are incorporated by reference in this
prospectus supplement and the accompanying prospectus.
INFORMATION
WE INCORPORATE BY REFERENCE
The SEC allows us to incorporate by reference the information in
documents we file with it, which means that we can disclose
important information to you by referring to those documents.
The information incorporated by reference is considered to be
part of this prospectus supplement, and information that we file
later with the SEC will automatically update and supersede this
information. Any statement contained in any document
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of
this prospectus supplement to the extent that a statement
contained in or omitted from this prospectus supplement, or in
any other subsequently filed document which also is or is deemed
to be incorporated by reference herein, modifies or supersedes
such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
S-ii
We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act until the completion of
the offerings of the notes described in this prospectus
supplement:
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our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009;
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our Quarterly Reports on
Form 10-Q
for the quarters ended March 31, 2010 and June 30,
2010; and
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our Current Reports on
Form 8-K
filed on February 18, 2010, March 3, 2010,
April 20, 2010, May 6, 2010, May 10, 2010,
June 2, 2010, June 28, 2010, July 1, 2010,
July 20, 2010 and July 27, 2010.
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We will not, however, incorporate by reference in this
prospectus supplement any documents or portions thereof that are
not deemed filed with the SEC, including any
information furnished pursuant to Item 2.02 or
Item 7.01 of our current reports on
Form 8-K
unless, and except to the extent, specified in such current
reports.
We will provide you with a copy of any of these filings (other
than an exhibit to these filings, unless the exhibit is
specifically incorporated by reference into the filing
requested) at no cost, if you submit a request to us by writing
or telephoning us at the following address and telephone number:
Ferro Corporation
1000 Lakeside Avenue
Cleveland, Ohio 44114
Telephone Number:
(216) 641-8580
Attn: Secretary
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, including the documents incorporated
by reference, contains statements that constitute
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, or the
Securities Act, and Section 21E of the Exchange Act. These
statements may be identified by the use of predictive,
future-tense or forward-looking terminology, such as
believes, anticipates,
expects, estimates, intends,
may, will or similar terms. These
statements speak only as of the date of this prospectus
supplement or the date of the document incorporated by
reference, as applicable, and we undertake no ongoing
obligation, other than that imposed by law, to update these
statements. These statements appear in a number of places in
this prospectus supplement, including the documents incorporated
by reference, and relate to, among other things, our intent,
belief or current expectations with respect to: our future
financial condition, results of operations or prospects; our
business and growth strategies; and our financing plans and
forecasts. You are cautioned that any such forward-looking
statements are not guarantees of future performance and involve
significant risks and uncertainties, and that actual results may
differ materially from those contained in or implied by the
forward-looking statements as a result of various factors, some
of which are unknown, including, without limitation:
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demand in the industries into which we sell our products may be
unpredictable, cyclical or heavily influenced by consumer
spending;
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the effectiveness of our efforts to improve operating margins
through sales growth, price increases, productivity gains, and
improved purchasing techniques;
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our ability to successfully implement
and/or
administer our restructuring programs;
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our ability to access capital markets, borrowings, or financial
transactions;
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our borrowing costs could be affected adversely by interest rate
increases;
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the availability of reliable sources of energy and raw materials
at a reasonable cost;
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competitive factors, including intense price competition;
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currency conversion rates and changing global economic, social
and political conditions;
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S-iii
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the impact of our performance on our ability to utilize our
significant deferred tax assets;
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liens on our assets by our lenders affect our ability to dispose
of property and businesses;
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restrictive covenants in our credit facilities could affect our
strategic initiatives and liquidity;
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increasingly aggressive domestic and foreign governmental
regulations on hazardous materials and regulations affecting
health, safety and the environment;
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our ability to successfully introduce new products;
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stringent labor and employment laws and relationships with our
employees;
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our ability to fund employee benefit costs, especially
post-retirement costs;
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risks and uncertainties associated with intangible assets;
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potential limitations on our use of operating loss carryforwards
and other tax attributes due to significant changes in the
ownership of our common stock;
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our presence in the Asia-Pacific region where it can be
difficult to compete lawfully;
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the identification of any material weaknesses in our internal
controls in the future could affect our ability to ensure timely
and reliable financial reports;
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uncertainties regarding the resolution of pending and future
litigation and other claims;
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other factors affecting our business beyond our control,
including disasters, accidents, and governmental actions;
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our ability to successfully complete the tender offer for our
outstanding convertible notes and enter into a new credit
facility; and
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those factors set forth in Risk Factors.
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These factors and the other risk factors described in this
prospectus supplement, including the documents incorporated by
reference, are not necessarily all of the important factors that
could cause actual results to differ materially from those
expressed in any of our forward-looking statements. Other
unknown or unpredictable factors also could harm our results.
Consequently, there can be no assurance that the actual results
or developments anticipated by us will be realized or, even if
substantially realized, that they will have the expected
consequences to or effects on us.
S-iv
PROSPECTUS
SUPPLEMENT SUMMARY
This summary highlights information about us and the notes
being offered pursuant to this prospectus supplement and the
accompanying prospectus. This summary is not complete and may
not contain all of the information that you should consider
prior to investing in the notes. For a more complete
understanding of our company, we encourage you to read this
entire document, including the information incorporated by
reference in this document and the other documents to which we
have referred.
Our
Company
We are a leading producer of value-added specialty materials and
chemicals that are sold to a broad range of manufacturers who,
in turn, make products for many end-use markets. Our business
structure is designed to drive product development, customer
engagement and growth. Our Electronic, Color and Glass Materials
Group leverages our core strengths in technology to drive growth
and maintain our leading market positions. Our Polymer and
Ceramic Engineered Materials Group employs our high-volume
manufacturing capabilities to maintain leading market positions
while making cost structure improvements and enhancing cash flow.
Through manufacturing sites around the world, we produce the
following types of products in our two business groups:
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Electronic, Color and Glass Materials
Conductive metal pastes and powders,
dielectrics, polishing materials, high-quality glazes, enamels,
pigments, dinnerware decoration colors, and other performance
materials; and
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Polymer and Ceramic Engineered Materials
Polymer specialty materials, engineered plastic
compounds, pigment dispersions, glazes, frits, porcelain enamel,
pigments, and high-potency pharmaceutical active ingredients.
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We refer to our products as performance materials and chemicals
because we formulate them to perform specific functions in the
manufacturing processes and end products of our customers. The
products we develop often are delivered to our customers in
combination with customized technical service. The value of our
products stems from the benefits they deliver in actual use.
Since 2006, we have implemented wide-ranging restructuring
programs and strategic initiatives designed to reduce costs,
drive growth, enhance our profitability and sustain our leading
market positions. These initiatives include consolidation of
certain manufacturing facilities in Europe, the United States,
Latin America and Asia-Pacific, reduction in our staffing levels
and selling, general and administrative, or SG&A, expenses,
and realignment of our businesses and portfolio to focus on
higher-margin, higher-growth products and investment in
strategic regional markets such as Asia-Pacific. We believe
these initiatives provide us with opportunities to drive growth,
expand margins, generate strong free cash flow, create
significant operating leverage and benefit from a continued
sales volume recovery in our end markets.
We generated net sales of $1,036 million and
$1,658 million for the six months ended June 30, 2010
and for the year ended December 31, 2009, respectively. We
report under six reporting segments: Electronic Materials, Color
and Glass Performance Materials, Performance Coatings, Polymer
Additives, Specialty Plastics and Pharmaceuticals.
S-1
Our
Competitive Strengths
Leading Positions in Attractive Niche Markets and
Products. We believe that we enjoy worldwide
product sales leadership within many of our businesses. We
believe that our competitive positions are sustainable due to
our leading-edge product portfolio and product development
pipeline, technological leadership, exposure to high-growth
niche markets, global manufacturing infrastructure, and a loyal
customer base. In addition, we have a technical sales and
service-oriented business model, the research and development
infrastructure required for new product development and close
customer interaction and a strong global brand. Many of our
products are characterized as specialty products, as they
perform specific functions in the manufacturing processes
and/or in
the end products of our customers. For example, we are a leader
in conductive pastes for solar cells with a complete offering of
conductive metallization products. Our customer relationships
with leading solar cell manufacturers around the world are
supported by patents and know-how in conductive metal powders,
electronic glasses, understanding of the interface between our
products and silicon, and in-depth knowledge of how these
factors influence the performance of our customers end
products.
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Ferro product leadership examples
(Based on management estimates
for 2008 and 2009)
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#1 worldwide in conductive pastes for solar cells
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#1 worldwide in porcelain enamel coatings
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#1 worldwide in pigments for digital tile printing
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#1 in North American metallic stearates, #2 worldwide
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#1 worldwide in plasticizers
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Critical Proprietary Technology. We leverage
our technology to increase our participation in value-added,
performance-related product offerings. Our competitive positions
are supported by the following core competencies:
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Particle Development and Engineering: synthesis and
isolation of particles with specific size distributions and
properties, such as particle size distribution control in pastes
for solar cells;
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Color Science and Technology: repeatable creation,
matching and characterization of colors for coatings and bulk
materials, such as beverage bottle decoration materials that
promote consumer brand identification;
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Glass Science and Technology: high-temperature inorganic
chemistry and glass formation; processing knowledge, such as
value-added sealing glasses for microelectromechanical systems;
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Surface Application Technology: coating and decorating
technology and surface finishing, such as products and
applications understanding related to high-speed, high-yield
tile coating manufacturing processes; and
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Formulation Technology: combination of materials to
create new products with enhanced properties, such as
high-performance automobile glass enamels.
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We are also actively engaged in our customers advanced
product development and manufacturing yield improvement
initiatives. Our core technical competencies have allowed us not
only to develop strong customer relationships, but also to
improve our product portfolio by transitioning toward
higher-margin businesses, such as our conductive metal pastes
for solar cell applications.
Significant Geographic, Product and End-Use Market
Diversity. We have a diversified portfolio of
businesses within which we focus on specific applications and
products where we can add value to our
S-2
customers products and processes. We believe this
diversity decreases our exposure to any one end market and helps
protect our business from the negative effects of economic down
cycles. Further, we have a balanced geographic exposure, with
54% of 2009 sales generated from outside the United States. We
have a well-established infrastructure and customer
relationships in key Asia-Pacific markets and are focused on
growing our presence in these markets.
The following charts are based on our 2009 net sales and
illustrate the diversity of the end markets we serve, the
diversity of our production base and the sizes of our segments:
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Net
Sales by
Application(1) |
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Net
Sales by Region |
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Based on our estimate of our customers application markets. |
Long-term Relationships with a Diverse and Stable Customer
Base. Our strong focus on technical support,
customer service and unique expertise in customized product
formulations has created long-term customer relationships.
Our customer base is well diversified both geographically and by
end market. We have over 7,000 active customers worldwide. Our
top ten customers accounted for less than 15% of our total sales
for the year ended December 31, 2009. Our ability to
develop customized, value-added solutions has deepened our
customer relationships across the globe. For example, we are a
conductive metal paste supplier to a majority of the top 15
global solar cell manufacturers. Our products generally are a
small portion of the total cost of our customers products,
but they can be critical to the appearance or functionality of
those products. We believe our global capabilities and the
significant capital investment we have made around the world
provide us with an advantage when servicing global customers.
Because of the long lead time required to develop and qualify
replacement sources of our products, our customers would incur
significant costs to switch to new suppliers. Additionally, as a
result of the strong customer service and applications support
we provide, we tend to have long-term relationships with our
customers.
Experienced and Proven Management Team. We
have an experienced management team whose members average more
than 25 years of business experience. Our management is
firmly committed to continue transforming Ferro by driving
growth and margin expansion, further reducing costs,
streamlining operations and optimizing our product portfolio to
strengthen and expand our existing businesses. Since he became
President and Chief Executive Officer of our company in November
2005, James Kirsch, along with other members of our senior
management team, has introduced several initiatives that have
resulted in significant improvement in our cost structure and
product mix. For example, we have reduced costs sufficiently
since January 1, 2008, to lower our break-even sales by
more than $100 million per quarter.
Our
Business Strategy
Building on our strengths, we plan to continue our existing
strategy to increase revenue and cash flow, expand margins and
improve profitability through:
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Continued focus on core competencies to extend or penetrate
markets, deliver growth and increase profitability;
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Further rationalization of our manufacturing assets to reduce
costs and expenses, particularly in Europe and North
America; and
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S-3
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Additional geographical expansion by investing in manufacturing
assets and customer technical support capabilities in the
Asia-Pacific region and other key emerging markets.
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Focus on Growth Initiatives. We are focused on
enhancing our growth and market positions through product and
geographic expansion. We have been moving into adjacent markets,
developing new applications and introducing environmentally
friendly product alternatives. In addition, we have been
expanding our presence in the emerging markets of Asia-Pacific,
Eastern Europe, the Middle East and North Africa. We have a
number of compelling growth platforms across our businesses such
as materials for solar cells, green chemistry alternatives and
high-performance coatings. We continue to make investments to
enhance our capabilities to more effectively serve our
customers, such as the construction of an electronic materials
manufacturing facility in Suzhou, China, for the solar market;
the development of organic colors and low-lead decorative
enamels; the development of pigmented inks for the decoration of
tile using digital printing equipment; and the commissioning of
a world-scale tile color plant in Castellon, Spain to serve
expected growth markets in Eastern Europe and North Africa.
In addition, we believe that growth in our end markets as a
result of the global economic recovery, combined with the
anticipated benefits of restructuring cost savings and other
strategic initiatives, will lead to margin expansion and
profitability improvements.
Optimize Our Business Portfolio. We assess on
an ongoing basis our portfolio of businesses, as well as our
financial metrics and capital structure, with the objectives of
leveraging our global scale, realigning and lowering our cost
structure and optimizing capacity utilization. As part of this
process, from time to time we evaluate the possible divestiture
of businesses that are not critical to our core strategic
objectives and, where appropriate, pursue the sale of such
businesses. We also evaluate and pursue acquisition
opportunities that we believe will enhance our strategic
position.
Continue to Pursue Operational
Efficiencies. We are focused on our plan to
unlock value through rigorous, company-wide operational
improvement initiatives. Our management has focused on three
principal areas of this strategy: (1) implement a strict
set of performance objectives and global operational metrics;
(2) restructure assets, rationalize our manufacturing
footprint and streamline our operations to reduce costs; and
(3) invest in our infrastructure and capabilities to
revitalize products and adjust market positioning to accelerate
growth.
We developed, initiated and continue to implement several
restructuring programs across our business segments with the
objectives of leveraging our global scale, realigning and
lowering our cost structure, improving our product portfolio and
optimizing capacity utilization. The programs will impact our
operations in Europe, North America and Asia-Pacific. Similar
restructuring and cost reduction programs have reduced annual
fixed manufacturing costs, SG&A expenses and corporate
costs by over $150 million from 2007 through June 30,
2010. Since January 1, 2008, we have closed or are in the
process of closing eleven plants, reduced worldwide staffing by
20% and reduced SG&A expenses by over 15%. We believe these
actions have lowered our break-even sales by more than
$100 million per quarter.
The following restructuring programs are expected to have a
positive impact on our cost structure in 2010 and future years
and are moving us substantially closer to our strategic goals:
Restructuring
Program in France
In January 2009, we initiated additional restructuring
activities within our Color and Glass Performance Materials
operations in Europe. We have discontinued smelting, milling and
other manufacturing operations in Limoges, France. These
activities are being consolidated at our other facilities in St.
Dizier, France; Frankfurt and Colditz, Germany; and Almazora,
Spain. In addition, all sales, technical service, and research
and development activities previously done in Limoges are being
transferred to St. Dizier and Frankfurt. This restructuring
action is expected to be substantially complete by the end of
2010. When the restructuring is completed, the Limoges site will
be closed. Cash costs to complete these programs are estimated
to be approximately $25 million through 2010, including
severance expense and other cash expenses.
S-4
Restructuring
Program in Spain
In June 2009, we initiated additional restructuring activities
at our Tile Coatings Systems operation in Nules, Spain. As part
of the European restructuring efforts initially announced in
2006, this program has resulted in the discontinuation of the
production of frits and glazes at this site. The production has
been consolidated at our facility in Almazora, Spain. These
restructuring activities are complete, and cash costs of
$2 million were incurred in connection with these
activities.
Restructuring
Program in Australia
In November 2009, we initiated restructuring activities within
our Porcelain Enamel and Color and Glass Performance Materials
businesses in Australia. This restructuring program will close
three manufacturing facilities at Moorabbin and Geelong,
Australia, and transfer the manufacturing activities to
lower-cost facilities in China, Thailand and Indonesia. After
completion of this program, Ferro Australias business will
be reduced to sales, technical services, import, export and
warehousing for servicing Australia, New Zealand and other
markets in the region. Cash costs to complete these programs are
estimated to be approximately $4 million in 2010, including
severance expense and other cash expenses.
Restructuring
Program in Portugal
In March 2010, we initiated restructuring activities within our
Color and Glass Performance Materials and Specialty Plastics
businesses in Castanheir do Ribatejo, Portugal. This
restructuring program will consolidate operations into our
existing manufacturing site in Almazora, Spain and will result
in discontinuing dinnerware frit and plastics manufacturing
operations in Portugal by the end of 2010. Cash costs to
complete the restructuring are estimated to be approximately
$10 million in 2010, including severance costs and other
cash expenses.
Restructuring
Programs in the Netherlands
In April 2010, we announced restructuring activities within our
Specialty Plastics business in Rotterdam, the Netherlands. This
restructuring program will consolidate plastics production into
our existing manufacturing site in Almazora, Spain and will
result in closing the manufacturing site in the Netherlands.
Cash costs to complete the restructuring are estimated to be
approximately $9 million in 2010, including severance costs
and other cash expenses.
Additionally, in May 2010, we announced that we expected to
discontinue manufacturing of dielectric products, which is part
of our Electronic Materials business, in Uden, the Netherlands.
Products currently manufactured at the site will be transferred
to other locations or discontinued and the manufacturing site
will be closed. Cash costs to complete the restructuring are
expected to be approximately $13 million, including
severance costs and other cash expenses.
Other
Cost Reduction Programs
In 2010, we initiated a number of other cost reduction programs.
The additional cash costs required to complete these programs
and fully realize these operational improvements are estimated
to be approximately $5 million in 2010, including severance
costs, capital expenditures and other cash expenses.
Debt
Refinancing
Tender Offer. On July 27, 2010, we commenced
an offer to purchase any and all of our outstanding 6.50%
convertible senior notes due 2013, which we refer to as our
convertible notes. As of June 30, 2010, $172.5 million
aggregate principal amount of our convertible notes were
outstanding. This tender offer for our convertible notes is
conditioned upon the completion of this offering and either
(a) our entry into a new credit facility or (b) our
entry into an amendment to, or our receipt of a waiver under,
the second amended and restated credit agreement governing our
existing credit facility that, in either case, will permit us to
use the net proceeds from this offering to consummate the tender
offer, as well as other conditions.
S-5
New Credit Facility. In connection with the
tender offer and this offering, we anticipate entering into a
new credit facility. We are currently in negotiations with the
lenders under our existing credit facility regarding a new
credit facility, although we have not yet obtained a commitment
for the full amount of the facility or finalized the credit
documents governing the new credit facility. We expect that the
new credit facility will provide up to an aggregate amount of
$350 million of borrowings. We expect to repay any
remaining term loans and revolving borrowings outstanding under
our existing credit facility concurrently with our entry into
the new credit facility.
Although we anticipate entering into a new credit facility
concurrently with the settlement of the tender offer, we may
enter into a new credit facility prior to such time.
Use of Proceeds. We intend to use the net
proceeds from this offering (a) to purchase all the
convertible notes that are tendered and not validly withdrawn
pursuant to the tender offer, including the payment of all
accrued and unpaid interest on the convertible notes and all
premiums and transaction expenses associated therewith, and
(b) to repay the remaining term loans and revolving
borrowings outstanding under our existing credit facility or any
borrowings outstanding under the new credit facility, as
applicable. If the tender offer is not consummated for any
reason, we will use the net proceeds from this offering to repay
all of the remaining term loans and revolving borrowings
outstanding under our existing credit facility or the borrowings
outstanding under the new credit facility, as applicable, and
for general corporate purposes. If this offering is consummated
prior to the purchase of our convertible notes pursuant to the
tender offer, the net proceeds from this offering will be
temporarily held as cash and cash equivalents. See
Capitalization.
We refer to this offering, the tender offer for our convertible
notes, any amendment to our existing credit facility and any new
credit facility that we may enter into, collectively, as the
Refinancing Transactions.
Corporate
Information
Our principal executive offices are located 1000 Lakeside
Avenue, Cleveland, Ohio 44114. Our telephone number is
(216) 641-8580.
Our website is www.ferro.com. The information contained on or
accessible through our website is not part of this prospectus
supplement, other than the documents that we file with the SEC
that are incorporated by reference into this prospectus
supplement.
S-6
The
Offering
|
|
|
Issuer |
|
Ferro Corporation. |
|
Notes Offered |
|
$250.0 million aggregate principal amount
of % Senior Notes
due ,
2018. |
|
Price |
|
% of the principal amount plus
accrued interest, if any,
from ,
2010. |
|
Maturity Date |
|
,
2018. |
|
Interest |
|
% per annum on the principal
amount, payable semi-annually in arrears
on
and
of each year, commencing
on ,
2011. |
|
Ranking |
|
The notes are our unsecured, senior obligations and rank: |
|
|
|
pari passu in right of payment with all of our
existing and future senior indebtedness; and
|
|
|
|
senior in right of payment to any future
subordinated indebtedness.
|
|
|
|
As of June 30, 2010, we had outstanding approximately
$179.8 million principal amount (or face value) of
unsecured indebtedness with which the notes would rank equally. |
|
|
|
The notes will be effectively subordinated to our secured
indebtedness, including all borrowings under either our existing
credit facility or our proposed new credit facility, to the
extent of the assets securing such credit facility. As of
June 30, 2010, we had $181.4 million of secured
indebtedness outstanding under our existing credit facility. We
expect that the new credit facility will provide up to an
aggregate amount of $350 million of borrowings. |
|
Guarantors |
|
None. Because the notes will not be guaranteed by any of our
subsidiaries, the notes will also be structurally subordinated
to all the liabilities of our subsidiaries, including trade
payables. As of June 30, 2010, our subsidiaries had
approximately $12.4 million of indebtedness and
$146.0 million of trade payables outstanding and had
guaranteed indebtedness of approximately $181.4 million
under our existing credit facility, all of which consists of
term loans that will be repaid in connection with the
Refinancing Transactions. |
|
|
|
Our new credit facility, if entered into, will be guaranteed by
certain of our subsidiaries. The notes would be structurally
subordinated to all liabilities of our subsidiaries under any
new credit facility. |
|
Optional Redemption |
|
We may redeem some or all of the notes on or
after ,
2014 at the redemption prices listed under Description of
the Notes Optional Redemption. In addition, on
or prior
to ,
2013, we may redeem up to 35% of the aggregate principal amount
of the notes with the net cash proceeds of certain equity
offerings. We may also redeem some or all of the notes prior
to ,
2014, at a redemption price equal to the greater of the
principal amount of such notes and the make-whole |
S-7
|
|
|
|
|
premium set forth under Description of the
Notes Optional Redemption plus, in each case,
accrued and unpaid interest. |
|
Change of Control |
|
Upon certain change of control events, we will be required to
make an offer to purchase each holders notes at a
repurchase price equal to 101% of their principal amount, plus
accrued and unpaid interest, if any, to the date of repurchase.
See Description of the Notes Repurchase at the
Option of Holders Change of Control. |
|
Certain Covenants |
|
The indenture governing the notes contains covenants that, among
other things, limit our ability and the ability of our
restricted subsidiaries to: |
|
|
|
incur additional indebtedness;
|
|
|
|
pay dividends or make other distributions or
repurchase stock;
|
|
|
|
make investments;
|
|
|
|
create liens;
|
|
|
|
sell assets;
|
|
|
|
engage in transactions with affiliates; and
|
|
|
|
merge or consolidate with other companies or sell
substantially all of our assets.
|
|
|
|
These covenants are subject to a number of important exceptions
and limitations, which are described under Description of
the Notes. |
|
Form and Denomination |
|
The notes will be issued only in denominations of $2,000 and
integral multiples of $1,000 in excess of $2,000. The notes will
be represented by one or more global notes, deposited with the
trustee as a custodian for The Depository Trust Company, or
DTC, and registered in the name of Cede & Co.,
DTCs nominee. Beneficial interests in the global notes
will be shown on, and any transfers will be effective only
through, records maintained by DTC and its participants. |
|
Use of Proceeds |
|
We estimate that the net proceeds from the sale of our notes in
this offering, after deducting underwriting discounts and
estimated offering expenses, will be approximately
$244.0 million. We intend to use the net proceeds from this
offering (a) to purchase all of the convertible notes that
are tendered and not validly withdrawn pursuant to the tender
offer, including the payment of all accrued and unpaid interest
on the convertible notes and all premiums and transaction
expenses associated therewith, and (b) to repay a portion
of the remaining term loans and revolving borrowings outstanding
under our existing credit facility or a portion of the
borrowings outstanding under the new credit facility, as
applicable. If the tender offer is not consummated for any
reason, we intend to use the net proceeds from this offering to
repay all of the remaining term loans and revolving borrowings
outstanding under our existing credit facility or any borrowings
outstanding under the new credit facility, as applicable, and
for general corporate purposes. If this offering is consummated
prior to the purchase of |
S-8
|
|
|
|
|
our convertible notes pursuant to the tender offer, the net
proceeds from this offering will be temporarily held as cash and
cash equivalents. See Use of Proceeds and
Capitalization. |
|
Trustee and Paying Agent |
|
Wilmington Trust FSB |
|
Listing and Trading |
|
The notes will not be listed on any securities exchange. |
|
Absence of a Public Market for the Notes |
|
The notes are new securities, and there is currently no
established market for the notes. The underwriters have advised
us that they currently intend to make a market in the notes.
However, they are not obligated to do so, and may discontinue
any market making with respect to the notes without notice. |
|
Risk Factors |
|
See Risk Factors and other information included or
incorporated by reference in this prospectus supplement and the
accompanying prospectus for a discussion of factors you should
carefully consider before investing in the notes. |
|
Further Issuances |
|
We may create and issue further notes ranking equally and
ratably in all respects with the notes offered by this
prospectus supplement, so that such further notes will be
consolidated and form a single series with the notes offered by
this prospectus supplement and will have the same terms as to
status, redemption or otherwise. |
Conflicts
of Interest
Certain of the underwriters and their affiliates perform various
financial advisory, investment banking and commercial banking
services from time to time for us and our affiliates, for which
they have received or may receive customary fees. A portion of
the net proceeds from this offering will be used to purchase all
of the convertible notes that are tendered and not validly
withdrawn pursuant to the tender offer. Certain of the
underwriters and/or their affiliates are holders of our
convertible notes and may receive proceeds from this offering in
connection with the tender offer. A portion of the net proceeds
from this offering will also be used to repay, among other
lenders, certain of the underwriters or their affiliates who are
lenders under the term loans and the revolving borrowings
outstanding under our existing credit facility or who may be
lenders under any new credit facility. See Use of
Proceeds. This offering is being made in accordance with
National Association of Securities Dealers, or NASD,
Rule 2720(a)(2) and Financial Industry Regulatory
Authority, or FINRA, Rule 5110, whereby J.P. Morgan Securities
Inc. has assumed the responsibilities of acting as a qualified
independent underwriter. See Underwriting (Conflicts of
Interest).
S-9
Summary
Consolidated Financial Data
The table below sets forth a summary of our consolidated
financial data for the periods presented. We derived the
financial data as of and for the years ended December 31,
2009, 2008 and 2007 from our audited financial statements. The
consolidated financial data as of and for the six months ended
June 30, 2010 and 2009 are derived from our unaudited
financial statements. The interim unaudited consolidated
financial data have been prepared on the same basis as the
annual consolidated financial data and include, in the opinion
of management, all adjustments, consisting of normal and
recurring adjustments, necessary to present fairly the data for
such periods and may not necessarily be indicative of full year
results. Prospective investors should read the summary of
consolidated financial data in conjunction with our consolidated
financial statements, the related notes and other financial
information incorporated by reference into this prospectus
supplement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Year Ended
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,036,350
|
|
|
$
|
757,086
|
|
|
$
|
1,657,569
|
|
|
$
|
2,245,152
|
|
|
$
|
2,147,904
|
|
Cost of sales
|
|
|
807,086
|
|
|
|
636,611
|
|
|
|
1,343,297
|
|
|
|
1,841,485
|
|
|
|
1,745,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
229,264
|
|
|
|
120,475
|
|
|
|
314,272
|
|
|
|
403,667
|
|
|
|
402,459
|
|
Selling, general and administrative expenses
|
|
|
140,800
|
|
|
|
130,608
|
|
|
|
272,259
|
|
|
|
297,119
|
|
|
|
314,878
|
|
Impairment charges(1)
|
|
|
2,202
|
|
|
|
|
|
|
|
8,225
|
|
|
|
80,205
|
|
|
|
128,737
|
|
Restructuring charges(2)
|
|
|
32,335
|
|
|
|
1,089
|
|
|
|
11,112
|
|
|
|
25,937
|
|
|
|
16,852
|
|
Other expense (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
26,677
|
|
|
|
28,364
|
|
|
|
63,918
|
|
|
|
51,290
|
|
|
|
57,837
|
|
Interest earned
|
|
|
(464
|
)
|
|
|
(473
|
)
|
|
|
(896
|
)
|
|
|
(714
|
)
|
|
|
(1,505
|
)
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,531
|
|
|
|
|
|
Foreign currency losses, net
|
|
|
3,246
|
|
|
|
2,929
|
|
|
|
3,827
|
|
|
|
742
|
|
|
|
1,254
|
|
Loss on sale of business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,348
|
|
Miscellaneous (income) expense, net(3)
|
|
|
(4,822
|
)
|
|
|
854
|
|
|
|
(618
|
)
|
|
|
(357
|
)
|
|
|
(1,488
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
29,290
|
|
|
|
(42,896
|
)
|
|
|
(43,555
|
)
|
|
|
(56,086
|
)
|
|
|
(115,454
|
)
|
Income tax expense (benefit)
|
|
|
22,508
|
|
|
|
(12,095
|
)
|
|
|
(3,515
|
)
|
|
|
(3,204
|
)
|
|
|
(17,952
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
6,782
|
|
|
|
(30,801
|
)
|
|
|
(40,040
|
)
|
|
|
(52,882
|
)
|
|
|
(97,502
|
)
|
Income from discontinued operations, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,014
|
|
|
|
5,312
|
|
(Loss) gain on disposal of discontinued operations, net of
income taxes
|
|
|
|
|
|
|
(358
|
)
|
|
|
(325
|
)
|
|
|
9,034
|
|
|
|
(225
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
6,782
|
|
|
|
(31,159
|
)
|
|
|
(40,365
|
)
|
|
|
(38,834
|
)
|
|
|
(92,415
|
)
|
Less: Net (loss) income attributable to noncontrolling interests
|
|
|
(250
|
)
|
|
|
984
|
|
|
|
2,551
|
|
|
|
1,596
|
|
|
|
2,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Ferro Corporation
|
|
|
7,032
|
|
|
|
(32,143
|
)
|
|
|
(42,916
|
)
|
|
|
(40,430
|
)
|
|
|
(94,479
|
)
|
Dividends on preferred stock
|
|
|
(330
|
)
|
|
|
(370
|
)
|
|
|
(705
|
)
|
|
|
(877
|
)
|
|
|
(1,035
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Ferro Corporation common
shareholders
|
|
$
|
6,702
|
|
|
$
|
(32,513
|
)
|
|
$
|
(43,621
|
)
|
|
$
|
(41,307
|
)
|
|
$
|
(95,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities
|
|
$
|
91,772
|
|
|
$
|
(40,486
|
)
|
|
$
|
2,151
|
|
|
$
|
(9,096
|
)
|
|
$
|
144,579
|
|
Net cash used for investing activities
|
|
|
(10,094
|
)
|
|
|
(22,897
|
)
|
|
|
(42,654
|
)
|
|
|
(17,050
|
)
|
|
|
(62,033
|
)
|
Net cash (used for) provided by financing activities
|
|
|
(69,843
|
)
|
|
|
69,449
|
|
|
|
46,625
|
|
|
|
23,854
|
|
|
|
(88,717
|
)
|
S-10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Year Ended
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
16,298
|
|
|
|
22,969
|
|
|
|
43,260
|
|
|
|
73,068
|
|
|
|
67,634
|
|
Depreciation and amortization
|
|
|
41,251
|
|
|
|
41,353
|
|
|
|
88,138
|
|
|
|
74,595
|
|
|
|
84,048
|
|
EBITDA(4)
|
|
|
97,468
|
|
|
|
25,837
|
|
|
|
105,950
|
|
|
|
73,734
|
|
|
|
24,367
|
|
Adjusted EBITDA(5)
|
|
|
138,143
|
|
|
|
31,807
|
|
|
|
138,626
|
|
|
|
183,857
|
|
|
|
180,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
|
As of December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
29,732
|
|
|
$
|
17,492
|
|
|
$
|
18,507
|
|
|
$
|
10,191
|
|
|
$
|
12,025
|
|
Working capital
|
|
|
312,496
|
|
|
|
327,135
|
|
|
|
330,923
|
|
|
|
291,825
|
|
|
|
196,860
|
|
Property, plant and equipment, net
|
|
|
384,940
|
|
|
|
444,084
|
|
|
|
432,405
|
|
|
|
456,549
|
|
|
|
495,599
|
|
Total assets
|
|
|
1,481,427
|
|
|
|
1,531,517
|
|
|
|
1,526,355
|
|
|
|
1,544,117
|
|
|
|
1,638,260
|
|
Total debt, including current portion
|
|
|
352,773
|
|
|
|
650,747
|
|
|
|
423,457
|
|
|
|
570,496
|
|
|
|
526,089
|
|
Total Ferro Corporation shareholders equity
|
|
|
531,840
|
|
|
|
314,804
|
|
|
|
550,226
|
|
|
|
335,969
|
|
|
|
476,284
|
|
|
|
|
(1) |
|
We recorded impairment charges of $2.2 million during the
six months ended June 30, 2010, as a result of the
discontinuance of manufacturing activities at our Limoges,
France, plant, which indicated a possible impairment of the
plants real estate assets. We recorded an
$8.2 million impairment of goodwill related to our
Pharmaceuticals business during 2009. The impairment was
triggered by changes made to the assumptions used to determine
valuation under the market approach. We recorded impairment
charges of $80.2 million related to goodwill and other
long-lived assets in our Performance Coatings, Specialty
Plastics and Electronic Materials businesses during 2008.
Goodwill was impaired related to tile coatings products in the
Performance Coatings segment, and goodwill and property, plant
and equipment were impaired related to products in our Specialty
Plastics segment. The impairments were due to lower forecasted
cash flows in the businesses resulting from significant
reductions in demand from customers due to the worldwide
economic downturn. In addition, we recorded an impairment of
property, plant and equipment in our Electronic Materials
facility in the Netherlands. This asset impairment was the
result of a decline in the operating results and reduced future
sales projections for our dielectric material products that are
produced at the Netherlands facility. An impairment charge in
the amount of $128.7 million related to goodwill and other
long-lived assets in our Polymer Additives and Pharmaceuticals
businesses was recorded during 2007. The impairment in the
Polymer Additives business was triggered by the cumulative
negative effect on earnings of a cyclical downturn in certain of
the primary
U.S.-based
end markets for the business, including housing and automobiles;
anticipated additional product costs due to recent hazardous
material legislation and regulations, such as the newly enacted
European Union REACH registration system, which
requires chemical suppliers to perform toxicity studies on the
components of their products and to register certain
information; and higher forecasted capital expenditures related
to the business. The 2007 impairment charge in the
Pharmaceuticals business is primarily the result of the longer
time necessary to transition the business from a supplier of
food supplements and additives to a supplier of high-value
pharmaceutical products and services. |
|
(2) |
|
Restructuring charges of $32.3 million and
$1.1 million were recorded in the six months ended
June 30, 2010 and 2009, respectively, primarily related to
the rationalization activities in our European manufacturing
operations. During 2009 and 2008, we continued several
restructuring programs across a number of our business segments
with the objectives of leveraging our global scale, realigning
and lowering our cost structure and optimizing capacity
utilization. The programs are primarily associated with North
America and Europe. In November 2007 and March 2008, we
initiated additional restructuring plans for our Performance
Coatings and Color and Glass Performance Materials segments. In
February |
S-11
|
|
|
|
|
2008, we announced the closing of a Plastics facility in
Aldridge, United Kingdom. Restructuring charges of
$11.1 million were recorded in 2009, primarily related to
manufacturing rationalization activities in our European
manufacturing operations and other cost-reduction actions.
Restructuring charges of $25.9 million were recorded in
2008, primarily associated with the rationalization of our
manufacturing operations in the Performance Coatings and Color
and Glass Performance Materials segments, and other
restructuring activities to reduce costs and expenses throughout
all of our businesses. Restructuring charges of
$16.9 million were recorded in 2007, primarily associated
with our manufacturing rationalization activities in the
Performance Coatings and Color and Glass Performance Materials
segments in Europe and our Electronic Materials segment in the
United States. |
|
(3) |
|
For the six months ended June 30, 2010, miscellaneous
income and expense includes a gain of $7.8 million as a
result of a business combination in which Ferro and Heraeus of
Hanau, Germany acquired from each other certain business lines
related to decoration materials for ceramic and glass products,
and a charge of $3.5 million for an increased reserve for
environmental remediation costs related to a non-operating
facility in Brazil. |
|
(4) |
|
EBITDA is defined as net income (loss) attributable to Ferro
Corporation less the gain (loss) on disposal of discontinued
operations and income from discontinued operations; plus
interest expense, loss on extinguishment of debt, income tax
expense (benefit) and depreciation and amortization. EBITDA is
not a recognized term under U.S. GAAP and does not purport to be
an alternative to net income (loss) as an indicator of operating
performance or to cash flows from operating activities as a
measure of liquidity. We believe that, in addition to net income
(loss) attributable to Ferro Corporation and cash flows from
operating activities, EBITDA is a useful financial performance
measurement for assessing operating performance, since it
provides an additional basis to evaluate our ability to incur
and service debt and to fund capital expenditures. Additionally,
EBITDA is not intended to be a measure of free cash flow for
managements discretionary use, as it does not consider
certain cash requirements such as interest payments, tax
payments, capital expenditures and debt service requirements. |
|
(5) |
|
We calculate Adjusted EBITDA from EBITDA by adding back the
impairment and restructuring charges provided in the table and
footnotes above for the periods presented and other special
charges of $6.1 million and $4.9 million for the six
months ended June 30, 2010 and 2009, respectively, and
$13.3 million, $4.0 million and $10.3 million for
the years ended December 31, 2009, 2008 and 2007,
respectively. Special charges include, without limitation,
severance and other costs related to manufacturing
rationalization and other expense reduction activities,
environmental reserves, litigation settlement amounts and asset
writeoffs, in each case net of applicable gains. We believe that
Adjusted EBITDA is a useful measurement for assessing operating
performance because it excludes charges that we consider to be
outside of our core operating results. |
S-12
The following table sets forth a reconciliation from net income
(loss) attributable to Ferro Corporation to EBITDA and to
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Year Ended
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net income (loss) attributable to Ferro Corporation
|
|
$
|
7,032
|
|
|
$
|
(32,143
|
)
|
|
$
|
(42,916
|
)
|
|
$
|
(40,430
|
)
|
|
$
|
(94,479
|
)
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on disposal of discontinued operations, net of tax
|
|
|
|
|
|
|
(358
|
)
|
|
|
(325
|
)
|
|
|
9,034
|
|
|
|
(225
|
)
|
Income from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,014
|
|
|
|
5,312
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
26,677
|
|
|
|
28,364
|
|
|
|
63,918
|
|
|
|
51,290
|
|
|
|
57,837
|
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,531
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
22,508
|
|
|
|
(12,095
|
)
|
|
|
(3,515
|
)
|
|
|
(3,204
|
)
|
|
|
(17,952
|
)
|
Depreciation and amortization
|
|
|
41,251
|
|
|
|
41,353
|
|
|
|
88,138
|
|
|
|
74,595
|
|
|
|
84,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
97,468
|
|
|
|
25,837
|
|
|
|
105,950
|
|
|
|
73,734
|
|
|
|
24,367
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges
|
|
|
2,202
|
|
|
|
|
|
|
|
8,225
|
|
|
|
80,205
|
|
|
|
128,737
|
|
Restructuring charges
|
|
|
32,335
|
|
|
|
1,089
|
|
|
|
11,112
|
|
|
|
25,937
|
|
|
|
16,852
|
|
Other special charges
|
|
|
6,138
|
|
|
|
4,881
|
|
|
|
13,339
|
|
|
|
3,981
|
|
|
|
10,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
138,143
|
|
|
$
|
31,807
|
|
|
$
|
138,626
|
|
|
$
|
183,857
|
|
|
$
|
180,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-13
RISK
FACTORS
Investing in our notes involves risk. Prior to making a
decision about investing in our notes, you should carefully
consider the following risk factors, as well as the risk factors
discussed under the heading Risk Factors in our
Annual Report on
Form 10-K
for the year ended December 31, 2009, which is incorporated
herein by reference. The risks and uncertainties we have
described are not the only ones we face. Additional risks and
uncertainties not presently known to us or that we currently
deem immaterial may also affect our operations. If any of these
risks actually occurs, our business, results of operations and
financial condition could suffer.
Risks
Related to Our Business
We
sell our products into industries where demand has been
unpredictable, cyclical or heavily influenced by consumer
spending, and such demand and our results of operations may be
further impacted by macro-economic circumstances and uncertainty
in credit markets.
We sell our products to a wide variety of customers who supply
many different market segments. Many of these market segments,
such as building and renovation, major appliances,
transportation, and electronics, are cyclical or closely tied to
consumer demand, which is difficult to predict. Incorrect
forecasts of demand or unforeseen reductions in demand can
adversely affect costs and profitability due to factors such as
underused manufacturing capacity, excess inventory, or working
capital needs.
Our results of operations are materially affected by conditions
in capital markets and economies in the U.S. and elsewhere
around the world. General economic conditions around the world
deteriorated sharply at the end of 2008, and difficult economic
conditions continue to exist. Concerns over fluctuating prices,
energy costs, geopolitical issues, government deficits and debt
loads, the availability and cost of credit, the
U.S. mortgage market and a declining real estate market
have contributed to increased volatility, diminished
expectations, and uncertainty regarding economies around the
world. These factors, combined with reduced business and
consumer confidence, increased unemployment, and volatile raw
materials costs, precipitated an economic slowdown and recession
in a number of markets around the world. As a result of these
conditions, our customers may experience cash flow problems and
may modify, delay, or cancel plans to purchase our products.
Additionally, if customers are not successful in generating
sufficient revenue or are precluded from securing financing,
they may not be able to pay, or may delay payment of, accounts
receivable that are owed to us. Any reduction in demand or
inability of our current
and/or
potential customers to pay us for our products may adversely
affect our earnings and cash flow.
We
strive to improve operating margins through sales growth, price
increases, productivity gains, and improved purchasing
techniques, but we may not achieve the desired
improvements.
We work to improve operating profit margins through activities
such as growing sales to achieve increased economies of scale,
increasing prices, improving manufacturing processes, and
adopting purchasing techniques that lower costs or provide
increased cost predictability to realize cost savings. However,
these activities depend on a combination of improved product
design and engineering, effective manufacturing process control
initiatives, cost-effective redistribution of production, and
other efforts that may not be as successful as anticipated. The
success of sales growth and price increases depends not only on
our actions but also the strength of customer demand and
competitors pricing responses, which are not fully
predictable. Failure to successfully implement actions to
improve operating margins could adversely affect our financial
performance.
We
have initiated and intend to initiate several restructuring
programs to improve our operating performance and achieve cost
savings, but we may not be able to implement and/or administer
these programs in the manner contemplated and these
restructuring programs may not produce the desired
results.
We have initiated several restructuring programs prior to and in
the fourth quarter of 2009, and we intend to initiate new
restructuring programs in the future. These programs involve,
among other things, plant closures and staff reductions.
Although we expect these programs to help us achieve operational
S-14
improvements, including incremental cost savings, we may not be
able to implement
and/or
administer these programs, including the implementation of plant
closures and staff reductions, in the manner contemplated, which
could cause the restructuring programs to fail to achieve the
desired results. Additionally, the implementation of
restructuring programs may result in impairment charges, some of
which could be material. Even if we do implement and administer
these restructuring programs in the manner contemplated, they
may not produce the desired results. Accordingly, the
restructuring programs that we have initiated and those that we
intend to initiate in the future may not improve our operating
performance and may not help us achieve cost savings. Failure to
successfully implement
and/or
administer these restructuring programs could have an adverse
effect on our financial performance.
We
depend on external financial resources, and the economic
environment and credit market uncertainty could interrupt our
access to capital markets, borrowings, or financial transactions
to hedge certain risks, which could adversely affect our
liquidity and our financial condition.
As of June 30, 2010, we had approximately
$352.8 million of short-term and long-term debt in the
aggregate with varying maturities and approximately
$78.0 million of off-balance sheet arrangements, including
consignment arrangements for precious metals, international
receivables sales programs, bank guarantees, and standby letters
of credit. These arrangements have allowed us to make
investments in growth opportunities and fund working capital
requirements. In addition, we enter into financial transactions
to hedge certain risks, including foreign exchange, commodity
pricing, and sourcing of certain raw materials. Our continued
access to capital markets, the stability of our lenders,
customers and financial partners and their willingness to
support our needs are essential to our liquidity and our ability
to meet our current obligations and to fund operations and our
strategic initiatives. An interruption in our access to external
financing, including an increase in the cash collateral required
by our lenders under our consignment arrangements for precious
metals or financial transactions to hedge risk could adversely
affect our business prospects and financial condition. See
further information regarding our liquidity in
Managements Discussion and Analysis of Financial
Condition and Results of Operations and in the notes to
the consolidated financial statements in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009 and our
Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010, which are
incorporated herein by reference.
Interest
rates on some of our borrowings are variable, and our borrowing
costs could be affected adversely by interest rate
increases.
Portions of our debt obligations have variable interest rates.
Generally, when interest rates rise, our cost of borrowings
increases. We estimate, based on the debt obligations
outstanding at June 30, 2010, that a one percent increase
in interest rates would cause interest expense to increase by
approximately $0.4 million annually. Continued interest
rate increases could raise the cost of borrowings and adversely
affect our financial performance. See further information
regarding our interest rates on our debt obligations in
Quantitative and Qualitative Disclosures about Market
Risk and in the notes to the consolidated financial
statements in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009 and our
Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010, which are
incorporated herein by reference.
We
depend on reliable sources of energy and raw materials,
including petroleum-based materials and other supplies, at a
reasonable cost, but the availability of these materials and
supplies could be interrupted and/or their prices could escalate
and adversely affect our sales and profitability.
We purchase energy and many raw materials, including
petroleum-based materials and other supplies, which we use to
manufacture our products. Changes in their availability or price
could affect our ability to manufacture enough products to meet
customers demands or to manufacture products profitably.
We try to maintain multiple sources of raw materials and
supplies where practical, but this may not prevent unanticipated
changes in their availability or cost. We may not be able to
pass cost increases through to our customers. Significant
disruptions in availability or cost increases could adversely
affect our manufacturing volume or costs, which could negatively
affect product sales or profitability of our operations.
S-15
The
markets for our products are highly competitive and subject to
intense price competition, and that could adversely affect our
sales and earnings performance.
Our customers typically have multiple suppliers from which to
choose. If we are unwilling or unable to provide products at
competitive prices, and if other factors, such as product
performance and value-added services do not provide an
offsetting competitive advantage, customers may reduce,
discontinue, or decide not to purchase our products. If we could
not secure alternate customers for lost business, our sales and
earnings performance could be adversely affected.
The
global scope of our operations exposes us to risks related to
currency conversion rates and changing economic, social and
political conditions around the world.
More than 50% of our net sales during 2009 were outside of the
U.S. In order to support global customers, access regional
markets and compete effectively, our operations are located
around the world. As a result, our operations have additional
complexity from changing economic, social and political
conditions in multiple locations and we are subject to risks
relating to currency conversion rates. Other risks inherent in
international operations include the following:
|
|
|
|
|
New and different legal and regulatory requirements and
enforcement mechanisms in local jurisdictions;
|
|
|
|
U.S. export licenses may be difficult to obtain and we may
be subject to export duties or import quotas or other trade
barriers;
|
|
|
|
Increased costs of, and decreased availability of,
transportation or shipping;
|
|
|
|
Credit risk and financial conditions of local customers and
distributors;
|
|
|
|
Risk of nationalization of private enterprises by foreign
governments or restrictions on investments;
|
|
|
|
Potentially adverse tax consequences, including imposition or
increase of withholding and other taxes on remittances and other
payments by subsidiaries; and
|
|
|
|
Local political, economic and social conditions, including the
possibility of hyperinflationary conditions, deflation, and
political instability in certain countries.
|
While we attempt to anticipate these changes and manage our
business appropriately in each location where we do business,
these changes are often beyond our control and difficult to
forecast. The consequences of these risks may have significant
adverse effects on our results of operations or financial
position.
We
have significant deferred tax assets, and if we are unable to
utilize these assets our results of operations may be adversely
affected.
To fully realize the carrying value of our net deferred tax
assets, we will have to generate adequate taxable profits in
various tax jurisdictions. As of December 31, 2009, we had
$146.7 million of net deferred tax assets, after valuation
allowances. If we do not generate adequate profits within the
time periods required by applicable tax statutes, the carrying
value of the tax assets will not be realized. If it becomes
unlikely that the carrying value of our net deferred tax assets
will be realized, the valuation allowances may need to be
increased in our consolidated financial statements, adversely
affecting results of operations. Further information on our
deferred tax assets is presented in the notes to the audited
consolidated financial statements in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, which is
incorporated herein by reference.
Many
of our assets are encumbered by liens that have been granted to
lenders, and those liens affect our flexibility to dispose of
property and businesses.
Our debt obligations under our credit facility are secured by
substantially all of our assets. These liens could reduce our
ability
and/or
extend the time to dispose of property and businesses, as these
liens must be cleared or waived by the lenders prior to any
disposition. These security interests are described in more
detail
S-16
in the notes to the audited consolidated financial statements in
our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009 and our
Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010, which are
incorporated herein by reference.
We are
subject to a number of restrictive covenants under our credit
facilities, which could affect our flexibility to fund ongoing
operations and strategic initiatives, and, if we are unable to
maintain compliance with such covenants, could lead to
significant challenges in meeting our liquidity
requirements.
Our credit facilities contain, and we expect that any new credit
facilities that we may enter into will contain, a number of
restrictive covenants, including those described in more detail
in the notes to the consolidated financial statements in our
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009. These
covenants include customary operating restrictions that limit
our ability to engage in certain activities, including
additional loans and investments; prepayments, redemptions and
repurchases of debt; and mergers, acquisitions and asset sales.
We are also subject to customary financial covenants, including
a leverage ratio and a fixed charge coverage ratio. These
covenants restrict the amount of our borrowings, reducing our
flexibility to fund ongoing operations and strategic
initiatives. These facilities are described in more detail in
our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009 and our
Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010, which are
incorporated herein by reference.
Breaches of these covenants could become defaults under our
credit facilities and cause the acceleration of debt payments
beyond our ability to pay. Compliance with some of these
covenants is based on financial measures derived from our
operating results. If economic conditions in key markets
deteriorate, we may experience material adverse impacts to our
business and operating results, such as through reduced customer
demand and inflation. A significant decline in our business
could make us unable to maintain compliance with these financial
covenants, in which case, our lenders could demand immediate
payment of outstanding amounts and we would need to seek
alternate financing sources to pay off such debts and to fund
our ongoing operations. Such financing may not be available on
favorable terms, if at all.
Regulatory
authorities in the U.S., European Union and elsewhere are taking
a much more aggressive approach to regulating hazardous
materials and other substances, and those regulations could
affect sales of our products.
Legislation and regulations concerning hazardous materials and
other substances can restrict the sale of products
and/or
increase the cost of producing them. Some of our products are
subject to restrictions under laws or regulations such as
California Proposition 65 or the European Unions hazardous
substances directive. The EU REACH registration
system became effective June 1, 2007, and requires us to
perform toxicity studies of the components of some of our
products and to register the information in a central database,
increasing the cost of these products. As a result of such
regulations, customers may avoid purchasing some products in
favor of perceived greener, less hazardous or less
costly alternatives. It may be impractical for us to continue
manufacturing heavily regulated products, and we may incur costs
to shut down or transition such operations to alternative
products. These circumstances could adversely affect our
business, including our sales and operating profits.
Our
operations are subject to operating hazards and, as a result, to
stringent environmental, health and safety regulations, and
compliance with those regulations could require us to make
significant investments.
Our production facilities are subject to hazards associated with
the manufacture, handling, storage and transportation of
chemical materials and products. These hazards can cause
personal injury and loss of life, severe damage to, or
destruction of, property and equipment and environmental
contamination and other environmental damage and could have an
adverse effect on our business, financial condition or results
of operations.
S-17
We strive to conduct our manufacturing operations in a manner
that is safe and in compliance with all applicable
environmental, health and safety regulations. Compliance with
changing regulations may require us to make significant capital
investments, incur training costs, make changes in manufacturing
processes or product formulations, or incur costs that could
adversely affect our profitability, and violations of these laws
could lead to substantial fines and penalties. These costs may
not affect competitors in the same way due to differences in
product formulations, manufacturing locations or other factors,
and we could be at a competitive disadvantage, which might
adversely affect financial performance.
Our
businesses depend on a continuous stream of new products, and
failure to introduce new products could affect our sales,
profitability and liquidity.
One way that we remain competitive in our markets is by
developing and introducing new and improved products on an
ongoing basis. Customers continually evaluate our products in
comparison to those offered by our competitors. A failure to
introduce new products at the right time that are price
competitive and that provide the features and performance
required by customers could adversely affect our sales, or could
require us to compensate by lowering prices. The result could be
lower sales, profitability
and/or
liquidity.
We are
subject to stringent labor and employment laws in certain
jurisdictions in which we operate, we are party to various
collective bargaining arrangements, and our relationship with
our employees could deteriorate, which could adversely impact
our operations.
A majority of our full-time employees are employed outside the
U.S. In certain jurisdictions where we operate, labor and
employment laws are relatively stringent and, in many cases,
grant significant job protection to certain employees, including
rights on termination of employment. In addition, in certain
countries where we operate, our employees are members of unions
or are represented by a works council. We are often required to
consult and seek the consent or advice of these unions
and/or works
councils. These regulations and laws, coupled with the
requirement to consult with the relevant unions or works
councils, could have a significant impact on our flexibility in
managing costs and responding to market changes.
Furthermore, with respect to our employees who are subject to
collective bargaining arrangements or similar arrangements
(approximately 18% of our U.S. workforce as of
December 31, 2009), there can be no assurance that we will
be able to negotiate labor agreements on satisfactory terms or
that actions by our employees will not disrupt our business. If
these workers were to engage in a strike, work stoppage or other
slowdown or if other employees were to become unionized, we
could experience a significant disruption of our operations
and/or
higher ongoing labor costs, which could adversely affect our
business, financial condition and results of operations.
Employee
benefit costs, especially postretirement costs, constitute a
significant element of our annual expenses, and funding these
costs could adversely affect our financial
condition.
Employee benefit costs are a significant element of our cost
structure. Certain expenses, particularly postretirement costs
under defined benefit pension plans and healthcare costs for
employees and retirees, may increase significantly at a rate
that is difficult to forecast and may adversely affect our
financial results, financial condition or cash flows. As of
December 31, 2009, our U.S. pension plans were
underfunded by approximately $112.4 million and our
non-U.S. pension
plans were underfunded by approximately $47.2 million.
Declines in global capital markets may cause reductions in the
value of our pension plan assets. Such circumstances could have
an adverse effect on future pension expense and funding
requirements. Further information regarding our retirement
benefits is presented in the notes to the consolidated financial
statements in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009 and our
Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010, which are
incorporated herein by reference.
We are
exposed to intangible asset risk, and a write down of our
intangible assets could have an adverse impact to our operating
results and financial position.
We have recorded intangible assets, including goodwill, in
connection with business acquisitions. We are required to
perform goodwill impairment tests at least on an annual basis
and whenever events or circumstances indicate that the carrying
value may not be recoverable from estimated future cash flows.
As a
S-18
result of our annual and other periodic evaluations, we may
determine that the intangible asset values need to be written
down to their fair values, which could result in material
charges that could be adverse to our operating results and
financial position.
Our
ability to use our operating loss carryforwards and other tax
attributes may be subject to limitation due to significant
changes in the ownership of our common stock.
As of December 31, 2009, we had gross operating loss
carryforwards of approximately $5.0 million and gross other
tax attributes of approximately $67.1 million for
U.S. federal income tax purposes. Under Section 382 of
the Internal Revenue Code of 1986, as amended, or the Code, if a
corporation undergoes an ownership change, the
corporations ability to use its pre-change operating loss
carryforwards and other tax attributes to offset its post-change
income may be limited and may result in a partial or full write
down of the related deferred tax assets. An ownership change is
defined generally for these purposes as a greater than 50%
change in ownership over a three-year period, taking into
account shareholders that own 5% or more by value of our common
stock. At December 31, 2009, we had reached a 43% threshold
as calculated under Section 382 of the Code.
We
have a growing presence in the Asia-Pacific region where it can
be difficult for a
U.S.-based
company, such as Ferro, to compete lawfully with local
competitors, which may cause us to lose business
opportunities.
Many of our most promising growth opportunities are in the
Asia-Pacific region, especially the Peoples Republic of
China. Although we have been able to compete successfully in
those markets to date, local laws and customs can make it
difficult for a
U.S.-based
company to compete on a level playing field with
local competitors without engaging in conduct that would be
illegal under U.S. law. Our strict policy of observing the
highest standards of legal and ethical conduct may cause us to
lose some otherwise attractive business opportunities to local
competition in the region.
We
have in the past identified material weaknesses in our internal
controls, and the identification of any material weaknesses in
the future could affect our ability to ensure timely and
reliable financial reports.
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, which is a
process designed by our management to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with U.S. generally accepted accounting
principles. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to risk that
controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures
may deteriorate.
We conducted an assessment of our internal controls over
financial reporting as of December 31, 2009 and 2008 and
concluded that the internal controls over financial reporting
were effective as of December 31, 2009 and 2008.
Previously, we had concluded that we had material weaknesses in
our internal controls as of December 31, 2007, 2006, 2005
and 2004. A material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such
that, there is a reasonable possibility that a material
misstatement of the companys annual or interim financial
statements will not be prevented or detected on a timely basis.
Accordingly, while we have taken actions to address the past
material weaknesses and continued activities that materially
improved, or are reasonably likely to materially improve, our
internal control over financial reporting, these measures may
not be sufficient to ensure that our internal controls are
effective in the future. If we are unable to correct future
weaknesses in internal controls in a timely manner, our ability
to record, process, summarize and report reliable financial
information within the time periods specified in the rules and
forms of the SEC will be adversely affected. This failure could
materially and adversely impact our business, our financial
condition and the market value of our securities.
S-19
We are
a defendant in several lawsuits that could have an adverse
effect on our financial condition and/or financial performance,
unless they are successfully resolved.
We are routinely involved in litigation brought by suppliers,
customers, employees, governmental agencies, and others.
Litigation is an inherently unpredictable process and
unanticipated negative outcomes are possible. The most
significant pending litigation is described in
Item 3 Legal Proceedings of our Annual Report
on
Form 10-K
for the fiscal year ended December 31, 2009 and our
Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010, which are
incorporated herein by reference.
We are
exposed to risks associated with acts of God, terrorists and
others, as well as fires, explosions, wars, riots, accidents,
embargoes, natural disasters, strikes and other work stoppages,
quarantines and other governmental actions, and other events or
circumstances that are beyond our control.
Ferro Corporation is exposed to risks from various events that
are beyond our control, which may have significant effects on
our results of operations. While we attempt to mitigate these
risks through appropriate insurance, contingency planning and
other means, we may not be able to anticipate all risks or to
reasonably or cost-effectively manage those risks that we do
anticipate. As a result, our results of operations could be
adversely affected by circumstances or events in ways that are
significant
and/or long
lasting.
The risks and uncertainties identified above are not the only
risks that we face. Additional risks and uncertainties not
presently known to us or that we currently believe to be
immaterial also may adversely affect us. If any known or unknown
risks and uncertainties develop into actual events, these
developments could have material adverse effects on our
financial position, results of operations, and cash flows.
Risks
Related to this Offering
Our
substantial leverage and significant debt service obligations
could adversely affect our ability to operate our business and
to fulfill our obligations, including under the
notes.
We have a significant amount of indebtedness. As of
June 30, 2010, assuming completion of the sale of the
notes, our entry into the new credit facility, the repurchase of
all of our outstanding convertible notes pursuant to the tender
offer and the repayment of all of the remaining term loans and
revolving borrowings outstanding under our existing credit
facility, our debt would have been $386.7 million,
excluding unused commitments under our new credit facility. We
also have off-balance sheet indebtedness associated with our
international receivables sales programs of approximately
$2.6 million as of June 30, 2010.
This high level of indebtedness could have important negative
consequences to us and you, including:
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we may have difficulty satisfying our obligations with respect
to the notes;
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we may have difficulty obtaining financing in the future for
working capital, capital expenditures, acquisitions or other
purposes;
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we will need to use a substantial portion of our available cash
flow to pay interest and principal on our debt, which will
reduce the amount of money available to finance our operations
and other business activities;
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some of our debt, including our borrowings under our new credit
facility, will have variable rates of interest, which will
expose us to the risk of increased interest rates;
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our debt level increases our vulnerability to general economic
downturns and adverse industry conditions;
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our debt level could limit our flexibility in planning for, or
reacting to, changes in our business and in our industry in
general;
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we may not have sufficient funds available, and our debt level
may also restrict us from raising the funds necessary, to
repurchase all of the notes tendered to us upon the occurrence
of a change of control, which would constitute an event of
default under the notes; and
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S-20
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our failure to comply with the financial and other restrictive
covenants in our debt instruments which, among other things,
require us to maintain specified financial ratios and limit our
ability to incur debt and sell assets, could result in an event
of default that, if not cured or waived, could have a material
adverse effect on our business or prospects.
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Despite
current indebtedness levels, we may still be able to incur
substantially more debt. This could increase the risks
associated with our substantial leverage.
We may be able to incur substantial additional indebtedness in
the future. Although the indenture governing the notes and the
credit agreement governing our existing credit facility contain,
and the agreement governing our new credit facility, if entered
into, will contain, restrictions on the incurrence of additional
indebtedness, these restrictions are subject to a number of
qualifications and exceptions, and the indebtedness incurred in
compliance with these restrictions could be substantial.
Furthermore, the indenture for the notes and the indenture
governing our convertible notes allow us to incur additional
debt. Any additional borrowings could be senior to the notes. If
we incur additional debt above the levels in effect upon the
closing of the offering, the risks associated with our
substantial leverage would increase. See
Capitalization and Description of the
Notes.
The
notes are unsecured and effectively junior to the claims of any
secured creditors.
The notes are unsecured obligations and will rank equally in
right of payment with all of our other existing and future
unsecured, unsubordinated obligations, including our convertible
notes. The notes are not secured by any of our assets and are
effectively junior to the claims of any secured creditors and to
the existing and future liabilities of our subsidiaries. As of
June 30, 2010, the amount of our secured debt was
$186.8 million, which includes capital lease obligations of
$5.4 million. Our obligations under our existing credit
facility are and our obligations under our new credit facility,
if entered into, will be secured by a pledge by us of 100% of
our North American assets, a pledge of 100% of the capital stock
of certain of our direct and indirect domestic subsidiaries and
a pledge of 65% of the capital stock of our foreign
subsidiaries. In addition, we may incur other senior
indebtedness, which may be substantial in amount, and which may,
in certain circumstances, be secured. Any future claims of
secured lenders, including the lenders under our credit facility
with respect to assets securing their loans will be prior to any
claim of the holders of the notes with respect to those assets.
As a result, our assets may be insufficient to pay amounts due
on your notes.
The
notes are not guaranteed and will therefore be structurally
junior to the existing and future liabilities of our
subsidiaries, and we may not have access to the cash flow and
other assets of our subsidiaries that we may need to make
payment on the notes.
Our subsidiaries are separate and distinct legal entities from
us. Our subsidiaries have no obligation to pay any amounts due
on the notes or to provide us with funds to meet our payment
obligations on the notes, whether in the form of dividends,
distributions, loans or other payments. In addition, any payment
of dividends, loans or advances by our subsidiaries could be
subject to statutory or contractual restrictions. Payments to us
by our subsidiaries will also be contingent upon the
subsidiaries earnings and business considerations. Our
right to receive any assets of any of our subsidiaries upon
their bankruptcy, liquidation or reorganization, and therefore
the right of the holders of the notes to participate in those
assets, will be effectively subordinated to the claims of that
subsidiarys creditors, including trade creditors. In
addition, even if we are a creditor of any of our subsidiaries,
our rights as a creditor would be subordinate to any security
interest in the assets of those subsidiaries and any
indebtedness of those subsidiaries senior to that held by us. In
addition, because the notes will not be guaranteed by any of our
subsidiaries, the notes will also be structurally subordinated
to all the liabilities of the our subsidiaries, including trade
payables. As of June 30, 2010, Ferro Corporations
subsidiaries had approximately $12.4 million of debt and
$146.0 million of trade payables outstanding. Certain of
our domestic subsidiaries also guarantee our debt under our
existing credit facility, and will guarantee our debt under our
new credit facility, if entered into, and are permitted under
the indenture to incur substantial additional indebtedness.
Finally, the indenture also permits us to make substantial
additional investments in and loans to our subsidiaries. After
giving pro forma effect to the merger
S-21
of Ferro Color & Glass Corporation with and into Ferro
Corporation, our subsidiaries generated 53.5% of our
consolidated net sales in the twelve-month period ended
June 30, 2010, and held 51.3% of our consolidated assets as
of June 30, 2010.
We may
not have the ability to raise the funds necessary to finance the
change of control offer required by the indenture.
Upon a change of control, we are required to offer to repurchase
all outstanding notes at 101% of their principal amount, plus
accrued and unpaid interest, if any, to the date of repurchase.
The source of funds for any such purchase of notes will be our
available cash or cash generated from our subsidiaries
operations or other sources, including borrowings, sales of
assets, sales of equity or funds provided by a new controlling
person. Sufficient funds may not be available at the time of any
change of control to make any required repurchases of notes
tendered. In addition, the terms of our existing credit facility
limit our ability to purchase your notes in those circumstances.
Under our existing credit facility, a change of control is an
event of default that would require us to repay all amounts
outstanding under the existing credit facility. Any of our
future debt agreements, including the agreement governing our
new credit facility, may contain similar restrictions and
provisions. If the holders of the notes exercise their right to
require us to repurchase all of the notes upon a change of
control, the financial effect of this repurchase could cause a
default under our other debt, even if the change in control
itself would not cause a default. Accordingly, it is possible
that we will not have sufficient funds at the time of the change
of control to make the required repurchase of notes or that
restrictions in our existing credit facility or other debt that
may be incurred in the future will not allow the repurchases.
See the section Description of Notes
Repurchase at the Option of Holders Change of
Control.
An
active trading market for the notes may not
develop.
The notes are a new issue of securities with no established
trading market and will not be listed on any securities
exchange. If an active trading market does not develop or is not
maintained, holders of the notes may experience difficulty in
reselling, or an inability to sell, the notes. Future trading
prices for the notes may be adversely affected by many factors,
including changes in our financial performance, changes in the
overall market for similar securities and performance or
prospects for companies in our industry.
Our
credit ratings may not reflect all the risks of your investments
in the notes.
Our credit ratings are an assessment by rating agencies of our
ability to pay our debts when due. Consequently, real or
anticipated changes in our credit ratings will generally affect
the market value of the notes. These credit ratings may not
reflect the potential impact of risks relating to structure or
marketing of the notes. Agency ratings are not a recommendation
to buy, sell or hold any security, and may be revised or
withdrawn at any time by the issuing organization. Each
agencys rating should be evaluated independently of any
other agencys rating.
Under
U.S. federal and state fraudulent transfer or conveyance
statutes, a court could void the notes or take other actions
detrimental to holders of the notes.
The issuance of the notes may be subject to review under
U.S. federal bankruptcy law and comparable provisions of
state fraudulent conveyance laws if a bankruptcy or
reorganization case or lawsuit is commenced by or on behalf of
the issuers unpaid creditors. Under these laws, if a court
were to find in such a bankruptcy or reorganization case or
lawsuit that, at the time the issuer issued the notes:
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it issued the notes with the intent to delay, hinder or defraud
present or future creditors; or
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it received less than reasonably equivalent value or fair
consideration for issuing the notes; and at the time it issued
the notes: it was insolvent or rendered insolvent by reason of
issuing the notes; it was engaged, or about to engage, in a
business or transaction for which its remaining unencumbered
assets constituted unreasonably small capital to carry on its
business; it intended to incur, believed that it would incur or
did incur, debts beyond its ability to pay as they mature; or it
was a defendant in an action for
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S-22
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money damages, or had a judgment for money damages docketed
against it if, in either case, after final judgment, the
judgment is unsatisfied;
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then the court could void the notes, subordinate the notes to
issuers other debt or take other action detrimental to
holders of the notes.
The measures of insolvency for purposes of fraudulent transfer
laws vary depending upon the law of the jurisdiction that is
being applied in any proceeding to determine whether a
fraudulent transfer had occurred. We cannot be sure as to the
standard that a court would use to determine whether or not the
issuer was solvent as of the date the issuer issued the notes,
or, regardless of the standard that the court uses, that the
issuance of the notes would not be voided or the notes would not
be subordinated to the issuers other debt. Additionally,
under U.S. federal bankruptcy or applicable state
insolvency law, if certain bankruptcy or insolvency proceedings
were initiated by or against the issuer within 90 days
after any payment by the issuer with respect to the notes, or if
the issuer anticipated becoming insolvent at the time of the
payment, all or a portion of the payment could be avoided as a
preferential transfer and the recipient of the payment could be
required to return the payment.
S-23
USE OF
PROCEEDS
The net proceeds from the sale of the notes, after deducting
underwriting discounts and commissions and estimated offering
expenses, will be approximately $244.0 million. We intend
to use the net proceeds from this offering (a) to purchase
all of the convertible notes that are tendered and not validly
withdrawn pursuant to the tender offer, including the payment of
all accrued and unpaid interest on the convertible notes and all
premiums and transaction expenses associated therewith, and
(b) to repay a portion of the term loans and revolving
borrowings outstanding under our existing credit facility or a
portion of the borrowings outstanding under any new credit
facility, as applicable. As of June 30, 2010, there was
$172.5 million aggregate principal amount of convertible
notes outstanding. The convertible notes bear interest at a rate
of 6.50% per annum and mature on August 15, 2013. As of
June 30, 2010, there was $181.4 million in term loans
and no revolving borrowings outstanding under our existing
credit facility, which matures on June 6, 2012. As of
June 30, 2010, the interest rate on the term loans was
6.52% per annum and the interest rate on the revolving
borrowings would have been the applicable LIBOR plus 4.5% per
annum had any amounts been outstanding under the revolving
portion of the existing credit facility.
If this offering is consummated prior to the purchase of our
convertible notes pursuant to the tender offer, the net proceeds
from this offering will be temporarily held as cash and cash
equivalents, See Capitalization. If the tender offer
for our convertible notes is not consummated for any reason, we
intend to use a portion of the net proceeds to repay all of the
term loans and revolving borrowings outstanding under our
existing credit facility or the borrowings outstanding under any
new credit facility, as applicable. The remaining net proceeds
will be used for general corporate purposes.
Certain of the underwriters
and/or their
affiliates are holders of our convertible notes and lenders
under our existing credit facility and may be lenders under any
new credit facility that we may enter into and therefore may
receive a portion of the net proceeds from this offering in
connection with the Refinancing Transactions. This offering is
being made in accordance with NASD Rule 2720(a)(2) and FINRA
Rule 5110, whereby J.P. Morgan Securities Inc. has assumed
the responsibilities of acting as a qualified independent
underwriter. See Underwriting (Conflicts of
Interest).
S-24
CAPITALIZATION
The following table sets forth our unaudited cash and cash
equivalents and deposits for precious metals and consolidated
capitalization as of June 30, 2010:
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on an historical basis; and
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on an as adjusted basis to give effect to (i) the offering
of the notes, (ii) the purchase of all of our outstanding
convertible notes pursuant to the tender offer, (iii) our
entry into and borrowing under the new credit facility and
(iv) the repayment of all of the term loans and revolving
borrowings outstanding under our existing credit facility with
the remaining net proceeds from this offering and borrowings
under our new credit facility.
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You should read this table in conjunction with our consolidated
financial statements, the related notes and other financial
information contained in our Annual Report on
Form 10-K
for the year ended December 31, 2009 and our Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2010, which are incorporated
by reference into this prospectus supplement and the
accompanying prospectus.
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As of June 30, 2010
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Actual
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As Adjusted(1)
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(Dollars in thousands)
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Cash and cash equivalents and deposits for precious metals:
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Cash and cash equivalents(2)
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$
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29,732
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$
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29,732
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Deposits for precious metals
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55,808
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55,808
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Total cash and cash equivalents and deposits for precious metals
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85,540
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85,540
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Capitalization:
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Short-term debt, including current portion of long-term debt(3)
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5,066
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5,066
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Long-term debt:
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Revolving borrowings
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124,080
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Term loans
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181,385
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Convertible notes(4)
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158,745
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Senior notes offered hereby
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250,000
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Other
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7,577
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7,577
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Total long-term debt
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347,707
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381,657
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Series A convertible preferred stock
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9,427
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9,427
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Total Ferro Corporation shareholders equity(5)
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531,840
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513,876
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Total Capitalization
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$
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894,040
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$
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910,026
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(1) |
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Assumes that all of our outstanding convertible notes are
repurchased pursuant to the tender offer. If not all of our
outstanding convertible notes are repurchased pursuant to the
tender offer, a greater portion of the net proceeds from this
offering will be used to repay amounts outstanding under either
our existing credit facility or any new credit facility, as
applicable, and, accordingly, the amount of revolving borrowings
outstanding under any such credit facility would decrease, with
a corresponding increase in the principal amount of convertible
notes outstanding. If the tender offer is not consummated for
any reason, we intend to use the net proceeds from this offering
to repay all of the amounts outstanding under our existing
credit facility or any new credit facility, as applicable. |
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(2) |
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If this offering is consummated prior to the purchase of our
convertible notes pursuant to the tender offer, the net proceeds
from this offering will be temporarily held as cash and cash
equivalents. |
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Excludes off-balance sheet indebtedness associated with our
international receivables sales programs of approximately
$2.6 million. |
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(4) |
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Amount shown is net of unamortized discounts. The aggregate
principal amount of convertible notes outstanding as of
June 30, 2010 was $172.5 million. |
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Reflects after-tax loss on extinguishment of debt of
$12.9 million (which includes tender offer premiums and
expenses and writeoff of deferred issuance fees) and the
after-tax loss on the settlement of interest rate swaps of
$5.1 million. Also reflects the removal of the convertible
notes bifurcation. |
S-25
DESCRIPTION
OF THE NOTES
You can find the definitions of certain terms used in this
description under the subheading Certain
Definitions. In this description, the word
Company refers only to Ferro Corporation and not to
any of its Subsidiaries.
The Company will issue the notes under a base indenture between
itself and Wilmington Trust FSB, as trustee, as
supplemented by a supplemental indenture (the
supplemental indenture) among the Company and
the trustee, which supplemental indenture will restate in their
entirety the terms of the base indenture as supplemented by the
supplemental indenture. In this description, the term
indenture refers to the base indenture as
supplemented by the supplemental indenture. The terms of the
notes will include those stated in the indenture and those made
part of the indenture by reference to the Trust Indenture
Act of 1939, as amended.
The following description is a summary of the material
provisions of the indenture. It does not restate that agreement
in its entirety. We urge you to read the indenture because it,
and not this description, defines your rights as holders of the
notes. We have filed copies of the base indenture, which has
been incorporated by reference as an exhibit to the registration
statement of which this prospectus supplement is part. For more
information on how you can obtain a copy of the base indenture
and the supplemental indenture, see Information We
Incorporate By Reference. Certain defined terms used in
this description but not defined below under
Certain Definitions have the meanings
assigned to them in the indenture.
The registered holder of a note will be treated as the owner of
it for all purposes. Only registered holders will have rights
under the indenture.
Brief
Description of the Notes
The
Notes
The notes:
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will be general unsecured, senior obligations of the Company;
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will be pari passu in right of payment with all existing
and future senior Indebtedness of the Company, including
borrowings under the credit facility;
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will be senior in right of payment to any future subordinated
Indebtedness of the Company;
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will not initially be guaranteed by any of the Companys
Subsidiaries.
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The notes will be effectively subordinated to all borrowings
under the credit facility, which are secured by substantially
all of the assets of the Company. See Risk
Factors The notes are unsecured and effectively
junior to the claims of any secured creditors. As of
June 30, 2010, we had outstanding approximately
$179.8 million principal amount (or face value) of
unsecured indebtedness with which the notes would rank equally.
As of June 30, 2010, assuming the successful completion of
the tender offer and the entry into a new credit facility and
giving effect to the offering of the notes and application of
the estimated net proceeds from the sale of the notes in this
offering as described under Use of Proceeds, the
notes would have been effectively subordinated to approximately
$132.1 million of secured indebtedness, which includes
capital lease obligations of $5.4 million.
Because the notes will not initially be guaranteed by any of the
Companys Subsidiaries, the notes will also be structurally
subordinated to all the liabilities of the Companys
Subsidiaries, including trade payables. As of June 30,
2010, the Companys Subsidiaries had approximately
$12.4 million of debt and $146.0 million of trade
payables. As of June 30, 2010, the Companys domestic
Subsidiaries provided guarantees with respect to approximately
$181.4 million of debt under our existing credit facility,
all of which consisted of term loans that will be repaid either
in connection with our entry into a new credit facility or the
completion of this offering. Additionally, the indenture permits
the Companys Subsidiaries to incur substantial additional
indebtedness. The indenture also permits the Company to make
substantial investments in its Subsidiaries. See Risk
Factors The notes are not guaranteed and will
therefore be structurally junior to the existing and future
liabilities of our
S-26
subsidiaries, and we may not have access to the cash flow and
other assets of our subsidiaries that we may need to make
payment on the notes.
In the event of a bankruptcy, liquidation or reorganization of
any of the Companys Subsidiaries, the Companys
Subsidiaries will pay the holders of their debt and their trade
creditors before these Subsidiaries will be able to distribute
any of their assets to the Company. After giving pro forma
effect to the merger of Ferro Color & Glass
Corporation with and into the Company, the Companys
Subsidiaries generated 53.5% of its consolidated net sales in
the twelve-month period ended June 30, 2010 and held 51.3%
of its consolidated assets as of June 30, 2010. See
Risk Factors The notes are not guaranteed and
will therefore be structurally junior to the existing and future
liabilities of our subsidiaries, and we may not have access to
the cash flow and other assets of our subsidiaries that we may
need to make payment on the notes.
Principal,
Maturity and Interest
The Company will issue $250.0 million in aggregate
principal amount of notes in this offering. The Company may
issue additional notes from time to time after this offering and
such additional notes may be issued either under the
supplemental indenture or one or more additional supplemental
indentures. Any issuance of additional notes is subject to all
of the covenants in the indenture, including the covenant
described below under the caption Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock. The notes and any additional notes
subsequently issued under the same supplemental indenture will
be treated as a single series for all purposes under the
supplemental indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase. The Company will
issue notes in denominations of $2,000 and integral multiples of
$1,000 in excess of $2,000. Unless the context requires
otherwise, for all purposes of the indenture and this
Description of the Notes, all references to the
notes include any additional notes actually issued. The notes
will mature
on ,
2018.
Interest on the notes will accrue at the rate
of % per annum and will be payable
semi-annually in arrears
on
and ,
commencing
on ,
2011. The Company will make each interest payment to the holders
of record on the immediately
preceding
and .
Interest on the notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it
was most recently paid. Interest will be computed on the basis
of a 360-day
year comprised of twelve
30-day
months.
Methods
of Receiving Payments on the Notes
If a holder of notes has given wire transfer instructions to the
Company, the Company will pay, or cause to be paid by the paying
agent, all principal, interest and premium, if any, on that
holders notes in accordance with those instructions. All
other payments on the notes will be made at the office or agency
of the paying agent and registrar unless the Company elects to
make interest payments by check mailed to the noteholders at
their address set forth in the register of holders.
Paying
Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar.
The Company may change the paying agent or registrar without
prior notice to the holders of the notes, and the Company or any
of its Subsidiaries may act as paying agent or registrar.
Transfer
and Exchange
A holder may transfer or exchange notes in accordance with the
provisions of the indenture. The registrar and the trustee may
require a holder, among other things, to furnish appropriate
endorsements and transfer documents in connection with a
transfer of notes. Holders will be required to pay all taxes due
on transfer. The Company will not be required to transfer or
exchange any note selected for redemption. Also, the Company
will not be required to transfer or exchange any note for a
period of 15 days before a selection of notes to be
redeemed.
S-27
Optional
Redemption
At any time prior
to ,
2013, the Company may on any one or more occasions redeem up to
35% of the aggregate principal amount of notes issued under the
indenture, upon not less than 30 nor more than
60 days notice, at a redemption price equal
to % of the principal amount of the
notes redeemed, plus accrued and unpaid interest, if any, to the
date of redemption (subject to the rights of holders of notes on
the relevant record date to receive interest on the relevant
interest payment date), with the net cash proceeds from an
Equity Offering by the Company; provided that:
(1) at least 65% of the aggregate principal amount of notes
issued under the indenture (excluding notes held by the Company
and its Subsidiaries) remains outstanding immediately after the
occurrence of such redemption; and
(2) the redemption occurs within 90 days of the date
of the closing of such Equity Offering.
At any time prior
to ,
2014, the Company may on any one or more occasions redeem all or
a part of the notes, upon not less than 30 nor more than
60 days notice, at a redemption price equal to 100%
of the principal amount of the notes redeemed, plus the
Applicable Premium as of, and accrued and unpaid interest, if
any, to the date of redemption, subject to the rights of holders
of notes on the relevant record date to receive interest due on
the relevant interest payment date.
Except pursuant to the preceding paragraphs, the notes will not
be redeemable at the Companys option prior
to ,
2014.
On or
after ,
2014, the Company may on any one or more occasions redeem all or
a part of the notes, upon not less than 30 nor more than
60 days notice, at the redemption prices (expressed
as percentages of principal amount) set forth below, plus
accrued and unpaid interest, if any, on the notes redeemed, to
the applicable date of redemption, if redeemed during the
twelve-month period beginning
on
of the years indicated below, subject to the rights of holders
of notes on the relevant record date to receive interest on the
relevant interest payment date:
|
|
|
|
|
Year
|
|
Percentage
|
|
|
2014
|
|
|
|
%
|
2015
|
|
|
|
%
|
2016
|
|
|
|
%
|
2017 and thereafter
|
|
|
100.000
|
%
|
Unless the Company defaults in the payment of the redemption
price, interest will cease to accrue on the notes or portions
thereof called for redemption on the applicable redemption date.
Mandatory
Redemption
The Company is not required to make mandatory redemption or
sinking fund payments with respect to the notes.
Governing
Law
The indenture and the notes will be governed by the internal
laws of the State of New York.
Repurchase
at the Option of Holders
Change
of Control
If a Change of Control occurs, each holder of notes will have
the right to require the Company to repurchase all or any part
(equal to $2,000 or an integral multiple of $1,000 in excess
thereof) of that holders notes pursuant to the offer
described below (the Change of Control Offer)
on the terms set forth in the indenture. In the Change of
Control Offer, the Company will offer a payment (a
Change of Control Payment) in cash equal to
101% of the aggregate principal amount of notes repurchased,
plus accrued and
S-28
unpaid interest, if any, on the notes repurchased to the date of
purchase (the Change of Control Payment
Date), subject to the rights of holders of notes on
the relevant record date to receive interest due on the relevant
interest payment date. Within 30 days following any Change
of Control, the Company will mail a notice to each holder
describing the transaction or transactions that constitute the
Change of Control and offering to repurchase notes on the Change
of Control Payment Date specified in the notice, which date will
be no earlier than 45 days and no later than 90 days
from the date such notice is mailed, pursuant to the procedures
required by the indenture and described in such notice.
On the Change of Control Payment Date, the Company will, to the
extent lawful:
(1) accept for payment all notes or portions of notes
properly tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the
Change of Control Payment in respect of all notes or portions of
notes properly tendered; and
(3) deliver or cause to be delivered to the trustee the
notes properly accepted together with an officers
certificate stating the aggregate principal amount of notes or
portions of notes being purchased by the Company.
The paying agent will promptly mail or deliver to each holder of
notes properly tendered the Change of Control Payment for such
notes, and the trustee will promptly authenticate and mail (or
cause to be transferred by book entry) to each holder a new note
equal in principal amount to any unpurchased portion of the
notes surrendered, if any; provided that each new note will be
in a principal amount of $2,000 or integral multiples of $1,000
in excess of $2,000. The Company will publicly announce the
results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The provisions described above that require the Company to make
a Change of Control Offer following a Change of Control will be
applicable whether or not any other provisions of the indenture
are applicable. Except as described above with respect to a
Change of Control, the indenture does not contain provisions
that permit the holders of the notes to require that the Company
repurchase or redeem the notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control
Offer upon a Change of Control if (1) a third party makes
the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by the
Company and purchases all notes properly tendered and not
withdrawn under the Change of Control Offer, or (2) notice
of redemption has been given pursuant to the indenture as
described above under the caption Optional
Redemption, unless and until there is a default in payment
of the applicable redemption price. Notwithstanding anything to
the contrary contained herein, a Change of Control Offer may be
made in advance of a Change of Control, conditional upon the
consummation of such Change of Control, if a definitive
agreement is in place for the Change of Control at the time the
Change of Control Offer is made.
The definition of Change of Control includes a phrase relating
to the direct or indirect sale, lease, transfer, conveyance or
other disposition of all or substantially all of the
properties or assets of the Company and its Subsidiaries taken
as a whole. Although there is a limited body of case law
interpreting the phrase substantially all, there is
no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of notes to require
the Company to repurchase its notes as a result of a sale,
lease, transfer, conveyance or other disposition of less than
all of the assets of the Company and its Subsidiaries taken as a
whole to another Person or group may be uncertain.
Asset
Sales
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (or the applicable Restricted Subsidiary,
as the case may be) receives consideration at the time of the
Asset Sale at least equal to the Fair Market Value (measured as
of the date of the
S-29
definitive agreement with respect to such Asset Sale) of the
assets or Equity Interests issued or sold or otherwise disposed
of; and
(2) except in the case of a Permitted Asset Swap, at least
75% of the consideration received in the Asset Sale by the
Company or such Restricted Subsidiary is in the form of cash or
Cash Equivalents. For purposes of this provision, each of the
following will be deemed to be cash for purposes of this clause
(2):
(a) any liabilities, as shown on the Companys most
recent consolidated balance sheet, of the Company or any
Restricted Subsidiary (other than liabilities that are by their
terms subordinated to the notes) (i) that are assumed by
the transferee of any such assets and from which the Company and
its Restricted Subsidiaries are unconditionally released or
indemnified against by such transferee or (ii) in respect
of which neither the Company nor any Restricted Subsidiary
following such Asset Sale has any obligation;
(b) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary from such
transferee that are, subject to ordinary settlement periods,
converted by the Company or such Restricted Subsidiary into cash
within 180 days of receipt thereof, to the extent of the
cash received in that conversion; and
(c) any stock or assets of the kind referred to in
clauses (2) or (4) of the next paragraph of this
covenant; and
(d) any Designated Non-Cash Consideration received by the
Company or its Restricted Subsidiaries in such Asset Sale having
an aggregate Fair Market Value, taken together with all other
Designated Non-Cash Consideration received pursuant to this
clause (d) that is at that time outstanding in the
aggregate, not to exceed the greater of
(i) $35.0 million and (ii) 2.50% of the
Companys Consolidated Total Assets, in each case, at the
time of the receipt of such Designated Non-Cash Consideration,
with the Fair Market Value of each item of Designated Non- Cash
Consideration measured at the time received and without giving
effect to subsequent changes in value, shall be deemed to be
cash for purposes of this provision and for no other purpose.
Within 365 days after the receipt of any Net Proceeds from
an Asset Sale, the Company (or the applicable Restricted
Subsidiary, as the case may be) may apply such Net Proceeds:
(1) to repay Indebtedness and other Obligations under a
Credit Facility that are secured by a Lien and, if the
Indebtedness repaid is revolving credit Indebtedness, to
correspondingly reduce commitments with respect thereto;
(2) to acquire all or substantially all of the assets of,
or any Capital Stock of, another Permitted Business, if, after
giving effect to any such acquisition of Capital Stock, the
Permitted Business is or becomes a Restricted Subsidiary of the
Company;
(3) to make a capital expenditure;
(4) to acquire other assets that are not classified as
current assets under GAAP and that are used or useful in a
Permitted Business;
(5) to repurchase all or a portion of the Convertible Notes;
(6) to consummate a restructuring of other assets or
properties of the Company or any of its Subsidiaries, so long
as, with respect to any Asset Sale, the aggregate Net Proceeds
applied pursuant to this clause (6) do not exceed 10.0% of
the Net Proceeds with respect to such Asset Sale.
In the case of clauses (2), (3), (4), (5) and
(6) above, a binding commitment shall be treated as a
permitted application of the Net Proceeds from the date of such
commitment; provided that in the event such binding
commitment is later canceled or terminated for any reason before
such Net Proceeds are so applied, the Company or such Restricted
Subsidiary may satisfy its obligation as to any Net Proceeds by
entering into another binding commitment within 180 days of
such cancellation or termination of the prior binding
commitment; provided, further, that the Company or
such Restricted Subsidiary may only enter into such a
S-30
commitment under the foregoing provision one time with respect
to each Asset Sale. Pending the final application of any Net
Proceeds, the Company (or the applicable Restricted Subsidiary)
may temporarily reduce revolving credit borrowings or otherwise
invest the Net Proceeds in any manner that is not prohibited by
the indenture.
Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the second paragraph of this covenant
will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $30.0 million,
within 10 business days thereof, the Company will make an offer
(an Asset Sale Offer) to all holders of notes
and, in the Companys discretion, to all holders of other
Indebtedness that is pari passu with the notes containing
provisions similar to those set forth in the indenture with
respect to offers to purchase or redeem with the proceeds of
sales of assets to purchase the maximum principal amount of
notes and such other pari passu Indebtedness (plus all
accrued interest on the Indebtedness and the amount of all fees
and expenses, including premiums, incurred in connection
therewith) that may be purchased out of the Excess Proceeds. The
offer price in any Asset Sale Offer will be equal to 100% of the
principal amount, plus accrued and unpaid interest, if any, to
the date of closing of such purchase, and will be payable in
cash. If any Excess Proceeds remain after consummation of an
Asset Sale Offer, the Company may use those Excess Proceeds for
any purpose not otherwise prohibited by the indenture. If the
aggregate principal amount of notes and other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the
amount of Excess Proceeds, the trustee will select the notes and
the trustee or agent for such other pari passu Indebtedness
shall select such other pari passu Indebtedness to be
purchased on a pro rata basis with such adjustments so that no
notes in an unauthorized denomination is redeemed in part. Upon
completion of each Asset Sale Offer, the amount of Excess
Proceeds will be reset at zero.
The Company will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent those laws and regulations
are applicable in connection with each repurchase of notes
pursuant to a Change of Control Offer or an Asset Sale Offer. To
the extent that the provisions of any securities laws or
regulations conflict with the Change of Control or Asset Sale
provisions of the indenture, the Company will comply with the
applicable securities laws and regulations and will not be
deemed to have breached its obligations under the Change of
Control or Asset Sale provisions of the indenture by virtue of
such compliance.
The agreements governing the Companys other Indebtedness
contain, and future agreements may contain, prohibitions of
certain events, including events that would constitute a Change
of Control or an Asset Sale. The exercise by the holders of
notes of their right to require the Company to repurchase the
notes upon a Change of Control or an Asset Sale could cause a
default under these other agreements, even if the Change of
Control or Asset Sale itself does not, due to the financial
effect of such repurchases on the Company. In the event a Change
of Control or Asset Sale occurs at a time when the Company is
prohibited from purchasing notes, the Company could seek the
consent of its senior lenders to the purchase of notes or could
attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain a consent or repay
those borrowings, the Company will remain prohibited from
purchasing notes. In that case, the Companys failure to
purchase tendered notes would constitute an Event of Default
under the indenture which could, in turn, constitute a default
under the other Indebtedness. Finally, the Companys
ability to pay cash to the holders of notes upon a repurchase
may be limited by the Companys then existing financial
resources. See Risk Factors We may not have
the ability to raise the funds necessary to finance the change
of control offer required by the indenture.
Selection
and Notice
If less than all of the notes are to be redeemed at any time,
the trustee will select notes for redemption on a pro rata
basis with such adjustments so that no notes in an
unauthorized denomination are redeemed in part (or, in the case
of notes issued in global form as discussed under
Book-Entry, Delivery and Form, based on
a method that most nearly approximates a pro rata selection as
the trustee deems fair and appropriate) unless otherwise
required by law or applicable stock exchange or depositary
requirements.
S-31
No notes of $2,000 or less can be redeemed in part. Notices of
redemption will be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each
holder of notes to be redeemed at its registered address, except
that redemption notices may be mailed more than 60 days
prior to a redemption date if the notice is issued in connection
with a defeasance of the notes or a satisfaction and discharge
of the indenture. Other than a Change of Control Offer made in
advance of a Change of Control, notices of redemption may not be
conditional.
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 of that note that is to be redeemed. A new
note in principal amount equal to the unredeemed portion of the
original note will be issued in the name of the holder of notes
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 notes called for redemption.
Certain
Covenants
Set forth below are summaries of certain covenants contained in
the indenture. Following the first day that:
(1) the notes have an Investment Grade Rating from both of
the Rating Agencies; and
(2) no Default has occurred and is continuing under the
indenture,
then, the Company and its Restricted Subsidiaries will not be
subject to the provisions of the indenture summarized under the
subcaptions:
(1) Repurchase at the Option of
Holders Asset Sales;
(2) Restricted Payments;
(3) Incurrence of Indebtedness and
Issuance of Preferred Stock;
(4) Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries;
(5) Merger, Consolidation or Sale of
Assets (but only clause (4) of such covenant);
(6) Transactions with
Affiliates; and
(7) Future Subsidiary Guarantors;
(collectively, the Suspended Covenants). In
the event that the Company and its Restricted Subsidiaries are
not subject to the Suspended Covenants for any period of time as
a result of the preceding sentence, and subsequently one or both
of the Rating Agencies withdraws its rating or downgrades the
rating assigned to the notes below an Investment Grade Rating,
then the Company and the Restricted Subsidiaries will thereafter
again be subject to the Suspended Covenants, and compliance with
the Suspended Covenants with respect to Restricted Payments made
after the time of such withdrawal or downgrade will be
calculated in accordance with the terms of the covenant
described below under Restricted
Payments as though such covenant had been in effect since
the date the notes were originally issued.
Restricted
Payments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment
or distribution on account of the Companys or any of its
Restricted Subsidiaries Equity Interests (including,
without limitation, any payment in connection with any merger or
consolidation involving the Company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of the
Companys or any of its Restricted Subsidiaries
Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company and other than dividends or
distributions payable to the Company or a Restricted Subsidiary
of the Company);
S-32
(2) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any
merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the
Company;
(3) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any
Indebtedness of the Company that is contractually subordinated
to the notes (excluding any intercompany Indebtedness between or
among the Company and any of its Restricted Subsidiaries),
except a payment of interest or principal at the Stated Maturity
thereof; or
(4) make any Restricted Investment (all such payments and
other actions set forth in these clauses (1) through
(4) being collectively referred to as Restricted
Payments),
unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default has occurred and is
continuing or would occur as a consequence of such Restricted
Payment;
(b) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock; and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and
its Restricted Subsidiaries since the date of the supplemental
indenture (excluding Restricted Payments permitted by clauses
(2), (3), (4), (5), (6), (7), (8), (9), (10), (11),
(12) and (13) of the next succeeding paragraph), is
less than the sum, without duplication, of:
(1) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from April 1,
2010 to the end of the Companys most recently ended fiscal
quarter for which internal financial statements are available at
the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such
deficit); plus
(2) 100% of the aggregate net cash proceeds received by the
Company since the date of the supplemental indenture as a
contribution to its common equity capital or from the issue or
sale of Qualifying Equity Interests of the Company or from the
issue or sale of convertible or exchangeable Disqualified Stock
of the Company or convertible or exchangeable debt securities of
the Company, in each case that have been converted into or
exchanged for such Equity Interests of the Company (other than
Equity Interests and convertible or exchangeable Disqualified
Stock or debt securities sold to a Subsidiary of the Company);
plus
(3) 100% of the aggregate net cash proceeds or Cash
Equivalents received from the disposition or sale of any
Restricted Investment that was made after the date of the
supplemental indenture; plus
(4) 100% of the net reduction in Investments in any Person
other than the Company or a Restricted Subsidiary resulting from
dividends, repayment of loans or advances or other transfers of
assets, in each case to the Company or any Restricted Subsidiary
in such Person; plus
(5) to the extent that any Unrestricted Subsidiary of the
Company designated as such after the date of the supplemental
indenture is redesignated as a Restricted Subsidiary or is
merged or consolidated with or into the Company or a Restricted
Subsidiary after the date of the supplemental indenture, 100% of
the lesser of (i) the Fair Market Value of the
Companys Restricted Investment in such Subsidiary as of
the date of such redesignation, merger or consolidation or
(ii) such Fair Market Value as of the date on which such
Subsidiary was
S-33
originally designated as an Unrestricted Subsidiary after the
date of the supplemental indenture; plus
(6) 100% of any dividends received in cash by the Company
or a Restricted Subsidiary of the Company after the date of the
supplemental indenture from an Unrestricted Subsidiary of the
Company, to the extent that such dividends were not otherwise
included in the Consolidated Net Income of the Company for such
period.
The preceding provisions will not prohibit:
(1) the payment of any dividend or the consummation of any
irrevocable redemption within 60 days after the date of
declaration of the dividend or giving of the redemption notice,
as the case may be, if at the date of declaration or notice, the
dividend or redemption payment would have complied with the
provisions of the indenture;
(2) the making of any Restricted Payment in exchange for,
or out of or with the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of,
Equity Interests of the Company (other than Disqualified Stock)
or from the substantially concurrent contribution of common
equity capital to the Company; provided that the amount
of any such net cash proceeds that are utilized for any such
Restricted Payment will not be considered to be net proceeds of
Qualifying Equity Interests for purposes of clause (c)(2) of the
preceding paragraph and will not be considered to be net cash
proceeds from an Equity Offering for purposes of the
Optional Redemption provisions of the indenture;
(3) the declaration or payment of any dividend (or, in the
case of any partnership or limited liability company, any
similar distribution) by a Restricted Subsidiary of the Company
to the holders of its Equity Interests on a pro rata basis;
(4) the repurchase, redemption, defeasance or other
acquisition or retirement for value of Indebtedness of the
Company that is contractually subordinated to the notes with the
net cash proceeds from a substantially concurrent incurrence of
Permitted Refinancing Indebtedness;
(5) so long as no Default or Event of Default has occurred
and is continuing, the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of
the Company or any Restricted Subsidiary of the Company held by
any current or former officer, director or employee (and their
respective permitted transferees under the applicable benefit
plan, if any, under which such Equity Interests were made) of
the Company or any of its Restricted Subsidiaries pursuant to
any equity subscription agreement, stock option agreement,
shareholders agreement or similar agreement; provided that
the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests may not exceed in any
calendar year $15.0 million (with unused amounts in any
calendar year being carried over to succeeding calendar years
subject to a maximum (without giving effect to the following
proviso) of $25.0 million in any calendar year);
provided, further, that such amount in any
calendar year may be increased by an amount not to exceed:
(a) the cash proceeds from the sale of Equity Interests
(other than Disqualified Stock) of the Company and, to the
extent contributed to the Company as common equity capital, the
cash proceeds from the sale of Equity Interests of any of the
Companys direct or indirect parent companies, in each case
to members of management, directors or consultants of the
Company, any of its Subsidiaries or any of its direct or
indirect parent companies that occurs after the date of the
supplemental indenture to the extent the cash proceeds from the
sale of Equity Interests of the Company (other than Disqualified
Stock) have not otherwise been applied to the making of
Restricted Payments pursuant to clause (c) of the preceding
paragraph or clause (2) of this paragraph or to an optional
redemption of notes pursuant to the Optional
Redemption provisions of the indenture; plus
(b) the cash proceeds of key man life insurance policies
received by the Company or its Restricted Subsidiaries after the
date of the supplemental indenture;
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and in addition, cancellation of Indebtedness owing to the
Company from any current or former officer, director or employee
(or any permitted transferees thereof) of the Company or any of
its Restricted Subsidiaries (or any direct or indirect parent
company thereof), in connection with a repurchase of Equity
Interests of the Company from such Persons will not be deemed to
constitute a Restricted Payment for purposes of this covenant or
any other provisions of the indenture;
(6) the repurchase of Equity Interests deemed to occur
(A) upon the exercise of stock options, warrants or similar
rights to the extent such Equity Interests represent a portion
of the exercise price of those stock options or warrants,
(B) as a result of common shares utilized to satisfy tax
withholding obligations upon exercise of stock options or
vesting of other equity awards or (C) upon the cancellation
of stock options, warrants or other equity awards.
(7) so long as no Default or Event of Default has occurred
and is continuing, the declaration and payment of regularly
scheduled or accrued dividends to holders of any class or series
of Disqualified Stock of the Company or any preferred stock of
any Restricted Subsidiary of the Company issued on or after the
date of the supplemental indenture in accordance with the Fixed
Charge Coverage Ratio test described below under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock;
(8) the declaration and payment of quarterly dividends to
holders of common Equity Interests of the Company in an
aggregate amount not to exceed $40.0 million in any
calendar year;
(9) distributions or payments of Receivables Fees;
(10) other Restricted Payments in an aggregate amount not
to exceed the greater of (A) $40.0 million and
(B) 2.75% of the Companys Consolidated Total Assets;
(11) the declaration or payment of a dividend on, or the
repurchase, redemption or other acquisition or retirement for
value of, the preferred stock of the Company outstanding as of
the date of the supplement indenture;
(12) cash payments made in lieu of the issuance of
fractional shares (whether in connection with the exercise of
warrants, options or other securities convertible into or
exchangeable into capital stock of the Company or
otherwise); and
(13) the repurchase or redemption of common stock or
preferred stock purchase rights issued in connection with any
shareholders rights plans.
The amount of all Restricted Payments (other than cash) will be
the Fair Market Value on the date of the Restricted Payment of
the asset(s) or securities proposed to be transferred or issued
by the Company or such Restricted Subsidiary, as the case may
be, pursuant to the Restricted Payment.
Incurrence
of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to
(collectively, incur) any Indebtedness
(including Acquired Debt), and the Company will not issue any
Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur
Indebtedness (including Acquired Debt) or issue Disqualified
Stock and the Companys Restricted Subsidiaries may incur
Indebtedness (including Acquired Debt) or issue preferred stock,
if the Fixed Charge Coverage Ratio for the Companys most
recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such
Disqualified Stock or such preferred stock is issued, as the
case may be, would have been at least 2.0 to 1.0, determined on
a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been
incurred or the Disqualified Stock or the preferred stock had
been issued, as the case may be, at the beginning of such
four-quarter period.
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The first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness
(collectively, Permitted Debt):
(1) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness and letters of credit
under Credit Facilities in an aggregate principal amount at any
one time outstanding under this clause (1) (with letters of
credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Restricted
Subsidiaries thereunder), not to exceed the greater of
(a) $450.0 million less the aggregate amount of all
Net Proceeds of Asset Sales applied by the Company or any of its
Restricted Subsidiaries since the date of the supplemental
indenture to repay any term Indebtedness under a Credit Facility
or to repay any revolving credit Indebtedness under a Credit
Facility and effect a corresponding commitment reduction
thereunder pursuant to the covenant described above under the
caption Repurchase at the Option of
Holders Asset Sales and (b) the Borrowing
Base, based on the most recent fiscal quarter end for which an
internal consolidated balance sheet of the Company is available;
(2) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness (other than
Indebtedness described in clauses (1) and (3) of this
paragraph);
(3) the incurrence by the Company of Indebtedness
represented by the notes to be issued on the date of the
supplemental indenture;
(4) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations,
in each case, incurred for the purpose of financing all or any
part of the purchase price, whether by direct purchase of assets
or the Capital Stock of any Person owning such assets, or cost
of design, construction, installation or improvement of
property, plant or equipment used in the business of the Company
or any of its Restricted Subsidiaries, in an aggregate principal
amount, including all Permitted Refinancing Indebtedness
incurred to renew, refund, refinance, replace, defease or
discharge any Indebtedness incurred pursuant to this clause (4),
not to exceed the greater of (A) $50.0 million at any
time outstanding and (B) 3.5% of the Companys
Consolidated Total Assets;
(5) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to renew, refund,
refinance, replace, defease or discharge any Indebtedness (other
than intercompany Indebtedness) that was permitted by the
indenture to be incurred under the first paragraph of this
covenant or clauses (2), (3), (5), (13) or (14) of
this paragraph; provided, that with respect to Indebtedness
incurred pursuant to our Convertible Notes, this clause (5)
shall only apply to Indebtedness related to Convertible Notes
that remain outstanding, if any, upon completion of the tender
offer therefor, commenced July 27, 2010;
(6) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the
Company and any of its Restricted Subsidiaries; provided,
however, that:
(a) if the Company is the obligor on such Indebtedness,
such Indebtedness must be unsecured and expressly subordinated
to the prior payment in full in cash of all Obligations then due
with respect to the notes; and
(b) (i) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary of the
Company and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary of the Company,
will be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Restricted Subsidiary,
as the case may be, that was not permitted by this clause (6);
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(7) the issuance by any of the Companys Restricted
Subsidiaries to the Company or to any of its Restricted
Subsidiaries of shares of preferred stock; provided,
however, that:
(a) any subsequent issuance or transfer of Equity Interests
that results in any such preferred stock being held by a Person
other than the Company or a Restricted Subsidiary of the
Company; and
(b) any sale or other transfer of any such preferred stock
to a Person that is not either the Company or a Restricted
Subsidiary of the Company, will be deemed, in each case, to
constitute an issuance of such preferred stock by such
Restricted Subsidiary that was not permitted by this clause (7);
(8) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations in the ordinary course of
business;
(9) the guarantee by the Company of Indebtedness of the
Company or a Restricted Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant;
provided that if the Indebtedness being guaranteed is
subordinated to or pari passu with the notes, then the
guarantee must be subordinated or pari passu, as
applicable, to the same extent as the Indebtedness guaranteed;
(10) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in respect of workers
compensation claims, payment obligations in connection with
health or other types of social security benefits, unemployment
or other insurance or self-insurance obligations, reclamations,
statutory obligations, bankers acceptances, performance,
surety or similar bonds and reimbursement obligations with
respect to letters of credit or completion or performance
guarantees or other similar obligations in the ordinary course
of business;
(11) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness arising from the honoring by a bank
or other financial institution of a check, draft or similar
instrument inadvertently drawn against insufficient funds, so
long as such Indebtedness is covered within five business days;
(12) the incurrence of Acquired Debt or Indebtedness by the
Company or any of its Restricted Subsidiaries to finance the
acquisition (including, without limitation, by way of a merger)
of Capital Stock of any Person engaged in, or assets used or
useful in, a Permitted Business and the incurrence by the
Company or any of its Restricted Subsidiaries of any Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to, renew, refund, refinance, replace, defease or
discharge any Indebtedness otherwise permitted to be incurred
pursuant to this clause (12), but only so long as (a) the
Fixed Charge Coverage Ratio for the Companys most recently
ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which
such Acquired Debt, additional Indebtedness or Permitted
Refinancing Indebtedness is incurred would have been at least
1.75 to 1.0, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the
Acquired Debt, additional Indebtedness or Permitted Refinancing
Indebtedness had been incurred at the beginning of such
four-quarter period and (b) the Company would, on the date
of such transaction after giving pro forma effect thereto and
any related financing transactions as if the same had occurred
at the beginning of the applicable four-quarter period, have had
a Fixed Charge Coverage Ratio equal to or greater than the
actual Fixed Charge Coverage Ratio for the Company for such four
quarter period;
(13) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any time
outstanding, including all Permitted Refinancing Indebtedness
incurred to renew, refund, refinance, replace, defease or
discharge any Indebtedness incurred pursuant to this clause
(13), not to exceed the greater of (A) $60.0 million
and (B) 4.0% of the Companys Consolidated Total
Assets;
(14) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness pursuant to any Recourse
Non-U.S. Receivables
Facility, in an aggregate principal amount at any one time
outstanding, including all Permitted Refinancing Indebtedness
incurred to renew, refund, refinance,
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replace, defease or discharge any Indebtedness otherwise
permitted to be incurred pursuant to this clause (14), not to
exceed $100 million;
(15) the guarantee by a Restricted Subsidiary of
Indebtedness of the Company under Credit Facilities;
(16) customary indemnification, adjustment of purchase
price or similar obligations, in each case, incurred in
connection with the acquisition or disposition of any assets or
Capital Stock of the Company or any Restricted Subsidiary;
and
(17) the incurrence of Indebtedness owing to any insurance
company or broker in connection with the financing of insurance
premiums in the ordinary course of business.
Notwithstanding the foregoing, Restricted Subsidiaries may incur
Indebtedness (including Acquired Debt) or issue preferred stock
pursuant to the first paragraph of this covenant and clauses
(1), (4), (5), (12) and (13) of the second paragraph
of this covenant, but only if the Priority Debt Leverage Ratio
as of the date of incurrence of such Indebtedness or issuance of
such preferred stock, as the case may be, would not exceed 2.25
to 1.0, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the preferred stock had been
issued, as the case may be, at the beginning of the most recent
four-quarter period for which internal financial statements are
available. For the avoidance of doubt, this paragraph shall not
apply to Indebtedness incurred in connection with
clause (14) of the second paragraph of this covenant.
The Company will not incur any Indebtedness (including Permitted
Debt) that is contractually subordinated in right of payment to
any other Indebtedness of the Company unless such Indebtedness
is also contractually subordinated in right of payment to the
notes on substantially identical terms; provided, however, that
no Indebtedness will be deemed to be contractually subordinated
in right of payment to any other Indebtedness of the Company
solely by virtue of being unsecured or by virtue of being
secured on junior priority basis.
For purposes of determining compliance with this
Incurrence of Indebtedness and Issuance of Preferred
Stock covenant, in the event that an item of Indebtedness
meets the criteria of more than one of the categories of
Permitted Debt described in clauses (1) through
(17) above, or is entitled to be incurred pursuant to the
first paragraph of this covenant, the Company in its sole
discretion will be permitted to classify such item of
Indebtedness on the date of its incurrence, the Company may
divide and classify an item of Indebtedness in one or more types
of Indebtedness and the Company may later reclassify all or a
portion of such item of Indebtedness, in any manner that
complies with this covenant. Indebtedness under Credit
Facilities outstanding on the date on which notes are first
issued and authenticated under the indenture will initially be
deemed to have been incurred on such date in reliance on the
exception provided by clause (1) of the definition of
Permitted Debt. Indebtedness under Recourse Non-U.S. Receivables
Facilities outstanding on the date on which notes are first
issued and authenticated under the indenture will initially be
deemed to have been incurred on such date in reliance on the
exception provided by clause (14) of the definition of Permitted
Debt. The accrual of interest, the accretion or amortization of
original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the
same terms, the reclassification of preferred stock as
Indebtedness due to a change in accounting principles, and the
payment of dividends on preferred stock or Disqualified Stock in
the form of additional shares of the same class of preferred
stock or Disqualified Stock will not be deemed to be an
incurrence of Indebtedness or an issuance of preferred stock or
Disqualified Stock for purposes of this covenant;
provided, in each such case, that the amount of any such
accrual, accretion or payment is included in Fixed Charges of
the Company as accrued. For purposes of determining compliance
with any U.S. dollar-denominated restriction on the
incurrence of Indebtedness, the U.S. dollar-equivalent
principal amount of Indebtedness denominated in a foreign
currency shall be utilized, calculated based on the relevant
currency exchange rate in effect on the date of determination.
Notwithstanding any other provision of this covenant, the
maximum amount of Indebtedness that the Company or any
Restricted Subsidiary may incur pursuant to this covenant shall
not be deemed to be exceeded solely as a result of fluctuations
in exchange rates or currency values.
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The amount of any Indebtedness outstanding as of any date will
be:
(1) the accreted value of the Indebtedness, in the case of
any Indebtedness issued with original issue discount;
(2) the principal amount of the Indebtedness, in the case
of any other Indebtedness; and
(3) in respect of Indebtedness of another Person secured by
a Lien on the assets of the specified Person, the lesser of:
(a) the Fair Market Value of such assets at the date of
determination; and
(b) the amount of the Indebtedness of the other Person; and
(4) in respect of any Hedging Obligations, the amount of
such obligations to be equal at any time to the termination
value of such agreement or arrangement.
For purposes of determining any particular amount of
Indebtedness under this Incurrence of
Indebtedness and Issuance of Preferred Stock covenant,
guarantees, Liens, obligations with respect to letters of credit
and other obligations supporting Indebtedness otherwise included
in the determination of a particular covenant will not be
included.
Liens
The Company will not and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume
or otherwise cause or suffer to exist or become effective any
Lien of any kind (other than Permitted Liens) securing
Indebtedness, including Attributable Debt, on any property or
asset, now owned or hereafter acquired, unless all payments due
under the indenture and the notes are secured on an equal and
ratable basis with the obligations so secured until such time as
such obligations are no longer secured by a Lien.
Limitation
on Sale and Leaseback Transactions
The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company and its Restricted Subsidiaries
may enter into a sale and leaseback transaction if:
(1) the Company or the Restricted Subsidiary could have
(a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback
transaction under the Fixed Charge Coverage Ratio test in the
first paragraph of the covenant described above under the
caption Incurrence of Indebtedness and
Issuance of Preferred Stock and (b) incurred a Lien
to secure such Indebtedness pursuant to the covenant described
above under the caption Liens;
(2) the gross cash proceeds of that sale and leaseback
transaction are at least equal to the Fair Market Value, of the
property that is the subject of that sale and leaseback
transaction; and
(3) the transfer of assets in that sale and leaseback
transaction is permitted by, and the Company or the Restricted
Subsidiary applies the proceeds of such transaction in
compliance with, the covenant described above under the caption
Repurchase at the Option of
Holders Asset Sales, if applicable.
Dividend
and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to
exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its
Capital Stock to the Company or any of its Restricted
Subsidiaries, or with respect to any other interest or
participation in, or measured by, its profits, or pay any
indebtedness owed to the Company or any of its Restricted
Subsidiaries;
(2) make loans or advances to the Company or any of its
Restricted Subsidiaries; or
(3) sell, lease or transfer any of its properties or assets
to the Company or any of its Restricted Subsidiaries.
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However, the preceding restrictions will not apply to
encumbrances or restrictions existing under or by reason of:
(1) agreements governing Existing Indebtedness and Credit
Facilities as in effect on the date of the supplemental
indenture and any amendments, restatements, modifications,
renewals, supplements, refundings, replacements or refinancings
of those agreements; provided that the amendments,
restatements, modifications, renewals, supplements, refundings,
replacements or refinancings are not materially more
restrictive, taken as a whole, with respect to such dividend and
other payment restrictions than those contained in those
agreements on the date of the supplemental indenture;
(2) the indenture and the notes;
(3) applicable law, rule, regulation or order;
(4) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness or Capital Stock was
incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable
to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so
acquired; provided that, in the case of Indebtedness,
such Indebtedness was permitted by the terms of the indenture to
be incurred;
(5) customary provisions in leases, subleases, joint
venture agreements or other similar agreements, asset sale
agreements, contracts and licenses entered into in the ordinary
course of business;
(6) purchase money obligations for property acquired in the
ordinary course of business and Capital Lease Obligations that
impose restrictions on the property purchased or leased of the
nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by that
Restricted Subsidiary pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness; provided
that the restrictions contained in the agreements governing
such Permitted Refinancing Indebtedness are not materially more
restrictive, taken as a whole, than those contained in the
agreements governing the Indebtedness being refinanced;
(9) Liens permitted to be incurred under the provisions of
the covenant described above under the caption
Liens that limit the right of the debtor
to dispose of the assets subject to such Liens;
(10) provisions limiting the disposition or distribution of
assets or property in joint venture agreements, asset sale
agreements, sale-leaseback agreements, stock sale agreements and
other similar agreements entered into with the approval of the
Board of Directors of the Company, which limitation is
applicable only to the assets that are the subject of such
agreements;
(11) restrictions on cash or other deposits or net worth
imposed by leases or contracts with customers under contracts
entered into in the ordinary course of business;
(12) restrictions created in connection with any
Receivables Facility that, as certified in an officers
certificate, are necessary or advisable to effect such
Receivables Facility;
(13) any agreement with respect to Indebtedness of a
Foreign Subsidiary of the Company permitted under the indenture
so long as such prohibitions or limitations are only with
respect to the properties and revenues of such Foreign
Subsidiary or any Subsidiary of such Foreign Subsidiary; and
(14) any encumbrances or restrictions of the type referred
to in clauses (1), (2) and (3) of the first paragraph
above imposed by any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations
referred to in clauses (1) through (13) above;
provided, however, that the encumbrances or
restrictions imposed by such amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings are, in the good faith judgment of
the Companys Board of Directors, not materially less
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favorable to the holders of the Notes than encumbrances and
restrictions contained in such predecessor agreements.
Merger,
Consolidation or Sale of Assets
The Company will not, directly or indirectly:
(x) consolidate or merge with or into another Person
(whether or not the Company is the surviving corporation), or
(y) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of the
Company and its Restricted Subsidiaries taken as a whole, in one
or more related transactions, to another Person, unless:
(1) either: (a) the Company is the surviving
corporation; or (b) the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, conveyance or other
disposition has been made is a corporation organized or existing
under the laws of the United States, any state of the United
States or the District of Columbia;
(2) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, conveyance or
other disposition has been made assumes all the obligations of
the Company under the notes and the indenture, pursuant to a
supplemental indenture;
(3) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be
continuing; and
(4) the Company or the Person formed by or surviving any
such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, conveyance or other
disposition has been made would, on the date of such transaction
after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the
applicable four-quarter period, (i) be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of
the covenant described above under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock or (ii) have had a Fixed Charge
Coverage Ratio equal to or greater than the Fixed Charge
Coverage Ratio for the Company immediately prior to such
transaction.
In addition, the Company will not, directly or indirectly, lease
all or substantially all the properties and assets of it and its
Restricted Subsidiaries taken as a whole, in one or more related
transactions, to any other Person.
This Merger, Consolidation or Sale of Assets
covenant will not apply to:
(1) any consolidation or merger, or any sale, assignment,
transfer, conveyance, lease or other disposition of assets
between or among the Company and any of its Restricted
Subsidiaries; or
(2) (except for clauses (1) and (2) of the first
paragraph of this covenant) a merger of the Company with an
Affiliate solely for the purpose of reincorporating the Company
in another jurisdiction.
Transactions
with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, pay any dividend to, or
sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets
from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or
for the benefit of, any Affiliate of the Company (each, an
Affiliate Transaction) involving aggregate
payments or consideration in excess of $5.0 million unless:
(1) the Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiary with an
unrelated Person; and
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(2) the Company delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $20.0 million, a resolution of the Board of
Directors of the Company set forth in an officers
certificate certifying that such Affiliate Transaction complies
with this covenant and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board
of Directors of the Company; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $40.0 million, an opinion as to the fairness
to the Company or such Subsidiary of such Affiliate Transaction
from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
The following items will not be deemed to be Affiliate
Transactions and, therefore, will not be subject to the
provisions of the prior paragraph:
(1) any employment agreement, employee benefit plan,
officer or director indemnification agreement or any similar
arrangement (including vacation plans, health and life insurance
plans, deferred compensation plans, retirement or savings plans,
and stock option, stock ownership or similar plans) entered into
by the Company or any of its Restricted Subsidiaries in the
ordinary course of business and payments pursuant thereto;
(2) transactions between or among the Company
and/or its
Restricted Subsidiaries;
(3) transactions with a Person (other than an Unrestricted
Subsidiary of the Company) that is an Affiliate of the Company
solely because the Company owns, directly or through a
Restricted Subsidiary, an Equity Interest in, or controls, such
Person;
(4) Restricted Payments that do not violate the provisions
of the indenture described above under the caption
Restricted Payments or Permitted
Investments;
(5) the payment of reasonable and customary compensation
and fees paid to, and indemnities provided on behalf of (and
entering into related agreements with) officers, directors,
employees or consultants of the Company or any Restricted
Subsidiary, as determined in good faith by the Board of
Directors of the Company or senior management thereof;
(6) payments or loans (or cancellations of loans) to
employees or consultants of the Company or any Restricted
Subsidiary which are approved by the Board of Directors of the
Company and which are otherwise permitted under the indenture,
but in any event not to exceed $5.0 million in the
aggregate outstanding at any one time;
(7) 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 indenture that are fair to the Company or its
Restricted Subsidiaries, in the reasonable determination of the
members of the Board of Directors of the Company or the senior
management thereof or are on terms at least as favorable as
would reasonably have been entered into at such time with an
unaffiliated party;
(8) the issuance of Equity Interests (other than
Disqualified Stock) of the Company to Affiliates of the Company;
(9) the entering into of any customary tax sharing
agreement or arrangement and any payments permitted by the
covenants described under Restricted
Payments;
(10) any contribution to the capital of the Company;
(11) transactions between the Company or any of its
Restricted Subsidiaries and any Person, a director of which is
also a director of the Company or any direct or indirect parent
company of the Company and such director is the sole cause for
such Person to be deemed an Affiliate of the Company or any of
its Restricted Subsidiaries; provided, however, that such
director abstains from voting as
S-42
director of the Company or such direct or indirect parent
company, as the case may be, on any matter involving such other
Person;
(12) pledges of Equity Interests of Unrestricted
Subsidiaries;
(13) sales of accounts receivable, or participations
therein, in connection with any Receivables Facility; and
(14) any agreement as in effect as of the date of the
supplemental indenture, or any amendment thereto or renewal or
replacement thereof (so long as any such amendment, renewal, or
replacement is not disadvantageous to the holders of the notes
when taken as a whole as compared to the applicable agreement as
in effect on the date of the supplemental indenture).
Designation
of Restricted and Unrestricted Subsidiaries
The Board of Directors of the Company may designate any
Restricted Subsidiary to be an Unrestricted Subsidiary if that
designation would not cause a Default. If a Restricted
Subsidiary is designated as an Unrestricted Subsidiary, the
aggregate Fair Market Value of all outstanding Investments owned
by the Company and its Restricted Subsidiaries in the Subsidiary
designated as Unrestricted will be deemed to be an Investment
made as of the time of the designation and will reduce the
amount available for Restricted Payments under the covenant
described above under the first paragraph under the caption
Restricted Payments or under one or more
clauses of the definition of Permitted Investments, as
determined by the Company. That designation will only be
permitted if the Investment would be permitted at that time and
if the Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary. The Board of Directors of the
Company may redesignate any Unrestricted Subsidiary to be a
Restricted Subsidiary if that redesignation would not cause a
Default.
Any designation of a Subsidiary of the Company as an
Unrestricted Subsidiary will be evidenced to the trustee by
filing with the trustee a certified copy of a resolution of the
Board of Directors giving effect to such designation and an
officers certificate certifying that such designation
complied with the preceding conditions and was permitted by the
covenant described above under the caption
Restricted Payments. If, at any time,
any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it will thereafter
cease to be an Unrestricted Subsidiary for purposes of the
indenture and any Indebtedness of such Subsidiary will be deemed
to be incurred by a Restricted Subsidiary of the Company as of
such date and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the
caption Incurrence of Indebtedness and
Issuance of Preferred Stock, the Company will be in
default of such covenant. The Board of Directors of the Company
may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary of the Company; provided that such
designation will be deemed to be an incurrence of Indebtedness
by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary, and such
designation will only be permitted if (1) such Indebtedness
is permitted under the covenant described under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock, calculated on a pro forma basis as if
such designation had occurred at the beginning of the
four-quarter reference period; and (2) no Default or Event
of Default would be in existence following such designation.
Payments
for Consent
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid
any consideration to or for the benefit of any holder of notes
for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the indenture or the notes
unless such consideration is offered to be paid and is paid to
all holders of the notes that consent, waive or agree to amend
in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
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Reports
Whether or not required by the rules and regulations of the SEC,
including the reporting requirements of Section 13 or 15(d)
of the Exchange Act, so long as any notes are outstanding, the
Company will file with the SEC (and provide the Trustee, within
15 days after it files them with the SEC),
(1) within 90 days after the end of each fiscal year,
annual reports on
Form 10-K
(or any successor or comparable form),
(2) within 45 days after the end of each of the first
three fiscal quarters of each fiscal year, reports on
Form 10-Q
(or any successor or comparable form),
(3) promptly from time to time after the occurrence of an
event required to be reported on a
Form 8-K
filed (as opposed to furnished) with the SEC, such other reports
on
Form 8-K
(or any successor or comparable form), and
(4) any other information, documents and other reports
which the Company would be required to file with the SEC if it
were subject to Section 13 or 15(d) of the Exchange Act.
provided, however, that the Company shall not be
so obligated to file such reports with the SEC if the SEC does
not permit such filing, in which event the Company will post the
reports specified in the first sentence of this paragraph on its
website within the time periods that would apply if the Company
were required to file those reports with the SEC.
Notwithstanding anything to the contrary in the foregoing, the
Company will be deemed to have furnished such information
referred to in the previous sentence to the Trustee if the
Company has filed such reports and other information with the
SEC via the EDGAR filing system (or any successor system) and
such reports and other information are publicly available. All
such reports will be prepared in all material respects in
accordance with all of the rules and regulations applicable to
such reports.
Future
Subsidiary Guarantees
Our obligations under the notes initially will not be guaranteed
by any of our Subsidiaries. However, in the event that any of
our Subsidiaries other than a Foreign Subsidiary or an
Unrestricted Subsidiary (any such Subsidiary, a
Subsidiary Guarantor) guarantees or becomes a
co-obligor with respect to any Indebtedness of the Company or
another Subsidiary Guarantor for borrowed money other than
Indebtedness under our Credit Facilities, such Subsidiary
Guarantor will be required to guarantee the notes equally and
ratably with such other Indebtedness pursuant to a supplement to
the indenture.
The guarantee of a future Subsidiary Guarantor will be released:
(1) in connection with any consolidation or merger if the
Subsidiary Guarantor or surviving Person will cease to be a
Subsidiary of the Company;
(2) in connection with any sale or other disposition of all
or substantially all of the assets of that Subsidiary Guarantor
(including by way of merger or consolidation) to a Person that
is not (either immediately before or immediately after giving
effect to such transaction) the Company or a Restricted
Subsidiary, if the sale or other disposition complies with the
provisions of the covenant described under
Repurchase at the Option of
Holders Asset Sales;
(3) upon designation of the Subsidiary Guarantor as an
Unrestricted Subsidiary in accordance with the provisions of the
Indenture;
(4) in connection with any (direct or indirect) sale of
Capital Stock or other transaction that results in the
Subsidiary Guarantor ceasing to be a Subsidiary of the Company,
if the sale or other transaction complies with the provisions of
the covenant described under Repurchase at the
Option of Holders Asset Sales;
(5) upon the release of the Subsidiary Guarantor from its
liability in respect of the Indebtedness of the Company or
another Subsidiary Guarantor that required the Subsidiary to
initially guarantee the notes;
S-44
(6) upon legal defeasance of the notes or satisfaction and
discharge of the Indenture as provided below under the captions
Legal Defeasance and Covenant Defeasance
and Satisfaction and Discharge; or
(7) with the consent of Holders of a majority in aggregate
principal amount of notes then outstanding in accordance with
the provisions described below under the caption
Amendment, Supplement and Waiver.
The obligations of any guarantor under its subsidiary guarantee
will be limited to the maximum amount that will not result in
the obligations of the guarantor under the subsidiary guarantee
constituting a fraudulent conveyance or fraudulent transfer
under federal or state law, after giving effect to any other
contingent and fixed liabilities of the guarantor. See
Risk Factors Under U.S. federal and state
fraudulent transfer or conveyance statues, a court could void
the notes or take other actions detrimental to holders of the
notes.
Events of
Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of
interest on the notes;
(2) default in the payment when due (at maturity, upon
redemption or otherwise) of the principal of, or premium, if
any, on, the notes;
(3) failure by the Company or any of its Restricted
Subsidiaries to comply with the provisions described under the
caption Certain Covenants Merger,
Consolidation or Sale of Assets;
(4) failure by the Company or any of its Restricted
Subsidiaries for 30 days after notice to the Company by the
trustee or the holders of at least 25% in aggregate principal
amount of the notes then outstanding voting as a single class to
comply with the provisions described under the captions
Repurchase at the Option of
Holders Change of Control,
Repurchase at the Option of
Holders Asset Sales, Certain
Covenants Restricted Payments or
Certain Covenants Incurrence of
Indebtedness and Issuance of Preferred Stock;
(5) failure by the Company or any of its Restricted
Subsidiaries for 60 days after notice to the Company by the
trustee or the holders of at least 25% in aggregate principal
amount of the notes then outstanding voting as a single class to
comply with any of the other agreements in the indenture;
(6) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed (other than
Indebtedness owing to the Company or a Restricted Subsidiary) by
the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or Guarantee
now exists, or is created after the date of the supplemental
indenture, if that default:
(a) is caused by a failure to pay principal of, or interest
or premium, if any, on, such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on
the date of such default (a Payment
Default); or
(b) results in the acceleration of such Indebtedness prior
to its express maturity,
and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default
or the maturity of which has been so accelerated, aggregates
$25.0 million or more and such Indebtedness has not been
discharged or such acceleration has not been rescinded or
annulled, as applicable;
(7) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments entered by a court or courts
of competent jurisdiction aggregating in excess of
$25.0 million (which are not covered by insurance or
indemnity as to which the insurer or a creditworthy indemnitor
has not disclaimed
S-45
coverage), which judgments are not paid, discharged or stayed
for a period of 60 days after such judgments become final
and non-appealable; and
(8) certain events of bankruptcy or insolvency described in
the indenture with respect to the Company or any of its
Restricted Subsidiaries that is a Significant Subsidiary or any
group of its Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary.
In the case of an Event of Default arising from certain events
of bankruptcy or insolvency, with respect to the Company or any
Restricted Subsidiary of the Company that is a Significant
Subsidiary or any group of Restricted Subsidiaries of the
Company that, taken together, would constitute a Significant
Subsidiary, all outstanding notes will become due and payable
immediately without further action or notice. If any other Event
of Default occurs and is continuing, the trustee or the holders
of at least 25% in aggregate principal amount of the then
outstanding notes may declare all the notes to be due and
payable immediately.
Subject to certain limitations, holders of a majority in
aggregate principal amount of the then outstanding notes may
direct the trustee in its exercise of any trust or power. The
trustee may withhold from holders of the notes notice of any
continuing Default or Event of Default if it determines that
withholding notice is in the interest of the holders, except a
Default or Event of Default relating to the payment of
principal, interest or premium, if any.
Subject to the provisions of the indenture relating to the
duties of the trustee, 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 holders of 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 notice
that an Event of Default is continuing;
(2) holders of at least 25% in aggregate principal amount
of the then outstanding notes have requested the trustee to
pursue the remedy;
(3) such holders have offered the trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the trustee has not complied with such request within
60 days after the receipt of the request and the offer of
security or indemnity; and
(5) holders of a majority in aggregate principal amount of
the then outstanding notes have not given the trustee a
direction inconsistent with such request within such
60-day
period.
The holders of a majority in aggregate principal amount of the
then outstanding notes by notice to the trustee may, on behalf
of the holders of all of the notes, rescind an acceleration or
waive any existing Default or Event of Default and its
consequences under the indenture except a continuing Default or
Event of Default in the payment of interest or premium, if any,
on, or the principal of, the notes.
The Company is required to deliver to the trustee annually a
statement regarding compliance with the indenture. Within
10 days of becoming aware of any Default or Event of
Default, the Company is required to deliver to the trustee a
statement specifying such Default or Event of Default, its
status and what action the Company is taking or is proposing to
take with respect thereto.
No
Personal Liability of Directors, Officers, Employees and
Shareholders
No director, officer, employee, incorporator or shareholder of
the Company, as such, will have any liability for any
obligations of the Company under the notes, the indenture or for
any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of notes by accepting
a note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the notes.
The waiver may not be effective to waive liabilities under the
federal securities laws.
S-46
Legal
Defeasance and Covenant Defeasance
The Company may at any time, at the option of its Board of
Directors evidenced by a resolution set forth in an
officers certificate, elect to have all of its and any
Subsidiary Guarantors obligations discharged with respect
to the outstanding notes (Legal Defeasance)
except for:
(1) the rights of holders of outstanding notes to receive
payments in respect of the principal of, or interest or premium,
if any, on, such notes when such payments are due from the trust
referred to below;
(2) the Companys obligations with respect to the
notes concerning issuing temporary notes, registration of notes,
mutilated, destroyed, lost or stolen notes and the maintenance
of an office or agency for payment and money for security
payments held in trust;
(3) the rights, powers, trusts, duties and immunities of
the trustee, and the Companys in connection
therewith; and
(4) the Legal Defeasance and Covenant Defeasance provisions
of the indenture.
In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with
respect to certain covenants (including its obligation to make
Change of Control Offers and Asset Sale Offers) that are
described in the indenture (Covenant
Defeasance) and thereafter any omission to comply with
those covenants will not constitute a Default or Event of
Default with respect to the notes. In the event Covenant
Defeasance occurs, all Events of Default described under
Events of Default and Remedies (except
those relating to payments on the notes or bankruptcy,
receivership, rehabilitation or insolvency) will no longer
constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(1) the Company must irrevocably deposit with the trustee,
in trust, for the benefit of the holders of the notes, cash in
U.S. dollars, non-callable Government Securities, or a
combination of cash in U.S. dollars and non-callable
Government Securities, in amounts as will be sufficient, in the
opinion of a nationally recognized investment bank, appraisal
firm or firm of independent public accountants, to pay the
principal of, or interest and premium, if any, on, the
outstanding notes on the stated date for payment thereof or on
the applicable redemption date, as the case may be, and the
Company must specify whether the notes are being defeased to
such stated date for payment or to a particular redemption date;
(2) in the case of Legal Defeasance, the Company must
deliver to the trustee an opinion of counsel confirming that
(a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or
(b) since the date of the supplemental indenture, there has
been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion
of counsel will confirm that, the holders of the outstanding
notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company must
deliver to the trustee an opinion of counsel confirming that the
holders of the outstanding notes will not recognize income, gain
or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not
occurred;
(4) no Default or Event of Default has occurred and is
continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be
applied to such deposit) and the deposit will not result in a
breach or violation of, or constitute a default under, any other
instrument to which the Company is a party or by which the
Company is bound;
(5) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default
under, any material agreement or instrument (other than the
indenture) to which the
S-47
Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(6) the Company must deliver to the trustee an
officers certificate stating that the deposit was not made
by the Company with the intent of preferring the holders of
notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding any creditors of
the Company or others; and
(7) the Company must deliver to the trustee an
officers certificate and an opinion of counsel, each
stating that all conditions precedent relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Amendment,
Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
indenture or the notes may be amended or supplemented with the
consent of the holders of at least a majority in aggregate
principal amount of the then outstanding notes (including,
without limitation, additional notes, if any) voting as a single
class (including, without limitation, consents obtained in
connection with a tender offer or exchange offer for, or
purchase of, the notes), and any existing Default or Event of
Default (other than a Default or Event of Default in the payment
of the principal of, premium on, if any, or interest, if any, on
the notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any
provision of the indenture or the notes may be waived with the
consent of the holders of a majority in aggregate principal
amount of the then outstanding notes (including, without
limitation, additional notes, if any) voting as a single class
(including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for,
notes).
Without the consent of each holder of notes affected, an
amendment, supplement or waiver may not (with respect to any
notes held by a non-consenting holder):
(1) reduce the principal amount of notes whose holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of
any note or alter or waive any of the provisions with respect to
the redemption of the notes (except those provisions relating to
the covenants described above under the caption
Repurchase at the Option of Holders);
(3) reduce the rate of or extend the time for payment of
interest, including default interest, on any note;
(4) waive a Default or Event of Default in the payment of
principal of, or interest or premium, if any, on, the notes
(except a rescission of acceleration of the notes by the holders
of at least a majority in aggregate principal amount of the then
outstanding notes and a waiver of the payment default that
resulted from such acceleration);
(5) make any note payable in money other than that stated
in the notes;
(6) make any change in the provisions of the indenture
relating to waivers of past Defaults or the rights of holders of
notes to receive payments of principal of, or interest or
premium, if any, on, the notes;
(7) waive a redemption payment with respect to any note
(other than a payment required by one of the covenants described
above under the caption Repurchase at the
Option of Holders); or
(8) make any change in the preceding amendment and waiver
provisions.
Notwithstanding the preceding, without the consent of any holder
of notes, the Company and the trustee may amend or supplement
the indenture or the notes:
(1) to cure any ambiguity, defect or inconsistency;
S-48
(2) to provide for uncertificated notes in addition to or
in place of certificated notes;
(3) to provide for the assumption of the Companys
obligations to holders of notes in the case of a merger or
consolidation or sale of all or substantially all of the
Companys assets;
(4) to make any change that would provide any additional
rights or benefits to the holders of notes or that does not
adversely affect the legal rights under the indenture of any
such holder;
(5) to comply with requirements of the SEC in order to
effect or maintain the qualification of the indenture under the
Trust Indenture Act;
(6) to conform the text of the indenture or the notes to
any provision of this Description of Notes to the extent that
such provision in this Description of Notes was intended to be a
verbatim recitation of a provision of the indenture or the
notes, which intent shall be evidenced by an officers
certificate to that effect;
(7) to provide for the issuance of additional notes in
accordance with the limitations set forth in the indenture as of
the date of the supplemental indenture; or
(8) to allow any Subsidiary to execute a supplement to the
Indenture
and/or a
guarantee with respect to the notes and to release any
Subsidiary from its guarantee in accordance with the terms of
the Indenture.
Satisfaction
and Discharge
The indenture will be discharged and will cease to be of further
effect as to all notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated, except lost,
stolen or destroyed notes that have been replaced or paid and
notes for whose payment money has been deposited in trust and
thereafter repaid to the Company, have been delivered to the
trustee for cancellation; or
(b) all notes that have not been delivered to the trustee
for cancellation have become due and payable by reason of the
mailing of a notice of redemption or otherwise or will become
due and payable or called for redemption within one year and the
Company has irrevocably deposited or caused to be deposited with
the trustee as trust funds in trust solely for the benefit of
the holders, cash in U.S. dollars, non- callable Government
Securities, or a combination of cash in U.S. dollars and
non-callable Government Securities, in amounts as will be
sufficient, without consideration of any reinvestment of
interest, to pay and discharge the entire Indebtedness on the
notes not delivered to the trustee for cancellation for
principal, premium, if any, and accrued interest to the date of
maturity or redemption;
(2) no Default or Event of Default has occurred and is
continuing on the date of the deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be
applied to such deposit) and the deposit will not result in a
breach or violation of, or constitute a default under, any other
instrument to which the Company is a party or by which the
Company is bound;
(3) the Company has paid or caused to be paid all sums
payable by it under the indenture; and
(4) the Company has delivered irrevocable instructions to
the trustee under the indenture to apply the deposited money
toward the payment of the notes at maturity or on the redemption
date, as the case may be.
In addition, the Company must deliver an officers
certificate and an opinion of counsel to the trustee stating
that all conditions precedent to satisfaction and discharge have
been satisfied.
S-49
Concerning
the Trustee
If the trustee becomes a creditor of the Company, the indenture
limits the right of the trustee to obtain payment of claims in
certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. The trustee
will be permitted to engage in other transactions; however, if
it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the SEC for permission to
continue as trustee (if the indenture has been qualified under
the Trust Indenture Act) or resign.
The holders of a majority in aggregate principal amount of the
then 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.
The indenture provides that in case an Event of Default occurs
and is continuing, the trustee will be required, in the exercise
of its power, to use the same degree of care and skill as a
prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs. Subject to such
provisions, 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 has offered to the
trustee security and indemnity satisfactory to it against any
loss, liability or expense.
Book-Entry,
Delivery and Form
Except as described in the next paragraph, the notes will
initially be issued in registered, global form without interest
coupons (the Global Notes) in minimum
denominations of $2,000 and integral multiples of $1,000 in
excess of $2,000. Notes will be issued at the closing of this
offering only against payment in immediately available funds.
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, for credit to an account of a direct or indirect
participant in DTC as described below.
Notes that are issued as described below under
Certificated Notes will be issued in the
form of registered definitive certificates (the
Certificated Notes). Upon the transfer of
Certificated Notes, Certificated Notes may, unless all Global
Notes have previously been exchanged for Certificated Notes, be
exchanged for an interest in the Global Note representing the
principal amount of notes being transferred, subject to the
transfer restrictions set forth in the indenture.
DTC has advised the Company 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), 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 the Company that, pursuant to procedures
established by it:
(1) upon deposit of the Global Notes, DTC will credit the
accounts of the Participants designated by the underwriters 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 interest in the Global Notes).
Prospective purchasers are advised that 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 such extent.
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So long as the Global Note Holder is the registered owner of any
notes, the Global Note Holder will be considered the sole holder
under the indenture of any notes evidenced by the Global Notes.
Beneficial owners of notes evidenced by the Global Notes will
not be considered the owners or holders of the notes under the
indenture for any purpose, including with respect to the giving
of any directions, instructions or approvals to the trustee
thereunder. Neither the Company nor the trustee will have any
responsibility or liability for any aspect of the records of DTC
or for maintaining, supervising or reviewing any records of DTC
relating to the notes.
Payments in respect of the principal of, and interest and
premium, 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 Company 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,
neither the Company, the trustee nor any agent of the Company 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 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 the Company 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 that 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 Company. Neither the
Company nor the trustee will be liable for any delay by DTC or
any of the Participants or the Indirect Participants in
identifying the beneficial owners of the notes, and the Company
and the trustee may conclusively rely on and will be protected
in relying on instructions from DTC or its nominee for all
purposes.
Certificated
Notes
Any Person having a beneficial interest in a Global Note may,
upon prior written request to the trustee, exchange such
beneficial interest for notes in the form of Certificated Notes
only if:
(1) DTC (a) notifies the Company that it is unwilling
or unable to continue as depositary for the Global Notes or
(b) has ceased to be a clearing agency registered under the
Exchange Act and, in either case, the Company fails to appoint a
successor depositary;
(2) the Company, 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 or Event
of Default with respect to the notes.
Upon surrender by the Global Note Holder of its Global Note,
notes in such form will be issued to each Person that the Global
Note Holder and DTC identify as being the beneficial owner of
the related notes. Upon any such issuance, the trustee is
required to register such Certificated Notes in the name of, and
cause the same to be delivered to, such Person or Persons (or
their nominee). All Certificated Notes would be subject to any
applicable legend requirements.
Neither the Company nor the trustee will be liable for any delay
by the Global Note Holder or DTC in identifying the beneficial
owners of notes and the Company and the trustee may conclusively
rely on, and will be protected in relying on, instructions from
the Global Note Holder or DTC for all purposes.
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Same Day
Settlement and Payment
The Company will make, or cause to be made through the paying
agent, payments in respect of the notes represented by the
Global Notes (including principal, premium, if any, and
interest) by wire transfer of immediately available funds to the
accounts specified by DTC or its nominee. The Company will make,
or cause to be made through the paying agent, all payments of
principal, interest and premium, 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 be
eligible to trade in The
PORTALsm
Market and 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 Company
expects that secondary trading in any Certificated Notes will
also be settled in immediately available funds.
Certain
Definitions
Set forth below are certain defined terms used in the indenture.
Reference is made to the indenture for a full disclosure of all
defined terms used therein, as well as any other capitalized
terms used herein for which no definition is provided.
Acquired Debt means, with respect to any
specified Person:
(1) Indebtedness of any other Person existing at the time
such other Person is merged with or into or became a Restricted
Subsidiary of such specified Person, whether or not such
Indebtedness is incurred in connection with, or in contemplation
of, such other Person merging with or into, or becoming a
Restricted Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
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 purposes of this definition, control, as
used with respect to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 20% or more of the Voting
Stock of a Person will be deemed to be control. For purposes of
this definition, the terms controlling,
controlled by and under common control
with have correlative meanings.
Applicable Premium means, with respect to any
note on any redemption date, as of such date, the greater of:
(1) 1.0% of the principal amount of the note; or
(2) the excess of:
(a) the present value at such redemption date of
(i) the redemption price of the note
at ,
2014, (such redemption price being set forth in the table
appearing above under the caption Optional
Redemption) plus (ii) all required interest payments
due on the note
through ,
2014, (excluding accrued but unpaid interest to the redemption
date), computed using a discount rate equal to the Treasury Rate
as of such redemption date plus 50 basis points; over
(b) the principal amount of the note.
Asset Sale means:
(1) the sale, lease, conveyance or other disposition of any
assets or rights by the Company or any of the Companys
Restricted Subsidiaries; provided that the sale, lease,
conveyance or other disposition of all or substantially all of
the assets of the Company and its Restricted Subsidiaries taken
as a whole will be governed by the provisions of the indenture
described above under the caption Repurchase
at the Option of Holders Change of Control
and/or the
provisions described above under the caption
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Certain Covenants Merger,
Consolidation or Sale of Assets and not by the provisions
of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of the
Companys Restricted Subsidiaries or the sale by the
Company or any of the Companys Restricted Subsidiaries of
Equity Interests in any of the Companys Subsidiaries
(other than directors qualifying shares or shares required
by applicable law to be held by a Person other than the Company
or a Restricted Subsidiary).
Notwithstanding the preceding, none of the following items will
be deemed to be an Asset Sale:
(1) any single transaction or series of related
transactions that involves assets (including the issuance or
sale of any Equity Interests of any Restricted Subsidiary)
having a Fair Market Value of less than the greater of
(i) $30.0 million and (ii) 2.25% of the
Companys Consolidated Total Assets;
(2) a transfer of assets between or among the Company and
its Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Restricted
Subsidiary of the Company to the Company or to a Restricted
Subsidiary of the Company;
(4) the sale, assignment, license,
sub-license,
lease or
sub-lease of
products, services, property or accounts receivable in the
ordinary course of business and any sale or other disposition of
damaged, worn-out or obsolete assets in the ordinary course of
business;
(5) the sale or other disposition of cash or Cash
Equivalents;
(6) a Restricted Payment that does not violate the covenant
described above under the caption Certain
Covenants Restricted Payments, or a Permitted
Investment;
(7) sales of accounts receivable, or participations
therein, in connection with any Receivables Facility;
(8) any sale of Equity Interests in, or Indebtedness or
other securities of, an Unrestricted Subsidiary;
(9) foreclosures on assets;
(10) dispositions of an account receivable in connection
with the collection or compromise thereof; and
(11) the grant in the ordinary course of business of any
licenses of patents, trademarks, know-how and any other
intellectual property.
Attributable Debt in respect of a sale and
leaseback transaction means, at the time of determination, the
present value of the obligation of the lessee for net rental
payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which
such lease has been extended or may, at the option of the
lessor, be extended. Such present value shall be calculated
using a discount rate equal to the rate of interest implicit in
such transaction, determined in accordance with GAAP; provided,
however, that if such sale and 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.
Beneficial Owner has the meaning assigned to
such term in
Rule 13d-3
and
Rule 13d-5
under the Exchange Act, except that in calculating the
beneficial ownership of any particular person (as
that term is used in Section 13(d)(3) of the Exchange Act),
such person will be deemed to have beneficial
ownership of all securities that such person has the
right to acquire by conversion or exercise of other securities,
whether such right is currently exercisable or is exercisable
only after the passage of time. The terms Beneficially
Owns and Beneficially Owned have a
corresponding meaning.
Board of Directors means:
(1) with respect to a corporation, the board of directors
of the corporation or any committee thereof duly authorized to
act on behalf of such board;
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(2) with respect to a partnership, the Board of Directors
of the general partner of the partnership;
(3) with respect to a limited liability company, the
managing member or members or any controlling committee of
managing members thereof; and
(4) with respect to any other Person, the board or
committee of such Person serving a similar function.
Borrowing Base means, as of any date, an
amount equal to the sum of:
(1) 80% of the book value of all accounts receivable owned
by the Company and its Restricted Subsidiaries, plus
(2) 50% of the book value of all inventory owned by the
Company and its Restricted Subsidiaries,
in each case, calculated on a consolidated basis and in
accordance with GAAP.
Capital Lease Obligation means, at the time
any determination is to be made, the amount of the liability in
respect of a capital lease that would at that time be required
to be capitalized on a balance sheet prepared in accordance with
GAAP (provided, however, that if subsequent to the date
of the supplemental indenture, there is a change in GAAP such
that certain obligations that previously were not treated as a
Capital Lease Obligation under GAAP would be treated as a
Capital Lease Obligation under GAAP as then in effect, such
obligations shall not be treated as Capital Lease Obligations),
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 prepaid by the
lessee without payment of a penalty.
Capital Stock means:
(1) in the case of a corporation, shares of capital stock
of any class of the corporation whether now or hereafter
authorized regardless of whether such capital stock shall be
limited to a fixed sum or percentage in respect of the rights of
the holders thereof to participate in dividends and in the
distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up;
(2) in the case of an association or business entity, any
and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability
company, partnership interests (whether general or limited) or
membership interests; and
(4) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person, but
excluding from all of the foregoing any debt securities
convertible into Capital Stock, whether or not such debt
securities include any right of participation with Capital Stock.
Cash Equivalents means:
(1) United States dollars, UK pounds sterling, Euro, and
Japanese Yen;
(2) securities issued or directly and fully guaranteed or
insured by the United States government or a State thereof which
is rated A (or such similar equivalent rating) or
higher by at least one nationally recognized statistically
rating organization (as defined in Rule 436 under the
Securities Act) (or any agency or instrumentality thereof
provided that the full faith and credit of the United
States or applicable State thereof is pledged in support of
those securities) having maturities of not more than six months
from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits
with maturities of one year or less from the date of
acquisition, bankers acceptances with maturities not
exceeding one year and overnight bank deposits, in each case,
with any lender party to the Credit Agreement or with any
domestic commercial bank having capital and surplus in excess of
$500.0 million and a Thomson Bank Watch Rating of
B or better;
S-54
(4) repurchase obligations with a term of not more than
thirty days for underlying securities of the types described in
clauses (2) and (3) above entered into with any
financial institution meeting the qualifications specified in
clause (3) above;
(5) commercial paper having one of the two highest ratings
obtainable from Moodys or S&P and, in each case,
maturing within one year after the date of acquisition; and
(6) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in
clauses (1) through (5) of this definition.
Change of Control means the occurrence of any
of the following:
(1) the direct or indirect sale, lease, transfer,
conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of
all or substantially all of the properties or assets of the
Company and its Subsidiaries taken as a whole to any
person (as that term is used in
Section 13(d)(3) of the Exchange Act);
(2) the adoption of a plan relating to the liquidation or
dissolution of the Company;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation), the result of which is
that any person (as defined above), becomes the
Beneficial Owner, directly or indirectly, of more than 50% of
the Voting Stock of the Company, measured by voting power rather
than number of shares;
(4) the Company consolidates with, or merges with or into,
any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction
in which any of the outstanding Voting Stock of the Company or
such other Person is converted into or exchanged for cash,
securities or other property, other than any such transaction
where the Voting Stock of the Company outstanding immediately
prior to such transaction constitutes or is converted into or
exchanged for a majority of the outstanding shares of the Voting
Stock of such surviving or transferee Person (immediately after
giving effect to such transaction); or
(5) the first day on which a majority of the members of the
full Board of Directors of the Company are not Continuing
Directors.
Consolidated EBITDA means, with respect to
any specified Person for any period, the Consolidated Net Income
of such Person for such period plus, without duplication:
(1) an amount equal to any extraordinary loss plus any net
loss realized by such Person or any of its Restricted
Subsidiaries in connection with an Asset Sale, to the extent
such losses were deducted in computing such Consolidated Net
Income; plus
(2) provision for taxes based on income or profits of such
Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing
such Consolidated Net Income; plus
(3) the Fixed Charges of such Person and its Restricted
Subsidiaries for such period, to the extent that such Fixed
Charges were deducted in computing such Consolidated Net Income;
plus
(4) depreciation, amortization (including amortization of
intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it
represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income; plus
(5) an amount equal to the loss on the extinguishment of
debt; plus
(6) non-recurring charges including, but not limited to,
legal settlements, legal judgments and restructuring expenses;
minus
S-55
(7) non-cash items increasing such Consolidated Net Income
for such period, other than the accrual of income in the
ordinary course of business,
in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on
the income or profits of, and the depreciation and amortization
and other non-cash expenses of, a Restricted Subsidiary of the
Company will be added to Consolidated Net Income to compute
Consolidated EBITDA of the Company only to the extent that a
corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted
Subsidiary without prior governmental approval (or, if such
government approval is required, such approval either
(i) has been obtained or (ii) in the good faith
judgment of the Company, could be expected to be obtained in the
next 12 months based on prior experience obtaining such
approvals in the country of domicile for such Restricted
Subsidiary), and without direct or indirect restriction pursuant
to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its
stockholders.
Consolidated Net Income means, with respect
to any specified Person for any period, the aggregate of the net
income (loss) of such Person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance
with GAAP and without any reduction in respect of preferred
stock dividends; provided that:
(1) all extraordinary gains and not losses and all gains
and losses realized in connection with any Asset Sale or the
disposition of securities or the early extinguishment of
Indebtedness, together with any related provision for taxes on
any such gain, will be excluded;
(2) the net income (but not loss) of any Person that is not
a Restricted Subsidiary or that is accounted for by the equity
method of accounting will be included only to the extent of the
amount of dividends or similar distributions paid in cash to the
specified Person or a Restricted Subsidiary of the Person;
(3) the net income (but not loss) of any Restricted
Subsidiary will be excluded to the extent that the declaration
or payment of dividends or similar distributions by that
Restricted Subsidiary of that net income is not at the date of
determination permitted without any prior U.S. governmental
approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary
or its stockholders;
(4) the cumulative effect of a change in accounting
principles will be excluded;
(5) all non-cash charges relating to goodwill, impairment
of assets, amortization of intangibles will be excluded;
(6) any non-cash compensation expense recognized for grants
of equity awards will be excluded; and
(7) notwithstanding clause (1) above, the net income
of any Unrestricted Subsidiary will be excluded, whether or not
distributed to the specified Person or one of its Subsidiaries.
Consolidated Total Assets of any Person as of
any date means the total assets of such Person and its
Restricted Subsidiaries as of the most recent fiscal quarter end
for which an internal consolidated balance sheet of such Person
and its Subsidiaries is available, all calculated on a
consolidated basis in accordance with generally accepted
accounting principles.
Continuing Directors means, as of any date of
determination, any member of the Board of Directors of the
Company who:
(1) was a member of such Board of Directors on the date of
the supplemental indenture; or
S-56
(2) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the
time of such nomination or election.
Convertible Notes means the Companys
6.50% Convertible Senior Notes due 2013, issued pursuant to
the Existing Indenture.
Credit Agreement means that certain Second
Amended and Restated Credit Agreement, dated as of
October 26, 2009, by and among the Company, Credit Suisse,
Cayman Islands Branch, as a term loan administrative agent, PNC
Bank, National Association, as a term loan administrative agent,
revolving loan administrative agent and collateral agent,
KeyBank National Association, as documentation agent and
Citigroup Global Markets Inc., as syndication agent, providing
for up to $605.0 million of revolving credit and term loan
borrowings, including any related notes, Guarantees, collateral
documents, instruments and agreements executed in connection
therewith, and, in each case, as amended, restated, modified,
renewed, refunded, replaced in any manner (whether upon or after
termination or otherwise) or refinanced (including by means of
sales of debt securities to institutional investors) in whole or
in part from time to time.
Credit Facilities means, one or more debt
facilities (including, without limitation, the Credit Agreement)
or commercial paper facilities, in each case, with banks or
other institutional lenders providing for revolving credit
loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced in any manner
(whether upon or after termination or otherwise) or refinanced
(including by means of sales of debt securities to institutional
investors) in whole or in part from time to time.
Default means any event that is, or with the
passage of time or the giving of notice or both would be, an
Event of Default.
Designated Non-Cash Consideration means the
Fair Market Value of non-cash consideration received by the
Company or any of its Restricted Subsidiaries in connection with
an Asset Sale that is so designated as Designated Non-Cash
Consideration pursuant to an officers certificate, setting
forth the basis of such valuation, executed by an executive vice
president and the principal financial officer of the Company.
Disqualified Stock means any Capital Stock
that, by its terms (or by the terms of any security into which
it is convertible, or for which it is exchangeable, in each
case, at the option of the holder of the Capital Stock), or upon
the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise,
or redeemable at the option of the holder of the Capital Stock,
in whole or in part, on or prior to the date that is
91 days after the date on which the notes mature.
Notwithstanding the preceding sentence, any Capital Stock that
would constitute Disqualified Stock solely because the holders
of the Capital Stock have the right to require the Company to
repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale will not constitute Disqualified Stock
if the terms of such Capital Stock provide that the Company may
not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with
the covenant described above under the caption
Certain Covenants Restricted
Payments. The amount of Disqualified Stock deemed to be
outstanding at any time for purposes of the indenture will be
the maximum amount that the Company and its Restricted
Subsidiaries may become obligated to pay upon the maturity of,
or pursuant to any mandatory redemption provisions of, such
Disqualified Stock, exclusive of accrued dividends.
Equity Interests means Capital Stock and all
warrants, options or other rights to acquire Capital Stock (but
excluding any debt security that is convertible into, or
exchangeable for, Capital Stock).
Equity Offering means a public or private
sale either (1) of Equity Interests of the Company by the
Company (other than Disqualified Stock and other than to a
Subsidiary of the Company) or (2) of Equity Interests of a
direct or indirect parent entity of the Company (other than to
the Company or a Subsidiary of the Company) to the extent that
the net proceeds therefrom are contributed to the common equity
capital of the Company.
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Existing Indebtedness means all Indebtedness
of the Company and its Subsidiaries (other than Indebtedness
under the Credit Agreement) in existence on the date of the
supplemental indenture.
Existing Indenture means that certain
Indenture, dated as of March 5, 2008, as supplemented by
the First Supplemental Indenture, dated as of August 19,
2008, each by and between the Company and U.S. Bank
National Association, as trustee (and any successor trustee(s)).
Fair Market Value means the value that would
be paid by a willing buyer to an unaffiliated willing seller in
a transaction not involving undue pressure or compulsion of
either party to complete the transaction. If the subject
transaction involves the payment of more than
$40.0 million, Fair Market Value will be determined in good
faith by the Board of Directors of the Company (unless otherwise
provided in the indenture).
Fixed Charge Coverage Ratio means with
respect to any specified Person for any period, the ratio of the
Consolidated EBITDA of such Person for such period to the Fixed
Charges of such Person for such period. In the event that the
specified Person or any of its Restricted Subsidiaries incurs,
assumes, guarantees, repays, repurchases, redeems, defeases or
otherwise discharges any Indebtedness (other than ordinary
working capital borrowings) or issues, repurchases or redeems
preferred stock subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated and on
or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the
Calculation Date), then the Fixed Charge
Coverage Ratio will be calculated giving pro forma effect (in
accordance with
Regulation S-X
under the Securities Act or any successor regulation, rule or
law) to such incurrence, assumption, Guarantee, repayment,
repurchase, redemption, defeasance or other discharge of
Indebtedness, or such issuance, repurchase or redemption of
preferred stock, and the use of the proceeds therefrom, as if
the same had occurred at the beginning of the applicable
four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge
Coverage Ratio:
(1) acquisitions and Asset Sales or other dispositions that
have been made by the specified Person or any of its Restricted
Subsidiaries, including through mergers or consolidations, or
any Person or any of its Restricted Subsidiaries acquired by the
specified Person or any of its Restricted Subsidiaries, and
including all related financing transactions and including
increases in ownership of Restricted Subsidiaries, during the
four-quarter reference period or subsequent to such reference
period and on or prior to the Calculation Date, or that are to
be made on the Calculation Date, will be given pro forma effect
(in accordance with
Regulation S-X
under the Securities Act and any successor regulation, rule or
law) as if they had occurred on the first day of the
four-quarter reference period except that such pro forma
calculations may also include operating expense reductions
for such period resulting from the Asset Sale or other
disposition or acquisition, merger, consolidation or
discontinued operation (as determined in accordance with GAAP)
for which pro forma effect is being given (A) that
have been realized or (B) for which steps have been taken
and are supportable and quantifiable, and, in each case,
including, but not limited to, (a) reduction in personnel
expenses, (b) reduction of costs related to administrative
functions, (c) reduction of costs related to leased or
owned properties and (d) reductions from the consolidation
of operations and streamlining of corporate overhead;
provided that, in either case, such adjustments are set
forth in an officers certificate signed by the
Companys principal financial officer or similar officer
that states (i) the amount of such adjustment or
adjustments and (ii) that such adjustment or adjustments
are based on the reasonable good faith belief of the officers
executing such officers certificate at the time of such
execution;
(2) the Consolidated EBITDA attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses (and ownership interests therein)
disposed of prior to the Calculation Date, will be excluded;
(3) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses (and ownership interests therein)
disposed of prior to the Calculation Date, will be excluded, but
only to the extent that the obligations giving rise to such
Fixed Charges will
S-58
not be obligations of the specified Person or any of its
Restricted Subsidiaries following the Calculation Date;
(4) any Person that is a Restricted Subsidiary on the
Calculation Date will be deemed to have been a Restricted
Subsidiary at all times during such four-quarter period;
(5) any Person that is not a Restricted Subsidiary on the
Calculation Date will be deemed not to have been a Restricted
Subsidiary at any time during such four-quarter period; and
(6) if any Indebtedness bears a floating rate of interest,
the interest expense on such Indebtedness will be calculated as
if the rate in effect on the Calculation Date had been the
applicable rate for the entire period (taking into account any
Hedging Obligation applicable to such Indebtedness if such
Hedging Obligation has a remaining term as at the Calculation
Date in excess of 12 months).
Fixed Charges means, with respect to any
specified Person for any period, the sum, without duplication,
of:
(1) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or
accrued, including, without limitation, amortization of original
issue discount and non-cash interest payments (but excluding the
amortization of debt issuance costs and deferred financing fees)
the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers acceptance
financings, and net of the effect of all payments made or
received pursuant to Hedging Obligations in respect of interest
rates; plus
(2) the consolidated interest expense of such Person and
its Restricted Subsidiaries that was capitalized during such
period; plus
(3) any interest on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries, whether or not such Guarantee or Lien
is called upon; plus
(4) the product of (a) all dividends, whether paid or
accrued and whether or not in cash, on any series of preferred
stock of such Person or any of its Restricted Subsidiaries,
other than dividends on Equity Interests payable solely in
Equity Interests of the Company (other than Disqualified Stock)
or to the Company or a Restricted Subsidiary of the Company,
times (b) a fraction, the numerator of which is one
and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such
Person, expressed as a decimal;
in each case, determined on a consolidated basis in accordance
with GAAP (provided, however, that if subsequent
to the date of the supplemental indenture, there is a change in
GAAP such that certain obligations that previously were not
treated as Indebtedness under GAAP would be treated as
Indebtedness under GAAP as then in effect, such obligations
shall not be treated as Indebtedness or as Fixed Charges),
provided, that any make-whole premium or interest expense
payable in connection with the prepayment of Indebtedness and,
if applicable, any swap breakage costs incurred in connection
with any prepayment of a term loan under a Credit Facility will
be excluded for purposes of calculating Fixed Charges.
Foreign Subsidiary of a Person means a
Subsidiary incorporated or otherwise organized or existing under
the laws of a jurisdiction other than the United States of
America, any state thereof or any territory or possession of the
United States of America.
GAAP means generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board, or the Securities
and Exchange Commission, or in such other statements by such
other entity as have been approved by a significant segment of
the accounting profession, which are in effect from time to time.
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Guarantee means any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any
Indebtedness of any other Person and any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other
Person or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness or other
obligation 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 endorsements for
collection or deposit in the ordinary course of business. The
Term Guarantee used as a verb has a corresponding
meaning.
Hedging Obligations means, with respect to
any specified Person, the obligations of such Person under:
(1) interest rate swap agreements (whether from fixed to
floating or from floating to fixed), interest rate cap
agreements and interest rate collar agreements;
(2) other agreements or arrangements designed to manage
interest rates or interest rate risk; and
(3) other derivative agreements or arrangements designed to
protect such Person against fluctuations in currency exchange
rates, commodity prices, or raw materials, but excluding
purchase and supply agreements.
Indebtedness means, with respect to any
specified Person, any indebtedness of such Person (excluding
accrued expenses and trade payables), whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in
respect thereof);
(3) in respect of bankers acceptances;
(4) representing Capital Lease Obligations or Attributable
Debt in respect of sale and leaseback transactions;
(5) representing the balance deferred and unpaid of the
purchase price of any property or services due more than six
months after such property is acquired or such services are
completed; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than
letters of credit, Attributable Debt and Hedging Obligations)
would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP (provided,
however, that if subsequent to the date of the supplemental
indenture, there is a change in GAAP such that certain
obligations that previously were not treated as liabilities
under GAAP would be treated as liabilities under GAAP as then in
effect, such obligations shall not be treated as Indebtedness).
In addition, the term Indebtedness includes all
Indebtedness of others secured by a Lien on any asset of the
specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included,
the Guarantee by the specified Person of any Indebtedness of any
other Person; provided, however, that obligations
under or in respect of Non-recourse US Receivables Facilities,
in an aggregate amount not to exceed the greater of
(i) $100.0 million and (ii) 6.75% of the
Companys Consolidated Total Assets, will not be deemed to
constitute Indebtedness; provided further,
however, that (i) obligations under or in respect of
Non-recourse US Receivables Facilities in excess of the greater
of (x) $100.0 million and (y) 6.75% of the
Companys Consolidated Total Assets will be deemed to
constitute Indebtedness that must be incurred pursuant to the
covenant described under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock, and (ii) if there is a change in the
characteristics of any Non-recourse US Receivables Facility such
that it fails to constitute a Non-recourse US Receivables
Facility, such change will be deemed to constitute Indebtedness
(in the amount of such Non-recourse US Receivables Facility that
becomes recourse Indebtedness to the Company or its Restricted
Subsidiaries) that must be incurred pursuant to the covenant
described under the caption Incurrence of
Indebtedness and Issuance of Preferred Stock.
Notwithstanding the preceding, the amount of obligations under
or in respect of any Non-recourse US Receivables Facility shall
not be deemed to exceed the greater of $50.0 million and
3.5% of the Companys Consolidated Total Assets
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solely as a result of fluctuations in exchange rates or currency
values. For the avoidance of doubt, the precious metals
consignment and lease arrangements of the Company and its
Subsidiaries shall not be treated as Indebtedness so long as
they do not appear upon a balance sheet of the specified Person
prepared in accordance with GAAP (provided, however, that
if subsequent to the date of the supplemental indenture, there
is a change in GAAP such that the obligations under such
precious metals consignment and lease arrangements that
previously were not treated as liabilities under GAAP would be
treated as liabilities under GAAP as then in effect, such
obligations shall not be treated as Indebtedness even if they
appear upon a balance sheet in accordance with GAAP).
Investment Grade Rating means a rating equal
to or higher than Baa3 (or the equivalent) by Moodys
Investors Service, Inc. and BBB- (or the equivalent) by
Standard & Poors Ratings Group, Inc., or an
equivalent rating by any other Rating Agency.
Investments means, with respect to any
Person, all direct or indirect investments by such Person in
other Persons (including Affiliates) in the forms of loans
(including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances
to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP. If the Company
or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect
Restricted Subsidiary of the Company such that, after giving
effect to any such sale or disposition, such Person is no longer
a Restricted Subsidiary of the Company, the Company will be
deemed to have made an Investment on the date of any such sale
or disposition equal to the Fair Market Value of the
Companys Investments in such Restricted Subsidiary that
were not sold or disposed of in an amount determined as provided
in the final paragraph of the covenant described above under the
caption Certain Covenants
Restricted Payments. The acquisition by the Company or any
Restricted Subsidiary of the Company of a Person that holds an
Investment in a third Person will be deemed to be an Investment
by the Company or such Restricted Subsidiary in such third
Person in an amount equal to the Fair Market Value of the
Investments held by the acquired Person in such third Person in
an amount determined as provided in the final paragraph of the
covenant described above under the caption
Certain Covenants Restricted
Payments. Except as otherwise provided in the indenture,
the amount of an Investment will be determined at the time the
Investment is made and without giving effect to subsequent
changes in value.
Lien means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset, whether or not filed,
recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction.
Moodys means Moodys Investors
Service, Inc.
Net Proceeds means the aggregate cash
proceeds and Cash Equivalents received by the Company or any of
its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash or Cash Equivalents
received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale, including, without
limitation, legal, accounting and investment banking fees, and
sales commissions, and any relocation expenses incurred as a
result of the Asset Sale, taxes paid or payable as a result of
the Asset Sale, in each case, after taking into account any
available tax credits or deductions and any tax sharing
arrangements, and amounts required to be applied to the
repayment of Indebtedness required in connection with such Asset
Sale, other than Indebtedness under a Credit Facility and any
reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP.
Non-Recourse Debt means Indebtedness:
(1) as to which neither the Company nor any of its
Restricted Subsidiaries (a) provides credit support of any
kind (including any undertaking, agreement or instrument that
would constitute
S-61
Indebtedness), (b) is directly or indirectly liable as a
guarantor or otherwise, or (c) constitutes the
lender; and
(2) as to which the lenders have been notified in writing
that they will not have any recourse to the stock or assets of
the Company or any of its Restricted Subsidiaries (other than
the Equity Interests of an Unrestricted Subsidiary).
Non-recourse US Receivables Facility means
one or more receivables financing or purchase and sale
facilities in the United States, the indebtedness of which is
non-recourse (except for standard representations, warranties,
covenants and indemnities made in connection with such
facilities) to the Company and the Restricted Subsidiaries
pursuant to which the Company
and/or any
of its Restricted Subsidiaries sells or transfers its accounts
receivable (or interests therein) to a Person that is not a
Restricted Subsidiary or to a Restricted Subsidiary that in turn
sells or transfers such accounts receivable (or interests
therein) to a Person that is not a Restricted Subsidiary.
Obligations means any principal, interest,
penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any
Indebtedness.
Permitted Asset Swap means the purchase and
sale or exchange within 30 days of assets of a Permitted
Business or a combination of business assets of a Permitted
Business and cash or Cash Equivalents between the Company or any
of its Restricted Subsidiaries and another Person that is not
the Company or any of its Restricted Subsidiaries; provided that
any cash or Cash Equivalents received must be applied in
accordance with the covenant described under Repurchase at
the Option of Holders Asset Sales.
Permitted Business means any business that is
the same as or related, ancillary or complementary to, or any
extension, development or expansion of, any of the businesses of
the Company and its Restricted Subsidiaries on the date of the
supplemental indenture.
Permitted Investments means:
(1) any Investment in the Company or in a Restricted
Subsidiary of the Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person, if as a result of such
Investment:
(a) such Person becomes a Restricted Subsidiary of the
Company; or
(b) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets
to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company;
(4) any Investment made as a result of the receipt of
non-cash consideration from an asset sale that either did not
constitute an Asset Sale pursuant to the Indenture or was made
pursuant to and in compliance with the covenant described above
under the caption Repurchase at the Option of
Holders Asset Sales;
(5) any acquisition of assets or Capital Stock solely in
exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company;
(6) any Investments received in compromise or resolution of
(A) obligations of trade creditors or customers that were
incurred in the ordinary course of business of the Company or
any of its Restricted Subsidiaries, including pursuant to any
plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of any trade creditor or customer; or
(B) litigation, arbitration or other disputes;
(7) Investments represented by Hedging Obligations;
(8) loans or advances to employees made in the ordinary
course of business of the Company or any Restricted Subsidiary
of the Company in an aggregate principal amount not to exceed
$5.0 million at any one time outstanding;
S-62
(9) any guarantee of Indebtedness permitted by the covenant
entitled Certain Covenants
Incurrence of Indebtedness and Issuance of Preferred Stock
to be incurred, other than Indebtedness of an Affiliate of the
Company that is not a Restricted Subsidiary of the Company;
(10) other Investments in any Person having an aggregate
Fair Market Value (measured on the date each such Investment was
made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to
this clause (10) that are at the time outstanding not to
exceed the greater of (A) $75.0 million and
(B) 5.0% of the Companys Consolidated Total Assets;
(11) any Investments consisting of any deferred portion of
the sales price received by the Company or any Restricted
Subsidiary in connection with an asset sale made pursuant to and
in compliance with the covenant described under the caption
Repurchase at the Option of Holders Asset
Sales;
(12) any Investments constituting (i) accounts
receivable arising, (ii) trade debt granted, or
(iii) deposits made in connection with the purchase price
of goods or services, in each case in the ordinary course of
business;
(13) Investments relating to any special purpose
wholly-owned subsidiary of the Company organized in connection
with a Receivables Facility that, in the good faith
determination of the board of directors of the Company, are
necessary or advisable to effect such Receivables
Facility; and
(14) Investments existing on the date of the supplemental
indenture.
Permitted Liens means:
(1) Liens on assets of the Company or Restricted
Subsidiaries securing Indebtedness and other Obligations under
Credit Facilities that was permitted by the terms of the
indenture to be incurred pursuant to clause (1) of the
definition of Permitted Debt
and/or
securing Hedging Obligations related thereto
and/or
securing Obligations with regard to treasury management
arrangements;
(2) Liens in favor of the Company;
(3) Liens on property of a Person existing at the time such
Person becomes a Restricted Subsidiary of the Company or is
merged with or into or consolidated with the Company or any
Restricted Subsidiary of the Company; provided that such
Liens were in existence prior to the contemplation of such
Person becoming a Restricted Subsidiary of the Company or such
merger or consolidation and do not extend to any assets other
than those of the Person that becomes a Restricted Subsidiary of
the Company or is merged into or consolidated with the Company
or a Restricted Subsidiary of the Company;
(4) Liens on property (including Capital Stock) existing at
the time of acquisition of the property by the Company or any
Subsidiary of the Company; provided that such Liens were
in existence prior to, such acquisition, and not incurred in
contemplation of, such acquisition;
(5) Liens incurred or deposits made in the ordinary course
of business in connection with workers compensation,
unemployment insurance or other forms of governmental insurance
or benefits, or to secure performance of tenders, statutory
obligations, bids, leases or other similar obligations (other
than for borrowed money) entered into in the ordinary course of
business or to secure obligations on surety and appeal bonds or
performance bonds;
(6) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (4) of the second
paragraph of the covenant entitled Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock covering only the assets acquired with or
financed by such Indebtedness;
(7) Liens existing on the date of the supplemental
indenture and any amendment thereto or renewal or replacement
thereof (so long as any such amendment, renewal, or replacement
is not disadvantageous to the holders of the notes when taken as
a whole as compared to the Lien in effect on the date of the
supplemental indenture);
(8) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested
in good faith by appropriate proceedings promptly instituted and
diligently
S-63
concluded; provided that any reserve or other appropriate
provision as is required in conformity with GAAP has been made
therefor;
(9) Liens imposed by law, such as carriers,
warehousemens, landlords and mechanics Liens,
in each case, incurred in the ordinary course of business;
(10) survey exceptions, easements or reservations of, or
rights of others for, licenses,
rights-of-way,
sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use
of real property that were not incurred in connection with
Indebtedness and that 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;
(11) Liens created for the benefit of (or to secure) the
notes;
(12) Liens to secure any Permitted Refinancing Indebtedness
permitted to be incurred under the indenture; provided,
however, that:
(a) the new Lien is 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 property or proceeds or distributions thereof); and
(b) the Indebtedness secured by the new Lien is not
increased to any amount greater than the sum of (x) the
outstanding principal amount, or, if greater, committed amount,
of the Indebtedness renewed, refunded, refinanced, replaced,
defeased or discharged with such Permitted Refinancing
Indebtedness and (y) an amount necessary to pay any fees
and expenses, including premiums, related to such renewal,
refunding, refinancing, replacement, defeasance or discharge;
(13) other Liens, but only so long as the Priority Debt
Leverage Ratio as of such date does not exceed 2.25 to 1.00,
determined on a pro forma basis, as if any Indebtedness that
such Liens secure (including, if applicable, a pro forma
application of any net proceeds therefrom) had been incurred
(with such Liens securing such Indebtedness) at the beginning of
the most recent four-quarter period for which internal financial
statements are available;
(14) judgment Liens in existence for less than 45 days
after the entry thereof or with respect to which execution has
been stayed or the payment of which is covered in full (subject
to a customary deductible) by insurance maintained with
responsible insurance companies;
(15) Liens incurred in the ordinary course of business of
the Company on inventory that has been chemically combined with
precious metals inventory or inventories so long as the
aggregate Indebtedness secured thereby does not exceed
$30.0 million and Liens created in connection with the
consignment or lease of metals;
(16) Liens on the assets of the Company or any Restricted
Subsidiary in connection with the Receivables Facility; and
(17) Liens incurred in the ordinary course of business of
the Company or any Restricted Subsidiary of the Company with
respect to obligations that at any one time outstanding do not
exceed the greater of (i) $15.0 million and
(ii) 1.25% of the Companys Consolidated Total Assets.
Permitted Refinancing Indebtedness means any
Indebtedness of the Company or any of its Restricted
Subsidiaries issued in exchange for, or the net proceeds of
which are used to renew, refund, refinance, replace, defease or
discharge other Indebtedness of the Company or any of its
Restricted Subsidiaries (other than intercompany Indebtedness);
provided that:
(1) the principal amount (or accreted value, if applicable)
of such Permitted Refinancing Indebtedness does not exceed the
original principal amount (or accreted value, if applicable) of
the Indebtedness renewed, refunded, refinanced, replaced,
defeased or discharged (plus all accrued interest on the
Indebtedness and the amount of all fees and expenses, including
premiums, incurred in connection therewith);
S-64
(2) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being
renewed, refunded, refinanced, replaced, defeased or discharged;
(3) if the Indebtedness being renewed, refunded,
refinanced, replaced, defeased or discharged is subordinated in
right of payment to the notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment to the notes on
terms at least as favorable to the holders of notes as those
contained in the documentation governing the Indebtedness being
renewed, refunded, refinanced, replaced, defeased or
discharged; and
(4) such Indebtedness is incurred either by the Company or
by the Restricted Subsidiary of the Company that was the obligor
on the Indebtedness being renewed, refunded, refinanced,
replaced, defeased or discharged and is guaranteed only by
Persons who were obligors on the Indebtedness being renewed,
refunded, refinanced, replaced, defeased or discharged.
Person means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company,
entity or government or any agency or political subdivision
thereof.
Priority Debt Leverage Ratio means, on any
date, the ratio of:
(1) (a) the aggregate principal amount of Indebtedness
of the Company and its Restricted Subsidiaries secured by Liens,
including without limitation, Capital Lease Obligations, but
excluding Hedging Obligations, outstanding as of such date (and,
for this purpose, letters of credit will be deemed to have a
principal amount equal to the face amount thereof, whether or
not drawn), plus (b) without duplication, the
aggregate principal amount of Indebtedness of all of the
Companys Restricted Subsidiaries to a Person that is
neither the Company nor a Restricted Subsidiary of the Company
for borrowed money outstanding as of such date, to:
(2) the aggregate amount of the Companys Consolidated
EBITDA for the most recent four-quarter period for which
internal financial statements are available, as of such date,
in each case with such pro forma adjustments as are consistent
with the pro forma adjustment provisions set forth in the
definition of Fixed Charge Coverage Ratio; provided that
any Restricted Subsidiary that becomes a guarantor of the notes
pursuant to the covenant described under the caption
Certain Covenants Future
Subsidiary Guarantors shall not be deemed to have incurred
Indebtedness pursuant to clause (1)(a) of this definition.
Qualifying Equity Interests means Equity
Interests of the Company other than (1) Disqualified Stock
and (2) Equity Interests sold in an Equity Offering prior
to the third anniversary of the date of the supplemental
indenture that are used to support an optional redemption of
notes pursuant to the Optional Redemption provisions
of the indenture.
Rating Agency means Standard &
Poors Ratings Group, Inc. and Moodys Investors
Services, Inc. or, if Standard & Poors Ratings
Group, Inc. or Moodys Investors Service, Inc. or both
shall not make a rating on the notes publicly available, a
nationally recognized statistical rating agency or agencies, as
the case may be, selected by the Company (as certified by a
resolution of the Board of Directors) which shall be substituted
for Standard & Poors Ratings Group, Inc. or
Moodys Investors Service, Inc. or both, as the case may be.
Receivables Facility means one or more
receivables financing or purchase and sale facilities, the
indebtedness of which is recourse or non-recourse (except for
standard representations, warranties, covenants and indemnities
made in connection with such facilities) to the Company and the
Restricted Subsidiaries pursuant to which the Company
and/or any
of its Restricted Subsidiaries sells or transfers its accounts
receivable (or interests therein) to a Person that is not a
Restricted Subsidiary or to a Restricted Subsidiary that in turn
sells or transfers such accounts receivable (or interests
therein) to a Person that is not a Restricted Subsidiary.
S-65
Receivables Fees means distributions or
payments made directly or by means of discounts with respect to
any participation interest issued or sold in connection with,
and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
Recourse
Non-U.S. Receivables
Facility means one or more receivables financing or
purchase and sale facilities outside of the United States, the
indebtedness of which is recourse to the Company and the
Restricted Subsidiaries pursuant to which the Company
and/or any
of its Restricted Subsidiaries sells or transfers its accounts
receivable (or interests therein) to a Person that is not a
Restricted Subsidiary or to a Restricted Subsidiary that in turn
sells or transfers such accounts receivable (or interests
therein) to a Person that is not a Restricted Subsidiary.
Restricted Investment means an Investment
other than a Permitted Investment.
Restricted Subsidiary of a Person means any
Subsidiary of such Person that at the time of determination is
not an Unrestricted Subsidiary.
S&P means Standard &
Poors Ratings Group.
Significant Subsidiary means any Subsidiary
that would be a significant subsidiary as defined in
Article 1,
Rule 1-02
of
Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date of the supplemental indenture.
Stated Maturity means, with respect to any
installment of interest or principal on any series of
Indebtedness, the date on which the payment of interest or
principal was scheduled to be paid in the documentation
governing such Indebtedness as of the date of the supplemental
indenture and excluding any provision providing for the
contingent repayment, redemption or repurchase of any such
interest or principal prior to the date originally scheduled for
the payment thereof unless such contingency has occurred.
Subsidiary means, with respect to any
specified Person:
(1) a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by that Person
or by one or more other Subsidiaries of that Person, or by that
Person and one or more other Subsidiaries of that Person. For
the purposes of this definition, voting stock means
stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior
class of stock has such voting power by reason of any
contingency; and
(2) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners
of which are that Person or one or more Subsidiaries of that
Person (or any combination thereof).
Treasury Rate means, as of any redemption
date, the yield to maturity as of such redemption date of United
States Treasury securities with a constant maturity (as compiled
and published in the most recent Federal Reserve Statistical
Release H.15 (519) that has become publicly available at
least two business days prior to the redemption date (or, if
such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to
the period from the redemption date
to ,
2014; provided, however, that if the period from
the redemption date
to ,
2014 is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant
maturity of one year will be used.
Unrestricted Subsidiary means any Subsidiary
of the Company or any successor to any of them) that has been
designated as of the date of determination by the Board of
Directors of the Company as an Unrestricted Subsidiary pursuant
to a resolution of the Board of Directors, but only to the
extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) except as permitted by the covenant described above
under the caption Certain
Covenants Transactions with Affiliates, is not
party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such
Restricted
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Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company;
(3) is a Person with respect to which neither the Company
nor any of its Restricted Subsidiaries has any direct or
indirect obligation (a) to subscribe for additional Equity
Interests or (b) to maintain or preserve such Persons
financial condition or to cause such Person to achieve any
specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company or
any of its Restricted Subsidiaries.
U.S. Government Obligations means securities
that are (x) direct obligations of the United States of
America for the payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the
United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act of 1933, as amended)
as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian
for the account of the holder of such depositary receipt,
provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the
holder of such depositary receipt from any amount received by
the custodian in respect of the U.S. Government Obligation
or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depositary
receipt.
Voting Stock of any specified Person as of
any date means the Capital Stock of such Person that is at the
time entitled to vote in the election of the Board of Directors
of such Person.
Weighted Average Life to Maturity means, when
applied to any Indebtedness at any date, the number of years
obtained by dividing:
(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking
fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect of the
Indebtedness, by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the
making of such payment; by
(2) the then outstanding principal amount of such
Indebtedness.
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MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain U.S. federal income
tax considerations relating to the ownership and disposition of
the notes. It is not a complete analysis of all the potential
tax considerations relating to the notes. This summary is based
upon the provisions of the Internal Revenue Code of 1986, as
amended, or the Code, Treasury Regulations promulgated under the
Code, administrative rulings and pronouncements and judicial
decisions, all relating to the U.S. federal income tax
treatment of debt instruments as currently in effect and
publicly available. These authorities may be changed, perhaps
with retroactive effect, so as to result in U.S. federal
income tax consequences different from those set forth below.
This summary is limited to beneficial owners of notes that
purchase the notes upon their initial issuance at their issue
price (within the meaning of Section 1273 of the Code) and
that hold the notes as capital assets (within the meaning of
Section 1221 of the Code). This summary does not address
the tax considerations arising under the laws of any foreign,
state or local jurisdiction. In addition, this discussion does
not address all tax considerations that may be applicable to
holders particular circumstances or to holders that may be
subject to special tax rules, such as, for example:
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holders subject to the alternative minimum tax;
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banks, insurance companies, or other financial institutions;
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real estate investment trusts and regulated investment companies;
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tax-exempt organizations;
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brokers and dealers in securities or currencies;
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persons who have ceased to be citizens or residents of the
United States;
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traders in securities that elect to use a
mark-to-market
method of tax accounting for their securities holdings;
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U.S. Holders (as defined below) whose functional currency
is not the U.S. dollar;
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persons that will hold the notes as a position in a hedging
transaction, straddle, conversion transaction or other risk
reduction transaction;
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persons deemed to sell the notes under the constructive sale
provisions of the Code; or
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partnerships (or other entities or arrangements classified as
partnerships for U.S. federal income tax purposes) or other
pass-through entities.
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This summary of certain U.S. federal income tax
considerations is for general information only and is not tax
advice. This summary is not binding on the Internal Revenue
Service, or the IRS. We have not sought, and will not seek, any
ruling from the IRS with respect to the statements made in this
summary, and there can be no assurance that the IRS will not
take a position contrary to these statements or that a contrary
position taken by the IRS would not be sustained by a court. If
you are considering purchasing the notes, you are urged to
consult your own tax advisor with respect to the application of
the U.S. federal income tax laws to your particular
situation, as well as any tax considerations arising under the
U.S. federal estate or gift tax rules, under the laws of
any state, local, or foreign taxing jurisdiction or under any
applicable income tax treaty.
Consequences
to U.S. Holders
The following is a summary of the general U.S. federal
income tax consequences that will apply to you if you are a
U.S. Holder of the notes. Certain consequences
to
Non-U.S. Holders
of the notes are described under Consequences
to
Non-U.S. Holders,
below. U.S. Holder means a beneficial owner of
a note that is, for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for
U.S. federal income tax purposes) created or organized in
or under the laws of the United States, any state thereof or the
District of Columbia;
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an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust that (1) is subject to the supervision of a court
within the United States and the control of one or more
U.S. persons or (2) has a valid election in effect
under applicable Treasury Regulations to be treated as a
U.S. person.
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If a partnership (or other entity or arrangement classified as a
partnership for U.S. federal income tax purposes) holds
notes, the tax treatment of a partner in the partnership will
generally depend upon the status of the partner and the
activities of the partnership. If you are an entity or
arrangement treated as a partnership for U.S. federal
income tax purposes (or if you are a partner in such a
partnership), you are urged to consult your tax advisor
regarding the tax consequences of holding the notes to you.
Payments
of Interest
Stated interest on the notes will generally be taxable to you as
ordinary income at the time it is paid or accrued in accordance
with your method of accounting for U.S. federal income tax
purposes.
Sale,
Exchange or Other Taxable Disposition of the Notes
Upon the sale, exchange, redemption or other taxable disposition
of a note, you generally will recognize taxable gain or loss
equal to the difference between the amount realized on such
disposition (except to the extent any amount realized is
attributable to accrued but unpaid interest, which, if not
previously taxed, will be taxable as such) and your adjusted tax
basis in the note. Your adjusted tax basis in a note generally
will be your cost for the note.
Gain or loss recognized on the disposition of a note generally
will be capital gain or loss, and will be long-term capital gain
or loss if, at the time of such disposition, the
U.S. Holders holding period for the note is more than
one year. Long-term capital gains recognized by a non-corporate
U.S. Holder generally are subject to a reduced rate of
U.S. federal income tax. The deductibility of capital
losses by U.S. Holders is subject to certain limitations.
Information
Reporting and Backup Withholding
In general, information reporting requirements will apply to
certain payments of principal, premium (if any) and interest on
and the proceeds of certain sales of notes unless you are an
exempt recipient. Backup withholding of tax (currently at a rate
of 28%) generally will apply to such payments if you fail to
provide your taxpayer identification number or proper
certification of exempt status or have been notified by the IRS
that payments to you are subject to backup withholding.
Any amounts withheld under the backup withholding rules will
generally be allowed as a refund or a credit against your
U.S. federal income tax liability provided that you furnish
the required information to the IRS on a timely basis.
Consequences
to Non-U.S.
Holders
As used in this prospectus supplement, the term
Non-U.S. Holder
means a beneficial owner of a note (other than an entity or
arrangement treated as a partnership for U.S. federal
income tax purposes) that is not a U.S. Holder.
If a partnership, including any entity or arrangement treated as
a partnership for U.S. federal income tax purposes, is a
holder of a note, the U.S. federal income tax treatment of
a partner in such a partnership will generally depend on the
status of the partner and the activities of the partnership.
Partners in such a partnership are urged to consult their tax
advisors as to the particular U.S. federal income tax
consequences applicable to them of acquiring, holding or
disposing of the notes.
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Payments
of Interest
Subject to the discussion of backup withholding below, if you
are a
Non-U.S. Holder
you will generally not be subject to U.S. federal income
tax or the 30% U.S. federal withholding tax on interest
paid on the notes so long as that interest is not effectively
connected with your conduct of a trade or business within the
United States (or, if an income tax treaty applies, is not
attributable to a permanent establishment maintained by you in
the United States), provided that:
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you do not (directly or indirectly, actually or constructively)
own 10% or more of the total combined voting power of all
classes of our stock that are entitled to vote;
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you are not a controlled foreign corporation that is directly or
indirectly related to us through actual or constructive stock
ownership;
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you are not a bank whose receipt of interest on a note is
described in Section 881(c)(3)(A) of the Code; and
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you provide the applicable withholding agent with, among other
things, your name and address, and certify, under penalties of
perjury, that you are not a U.S. person (which
certification may be made on an IRS
Form W-8BEN
(or successor form)).
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If you cannot satisfy the requirements described above, payments
of interest will be subject to the 30% U.S. federal
withholding tax, unless you provide the applicable withholding
agent with a properly executed (1) IRS
Form W-8BEN
(or successor form) claiming an exemption from or reduction in
withholding under the benefit of an applicable income tax treaty
or (2) IRS
Form W-8ECI
(or successor form) stating that interest paid on the notes is
not subject to U.S. federal withholding tax because it is
effectively connected with your conduct of a trade or business
in the United States.
Sale,
Exchange or Other Taxable Disposition of the Notes
Subject to the discussion of backup withholding below, you will
generally not be subject to U.S. federal income or
withholding tax on any gain recognized on the sale, exchange,
redemption or other taxable disposition of a note, unless:
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that gain is effectively connected with the conduct by you of a
trade or business within the United States (and if an income tax
treaty applies, such gain is attributable to a permanent
establishment maintained by you in the United States); or
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if you are an individual
Non-U.S. Holder,
you are present in the United States for at least 183 days
in the taxable year of such sale, exchange, redemption or other
taxable disposition and certain other conditions are met.
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If you are described in the second bullet point above, you will
generally be subject to U.S. federal income tax at a rate
of 30% on the amount by which your capital gains allocable to
U.S. sources, including gain from such sale, exchange,
redemption or other taxable disposition, exceed capital losses
allocable to U.S. sources, except as otherwise required by
an applicable income tax treaty.
To the extent that the amount realized on any sale, exchange,
redemption or other taxable disposition of notes is attributable
to accrued but unpaid interest on the note, this amount
generally will be treated in the same manner as payments of
interest as described under the heading
Payments of Interest above.
Interest
or Gain Effectively Connected with a U.S. Trade or
Business
If you are engaged in a trade or business in the United States
and interest on a note or gain recognized from the sale,
exchange, redemption or other taxable disposition of a note is
effectively connected with the conduct of that trade or business
(and, if an income tax treaty applies, is attributable to a
permanent establishment maintained by you in the United States),
you will generally be subject to U.S. federal income tax
(but not the 30% U.S. federal withholding tax if you
provide an IRS
Form W-8ECI
with respect to interest, as described above) on that interest
or gain on a net income basis in the same manner as if you were
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a U.S. person as defined under the Code. In addition, if
you are a foreign corporation, you may be subject to a
branch profits tax equal to 30% (or lower applicable
income tax treaty rate) of your earnings and profits for the
taxable year, subject to adjustments, that are effectively
connected with your conduct of a trade or business in the United
States. For this purpose, interest or gain effectively connected
with your trade or business in the United States will be
included in your earnings and profits.
Information
Reporting and Backup Withholding
Generally, information returns will be filed with the IRS in
connection with payments on the notes and proceeds from the sale
or other disposition of the notes. You may be subject to backup
withholding of tax on these payments unless you comply with
certain certification procedures to establish that you are not a
U.S. person. The certification procedures required to claim
an exemption from withholding of tax on interest described above
will satisfy the certification requirements necessary to avoid
backup withholding as well. The amount of any backup withholding
from a payment to you will be allowed as a credit against your
U.S. federal income tax liability and may entitle you to a
refund, provided that the required information is timely
furnished to the IRS.
S-71
CERTAIN
ERISA CONSIDERATIONS
The following summary regarding certain aspects of the
U.S. Employee Retirement Income Security Act of 1974, as
amended (ERISA), and the Code is based on ERISA and
the Code, judicial decisions and U.S. Department of Labor
and IRS regulations and rulings that are in existence on the
date of this prospectus supplement. This summary is general in
nature and does not address every issue pertaining to ERISA that
may be applicable to us, the notes or a particular investor.
Accordingly, each prospective investor should consult with his,
her or its own counsel in order to understand the ERISA-related
issues that affect or may affect the investor with respect to
this investment.
ERISA and the Code impose certain requirements on employee
benefit plans (as defined in Section 3(3) of ERISA) that
are subject to Title I of ERISA and plans subject to
Section 4975 of the Code (each such employee benefit plan
or plan, a Plan) and on those persons who are
fiduciaries with respect to Plans. In considering an
investment of the assets of a Plan subject to Title I of
ERISA in the notes, a fiduciary must, among other things,
discharge its duties solely in the interest of the participants
of such Plan and their beneficiaries and for the exclusive
purpose of providing benefits to such participants and
beneficiaries and defraying reasonable expenses of administering
the Plan. A fiduciary must act prudently and must diversify the
investments of a Plan subject to Title I of ERISA so as to
minimize the risk of large losses, as well as discharge its
duties in accordance with the documents and instruments
governing such Plan. In addition, ERISA generally requires
fiduciaries to hold all assets of a Plan subject to Title I
of ERISA in trust and to maintain the indicia of ownership of
such assets within the jurisdiction of the district courts of
the United States. A fiduciary of a Plan subject to Title I
of ERISA should consider whether an investment in the notes
satisfies these requirements.
An investor who is considering acquiring the notes with the
assets of a Plan must consider whether the acquisition and
holding of the notes will constitute or result in a non-exempt
prohibited transaction. Section 406(a) of ERISA and
Sections 4975(c)(1)(A), (B), (C) and (D) of the
Code prohibit certain transactions that involve a Plan and a
party in interest as defined in Section 3(14)
of ERISA or a disqualified person as defined in
Section 4975(e)(2) of the Code with respect to such Plan.
Examples of such prohibited transactions include, but are not
limited to, sales or exchanges of property or extensions of
credit between a Plan and a party in interest or disqualified
person (such as a purchase of notes). Section 406(b) of
ERISA and Sections 4975(c)(1)(E) and (F) of the Code
generally prohibit a fiduciary with respect to a Plan from
dealing with the assets of the Plan for its own benefit (for
example when a fiduciary of a Plan uses its position to cause
the Plan to make investments in connection with which the
fiduciary (or a party related to the fiduciary) receives a fee
or other consideration).
ERISA and the Code contain certain exemptions from the
prohibited transactions described above, and the Department of
Labor has issued several exemptions, although certain exemptions
do not provide relief from the prohibitions on self-dealing
contained in Section 406(b) of ERISA and
Sections 4975(c)(1)(E) and (F) of the Code. Exemptions
include Section 408(b)(17) of ERISA and
Section 4975(d)(20) of the Code pertaining to certain
transactions with non-fiduciary service providers; Department of
Labor Prohibited Transaction Class Exemption (PTCE)
95-60,
applicable to transactions involving insurance company general
accounts;
PTCE 90-1,
regarding investments by insurance company pooled separate
accounts;
PTCE 91-38,
regarding investments by bank collective investment funds;
PTCE 84-14,
regarding investments effected by a qualified professional asset
manager; and
PTCE 96-23,
regarding investments effected by an in-house asset manager.
There can be no assurance that any of these exemptions will be
available with respect to the acquisition of the notes. Under
Section 4975 of the Code, excise taxes are imposed on
disqualified persons who participate in non-exempt prohibited
transactions (other than a fiduciary acting only as such).
As a general rule, a governmental plan, as defined in
Section 3(32) of ERISA (a Governmental Plan), a
church plan, as defined in Section 3(33) of ERISA, that has
not made an election under Section 410(d) of the Code (a
Church Plan) and
non-U.S. plans
are not subject to the above-described requirements of ERISA or
Section 4975 of the Code. Accordingly, assets of such plans
may be invested without regard to the fiduciary and prohibited
transaction considerations described above. Although a
Governmental Plan, a Church Plan or a
non-U.S. plan
is not subject to the above-described requirements of ERISA or
Section 4975 of the Code, it
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may be subject to other U.S. federal, state or local laws
or
non-U.S. laws
that regulate its investments (a Similar Law). A
fiduciary of a Government Plan, a Church Plan or a
non-U.S. plan
should make its own determination as to the requirements, if
any, under any Similar Law applicable to the acquisition of the
notes.
The notes may be acquired by a Plan or an entity whose
underlying assets include the assets of a Plan or by a
Governmental Plan, a Church Plan or a
non-U.S. plan,
but only if the acquisition will not result in a non-exempt
prohibited transaction under ERISA or Section 4975 of the
Code or a violation of Similar Law. Therefore, any investor in
the notes will be deemed to represent and warrant to us and the
trustee that (1)(a) it is not (i) a Plan, (ii) an
entity whose underlying assets include the assets of a Plan,
(iii) a Governmental Plan, (iv) a Church Plan or
(v) a
non-U.S. plan,
(b) it is a Plan or an entity whose underlying assets
include the assets of a Plan and the acquisition and holding of
the notes will not result in a non-exempt prohibited transaction
under Section 406 of ERISA or Section 4975 of the
Code, or (c) it is a Governmental Plan, a Church Plan or a
non-U.S. plan
that is not subject to (i) ERISA,
(ii) Section 4975 of the Code or (iii) any
Similar Law that prohibits or taxes (in terms of an excise or
penalty tax) the acquisition or holding of the notes; and
(2) it will notify us and the trustee immediately if, at
any time, it is no longer able to make the representations
contained in clause (1) above. Any purported transfer of
the notes to a transferee that does not comply with the
foregoing requirements shall be null and void ab initio.
This offer is not a representation by us or the underwriters
that an acquisition of the notes meets all legal requirements
applicable to investments by Plans, entities whose underlying
assets include assets of a Plan, Governmental Plans, Church
Plans or
non-U.S. plans
or that such an investment is appropriate for any particular
Plan, entities whose underlying assets include assets of a Plan,
Governmental Plan, Church Plan or
non-U.S. plan.
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UNDERWRITING
(CONFLICTS OF INTEREST)
Under the terms and subject to the conditions contained in an
underwriting agreement
dated ,
2010, we have agreed to sell to the underwriters, for whom
Credit Suisse Securities (USA) LLC, J.P. Morgan Securities
Inc., Banc of America Securities LLC and Citigroup Global
Markets Inc. are acting as representatives, the following
respective principal amount of notes.
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Principal Amount
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Underwriters
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of Notes
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Credit Suisse Securities (USA) LLC
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$
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J.P. Morgan Securities Inc.
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Banc of America Securities LLC
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Citigroup Global Markets Inc.
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PNC Capital Markets LLC
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KeyBanc Capital Markets Inc.
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Fifth Third Securities, Inc.
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RBS Securities Inc.
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Total
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$
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250,000,000
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The underwriting agreement provides that the underwriters are
obligated, severally and not jointly, to purchase all of the
notes if any are purchased. The underwriting agreement also
provides that if an underwriter defaults the purchase
commitments of non-defaulting underwriters may be increased or
the offering may be terminated.
The underwriters have advised us that they propose initially to
offer the notes to the public at the public offering price on
the cover page of this prospectus supplement, and to dealers at
that price less a concession not in excess
of % of the principal amount of the
notes. The underwriters may allow, and the dealers may reallow,
a discount not in excess of % of
the principal amount of the notes to other dealers. After the
initial public offering, the public offering price, concession
and discount may be changed.
The following table shows the discounts and commissions we will
pay to the underwriters in respect to this offering:
Per note %
Total $
The expenses of the offering, not including the underwriting
discount, are estimated to be approximately $983,500 and are
payable by us.
Notice to
Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
Relevant Member State), each Underwriter represents
and agrees that with effect from and including the date on which
the Prospectus Directive is implemented in that Relevant Member
State (the Relevant Implementation Date) it has not
made and will not make an offer of the notes to the public in
that Relevant Member State prior to the publication of a
prospectus in relation to the notes which has been approved by
the competent authority in that Relevant Member State or, where
appropriate, approved in another Relevant Member State and
notified to the competent authority in that Relevant Member
State, all in accordance with the Prospectus Directive, except
that it may, with effect from and including the Relevant
Implementation Date, make an offer of notes to the public in
that Relevant Member State at any time,
(a) to legal entities which are authorized or regulated to
operate in the financial markets or, if not so authorized or
regulated, whose corporate purpose is solely to invest in
securities;
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(b) to any legal entity which has two or more of
(1) an average of at least 250 employees during the
last financial year; (2) a total balance sheet of more than
43,000,000 and (3) an annual net turnover of more
than 50,000,000, as shown in its last annual or
consolidated accounts;
(c) to fewer than 100 natural or legal persons (other than
qualified investors as defined below) subject to obtaining the
prior consent of the manager for any such offer; or
(d) in any other circumstances falling within
Article 3(2) of the Prospectus Directive, provided
that such offer will not require the publication of a prospectus
pursuant to Article 3 of the Prospectus Directive or any
measure implementing the Prospectus Directive in that Relevant
Member State.
Each purchaser of notes described in this prospectus located
within a Relevant Member State will be deemed to have
represented, acknowledged and agreed that it is a
qualified investor within the meaning of
Article 2(1)(e) of the Prospectus Directive.
The expression an offer of notes to the public in
relation to any notes in any Relevant Member State means the
communication in any form and by any means of sufficient
information on the terms of the offer and the notes to be
offered so as to enable an investor to decide to purchase or
subscribe for the note, as the same may be varied in that
Relevant Member State by any measure implementing the Prospectus
Directive in that Relevant Member State, and the expression
Prospectus Directive means Directive 2003/71/EC and includes any
relevant implementing measure in each Relevant Member State.
Notice to
Prospective Investors in the United Kingdom
Each of the underwriters severally represents, warrants and
agrees as follows:
(a) it has only communicated or caused to be communicated
and will only communicate or cause to be communicated an
invitation or inducement to engage in investment activity
(within the meaning of section 21 of FSMA) received by it
in connection with the issue or sale of the notes in
circumstances in which section 21 of FSMA does not apply to
the company; and
(b) it has complied with, and will comply with all
applicable provisions of FSMA with respect to anything done by
it in relation to the notes in, from or otherwise involving the
United Kingdom.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of
1933, as amended, or, if such indemnification is not available,
to contribute to payments the underwriters may be required to
make in respect of these liabilities.
The notes are a new issue of securities for which there
currently is no market. The underwriters have advised us that
they intend to make a market in the notes as permitted by
applicable law. They are not obligated, however, to make a
market in the notes and any market-making may be discontinued at
any time at their sole discretion. Accordingly, no assurance can
be given as to the development or liquidity of any market for
the notes. If an active public trading market for the notes does
not develop, the market price and liquidity of the notes may be
adversely affected.
The underwriters may engage in over-allotment, stabilizing
transactions, covering transactions and penalty bids in
accordance with Regulation M under the Exchange Act:
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Over-allotment involves sales in excess of the offering size,
which creates a short position for the underwriters.
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Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum.
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Covering transactions involve purchases of the notes in the open
market after the distribution has been completed in order to
cover short positions.
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Penalty bids permit the underwriters to reclaim a selling
concession from a broker/dealer when the notes originally sold
by such broker/dealer are purchased in a stabilizing or covering
transaction to cover short positions.
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These stabilizing transactions, covering transactions and
penalty bids may cause the price of the notes to be higher than
it would otherwise be in the absence of these transactions.
These transactions, if commenced, may be discontinued at any
time. We make no representation or prediction as to the
direction or magnitude of any effect that the transactions
described above may have on the price of the notes. In addition,
we make no representation that the underwriters will engage in
these transactions or that these transactions, once commenced,
will not be discontinued without notice.
We expect that delivery of the notes will be made against
payment therefor on or about
the
business day following the date of confirmation of orders with
respect to the notes (this settlement cycle being referred to as
T+ ). Under
Rule 15c6-1
of the Commission under the Exchange Act, trades in the
secondary market generally are required to settle in three
business days, unless the parties to any such trade expressly
agree otherwise. Accordingly, purchasers who wish to trade the
notes before the notes are delivered will be required, by virtue
of the fact that the notes initially will settle in T+ , to
specify an alternate settlement cycle at the time of any such
trade to prevent a failed settlement. Purchasers of the notes
who wish to trade the notes before their delivery should consult
their own advisor.
In the ordinary course of their various business activities, the
underwriters and their respective affiliates may make or hold a
broad array of investments and actively trade debt and equity
securities (or related derivative securities) and financial
instruments (including bank loans) for their own account and for
the accounts of their customers and may at any time hold long
and short positions in such securities and instruments. Such
investment and securities activities may involve securities and
instruments of the issuer.
The underwriters and their respective affiliates are full
service financial institutions engaged in various activities,
which may include securities trading, commercial and investment
banking, financial advisory, investment management, cash
management, principal investment, hedging, financing and
brokerage activities. Certain of the underwriters and their
respective affiliates have, from time to time, performed, and
may in the future perform, various financial advisory and
investment banking services for the issuer, for which they
received or will receive customary fees and expenses.
Certain of the underwriters
and/or their
affiliates are holders of our convertible notes. A portion of
the net proceeds from this offering will be used to repurchase
our convertible notes pursuant to the tender offer, if
consummated. Accordingly, certain of the underwriters and/or
their affiliates may receive a portion of the net proceeds from
this offering upon valid tender of any of their convertible
notes pursuant to the tender offer and if the tender offer is
consummated.
Certain of the underwriters and/or their affiliates may also be
lenders and/or agents under the new credit facility that we
anticipate entering into in connection with the tender offer and
this offering. Accordingly, certain of the underwriters and/or
their affiliates may receive payment concurrently with the
Refinancing Transactions if any borrowings under the new credit
facility are repaid in connection with the Refinancing
Transactions.
An affiliate of KeyBanc Capital Markets Inc., an underwriter in
this offering, is the documentation agent under our existing
credit facility. An affiliate of Credit Suisse Securities (USA)
LLC (Credit Suisse), an underwriter in this
offering, is a term loan administrative agent under our existing
credit facility. An affiliate of PNC Capital Markets LLC
(PNC), an underwriter in this offering, is the
revolving loan administrative agent and collateral agent under
our existing credit facility, and is currently a term loan
administrative agent under our existing credit facility. Certain
of the underwriters and/or their affiliates are lenders under
our existing credit facility, and in connection with the
Refinancing Transactions will be repaid, along with the other
lenders under our existing credit facility.
Upon repayment of the term loans outstanding under our existing
credit facility, certain affiliates of J.P. Morgan Securities
Inc. and Citigroup Global Markets Inc., each underwriters in
this offering, will receive
S-76
payment in connection with the termination of an interest rate
swap agreement related to the term loans under our existing
credit facility. Neither J.P. Morgan Securities Inc. nor
Citigroup Global Markets Inc. is deemed to have a conflict
of interest under NASD Rule 2720 as a result of this
payment.
Certain affiliates of each of Credit Suisse and PNC are lenders
under our existing credit facility and may receive more than 5%
of the net proceeds generated in connection with the Refinancing
Transactions when we repay all or a portion of the remaining
term loans and revolving borrowings outstanding under our
existing credit facility. See Use of Proceeds and
Capitalization. Therefore, each of Credit Suisse and
PNC may be deemed to have a conflict of interest
under NASD Rule 2720 and, accordingly, this offering is
being made in accordance with NASD Rule 2720(a)(2) and
FINRA Rule 5110. In accordance with these rules, J.P.
Morgan Securities Inc. (J.P. Morgan) has assumed the
responsibilities of acting as a qualified independent
underwriter. In its role as a qualified independent underwriter,
J.P. Morgan has participated in due diligence and the
preparation of this prospectus supplement and the registration
statement of which this prospectus supplement is a part.
J.P. Morgan will not receive any additional fees for
serving as a qualified independent underwriter in connection
with this offering. We have agreed to indemnify J.P. Morgan
against liabilities incurred in connection with acting as a
qualified independent underwriter, including liabilities under
the Securities Act.
S-77
LEGAL
MATTERS
Jones Day will pass upon the validity of the notes for Ferro
Corporation. Certain legal matters relating to the offering of
the notes will be passed upon for the underwriters by
Latham & Watkins, LLP, New York, New York.
S-78
PROSPECTUS
Debt
Securities
We may offer and sell from time to time our debt securities. We
may sell these debt securities in one or more offerings at
prices and on other terms to be determined at the time of
offering.
We will provide the specific terms of the debt securities to be
offered in one or more supplements to this prospectus. You
should read this prospectus and the applicable prospectus
supplement carefully before you invest in our debt securities.
This prospectus may not be used to offer and sell our debt
securities unless accompanied by a prospectus supplement
describing the method and terms of the offering of those offered
debt securities.
We may offer our debt securities through agents, underwriters or
dealers or directly to investors. Each prospectus supplement
will provide the amount, price and terms of the plan of
distribution relating to the debt securities to be sold pursuant
to such prospectus supplement. We will set forth the names of
any underwriters or agents in the accompanying prospectus
supplement, as well as the net proceeds we expect to receive
from such sale.
Investing in any of our debt securities involves risk. Please
read carefully the section entitled Risk Factors
beginning on page 5 of this prospectus and the information
included and incorporated by reference in this prospectus.
Our common stock is listed on the New York Stock Exchange under
the symbol FOE. If we decide to seek a listing of
any debt securities offered by this prospectus, we will disclose
the exchange or market on which the debt securities will be
listed, if any, or where we have made an application for
listing, if any, in one or more supplements to this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these debt
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is July 27, 2010
TABLE OF
CONTENTS
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Page
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About This Prospectus
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1
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Where You Can Find More
Information
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1
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Information We
Incorporate By Reference
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1
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Disclosure Regarding
Forward-Looking Statements
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3
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The Company
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4
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Risk Factors
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5
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Use of Proceeds
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6
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Ratio of Earnings to
Fixed Charges
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6
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Description of Debt
Securities
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7
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Plan of Distribution
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15
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Legal Matters
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17
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Experts
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17
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i
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission, or SEC, using
a shelf registration process. Under this shelf
registration process, we may from time to time sell the debt
securities described in this prospectus in one or more offerings
at prices and on other terms to be determined at the time of
offering.
This prospectus provides you with a general description of the
debt securities we may offer. Each time we sell debt securities,
we will provide a prospectus supplement that will contain
specific information about the terms of that offering. For a
more complete understanding of the offering of the debt
securities, you should refer to the registration statement,
including its exhibits. The prospectus supplement may also add,
update or change information contained in this prospectus. You
should read both this prospectus and any prospectus supplement
together with additional information under the heading
Where You Can Find More Information and
Information We Incorporate By Reference.
You should rely only on the information contained or
incorporated by reference in this prospectus and in any
prospectus supplement or in any free writing prospectus that we
may provide you. We have not authorized anyone to provide you
with different information. You should not assume that the
information contained in this prospectus, any prospectus
supplement, any free writing prospectus or any document
incorporated by reference is accurate as of any date other than
the date mentioned on the cover page of these documents. This
document may be used only where it is legal to sell the debt
securities. We are not making offers to sell the debt securities
in any jurisdiction in which an offer or solicitation is not
authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it
is unlawful to make an offer or solicitation.
References in this prospectus to the terms we,
us, our, the Company or
Ferro or other similar terms mean Ferro Corporation
and its consolidated subsidiaries, unless we state otherwise or
the context indicates otherwise.
WHERE YOU
CAN FIND MORE INFORMATION
We are subject to the informational reporting requirements of
the Securities Exchange Act of 1934, or the Exchange Act. We
file annual, quarterly, and current reports, proxy statements
and other information with the SEC. Our SEC filings are
available over the Internet at the SECs web site at
http://www.sec.gov.
You may read and copy any reports, statements and other
information filed by us at the SECs Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549.
Please call
1-800-SEC-0330
for further information on the Public Reference Room. You may
also inspect our SEC reports and other information at the New
York Stock Exchange, 20 Broad Street, New York, New York
10005, or at our web site at
http://www.ferro.com.
We do not intend for information contained on or accessible
through our web site to be part of this prospectus, other than
the documents that we file with the SEC that are incorporated by
reference into this prospectus.
INFORMATION
WE INCORPORATE BY REFERENCE
The SEC allows us to incorporate by reference the information in
documents we file with it, which means that we can disclose
important information to you by referring to those documents.
The information incorporated by reference is considered to be
part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this
information. Any statement contained in any document
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained in or
omitted from this prospectus or any accompanying prospectus
supplement, or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus.
1
We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act until the completion of
the offerings of debt securities described in this prospectus:
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our Annual Report on
Form 10-K
for the year ended December 31, 2009;
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our Quarterly Reports on
Form 10-Q
for the quarters ended March 31, 2010 and June 30,
2010; and
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our Current Reports on
Form 8-K
filed on February 18, 2010, March 3, 2010,
April 20, 2010, May 6, 2010, May 10, 2010, May
11, 2010, June 2, 2010, June 28, 2010, July 1,
2010 and July 20, 2010.
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We will not, however, incorporate by reference in this
prospectus any documents or portions thereof that are not deemed
filed with the SEC, including any information
furnished pursuant to Item 2.02 or Item 7.01 of our
current reports on
Form 8-K
unless, and except to the extent, specified in such current
reports.
We will provide you with a copy of any of these filings (other
than an exhibit to these filings, unless the exhibit is
specifically incorporated by reference into the filing
requested) at no cost, if you submit a request to us by writing
or telephoning us at the following address and telephone number:
Ferro
Corporation
1000 Lakeside Avenue
Cleveland, Ohio 44114
Telephone Number:
(216) 641-8580
Attn: Secretary
2
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents incorporated by
reference, contains, and any prospectus supplement may contain,
statements that constitute forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, or the Securities Act, and
Section 21E of the Exchange Act. These statements may be
identified by the use of predictive, future-tense or
forward-looking terminology, such as believes,
anticipates, expects,
estimates, intends, may,
will or similar terms. These statements speak only
as of the date of this prospectus, the date of the prospectus
supplement or the date of the document incorporated by
reference, as applicable, and we undertake no ongoing
obligation, other than that imposed by law, to update these
statements. These statements appear in a number of places in
this prospectus, including the documents incorporated by
reference, and relate to, among other things, our intent, belief
or current expectations with respect to: our future financial
condition, results of operations or prospects; our business and
growth strategies; and our financing plans and forecasts. You
are cautioned that any such forward-looking statements are not
guarantees of future performance and involve significant risks
and uncertainties, and that actual results may differ materially
from those contained in or implied by the forward-looking
statements as a result of various factors, some of which are
unknown, including, without limitation:
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demand in the industries into which we sell our products may be
unpredictable, cyclical or heavily influenced by consumer
spending;
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the effectiveness of our efforts to improve operating margins
through sales growth, price increases, productivity gains, and
improved purchasing techniques;
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our ability to successfully implement
and/or
administer our restructuring programs;
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our ability to access capital markets, borrowings, or financial
transactions;
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our borrowing costs could be affected adversely by interest rate
increases;
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the availability of reliable sources of energy and raw materials
at a reasonable cost;
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competitive factors, including intense price competition;
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currency conversion rates and changing global economic, social
and political conditions;
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the impact of our performance on our ability to utilize our
significant deferred tax assets;
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liens on our assets by our lenders affect our ability to dispose
of property and businesses;
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restrictive covenants in our credit facilities could affect our
strategic initiatives and liquidity;
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increasingly aggressive domestic and foreign governmental
regulations on hazardous materials and regulations affecting
health, safety and the environment;
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our ability to successfully introduce new products;
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stringent labor and employment laws and relationships with our
employees;
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our ability to fund employee benefit costs, especially
post-retirement costs;
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risks and uncertainties associated with intangible assets;
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potential limitations on our use of operating loss carryforwards
and other tax attributes due to significant changes in the
ownership of our common stock;
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our presence in the Asia-Pacific region where it can be
difficult to compete lawfully;
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the identification of any material weaknesses in our internal
controls in the future could affect our ability to ensure timely
and reliable financial reports;
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uncertainties regarding the resolution of pending and future
litigation and other claims; and
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other factors affecting our business beyond our control,
including disasters, accidents, and governmental actions.
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These factors and the other risk factors described in this
prospectus and any accompanying prospectus supplement, including
the documents incorporated by reference, are not necessarily all
of the important factors that could cause actual results to
differ materially from those expressed in any of our
forward-looking statements. Other unknown or unpredictable
factors also could harm our results. Consequently, there can be
no assurance that the actual results or developments anticipated
by us will be realized or, even if substantially realized, that
they will have the expected consequences to or effects on us.
3
THE
COMPANY
Ferro Corporation was incorporated in Ohio in 1919 as an
enameling company. Today, we are a leading producer of specialty
materials and chemicals that are sold to a broad range of
manufacturers who, in turn, make products for many end-use
markets. Through manufacturing sites around the world, we
produce the following types of products:
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Electronics, Color and Glass Materials Conductive
metal pastes and powders, dielectrics, polishing materials,
high-quality glazes, enamels, pigments, dinnerware decoration
colors, and other performance materials; and
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Polymer and Ceramic Engineered Materials Polymer
specialty materials, engineered plastic compounds, pigment
dispersions, glazes, frits, porcelain enamel, pigments, and
high-potency pharmaceutical active ingredients.
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We refer to our products as performance materials and chemicals
because we formulate them to perform specific functions in the
manufacturing processes and end products of our customers. The
products we develop often are delivered to our customers in
combination with customized technical service. The value of our
products stems from the benefits they deliver in actual use.
Corporate
Information
Our principal executive offices are located 1000 Lakeside
Avenue, Cleveland, Ohio 44114. Our telephone number is
(216) 641-8580.
Our website is www.ferro.com. The information contained on or
accessible through our website is not part of this prospectus,
other than the documents that we file with the SEC that are
incorporated by reference into this prospectus.
4
RISK
FACTORS
Investing in our debt securities involves risk. Prior to making
a decision about investing in our debt securities, you should
carefully consider the specific factors discussed under the
heading Risk Factors in our most recent Annual
Report on
Form 10-K
and in our most recent Quarterly Reports on
Form 10-Q,
which are incorporated herein by reference and may be amended,
supplemented or superseded from time to time by other reports we
file with the SEC in the future. The risks and uncertainties we
have described are not the only ones we face. Additional risks
and uncertainties not presently known to us or that we currently
deem immaterial may also affect our operations. If any of these
risks actually occurs, our business, results of operations and
financial condition could suffer. In that case, the trading
price of our securities could decline, and you could lose all or
a part of your investment.
5
USE OF
PROCEEDS
Unless we inform you otherwise in the applicable prospectus
supplement, we expect to use the net proceeds from the sale of
our debt securities for general corporate purposes. These
purposes may include, but are not limited to:
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reduction or refinancing of outstanding indebtedness or other
corporate obligations;
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additions to working capital;
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capital expenditures; and
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acquisitions.
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Pending any specific application, we may initially invest funds
in short-term marketable securities or apply them to the
reduction of short-term indebtedness.
RATIO OF
EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of consolidated
earnings to fixed charges for the periods presented:
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Six Months
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Ended
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Year Ended December 31,
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June 30,
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2005
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2006
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2007
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2008
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2009
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2010
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Ratio of earnings to fixed charges
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1.46
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1.27
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2.05
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Fixed charges are equal to interest expense (including
amortization of deferred financing costs and costs associated
with the Companys asset securitization program), plus the
portion of rent expense estimated to represent interest. Total
earnings were insufficient to cover the fixed charges for the
years ended December 31, 2009, 2008, and 2007 by
$44.7 million, $58.2 million and $118.2 million,
respectively. The insufficient earnings were primarily due to
losses from continuing operations of $40.0 million,
$52.9 million and $97.5 million in the years ended
December 31, 2009, 2008 and 2007, respectively, and the
non-cash impairment charges of $8.2 million,
$80.2 million and $128.7 million in the years ended
December 31, 2009, 2008 and 2007, respectively.
Accordingly, such ratios are not presented.
6
DESCRIPTION
OF DEBT SECURITIES
The following description sets forth certain general terms and
provisions of the debt securities that we may issue. We will set
forth the particular terms of the debt securities we offer in a
prospectus supplement and the extent, if any, to which the
following general terms and provisions will apply to particular
debt securities.
The debt securities will be issued under an indenture to be
entered into between us and Wilmington Trust FSB, as
trustee. The indenture, and any supplemental indentures thereto,
will be subject to, and governed by, the Trust Indenture
Act of 1939, as amended. The following description of general
terms and provisions relating to the debt securities and the
indenture under which the debt securities will be issued is a
summary only and therefore is not complete and is subject to,
and qualified in its entirety by reference to, the terms and
provisions of the indenture. The form of the indenture has been
filed with the SEC as an exhibit to the registration statement,
of which this prospectus forms a part, and you should read the
indenture for provisions that may be important to you. For more
information on how you can obtain a copy of the form of the
indenture, see Where You Can Find More Information.
Capitalized terms used in this section and not defined herein
have the meanings specified in the indenture. When we refer to
Ferro Corporation, we, our
and us in this section, we mean Ferro Corporation
excluding, unless the context otherwise requires or as otherwise
expressly stated, our subsidiaries.
Unless otherwise specified in a prospectus supplement, the debt
securities will be our direct, unsecured obligations and will
rank equally with all of our other unsecured indebtedness.
General
The terms of each series of debt securities will be established
by or pursuant to a resolution of our Board of Directors and set
forth or determined in the manner provided in a resolution of
our Board of Directors, supplemental indenture or officers
certificate. The particular terms of each series of debt
securities will be described in a prospectus supplement relating
to such series (including any pricing supplement or term sheet).
We can issue an unlimited amount of debt securities under the
indenture that may be in one or more series. Debt securities may
differ between series in respect to any matter, but all series
of debt securities will be equally and ratably entitled to the
benefits of the indenture. We will set forth in a prospectus
supplement (including any pricing supplement or term sheet)
relating to any series of debt securities being offered, the
aggregate principal amount and the following terms of the debt
securities, if applicable:
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the title of the series of debt securities;
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the price or prices (expressed as a percentage of the principal
amount) at which the series of debt securities will be issued;
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any limit on the aggregate principal amount of the series of
debt securities;
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the date or dates on which the principal on the series of debt
securities is payable;
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the rate or rates (which may be fixed or variable) per annum, if
applicable, or the method used to determine such rate or rates
(including any commodity, commodity index, stock exchange index
or financial index) at which the series of debt securities will
bear interest, if any, the date or dates from which such
interest, if any, will accrue, the date or dates on which such
interest, if any, will commence and be payable and any regular
record date for the interest payable on any interest payment
date;
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the place or places where the principal of, premium and
interest, if any, on the series of debt securities will be
payable;
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if applicable, the period within which, the price at which and
the terms and conditions upon which the series of debt
securities may be redeemed (in whole or in part, at our option);
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any obligation we may have to redeem or purchase the series of
debt securities pursuant to any sinking fund or analogous
provisions or at the option of a holder of the series of debt
securities and the terms and conditions of such obligation;
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the dates, if any, on which and the price or prices at which we
will repurchase the series of debt securities at the option of
the holders of that series of debt securities and other detailed
terms and provisions of such repurchase obligations;
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the denominations in which the series of debt securities will be
issued, if other than denominations of $1,000 and any integral
multiple thereof;
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the form of the series of debt securities and whether the series
of debt securities will be issuable as global debt securities
and any appropriate legends if the debt securities are discount
securities;
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the portion of principal amount of the series of debt securities
payable upon declaration of acceleration of the maturity date,
if other than the principal amount;
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the currency of denomination of the series of debt securities
and, if other than U.S. Dollars or the ECU, the agency
responsible for overseeing such currency;
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the designation of the currency, currencies or currency units in
which payment of principal of, premium and interest, if any, on
the series of debt securities will be made;
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if payments of principal of, premium or interest, if any, on the
series of debt securities will be made in one or more currencies
or currency units other than that or those in which the series
of debt securities are denominated, the manner in which the
exchange rate with respect to such payments will be determined;
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the manner in which the amounts of payment of principal of,
premium or interest on the series of debt securities will be
determined, if such amounts may be determined by reference to an
index based on a currency or currencies or by reference to a
commodity, commodity index, stock exchange index or financial
index;
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any provisions relating to any security provided for the series
of debt securities;
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any addition to or change in the Events of Default described in
this prospectus or in the indenture which applies to the series
of debt securities and any change in the right of the trustee or
the holders of the series of debt securities to declare the
principal amount thereof due and payable;
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any addition to or change in the covenants described in this
prospectus or in the indenture with respect to the series of
debt securities;
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any other terms of the series of debt securities (which may
supplement, modify or delete any provision of the indenture as
it applies to such series);
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any depositaries, interest rate calculation agents, exchange
rate calculation agents or other agents with respect to the
series of debt securities, if other than appointed in the
indenture;
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any provisions relating to conversion of the series of debt
securities; and
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whether the series of debt securities will be senior or
subordinated debt securities and a description of the
subordination thereof.
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In addition, the indenture does not limit our ability to issue
subordinated debt securities. Any subordination provisions of a
particular series of debt securities will be set forth in the
resolution of our Board of Directors, the officers
certificate or supplemental indenture related to that series of
debt securities and will be described in the relevant prospectus
supplement.
We may issue debt securities that provide for an amount less
than their stated principal amount to be due and payable upon
declaration of acceleration of their maturity pursuant to the
terms of the indenture. We will provide you with information on
the federal income tax considerations and other special
considerations applicable to any of these debt securities in the
applicable prospectus supplement.
If we denominate the purchase price of any of the debt
securities in a foreign currency or currencies or a foreign
currency unit or units, or if the principal of and any premium
and interest on any series of debt
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securities is payable in a foreign currency or currencies or a
foreign currency unit or units, we will provide you with
information on the restrictions, elections, general tax
considerations, specific terms and other information with
respect to that issue of debt securities and such foreign
currency or currencies or foreign currency unit or units in the
applicable prospectus supplement.
Transfer
and Exchange
Each debt security will be represented by either one or more
global securities registered in the name of The Depository
Trust Company, as Depositary (the Depositary),
or a nominee (we will refer to any debt security represented by
a global debt security as a book-entry debt
security), or a certificate issued in definitive
registered form (we will refer to any debt security represented
by a certificated security as a certificated debt
security) as set forth in the applicable prospectus
supplement. Except as set forth under the heading
Global Debt Securities and Book-Entry
System below, book-entry debt securities will not be
issuable in certificated form.
Certificated Debt Securities. You may transfer
or exchange certificated debt securities at any office we
maintain for this purpose in accordance with the terms of the
indenture. No service charge will be made for any transfer or
exchange of certificated debt securities (except as expressly
permitted under the indenture), but we may require payment of a
sum sufficient to cover any tax or other governmental charge
payable in connection with a transfer or exchange.
You may effect the transfer of certificated debt securities and
the right to receive the principal of, premium and interest on
certificated debt securities only by surrendering the
certificate representing those certificated debt securities and
either reissuance by us of the certificate to the new holder or
the issuance by us of a new certificate to the new holder.
Global Debt Securities and Book-Entry
System. Each global debt security representing
book-entry debt securities will be issued to the Depositary or a
nominee of the Depositary and registered in the name of the
Depositary or a nominee of the Depositary.
The Depositary has indicated it intends to follow the following
procedures with respect to book-entry debt securities.
Ownership of beneficial interests in book-entry debt securities
will be limited to persons that have accounts with the
Depositary for the related global debt security
(participants) or persons that may hold interests
through participants. Upon the issuance of a global debt
security, the Depositary will credit, on its book-entry
registration and transfer system, the participants
accounts with the respective principal amounts of the book-entry
debt securities represented by such global debt security
beneficially owned by such participants. The accounts to be
credited will be designated by any dealers, underwriters or
agents participating in the distribution of the book-entry debt
securities. Ownership of book-entry debt securities will be
shown on, and the transfer of such ownership interests will be
effected only through, records maintained by the Depositary for
the related global debt security (with respect to interests of
participants) and on the records of participants (with respect
to interests of persons holding through participants). The laws
of some states may require that certain purchasers of securities
take physical delivery of such securities in definitive form.
These laws may impair the ability to own, transfer or pledge
beneficial interests in book-entry debt securities.
So long as the Depositary for a global debt security, or its
nominee, is the registered owner of that global debt security,
the Depositary or its nominee, as the case may be, will be
considered the sole owner or holder of the book-entry debt
securities represented by such global debt security for all
purposes under the indenture. Except as described below,
beneficial owners of book-entry debt securities will not be
entitled to have securities registered in their names, will not
receive or be entitled to receive physical delivery of a
certificate in definitive form representing securities and will
not be considered the owners or holders of those securities
under the indenture. Accordingly, each person beneficially
owning book-entry debt securities must rely on the procedures of
the Depositary for the related global debt security and, if such
person is not a participant, on the procedures of the
participant through which such person owns its interest, to
exercise any rights of a holder under the indenture.
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We understand, however, that under existing industry practice,
the Depositary will authorize the persons on whose behalf it
holds a global debt security to exercise certain rights of
holders of debt securities, and the indenture provides that we,
the trustee and our respective agents will treat as the holder
of a debt security the persons specified in a written statement
of the Depositary with respect to such global debt security for
purposes of obtaining any consents, declarations, waivers or
directions required to be given by holders of the debt
securities pursuant to the indenture.
We will make payments of principal of, and premium and interest,
if any, on book-entry debt securities to the Depositary or its
nominee, as the case may be, as the registered holder of the
related global debt security. Ferro Corporation, the trustee and
any other agent of ours or agent of the trustee will not have
any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership
interests in a global debt security or for maintaining,
supervising or reviewing any records relating to beneficial
ownership interests.
We expect that the Depositary, upon receipt of any payment of
principal of, premium or interest, if any, on a global debt
security, will immediately credit participants accounts
with payments in amounts proportionate to the respective amounts
of book-entry debt securities held by each participant as shown
on the records of such Depositary. We also expect that payments
by participants to owners of beneficial interests in book-entry
debt securities held through those participants will be governed
by standing customer instructions and customary practices, as is
now the case with the securities held for the accounts of
customers in bearer form or registered in street
name, and will be the responsibility of those participants.
We will issue certificated debt securities in exchange for each
global debt security only if (i) the Depositary notifies us
that it is unwilling or unable to continue as Depositary for
such global debt security or if at any time such Depositary
ceases to be a clearing agency registered under the Exchange
Act, and, in either case, we fail to appoint a successor
Depositary registered as a clearing agency under the Exchange
Act within 90 days of such event or (ii) we execute
and deliver to the trustee an officers certificate to the
effect that such global debt security shall be so exchangeable.
Any certificated debt securities issued in exchange for a global
debt security will be registered in such name or names as the
Depositary shall instruct the trustee. We expect that such
instructions will be based upon directions received by the
Depositary from participants with respect to ownership of
book-entry debt securities relating to such global debt security.
We have obtained the foregoing information concerning the
Depositary and the Depositarys book-entry system from
sources we believe to be reliable, but we take no responsibility
for the accuracy of this information.
No
Protection In the Event of a Change of Control
Unless we state otherwise in the applicable prospectus
supplement, the debt securities will not contain any provisions
which may afford holders of the debt securities protection in
the event we have a change in control or in the event of a
highly leveraged transaction (whether or not such transaction
results in a change in control) which could adversely affect
holders of debt securities.
Covenants
We will set forth in the applicable prospectus supplement any
restrictive covenants applicable to any issue of debt securities.
Consolidation,
Merger and Sale of Assets
We may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all of our properties and
assets to, any person (a successor person) unless:
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we are the surviving corporation or the successor person (if
other than Ferro Corporation) is a corporation organized and
validly existing under the laws of any U.S. domestic
jurisdiction and expressly assumes our obligations on the debt
securities and under the indenture;
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immediately after giving effect to the transaction, no Event of
Default, and no event which, after notice or passage of time, or
both, would become an Event of Default, shall have occurred and
be continuing under the indenture; and
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certain other conditions provided for in the indenture are met.
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Notwithstanding the above, any subsidiary of Ferro Corporation
may consolidate with, merge into or transfer all or part of its
properties to Ferro Corporation or its subsidiaries.
Events of
Default
Event of Default means with respect to any
series of debt securities, any of the following events, unless
in the board resolution, supplemental indenture or
officers certificate, it is provided that such series of
debt securities shall not have the benefit of a particular Event
of Default:
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default in the payment of any interest upon any debt security of
that series when it becomes due and payable, and continuance of
that default for a period of 30 days (unless the entire
amount of the payment is deposited by us with the trustee or
with a paying agent prior to the expiration of such period of
30 days);
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default in the payment of principal of or premium on any debt
security of that series at maturity or which such principal
otherwise becomes due and payable;
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default in the performance or breach of any other covenant or
warranty by us in the indenture (other than a covenant or
warranty that has been included in the indenture solely for the
benefit of a series of debt securities other than that series),
which default continues uncured for a period of 60 days
after written notice thereof has been given, by registered or
certified mail, to us by the trustee or to us and the trustee by
the holders of at least 25% in principal amount of the
outstanding debt securities of that series, as provided in the
indenture;
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certain events of bankruptcy, insolvency or reorganization of
Ferro Corporation; and
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any other Event of Default provided with respect to debt
securities of that series that is described in the applicable
board resolution, supplemental indenture or officers
certificate establishing such series of debt securities.
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No Event of Default with respect to a particular series of debt
securities (except as to certain events of bankruptcy,
insolvency or reorganization) necessarily constitutes an Event
of Default with respect to any other series of debt securities.
The occurrence of certain Events of Default or an acceleration
under the indenture may constitute an event of default under
certain of our other indebtedness outstanding from time to time.
If an Event of Default with respect to debt securities of any
series at the time outstanding occurs and is continuing, then
the trustee or the holders of not less than 25% in principal
amount of the outstanding debt securities of that series may, by
a notice in writing to us (and to the trustee if given by the
holders), declare to be due and payable immediately the
principal (or, if the debt securities of that series are
discount securities, that portion of the principal amount as may
be specified in the terms of that series) of and accrued and
unpaid interest, if any, on all debt securities of that series.
In the case of an Event of Default resulting from certain events
of bankruptcy, insolvency or reorganization, the principal (or
such specified amount) of and accrued and unpaid interest, if
any, on all outstanding debt securities will become and be
immediately due and payable without any declaration or other act
on the part of the trustee or any holder of outstanding debt
securities. At any time after a declaration of acceleration with
respect to debt securities of any series has been made, and
before a judgment or decree for payment of the money due has
been obtained by the trustee, the holders of a majority in
principal amount of the outstanding debt securities of that
series may rescind and annul the acceleration if all Events of
Default, other than the non-payment of accelerated principal and
interest, if any, with respect to debt securities of that
series, have been cured or waived as provided in the indenture.
We will describe in the prospectus supplement relating to any
series of debt securities that are discount securities the
particular provisions relating to acceleration of a portion of
the principal amount of such discount securities upon the
occurrence of an Event of Default.
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The indenture provides that the trustee will be under no
obligation to exercise any of its rights or powers under the
indenture unless the trustee receives indemnity satisfactory to
it against any loss, liability or expense. Subject to certain
rights of the trustee, the holders of a majority in principal
amount of the outstanding debt securities of any series will
have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the
trustee, or exercising any trust or power conferred on the
trustee, with respect to the debt securities of that series.
No holder of any debt security of any series will have any right
to institute any proceeding, judicial or otherwise, with respect
to the indenture or for the appointment of a receiver or
trustee, or for any remedy under the indenture, unless:
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that holder has previously given to the trustee written notice
of a continuing Event of Default with respect to debt securities
of that series; and
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the holders of not less than 25% in principal amount of the
outstanding debt securities of that series have made written
request, and offered reasonable indemnity, to the trustee to
institute the proceeding as trustee, and the trustee has not
received from the holders of a majority in principal amount of
the outstanding debt securities of that series a direction
inconsistent with that request and has failed to institute the
proceeding within 60 days.
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Notwithstanding any other provision of the indenture, the holder
of any debt security will have an absolute and unconditional
right to receive payment of the principal of, premium and
interest, if any, on that debt security on or after the due
dates expressed in that debt security and to institute suit for
the enforcement of payment.
The indenture requires us, within 120 days after the end of
our fiscal year, to furnish to the trustee an officers
certificate as to compliance with the indenture. The indenture
provides that the trustee may withhold notice to the holders of
debt securities of any series of any event which, after notice
or passage of time, or both, would become an Event of Default or
any Event of Default (except in payment of principal of, premium
or interest on any debt securities of that series) with respect
to debt securities of that series if the trustee in good faith
determines that withholding notice is in the interest of the
holders of those debt securities.
Modification
and Waiver
We may modify and amend the indenture with the consent of the
holders of at least a majority in principal amount of the
outstanding debt securities of each series affected by the
modifications or amendments. We may not make any modification or
amendment without the consent of the holders of each affected
debt security then outstanding if that amendment will:
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reduce the principal amount of debt securities whose holders
must consent to an amendment, supplement or waiver;
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reduce the rate of or extend the time for payment of interest
(including default interest) on any debt security;
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reduce the principal of or premium on or change the stated
maturity date of any debt security or reduce the amount of, or
postpone the date fixed for, the payment of any sinking fund or
analogous obligation with respect to any series of debt
securities;
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reduce the principal amount of discount securities payable upon
acceleration of maturity;
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waive a default in the payment of the principal of, premium or
interest, if any, on any debt security (except a rescission of
acceleration of the debt securities of any series by the holders
of at least a majority in aggregate principal amount of the then
outstanding debt securities of that series and a waiver of the
payment default that resulted from such acceleration);
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make the principal of or premium or interest on any debt
security payable in currency other than that stated in the debt
security;
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make any change to certain provisions of the indenture relating
to, among other things, the right of holders of debt securities
to receive payment of the principal of, premium and interest on
those debt securities and to institute suit for the enforcement
of any such payment and to waivers or amendments; or
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waive a redemption payment, provided that it is made at
the option of Ferro Corporation, with respect to any debt
security.
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Except for certain specified provisions, the holders of at least
a majority in principal amount of the outstanding debt
securities of any series may on behalf of the holders of all
debt securities of that series waive our compliance with
provisions of the indenture. The holders of a majority in
principal amount of the outstanding debt securities of any
series may on behalf of the holders of all the debt securities
of such series waive any past default under the indenture with
respect to that series and its consequences, except a default in
the payment of the principal of, premium or interest, if any, on
any debt security of that series; provided,
however, that the holders of a majority in principal
amount of the outstanding debt securities of any series may
rescind an acceleration and its consequences, including any
related payment default that resulted from such acceleration.
Defeasance
of Debt Securities and Certain Covenants in Certain
Circumstances
Legal Defeasance. The indenture provides that,
unless otherwise provided by the terms of the applicable series
of debt securities, we may be discharged from any and all
obligations in respect of the debt securities of any series
(except for certain obligations to register the transfer or
exchange of debt securities of such series, to replace stolen,
lost or mutilated debt securities of such series, and to
maintain paying agencies and certain provisions relating to the
treatment of funds held by paying agents). We will be so
discharged upon the deposit with the trustee, in trust, of money
and/or
U.S. Government Obligations or, in the case of debt
securities denominated in a single currency other than
U.S. dollars, Foreign Government Obligations, that, through
the payment of interest and principal in accordance with their
terms, will provide not later than one day before the due date
of any payment of money, an amount in cash, sufficient in the
opinion of a nationally recognized firm of independent public
accountants to pay and discharge each installment of principal,
premium and interest on and any mandatory sinking fund payments
in respect of the debt securities of that series on the stated
maturity of those payments in accordance with the terms of the
indenture and those debt securities.
This discharge may occur only if, among other things, such
deposit will not result in a breach or violation of, or
constitute a default under the indenture or any other material
agreement to which Ferro Corporation is bound and we have
delivered to the trustee an officers certificate and an
opinion of counsel stating that we have received from, or there
has been published by, the U.S. Internal Revenue Service a
ruling or, since the date of execution of the indenture, there
has been a change in the applicable U.S. federal income tax
law, in either case to the effect that, and based thereon such
opinion shall confirm that, the holders of the debt securities
of that series will not recognize income, deduction, gain or
loss for U.S. federal income tax purposes as a result of
the deposit, defeasance and discharge and will be subject to
U.S. federal income tax on the same amounts and in the same
manner and at the same times as would have been the case if the
deposit, defeasance and discharge had not occurred.
Defeasance of Certain Covenants. The indenture
provides that, unless otherwise provided by the terms of the
applicable series of debt securities, upon compliance with
certain conditions as described below:
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we may omit to comply with the covenant described under the
heading Consolidation, Merger and Sale of Assets and
certain other covenants set forth in the indenture, as well as
any additional covenants which may be described in the
applicable prospectus supplement; and
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any omission to comply with those covenants will not constitute
an event which, after notice or lapse of time, or both, would
become an Event of Default or an Event of Default with respect
to the debt securities of that series (covenant
defeasance).
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The conditions include:
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depositing with the trustee money
and/or
U.S. Government Obligations or, in the case of debt
securities denominated in a single currency other than
U.S. dollars, Foreign Government Obligations, that,
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through the payment of interest and principal in accordance with
their terms, will provide not later than one day before the due
date of any payment of money, an amount in cash, sufficient in
the opinion of a nationally recognized firm of independent
public accountants to pay and discharge each installment of
principal of, premium and interest on and any mandatory sinking
fund payments in respect of the debt securities of that series
on the stated maturity of those payments in accordance with the
terms of the indenture and those debt securities; and
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delivering to the trustee an opinion of counsel to the effect
that the holders of the debt securities of that series will not
recognize income, deduction, gain or loss for U.S. federal
income tax purposes as a result of the deposit and related
covenant defeasance and will be subject to U.S. federal
income tax on the same amounts and in the same manner and at the
same times as would have been the case if the deposit and
related covenant defeasance had not occurred.
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Covenant Defeasance and Events of Default. In
the event we exercise our option to effect covenant defeasance
with respect to any series of debt securities and the debt
securities of that series are declared due and payable because
of the occurrence of any Event of Default, the amount of money
and/or
U.S. Government Obligations or Foreign Government
Obligations on deposit with the trustee will be sufficient to
pay amounts due on the debt securities of that series at the
time of their stated maturity but may not be sufficient to pay
amounts due on the debt securities of that series at the time of
the acceleration resulting from the Event of Default. However,
we shall remain liable for those payments.
Certain
Defined Terms
Foreign Government Obligations means, with
respect to debt securities of any series that are denominated in
a currency other than U.S. dollars:
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direct obligations of the government that issued or caused to be
issued such currency for the payment of which obligations its
full faith and credit is pledged; or
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obligations of a person controlled or supervised by or acting as
an agency or instrumentality of that government the timely
payment of which is unconditionally guaranteed as a full faith
and credit obligation by that government,
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which, in either case are not callable or redeemable at the
option of the issuer thereof.
U.S. Government Obligations means debt
securities that are:
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direct obligations of The United States of America for the
payment of which its full faith and credit is pledged; or
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obligations of a person controlled or supervised by and acting
as an agency or instrumentality of The United States of America
the payment of which is unconditionally guaranteed as full faith
and credit obligation by The United States of America,
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which, in either case, are not callable or redeemable at the
option of the issuer itself and shall also include a depository
receipt issued by a bank or trust company as custodian with
respect to any such U.S. Government Obligation or a
specific payment of interest on or principal of any such
U.S. Government Obligation held by such custodian for the
account of the holder of a depository receipt. Except as
required by law, such custodian is not authorized to make any
deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation evidenced by such
depository receipt.
Governing
Law
The indenture and the debt securities will be governed by, and
construed in accordance with, the internal laws of the State of
New York.
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PLAN OF
DISTRIBUTION
We may sell the offered debt securities in and outside the
United States:
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through underwriters or dealers;
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directly to purchasers;
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through agents; or
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through a combination of any of these methods.
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The prospectus supplement will include the following information:
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the terms of the offering;
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the names of any underwriters or agents;
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the name or names of any managing underwriter or underwriters;
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the purchase price or initial public offering price of the debt
securities;
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the net proceeds from the sale of the debt securities;
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any delayed delivery arrangements;
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any underwriting discounts, commissions and other items
constituting underwriters compensation;
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any discounts or concessions allowed or reallowed or paid to
dealers;
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any commissions paid to agents; and
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any securities exchanges on which the debt securities may be
listed.
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Sale
through Underwriters or Dealers
If underwriters are used in the sale, we will execute an
underwriting agreement with them regarding the debt securities.
The underwriters will acquire the debt securities for their own
account, subject to the conditions in the underwriting
agreement. The underwriters may resell the debt securities from
time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying
prices determined at the time of sale. Underwriters may offer
securities to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by
one or more firms acting as underwriters. Unless we inform you
otherwise in the prospectus supplement, the obligations of the
underwriters to purchase the debt securities will be subject to
certain conditions, and the underwriters will be obligated to
purchase all the offered securities if they purchase any of
them. The underwriters may change from time to time any initial
public offering price and any discounts or concessions allowed
or reallowed or paid to dealers.
During and after an offering through underwriters, the
underwriters may purchase and sell the debt securities in the
open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicate short
positions created in connection with the offering. The
underwriters may also impose a penalty bid, which means that
selling concessions allowed to syndicate members or other
broker-dealers for the offered securities sold for their account
may be reclaimed by the syndicate if the offered securities are
repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or
otherwise affect the market price of the offered securities,
which may be higher than the price that might otherwise prevail
in the open market. If commenced, the underwriters may
discontinue these activities at any time.
Some or all of the debt securities that we offer though this
prospectus may be new issues of securities with no established
trading market. Any underwriters to whom we sell our securities
for public offering and sale may make a market in those
securities, but they will not be obligated to do so and they may
discontinue
15
any market making at any time without notice. Accordingly, we
cannot assure you of the liquidity of, or continued trading
markets for, any securities that we offer.
If dealers are used in the sale of the debt securities, we will
sell the debt securities to them as principals. They may then
resell those securities to the public at varying prices
determined by the dealers at the time of resale. We will include
in the prospectus supplement the names of the dealers and the
terms of the transaction.
Direct
Sales and Sales through Agents
We may sell the debt securities directly. In this case, no
underwriters or agents would be involved. We may also sell the
debt securities through agents designated from time to time. In
the prospectus supplement, we will name any agent involved in
the offer or sale of the offered securities, and we will
describe any commissions payable to the agent. Unless we inform
you otherwise in the prospectus supplement, any agent will agree
to use its reasonable best efforts to solicit purchases for the
period of its appointment.
We may sell the debt securities directly to institutional
investors or others who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any sale of
those securities. We will describe the terms of any sales of
these securities in the prospectus supplement.
Remarketing
Arrangements
Offered securities may also be offered and sold, if so indicated
in the applicable prospectus supplement, in connection with a
remarketing upon their purchase, in accordance with a redemption
or repayment pursuant to their terms, or otherwise, by one or
more remarketing firms, acting as principals for their own
accounts or as agents for us. Any remarketing firm will be
identified and the terms of its agreements, if any, with us and
its compensation will be described in the applicable prospectus
supplement.
Delayed
Delivery Contracts
If we so indicate in the prospectus supplement, we may authorize
agents, underwriters or dealers to solicit offers from certain
types of institutions to purchase securities from us at the
public offering price under delayed delivery contracts. These
contracts would provide for payment and delivery on a specified
date in the future. The contracts would be subject only to those
conditions described in the prospectus supplement. The
prospectus supplement will describe the commission payable for
solicitation of those contracts.
General
Information
We may have agreements with the agents, dealers, underwriters
and remarketing firms to indemnify them against certain civil
liabilities, including liabilities under the Securities Act, or
to contribute with respect to payments that the agents, dealers,
underwriters or remarketing firms may be required to make.
Agents, dealers, underwriters and remarketing firms may be
customers of, engage in transactions with or perform services
for us in the ordinary course of their businesses.
In compliance with the guidelines of the Financial Industry
Regulatory Authority, or FINRA, no FINRA member may participate
in any offering of debt securities made under this prospectus if
such member has a conflict of interest under the National
Association of Securities Dealers, or NASD, Rule 2720,
unless the offering complies with NASD Rule 2720. In the
event that any FINRA member participating in any offering of
debt securities made under this prospectus has a conflict of
interest under NASD Rule 2720, the offering will be
conducted in accordance with NASD Rule 2720, including the
prominent disclosure provisions of Section 2720(a)(1).
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LEGAL
MATTERS
Jones Day will pass upon the validity of the debt securities
being offered hereby.
EXPERTS
The consolidated financial statements and the related financial
statement schedule as of December 31, 2009 and 2008, and
for each of the three years in the period ended
December 31, 2009, incorporated in this prospectus by
reference from Ferro Corporations Annual Report on
Form 10-K
for the year ended December 31, 2009, and the effectiveness
of Ferro Corporations internal control over financial
reporting have been audited by Deloitte & Touche LLP,
an independent registered public accounting firm, as stated in
their reports (which reports (1) express an unqualified
opinion on the consolidated financial statements and financial
statement schedule and include an explanatory paragraph relating
to the Companys change in its methodology of accounting
for uncertainties in income taxes in 2007, and (2) express
an unqualified opinion on the effectiveness of internal control
over financial reporting), which are incorporated by reference
herein. Such consolidated financial statements and financial
statement schedule are incorporated by reference in reliance
upon the reports of such firm, given upon their authority as
experts in accounting and auditing.
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