Filed Pursuant to Rule 424(b)(7)
Registration No. 333-214867
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 1, 2016)
20,000,000 Shares
Fairmount Santrol Holdings Inc.
COMMON STOCK
The
selling security holder identified in this prospectus supplement is offering to sell 20,000,000 shares of common stock of Fairmount Santrol Holdings Inc. to the underwriter named below. We will not receive any proceeds from the sale of our common
stock by the selling security holder.
The underwriter has agreed to purchase our common stock from the selling
security holder at a price of $8.53750 per share, which will result in approximately $170,750,000 of proceeds to the selling security holder (before offering expenses). The underwriter may offer shares of our common stock from time to time for sale
in one or more transactions on the New York Stock Exchange (“NYSE”), in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market
prices or at negotiated prices. See “Underwriting.”
Our
common stock, par value $0.01 per share, is listed on the NYSE under the symbol “FMSA.” The last reported sale price of our common stock on the NYSE on December 1, 2016, was $9.52 per share.
Investing in our common stock involves risk. Before you invest in our common stock, you should carefully consider each of the
factors described under “
Risk Factors
” beginning on page S-4 of this prospectus supplement, as well as in the accompanying prospectus and the documents we have filed with the Securities and Exchange
Commission that are incorporated by reference.
The
selling security holder has granted the underwriter the option to purchase up to 3,000,000 additional shares of common stock on the same terms and conditions as set forth above within 30 days from the date of this prospectus supplement. If the
underwriter exercises the option in full, the total proceeds, before expenses, to the selling security holder will be $196,362,500.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus supplement. Any representation to the
contrary is a criminal offense.
The underwriter expects to deliver the shares on or about December 7, 2016.
MORGAN STANLEY
The date of this prospectus supplement is December 1, 2016
TABLE OF CONTENTS
You should read
this prospectus supplement along with the accompanying prospectus dated December 1, 2016. This prospectus supplement and the accompanying prospectus form one single document and both contain information you should consider when making your
investment decision. You should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus and any related free writing prospectus prepared by us or on our behalf. We, the selling
security holder, and the underwriter have not authorized anyone to provide you with information that is different. If the information contained in this prospectus supplement is inconsistent with the accompanying prospectus, you should rely on this
prospectus supplement. The information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus and any related free writing prospectus prepared by us or on our behalf may only be accurate as of their
respective dates. Our business, financial condition, results of operations and prospects may have changed since those dates.
The
distribution of this prospectus supplement and the accompanying prospectus and the offering of the common stock in certain jurisdictions may be restricted by law. Persons who come into possession of this prospectus supplement and the accompanying
prospectus should inform themselves about and observe any such restrictions. This prospectus supplement and the accompanying prospectus do not constitute, and may not be used in connection with, an offer or solicitation by anyone in any jurisdiction
in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.
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INDUSTRY AND MARKET DATA
The market data and certain other statistical information used throughout this prospectus supplement are based on independent industry
publications, government publications and other published independent sources. Investors are cautioned not to place undue reliance on the market related research statistics. The market data regarding supply and demand is difficult to quantify as the
proppant industry continues to evolve and many market participants are privately held, making accurate estimates of supply capacity and market demand difficult to qualify. Some data is also based on our good faith estimates. Although these are
third-party sources, we acknowledge our responsibility for all disclosures in this prospectus supplement. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in
the section entitled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications.
TRADEMARKS AND TRADE NAMES
We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This
prospectus supplement may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in
this prospectus supplement is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the
®
, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable
licensor to these trademarks, service marks and trade names.
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SUMMARY
The following summary is qualified in its entirety by the more detailed information included elsewhere or incorporated by reference in this
prospectus supplement and the accompanying prospectus. Because this is a summary, it may not contain all the information that may be important to you. You should read the entire prospectus supplement and the accompanying prospectus as well as the
documents incorporated by reference before making an investment decision. Some of the statements in this prospectus supplement are forward-looking statements. See “Forward-Looking Statements.” Unless we state otherwise or the context
otherwise requires, the terms “we,” “us,” “our,” “Fairmount Santrol,” “our business” and “our company” refer to Fairmount Santrol Holdings Inc. and its consolidated subsidiaries and
predecessor companies.
Our Company
We are one of the world’s largest providers of sand-based proppant solutions and for nearly 40 years have been a pioneer in the
development of high performance proppants used by Exploration & Production (“E&P”) companies to enhance the productivity of their oil and gas wells. We offer the broadest range of proppants available in the market today,
including high quality sand and a variety of resin-coated and other value-added products. All of our frac sand exceeds American Petroleum Institute (“API”) specifications. Additionally, for more than 120 years, we and our predecessor
companies have provided high quality sand-based products, strong technical leadership and applications knowledge to end users in the Industrial & Recreational (“I&R”) markets.
Our asset base as of December 31, 2015 includes 798 million tons of proven and probable mineral reserves, which we believe is one of
the largest reserve bases in the industry. Due to the challenging conditions in the oil and gas industry, we have adjusted our operations to minimize our costs and consolidate into what we believe is our lowest-cost footprint. As of October 2016, we
have 10 sand processing facilities (6 of which are active) with 16.8 million tons of annual sand processing capacity. We re-opened our Menomonie, Wisconsin facility at the end of third quarter 2016, primarily to serve the I&R market and
will also enable us to provide more fine-mesh products to the proppant market from our Wedron, Illinois facility. We also have 9 coating facilities (5 of which are active) with 2.3 million tons of annual coating capacity.
As one of the nation’s longest continuously operating mining organizations, we have developed a strong commitment to environmental
stewardship and to the three pillars of Sustainable Development: People, Planet and Prosperity. Our strong commitment to safety is reflected in the health and safety of our employees and is illustrated by our achieving a consistently low recordable
incident rate among our similarly sized industrial sand competitors as well as one of the lowest rates for all those reporting in the Industrial Mining Association of North America. Since 2011, our employees have demonstrated our commitment to our
communities by donating over 73,000 hours of company-paid volunteer hours, as well as significant personal volunteer hours, into the communities in which we live and operate. We are focused on environmental stewardship, and 30 of our facilities now
generate zero waste to landfills. Additionally, we executed upon annual initiatives to reduce our carbon emissions and have planted over 395,000 trees since 2011 in order to offset our remaining Tier I and Tier 2 greenhouse gas emissions. We believe
adhering to sustainable development principles is not only the right thing to do, but also results in a higher level of engagement and commitment from our employees, better relationships with our communities and, as a result, a stronger base from
which to pursue profitable growth over the long-term. Abiding by these guiding principles, our corporate motto is “Do Good. Do Well.”
We are capable of Class I railroad deliveries to each of North America’s major oil and gas producing basins and also have the flexibility
to ship our product via barge, marine terminals and trucks to reach our customers as needed. As of October 2016, we operate an integrated logistics platform consisting of 41 proppant distribution terminals and a fleet of approximately 10,200
railcars.
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We have expanded our unit train capabilities to now include two production facilities and
eight in-basin terminals, which reduce freight costs and improve cycle times for our railcar fleet. In order to better align our logistics network with customer demand and to reduce costs, we discontinued activity at four transloading terminals in
2016.
Our operations are organized into two segments based on the primary end markets we serve: (i) Proppant Solutions and
(ii) I&R Products. Our Proppant Solutions segment predominantly provides sand-based proppants for use in hydraulic fracturing operations throughout the U.S. and Canada, Argentina, Mexico, China, northern Europe and the United Arab Emirates.
Our I&R Products segment provides raw, coated, and custom blended sands to the foundry, building products, glass, turf and landscape and filtration industries primarily in North America. We believe our two market segments are complementary.
Our ability to sell to a wide range of customers across multiple end markets allows us to maximize the recovery of our reserve base within our mining operations and to reduce the cyclicality of our earnings.
In 2015, our Proppant Solutions segment sold 6.2 million tons of proppant with revenues of $710 million, which represent decreases of 14%
and 42%, respectively, from 2014. Proppant Solutions represented approximately 91% and 87% of total company revenues for 2014 and 2013, respectively. For 2015, our I&R Products segment had sales volume of 2.3 million tons with revenues of
$119 million, which represent decreases of 5% and 5%, respectively, from 2014.
In the nine months ended September 30, 2016, our
Proppant Solutions segment sold 4.6 million tons of proppant with revenues of $302.7 million. Our Proppant Solutions segment sold 4.8 million tons of proppant with revenues of $602.6 million in the nine months ended September 30,
2015. Our I&R Products segment had sales volume of 1.9 million tons with revenues of $91.8 million in the nine months ended September 30, 2016. In the nine months ended September 30, 2015, our I&R Products segment
had sales volume of 1.7 million tons with revenues of $91.2 million.
Corporate History Information
We were incorporated as a Delaware corporation in 1986. Our predecessor companies began operations over 120 years ago. On October 3,
2014, we completed an initial public offering of 25 million shares of our common stock at an offering price of $16.00 per share (the “IPO”). We are listed under the ticker symbol “FMSA” on the New York Stock Exchange.
In August 2010, we partnered with American Securities LLC (“American Securities”) when affiliated funds managed by American
Securities (collectively with American Securities, the “AS Group”) acquired indirect control over the selling security holder, which acquired 51% of our stock (the “AS Group Acquisition”). At the time of this offering, the AS
Group indirectly owns approximately 31.9% of our outstanding common stock.
Our corporate headquarters is located at 8834 Mayfield Road,
Chesterland, Ohio 44026. Our telephone number is (800) 255-7263. Our company website is
www.fairmountsantrol.com
. We make available free of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and amendments to those reports as soon as reasonably practicable after we file or furnish such reports to the Securities and Exchange Commission (the “SEC”). The information on our website is not incorporated by reference in or
considered to be a part of this prospectus supplement.
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THE OFFERING
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Selling Security Holder
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ASP FML Holdings, LLC
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Common Stock Offered by Selling Security Holder
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20,000,000 shares of our common stock (23,000,000 shares if the underwriter exercises its option
to purchase additional shares of common stock in full).
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Common Stock Outstanding
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222,890,868 shares as of November 21, 2016.
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Use of Proceeds
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We will not receive any of the proceeds from the sale of shares by the selling security
holder.
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Dividend policy
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We do not anticipate paying any cash dividends on our common stock. In addition, our revolving
credit facility and term loans place certain restrictions on our ability to pay cash dividends.
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New York Stock Exchange Symbol
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FMSA
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Risk Factors
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You should carefully consider the information set forth in the section of this prospectus
supplement entitled “Risk Factors” as well as the other information included in or incorporated by reference in this prospectus supplement and the accompanying prospectus before deciding whether to invest in our common stock.
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The information above excludes 14,325,696 shares of common stock issuable upon the exercise of stock
options outstanding as of November 21, 2016 under our equity incentive plans, as well as 11,004,707 shares of common stock reserved for issuance under our 2014 Long-Term Incentive Plan, or the LTIP.
Unless we specifically state otherwise, the information in this prospectus supplement assumes that the underwriter does not exercise its
option to purchase additional shares of our common stock.
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RISK FACTORS
This offering and an investment in our common stock involve a high degree of risk. You should refer to the other information set forth or
incorporated by reference in this prospectus supplement and the accompanying prospectus, including the “Risk Factors” sections of our Annual Report on Form 10-K for the year ended December 31, 2015, our Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016 and our consolidated financial statements and the related notes incorporated by reference in this prospectus supplement and the
accompanying prospectus. If any of these risks actually occurs, our business, financial condition, results of operations, cash flows and prospects could be materially and adversely affected. As a result, the trading price of our common stock could
decline and you could lose all or part of your investment in our common stock.
Risks Related to This Offering and Ownership of Our Common Stock
The concentration of our capital stock ownership among our largest stockholders and their affiliates will limit your ability to
influence corporate matters.
As a result of this offering, the selling security holder will indirectly own approximately 23.0% of
our outstanding common stock (not including the exercise of the underwriter’s option), and management and other employees own a substantial portion of the remainder of our stock. As a result, the portion of our stock held by the investing
public taken as a whole will be approximately 47% following this offering. Consequently, the selling security holder and our management and employees will continue to have significant influence over all matters that require approval by our
stockholders, including the election of directors and approval of significant corporate transactions. This concentration of ownership will limit your ability to influence corporate matters, and as a result, actions may be taken that you may not view
as beneficial.
Furthermore, conflicts of interest could arise in the future between us, on the one hand, and American Securities and its
affiliates, including its portfolio companies, on the other hand, concerning among other things, potential competitive business activities or business opportunities. American Securities is a private equity firm in the business of making investments
in entities in a variety of industries. As a result, American Securities’ existing and future portfolio companies which it controls may compete with us for investment or business opportunities. These conflicts of interest may not be resolved in
our favor.
We have also renounced our interest in certain business opportunities. See “—Our amended and restated certificate of
incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities.”
Our stock price
could be volatile, and you may not be able to resell shares of your common stock at or above the price you paid.
The stock markets
in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. Volatility in the market
price of our common stock may prevent you from being able to sell your common stock at or above the price at which you purchased the stock. As a result, you may suffer a loss on your investment. Securities class action litigation has often been
instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us, could result in very substantial costs, divert our
management’s attention and resources and harm our business, operating results and financial condition.
In addition to the risks
described in this section, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:
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our operating and financial performance;
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quarterly variations in the rate of growth of our financial indicators, such as revenues, EBITDA, net income, and net income per share;
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the public reaction to our press releases, our other public announcements, and our filings with the SEC;
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strategic actions by our competitors;
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our failure to meet revenue or earnings estimates by research analysts or other investors;
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changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts;
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speculation in the press or investment community;
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the failure of research analysts to cover our common stock;
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sales of our common stock by us, the selling security holders, or other stockholders, or the perception that such sales may occur;
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changes in accounting principles, policies, guidance, interpretations, or standards;
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additions or departures of key management personnel;
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actions by our stockholders;
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general market conditions, including fluctuations in commodity prices, sand-based proppants, or industrial and recreational sand-based products;
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domestic and international economic, legal and regulatory factors unrelated to our performance; and
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the realization of any risks described under this “Risk Factors” section.
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Our
amended and restated certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities.
Our amended and restated certificate of incorporation provides for the allocation of certain corporate opportunities between us and American
Securities. Under these provisions, neither American Securities, its affiliates and subsidiaries, nor any of their officers, directors, agents, stockholders, members, or partners will have any duty to refrain from engaging, directly or indirectly,
in the same business activities or similar business activities or lines of business in which we operate, other than opportunities related to hydraulic fracturing proppants. For instance, a director of our company who also serves as a director,
officer or employee of American Securities or any of its subsidiaries or affiliates may pursue certain acquisitions or other opportunities that may be complementary to our business and, as a result, such acquisition or other opportunities may not be
available to us. These potential conflicts of interest could have a material adverse effect on our business, financial condition and results of operations if attractive corporate opportunities are allocated by American Securities to itself or its
subsidiaries or affiliates instead of to us.
Our amended and restated certificate of incorporation and amended and restated bylaws,
as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our common stock.
Our amended and restated certificate of incorporation authorizes our board of directors to issue preferred stock without stockholder approval.
If our board of directors elects to issue preferred stock, it could be more difficult for a third party to acquire us. In addition, some provisions of our amended and restated certificate of incorporation and amended and restated bylaws could make
it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our stockholders, including:
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a classified board of directors;
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advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders;
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providing that the board of directors is expressly authorized to adopt, or to alter or repeal our amended and restated bylaws;
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establishing advance notice and certain information requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;
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giving the Board of Directors the power to authorize the issuance of one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over
our common stock respecting dividends and distributions;
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providing that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for certain stockholder actions involving the Company, and
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as described below, limitations on the removal of directors and limitations on the ability of our stockholders to call special meetings.
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As a result of the completion of our common stock offering in October 2016, the AS Group’s ownership fell below 35% of the outstanding
shares of our common stock. As a result, certain provisions in our amended and restated certificate of incorporation and amended and restated bylaws became effective that increased the voting thresholds required by our amended and restated
certificate of incorporation and amended and restated bylaws for various shareholder actions and otherwise may make it more difficult for a third party to acquire control of us. These provisions provide that:
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any action required or permitted to be taken by the stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing in lieu of a meeting of such
stockholders, subject to the rights of the holders of any series of preferred stock with respect to such series;
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our amended and restated bylaws may be amended by the stockholders only by the affirmative vote of the holders of at least two-thirds of our then outstanding common stock;
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special meetings of our stockholders may only be called by the board of directors;
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certain provisions of our amended and restated certificate of incorporation may be amended by the affirmative vote of the holders of at least 75% of our then outstanding common stock; and
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subject to the rights of the preferred stockholders, if any, any director may be removed only for cause and upon the affirmative vote of the holders of at least 75% of our then outstanding common stock.
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We currently do not intend to pay dividends on our common stock, and our debt agreements place certain restrictions
on our ability to do so. Consequently, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.
We do not plan to declare dividends on shares of our common stock in the foreseeable future. Additionally, our existing revolving credit
facility and our term loan both place certain restrictions on our ability to pay cash dividends. Consequently, unless we revise our dividend policy, your only opportunity to achieve a return on your investment in us will be if you sell your common
stock at a price greater than you paid for it. There is no guarantee that the price of our common stock that will prevail in the market will ever exceed the price that you pay in this offering.
Future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the
sale of equity or convertible securities may dilute your ownership in us.
We may sell additional shares of common stock in
subsequent public offerings. We may also issue additional shares of common stock or convertible securities. We cannot predict the size of future issuances of our
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common stock or securities convertible into common stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock.
Sales of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our common stock.
The underwriter of this offering may waive or release parties to the lock-up agreements entered into in connection with this offering,
which could adversely affect the price of our common stock.
We, the selling security holder, and all of our directors and
executive officers will enter into lock-up agreements with respect to their common stock, pursuant to which they are subject to certain resale restrictions for a period of 60 days following the date of this prospectus supplement. Morgan
Stanley & Co. LLC may, at any time and without notice, release all or any portion of the common stock subject to the foregoing lock-up agreements. If the restrictions under the lock-up agreements are waived, then common stock will be
available for sale into the public markets, which could cause the market price of our common stock to decline and impair our ability to raise capital.
If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations
regarding our common stock or if our operating results do not meet their expectations, our stock price could decline.
The trading
market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly,
we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover our company downgrades our common stock or if our operating results do not
meet their expectations, our stock price could decline.
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FORWARD-LOOKING STATEMENTS
This prospectus supplement (including the information incorporated by reference herein) contains forward-looking statements. These statements
relate to our plans, expectations, estimates and beliefs of future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or
achievements to be materially different from those expressed or implied by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,”
“would,” “should,” “expect,” “plan,” “anticipate,” “target,” “project,” “intend,” “believe,” “estimate,” “predict,” “potential,”
“pro forma,” “seek” or “continue” or the negative of those terms or other comparable terminology. These statements are only predictions and we can give no assurance that such expectations will prove to be correct. Some
of the things that could cause our actual results to differ substantially from our expectations are:
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the price of oil and gas and the level of activity in the oil and gas industries;
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the level of cash flows generated to provide adequate liquidity to meet our working capital needs, capital expenditures, and our lease and debt obligations;
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increasing costs or a lack of dependability or availability of transportation services or infrastructure and geographic shifts in demand;
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changes to leased terminal arrangements impacting our distribution network and ability to deliver our products to our customers;
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our rights and ability to mine our properties and our renewal or receipt of the required permits and approvals from governmental authorities and other third parties;
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fluctuations in demand and pricing for raw and coated sand-based proppants or the development of either effective alternative proppants or new processes to replace hydraulic fracturing;
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continuing pressure on market-based pricing;
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lower of cost or market inventory adjustments and/or obsolete inventory due to lower proppant demand from the oil and gas industry;
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our ability to protect our intellectual property rights;
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our ability to successfully develop and commercialize Propel SSP;
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our ability to succeed in competitive markets;
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loss of, or reduction in, business from our largest customers;
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our exposure to the credit risk of our customers and any potential material nonpayments, bankruptcies and/or nonperformance by our customers;
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our transactions in, and operating subsidiaries with, functional currencies other that the U.S. dollar. We are exposed to fluctuations in the exchange rates of these currencies compared to the U.S. dollar, which is
the primary currency in which we operate. These fluctuations may be significant, and may not be fully mitigated by risk management techniques such as foreign currency hedging;
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changes in U.S. or international economic conditions could adversely impact our operating results;
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fluctuations in demand for industrial and recreational sand;
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operating risks that are beyond our control, such as changes in the price and availability of transportation, natural gas or electricity; unusual or unexpected geological formations or pressures; cave-ins, pit wall
failures or rock falls; or unanticipated ground, grade or water conditions;
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our dependence on our Wedron Silica sand-mining facility for a significant portion of our sales, which currently supplies almost all of our Northern White frac sand and a portion of our industrial and recreation sand
sold into our markets;
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the availability of raw materials to support our manufacturing of resin-coated proppants;
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diminished access to water;
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challenges to our title to our mineral properties and water rights;
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our ability to make capital expenditures to maintain, develop and increase our asset base and our ability to obtain needed capital or financing on satisfactory terms, including financing for existing commitments such as
future railcar deliveries;
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the potential impairment of our property, including our mineral reserves, plant, equipment, goodwill and intangible assets as a result of continuing depressed market conditions;
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substantial indebtedness, lease and pension obligations;
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restrictions imposed by our indebtedness and lease obligations on our current and future operations;
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the accuracy of our estimates of our mineral reserves and our ability to mine them;
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substantial costs related to mines, resin-coating facilities, and terminals that have been closed;
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potential disruption of our operations due to severe weather conditions, such as tornados and electrical storms, which frequently occur in areas where we operate;
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a shortage of skilled labor and rising labor costs in the mining industry;
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increases in the prices of, or interruptions in the supply of, natural gas and electricity, or any other energy sources;
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•
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our ability to attract and retain key personnel;
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•
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our ability to maintain satisfactory labor relations;
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•
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silica-related health issues and corresponding litigation;
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•
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our ability to maintain effective quality control systems at our mining, processing and production facilities;
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•
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fluctuations in our sales and results of operations due to seasonality and other factors;
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•
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interruptions or failures in our information technology systems;
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•
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failure to comply with the provisions of the Foreign Corrupt Practices Act (“FCPA”);
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•
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the impact of a terrorist attack or armed conflict;
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•
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cybersecurity breaches;
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•
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our failure to maintain adequate internal controls;
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•
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extensive and evolving environmental, mining, health and safety, licensing, reclamation and other regulation (and changes in their enforcement or interpretation);
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•
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our ability to acquire, maintain or renew financial assurances related to the reclamation and restoration of mining property; and
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•
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other factors referenced in this prospectus supplement and any accompanying prospectus, including those set forth or referenced under the caption “Risk Factors,” and in our filings with the SEC, including
those set forth or discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of those reports.
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We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events
or otherwise, after the date of this prospectus supplement to conform them to actual results. All of the forward-looking statements are qualified in their entirety by reference to the factors
S-9
discussed in and incorporated by reference into the section captioned “Risk Factors,” and by any cautionary language in this prospectus supplement and the accompanying prospectus. We
caution you that these risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if
any, of such new risk factors on our businesses or the extent to which any factor or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statements. In light of these risks, uncertainties
and assumptions, the forward-looking events discussed in this prospectus supplement or in documents incorporated by reference herein might not occur.
S-10
USE OF PROCEEDS
We will not receive any proceeds as a result of the sale of shares of our common stock by the selling security holder described in this
prospectus supplement and the accompanying prospectus.
SELLING SECURITY HOLDER
The following table sets forth (i) the name of the selling security holder, (ii) the number and percentage of common shares that the
selling security holder beneficially owned as of November 21, 2016, (iii) the number of common shares that may be offered and sold by the selling security holder in this offering and (iv) the number and percentage of common shares
that may be beneficially owned by the selling security holder after completion of this offering. The information contained in the table below in respect of the beneficial ownership of common shares by the selling security holder has been furnished
by or on behalf of the selling security holder and has not been independently verified by us.
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Shares Beneficially
Owned After this
Offering
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Shares Beneficially
Owned Before this
Offering
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Shares to be Sold
in this Offering
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Excluding Option
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Including Option
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Selling Security Holder
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Number
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Percent
(1)
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Excluding
Option
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Including
Option
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Number
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Percent
(1)
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Number
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Percent
(1)
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ASP FML Holdings, LLC
(2)
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71,156,628
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31.9
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%
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20,000,000
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23,000,000
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51,156,628
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23.0
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%
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48,156,628
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21.6
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%
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(1)
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For purposes of this table, information as to the percentage of shares beneficially owned is calculated based on 222,890,868 shares of our common stock outstanding as of November 21, 2016.
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(2)
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Represents shares held by ASP FML Holdings, LLC, a Delaware limited liability company referred to as the selling security holder or ASP FML Holdings. American Securities Partners V, L.P., American Securities Partners
V(B), L.P. and American Securities Partners V(C), L.P., collectively referred to as the ASP Sponsors, are owners of approximately 74% of the limited liability company interests of ASP FML Investco, LLC, a Delaware limited liability company, referred
to as ASP FML Investco. ASP FML
Co-Invest
I, LLC, a Delaware limited liability company referred to as ASP FML Co-Invest I, is the owner of approximately 26% of the limited liability company interests of ASP
FML Investco. ASP FML Investco is the owner of approximately 89% of the limited liability company interests of ASP FML Holdings. American Securities Associates V, LLC, a Delaware limited liability company referred to as ASA V, is the general partner
of each ASP Sponsor. American Securities LLC, a New York limited liability company referred to as American Securities, provides investment advisory services to each ASP Sponsor and to ASA V, and is the owner of 100% of the issued and outstanding
shares of ASP Manager Corp., the manager of each of ASP FML Holdings, ASP FML Investco and ASP FML Co-Invest I. As such, American Securities may be deemed to have indirect beneficial ownership of the shares held by ASP FML Holdings. The address for
ASP FML Holdings is c/o American Securities LLC, 299 Park Avenue, 34th Floor, New York, NY 10171. Each of Messrs. Michael G. Fisch and Michael E. Sand, members of our Board of Directors since 2015 and 2010, respectively, may be deemed to have shared
voting and investment power over the shares held by ASP FML Holdings. Mr. Fisch and Mr. Sand each disclaim beneficial ownership of the shares of our common stock held by ASP FML Holdings, except to the extent of their respective pecuniary
interests therein. Additionally, (a) David L. Horing and Michael G. Fisch, in their capacities as the managing members of ASA V, and (b) Michael G. Fisch, in his capacity as trustee of The Michael G. Fisch 2006 Revocable Trust, which is
the manager of ASCP, LLC, which is the managing member of American Securities, may be deemed to have shared voting and investment power over the shares held by ASP FML Holdings. Mr. Horing and Mr. Fisch each disclaim beneficial ownership
of the shares of our common stock held by ASP FML Holdings, except to the extent of their respective pecuniary interests therein.
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S-11
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Market Information
Shares of our common
stock, traded under the symbol “FMSA,” have been publicly traded since October 3, 2014, when our common stock was listed and began trading on the New York Stock Exchange. Prior to that date, there was no public market for our common
stock.
The following table sets forth, for the reporting period indicated, the high and low market prices per share for our common stock,
as reported on the New York Stock Exchange composite tape:
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Sales Price
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High
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Low
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Fiscal 2014
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October 3, 2014—December 31, 2014
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$
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16.98
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$
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6.43
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Fiscal 2015
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January 1, 2015—March 31, 2015
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$
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7.48
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$
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4.91
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April 1, 2015—June 30, 2015
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9.49
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7.14
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July 1, 2015—September 30, 2015
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8.25
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2.60
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October 1, 2015—December 31, 2015
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3.45
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2.21
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Fiscal 2016
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January 1, 2016—March 31, 2016
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$
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3.35
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1.00
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April 1, 2016—June 30, 2016
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8.17
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2.39
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July 1, 2016—September 30, 2016
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8.83
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5.88
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October 1, 2016—December 1, 2016
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10.08
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7.36
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Holders of Record
On November 21, 2016, there were 222,890,868 shares of our common stock outstanding, which were held by approximately 56 stockholders of
record. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Dividend Policy
We do not anticipate
declaring or paying any cash dividends to holders of our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance the growth of our business. Our future dividend policy is within the discretion of our
board of directors and will depend upon then-existing conditions, including our results of operations, financial condition, capital requirements, investment opportunities, statutory restrictions on our ability to pay dividends and other factors our
board of directors may deem relevant. In addition, our revolving credit facility and term loans place restrictions on our ability to pay cash dividends.
S-12
UNDERWRITING
Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus supplement, Morgan
Stanley & Co. LLC, as underwriter, has agreed to purchase 20,000,000 shares of our common stock from the selling security holder.
The underwriter is offering the shares of common stock subject to its acceptance of the shares from selling security holder and subject to
prior sale. The underwriting agreement provides that the obligations of the underwriter to pay for and accept delivery of the shares of common stock offered by this prospectus supplement are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The underwriter is obligated to take and pay for all of the shares of common stock offered by this prospectus supplement if any such shares are taken. However, the underwriter is not required to take or pay
for the shares covered by the underwriter’s option to purchase additional shares described below.
The underwriter may offer the
shares of common stock from time to time for sale in one or more transactions on the NYSE, in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices, subject to receipt and acceptance by it and subject to its right to reject any order in whole or in part. In connection with the sale of the shares of common stock offered hereby, the underwriter may be deemed
to have received compensation in the form of underwriting discounts. The underwriter may effect such transactions by selling shares of common stock to or through dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriter and/or purchasers of shares of common stock for whom they may act as agents or to whom they may sell as principal.
The selling security holder has granted to the underwriter an option, exercisable for 30 days from the date of this prospectus supplement, to
purchase up to 3,000,000 additional shares of common stock at the public offering price listed on the cover page of this prospectus supplement, less underwriting discounts and commissions.
The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $825,000. We have
also agreed to reimburse the underwriter for certain of its expenses in an amount up to $30,000 as set forth in the underwriting agreement.
The underwriter has informed us that it does not intend sales to discretionary accounts to exceed 5% of the total number of shares of common
stock offered by them.
Our common stock is listed on the New York Stock Exchange under the trading symbol “FMSA”.
We and all directors and officers and the selling security holder have agreed that, without the prior written consent of Morgan
Stanley & Co. LLC, we and they will not, during the period ending 60 days after the date of this prospectus supplement (the “restricted period”):
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offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock;
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•
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file any registration statement with the Securities and Exchange Commission relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or
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•
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enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock.
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S-13
whether any such transaction described above is to be settled by delivery of common stock or such
other securities, in cash or otherwise. In addition, each such person agrees that, without the prior written consent of Morgan Stanley & Co. LLC, such other person will not, during the restricted period, make any demand for, or exercise any
right with respect to, the registration of any shares of common stock or any security convertible into or exercisable or exchangeable for common stock.
The restrictions described in the immediately preceding paragraph to do not apply to:
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•
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the sale of shares to the underwriter; or
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•
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the issuance by the Company of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus supplement (or certain transfers or
withholdings or sales by individual holders to the Company pursuant to the exercise of stock option/incentive plan grants); or
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•
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certain permitted bona fide gifts; or
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•
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the issuance by the Company of stock options, restricted stock, shares of common stock or other equity incentive awards pursuant to the Company’s equity compensation or director compensation plans as in effect as
of the date of this prospectus supplement and which has been disclosed or incorporated by reference herein; or
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•
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the establishment of a trading plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the transfer of shares of common stock, provided that (i) such
plan does not provide for the transfer of common stock during the restricted period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made regarding the establishment of such
plan, such announcement or filing shall include a statement to the effect that no transfer of common stock may be made under such plan during the restricted period.
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Morgan Stanley & Co. LLC, in its sole discretion, may release the common stock and other securities subject to the lock-up agreements
described above in whole or in part at any time with or without notice.
In order to facilitate the offering of the common stock, the
underwriter may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriter may sell more shares than they are obligated to purchase under the underwriting agreement, creating a
short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriter under the option. The underwriter can close out a covered short sale by exercising the option or
purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriter will consider, among other things, the open market price of shares compared to the price available under the option. The
underwriter may also sell shares in excess of the option, creating a naked short position. The underwriter must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the
underwriter is concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering,
the underwriter may bid for, and purchase, shares of common stock in the open market to stabilize the price of the common stock. These activities may raise or maintain the market price of the common stock above independent market levels or prevent
or retard a decline in the market price of the common stock. The underwriter is not required to engage in these activities and may end any of these activities at any time.
We and the underwriter have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. The
selling security holder has also agreed to indemnify the underwriter against certain liabilities.
The underwriter and certain of its
affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory,
S-14
investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriter and certain of its affiliates have, from time to time, performed,
and may in the future perform, various commercial and investment banking and financial advisory services for the Company and its affiliates, for which they received or may in the future receive customary fees and expenses.
In the ordinary course of their various business activities, the underwriter and certain of its 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 its own account and for the accounts of its customers, and such investment and securities activities
may involve securities and/or instruments of the Company or its affiliates. If the underwriter or its affiliates have a lending relationship with us, they may hedge their credit exposure to us consistent with their customary risk management
policies. Typically, the underwriter and its affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of
our affiliates, including potentially the shares of common stock offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the shares of common stock offered hereby. The underwriter and certain
of its affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to
clients that they acquire, long and/or short positions in such securities and instruments.
A prospectus supplement in electronic format
may be made available on websites maintained by the underwriter, or selling group members, if any, participating in this offering. The underwriter may agree to allocate a number of shares of common stock for sale to its online brokerage account
holders.
Selling Restrictions
Canada
The shares
may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are
permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the
prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a
purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit
prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these
rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of
a
non-Canadian
jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriter is not required to comply with the disclosure requirements of NI 33-105 regarding
underwriter conflicts of interest in connection with this offering.
S-15
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us by Calfee, Halter & Griswold LLP, Cleveland, Ohio. Certain
legal matters will be passed upon for the underwriter by Latham & Watkins LLP, Houston, Texas. Certain legal matters will be passed upon for the selling security holder by Kaye Scholer LLP, New York, New York.
EXPERTS
The financial statements and management’s assessment of the effectiveness of internal control over financial reporting (which is included
in Management’s Report on Internal Control over Financial Reporting) incorporated in this Prospectus Supplement by reference to the Annual Report on Form 10-K for the year ended December 31, 2015 have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the SEC. The reports, proxy statements and other
information that we file electronically with the SEC are available to the public free of charge at the SEC’s website at
www.sec.gov
. You may also read and copy any document we file with the SEC, at prescribed rates, at the SEC’s
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of its Public Reference Room. You can also inspect our reports, proxy statements and other
information at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
We “incorporate by
reference” into this prospectus supplement the information we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part
of this prospectus supplement. Some information contained in this prospectus supplement updates the information incorporated by reference into this prospectus supplement, and information that we subsequently file with the SEC will automatically
update information in this prospectus supplement, as well as our other filings with the SEC. In other words, in the case of a conflict or inconsistency between information in this prospectus supplement and/or information incorporated by reference
into this prospectus supplement, you should rely on the information contained in the document that was filed later. We incorporate by reference the documents listed below and any filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), after the initial filing of the registration statement that contains this prospectus supplement and prior to the time that we sell all the securities offered under
this prospectus supplement, other than the portions of such documents that by statute, by designation in such documents, or otherwise are not deemed to be filed with the SEC or are not required to be incorporated herein by reference:
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•
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Annual report on Form 10-K for the year ended December 31, 2015;
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•
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Amended annual report on Form 10-K/A for the year ended December 31, 2015;
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•
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Quarterly reports on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016;
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•
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The information in our Definitive Proxy Statement on Schedule 14A filed on April 7, 2016 that is specifically incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2015;
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S-16
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•
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Free Writing Prospectus, dated December 1, 2016;
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•
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Current reports on Form 8-K filed on March 3, 2016, May 2, 2016, May 12, 2016, July 25, 2016, October 24, 2016, November 17, 2016, November 29, 2016 and
December 1, 2016 (except that the information furnished pursuant to Item 7.01 of Form 8-K and the exhibits relating to such information are not incorporated into this prospectus); and
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The description of our common stock included under the caption “Description of Capital Stock” contained in the prospectus forming part of our Registration Statement on Form S-1
(File No. 333-198322),
which description has been incorporated by reference in Item 1 of our Registration Statement on Form 8-A, filed pursuant to Section 12 of the Exchange Act, on
September 30, 2014 including any amendment or report filed for the purpose of updating such description.
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We will
provide to each person, including any beneficial owner, to whom this prospectus supplement is delivered any or all of these filings (other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing) at
no cost, upon written or oral request. You may request these documents by writing to or telephoning us at the following address and number:
Corporate Secretary
Fairmount
Santrol Holdings Inc.
8834 Mayfield Road
Chesterland, Ohio 44026
(800) 255-7263
You should
rely only on the information incorporated by reference or set forth in this prospectus supplement, the applicable prospectus, or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We have not authorized
anyone else to provide you with additional or different information. The selling security holder is only offering these securities in states where the offer is permitted. You should not assume that the information in this prospectus supplement, the
applicable prospectus or any related free writing prospectus is accurate as of any date other than the dates on the front of those documents.
S-17
PROSPECTUS
FAIRMOUNT SANTROL HOLDINGS INC.
Common Stock
Preferred
Stock
Debt Securities
Warrants
Units
Purchase Contracts
We, from time
to time, may offer to sell common stock, preferred stock, debt securities, warrants, units or purchase contracts. We refer to our common stock, preferred stock, debt securities, warrants, units and purchase contracts collectively as the
“securities.” The debt securities and preferred stock may be convertible into or exercisable or exchangeable for our common stock, our preferred stock, our other securities or the debt or equity securities of one or more other entities.
This prospectus describes some of the general terms that may apply to these securities.
In addition, the selling security holder
identified in this prospectus and such additional selling security holders as may be named in one or more prospectus supplements (collectively, the “selling security holders”) may offer and sell shares of our common stock from time to time
in amounts, at prices and on terms that will be determined at the time of the offering. We will not receive any of the proceeds from the sale of our common stock offered by the selling security holders.
We or the selling security holders may offer and sell these securities to or through one or more underwriters, dealers or agents, or directly
to investors, or through a combination of these methods, on a continuous or delayed basis.
Our common stock is traded on the New York
Stock Exchange under the symbol “FMSA.” We have not yet determined whether any of the other securities that may be offered by this prospectus will be listed on any exchange, inter-dealer quotation system or over-the-counter market. If we
decide to seek the listing of any such securities upon issuance, the prospectus supplement relating to those securities will disclose the exchange, quotation system or market on which the securities will be listed.
Investing in our securities involves a high degree of risk. Please read the risk factors discussed or incorporated by reference under the
section of the prospectus captioned “
Risk Factors
” on page 5.
Neither the Securities and
Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is December 1, 2016.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (“SEC”) using a
“shelf” registration procedure. Under this shelf registration process, we may sell any combination of the securities described in this prospectus in one or more offerings from time to time, and the selling security holders may sell shares
of our common stock in one or more offerings from time to time. This prospectus provides you with a general description of the securities we may offer, as well as the shares of our common stock that the selling security holders may offer. Each time
we sell securities under this shelf registration, or the selling security holders sell shares of our common stock, to the extent required, we will provide a prospectus supplement that will contain specific information about the terms of that
offering.
Any prospectus supplement and any related free writing prospectus that we or any selling security holders may authorize may
also add, update, or change information contained in this prospectus. The prospectus supplement and any related free writing prospectus may also add, update or change information contained in this prospectus. Therefore, if there is any inconsistency
between the information in this prospectus and the prospectus supplement or free writing prospectus, you should rely on the information in the prospectus supplement or free writing prospectus, as applicable. You should carefully read this
prospectus, the applicable prospectus supplement and any free writing prospectuses we or any selling security holders have authorized for use in connection with a specific offering, together with the additional information described under the
heading “Where You Can Find More Information,” in their entirety. They contain information that you should consider when making your investment decision.
We and the selling security holders have not authorized any dealer, salesman or other person to give any information or to make any
representation other than those contained or incorporated by reference in this prospectus and any related prospectus supplement. You must not rely upon any information or representation not contained or incorporated by reference in this prospectus
or the related prospectus supplement. This prospectus and any related prospectus supplement do not constitute an offer to sell or the solicitation of an offer to buy any securities other than the registered securities to which they relate, nor do
this prospectus and any related prospectus supplement constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. You
should not assume that the information in this prospectus, any prospectus supplement, or any document incorporated by reference is accurate as of any date other than the date of the document in which such information is contained, or such other date
referred to in such document, regardless of the time of any sale or issuance of a security.
The registration statement that contains this
prospectus contains additional information about our company and the securities offered under this prospectus. That registration statement can be read at the SEC website or at the SEC offices mentioned under the heading “Where You Can Find More
Information.”
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the SEC. The reports, proxy statements and other
information that we file electronically with the SEC are available to the public free of charge at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC, at prescribed rates, at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of its Public Reference Room. You can also inspect our reports, proxy statements and other information at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
We “incorporate by reference” into this
prospectus the information we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus. Some information
contained in this prospectus
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updates the information incorporated by reference into this prospectus, and information that we subsequently file with the SEC will automatically update information in this prospectus, as well as
our other filings with the SEC. In other words, in the case of a conflict or inconsistency between information in this prospectus and/or information incorporated by reference into this prospectus, you should rely on the information contained in the
document that was filed later. We incorporate by reference the documents listed below and any filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
after the initial filing of the registration statement that contains this prospectus and prior to the time that we sell all the securities offered under this prospectus, other than the portions of such documents that by statute, by designation in
such documents, or otherwise are not deemed to be filed with the SEC or are not required to be incorporated herein by reference:
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annual report on Form 10-K for the year ended December 31, 2015;
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amended annual report on Form 10-K/A for the year ended December 31, 2015;
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quarterly reports on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016;
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the information in our Definitive Proxy Statement on Schedule 14A filed on April 7, 2016 that is specifically incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2015;
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current reports on Form 8-K filed on March 3, 2016, May 2, 2016, May 12, 2016, July 25, 2016, October 24, 2016, November 17, 2016, November 29, 2016 and December 1, 2016
(except that the information furnished pursuant to Item 7.01 of Form 8-K and the exhibits relating to such information are not incorporated into this prospectus); and
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the description of our common stock included under the caption “Description of Capital Stock” contained in the prospectus forming part of our Registration Statement on Form S-1 (File No. 333-198322),
which description has been incorporated by reference in Item 1 of our Registration Statement on Form 8-A, filed pursuant to Section 12 of the Exchange Act, on September 30, 2014 including any amendment or report filed for the purpose
of updating such description.
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We will provide to each person, including any beneficial owner, to whom this prospectus is
delivered any or all of these filings (other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing) at no cost, upon written or oral request. You may request these documents by writing to or
telephoning us at the following address and number:
Corporate Secretary
Fairmount Santrol Holdings Inc.
8834 Mayfield Road
Chesterland,
Ohio 44026
(800) 255-7263
You should rely only on the information incorporated by reference or set forth in this prospectus, the applicable prospectus supplement, or in
any free writing prospectus prepared by or on behalf of us or to which we have referred you. We have not authorized anyone else to provide you with additional or different information. We may only use this prospectus to sell securities if it is
accompanied by a prospectus supplement. We are only offering these securities in states where the offer is permitted. You should not assume that the information in this prospectus, the applicable prospectus supplement or any related free writing
prospectus is accurate as of any date other than the dates on the front of those documents.
SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus (including the information incorporated by reference herein) contains, and any
accompanying prospectus supplement will contain, forward-looking statements. These statements relate to our
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plans, expectations, estimates and beliefs of future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,”
“will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “target,” “project,” “intend,” “believe,” “estimate,”
“predict,” “potential,” “pro forma,” “seek” or “continue” or the negative of those terms or other comparable terminology. These statements are only predictions and we can give no assurance that such
expectations will prove to be correct. Some of the things that could cause our actual results to differ substantially from our expectations are:
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the price of oil and gas and the level of activity in the oil and gas industries;
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the level of cash flows generated to provide adequate liquidity to meet our working capital needs, capital expenditures, and our lease and debt obligations;
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increasing costs or a lack of dependability or availability of transportation services or infrastructure and geographic shifts in demand;
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changes to leased terminal arrangements impacting our distribution network and ability to deliver our products to our customers;
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our rights and ability to mine our properties and our renewal or receipt of the required permits and approvals from governmental authorities and other third parties;
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fluctuations in demand and pricing for raw and coated sand-based proppants or the development of either effective alternative proppants or new processes to replace hydraulic fracturing;
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continuing pressure on market-based pricing;
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lower of cost or market inventory adjustments and/or obsolete inventory due to lower proppant demand from the oil and gas industry;
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our ability to protect our intellectual property rights;
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our ability to successfully develop and commercialize Propel SSP;
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our ability to succeed in competitive markets;
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loss of, or reduction in, business from our largest customers;
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our exposure to the credit risk of our customers and any potential material nonpayments, bankruptcies and/or nonperformance by our customers;
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our transactions in, and operating subsidiaries with, functional currencies other that the U.S. dollar. We are exposed to fluctuations in the exchange rates of these currencies compared to the U.S. dollar, which is
the primary currency in which we operate. These fluctuations may be significant, and may not be fully mitigated by risk management techniques such as foreign currency hedging;
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changes in U.S. or international economic conditions could adversely impact our operating results;
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fluctuations in demand for industrial and recreational sand;
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operating risks that are beyond our control, such as changes in the price and availability of transportation, natural gas or electricity; unusual or unexpected geological formations or pressures; cave-ins, pit wall
failures or rock falls; or unanticipated ground, grade or water conditions;
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our dependence on our Wedron Silica sand-mining facility for a significant portion of our sales, which currently supplies almost all of our Northern White frac sand and a portion of our industrial and recreation sand
sold into our markets;
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the availability of raw materials to support our manufacturing of resin-coated proppants;
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diminished access to water;
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challenges to our title to our mineral properties and water rights;
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our ability to make capital expenditures to maintain, develop and increase our asset base and our ability to obtain needed capital or financing on satisfactory terms, including financing for existing commitments such as
future railcar deliveries;
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the potential impairment of our property, including our mineral reserves, plant, equipment, goodwill and intangible assets as a result of continuing depressed market conditions;
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substantial indebtedness, lease and pension obligations;
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restrictions imposed by our indebtedness and lease obligations on our current and future operations;
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the accuracy of our estimates of our mineral reserves and our ability to mine them;
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substantial costs related to mines, resin-coating facilities, and terminals that have been closed;
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potential disruption of our operations due to severe weather conditions, such as tornados and electrical storms, which frequently occur in areas where we operate;
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a shortage of skilled labor and rising labor costs in the mining industry;
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increases in the prices of, or interruptions in the supply of, natural gas and electricity, or any other energy sources;
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our ability to attract and retain key personnel;
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our ability to maintain satisfactory labor relations;
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silica-related health issues and corresponding litigation;
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our ability to maintain effective quality control systems at our mining, processing and production facilities;
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fluctuations in our sales and results of operations due to seasonality and other factors;
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interruptions or failures in our information technology systems;
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failure to comply with the provisions of the Foreign Corrupt Practices Act (“FCPA”);
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the impact of a terrorist attack or armed conflict;
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cybersecurity breaches;
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our failure to maintain adequate internal controls;
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extensive and evolving environmental, mining, health and safety, licensing, reclamation and other regulation (and changes in their enforcement or interpretation);
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our ability to acquire, maintain or renew financial assurances related to the reclamation and restoration of mining property; and
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other factors referenced in this prospectus and any accompanying prospectus supplement, including those set forth or referenced under the caption “Risk Factors,” and in our filings with the SEC, including
those set forth or discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of those reports.
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We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events
or otherwise, after the date of this prospectus to conform them to actual results. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed in and incorporated by reference into the section
captioned “Risk Factors,” and by any cautionary language in
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this prospectus and any accompanying prospectus supplement. We caution you that these risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk
factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our businesses or the extent to which any factor or combination of factors, may cause actual results
to differ materially from those projected in any forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus or in documents incorporated by reference herein might not
occur.
RISK FACTORS
Investing in our securities involves risks. Before deciding whether to purchase any of our securities, you should carefully consider the risks
involved in an investment in our securities, as set forth in:
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Item 1A, Risk Factors, in our Annual Report on Form 10-K for our fiscal year ended December 31, 2015; and
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the other risks described in any prospectus supplement or in any of the documents incorporated by reference in this prospectus.
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It is possible that our business, financial condition, liquidity or results of operations could be materially adversely affected by any of
these risks.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities for other general corporate purposes unless otherwise indicated in the
applicable prospectus supplement or in any free writing prospectuses we have authorized relating to a specific issuance of securities. Our general corporate purposes include, but are not limited to, working capital, repayment, redemption or
refinancing of debt, leases, capital expenditures, investments in or loans to subsidiaries and joint ventures, funding of possible acquisitions and satisfaction of other obligations. Pending any such use, the net proceeds from the sale of the
securities may be invested in short-term, investment grade, interest-bearing instruments. We will include a more detailed description of the use of proceeds of any specific offering in the applicable prospectus supplement relating to an offering of
securities under this prospectus. Unless otherwise set forth in a prospectus supplement, we will not receive any proceeds from the sale of common stock by any selling security holders.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of our earnings to our fixed charges for the periods indicated. The ratio has been computed by
dividing earnings by fixed charges. For purposes of computing the ratio, “Earnings” is income before income taxes plus fixed charges, less capitalized interest. “Fixed Charges” is interest expense plus capitalized interest and
the portion of rental expense which management believes is representative of interest expense.
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Fiscal Years Ended December 31,
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Nine Months Ended
September 30,
2016
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2011
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2012
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2013
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2014
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2015
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4.02
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4.27
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3.02
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3.99
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N/M*
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N/M*
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For these periods, earnings are insufficient to cover fixed charges. The deficiency, which is the dollar amount of earnings necessary to attain a ratio equal to one to one, is $97,619 for the twelve months ended
December 31, 2015 and $219,003 for the nine months ended September 30, 2016.
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DESCRIPTION OF CAPITAL STOCK
The following summary of the capital stock and amended and restated certificate of incorporation and amended and restated bylaws of Fairmount
Santrol Holdings Inc. does not purport to be complete and is qualified in its entirety by reference to the provisions of applicable law and to our amended and restated certificate of incorporation and amended and restated bylaws.
Common Stock
Our amended and restated
certificate of incorporation authorizes us to issue up to 1,850,000,000 shares of common stock, par value $0.01 per share. As of November 21, 2016, there were 222,890,868 shares of common stock outstanding, net of treasury shares, held by 56
direct registered stockholders.
Except as provided by law or in a preferred stock designation, holders of common stock are entitled to
one vote for each share held of record on all matters submitted to a vote of the stockholders, will have the exclusive right to vote for the election of directors and do not have cumulative voting rights. Except as otherwise required by law, holders
of common stock are not entitled to vote on any amendment to the amended and restated certificate of incorporation (including any certificate of designations relating to any series of preferred stock) that relates solely to the terms of any
outstanding series of preferred stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to the amended and restated certificate of
incorporation (including any certificate of designations relating to any series of preferred stock) or pursuant to the Delaware General Corporation Law (the “DGCL”). Subject to prior rights and preferences that may be applicable to any
outstanding shares or series of preferred stock, holders of common stock are entitled to receive ratably in proportion to the shares of common stock held by them such dividends (payable in cash, stock or otherwise), if any, as may be declared from
time to time by our board of directors out of funds legally available for dividend payments. All outstanding shares of common stock are fully paid and non-assessable. The holders of common stock have no preferences or rights of conversion, exchange,
pre-emption or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of our affairs, holders of common stock
will be entitled to share ratably in our assets in proportion to the shares of common stock held by them that are remaining after payment or provision for payment of all of our debts and obligations and after distribution in full of preferential
amounts to be distributed to holders of outstanding shares of preferred stock, if any.
Preferred Stock
Our amended and restated certificate of incorporation authorizes our board of directors, subject to any limitations prescribed by law, without
further stockholder approval, to establish and to issue from time to time one or more series of preferred stock, par value $0.01 per share. Each such series of preferred stock will cover the number of shares and will have the powers, preferences,
rights, qualifications, limitations and restrictions determined by the board of directors, which may include, among others, dividend rights, participation rights, liquidation preferences, voting rights, conversion rights, preemptive rights and
redemption rights. Except as provided by law or in a preferred stock designation, the holders of preferred stock will not be entitled to vote at or receive notice of any meeting of stockholders.
Anti-Takeover Effects of Provisions of Our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws and Delaware Law
Some provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions
that could make the following transactions more difficult: acquisitions of us by means of a tender offer, a proxy contest or otherwise or removal of our directors. These provisions may also have the effect of preventing changes in our management. It
is possible that these provisions
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could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions that
might result in a premium over the market price for our shares.
These provisions are expected to discourage coercive takeover practices
and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection and our potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.
Delaware Law
Section 203 of the DGCL prohibits a Delaware corporation, including those whose securities are listed for trading on the NYSE, from
engaging in any business combination (as defined in Section 203) with any interested stockholder (as defined in Section 203) for a period of three years following the date that the stockholder became an interested stockholder, unless:
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the business combination or the transaction which resulted in the stockholder becoming an interested stockholder is approved by the board of directors before the date the interested stockholder attained that status;
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upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced; or
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on or after such time the business combination is approved by the board of directors and authorized at a meeting of stockholders by at least two-thirds of the outstanding voting stock that is not owned by the interested
stockholder.
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A corporation may elect not to be subject to Section 203 of the DGCL. We have elected to not be subject
to the provisions of Section 203 of the DGCL.
Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws
Provisions of our amended and restated certificate of incorporation and amended and restated bylaws may delay or discourage transactions
involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in
their best interests. Therefore, these provisions could adversely affect the price of our common stock.
Among other things our amended
and restated certificate of incorporation and amended and restated bylaws:
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establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These
procedures provide that notice of stockholder proposals must be timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive
offices not less than 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. Our amended and restated bylaws specify the requirements as to form and content of all stockholders’ notices.
These requirements may preclude stockholders from bringing matters before the stockholders at an annual or special meeting;
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provide our board of directors the ability to authorize undesignated preferred stock. This ability makes it
possible for our board of directors to issue, without stockholder approval, preferred stock with voting or
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other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes
in control or management of our company;
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provide that the authorized number of directors may be changed only by resolution of the board of directors;
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provide that all vacancies, including newly created directorships, shall, except as otherwise required by law or, if applicable, the rights of holders of a series of preferred stock, be filled exclusively by the
affirmative vote of a majority of directors then in office, even if less than a quorum;
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provide that any action required or permitted to be taken by the stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing in lieu of a
meeting of such stockholders, subject to the rights of the holders of any series of preferred stock with respect to such series;
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provide that our bylaws may be amended by the stockholders only by the affirmative vote of the holders of at least two-thirds of our then outstanding common stock;
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provide that special meetings of our stockholders may only be called by the board of directors;
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provide that certain provisions of our certificate of incorporation may be amended by the affirmative vote of the holders of at least 75% of our then outstanding common stock;
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provide that, subject to the rights of the preferred stockholders, if any, any director may be removed only for cause and upon the affirmative vote of the holders of at least 75% of our then outstanding common stock;
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provide for our board of directors to be divided into three classes of directors, with each class as nearly equal in number as possible, serving staggered three year terms, other than directors which may be elected by
holders of preferred stock, if any. This system of electing and removing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us, because it generally makes it more difficult for
stockholders to replace a majority of the directors;
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provide that we renounce any interest in certain business opportunities presented to American Securities LLC or any of its officers, directors, agents, members, affiliates and subsidiaries (other than business
opportunities presented to such person in his or her capacity as an officer or director of the company) and that to the fullest extent permitted by law they have no obligation to offer us those opportunities, other than opportunities relating to
hydraulic fracturing proppants; and
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provide that our bylaws can be amended or repealed by the board of directors.
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Forum Selection
Our amended and restated certificate of incorporation provides that unless we consent in writing to the selection of an alternative forum, the
Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for:
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any derivative action or proceeding brought on our behalf;
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any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders;
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any action asserting a claim against us arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our bylaws; or
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any action asserting a claim against us that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as
defendants therein.
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Our amended and restated certificate of incorporation also provides that any person or entity
purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to have consented to this forum selection provision. However, it is possible that a court could find our forum selection provision to
be inapplicable or unenforceable.
Stockholders’ Agreement
On October 8, 2014, we amended and restated our stockholders’ agreement (the “Stockholders’ Agreement”) to, among
certain other things, revise certain registration rights as described below.
Registration Rights.
In accordance with the
requirements of the Stockholders’ Agreement, we filed a shelf registration statement, of which this prospectus is a part. We are required to use our reasonable best efforts to keep the shelf registration statement effective until all of the
shares of common stock described under “Selling Security Holders” have been sold in accordance with the means of distribution described under “Plan of Distribution” or can otherwise be freely sold under the Securities Act without
registration.
Demand Rights.
While the registration statement of which this prospectus is a part remains effective,
certain major stockholders (or their permitted transferees), including ASP FML Holdings, LLC, have the right to require us to engage in an underwritten offering in respect of their shares.
Piggy-back Rights.
If, at any time, subject to certain customary limitations and exceptions, we propose to conduct a
registered offering of common stock for our own account or for the account of any third party, then we must give written notice to all holders entitled to registration rights who own common stock with an anticipated gross offering price of at least
$5 million to allow them to include a specified number of their shares in the offering.
Conditions and Limitations;
Expenses.
These registration rights are subject to certain conditions and limitations, including the right of the underwriters in any underwritten offering to limit the number of shares to be included in the offering and our right to
delay or withdraw an offering under certain circumstances.
Limitation of Liability and Indemnification Matters
Our amended and restated certificate of incorporation limits the liability of our directors for monetary damages for breach of their fiduciary
duty as directors, except for liability:
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for any breach of their duty of loyalty to us or our stockholders;
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for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
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for unlawful payment of dividend or unlawful stock repurchase or redemption, as provided under Section 174 of the DGCL; or
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for any transaction from which the director derived an improper personal benefit.
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amendment, repeal or modification of these provisions will be prospective only and would not affect any limitation on liability of a director for acts or omissions that occurred prior to any such amendment, repeal or modification.
Our amended and restated certificate of incorporation and amended and restated bylaws also provide that we will indemnify and advance expenses
to our directors and officers to the fullest extent permitted by Delaware law. Under Delaware law we may purchase insurance on behalf of any officer, director, employee or other agent for any liability arising out of that person’s actions as
our officer, director, employee or agent, regardless of whether Delaware law would permit indemnification. We entered into indemnification agreements with each of our current directors and officers. These agreements require us to indemnify these
individuals to the fullest extent permitted under Delaware law against liability that may arise by reason of their service to us, and to
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advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We believe that the limitation of liability, indemnification and advancement of
expenses provisions in our amended and restated certificate of incorporation and the indemnification agreements will facilitate our ability to continue to attract and retain qualified individuals to serve as directors and officers.
Transfer Agent and Registrar
The
transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC.
Listing
Our common stock is listed on the New York Stock Exchange under the symbol “FMSA.”
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities (as defined below) sets forth certain general terms and provisions of the Debt
Securities to which any prospectus supplement may relate. The particular terms of the Debt Securities offered by any prospectus supplement and the extent, if any, to which such general provisions may apply to the Debt Securities so offered will be
described in the prospectus supplement relating to such Debt Securities. Accordingly, for a description of the terms of a particular issue of Debt Securities, reference must be made to both the prospectus supplement relating thereto and to the
following description.
The Debt Securities will be issued under an indenture (the “Indenture”) dated as of December 1, 2016,
between us and The Bank Of New York Mellon Trust Company, N.A. (the “Trustee”). As used in this prospectus, “Debt Securities” means the debentures, notes, bonds and other evidences of indebtedness that we issue and the Trustee
authenticates and delivers under the Indenture.
We have summarized certain terms and provisions of the Indenture in this section. The
summary is not complete. The Indenture is also an exhibit to the registration statement that included this prospectus. You should read the Indenture for additional information before you buy any Debt Securities. The summary that follows includes
references to section numbers of the Indenture so that you can more easily locate these provisions. Capitalized terms used but not defined in this summary have the meanings specified in the Indenture.
General
The Debt Securities will be our
direct unsecured obligations. The Indenture does not limit the amount of Debt Securities that we may issue and permits us to issue Debt Securities from time to time. Debt Securities issued under the Indenture will be issued as part of a series that
has been established by us pursuant to the Indenture (Section 2.01(b)). Unless a prospectus supplement relating to Debt Securities states otherwise, the Indenture and the terms of the Debt Securities will not contain any covenants designed to afford
holders of any Debt Securities protection in a highly leveraged or other transaction involving us that may adversely affect holders of the Debt Securities.
A prospectus supplement relating to a series of Debt Securities being offered will include specific terms relating to the offering. These
terms will include some or all of the following:
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the title and type of the Debt Securities;
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any limit on the total principal amount of the Debt Securities;
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the price at which the Debt Securities will be issued;
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the date or dates on which the principal of and premium, if any, on the Debt Securities will be payable;
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the maturity date of the Debt Securities;
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if the Debt Securities will bear interest, and if so:
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the interest rate on the Debt Securities,
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the date from which interest will accrue,
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the record and interest payment dates for the Debt Securities or the method of determining such rate,
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the first interest payment date, and
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any circumstances under which we may defer interest payments;
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if the amount of principal, interest or premium, if any, with respect to the Debt Securities may be determined with reference to an index or pursuant to a formula, the manner in which such amounts will be determined;
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any optional conversion provisions that would permit us or the Holders (as defined below) of Debt Securities to elect to convert the Debt Securities prior to their final maturity;
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any optional redemption provisions that would permit us or the Holders (as defined below) of Debt Securities to elect redemption of the Debt Securities prior to their final maturity;
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any sinking fund or analogous provisions that would obligate us to redeem, purchase or repay the Debt Securities prior to their final maturity;
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the currency or currencies in which the Debt Securities will be denominated and payable, if other than U.S. dollars;
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any provisions that would permit us or the Holders of the Debt Securities to elect the currency or currencies in which the Debt Securities are paid;
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the extent to which the Debt Securities will be subordinated to our other debt;
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any changes to or additional Events of Default (as defined below);
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any changes to or additional covenants or provisions to the Indenture;
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whether the Debt Securities will be issued in whole or in part in the form of Global Securities and, if so, the Depositary for those Global Securities (a “Global Security” means a Debt Security that we issue
in accordance with the Indenture to represent all or part of a series of Debt Securities);
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any material United States federal income tax consequences of the Debt Securities; and
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any other terms of the Debt Securities (which terms shall not be prohibited by the provisions of the Indenture).
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A “Holder” means the person in whose name a particular Security is registered in the Security Register (Section 1.01).
Payment and Transfer
In the prospectus
supplement relating to a series of Debt Securities, we will designate a “Place of Payment” where you can receive payment of the principal of and any premium and interest on such Debt Securities or transfer such Debt Securities. There will
be no service charge for any registration of transfer or exchange of the Debt Securities, but we may require you to pay any tax or other governmental charge payable in connection with a transfer or exchange of the Debt Securities.
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All funds which we pay to any paying agent for the payment of principal, interest or premium, if
any, with respect to the Debt Securities that remain unclaimed at the end of two years after such principal, interest or premium shall have become due and payable will be repaid to us, and the holders of such Debt Securities will thereafter look
only to us for payment thereof.
Denominations
Unless the prospectus supplement states otherwise, the Debt Securities will be issued only in registered form, without coupons, in
denominations of $1,000 each, or multiples of $1,000.
Original Issue Discount
Debt Securities may be issued under the Indenture as Original Issue Discount Securities and sold at a substantial discount below their stated
principal amount. If a Debt Security is an “Original Issue Discount Security,” that means that an amount less than the principal amount of the Debt Security will be due and payable upon a declaration of acceleration of the maturity of the
Debt Security pursuant to the Indenture (Section 1.01). The prospectus supplement will describe the federal income tax consequences and other special factors which should be considered prior to purchasing any Original Issue Discount Securities.
Consolidation, Merger or Sale of Assets
The Indenture generally permits a consolidation or merger between us and another company. It also permits the sale or transfer by us of all or
substantially all of our property and assets and the purchase by us of all or substantially all of the property and assets of another company. These transactions are permitted if:
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the resulting or acquiring company (if other than us) is a U.S. corporation, partnership or trust which assumes, or has its parent company assume, all of our responsibilities and liabilities under the Indenture,
including the payment of all amounts due on the Debt Securities and performance of the covenants in the Indenture; and
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immediately after the transaction, no Event of Default exists.
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If we consolidate or merge
with or into any other corporation or sell all or substantially all of our assets according to the terms and conditions of the Indenture, the resulting or acquiring corporation will be substituted for us in the Indenture with the same effect as if
it had been an original party to the Indenture. As a result, the successor corporation may exercise our rights and powers under the Indenture, in our name or in its own name and we will be released from all our liabilities and obligations under the
Indenture and under the Debt Securities (Sections 11.01(a) and (b)).
Satisfaction and Discharge; Defeasance and Covenant Defeasance
The following discussion of satisfaction and discharge, defeasance and covenant defeasance will be applicable to a series of Debt Securities
only if we choose to have them apply to that series. If we do so choose, we will state that in the applicable prospectus supplement.
Satisfaction and Discharge.
The Indenture will be satisfied and discharged if:
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we deliver to the Trustee all Debt Securities then outstanding for cancellation; or
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all Debt Securities not delivered to the Trustee for cancellation have become due and payable, are to become due and payable within one year upon their stated maturity or are to be called for redemption within one year
and we deposit an amount sufficient to pay the principal, premium, if any, and interest to the date of maturity or redemption as applicable, or deposit (in the case of Debt Securities that have become due and payable), provided that in either case
we have paid all other sums payable under the Indenture.
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Defeasance and Covenant Defeasance.
The Indenture provides, if such provision is made
applicable to the Debt Securities of a series, that:
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to defease and be discharged from any and all obligations with respect to any Debt Security of such series (except for the obligations to register the transfer or exchange of such Debt Security, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or agency in respect of the Debt Securities and to hold moneys for payment in trust) (“defeasance”); or
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to be released from our obligations with respect to certain restrictive covenants that may be applicable for a particular series; and
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that the Events of Default described in the third, fourth (only with respect to those restrictive covenants that no longer apply) and sixth bullets under “Events of Default,” shall not be Events of Default
under the Indenture with respect to such series (“covenant defeasance”), upon the deposit with the Trustee (or other qualifying trustee), in trust for such purpose, of money and/or certain U.S. government obligations which through the
payment of principal and interest in accordance with their terms will provide money, in an amount sufficient to pay the principal of (and premium, if any) and interest on such Debt Security, on the scheduled due dates.
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In the case of defeasance, the holders of such Debt Securities are entitled to receive payments in respect of such Debt Securities solely from
such trust. Such a trust may only be established if, among other things, we have delivered to the Trustee an opinion of counsel (as specified in the Indenture) to the effect that the holders of the Debt Securities affected thereby will not recognize
income, gain or loss for federal income tax purposes as a result of such defeasance or 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
defeasance or covenant defeasance had not occurred. Such opinion of counsel, in the case of defeasance described above, must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable federal income tax law
occurring after the date of the Indenture.
Modification and Waiver
Under the Indenture, certain of our rights and obligations and certain of the rights of Holders of the Debt Securities may be modified or
amended with the consent of the Holders of a majority in aggregate principal amount of the outstanding Debt Securities of each series of Debt Securities affected by the modification or amendment. The following modifications and amendments will not
be effective against any Holder of any outstanding Debt Security affected thereby without its consent:
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a change in the stated maturity date of any payment of principal or interest;
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a reduction in the principal amount, in the rate of interest or in any premium payable upon redemption;
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a reduction in the principal amount of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the maturity of a Debt Security pursuant to the Indenture;
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a change in the Place of Payment or currency in which any payment on the Debt Securities is payable;
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an impairment of a Holder’s right to sue us for the enforcement of certain payments due on the Debt Securities;
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a reduction in the percentage of outstanding Debt Securities required to consent to a modification, waiver or amendment of the Indenture;
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a modification with respect to the subordination of any Debt Security in a manner that adversely affects the rights of any Holder; and
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a modification of any of the foregoing requirements or a reduction in the percentage in principal amount of outstanding Debt Securities required to waive compliance with certain provisions of the Indenture or to waive
certain defaults under the Indenture (Section 10.02).
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Events of Default
The term “Event of Default” when used in the Indenture with respect to any series of Debt Securities, means any of the following:
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failure to pay interest (including defaulted interest, if any) on any Debt Security of that series when due, and continuance of such default for a period of 30 days;
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failure to pay the principal of or any premium on any Debt Security of that series when due;
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failure to make any sinking fund payment when and as due by the terms of a Debt Security of that series, and continuance of such default for a period of 60 days;
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default in the performance, or breach, of any covenant or warranty of the Company in the Indenture (other than a covenant or warranty, a default in the performance or breach of which is elsewhere specifically dealt with
or which has expressly been included in the Indenture solely for the benefit of one or more series of Debt Securities other than that series), and continuance of such default or breach for a period of 90 calendar days after there has been given and
actually received by the Company a Notice of Default (as defined in the Indenture) with respect to such default or breach;
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certain events in bankruptcy, insolvency or reorganization; or
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any other Event of Default that may be specified for the Debt Securities of that series when that series is created (Section 8.01(a)).
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If an Event of Default (other than the Event of Default referred to in the fifth bullet above) for any series of Debt Securities occurs and
continues, the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Debt Securities of the series may declare the entire principal of all the Debt Securities of that series to be due and payable immediately. If
such a declaration occurs, the Holders of a majority of the aggregate principal amount of the outstanding Debt Securities of that series can, subject to certain conditions, rescind the declaration. Upon the occurrence of the Event of Default
referred to in the fifth bullet above the entire principal of, and interest and premium (if any) on, all the Debt Securities of each series shall be due and payable immediately without any declaration or other act on the part of the Trustee or any
Holder (Section 8.01(b) and (c)).
The prospectus supplement relating to each series of Debt Securities that are Original Issue Discount
Securities will describe the particular provisions that relate to the acceleration of maturity of a portion of the principal amount of such series when an Event of Default occurs and continues.
An Event of Default for a particular series of Debt Securities does not necessarily constitute an Event of Default for any other series of
Debt Securities issued under the Indenture. The Indenture requires us to file an Officers’ Certificate with the Trustee each fiscal year that states that certain defaults do not exist under the terms of the Indenture (Section 6.05).
Other than its duties in the case an Event of Default has occurred and is continuing, a Trustee is not obligated to exercise any of its rights
or powers under the Indenture at the request or direction of any Holders, unless the Holders offer the Trustee indemnification satisfactory to it (Section 9.02(e)). If such indemnification is provided, then, subject to certain other rights of the
Trustee, the Holders of a majority in principal amount of the outstanding Debt Securities of any series may, with respect to the Debt Securities of that series, direct the time, method and place of:
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conducting any proceeding for any remedy available to the Trustee; or
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exercising any trust or power conferred upon the Trustee (Section 8.06).
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The Holder of a Debt
Security of any series will have the right to begin any proceeding with respect to the Indenture or for any other remedy under the Indenture (including the appointment of a receiver or trustee), only if:
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the Holder has previously given the Trustee written notice of a continuing Event of Default with respect to the Debt Securities of that series;
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the Holders of at least 25% in aggregate principal amount of the outstanding Debt Securities of that series have made a written request of, and offered satisfactory indemnification to, the Trustee to begin such
proceeding;
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the Holders have offered the Trustee indemnification to the Trustee’s satisfaction with respect to compliance with the request;
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the Trustee has not started such proceeding within 60 days after receiving the request; and
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the Trustee has not received directions inconsistent with such request from the Holders of a majority in aggregate principal amount of the outstanding Debt Securities of that series during those 60 days
(Section 8.04).
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However, the Holder of any Debt Security will have an absolute right to receive payment of principal
of and any premium and interest on the Debt Security when due and to institute suit to enforce such payment (Section 8.09).
“Street
Name” and Other Indirect Holders
Investors who hold securities in accounts at banks or brokers generally will not be recognized
by us as legal Holders of Debt Securities. This is called holding in “Street Name.” Instead, we would recognize only the bank or broker, or the financial institution that the bank or broker uses to hold its securities. These intermediary
banks, brokers and other financial institutions pass along principal, interest and other payments on the Debt Securities, either because they agree to do so in their customer agreements or because they are legally required to. If you hold Debt
Securities in “Street Name,” you should check with your own institution to find out:
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how it handles payments and notices;
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whether it imposes fees or charges;
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how it would handle voting if applicable;
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whether and how you can instruct it to send you Debt Securities registered in your own name so you can be a direct Holder as described below; and
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if applicable, how it would pursue rights under your Debt Securities if there were a default or other event triggering the need for Holders to act to protect their interests.
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Direct Holders
Our obligations, as well
as the obligations of the Trustee under the Indenture and those of any third parties employed by us or the Trustee under the Indenture, run only to persons who are registered as Holders of Debt Securities issued under the Indenture. As noted above,
we do not have obligations to you if you hold in “Street Name” or other indirect means, either because you choose to hold Debt Securities in that manner or because the Debt Securities are issued in the form of global securities as
described below. For example, once we make payment to the registered Holder, we have no further responsibility for the payment even if that Holder is legally required to pass the payment along to you as a “Street Name” customer but does
not do so.
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Book-Entry, Delivery and Form
We have obtained the information in this section concerning DTC, Clearstream Banking S.A., or “Clearstream,” and Euroclear
Bank S.A./N.V., as operator of the Euroclear System, or “Euroclear,” and the book-entry system and procedures from sources that we believe to be reliable, but we take no responsibility for the accuracy of this information.
Unless otherwise specified in the applicable prospectus supplement, the Debt Securities will be issued as fully-registered global securities
which will be deposited with, or on behalf of, DTC and registered, at the request of DTC, in the name of Cede & Co. Beneficial interests in the global securities will be represented through book-entry accounts of financial institutions
acting on behalf of beneficial owners as direct or indirect participants in DTC. The direct and indirect participants will remain responsible for keeping account of their holdings on behalf of their customers. Investors may elect to hold their
interests in the global securities through either DTC (in the United States) or (in Europe) through Clearstream or through Euroclear. Investors may hold their interests in the global securities directly if they are participants of such systems, or
indirectly through organizations that are participants in these systems. Interests held through Clearstream and Euroclear will be recorded on DTC’s books as being held by the U.S. depositary for each of Clearstream and Euroclear (the “U.S.
Depositories”), which U.S. Depositories will, in turn, hold interests on behalf of their participants’ customers’ securities accounts. Unless otherwise specified in the applicable prospectus supplement, beneficial interests in the
global securities will be held in denominations of $1,000 and multiples of $1,000 in excess thereof. Except as set forth below, the global securities may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee.
Debt Securities represented by a global security can be exchanged for definitive securities in registered form only
if:
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DTC notifies us that it is unwilling or unable to continue as depositary for that global security and we do not appoint a qualified successor depositary within 90 days after receiving that notice;
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at any time DTC ceases to be a clearing agency registered under the Exchange Act and we do not appoint a successor depositary within 90 days after becoming aware that DTC has ceased to be registered as a clearing
agency;
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we in our sole discretion determine that such global security will be exchangeable for definitive securities in registered form or elect to terminate the book-entry system through DTC and notify the trustee of our
decision; or
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an event of default with respect to the Debt Securities represented by that global security has occurred and is continuing.
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A global security that can be exchanged as described in the preceding sentence will be exchanged for definitive securities issued in authorized denominations
in registered form for the same aggregate amount. The definitive securities will be registered in the names of the owners of the beneficial interests in the global security as directed by DTC.
We will make principal and interest payments on all Debt Securities represented by a global security to the paying agent which in turn will
make payment to DTC or its nominee, as the case may be, as the sole registered owner and the sole holder of the Debt Securities represented by a global security for all purposes under the Indenture. Accordingly, we, the trustee and any paying agent
will have no responsibility or liability for:
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any aspect of DTC’s records relating to, or payments made on account of, beneficial ownership interests in a Debt Security represented by a global security;
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any other aspect of the relationship between DTC and its participants or the relationship between those participants and the owners of beneficial interests in a global security held through those participants; or
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the maintenance, supervision or review of any of DTC’s records relating to those beneficial ownership interests.
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DTC has advised us that its current practice is to credit direct participants’ accounts on
each payment date with payments in amounts proportionate to their respective beneficial interests in the principal amount of such global security as shown on DTC’s records, upon DTC’s receipt of funds and corresponding detail information.
The underwriters or agents for the Debt Securities represented by a global security will initially designate the accounts to be credited. Payments by participants to owners of beneficial interests in a global security will be governed by standing
instructions and customary practices, as is the case with securities held for customer accounts registered in “street name,” and will be the sole responsibility of those participants, and not of DTC or its nominee, the trustee, any agent
of ours, or us, subject to any statutory or regulatory requirements. Book-entry notes may be more difficult to pledge because of the lack of a physical note.
DTC
So long as DTC or
its nominee is the registered owner of a global security, DTC or its nominee, as the case may be, will be considered the sole owner and holder of the Debt Securities represented by that global security for all purposes of the Debt Securities. Owners
of beneficial interests in the Debt Securities will not be entitled to have Debt Securities registered in their names, will not receive or be entitled to receive physical delivery of the Debt Securities in definitive form and will not be considered
owners or holders of Debt Securities under the Indenture. Accordingly, each person owning a beneficial interest in a global security must rely on the procedures of DTC and, if that person is not a DTC participant, on the procedures of the
participant through which that person owns its interest, to exercise any rights of a holder of Debt Securities. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of the securities in certificated
form. These laws may impair the ability to transfer beneficial interests in a global security. Beneficial owners may experience delays in receiving distributions on their Debt Securities since distributions will initially be made to DTC and must
then be transferred through the chain of intermediaries to the beneficial owner’s account.
We understand that, under existing
industry practices, if we request holders to take any action, or if an owner of a beneficial interest in a global security desires to take any action which a holder is entitled to take under the Indenture, then DTC would authorize the participants
holding the relevant beneficial interests to take that action and those participants would authorize the beneficial owners owning through such participants to take that action or would otherwise act upon the instructions of beneficial owners owning
through them.
Beneficial interests in a global security will be shown on, and transfers of those ownership interests will be effected
only through, records maintained by DTC and its participants for that global security. The conveyance of notices and other communications by DTC to its participants and by its participants to owners of beneficial interests in the Debt Securities
will be governed by arrangements among them, subject to any statutory or regulatory requirements in effect.
DTC has advised us that it is
a limited-purpose trust company organized under the New York banking law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the
meaning of the New York Uniform Commercial Code and a “clearing agency” registered under the Exchange Act. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation (“
DTCC
”). DTCC is the
holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries.
DTC holds the securities of its participants and facilitates the clearance and settlement of securities transactions among its participants in
such securities through electronic book-entry changes in accounts of its participants. The electronic book-entry system eliminates the need for physical certificates. DTC’s participants include securities brokers and dealers, including
underwriters, banks, trust companies, clearing corporations and certain other organizations, some of which, and/or their representatives, own DTCC. Banks, brokers, dealers,
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trust companies and others that clear through or maintain a custodial relationship with a participant, either directly or indirectly, also have access to DTC’s book-entry system. The rules
applicable to DTC and its participants are on file with the SEC.
DTC has advised us that the above information with respect to DTC has
been provided to its participants and other members of the financial community for informational purposes only and is not intended to serve as a representation, warranty or contract modification of any kind.
Clearstream
Clearstream
has advised us that it is incorporated under the laws of Luxembourg as an international clearing system. Clearstream holds securities for its participating organizations, or “Clearstream Participants,” and facilitates the clearance and
settlement of securities transactions between Clearstream Participants through electronic book-entry changes in accounts of Clearstream Participants, thereby eliminating the need for physical movement of certificates. Clearstream provides to
Clearstream Participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic securities markets in
several countries. As a professional depositary, Clearstream is subject to regulation by the Luxembourg Commission for the Supervision of the Financial Sector (Commission de Surveillance du Secteur Financier). Clearstream Participants are recognized
financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Clearstream’s U.S. Participants are limited to securities brokers
and dealers and banks. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream Participant either directly or
indirectly.
Distributions with respect to Debt Securities held beneficially through Clearstream will be credited to cash accounts of
Clearstream Participants in accordance with its rules and procedures, to the extent received by the U.S. Depositary for Clearstream.
Euroclear
Euroclear has
advised us that it was created in 1968 to hold securities for participants of Euroclear, or “Euroclear Participants,” and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Euroclear performs various other services, including securities lending and borrowing and
interacts with domestic markets in several countries. Euroclear is operated by Euroclear Bank S.A./N.V., or the “Euroclear Operator,” under contract with Euroclear plc, a U.K. corporation. All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not Euroclear plc. Euroclear plc establishes policy for Euroclear on behalf of Euroclear
Participants. Euroclear Participants include banks, including central banks, securities brokers and dealers and other professional financial intermediaries. Indirect access to Euroclear is also available to other firms that clear through or maintain
a custodial relationship with a Euroclear Participant, either directly or indirectly. Euroclear is an indirect participant in DTC.
The
Euroclear Operator is a Belgian bank. As such, it is regulated by the Belgian Banking and Finance Commission and the National Bank of Belgium.
Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law, which we will refer to herein as the “Terms and Conditions.” The Terms and Conditions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on
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a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants, and has no record of or relationship with persons holding through Euroclear Participants.
Distributions with respect to
Debt Securities held beneficially through Euroclear will be credited to the cash accounts of Euroclear Participants in accordance with the Terms and Conditions, to the extent received by the Euroclear Operator.
Euroclear has further advised us that investors that acquire, hold and transfer interests in the Debt Securities by book-entry through
accounts with the Euroclear Operator or any other securities intermediary are subject to the laws and contractual provisions governing their relationship with such intermediary, as well as the laws and contractual provisions governing the
relationship between such an intermediary and each other intermediary, if any, standing between themselves and the global securities.
Global Clearance
and Settlement Procedures
Unless otherwise specified in the applicable prospectus supplement, initial settlement for the Debt
Securities will be made in immediately available funds. Secondary market trading between DTC participants will occur in the ordinary way in accordance with DTC rules and will be settled in immediately available funds using DTC’s Same-Day Funds
Settlement System. Secondary market trading between Clearstream Participants and/or Euroclear Participants will occur in the ordinary way in accordance with the applicable rules and operating procedures of Clearstream and Euroclear and will be
settled using the procedures applicable to conventional eurobonds in immediately available funds.
Cross-market transfers between persons
holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream Participants or Euroclear Participants, on the other, will be effected through DTC in accordance with DTC rules on behalf of the relevant
European international clearing system by its U.S. Depositary; however, such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in such system in accordance with
its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its U.S. Depositary to take action
to effect final settlement on its behalf by delivering or receiving Debt Securities through DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream Participants and
Euroclear Participants may not deliver instructions directly to their respective U.S. Depositaries.
Because of time-zone differences,
credits of Debt Securities received through Clearstream or Euroclear as a result of a transaction with a DTC participant will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date.
Such credits or any transactions in such Debt Securities settled during such processing will be reported to the relevant Euroclear Participants or Clearstream Participants on such business day. Cash received in Clearstream or Euroclear as a result
of sales of Debt Securities by or through a Clearstream Participant or a Euroclear Participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account
only as of the business day following settlement in DTC.
If the Debt Securities are cleared only through Euroclear and Clearstream (and
not DTC), you will be able to make and receive through Euroclear and Clearstream payments, deliveries, transfers, exchanges, notices, and other transactions involving any securities held through those systems only on days when those systems are open
for business. Those systems may not be open for business on days when banks, brokers, and other institutions are open for business in the United States. In addition, because of time-zone differences, U.S. investors who hold their interests in the
securities through these systems and wish to transfer their interests, or to receive or make a payment or delivery or exercise any other right with respect to their interests, on a particular
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day may find that the transaction will not be effected until the next business day in Luxembourg or Brussels, as applicable. Thus, U.S. investors who wish to exercise rights that expire on a
particular day may need to act before the expiration date.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Debt Securities among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be modified or discontinued
at any time. Neither we nor any paying agent will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective direct or indirect participants of their obligations under the rules and procedures governing their
operations.
What is a Global Security?
A global security is a special type of indirectly held Debt Security as described above under “—‘Street Name’ and Other
Indirect Holders.” If we choose to issue Debt Securities in the form of global securities, the ultimate beneficial owners can only hold the Debt Securities in “Street Name.” We would do this by requiring that the global security be
registered in the name of a financial institution we select and by requiring that the Debt Securities included in the global security not be transferred to the name of any other direct Holder unless the special circumstances described below occur.
The financial institution that acts as the sole direct Holder of the global security is called the “depositary.” Any person wishing to own a Debt Security issued in the form of a global security must do so indirectly by virtue of an
account with a broker, bank or other financial institution that in turn has an account with the depositary. The applicable prospectus supplement will indicate whether a series of Debt Securities will be issued only in the form of global securities
and, if so, will describe the specific terms of the arrangement with the depositary.
Special Investor Considerations for Global Securities
As an indirect holder, an investor’s rights relating to a global security will be governed by the account rules of the
investor’s financial institution and of the depositary, as well as general laws relating to securities transfers. We do not recognize this type of investor as a holder of Debt Securities and instead deal only with the depositary that holds the
global security.
An investor should be aware that if a series of Debt Securities are issued only in the form of global securities:
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the investor cannot get Debt Securities of that series registered in his or her own name;
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the investor cannot receive physical certificates for his or her interest in the Debt Securities of that series;
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the investor will be a “Street Name” holder and must look to his or her own bank or broker for payments on the Debt Securities of that series and protection of his or her legal rights relating to the Debt
Securities of that series, as described under “ ‘Street Name’ and Other Indirect Holders”;
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the investor may not be able to sell interests in the Debt Securities of that series to some insurance companies and other institutions that are required by law to own their securities in the form of physical
certificates; and
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the depositary’s policies will govern payments, transfers, exchange and other matters relating to the investor’s interest in the global security. We and the Trustee have no responsibility for any aspect of the
depositary’s actions or for its records of ownership interests in the global security. We and the Trustee also do not supervise the depositary in any way.
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Special Situations When The Global Security Will be Terminated
In a few special situations, a global security will terminate, and interests in it will be exchanged for physical certificates representing
Debt Securities. After that exchange, the choice of whether to hold Debt Securities directly or in “Street Name” will be up to the investor. Investors must consult their own bank or brokers to find out how to have their interests in Debt
Securities transferred to their own name, so that they will be direct Holders. The rights of “Street Name” investors and direct Holders in Debt Securities have been previously described in subsections entitled “—‘Street
Name’ and Other Indirect Holders” and “—Direct Holders.”
The special situations for termination of a global
security are:
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when the depositary notifies us that it is unwilling, unable or no longer qualified to continue as depositary, and we do not appoint a successor depositary;
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when an Event of Default on the series of Debt Securities has occurred and has not been cured; and
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at any time if we decide to terminate a global security.
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The applicable prospectus supplement
may also list additional situations for terminating a global security that would apply only to the particular series of Debt Securities covered by the prospectus supplement. When a global security terminates, only the depositary is responsible for
deciding the names of the institutions that will be the initial direct Holders.
DESCRIPTION OF WARRANTS
The following description, together with the additional information that we include in any applicable prospectus supplements and in
any related free writing prospectus that we may authorize to be distributed to you, summarizes the material terms and provisions of the warrants that we may offer under this prospectus. While the terms we have summarized below will apply generally
to any warrants that we may offer under this prospectus, we will describe the particular terms of any warrants in more detail in the applicable prospectus supplement. The terms of any warrants offered under a prospectus supplement may differ from
the terms described below.
We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate
by reference from reports that we file with the SEC, the form of warrant agreement that describes the terms of the warrants we are offering, and any supplemental agreements, before the issuance of the related warrants. The following summaries of
material terms and provisions of the warrants are subject to, and qualified in their entirety by reference to, all the provisions of the warrant agreement and any supplemental agreements applicable to a particular warrant. We urge you to read the
applicable prospectus supplements related to the particular warrants that we may offer under this prospectus, as well as any related free writing prospectuses and the complete warrant agreement and any supplemental agreements that contain the terms
of the warrants.
We may issue (either separately or together with other offered securities) warrants to purchase underlying debt
securities, preferred stock, common stock or any combination thereof issued by us (“offered warrants”). Such warrants may be issued independently or together with any such securities and may be attached or separate from the securities. We
may issue the warrants under separate warrant agreements (each a “warrant agreement”) to be entered into between us and a bank or trust company, as warrant agent (the “warrant agent”), identified in the prospectus supplement. The
warrant agent will act solely as our agent and will not assume any obligation or relationship of agency for or with holders of beneficial owners of warrants.
General
You should read the prospectus
supplement for the material terms of the offered warrants, including the following:
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the title and aggregate number of the warrants.
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the title, rank, aggregate principal amount and terms of the underlying debt securities, preferred stock or common stock purchasable upon exercise of the warrants.
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the principal amount of underlying debt securities, preferred stock or common stock that may be purchased upon exercise of each warrant, and the price or the manner of determining the price at which this principal
amount may be purchased upon exercise.
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the currency or currencies, including composite currencies, in which the price of such warrants may be payable.
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the price at which and the currencies, including composite currencies, in which the securities purchasable upon exercise of such warrants shall commence and the date on which such right will expire.
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if applicable, the minimum or maximum amount of such warrants which may be exercised at any one time.
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if applicable, the title, rank, aggregate principal amount and terms of the securities with which such warrants are issued and the number of such warrants issued with each such security.
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if applicable, the date on and after which such warrants and related securities will be separately transferable.
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any optional redemption terms.
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whether certificates evidencing the warrants will be issued in registered or bearer form and, if registered, where they may be transferred and exchanged.
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any other material terms of the warrants.
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The prospectus supplement will also contain a
discussion of the United States federal income tax considerations relevant to the offering.
Warrant certificates will be exchangeable for
new warrant certificates of different denominations. No service charge will be imposed for any permitted transfer or exchange of warrant certificates, but we may require payment of any tax or other governmental charge payable in connection
therewith. Warrants may be exercised and exchanged and warrants in registered form may be presented for registration of transfer at the corporate trust office of the warrant agent or any other office indicated in the prospectus supplement or term
sheet.
Exercise of Warrants
Each
offered warrant will entitle the holder thereof to purchase the amount of underlying debt securities, preferred stock, common stock or any combination thereof at the exercise price set forth in, or calculable from, the prospectus supplement relating
to the offered warrants. After the close of business on the expiration date, unexercised warrants will be void.
Warrants may be exercised
by payment to the warrant agent of the applicable exercise price and by delivery to the warrant agent of the related warrant certificate, properly completed. Warrants will be deemed to have been exercised upon receipt of the exercise price and the
warrant certificate or certificates. Upon receipt of this payment and the properly completed warrant certificates, we will, as soon as practicable, deliver the amount of underlying debt securities, preferred stock, common stock or any combination
thereof purchased upon exercise.
If fewer than all of the warrants represented by any warrant certificate are exercised, a new warrant
certificate will be issued for the unexercised warrants. The holder of a warrant will be required to pay any tax or other governmental charge that may be imposed in connection with any transfer involved in the issuance of underlying debt securities,
preferred stock, common stock or other combination thereof purchased upon exercise.
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Amendments and Supplements to Warrant Agreement
We and the warrant agent may amend or supplement the warrant agreement for a series of warrants without the consent of the holders of the
warrants issued thereunder to effect changes that are not inconsistent with the provisions of the warrants and that do not materially and adversely affect the interests of the holders of the warrants.
No Rights as Holders of Underlying Debt Securities, Preferred Stock or Common Stock
Before the warrants are exercised, holders of the warrants are not entitled to payments of principal of, premium, if any, or interest on the
related underlying debt securities and dividends on the preferred stock, common stock or any combination thereof, as applicable, or to exercise any rights whatsoever as holders of the underlying debt securities, preferred stock or common stock.
DESCRIPTION OF UNITS
The following description, together with the additional information that we include in any applicable prospectus supplements and in any
related free writing prospectus that we may authorize to be distributed to you, summarizes the material terms and provisions of the units that we may offer under this prospectus. While the terms we have summarized below will apply generally to any
units that we may offer under this prospectus, we will describe the particular terms of any series of units in more detail in the applicable prospectus supplement. The terms of any units offered under a prospectus supplement may differ from the
terms described below.
We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by
reference from reports that we file with the SEC, the form of unit agreement that describes the terms of the series of units we are offering, and any supplemental agreements, before the issuance of the related series of units. The following
summaries of material terms and provisions of the units are subject to, and qualified in their entirety by reference to, all the provisions of the unit agreement and any supplemental agreements applicable to a particular series of units. We urge you
to read the applicable prospectus supplements related to the particular series of units that we may offer under this prospectus, as well as any related free writing prospectuses and the complete unit agreement and any supplemental agreements that
contain the terms of the units.
General
We may issue units comprised of one or more of the securities offered hereby in any combination. Each unit will be issued so that the holder of
the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities
included in the unit may not be held or transferred separately, at any time or at any time before a specified date.
We will describe in
the applicable prospectus supplement the terms of the series of units being offered, including:
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the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately;
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any provisions of the governing unit agreement that differ from those described below; and
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any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units.
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The provisions described in this section, as well as those described under “Description of
Capital Stock,” “Description of Debt Securities,” “Description of Warrants” and “Description of Purchase Contracts” will apply to each unit and to any common stock, preferred stock, debt security, purchase contract
or warrant included in each unit, respectively.
Issuance in Series
We may issue units in such amounts and in such numerous distinct series as we determine.
Enforceability of Rights by Holders of Units
Each unit agent will act solely as our agent under the applicable unit agreement and will not assume any obligation or relationship of agency
or trust with any holder of any unit. A single bank or trust company may act as unit agent for more than one series of units. A unit agent will have no duty or responsibility in case of any default by us under the applicable unit agreement or unit,
including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a unit may, without the consent of the related unit agent or the holder of any other unit, enforce by appropriate
legal action its rights as holder under any security included in the unit.
Title
We, and any unit agent and any of their agents, may treat the registered holder of any unit certificate as an absolute owner of the units
evidenced by that certificate for any purpose and as the person entitled to exercise the rights attaching to the units so requested, despite any notice to the contrary.
DESCRIPTION OF PURCHASE CONTRACTS
We will set forth in the applicable prospectus supplement a description of any purchase contracts that may be offered pursuant to this
prospectus.
SELLING SECURITY HOLDERS
Up to 71,156,628 shares of common stock are being offered by this prospectus, all of which are being offered for resale for the account of the
selling security holders. The selling security holders may, from time to time, offer and sell pursuant to this prospectus any or all of the shares of common stock being registered. When we refer to the “selling security holders” in this
prospectus, we mean the security holder specifically identified in the table below, as well as the donees, pledgees, transferees or other successors-in-interest who later come to hold any of such selling security holder’s interests other than
through a public sale. Any permitted donee, pledgee, transferee or other successor-in-interest that intend to offer or sell securities through this prospectus will be named in a prospectus supplement, if required.
We cannot advise you as to whether the selling security holders will in fact sell any or all of the securities being registered. In addition,
the selling security holders may have sold, transferred or otherwise disposed of, or may sell, transfer or otherwise dispose of, at any time and from time to time, the securities in transactions exempt from the registration requirements of the
Securities Act after the date on which they provided the information set forth in the table below.
To the extent that any of the selling
security holders may be deemed to be an affiliate of a broker-dealer, (1) any such selling security holder purchased the securities being registered for resale in the ordinary course of business; and (2) at the time of purchase of the
securities being registered for resale, the selling security holder had no agreements or understanding, directly or indirectly, with any person, to distribute the securities.
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All information with respect to common stock ownership of the selling security holders has been
furnished by or on behalf of the selling security holders. We believe, based on information supplied by the selling security holders, that except as may otherwise be indicated in the footnotes to the table below, the selling security holders have
sole voting and dispositive power with respect to the common stock reported as beneficially owned by them. Because the selling security holders identified in the table may sell some or all of the shares owned by them which are included in this
prospectus, and because there are currently no agreements, arrangements or understandings with respect to the sale of any of the shares of common stock, no estimate can be given as to the number of shares of common stock, (or the percentage of our
outstanding common stock) that will be held by the selling security holders upon termination of this offering. In addition, the selling security holders may have sold, transferred or otherwise disposed of, or may sell, transfer or otherwise dispose
of, at any time and from time to time, the shares of common stock they hold in transactions exempt from the registration requirements of the Securities Act after the date on which they provided the information set forth on the table below. We have,
therefore, assumed for the purposes of the following table, that the selling security holders will sell all of the shares owned beneficially by them that are covered by this prospectus.
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Shares Beneficially Owned
Before this Offering
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Shares
Offered
Hereby
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Shares Beneficially Owned
After this Offering
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Name of Beneficial Owner
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Number
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Percentage(1)
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Number
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Percentage
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ASP FML Holdings, LLC(2)
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71,156,628
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31.9
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71,156,628
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(1)
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For purposes of this table, information as to the percentage of shares beneficially owned is calculated based on 222,890,868 shares of our common stock outstanding as of November 21, 2016.
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Represents shares held by ASP FML Holdings, LLC, a Delaware limited liability company referred to as ASP FML Holdings. American Securities Partners V, L.P., American Securities Partners V(B), L.P. and American
Securities Partners V(C), L.P., collectively referred to as the ASP Sponsors, are owners of approximately 74% of the limited liability company interests of ASP FML Investco, LLC, a Delaware limited liability company, referred to as ASP FML Investco.
ASP FML Co-Invest I, LLC, a Delaware limited liability company referred to as ASP FML Co-Invest I, is the owner of approximately 26% of the limited liability company interests of ASP FML Investco. ASP FML Investco is the owner of approximately 89%
of the limited liability company interests of ASP FML Holdings. American Securities Associates V, LLC, a Delaware limited liability company referred to as ASA V, is the general partner of each ASP Sponsor. American Securities LLC, a New York limited
liability company referred to as American Securities, provides investment advisory services to each ASP Sponsor and to ASA V, and is the owner of 100% of the issued and outstanding shares of ASP Manager Corp., the manager of each of ASP FML
Holdings, ASP FML Investco and ASP FML Co-Invest I. As such, American Securities may be deemed to have indirect beneficial ownership of the shares held by ASP FML Holdings. The address for ASP FML Holdings is c/o American Securities LLC, 299 Park
Avenue, 34th Floor, New York, NY 10171. Each of Messrs. Michael G. Fisch and Michael E. Sand, members of our Board of Directors since 2015 and 2010, respectively, may be deemed to have shared voting and investment power over the shares held by ASP
FML Holdings. Mr. Fisch and Mr. Sand each disclaim beneficial ownership of the shares of our common stock held by ASP FML Holdings, except to the extent of their respective pecuniary interests therein. Additionally, (a) David L. Horing and
Michael G. Fisch, in their capacities as the managing members of ASA V, and (b) Michael G. Fisch, in his capacity as trustee of The Michael G. Fisch 2006 Revocable Trust, which is the manager of ASCP, LLC, which is the managing member of
American Securities, may be deemed to have shared voting and investment power over the shares held by ASP FML Holdings. Mr. Horing and Mr. Fisch each disclaim beneficial ownership of the shares of our common stock held by ASP FML Holdings, except to
the extent of their respective pecuniary interests therein.
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Information regarding any additional selling security holders,
where applicable, will be set forth in a prospectus supplement, in a post-effective amendment to the registration statement of which this prospectus forms a part, or in filings we make with the SEC under the Exchange Act that are incorporated by
reference into this prospectus.
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PLAN OF DISTRIBUTION
General
We may sell any combination of
the securities offered pursuant to this prospectus through agents, through underwriters or dealers or directly to one or more purchasers, or through a combination of these methods.
Underwriters, dealers and agents that participate in the distribution of the securities offered pursuant to this prospectus may be
underwriters as defined in the Securities Act, and any discounts or commissions received by them from us and any profit on the resale of the offered securities by them may be treated as underwriting discounts and commissions under the Securities
Act. If a material arrangement with any underwriter, broker, dealer or agent is entered into for the sale of the offered securities, a prospectus supplement will be filed, if necessary, under the Securities Act disclosing the material terms and
conditions of such arrangement. Any underwriters or agents will be identified and their compensation (including underwriting discount) will be described in the prospectus supplement. The prospectus supplement will also describe other terms of the
offering, including any discounts or concessions allowed or reallowed or paid to dealers and any securities exchanges on which the offered securities may be listed.
The distribution of the securities offered under this prospectus may occur from time to time in one or more transactions at a fixed price or
prices, which may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices.
If the prospectus supplement indicates, we will authorize dealers or agents to solicit offers by certain institutions to purchase offered
securities from us pursuant to contracts that provide for payment and delivery on a future date. We must approve all institutions, but they may include, among others:
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commercial and savings banks;
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investment companies; and
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educational and charitable institutions.
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An institutional purchaser’s obligations under
any contract to purchase our securities will only be subject to the condition that the purchase of the offered securities at the time of delivery is allowed by the laws that govern the purchaser. The dealers and our agents will not be responsible
for the validity or performance of these contracts.
We may have agreements with the underwriters, dealers and agents to indemnify them
against certain civil liabilities, including liabilities under the Securities Act, or to contribute with respect to payments which the underwriters, dealers or agents may be required to make as a result of those certain civil liabilities.
When we issue the securities offered by this prospectus, they may be new securities without an established trading market. If we sell a
security offered by this prospectus to an underwriter for public offering and sale, the underwriter may make a market for that security, but the underwriter will not be obligated to do so and could discontinue any market making without notice at any
time. Therefore, we cannot give any assurances to you concerning the liquidity of any security offered by this prospectus.
Underwriters
and agents and their affiliates may be customers of, engage in transactions with, or perform services for us or our subsidiaries in the ordinary course of their businesses.
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The Selling Security Holders’ Distributions
The selling security holders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of our
common stock or interests in shares of our common stock received after the date of this prospectus from the selling security holders as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise
dispose of any or all of their shares of our common stock or interests in shares of our common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed
prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.
The selling security holders may use any one or more of the following methods when disposing of shares of our common stock or interests
therein:
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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one or more underwritten offerings;
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block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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an exchange distribution in accordance with the rules of the applicable exchange;
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privately negotiated transactions;
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short sales effected after the date the registration statement of which this prospectus is a part is declared effective by the SEC;
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through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
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broker-dealers may agree with the selling security holders to sell a specified number of such shares at a stipulated price per share; and
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a combination of any such methods of sale.
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The selling security holders may, from time to
time, pledge or grant a security interest in some or all of the shares of our common stock owned by them and, if a selling security holder defaults in the performance of its secured obligations, the pledgees or secured parties may offer and sell the
shares of our common stock, from time to time, under this prospectus, or under an amendment or supplement to this prospectus amending the list of the selling security holders to include the pledgee, transferee or other successors in interest as the
selling security holders under this prospectus. The selling security holders also may transfer the shares of our common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.
In connection with the sale of our common stock or interests therein, the selling
security holders may enter into derivative or other hedging transactions involving the securities with third parties, or sell securities not covered by this prospectus to third parties in privately-negotiated transactions. In connection with those
derivative transactions, the third parties may sell securities covered by this prospectus and any related prospectus supplement, including in short sale transactions, or may lend securities in order to facilitate short sale transactions by others.
If so, the third party may use securities pledged by the selling security holders or borrowed from the selling security holders or others to settle those sales or to close out any related open borrowings of securities, and may use securities
received from the Selling Securities in settlement of those derivative or hedging transactions to close out any related open borrowings of securities.
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The aggregate proceeds to the selling security holders from the sale of our common stock offered
by them will be the purchase price of our common stock less discounts or commissions, if any. The selling security holders reserve the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed
purchase of our common stock to be made directly or through agents. We will not receive any of the proceeds from any offering by the selling security holders.
The selling security holders also may resell all or a portion of the shares of our common stock in open market transactions in reliance upon
Rule 144 under the Securities Act, provided that they meet the criteria and conform to the requirements of that rule, or pursuant to other available exemptions from the registration requirements of the Securities Act.
The selling security holders and any underwriters, broker-dealers or agents that participate in the sale of our common stock or interests
therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares of our common stock may be underwriting discounts and
commissions under the Securities Act. If any selling security holder is an “underwriter” within the meaning of Section 2(11) of the Securities Act, then the selling security holder will be subject to the prospectus delivery
requirements of the Securities Act. Underwriters and their controlling persons, dealers and agents may be entitled, under agreements entered into with us and the selling security holders, to indemnification against and contribution toward specific
civil liabilities, including liabilities under the Securities Act.
To the extent required, the shares of our common stock to be sold, the
respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, and any applicable discounts, commissions, concessions or other compensation with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.
To facilitate the offering of the shares of our common stock offered by the selling security holders, certain persons participating in the
offering may engage in transactions that stabilize, maintain or otherwise affect the price of our common stock. This may include over-allotments or short sales, which involve the sale by persons participating in the offering of more shares than were
sold to them. In these circumstances, these persons would cover such over-allotments or short positions by making purchases in the open market or by exercising their over-allotment option, if any. In addition, these persons may stabilize or maintain
the price of our common stock by bidding for or purchasing shares in the open market or by imposing penalty bids, whereby selling concessions allowed to dealers participating in the offering may be reclaimed if shares sold by them are repurchased in
connection with stabilization transactions. The effect of these transactions may be to stabilize or maintain the market price of our common stock at a level above that which might otherwise prevail in the open market. These transactions may be
discontinued at any time.
VALIDITY OF SECURITIES
The validity of the securities described in this prospectus has been passed upon by Calfee, Halter & Griswold LLP, The Calfee
Building, 1405 East Sixth Street, Cleveland, Ohio 44114.
EXPERTS
The financial statements and management’s assessment of the effectiveness of internal control over financial reporting (which is included
in Management’s Report on Internal Control over Financial Reporting) incorporated in this Prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 2015 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
28
20,000,000 Shares
Fairmount Santrol Holdings Inc.
COMMON STOCK
PROSPECTUS SUPPLEMENT
December 1, 2016
Morgan Stanley
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