If the securities being registered on this Form are being offered in connection with the formation of a holding company and
there is compliance with General Instruction G, check the following box. ☐
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in
Rule 12b-2
of the Exchange Act.
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting
this transaction:
RISK FACTORS
Investing in the New Notes involves risk. In addition to the other information included or incorporated by reference in this prospectus,
including the matters addressed under Cautionary Statement Regarding
Forward-Looking
Statements, you should carefully consider the risks and uncertainties described below, as well as the risks
discussed in our public filings with the SEC (including under the heading Risk Factors in the Quarterly Report on Form
10-Q),
before deciding to participate in the Exchange Offer and to invest in
the New Notes. The risks and uncertainties described below and incorporated by reference into this prospectus are not the only ones related to our business, the Exchange Offer or the New Notes. Additional risks and uncertainties not presently known
to us or that we currently deem immaterial may also materially and adversely affect our business operations, results of operations, financial condition, liquidity or prospects. The trading price of the New Notes could decline due to the
materialization of any of these risks, and you may lose all or part of your original investment in the New Notes.
Risks Relating to Our
Indebtedness and the New Notes
The incurrence of substantial indebtedness in connection with the financing of the Merger may have an adverse
impact on our liquidity, limit our flexibility in responding to other business opportunities and increase our vulnerability to adverse economic and industry conditions.
In connection with the Merger, we substantially increased our indebtedness, which could adversely affect our ability to fulfill our obligations
and have a negative impact on our financing options and liquidity position. On April 13, 2016, we issued $1,875.0 million in senior secured notes due 2023 (the Secured Notes) and $3,350.0 million in the Old Notes. We also
entered into new senior credit facilities on April 29, 2016 (the Credit Facilities) under which we had $8.1billion aggregate principal amount outstanding as of September 30, 2016. As of September 30, 2016, we had
$13.4 billion aggregate principal amount of total indebtedness and we had $1.0 billion of additional borrowing availability under our revolving credit facility. The proceeds from the notes issuance and new credit facilities were used to
pay part of the purchase price for the Merger, refinance existing indebtedness of Western Digital and SanDisk and pay related transaction-related fees and expenses.
Our high debt balances could have significant consequences, which include, but are not limited to, the following:
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limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes;
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requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures,
acquisitions, R&D and other general corporate purposes;
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limiting our ability to refinance our indebtedness on terms acceptable to us or at all;
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imposing restrictive covenants on our operations;
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if we breach the covenants under our debt agreements, causing an event of default under the applicable indebtedness, which, if not cured or waived, could result in us having to repay our indebtedness before their due
dates or result in cross defaults;
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placing us at a competitive disadvantage to competitors carrying less debt; and
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making us more vulnerable to economic downturns and limiting our ability to withstand competitive pressures.
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In addition, our credit ratings impact the cost and availability of future borrowings and, accordingly, our cost of capital. Our ratings
reflect the opinions of the ratings agencies of our financial strength, operating performance and ability to meet our debt obligations. There can be no assurance that we will achieve a particular rating or maintain a particular rating in the future.
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Because of high debt balances, we may not be able to service our debt obligations in accordance with their
terms.
As of September 30, 2016, we had $13.4 billion aggregate principal amount of total indebtedness and we had
$1.0 billion of additional borrowing availability under our revolving credit facility. Our ability to meet our expense and debt service obligations contained in our debt agreements will depend on our available cash and our future performance,
which will be affected by financial, business, economic and other factors, including potential changes in laws or regulations, industry conditions, industry supply and demand balance, customer preferences, the success of our products and pressure
from competitors. If we are unable to meet our debt service obligations or should we fail to comply with our financial and other restrictive covenants contained in the agreements governing our indebtedness, we may be required to refinance all or
part of our debt, sell important strategic assets at unfavorable prices, incur additional indebtedness or issue common stock or other equity securities. We may not be able to, at any given time, refinance our debt, sell assets, incur additional
indebtedness or issue equity securities on terms acceptable to us, in amounts sufficient to meet our needs or at all. Our inability to service our debt obligations or refinance our debt could have a material adverse effect on our business, operating
results and financial condition. In addition, our debt obligations may limit our ability to make required investments in capacity, technology or other areas of our business, which could have a material adverse effect on our business, operating
results and financial condition. Further, if we are unable to repay, refinance or restructure our secured indebtedness, the holder of such debt could proceed against the collateral securing that indebtedness.
The terms of the agreements governing our indebtedness may restrict our current and future operations, particularly our ability to respond to changes or
to pursue our business strategies, and could adversely affect our capital resources, financial condition and liquidity.
The
agreements that govern our indebtedness contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests, including,
among other things, restrictions on our ability to:
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incur, assume or guarantee additional indebtedness;
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declare or pay dividends or make other distributions with respect to, or purchase or otherwise acquire or retire for value, equity interests;
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make principal payments on, or redeem or repurchase, subordinated debt;
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make loans, advances or other investments;
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sell or otherwise dispose of assets, including capital stock of subsidiaries;
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purchase assets, make investments, complete acquisitions, consolidate or merge with or into, or sell all or substantially all of our assets to, another person; and
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enter into transactions with affiliates.
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Due to these restrictions, we may be unable to raise
additional debt or equity financing to operate our business during general economic or business downturns, and we may be unable to compete effectively or take advantage of new opportunities to grow our business. In addition, our credit facilities
require us to comply with certain financial maintenance covenants. Our ability to satisfy these financial maintenance covenants can be affected by events beyond our control, and we cannot assure you that we will meet them. The indebtedness and these
restrictive covenants may have the effect, among other things, of limiting our flexibility in the conduct of our business and making us more vulnerable to economic downturns and adverse competitive and industry conditions.
A breach of the covenants under these agreements could result in an event of default under the applicable indebtedness, which, if not cured or
waived, could result in us having to repay our borrowings or repay the
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Secured Notes and the New Notes before their due dates. Such default may allow the debt holders to accelerate the related debt and may result in the acceleration of any other debt, leases, or
other obligations to which a cross-acceleration or cross-default provision applies. If we are forced to refinance these borrowings or the Secured Notes and the New Notes on less favorable terms or if we were to experience difficulty in refinancing
the debt prior to maturity, our results of operations and financial condition could be materially affected. In addition, an event of default under our credit facilities may permit the lenders under our credit facilities to terminate all commitments
to extend further credit under such credit facilities. If we are unable to repay the amounts due and payable under our credit facilities and the Secured Notes, those lenders may be able to proceed against the collateral granted to them to secure
that indebtedness. In the event our lenders or holders of notes accelerate the repayment of such borrowings, we cannot assure you that we will have sufficient assets to repay such indebtedness. Any of the foregoing would have a material adverse
effect on our business, results of operations and financial condition.
We, including our subsidiaries, have the ability to incur substantially more
indebtedness, including senior secured indebtedness, which could further increase the risks associated with our leverage.
Subject
to the restrictions in the Credit Facilities and the indentures governing the Secured Notes and the New Notes, we, including our subsidiaries, have the ability to incur significant additional indebtedness. As of September 30, 2016, we had:
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$8.1 billion aggregate principal amount of senior secured indebtedness under the Credit Facilities;
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$1,875.0 million aggregate principal amount of Secured Notes;
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$3,350.0 million aggregate principal amount of Old Notes;
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approximately $1.0 billion available for borrowing under the Revolving Facility, which, if borrowed, would be senior secured indebtedness; and
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subject to our compliance with certain covenants and other conditions, we have the option to incur certain additional secured indebtedness and/or additional unsecured indebtedness.
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Although the terms of the Credit Facilities and the indentures governing the Secured Notes and the New Notes include restrictions on the
incurrence of additional indebtedness, these restrictions are subject to a number of important exceptions, and indebtedness incurred in compliance with these restrictions could be substantial. If we incur significant additional indebtedness, the
related risks that we face could increase.
The New Notes will be our senior unsecured obligations, and the related guarantees will be unsecured
obligations of the guarantors. As such, the New Notes and the related guarantees will be effectively subordinated to any of our or our guarantors secured debt, including our existing and any future debt under the Credit Facilities and the
Secured Notes.
Our obligations under the New Notes and the guarantors obligations under the guarantees will not be secured.
The New Notes will be effectively subordinated to our and our guarantors existing and any future secured indebtedness, including the Credit Facilities and the Secured Notes, to the extent of the value of the assets securing such indebtedness,
which assets include substantially all of our assets and the assets of our subsidiary guarantors.
As of September 30, 2016, we and
our guarantors had approximately $10.0 billion aggregate principal amount of secured indebtedness outstanding and $1.0 billion available under the Revolving Facility. If we are involved in any dissolution, liquidation or reorganization, or
if we default under the indenture governing the New Notes, holders of our secured debt would be paid before holders of the New Notes receive any amounts due under the New Notes to the extent of the value of the collateral securing such indebtedness.
In that event, holders of the New Notes may not be able to recover any or all of the principal or interest due under the New Notes.
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In the event that we are declared bankrupt, become insolvent or are liquidated or reorganized or
if we default under the Credit Facilities or the Secured Notes, the lenders could foreclose on the pledged assets to the exclusion of holders of the New Notes, even if an event of default exists under the indenture governing the New Notes at such
time. Furthermore, if the lenders foreclose upon and sell the pledged equity interests in any guarantor of the New Notes, then that guarantor will be released from its guarantee of the New Notes automatically and immediately upon such sale. In any
such event, because the New Notes will not be secured by any of our assets or the equity interests in the guarantors, it is possible that there would be no assets remaining from which your claims could be satisfied or, if any assets remained, they
might be insufficient to satisfy your claims in full.
The New Notes will be structurally subordinated to all indebtedness of our existing
subsidiaries that are not guarantors of the New Notes and our future subsidiaries that do not become guarantors of the New Notes.
The New Notes will not be guaranteed by any of our existing or future
non-U.S.
subsidiaries, any of our
less than 100% owned U.S. subsidiaries or any other U.S. subsidiaries that do not guarantee the Credit Facilities. Accordingly, claims of holders of the New Notes will be structurally subordinated to the claims of creditors of these
non-guarantor
subsidiaries, including trade creditors. All obligations of our
non-guarantor
subsidiaries will have to be satisfied before any of the assets of such
subsidiaries would be available for distribution, upon a liquidation or otherwise, to us or a guarantor of the New Notes. As of September 30, 2016, our
non-guarantor
subsidiaries had $3.0 billion of
aggregate total liabilities (excluding intercompany transactions), all of which would have been structurally senior to the New Notes and the related guarantees.
In addition, the indenture governing the New Notes will, subject to some limitations, permit these
non-guarantor
subsidiaries to incur additional indebtedness and will not include any limitation on the amount of other liabilities, such as trade payables, that may be incurred by these subsidiaries.
The lenders under the Credit Facilities will have the discretion to release guarantors under these facilities in a variety of circumstances, which will
cause those guarantors to be released from their guarantees of the New Notes.
So long as any obligations under our Credit
Facilities remain outstanding, any guarantee of the New Notes may be released without action by, or consent of, any holder of New Notes or the trustee under the indenture governing the New Notes if, at the discretion of lenders under the Credit
Facilities, the related guarantor is no longer a guarantor of obligations under the Credit Facilities. The lenders under the Credit Facilities will have the discretion to release the guarantees under these facilities in a variety of circumstances.
Any of our subsidiaries that are released as guarantors of the Credit Facilities will automatically be released as guarantors of the New Notes. You will not have a claim as a creditor against any subsidiary that is no longer a guarantor of the New
Notes, and the indebtedness and other liabilities, including trade payables, whether secured or unsecured, of those subsidiaries will effectively be senior to your claims as a holder of the New Notes.
Under certain circumstances a court could cancel the New Notes or the related guarantees under fraudulent conveyance laws. If that occurs, you may not
receive any payments on the New Notes.
Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of
the New Notes and the incurrence of the guarantees. Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the New Notes or guarantees could be voided as a
fraudulent transfer or conveyance if we or any of the guarantors, as applicable: (1) issued the New Notes or incurred the guarantees with the intent of hindering, delaying or defrauding creditors or (2) received less than reasonably
equivalent value or fair consideration in return for either issuing the New Notes or incurring the guarantees and, in the case of (2) only, one of the following is also true at the time thereof:
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we or any of the guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the New Notes or the incurrence of the guarantees;
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the issuance of the New Notes or the incurrence of the guarantees left us or any of the guarantors, as applicable, with an unreasonably small amount of capital to carry on the business;
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we or any of the guarantors intended to, or believed that we or such guarantor would, incur debts beyond our or such guarantors ability to pay as they mature; or
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we or any of the guarantors was a defendant in an action for money damages, or had a judgment for money damages docketed against us or such guarantor if, in either case, after final judgment, the judgment is
unsatisfied.
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If a court were to find that the issuance of the New Notes or the incurrence of the guarantees was a
fraudulent transfer or conveyance, the court could void the payment obligations under the New Notes or such guarantee or subordinate the New Notes or such guarantee to presently existing and future indebtedness of ours or of the related guarantor,
or require the holders of the New Notes to repay any amounts received with respect to such guarantee. In the event of a finding that a fraudulent transfer or conveyance occurred, you may not receive any repayment on the New Notes. Further, the
voidance of the New Notes could result in an event of default with respect to our and our subsidiaries other debt that could result in acceleration of such debt.
As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or
an antecedent debt is secured or satisfied. A debtor will generally not be considered to have received value in connection with a debt offering if the debtor uses the proceeds of that offering to make a dividend payment or otherwise retire or redeem
equity securities issued by the debtor. We cannot be certain as to the standards a court would use to determine whether or not we or the guarantors were solvent at the relevant time or, regardless of the standard that a court uses, that the issuance
of the New Notes and the guarantees would not be subordinated to our or any of our guarantors other debt.
Generally, an entity
would be considered insolvent if, at the time it incurred debt:
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the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all its assets;
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the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts and liabilities, including contingent liabilities, as they become
absolute and mature; or
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it could not pay its debts as they become due.
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If the guarantees were legally challenged, any
guarantee could also be subject to the claim that, since the guarantee was incurred for our benefit, and only indirectly for the benefit of the guarantor, the obligations of the applicable guarantor were incurred for less than fair consideration. A
court could thus void the obligations under the guarantees, subordinate them to the applicable guarantors other debt or take other action detrimental to the holders of the New Notes.
The indenture governing the New Notes includes a savings clause intended to limit each guarantors liability under its
guarantee to the maximum amount that it could incur without causing the guarantee to be a fraudulent transfer under applicable law. There can be no assurance that this provision will be upheld as intended. In a 2009 case, the U.S. Bankruptcy Court
in the Southern District of Florida found this kind of provision in that case to be ineffective, and held the guarantees to be fraudulent transfers and voided them in their entirety. The United States Court of Appeals for the Eleventh Circuit
subsequently affirmed the liability findings of the bankruptcy court without ruling directly on the enforceability of savings clauses generally. If the decision of the bankruptcy court were followed by other courts, the risk that the guarantees
would be deemed fraudulent conveyances would be significantly increased.
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Repayment of our indebtedness, including the New Notes, is dependent on cash flow generated by our
subsidiaries.
Our subsidiaries own a substantial portion of our assets and conduct a substantial portion of our operations.
Accordingly, repayment of our indebtedness, including the New Notes, is dependent, to a significant extent, on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or
otherwise. Unless they are guarantors of the New Notes, our subsidiaries do not have any obligation to pay amounts due on the New Notes or to make funds available for that purpose. Certain of our subsidiaries may not be able to, or may not be
permitted to, make distributions to enable us to make payments in respect of our indebtedness, including the New Notes. Each subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our
ability to obtain cash from our subsidiaries. While the indenture governing the New Notes limits the ability of our restricted subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us,
these limitations are subject to certain qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness, including the New
Notes.
There is no established trading market for the New Notes, and you may not be able to sell the New Notes readily or at all or at or above the
price that you paid.
The New Notes are a new issue of securities and there is no established trading market for them. We do not
intend to apply for the New Notes to be listed on any securities exchange or to arrange for quotation on any automated dealer quotation system. The initial purchasers of the Old Notes have advised us that they intend to make a market in the New
Notes, but they are not obligated to do so and may discontinue any market making in the New Notes at any time, in their sole discretion. You may not be able to sell the New Notes at a particular time or at favorable prices. As a result, we cannot
assure you as to the liquidity of any trading market for the New Notes. Accordingly, you may be required to bear the financial risk of your investment in the New Notes indefinitely. If a trading market were to develop, future trading prices of the
New Notes may be volatile and will depend on many factors, including:
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our operating performance and financial condition;
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the interest of securities dealers in making a market for them;
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prevailing interest rates; and
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the market for similar securities.
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In addition, the market for
non-investment
grade debt historically has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the New Notes. The market for the New Notes, if any, may be
subject to similar disruptions that could adversely affect their value.
We may not have the ability to raise the funds necessary to finance the
change of control offer required by the indenture governing the New Notes.
Upon the occurrence of a change of control,
as defined in the indenture governing the New Notes, we must offer to buy back the New Notes at a price equal to 101% of the principal amount, together with any accrued and unpaid interest, if any, to the date of the repurchase. Our failure to
purchase, or give notice of purchase of, the New Notes would be a default under the indenture governing the New Notes. See Description of the NotesChange of Control.
Furthermore, certain change of control events would also constitute an event of default under the Credit Facilities. Upon the occurrence of a
change of control, the lenders under the Credit Facilities may have the right, among other things, to terminate their lending commitments or to cause all outstanding debt obligations under the
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Credit Facilities to become due and payable and proceed against the assets securing such debt, any of which actions would prevent us from borrowing under the Credit Facilities to finance a
repurchase of the New Notes. We cannot assure you that we will have available funds sufficient to repurchase the New Notes and satisfy other payment obligations that could be triggered upon the change of control. If we do not have sufficient
financial resources to effect a change of control offer, we would be required to seek additional financing from outside sources to repurchase the New Notes. We cannot assure you that financing would be available to us on satisfactory terms, or at
all.
The definition of change of control in the indenture governing the New Notes includes a phrase relating to the sale, assignment,
conveyance, transfer or other disposition of all or substantially all of our and our subsidiaries assets, taken as a whole. Although there is a limited body of case law interpreting the phrase substantially all, there
is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of all or substantially
all of the property or assets of a person. As a result, it may be unclear as to whether a change of control has occurred and whether a holder of New Notes may require us to make an offer to repurchase the New Notes as described above.
The trading prices for the Notes will be directly affected by many factors, including our credit rating.
Credit rating agencies continually revise their ratings for companies they follow, including us. Any ratings downgrade could adversely affect
the trading price of the New Notes, or the trading market for the New Notes, to the extent a trading market for the New Notes develops. The condition of the financial and credit markets and prevailing interest rates have fluctuated in the past and
are likely to fluctuate in the future and any fluctuation may impact the trading prices of the New Notes.
If the Notes become rated investment
grade at any time by two of S&P, Moodys or Fitch, certain covenants included in the indenture will be suspended, and the holders of the New Notes will lose the protection of these covenants.
The indenture for the New Notes includes certain covenants that will be suspended and cease to have any effect from and after the first date
when the New Notes are rated investment grade by two of S&P, Moodys or Fitch. See Description of the NotesCertain CovenantsSuspension of Covenants. These covenants restrict, among other things, our ability to pay
dividends, incur additional debt and to enter into certain types of transactions. Because we would not be subject to these restrictions at any time that the New Notes are rated investment grade, we would be able to make dividends and distributions
and incur substantial additional debt without satisfying the terms of the suspended covenants. If after these covenants are suspended, two of S&P, Moodys or Fitch were to downgrade their ratings of the New Notes to a
non-investment
grade level, the covenants would be reinstated and the holders of the New Notes would again have the protection of these covenants. However, any indebtedness incurred or other transactions entered
into during such time as the New Notes were rated investment grade would be permitted.
Risks Relating to the Exchange Offer
The consummation of the Exchange Offer may not occur.
We are not obligated to complete the Exchange Offer under certain circumstances. See Description of the Exchange OfferConditions to
the Exchange Offer. Even if the Exchange Offer is completed, it may not be completed on the schedule described in this prospectus. Accordingly, holders participating in the Exchange Offer may have to wait longer than expected to receive their
New Notes, during which time those holders of the Old Notes will not be able to effect transfers of their Old Notes tendered in the Exchange Offer.
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You may be required to deliver prospectuses and comply with other requirements in connection with any
resale of the New Notes.
If you tender your Old Notes for the purpose of participating in a distribution of the New Notes, you
will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the New Notes. In addition, if you are a
broker-dealer
that receives
the New Notes for your own account in exchange for the Old Notes that you acquired as a result of
market-making
activities or any other trading activities, you will be required to acknowledge that you will
deliver a prospectus in connection with any resale of such New Notes.
Late deliveries of Old Notes or any other failure to comply with the Exchange
Offer procedures could prevent a holder from exchanging its Old Notes.
Holders are responsible for complying with all procedures
related to the Exchange Offer. The issuance of New Notes in exchange for Old Notes will only occur upon proper completion of the procedures described in this prospectus under The Exchange Offer. Therefore, holders of Old Notes that wish
to exchange them for New Notes should allow sufficient time for timely completion of the exchange procedure. Neither we nor the exchange agent are obligated to extend the Exchange Offer or notify you of any failure to follow the proper procedure.
Failure to tender the Old Notes in the Exchange Offer may affect their marketability and will substantially limit, and may effectively eliminate,
opportunities to sell your Old Notes in the future.
If the Old Notes are tendered and accepted in the Exchange Offer, the trading
market, if any, for the untendered and tendered but unaccepted Old Notes will be adversely affected. Your failure to participate in the Exchange Offer will substantially limit, and may effectively eliminate, opportunities to sell your Old Notes in
the future.
We issued the Old Notes in a private placement exempt from the registration requirements of the Securities Act. Accordingly,
you may not offer, sell or otherwise transfer your Old Notes except in compliance with the registration requirements of the Securities Act and any other applicable securities laws, or pursuant to an exemption from the securities laws, or in a
transaction not subject to the securities laws. If you do not exchange your Old Notes for the New Notes in the Exchange Offer, your Old Notes will continue to be subject to these transfer restrictions after the completion of the Exchange Offer. In
addition, after the completion of the Exchange Offer, you will no longer be able to obligate us to register the Old Notes under the Securities Act.
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DESCRIPTION OF THE NOTES
Certain terms used in this description are defined under the subheading Certain Definitions. In this description,
(i) the terms Issuer, we, our and us each refer to Western Digital Corporation and not to any of its consolidated subsidiaries and (ii) the term Notes refers to the New Notes and
the Old Notes, together.
On April 13, 2016, the Issuer issued $3,350,000,000 aggregate principal amount of the Old Notes under an
indenture dated as of April 13, 2016 (the Indenture) among the Issuer, the Guarantors and U.S. Bank National Association, as trustee (the Trustee). The Old Notes were issued in a private transaction that was not subject
to the registration requirements of the Securities Act.
The Issuer will issue up to $3,350,000,000 aggregate principal amount of the New
Notes under the Indenture in exchange for the Old Notes. The terms of the New Notes are substantially identical to the terms of the Old Notes, except that the New Notes will be registered under the Securities Act, and the transfer restrictions and
registration rights and related additional interest provisions applicable to the Old Notes will not apply to the New Notes.
The following
description is only a summary of the material provisions of the Notes and the Indenture, does not purport to be complete and is qualified in its entirety by reference to the provisions of the Indenture and the Notes, including the definitions
therein of certain terms used below and those made part thereof by reference to the Trust Indenture Act of 1939, as amended (the Trust Indenture Act). We urge you to read the Indenture in its entirety because it, not this description,
defines your rights as Holders of the Notes. You may request copies of the Indenture at our address set forth under the heading Incorporation of Certain Information by Reference.
Brief Description of the Notes
The Notes
will be senior obligations of the Issuer. The Notes will be guaranteed by each of the Issuers wholly-owned domestic Restricted Subsidiaries that is required to provide a guarantee under the Credit Agreement (collectively, the
Guarantors
). The Notes and the guarantees:
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will be general unsecured senior obligations of the Issuer and the Guarantors;
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will rank senior in right of payment to any future Subordinated Obligations of the Issuer and the Guarantors;
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will rank
pari passu
in right of payment with all existing and future Senior Indebtedness of the Issuer and the Guarantors (including the Indebtedness of the Issuer and the Guarantors under the Credit Agreement
and the Secured Notes);
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will be effectively subordinated to all Secured Indebtedness of the Issuer and the Guarantors (including all the Indebtedness under the Credit Agreement and the Secured Notes) to the extent of the value of the assets
securing such Indebtedness;
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will be guaranteed by each Guarantor; and
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will be structurally subordinated to all existing and future Indebtedness, claims of holders of Preferred Stock and other liabilities of the Issuers Subsidiaries that are not guaranteeing the Notes.
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Principal, Maturity and Interest
The Issuer will issue the Notes initially with an aggregate principal amount of $3,350 million. The Issuer will issue the Notes in minimum
denominations of $2,000 and any integral multiple of $1,000 in excess thereof. The Notes will mature on April 1, 2024. Subject to our compliance with the covenant described under the subheading Certain CovenantsLimitation on
Indebtedness, we are permitted to issue more Notes from time to time (the
Additional Notes
). The Notes and the Additional Notes, if any, will be treated as a single class
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for all purposes of the Indenture, including waivers, amendments, redemptions and offers to purchase;
provided
,
however
, that in the event that any Additional Notes are not fungible
with the Notes for U.S. federal income tax purposes, such nonfungible Additional Notes will be issued with a separate CUSIP or ISIN number so that they are distinguishable from the Notes. Unless the context otherwise requires, for all purposes of
the Indenture and this Description of the Notes, references to the Notes include any Additional Notes actually issued.
Interest on the New Notes will accrue at the rate of 10.500% per annum and will be payable semiannually in arrears on April 1 and
October 1, commencing on April 1, 2017. The Issuer will make each interest payment to the Holders of record on the immediately preceding March 15 and September 15. If a payment date is on a Legal Holiday, payment will be made on the
next succeeding Business Day and no interest shall accrue for the intervening period.
Interest on the New Notes will accrue from the
later of (i) the last interest payment date on which interest was paid on the Old Note surrendered in exchange for the New Note or (ii) if the Old Note is surrendered for exchange on a date in a period that includes the record date for an
interest payment date to occur on or after the date of such exchange and as to which interest will be paid, the date of such interest payment date. Interest will be computed on the basis of a
360-day
year
comprised of twelve
30-day
months.
Optional Redemption
Except as set forth below, we will not be entitled to redeem the Notes at our option prior to April 1, 2019.
On and after April 1, 2019, we will be entitled at our option on one or more occasions to redeem all or a portion of the Notes upon not
less than 30 nor more than 60 days notice, at the redemption prices (expressed in percentages of principal amount on the redemption date), plus accrued and unpaid interest to, but excluding, the redemption date (subject to the right of Holders
of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the
12-month
period commencing on April 1 of the years set forth below:
|
|
|
|
|
Period
|
|
Redemption
price
|
|
2019
|
|
|
107.875
|
%
|
2020
|
|
|
105.250
|
%
|
2021
|
|
|
102.625
|
%
|
2022 and thereafter
|
|
|
100.000
|
%
|
In addition, any time prior to April 1, 2019, we will be entitled at our option on one or more occasions
to redeem the Notes (which includes Additional Notes, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Notes and the Additional Notes (at a redemption price (expressed as a percentage of principal
amount) of 110.500%, plus accrued and unpaid interest to, but excluding, the redemption date (subject to the right of Holders of
record on
the relevant record date to receive interest due on the relevant interest payment date), with
the net cash proceeds from one or more Qualified Equity Offerings;
provided
,
however
, that
|
(1)
|
at least 65% of the original aggregate principal amount of Notes and any Additional Notes, if any, remains outstanding immediately after the occurrence of each such redemption (other than Notes held, directly or
indirectly, by the Issuer, the Guarantors or their Affiliates); and
|
|
(2)
|
each such redemption occurs within 90 days after the date of the related Qualified Equity Offering.
|
Prior to April 1, 2019, we will be entitled at our option to redeem all or a portion of the Notes at a redemption price equal to 100% of
the principal amount of the Notes to be redeemed plus the Applicable Premium as of, and accrued and unpaid interest to, but excluding, the redemption date (subject to the right of
31
Holders of record on the relevant record date to receive interest due on the relevant interest payment date). Notice of such redemption must be mailed by first class mail to each Holders
registered address (or sent electronically in accordance with the applicable procedures of the depositary in the case of global Notes), not less than 30 nor more than 60 days prior to the redemption date.
Selection and notice of redemption
If we are redeeming less than all of the Notes at any time, the Trustee will select Notes on a pro rata basis to the extent practicable or in
such manner as it shall deem fair and appropriate, unless another method is required by law or applicable exchange or depositary requirements.
We will redeem Notes of $2,000 or less in whole and not in part. We will cause notices of redemption to be mailed by first-class mail at least
30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address (or sent electronically in accordance with the applicable procedures of the depositary in the case of global Notes), except that
redemption notices may be sent more than 60 days prior to the redemption date if the notice is issued in connection with a defeasance of Notes or a satisfaction and discharge of the Indenture. Any inadvertent defect in the notice of redemption,
including an inadvertent failure to give notice, to any Holder selected for redemption will not impair or affect the validity of the redemption of any other Note redeemed in accordance with provisions of the Indenture.
If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount
thereof to be redeemed. We will issue a new Note in a principal amount equal to the unredeemed portion of the original Note in the name of the Holder upon cancellation of the original Note;
provided
that new Notes will only be issued in
minimum denominations of $2,000 and integral multiples of $1,000 in excess of $2,000. Notes called for redemption become due on the date fixed for redemption. Notes held in certificated form must be surrendered to the paying agent in order to
collect the redemption price. Unless the Issuer defaults in the payment of the redemption price, on and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption.
Notice of any redemption, whether in connection with a Qualified Equity Offering or otherwise, may, at the Issuers discretion, be
subject to one or more conditions precedent, including, but not limited to, the completion of a Qualified Equity Offering or other financing or of a transaction resulting in a Change of Control. In the event that the relevant conditions precedent
are not satisfied as of the date specified for redemption in any such notice (or amendment thereto), the Issuer may, in its discretion, rescind such notice or amend it to specify another redemption date.
Mandatory redemption; offers to purchase; open market purchases
We are not required to make any mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances,
we may be required to offer to purchase Notes as described under Change of Control and Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock. We may at any time and from time to time purchase
Notes in the open market or otherwise.
Subsidiary Guarantees
The Notes will be guaranteed by the Guarantors. Each of the Guarantors will jointly and severally guarantee, on a senior unsecured basis,
obligations under the Notes. The obligations of each Guarantor under its Subsidiary Guarantee are designed to be limited as necessary to prevent that Subsidiary Guarantee from constituting a fraudulent conveyance under applicable law, and,
therefore, such Subsidiary Guarantee is specifically limited to an amount that such Guarantor could guarantee without such Subsidiary Guarantee constituting a fraudulent conveyance. This limitation, however, may not be effective to prevent such
Subsidiary Guarantee from constituting a fraudulent conveyance. If a Subsidiary Guarantee was rendered voidable, it could
32
be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the applicable Guarantor, and, depending on the amount of such indebtedness, a
Guarantors liability on its Subsidiary Guarantee could be reduced to zero. See Risk FactorsRisks Relating to Our Indebtedness and the New NotesUnder certain circumstances a court could cancel the New Notes or the related
guarantees under fraudulent conveyance laws. If that occurs, you may not receive any payments on the New Notes.
Each Guarantor that
makes a payment under its Subsidiary Guarantee will be entitled upon payment in full of all guaranteed obligations under the Indenture to a contribution from each other Guarantor in an amount equal to such other Guarantors pro rata portion of
such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP.
The
Subsidiary Guarantee of a Guarantor will be released upon:
|
(1)
|
(a) the designation of such Guarantor as an Unrestricted Subsidiary to the extent permitted by the Indenture;
|
|
(b)
|
the release of such Guarantor from its guarantee of Indebtedness under the Credit Agreement (other than a release by or as a result of the payment of such Indebtedness), so long as such Guarantor would not then
otherwise be required to guarantee the Notes pursuant to the covenant described under Certain CovenantsFuture Subsidiary Guarantors;
|
|
(c)
|
the sale, issuance or other disposition of Capital Stock of such Guarantor (including by way of merger or consolidation), such that it is no longer a Restricted Subsidiary or the sale of all or substantially all of its
assets to a Person that is not (either before or after giving effect to such transaction) the Issuer or a Restricted Subsidiary, so long as the sale or other disposition does not violate any provisions of the covenant described under
Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock or Certain CovenantsMerger and Consolidation required to be performed at the time of such transaction;
|
|
(d)
|
the release or discharge of the Indebtedness (other than the Credit Agreement) that would have required such Guarantor to provide a Subsidiary Guarantee pursuant to the covenant described under Certain
CovenantsFuture Subsidiary Guarantors other than a release or discharge in connection with enforcement;
|
|
(e)
|
the Issuer exercising its legal defeasance option or its covenant defeasance option as described under Defeasance or if our obligations under the Indenture are discharged in accordance with the terms
of the Indenture; or
|
|
(f)
|
in connection with the dissolution or liquidation of such Guarantor; and
|
|
(2)
|
such Guarantor delivering to the Trustee an Officers Certificate stating that all conditions provided for in the Indenture relating to such release have been complied with.
|
Ranking
The Notes will be the senior
obligations of the Issuer. The Notes will be guaranteed jointly and severally by each of the Guarantors on a senior unsecured basis. The indebtedness evidenced by the Notes and the Subsidiary Guarantees will rank
pari passu
in right of
payment to all other Senior Indebtedness of the Issuer and the Guarantors, as the case may be, but will be effectively junior to all secured Indebtedness, including our obligations under the Secured Notes and the Credit Agreement, to the extent of
the value of the assets securing such Indebtedness.
As of September 30, 2016:
|
(1)
|
the Issuer and the Guarantors had approximately $10.0 billion aggregate principal amount of secured Indebtedness outstanding; and
|
33
|
(2)
|
the Issuer and the Guarantors would have had approximately $1.0 billion of secured Indebtedness available for borrowing under the Credit Agreement.
|
Subject to the limits described under Certain CovenantsLimitation on Indebtedness and Certain
CovenantsLimitation on Liens, the Issuer and its Restricted Subsidiaries may Incur additional secured Indebtedness.
Virtually
all of the Senior Indebtedness of the Guarantors consists of their respective guaranties of Senior Indebtedness of the Issuer under the Credit Agreement and with respect to the Secured Notes and the Notes.
A substantial portion of our operations are conducted through our Subsidiaries. Most of our Subsidiaries are not guaranteeing the Notes, and,
as described above under Subsidiary Guarantees, Subsidiary Guarantees may be released under certain circumstances. In addition, our future Subsidiaries may not be required to guarantee the Notes. Claims of creditors of such
non-Guarantor
Subsidiaries, including trade creditors and creditors holding Indebtedness or guarantees issued by such
non-Guarantor
Subsidiaries, and claims of preferred
stockholders of such
non-Guarantor
Subsidiaries generally will have priority with respect to the assets and earnings of such
non-Guarantor
Subsidiaries over the claims
of our creditors, including the Holders. Accordingly, the Notes will be structurally subordinated to creditors (including trade creditors) and preferred stockholders, if any, of such
non-Guarantor
Subsidiaries.
Although the Indenture limits the incurrence of Indebtedness and preferred stock by our Restricted Subsidiaries that are
not Guarantors, such limitation is subject to a number of significant qualifications. Moreover, the Indenture does not impose any limitation on the incurrence by such Subsidiaries of liabilities that are not considered Indebtedness under the
Indenture. See Certain CovenantsLimitation on Indebtedness.
Change of Control
Upon the occurrence of a Change of Control, each Holder shall have the right to require that the Issuer repurchase such Holders Notes at
a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date).
Within 30 days following any Change of Control, unless we have previously or
concurrently mailed a redemption notice with respect to all outstanding Notes as described under Optional Redemption, we will send electronically or mail a notice by first-class mail to each Holder with a copy to the Trustee (the
Change of Control Offer
) stating:
|
(1)
|
that a Change of Control has occurred and that such Holder has the right to require us to purchase such Holders Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of
purchase, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date);
|
|
(2)
|
the circumstances and relevant facts regarding such Change of Control;
|
|
(3)
|
the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is sent); and
|
|
(4)
|
the instructions, as determined by us, consistent with the covenant described hereunder, that a Holder must follow in order to have its Notes purchased.
|
We will not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by us and purchases all such Notes validly tendered and not withdrawn under such Change of Control
Offer.
34
A Change of Control Offer may be made in advance of a Change of Control, conditional upon such
Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer. In the event that the Change of Control has not occurred as of the purchase date for the Change of Control Offer
specified in the notice therefor (or amendment thereto), the Issuer (or third party offeror) may, in its discretion, rescind such notice or amend it to specify another purchase date.
We will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, we will comply with
the applicable securities laws and regulations and shall not be deemed to have breached our obligations under the covenant described hereunder by virtue of our compliance with such securities laws or regulations.
The Change of Control purchase feature of the Notes may in certain circumstances make more difficult or discourage a sale or takeover of the
Issuer and, thus, the removal of incumbent management. The Change of Control purchase feature is a result of negotiations between the Issuer and the initial purchasers. We have no present intention to engage in a transaction involving a Change of
Control, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that
would not constitute a Change of Control under the Indenture, but that could increase the amount of Indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to Incur additional
Indebtedness are contained in the covenants described under Certain CovenantsLimitation on Indebtedness and Certain CovenantsLimitation on Liens. Such restrictions can only be waived with the consent
of the Holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenants, however, the Indenture will not contain any covenants or provisions that may afford Holders protection in the
event of a highly leveraged transaction. In addition, Holders may not be entitled to require the Issuer to repurchase their Notes in certain circumstances involving a significant change in the composition of the Issuers board of directors,
including in connection with a proxy contest, where the Issuers board of directors does not endorse a dissident slate of directors but approves them for purposes of the Indenture.
The Credit Agreement may prohibit or limit, and future credit agreements or other agreements to which the Issuer becomes a party may prohibit
or limit, the Issuer from purchasing any Notes as a result of a Change of Control. In the event a Change of Control occurs at a time when the Issuer is prohibited from purchasing the Notes, the Issuer could seek the consent of its lenders or
investors to permit the purchase of the Notes or could attempt to refinance the borrowings or securities that contain such prohibition. If the Issuer does not obtain such consent or repay such borrowings or securities, the Issuer will remain
prohibited from purchasing the Notes. In such case, the Issuers failure to purchase tendered Notes after any applicable notice and lapse of time would constitute an Event of Default under the Indenture.
The occurrence of events that would constitute a Change of Control would constitute a default under the Credit Agreement. The indenture
governing the Secured Notes may require us to repurchase the Secured Notes at the option of the holders of the Secured Notes upon a Change of Control. Future Indebtedness of the Issuer may also contain prohibitions on certain events that would
constitute a Change of Control or require such Indebtedness to be repurchased upon a Change of Control. If the Issuer experiences a change of control that triggers a default under the Credit Agreement, we could seek a waiver of such default or seek
to refinance the Credit Agreement. In the event we do not obtain such a waiver or refinance the Credit Agreement, such default could result in amounts outstanding under the Credit Agreement being declared due and payable. Moreover, the exercise by
the Holders of their right to require us to repurchase the Notes could cause a default under such senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of such purchase on us. Finally, our ability to pay
cash to the Holders following the occurrence of a Change of Control may be limited by our then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases.
35
The definition of Change of Control includes a disposition of all or substantially
all of the assets of the Issuer to any Person. Although there is a limited body of case law interpreting the phrase substantially all, there is no precise established definition of the phrase under applicable law. Accordingly, in certain
circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of all or substantially all of the assets of the Issuer. As a result, it may be unclear as to whether a Change of
Control has occurred and whether a Holder may require the Issuer to make an offer to repurchase the Notes as described above.
The
provisions under the Indenture relative to our obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes.
Certain Covenants
The Indenture
contains covenants including, among others, those summarized below. During any period of time that:
|
(1)
|
the Notes have an Investment Grade Rating from at least two Ratings Agencies, and
|
|
(2)
|
no Default or Event of Default has occurred and is continuing under the Indenture,
|
the Issuer and its
Restricted Subsidiaries will not be subject to the provisions of the Indenture summarized below under:
|
(1)
|
Limitation on Indebtedness;
|
|
(2)
|
Limitation on Restricted Payments;
|
|
(3)
|
Limitation on Restrictions on Distributions from Restricted Subsidiaries;
|
|
(4)
|
Limitation on Sales of Assets and Subsidiary Stock;
|
|
(5)
|
Limitation on Affiliate Transactions;
|
|
(6)
|
clause (3) of the first paragraph under Merger and Consolidation; and
|
|
(7)
|
Future Subsidiary Guarantors
|
(collectively, the
Suspended Covenants
). In
the event that the Issuer and the Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the preceding sentence and, subsequently, two of the Ratings Agencies rate the Notes below the required
Investment Grade Ratings or a Default or Event of Default occurs and is continuing (the date of such ratings withdrawal or downgrade or the occurrence of such Default or Event of Default, the
Reversion Date
), then the Issuer and
the Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants for all periods after that withdrawal, downgrade, Default or Event of Default;
provided
that there will not be deemed to have occurred a Default or Event
of Default with respect to any covenant during the time (the
Suspension Period
) that the Issuer and the Restricted Subsidiaries were not subject to the Suspended Covenants (or after that time based solely on events that occurred
during that time). Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under Limitations on Restricted Payments will be made as though the covenant described under
Limitation on Restricted Payments had been in effect since the Escrow Release Date and prior to, but not during, the Suspension Period;
provided
that any dividend or distribution
declared during the three-month period
prior to any Reversion Date will be treated as though the covenant had been in effect on such date. Accordingly, other than as set forth in the immediately preceding proviso, Restricted Payments made during the Suspension Period will not reduce the
amount available to be made as Restricted Payments under the first paragraph of Limitation on Restricted Payments. The Issuer will give the Trustee written notice of any such suspension of covenants and in any event not later than
five Business Days after such suspension has occurred. In
36
the absence of such notice, the Trustee shall assume that the Suspended Covenants are in full force and effect. The Trustee has no duty to monitor the rating of the Notes or to notify Holders of
the occurrence of any Suspension Period or Reversion Date.
Solely for the purpose of determining the amount of Permitted Liens under the
Limitation on Liens covenant during any Suspension Period and without limiting the Issuers or any Restricted Subsidiarys ability to Incur Indebtedness during any Suspension Period, to the extent that calculations in the
Limitation on Liens covenant refer to the Limitation on Indebtedness covenant, such calculations will be made as though the Limitation on Indebtedness covenant remains in effect during the
Suspension Period. On the Reversion Date, all Indebtedness Incurred during the Suspension Period will be classified to have been Incurred pursuant to clause (a) or one of the subclauses set forth in clause (b) of the covenant described
under Limitation on Indebtedness (to the extent such Indebtedness would be permitted to be Incurred thereunder as of the Reversion Date and after giving effect to the Indebtedness Incurred prior to the Suspension Period and
outstanding on the Reversion Date). To the extent such Indebtedness would not be permitted to be Incurred pursuant to clause (a) or one of the subclauses set forth in clause (b) of the covenant described under Limitation on
Indebtedness, such Indebtedness will be deemed to have been outstanding on the Escrow Release Date, so that it is classified as permitted under subclause (b)(4) of the covenant described under Limitation on Indebtedness. For
purposes of determining compliance with the covenant described under Limitation on Sales of Assets and Subsidiary Stock, on the Reversion Date, the Net Available Cash from all Asset Dispositions not applied in accordance with the
covenant will be deemed to reset at zero. No Subsidiaries may be designated as Unrestricted Subsidiaries during any Suspension Period. The Issuer will give the Trustee written notice of any occurrence of a Reversion Date not later than five Business
Days after such Reversion Date. After any such notice of the occurrence of a Reversion Date, the Trustee shall assume that the Suspended Covenants apply and are in full force and effect.
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness
(a) The
Issuer will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness;
provided
,
however
, that the Issuer and the Restricted Subsidiaries will be entitled to Incur Indebtedness if, on the
date of such Incurrence and after giving effect thereto on a
pro forma
basis, the Consolidated Coverage Ratio would have been at least 2.00 to 1.00 (any such Indebtedness Incurred pursuant to this clause (a) being herein referred to as
Coverage Indebtedness
);
provided further
that the amount of Indebtedness that may be Incurred by
non-Guarantor
Subsidiaries under this paragraph (after giving pro forma effect to such
Incurrence, including a pro forma application of the net proceeds therefrom), together with the aggregate principal amount of Indebtedness Incurred by
non-Guarantor
Subsidiaries pursuant to clause
(5)(b) of paragraph (b) below, shall not exceed the greater of (a) $400 million and (b) 1.25% of Total Assets at any one time outstanding.
(b) Clause (a) of this covenant will not prohibit the Incurrence of the following Indebtedness (any such Indebtedness Incurred pursuant
to this clause (b) being herein referred to as
Permitted Indebtedness
):
|
(1)
|
Indebtedness Incurred by the Issuer and its Restricted Subsidiaries pursuant to any Credit Facility (including
the Credit Agreement); provided, however, that the aggregate principal amount of all Indebtedness Incurred under this clause (b)(1) and subject to clause (d) below, then outstanding does not at any time exceed the greater of (x)
$13,125 million, less the aggregate principal amount of Convertible Notes that were extinguished between the Issue Date and August 10, 2016 (
plus
the amount of any Financing Fees paid in connection with any Refinancing Credit
Facility incurred under this subclause (1)(x)) and (y) the aggregate principal amount of Indebtedness that at the time of Incurrence does not cause the Consolidated Secured Leverage Ratio for the Issuer for the most recently ended four
full fiscal quarters for which internal financial statements are available, determined on a
pro
|
37
|
forma
basis, to exceed 2.25 to 1.00;
provided
that, for purposes of determining the amount of Indebtedness that may be Incurred under clause (b)(1)(y) and for purposes of any
subsequent calculation of the Consolidated Secured Leverage Ratio, all Indebtedness Incurred and outstanding under this clause (b)(1) shall be treated as Secured Indebtedness (any such Indebtedness Incurred pursuant to this clause (b)(1) being
herein referred to as
Credit Facility Indebtedness
);
provided further
that any Refinancing Credit Facility in respect of any Credit Facility Indebtedness incurred under this clause (b)(1) in an amount not to exceed the
amount of such Credit Facility Indebtedness incurred under this clause (b)(1) (plus the amount of Financing Fees paid in connection with the incurrence of such Refinancing Credit Facility) may be incurred under this clause (b)(1) even if such
incurrence is not otherwise permitted by this clause (b)(1) at such time of incurrence of such Refinancing Credit Facility (and any new Refinancing Credit Facility in respect of any earlier Refinancing Credit Facility incurred under this proviso in
an amount not to exceed the amount of such earlier Refinancing Credit Facility (plus the amount of any Financing Fees paid in connection with the incurrence of such new Refinancing Credit Facility) may also be incurred under this clause (b)(1) even
if such incurrence is not otherwise permitted by this clause (b)(1) at the time of incurrence of such new Refinancing Credit Facility);
|
|
(2)
|
Indebtedness owed to and held by the Issuer or a Restricted Subsidiary;
provided
,
however
, that (A) any subsequent issuance or transfer of any Capital Stock which results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Issuer or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the obligor
thereon not permitted by this clause (2), (B) if the Issuer is the obligor on such Indebtedness and such Indebtedness is owed to a
non-Guarantor
Subsidiary, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all obligations with respect to the Notes and (C) if a Guarantor is the obligor on such Indebtedness and such Indebtedness is owed to a
non-Guarantor
Subsidiary, such
Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations of such Guarantor with respect to its Subsidiary Guarantee;
|
|
(3)
|
(x) the Notes and the Subsidiary Guarantees (other than any Additional Notes) and the guarantees thereof and (y) the Secured Notes issued on the Issue Date and the guarantees thereof;
|
|
(4)
|
Indebtedness of the Issuer and its Restricted Subsidiaries outstanding on the Issue Date and of the Issuer and its Restricted Subsidiaries (including SanDisk Corporation and any of its Subsidiaries) outstanding on the
Escrow Release Date (other than Indebtedness described in clause (1), (2), (3) or (15) of this covenant);
|
|
(a)
|
(i) of a Restricted Subsidiary on the date it becomes a Restricted Subsidiary as a result of the acquisition of its Capital Stock by the Issuer or a Restricted Subsidiary or (ii) assumed by the Issuer or a
Restricted Subsidiary in connection with an Acquisition Transaction, in the case of clause (i) and (ii), so long as such Indebtedness was not Incurred in connection with or in anticipation of such Person becoming a Restricted Subsidiary or such
Acquisition Transaction, as the case may be; or
|
|
(b)
|
Indebtedness or Disqualified Stock of the Issuer or Indebtedness, Disqualified Stock or Preferred Stock of a Restricted Subsidiary (i) Incurred or issued to finance an Acquisition Transaction, or (ii) that is
assumed by the Issuer or any Restricted Subsidiary (including as a result of a merger, amalgamation or consolidation) or retained by an entity that becomes a Successor Company or Restricted Subsidiary, in each case in connection with an Acquisition
Transaction and which Indebtedness, Disqualified Stock or Preferred Stock was Incurred in connection with or in anticipation of the relevant Acquisition Transaction;
|
provided
, that, in the case of clause (a) and (b) on the date of any such acquisition and after giving
pro forma
effect thereto, either (x) the Issuer would have been entitled to Incur at least $1.00 of Coverage Indebtedness pursuant to paragraph (a) of this covenant or (y) the Consolidated
38
Coverage Ratio would have been greater than the Consolidated Coverage Ratio immediately prior to such transaction;
provided further
that the amount of Indebtedness that may be Incurred by
non-Guarantor
Subsidiaries under clause (5)(b) above (after giving pro forma effect to such Incurrence, including a pro forma application of the net proceeds therefrom), together with the aggregate principal
amount of Indebtedness Incurred by
non-Guarantor
Subsidiaries pursuant to paragraph (a) above, shall not exceed the greater of (a) $400 million and (b) 1.25% of Total Assets at any one time
outstanding;
|
(6)
|
Refinancing Indebtedness in respect of any Coverage Indebtedness or any Permitted Indebtedness Incurred pursuant to clause (3), (4), (5) or this clause (6);
|
|
(7)
|
Hedging Obligations Incurred in the ordinary course of business and not for the purpose of speculation;
|
|
(8)
|
obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Issuer or any Restricted Subsidiary in the ordinary course of
business;
|
|
(9)
|
Indebtedness Incurred by the Issuer or any Restricted Subsidiary constituting endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business or reimbursement
obligations with respect to bankers acceptances and letters of credit issued in the ordinary course of business, including letters of credit in respect of workers compensation laws, unemployment insurance laws or similar legislation, or
other Indebtedness with respect to reimbursement type obligations regarding workers compensation laws, unemployment insurance laws or similar legislation;
provided
,
however
, that upon the drawing of such bankers acceptances
and letters of credit or the Incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or Incurrence;
|
|
(10)
|
the Guarantee by the Issuer or any Restricted Subsidiary of Indebtedness of the Issuer or any Restricted Subsidiary that was permitted to be Incurred by another provision of this covenant;
provided
,
however
, that if the Indebtedness being guaranteed is subordinated to or pari passu with the Notes, then the Guarantee thereof Incurred pursuant to this clause (10) shall be subordinated or
pari passu
, as applicable, to the same
extent as the Indebtedness being Guaranteed;
|
|
(11)
|
Indebtedness of Foreign Subsidiaries in an aggregate principal amount outstanding at any one time not in excess of the greater of (x) $350 million and (y) 1.5% of Foreign Subsidiary Total Assets (measured at the
time of any Incurrence in reliance on this clause (y));
|
|
(12)
|
Indebtedness of the Issuer or any Restricted Subsidiary in the form of purchase price adjustments, earn-outs, indemnification, adjustment of purchase price or other arrangements representing acquisition consideration or
deferred payments of a similar nature or similar obligations Incurred in connection with any Acquisition Transaction or any other Investment or in connection with the disposition of any business, assets or Capital Stock permitted by the Indenture;
|
|
(13)
|
Permitted Receivables Financing not to exceed $700 million at any time outstanding;
|
|
(14)
|
(i) Purchase Money Indebtedness Incurred to finance the acquisition, lease, construction, repair, replacement, expansion or improvement by the Issuer or a Restricted Subsidiary of assets in the ordinary course of
business or otherwise Incurred in respect of capital expenditures, whether through the direct purchase of assets or the purchase of capital stock of any Person owning such assets and (ii) Indebtedness Incurred in connection with the leases of
precious metals and/or commodities, and any Refinancing Indebtedness Incurred to Refinance such Indebtedness, in an aggregate principal amount which, when added together with the amount of Indebtedness Incurred pursuant to this clause (14) and
then outstanding, does not exceed the greater of (x) $175 million and (y) 0.50 % of Total Assets (measured at the time of any Incurrence in reliance on this clause (y));
|
|
(15)
|
Indebtedness Incurred under the Additional Bridge Facility;
|
39
|
(16)
|
Indebtedness of the Issuer or any Restricted Subsidiary in an aggregate principal amount which, when taken together with all other Indebtedness of the Issuer and the Restricted Subsidiaries outstanding on the date of
such Incurrence and Incurred pursuant to this clause (16) does not exceed the greater of (x) $400 million and (y) 1.25% of Total Assets (measured at the time of any Incurrence in reliance on this clause (y));
|
|
(17)
|
Indebtedness Incurred in connection with any Sale/Leaseback Transaction, together with any Refinancing Indebtedness Incurred to Refinance such Indebtedness, in an aggregate principal amount which, when taken together
with all other Indebtedness outstanding on the date of such Incurrence and Incurred pursuant to this clause (17) and then outstanding, does not exceed $230 million.
|
|
(18)
|
(i) Indebtedness owed on a short term basis of no longer than 30 days to banks and other financial institutions Incurred in the ordinary course of business of the Issuer and its Restricted Subsidiaries with such banks
or other financial institutions that arise in connection with ordinary banking arrangements to manage cash balances of the Issuer and its Restricted Subsidiaries and (ii) Indebtedness in the ordinary course of business in respect of Cash
Management Services, netting services, automatic clearing house arrangements, employees credit or purchase cards, overdraft protections and similar arrangements for the Issuer and its Subsidiaries or joint ventures to which the Issuer and its
Restricted Subsidiaries are a party;
|
|
(19)
|
Indebtedness Incurred by a Restricted Subsidiary in connection with discounted bills of exchange or the discounting or factoring of receivables for credit management purposes, in each case Incurred or undertaken in the
ordinary course of business on arms length commercial terms;
|
|
(20)
|
Indebtedness consisting solely of Liens granted in reliance on clause (28) of the definition of Permitted Liens;
|
|
(21)
|
Indebtedness Incurred in the ordinary course of business in respect of obligations of suppliers, customers, franchisees, lessors, licensees or distribution partners;
|
|
(22)
|
unsecured (other than vendors liens arising by operation of law) Indebtedness in respect of obligations of the Issuer or any Restricted Subsidiary to pay the deferred purchase price of goods or services or
progress payments in connection with such goods and services;
provided
that such obligations are Incurred in connection with open accounts extended by suppliers on customary trade terms in the ordinary course of business and not in connection
with the borrowing of money or any hedge agreements and (ii) unsecured Indebtedness in respect of intercompany obligations of the Issuer or any Restricted Subsidiary in respect of accounts payable incurred in connection with goods sold or
services rendered in the ordinary course of business and not in connection with the borrowing of money;
|
|
(23)
|
Indebtedness of the Issuer or any Restricted Subsidiary consisting of (i) obligations to pay insurance premiums or (ii) take or pay obligations contained in supply agreements, in each case arising in the
ordinary course of business and not in connection with the borrowing of money or Hedging Obligations;
|
|
(24)
|
Indebtedness representing deferred compensation or similar arrangements to employees, consultants or independent contractors of the Issuer and its Restricted Subsidiaries Incurred in the ordinary course of business or
otherwise Incurred in connection with the consummation of the Transactions or any Acquisition Transaction or other investment whether consummated prior to the Escrow Release Date or that otherwise constitutes a Permitted Investment;
|
|
(25)
|
Indebtedness consisting of promissory notes issued to current or former officers, managers, consultants, directors and employees (or their respective spouses, former spouses, successors, executors, administrators,
heirs, legatees or distributees) to finance the purchase or redemption of Capital Stock of the Issuer permitted to be made pursuant to the covenant described under Limitation on Restricted Payments;
|
|
(26)
|
Indebtedness of the Issuer or any of its Restricted Subsidiaries supported by a letter of credit in a principal amount not to exceed the face amount of such letter of credit;
|
40
|
(27)
|
additional Indebtedness of the Issuer or any of its Restricted Subsidiaries that are not Guarantors, when taken together with all other Indebtedness of the Issuer and its Restricted Subsidiaries that are not Guarantors
outstanding on the date of such Incurrence and Incurred pursuant to this clause (27) does not exceed the greater of (x) $460 million and (y) 1.5% of Total Assets (measured at the time of any Incurrence in reliance on this clause (y)); and
|
|
(28)
|
obligations of the Issuer or any of its Restricted Subsidiaries Incurred in connection with rebate programs.
|
(c) For purposes of determining compliance with this covenant:
|
(1)
|
any Indebtedness outstanding on the Escrow Release Date under the Credit Agreement will be treated as Incurred on the Escrow Release Date under clause (1) of paragraph (b) above and cannot be reclassified and
any refinancing of Credit Facility Indebtedness must also be incurred pursuant to such clause (1) and cannot be reclassified;
|
|
(2)
|
any Indebtedness outstanding on the Escrow Release Date under the Additional Bridge Facility will be treated as Incurred on the Escrow Release Date under clause (15) of paragraph (b) above and cannot be
reclassified;
|
|
(3)
|
in the event that an item of Indebtedness (or any portion thereof) meets the criteria of more than one of the types of Indebtedness described above, the Issuer, in its sole discretion, will classify such item of
Indebtedness (or any portion thereof) at the time of Incurrence and will only be required to include the amount and type of such Indebtedness in one of the above clauses;
|
|
(4)
|
the Issuer will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described above and, in that connection, the Issuer will be entitled to treat a portion of such
Indebtedness as Coverage Indebtedness and the balance of such Indebtedness as an item or items of Permitted Indebtedness;
|
|
(5)
|
any Permitted Indebtedness originally classified as Incurred pursuant to one of the clauses in paragraph (b) above (other than Permitted Indebtedness Incurred pursuant to clause (1), (2) or (15) of paragraph
(b) above) may later be reclassified by the Issuer such that it will be deemed as having been Incurred as Coverage Indebtedness pursuant to paragraph (a) above or as Permitted Indebtedness pursuant to another clause in paragraph
(b) above, as applicable, to the extent that such reclassified Indebtedness could be Incurred pursuant thereto at the time of such reclassification;
|
|
(6)
|
in the event that the Issuer or a Restricted Subsidiary incurs Indebtedness to finance an acquisition or assumes Indebtedness of Persons that are acquired by the Issuer or any Restricted Subsidiary or merged into the
Issuer or a Restricted Subsidiary in accordance with the terms of the Indenture, at the option of the Issuer, such Indebtedness shall be deemed to have been Incurred on the date the definitive acquisition agreement relating to such Acquisition
Transaction was entered into (and not at the time such Acquisition Transaction is consummated) and the Consolidated Coverage Ratio and/or the Consolidated Secured Leverage Ratio shall be tested (x) in connection with such Incurrence, as of the
date the definitive acquisition agreement relating to such Acquisition Transaction was entered into, giving
pro forma
effect to such Acquisition Transaction, to any such Indebtedness or Lien, and to all transactions in connection therewith
and, for the avoidance of doubt, if any such ratios are exceeded as a result of fluctuations in such ratio (including due to fluctuations in the EBITDA of the Issuer or the target company) at or prior to the consummation of the relevant acquisition,
such ratios will not be deemed to have been exceeded as a result of such fluctuations solely for purposes of determining whether such acquisition and any related transactions are permitted hereunder and (y) in connection with any other
Incurrence after the date the definitive acquisition agreement relating to such Acquisition Transaction was entered into and prior to the earlier of the consummation of such Acquisition Transaction or the termination of such definitive agreement
prior to the Incurrence, both (i) on the basis set forth in clause (x) above and (ii) without giving effect to such Acquisition Transaction or the Incurrence of any such Indebtedness or Liens or the other transactions in connection
therewith;
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41
|
(7)
|
in the event that the Issuer or a Restricted Subsidiary enters into or increases commitments under a revolving credit facility, the Consolidated Coverage Ratio or the Consolidated Secured Leverage Ratio, as applicable,
for borrowings and reborrowings thereunder (and including issuance and creation of letters of credit and bankers acceptances thereunder) will be determined on the date of such revolving credit facility or such increase in commitments (assuming
for such purpose and for the calculation of any other ratio or test under the Indenture after such date that the full amount thereof has been borrowed as of such date and while such commitments remain outstanding), and, if such Consolidated Coverage
Ratio or Consolidated Secured Leverage Ratio, as applicable, test is satisfied with respect thereto at such time, any borrowing or reborrowing thereunder (and the issuance and creation of letters of credit and bankers acceptances thereunder)
will be permitted under this covenant irrespective of the Consolidated Coverage Ratio or Consolidated Secured Leverage Ratio, as applicable, at the time of any borrowing or reborrowing (or issuance or creation of letters of credit or bankers
acceptances thereunder) (the committed amount permitted to be borrowed or reborrowed (and the issuance and creation of letters of credit and bankers acceptances) on a date pursuant to the operation of this paragraph shall be the
Reserved Indebtedness Amount
as of such date for purposes of the Consolidated Coverage Ratio or Consolidated Secured Leverage Ratio, as applicable); and
|
|
(8)
|
accrual of interest, the accretion of accreted value, the payment of interest or dividends in the form of additional Indebtedness, Disqualified Stock or Preferred Stock, as applicable, amortization of original issue
discount, the accretion of liquidation preference and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in the exchange rate of currencies will not be deemed to be an Incurrence of Indebtedness, Disqualified
Stock or Preferred Stock for purposes of this covenant. Where any Indebtedness of any Person other than the Issuer and its Restricted Subsidiaries is guaranteed by one or more of the Issuer and its Restricted Subsidiaries, the aggregate amount of
Indebtedness of the Issuer and its Restricted Subsidiaries deemed to be Incurred or outstanding as a result of all such guarantees shall not exceed the amount of such guaranteed Indebtedness. Guarantees of, or obligations in respect of letters of
credit relating to, Indebtedness which is otherwise included in the determination of a particular amount of Indebtedness shall not be included in the determination of such amount of Indebtedness;
provided
that the Incurrence of the
Indebtedness represented by such guarantee or letter of credit, as the case may be, was in compliance with this covenant.
|
(d) For purposes of determining compliance with any U.S. dollar restriction on the Incurrence of Indebtedness where the Indebtedness Incurred
is denominated in a different currency, the amount of such Indebtedness will be the U.S. Dollar Equivalent determined on the date of the Incurrence of such Indebtedness;
provided
,
however
, that if any such Indebtedness denominated
in a different currency is subject to a Currency Agreement with respect to U.S. dollars covering all principal, premium, if any, and interest payable on such Indebtedness, the amount of such Indebtedness expressed in U.S. dollars will be as provided
in such Currency Agreement. The principal amount of any Refinancing Indebtedness Incurred in the same currency as the Indebtedness being Refinanced will be the U.S. Dollar Equivalent, as appropriate, of the Indebtedness Refinanced, except to
the extent that (1) such U.S. Dollar Equivalent was determined based on a Currency Agreement, in which case the Refinancing Indebtedness will be determined in accordance with the preceding sentence, and (2) the principal amount of the
Refinancing Indebtedness exceeds the principal amount of the Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such excess, as appropriate, will be determined on the date such Refinancing Indebtedness is Incurred;
provided
that the relevant U.S. Dollar Equivalent will not be deemed to be exceeded so long as the principal amount (or, if applicable, the liquidation preference, face amount, or the like) of any such new Indebtedness does not exceed
the sum of the principal amount (or, if applicable, the liquidation preference, face amount, or the like) of the Indebtedness being Refinanced and the related Financing Fees.
(e) Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Issuer and its Restricted Subsidiaries
may Incur pursuant to this covenant shall not be deemed to be exceeded, with respect to any outstanding Indebtedness, solely as a result of fluctuations in the exchange rate of currencies.
42
The principal amount (or, if applicable, the liquidation preference, face amount, or the like) of any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a different currency
from the Indebtedness being refinanced, will be calculated based on the currency exchange rate applicable to the currencies in which the respective Indebtedness is denominated that is in effect on the date of the refinancing.
(f) In the case of any Refinancing of any Indebtedness Incurred under clause (b)(1), (5), (11), (14), (16), (17) or (27) above with
new Indebtedness Incurred under such clause, the amount (or, if applicable, the liquidation preference, face amount, or the like) of new Indebtedness Incurred under such clause shall not be deemed to be exceeded so long as the principal amount of
such new Indebtedness does not exceed the principal amount (or, if applicable, the liquidation preference, face amount, or the like) of the Indebtedness being Refinanced plus related Financing Fees.
(g) In the case of any Refinancing of any Indebtedness Incurred under clause (b)(5), (11), (14), (16) or (27) above measured by
reference to a percentage of Total Assets with new Indebtedness Incurred under such clause, and the Incurrence of the relevant Indebtedness would cause the percentage of Total Assets restriction to be exceeded if calculated based on the percentage
of Total Assets on the date of such Refinancing, such percentage of Total Assets restriction shall not be deemed to be exceeded so long as the principal amount of such new Indebtedness does not exceed the principal amount of the Indebtedness being
Refinanced plus related Financing Fees.
(h) Notwithstanding the foregoing, the Issuer will not permit Indebtedness (other than
subordinated intercompany Indebtedness) to be incurred by Western Digital International other than up to $500 million of secured or unsecured Indebtedness;
provided
that within ninety (90) days of the incurrence of such
Indebtedness, the Issuer shall use 75% of the proceeds thereof to repay Credit Facility Indebtedness.
Limitation on Restricted Payments
(a) The Issuer will not, and will not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at
the time the Issuer or such Restricted Subsidiary makes such Restricted Payment:
|
(1)
|
a Default shall have occurred and be continuing (or would result therefrom);
|
|
(2)
|
the Issuer is not entitled to Incur an additional $1.00 of Coverage Indebtedness pursuant to the covenant described under Limitation on Indebtedness; or
|
|
(3)
|
the aggregate amount of such Restricted Payment and all other Restricted Payments since the Escrow Release Date (other than those set forth in clauses (1), (2), (5), (6), (7), (9), (11), (13), (14), (15) and
(16) of paragraph (b) below) would exceed the sum of (without duplication):
|
|
(A)
|
50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the first day of the fiscal quarter following the fiscal quarter in which the Escrow Release Date occurred to the end
of the most recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit);
plus
|
|
(B)
|
100% of the aggregate Net Cash Proceeds or Fair Market Value of any asset (other than cash) received by the Issuer either (x) from the issuance or sale of its Qualified Capital Stock subsequent to the Escrow
Release Date (other than any such issuance or sale to a Restricted Subsidiary) or (y) as a contribution in respect of its Qualified Capital Stock from its shareholders subsequent to the Escrow Release Date, but excluding in each case any
Excluded Contribution;
plus
|
|
(C)
|
the amount by which the principal amount of Indebtedness of the Issuer or any Restricted Subsidiary (other than
Indebtedness owing to a Subsidiary) is reduced upon the conversion or exchange subsequent to the Escrow Release Date of any Indebtedness of the Issuer or any
|
43
|
Restricted Subsidiary convertible or exchangeable for Qualified Capital Stock of the Issuer (less the amount of any cash, or the fair value of any other property, distributed by the Issuer upon
such conversion or exchange);
provided
,
however
, that the foregoing amount shall not exceed the Net Cash Proceeds received by the Issuer or any Restricted Subsidiary after the Escrow Release Date from the sale of such Indebtedness
(excluding Net Cash Proceeds from sales to a Subsidiary of the Issuer or to an employee stock ownership plan or a trust established by the Issuer or any of its Subsidiaries for the benefit of their employees);
plus
|
|
(D)
|
an amount equal to the sum of (x) the aggregate amount of cash and the Fair Market Value of any asset (other than cash) received by the Issuer or any Restricted Subsidiary subsequent to the Escrow Release Date with
respect to Investments (other than Permitted Investments) made by the Issuer or any Restricted Subsidiary subsequent to the Escrow Release Date in any Person (other than the Issuer or any Restricted Subsidiary) and resulting from repurchases,
repayments or redemptions of, or dividends or distributions on, such Investments by such Person, or proceeds realized on the sale of all or part of such Investment, and (y) in the event that the Issuer redesignates an Unrestricted Subsidiary to
be a Restricted Subsidiary, the portion (proportionate to the Issuers equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a
Restricted Subsidiary (other than to the extent the Issuers Investment in such Unrestricted Subsidiary constituted a Permitted Investment);
provided
,
however
, that the foregoing sum shall not exceed, in the case of any such
Person or Unrestricted Subsidiary, the amount of Investments (excluding Permitted Investments) previously made after the Escrow Release Date (and treated as a Restricted Payment) by the Issuer or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary.
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(b) The preceding provisions will not prohibit:
|
(1)
|
(i) any Restricted Payment described in clause (1), (2) or (3) of the definition thereof made out of the Net Cash Proceeds of the substantially concurrent sale of, or made by exchange for or conversion into,
Qualified Capital Stock of the Issuer or a substantially concurrent cash capital contribution received by the Issuer from its shareholders with respect to its Qualified Capital Stock, in each case other than Excluded Contributions;
provided
,
however
, that the Net Cash Proceeds from such sale or such cash capital contribution (to the extent so used for such Restricted Payment) shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above
and (ii) Restricted Payments in an aggregate amount not to exceed the aggregate amount of Excluded Contributions;
|
|
(2)
|
any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations of the Issuer or a Guarantor made by exchange for, or out of the proceeds of the substantially
concurrent Incurrence of, Indebtedness of such Person which is permitted to be Incurred pursuant to the covenant described under Limitation on Indebtedness so long as:
|
|
(A)
|
the principal amount of such Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus related Financing Fees;
|
|
(B)
|
such Indebtedness is subordinated to the Notes or the applicable Guarantee at least to the same extent as such Subordinated Obligations so purchased, repurchased, redeemed, defeased or acquired or retired for value;
|
|
(C)
|
such Indebtedness has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Obligations being so purchased, repurchased, redeemed, defeased or acquired or retired;
and
|
|
(D)
|
such Indebtedness has a weighted average life to maturity equal to or greater than the remaining weighted average life to maturity of the Subordinated Obligations being so purchased, repurchased, redeemed, defeased or
acquired or retired;
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44
|
(3)
|
the payment of any dividend, distribution or redemption of any Capital Stock or Subordinated Obligation within 60 days after the date of declaration thereof or call for redemption if, at such date of declaration or call
for redemption, such payment or redemption was permitted by the provisions of paragraph (a) of this covenant (the declaration of such payment will be deemed a Restricted Payment under paragraph (a) of this covenant as of the date of
declaration and the payment itself will be deemed to have been paid on such date of declaration and will not also be deemed a Restricted Payment under paragraph (a) of this covenant); provided, however, that any Restricted Payment made in
reliance on this clause (3) shall reduce the amount available for Restricted Payments pursuant to clause (a)(3) above only once;
|
|
(4)
|
(A) so long as no Event of Default has occurred and is continuing, the purchase, redemption or other acquisition or retirement (and the declaration and payment of distributions by the Issuer the proceeds of which are
used for the purchase, redemption or other acquisition or retirement and for the payment of withholding or similar tax payments that are expected to be payable in connection therewith) for value of shares of Capital Stock of the Issuer or any of its
Subsidiaries (or any options or warrants or stock appreciation rights issued with respect to any of such Capital Stock) held by any officers, former officers, managers, former managers, employees, former employees, directors, former directors,
consultants or former consultants of the Issuer or any of its Subsidiaries (or permitted transferees of such officers, former officers, managers, former managers, employees, former employees, directors, former directors, consultants or former
consultants, including, without limitations, their respective spouses, former spouses, successors, executors, administrators, heirs, legatees or distributees), pursuant to any management equity plan, employee stock option plan, stock subscription
plan, employment termination agreement or any other management or employee benefit plan or any other management or employment agreement or equity holders agreement;
provided
,
however
, that the aggregate amount of such Restricted
Payments (excluding amounts representing cancellation of Indebtedness) shall not exceed $50 million in the aggregate for any fiscal year;
provided further
that the Issuer may carry over and make in the next two (2) fiscal years, in
addition to the amounts permitted for such fiscal year, the amount of such purchases, redemptions or other acquisitions or retirements permitted to have been made but not made in the preceding fiscal years plus:
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|
(i)
|
the amount of any bona fide cash bonuses otherwise payable to officers, employees, directors, or consultants of the Issuer or any Subsidiary that are foregone in return for the receipt of Capital Stock, the fair market
value of which is equal to or less than the amount of such cash bonuses, which, if not used in any year, may be carried forward and used in the subsequent two (2) fiscal years;
plus
|
|
(ii)
|
the cash proceeds of key man life insurance policies received by the Issuer or its Restricted Subsidiaries after the Escrow Release Date; and
|
|
(B)
|
the cancellation of Indebtedness owing to the Issuer or any of its Subsidiaries from any future, present or former officers, employees, directors or consultants of the Issuer or in connection with a repurchase of
Capital Stock of the Issuer or any of its Subsidiaries;
|
|
(5)
|
the declaration and payments of dividends or distributions on Disqualified Stock or Preferred Stock of the Issuer or any Restricted Subsidiary issued pursuant to the covenant described under Limitation on
Indebtedness;
|
|
(6)
|
repurchases of Capital Stock deemed to occur (i) upon exercise of stock options, warrants or similar rights if such Capital Stock represents a portion of the exercise price of such options, warrants or similar
rights or (ii) for purposes of satisfying any required tax withholding obligation upon the exercise or vesting of a grant or award that was granted or awarded to an employee;
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|
(7)
|
cash payments in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of the Issuer;
|
|
(8)
|
in the event of a Change of Control or Asset Disposition, the payment, purchase, redemption, defeasance or other
acquisition or retirement of Subordinated Obligations of the Issuer or any
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45
|
Guarantor, in each case, at a purchase price not greater than 101%, in the event of a Change of Control, or 100%, in the event of an Asset Disposition, of the principal amount of such
Subordinated Obligations, plus any accrued and unpaid interest thereon;
provided
,
however
, that prior to such payment, purchase, redemption, defeasance or other acquisition or retirement, the Issuer (or a third party to the extent
permitted by the Indenture) has made a Change of Control Offer, as a result of such Change of Control, or an Asset Disposition Offer, as a result of such Asset Disposition, and has repurchased all Notes validly tendered and not withdrawn in
connection with such Change of Control Offer or Asset Disposition Offer, as applicable;
|
|
(9)
|
Restricted Payments in an aggregate amount which, when taken together with all Restricted Payments made pursuant to this clause (9), does not exceed $115 million;
provided
,
however
, that no Event of
Default has occurred and is continuing or would otherwise result therefrom;
|
|
(10)
|
the making of any Restricted Payments if, at the time of making such payments, and after giving effect thereto (including the Incurrence of any Indebtedness permitted to be Incurred pursuant to the covenant described
under Limitation on Indebtedness to finance such payment), the Issuers Consolidated Leverage Ratio would not exceed 2.00 to 1.00;
provided
,
however
, that no Event of Default has occurred and is continuing or
would otherwise result therefrom;
|
|
(11)
|
payments and prepayments of intercompany subordinated Permitted Indebtedness, the Incurrence of which was permitted under clause (2) of paragraph (b) of the covenant described under Limitation on
Indebtedness;
|
|
(12)
|
the declaration and payment of any dividend in respect of the Capital Stock of the Issuer or the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Capital Stock of the Issuer
held by any Person, in an amount not to exceed $625 million in the aggregate for any fiscal year;
|
|
(13)
|
repurchases of the Issuers common Capital Stock in an aggregate amount not to exceed $60 million;
|
|
(14)
|
any Restricted Payment used to fund the Transactions, the Intercompany Transactions and the related transactions and the Financing Fees Incurred in connection therewith and any Restricted Payments in connection with the
repurchase of the Convertible Notes and any warrants or similar rights related thereto or owed by the Issuer or any direct or indirect parent of the Issuer or the Restricted Subsidiaries to Affiliates, and any other payments made in connection with
the consummation of the Transactions, the Intercompany Transactions and the related transactions, whether payable on the Issue Date or the Escrow Release Date or thereafter, in each case to the extent permitted by the covenant described under
Limitation on Affiliate Transactions (other than clause (b)(2) thereof);
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(15)
|
any Restricted Payment made under the Merger Agreement and the other agreements related thereto as in effect on the Issue Date or the Escrow Release Date, as applicable, together with such amendments, modifications and
waivers that are (i) not materially adverse to the Holders of the Notes in their capacities as such, as determined in good faith by the Issuer or (ii) consented to by the Holders of a majority in principal amount of the Notes outstanding;
|
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(16)
|
to the extent constituting Restricted Payments, amounts that would be permitted to be paid directly by the Issuer or its Restricted Subsidiaries under clauses (b)(5), (9), (11) and (15) of the covenant described
under Affiliate Transactions;
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(17)
|
so long as no Event of Default has occurred and is continuing, the declaration and payment of dividends on the Issuers common Capital Stock (or the payment of dividends to any direct or indirect parent company of
the Issuer to fund a payment of dividends on such companys common Capital Stock), of up to 6.0% per annum of the net cash proceeds received by or contributed to the Issuer in or from any offering of Qualified Capital Stock, occurring after the
Issue Date other than public offerings with respect to the Issuers common Capital Stock registered on Form
S-4
or Form
S-8
and other than any public sale
constituting an Excluded Contribution; and
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46
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(18)
|
payments or distributions to dissenting stockholders pursuant to applicable law, pursuant to or in connection with a consolidation, amalgamation, merger or transfer of all or substantially all of the assets of the
Issuer and its Restricted Subsidiaries, taken as a whole, that complies with the covenant described under Merger and Consolidation;
provided
that as a result of such consolidation, amalgamation, merger or transfer of assets,
the Issuer shall have made a Change of Control Offer (if required by the Indenture) and that all Notes tendered by Holders in connection with such Change of Control Offer have been repurchased, redeemed or acquired for value.
|
For purposes of determining compliance with this covenant, in the event that a Restricted Payment or Investment (or a portion thereof) meets
the criteria of one or more of clauses (1) through (18) above or the definition of Permitted Investments, the Issuer, in its sole discretion, will classify and may later reclassify (based on circumstances existing on the date
of such reclassification) such Restricted Payment or Investment (or portion thereof) between one or more of such clauses (1) through (18) and/or such clauses of the definition of Permitted Investments in a manner that complies
with this covenant.
Limitation on Restrictions on Distributions from Restricted Subsidiaries
The Issuer will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock to the Issuer or a Restricted Subsidiary or pay any Indebtedness owed to the Issuer or
any Restricted Subsidiary, (b) make any loans or advances to the Issuer or any Restricted Subsidiary or (c) transfer any of its property or assets to the Issuer or any Restricted Subsidiary, except:
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(1)
|
with respect to clauses (a), (b) and (c),
|
|
(A)
|
any encumbrance or restriction pursuant to (i) an agreement in effect at or entered into on the Escrow Release Date (including the Credit Agreement in effect on the Escrow Release Date, the Additional Bridge
Facility in effect on the Escrow Release Date, the Secured Notes and the related guarantees, the indenture relating to the Secured Notes, the Indenture, the Notes and the Subsidiary Guarantees and, in each case, any related documentation and Hedging
Obligations) or similar encumbrances or restrictions contained in any future Credit Facilities or Hedging Obligations of or guaranteed by the Issuer and (ii) the New Notes and related guarantees and similar restrictions contained in the
documentation entered into in connection with any future debt securities issued or guaranteed by the Issuer;
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(B)
|
any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any contractual obligation binding on such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Issuer (other than contractual obligations as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions
pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Issuer) and outstanding on such date;
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|
(C)
|
any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (A) or (B) of clause (1) of this covenant or this clause
(C) or contained in any amendment to an agreement referred to in clause (A) or (B) of clause (1) of this covenant or this clause (C);
provided
,
however
, that the encumbrances and restrictions with respect to such
Restricted Subsidiary contained in any such refinancing agreement or amendment are no less favorable to the Issuer or any Restricted Subsidiary (as reasonably determined by the Issuer in good faith) than encumbrances and restrictions with respect to
such Restricted Subsidiary contained in such predecessor agreements;
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(D)
|
any encumbrance or restriction with respect to (i) a Restricted Subsidiary imposed pursuant to an agreement
entered into for the sale or disposition of all or substantially all the Capital Stock or
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47
|
assets of such Restricted Subsidiary or (ii) a business unit, division, product line or line of business or other assets in a transaction permitted under the covenant described under
Limitation on Sales of Assets and Subsidiary Stock, in each case pending the closing of such sale or disposition;
|
|
(E)
|
any encumbrance or restriction pursuant to applicable law, rule, regulation or order;
|
|
(F)
|
provisions contained in any approval, license or permit with a regulatory authority, in each case entered into in the ordinary course of business;
|
|
(G)
|
restrictions on cash, cash equivalents, Temporary Cash Investments or other deposits or net worth imposed under contracts entered into in the ordinary course of business, including such restrictions imposed by customers
or insurance, surety or bonding companies, and customary provisions in leases, subleases, licenses, sublicenses, service agreements, product sales, asset sale agreements and other contracts restricting the assignment thereof, in each case entered
into in the ordinary course of business;
|
|
(H)
|
any encumbrance or restriction with respect to a Foreign Subsidiary entered into in the ordinary course of business or pursuant to the terms of Indebtedness that was Incurred by such Foreign Subsidiary in compliance
with the terms of the Indenture;
|
|
(I)
|
provisions contained in any license, permit or other accreditation with a regulatory authority entered into in the ordinary course of business;
|
|
(J)
|
provisions in agreements or instruments which prohibits the payment or making of dividends or other distributions other than on a pro rata basis;
|
|
(K)
|
customary provisions in joint venture agreements and other similar agreements (in each case relating solely to the respective joint venture or similar entity or the equity interests therein) entered into in the ordinary
course of business and any provisions in joint venture agreements in effect at or entered into on the Escrow Release Date;
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(L)
|
any encumbrance or restriction contained in the terms of any agreement under which Indebtedness is permitted to be Incurred after the Escrow Release Date pursuant to the covenant described under Limitation
on Indebtedness, if (x) the Issuer reasonably determines in good faith at the time any such Indebtedness is Incurred (and at the time of any modification of the terms of any such encumbrance or restriction) that any such encumbrance or
restriction will not materially affect the Issuers ability to make principal or interest payments on the Notes and (y) the encumbrance or restriction is not materially more disadvantageous to the Holders than is customary in comparable
financings or agreements (as reasonably determined by the Issuer in good faith);
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|
(M)
|
any encumbrance or restriction of a Receivables Financing Subsidiary effected in connection with a Permitted Receivables Financing;
provided
,
however
, that such restrictions apply only to such Receivables
Financing Subsidiary;
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|
(N)
|
any agreement or instrument governing any Indebtedness, Disqualified Stock, or Preferred Stock permitted to be Incurred or issued pursuant to the covenant described under Limitation on Indebtedness
entered into after the Issue Date or the Escrow Release Date so long as such encumbrances and restrictions included therein are no more restrictive in any material respect taken as a whole with respect to any Restricted Subsidiary than
(x) encumbrances or restrictions contained in the Indenture or the Credit Agreement as of the Escrow Release Date, or (y) encumbrances or restrictions that were in effect on the Escrow Release Date with respect to that Restricted
Subsidiary pursuant to agreements in effect on the Issue Date or the Escrow Release Date in the good faith judgment of the senior management the Issuer at the time such encumbrances or restrictions are agreed to; and
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48
|
(O)
|
any encumbrances or restrictions of the type referred to in clauses (a) through (c) imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings
of the contracts, instruments or obligations referred to in clauses (A) through (N) above;
provided
that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the
good faith judgment of the Issuer, no more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal,
increase, supplement, refunding, replacement or refinancing,
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(2)
|
with respect to clause (c) only,
|
|
(A)
|
any encumbrance or restriction consisting of customary provisions in leases and other agreements to the extent such provisions restrict the transfer of the lease or the property leased thereunder;
|
|
(B)
|
any encumbrance or restriction contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance or restriction restricts the transfer of the property subject
to such security agreements or mortgages;
|
|
(C)
|
any encumbrance or restriction contained in any Secured Indebtedness otherwise permitted to be incurred pursuant to the covenants described under Limitation on Indebtedness and Limitation
on Liens if such restrictions or conditions apply only to the property or assets securing such Indebtedness;
|
|
(D)
|
any encumbrance or restriction contained in any agreement relating to Purchase Money Indebtedness permitted by the covenant described under Limitation on Indebtedness if such restrictions or conditions
apply only to the assets securing such Indebtedness; and
|
|
(E)
|
any encumbrance or restriction consisting of customary provisions restricting assignment of, or the creation of any Lien over, any agreement entered into in the ordinary course of business,
|
|
(3)
|
for purposes of determining compliance with this covenant, (x) the priority of any Preferred Stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on
other Capital Stock shall not be deemed a restriction on the ability to make distributions on Capital Stock and (y) the subordination of loans or advances made to the Issuer or a Restricted Subsidiary to other Indebtedness Incurred by the
Issuer or any such Restricted Subsidiary shall not be deemed a restriction on the ability to make loans or advances.
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Limitation on
Sales of Assets and Subsidiary Stock
The Issuer will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, consummate any Asset Disposition unless:
|
(1)
|
the Issuer or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the Fair Market Value (including as to the value of all
non-cash
consideration) of the shares and assets subject to such Asset Disposition; and
|
|
(2)
|
at least 75% of the consideration thereof received by the Issuer or such Restricted Subsidiary is in the form of cash or Temporary Cash Investments.
|
Within 365 days after the receipt of any Net Available Cash from such Asset Disposition, the Issuer or the applicable Restricted Subsidiary,
as the case may be, shall apply such Net Available Cash:
|
(i)
|
to reduce Obligations with respect to Credit Facility Indebtedness and, in the case of revolving loans, to correspondingly reduce commitments with respect thereto;
|
|
(ii)
|
to reduce Obligations under Indebtedness (other than Subordinated Obligations) that is secured by a Lien (including Obligations under the indenture governing the Secured Notes), which Lien is permitted by the Indenture
and, in the case of revolving loans, to correspondingly reduce commitments with respect thereto;
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49
|
(iii)
|
to reduce Obligations under any other Senior Indebtedness of the Issuer or a Guarantor;
provided
,
however
, that to the extent the Issuer or such Guarantor repays any such other Senior Indebtedness, the
Issuer shall equally and ratably reduce the principal amount of the Notes outstanding through open-market purchases or through redemption, or shall offer (in accordance with the procedures set forth below in clause (b) of this covenant) to all
Holders to purchase their Notes at 100% of the principal amount thereof, plus accrued but unpaid interest, if any, in an aggregate principal amount which, if the offer were accepted, would result in such reduction (and, in the case of revolving
loans, to correspondingly reduce commitments with respect thereto);
|
|
(iv)
|
to reduce Obligations under any Indebtedness of a Restricted Subsidiary that is not a Guarantor and, in the case of revolving loans, to correspondingly reduce commitments with respect thereto;
|
|
(v)
|
to acquire Additional Assets; or
|
|
(vi)
|
to make capital expenditures that are used or useful in a Related Business or that replace the businesses, properties and/or assets that are the subject of such Asset Disposition;
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in the case of clauses (i), (ii), (iii) and (iv) other than Indebtedness owed to the Issuer or an Affiliate of the Issuer;
provided
that, a
binding commitment to apply any Net Available Cash for purposes specified in clause (v) or (vi) above entered into in good faith by the Issuer or a Restricted Subsidiary prior to the expiration of the relevant
365-day
period will extend such period by an additional 180 days to the extent of the Net Available Cash covered thereby.
Notwithstanding the foregoing provisions of this covenant, the Issuer and the Restricted Subsidiaries will not be required to apply any Net
Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions which is not applied in accordance with this covenant exceeds $50 million. Pending application of Net
Available Cash pursuant to this covenant, such Net Available Cash may be utilized for general corporate purposes, including repayment of revolving credit borrowings.
Any Net Available Cash that is not applied or invested as provided in the preceding paragraphs will constitute Excess Proceeds.
When the aggregate amount of Excess Proceeds exceeds $50 million, the Issuer will make an offer (an
Asset Disposition Offer
) to all Holders (with a copy to the Trustee) and, at the Issuers election, to holders of other
Senior Indebtedness to purchase or redeem the maximum principal amount of Notes and such other Senior Indebtedness that may be purchased out of the amount of such Excess Proceeds. The offer price in any Asset Disposition Offer will be equal to 100%
of the principal amount of the Notes and/or any such Senior Indebtedness plus accrued and unpaid interest to the date of purchase, and will be payable in cash in accordance with the procedures (including prorating in the event of oversubscription)
set forth in the Indenture or the agreements governing the other Senior Indebtedness. If the aggregate purchase price of Indebtedness tendered exceeds the amount of Excess Proceeds, the Trustee will select the Notes and the trustee or agent for the
other Senior Indebtedness shall select such other Senior Indebtedness to be purchased on a pro rata basis but in round denominations, which, in the case of the Notes, will be denominations of $2,000 principal amount or integral multiples of $1,000
in excess thereof. Upon completion of each Asset Disposition Offer, the amount of Excess Proceeds will be reset at zero and, so long as all such Notes validly tendered and not withdrawn pursuant to such offer are purchased by the Issuer in
compliance with this covenant, any excess of the offer amount over the amount applied to purchase such Notes (and such other Senior Indebtedness) pursuant to such offer may be applied by the Issuer for any purpose not prohibited by the Indenture.
The Issuer will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of the Notes pursuant to this covenant. To the extent
that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this
covenant by virtue of its compliance with such securities laws or regulations. The Issuer may satisfy its obligations under this covenant with respect to any Net Available Cash by making an Asset Disposition Offer with respect to such Net Available
Cash prior to the expiration of the relevant 365 days (or extended period
50
provided above) or with respect to Excess Proceeds of $50 million or less, including by making an offer to purchase Notes pursuant to clause (iii) of the second paragraph of this
covenant.
For the purposes of this covenant, the following are deemed to be cash or Temporary Cash Investments:
|
(1)
|
the assumption or discharge of Indebtedness of the Issuer or any Restricted Subsidiary (other than Subordinated Obligations or Obligations in respect of Disqualified Stock of the Issuer or Preferred Stock of a
Guarantor) and the release of the Issuer or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition;
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|
(2)
|
any liabilities, as shown on the Issuers most recent consolidated balance sheet, of the Issuer or any Restricted Subsidiary (other than contingent liabilities and Subordinated Obligations) that are assumed by the
transferee of shares of Capital Stock, property or other assets in the Asset Disposition or that are otherwise cancelled or terminated in connection with the transaction with such transferee, in each case pursuant to a customary agreement that
releases the Issuer or such Restricted Subsidiary from any and all liability therefor;
|
|
(3)
|
any securities, notes or other obligations received by the Issuer or any Restricted Subsidiary from the transferee that are converted by the Issuer or such Restricted Subsidiary into cash or Temporary Cash Investments
(to the extent of the Temporary Cash Investments received) within 180 days after the date of the applicable Asset Disposition, to the extent of the cash received in that conversion; and
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|
(4)
|
any Designated Noncash Consideration received by the Issuer or any of its Restricted Subsidiaries in such Asset Disposition having an aggregate Fair Market Value that, when taken together with all other Designated
Noncash Consideration received pursuant to this clause (4) that is at that time outstanding, does not exceed the greater of (x) $90 million and (y) 0.30% of Total Assets (determined as of the end of the most recent fiscal quarter for which
internal financial statements are available) at the time of the receipt of such Designated Noncash Consideration (with the Fair Market Value of each item of Designated Noncash Consideration being measured at the time received and without giving
effect to subsequent changes in value).
|
Limitation on Affiliate Transactions
(a) The Issuer will not, and will not permit any Restricted Subsidiary to, enter into any transaction (including the purchase, sale, lease or
exchange of any property, employee compensation arrangements or the rendering of any service) with, or for the benefit of, any Affiliate of the Issuer (an
Affiliate Transaction
) involving aggregate payments or consideration in
excess of $35 million unless:
|
(1)
|
the terms of the Affiliate Transaction are no less favorable to the Issuer or such Restricted Subsidiary than those that could be obtained at the time of the Affiliate Transaction in
arms-length
dealings with a Person who is not an Affiliate; and
|
|
(2)
|
if such Affiliate Transaction involves an amount in excess of $75 million, the terms of the Affiliate Transaction are set forth in writing and a majority of the Board of Directors of the Issuer have determined in
good faith that the criteria set forth in clause (1) are satisfied and have approved the relevant Affiliate Transaction as evidenced by a resolution of the Board of Directors and as set forth in an Officers Certificate certifying that
such Affiliate Transaction complies with clause (1) above.
|
(b) The provisions of the preceding paragraph (a) will
not prohibit:
|
(1)
|
any transaction between or among the Issuer or any of its Restricted Subsidiaries;
|
|
(2)
|
any Permitted Investment or any Restricted Payment permitted to be made pursuant to the covenant described under Limitation on Restricted Payments (other than clause (b)(14) thereof);
|
|
(3)
|
any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or
the funding of, employment arrangements, stock options and stock ownership plans (including
|
51
|
management and employee benefit plans or agreements, subscription agreements or similar agreements pertaining to the repurchase of capital stock pursuant to put/call rights or similar rights with
current or former employees, officers or directors or incentive plans and other compensation arrangements) and payments or loans (or cancellation of loans) to directors, managers, officers, employees and consultants of the Issuer and its Restricted
Subsidiaries, the proceeds of which are used solely to purchase Capital Stock (other than Disqualified Stock) of the Issuer, in each case in the ordinary course of business;
|
|
(4)
|
loans or advances and the payment of customary fees and reasonable
out-of-pocket
costs to directors, managers, officers, employees and
consultants of the Issuer and its Restricted Subsidiaries, in the ordinary course of business and on customary terms;
|
|
(5)
|
any employment, severance, consulting, service or termination agreement, or reasonable and customary indemnification agreement, entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of
business (and payments made pursuant thereto), and the payment of reasonable fees and expenses, and the provision of customary indemnities, to directors, managers, officers, employees or consultants of the Issuer or any of its Restricted
Subsidiaries in their capacities as such;
|
|
(6)
|
payments to or from, and any transactions (including, without limitation, any cash management activities related thereto) with, (x) Flash Partners Ltd., Flash Alliance Ltd., Flash Forward Ltd. or any other joint
venture with Toshiba Corporation (or one of its Affiliates) or (y) other joint ventures in the ordinary course of business with any other Person (other than an Unrestricted Subsidiary) which would constitute an Affiliate Transaction solely
because the Issuer or a Restricted Subsidiary owns an equity interest in or otherwise controls such Person;
|
|
(7)
|
any other transaction with a joint venture partner in the ordinary course of business of the Issuer and its Restricted Subsidiaries and otherwise in compliance with the terms of the Indenture;
provided
that, in
the reasonable, good faith determination of the members of the Board of Directors or senior management of the Issuer, such transaction is on terms that are no less favorable to the Issuer or the relevant Restricted Subsidiary than those that could
have reasonably been obtained at the time of such transaction in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person;
|
|
(8)
|
the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Issuer, including any transaction under a subscription agreement, registration rights agreement, shareholders agreement or similar
agreement entered into in connection therewith on customary terms as the Issuer reasonably determines in good faith;
|
|
(9)
|
transactions with customers, clients, vendors, suppliers or other purchasers or sellers of goods or services, or transactions otherwise relating to the purchase or sale of goods or services, in each case in the ordinary
course of business (including pursuant to joint venture agreements);
|
|
(10)
|
payments and transactions effected pursuant to any binding agreement or commitment or executed agreement (x) as in effect on the Issue Date and on the Escrow Release Date, (y) as was in effect on the Escrow
Release Date and as described in the Offering Memorandum and (z) of SanDisk Corporation and its subsidiaries as in effect on the Escrow Release Date, and any amendment, modification or replacement of any such agreement (so long as such
amendments, modifications or replacements are not adverse, taken as a whole, to the Holders in any material respect as compared to the applicable agreement as in effect on the Issue Date and on the Escrow Release Date or as was in effect on the
Escrow Release Date and described in the Offering Memorandum or of SanDisk Corporation and its subsidiaries as in effect on the Escrow Release Date);
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|
(11)
|
any transaction on
arms-length
terms with any
non-Affiliate
that becomes an Affiliate as a result of such transactions;
|
|
(12)
|
any transaction in which the Issuer delivers to the Trustee a written opinion from an Independent Qualified Party to the effect that such transaction is fair, from a financial standpoint, to the Issuer and its
Restricted Subsidiaries;
|
52
|
(13)
|
the execution of the Transactions, the Intercompany Transactions and the related transactions and the payment of all fees, expenses, bonuses and awards related to the Transaction;
|
|
(14)
|
any transaction in connection with a Permitted Receivables Financing; and
|
|
(15)
|
transactions between the Issuer or any Restricted Subsidiary and any Person, a director of which is also a director of the Issuer, any Restricted Subsidiary or any direct or indirect parent of the Issuer;
provided
,
however
, that such Person abstains from voting as a director of the Issuer, such Restricted Subsidiary or such direct or indirect parent of the Issuer.
|
Limitation on Liens
The Issuer
will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Lien (the
Initial Lien
) of any nature whatsoever on any of its properties (including Capital Stock of a Restricted
Subsidiary), whether owned at the Issue Date or thereafter acquired, securing any Indebtedness, other than Permitted Liens, without effectively providing that the Notes or the relevant Guarantee of the Notes, as the case may be, shall be secured
equally and ratably with (or prior to) the obligations so secured for so long as such obligations are so secured. For the avoidance of doubt, for the purposes of determining whether any Initial Lien is a Permitted Lien following a Suspension Period,
any Incurrence of Liens securing Indebtedness shall be tested as though the covenant described under Limitation on Indebtedness was in effect at such time.
Any such Lien thereby created in favor of the Notes or any Subsidiary Guarantee will be automatically and unconditionally released and
discharged upon (i) the release and discharge of each Initial Lien to which it relates, (ii) in the case of such Lien in favor of any such Subsidiary Guarantee, upon the termination and discharge of such Subsidiary Guarantee in accordance
with the terms of the Indenture or (iii) any sale, exchange or transfer to any Person not an Affiliate of the Issuer of the property or assets secured by such Initial Lien.
The expansion of Liens by virtue of the accrual of interest, the accretion or amortization of original issue discount (excluding accretion or
amortization that is expressly provided for in the agreement providing for the applicable Indebtedness that is a zero coupon or other discount instrument) and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in
the exchange rate of currencies or increases in the value of the property securing the applicable Indebtedness will not be deemed to be an Incurrence of Liens for purposes of this covenant.
For purposes of determining compliance with this covenant, (A) a Lien securing an item of Indebtedness need not be permitted solely by
reference to one category of Permitted Liens (or any portion thereof) described in the definition of Permitted Liens or pursuant to the first paragraph of this covenant but may be permitted in part under any combination thereof and
(B) in the event that a Lien securing an item of Indebtedness (or any portion thereof) meets the criteria of one or more of the categories of Permitted Liens (or any portion thereof) described in the definition of Permitted Liens or
pursuant to the first paragraph of this covenant, the Issuer may, in its sole discretion, classify or reclassify, or later divide, classify or reclassify (as if Incurred at such later time), such Lien securing such item of Indebtedness (or any
portion thereof) in any manner that complies with this covenant and will be entitled to only include the amount and type of such Lien or such item of Indebtedness secured by such Lien (or any portion thereof) in one of the categories of Permitted
Liens (or any portion thereof) described in the definition of Permitted Liens or pursuant to the first paragraph of this covenant and, in such event, such Lien securing such item of Indebtedness (or any portion thereof) will be treated
as being Incurred or existing pursuant to only such clause or clauses (or any portion thereof) or pursuant to the first paragraph hereof.
53
Merger and Consolidation
(a) The Issuer will not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions,
directly or indirectly, all or substantially all its assets as determined on a consolidated basis to, any Person, unless:
|
(1)
|
either (i) the Issuer shall be the surviving corporation or (ii) the resulting, surviving or transferee Person (in each of clauses (i) or (ii), the
Successor Company
) shall (A) be
a corporation or limited liability company organized and existing under the laws of the United States of America, any State thereof or the District of Columbia (
provided
that, if the Successor Company is a limited liability company, then
there shall be a Restricted Subsidiary of such Person which shall be a corporation organized in the jurisdictions permitted by this clause (1) and a
co-obligor
of the Notes) and (B) expressly assume,
by an indenture supplemental thereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Issuer under the Notes and the Indenture.
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|
(2)
|
immediately after giving
pro forma
effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been
Incurred by such Successor Issuer or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing;
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|
(3)
|
immediately after giving
pro forma
effect to such transaction, either (x) the Successor Company would be able to Incur an additional $1.00 of Coverage Indebtedness pursuant to the covenant described under
Limitation on Indebtedness or (y) the Consolidated Coverage Ratio for the Successor Company and its Restricted Subsidiaries would be greater than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to
such transaction; and
|
|
(4)
|
if the Issuer is not the surviving corporation, the Issuer shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with the Indenture;
|
provided
,
however
, that (A) the foregoing will not be
applicable to a Restricted Subsidiary consolidating with, merging into or transferring all or part of its properties and assets to the Issuer or one or more Guarantors and (B) clause (3) above will not be applicable to the Issuer merging
with an Affiliate of the Issuer solely for the purpose and with the sole effect of reincorporating the Issuer in another jurisdiction.
For purposes of this covenant, the sale, lease, conveyance, assignment, transfer or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Issuer, which properties and assets, if held by the Issuer instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Issuer on a consolidated
basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Issuer, subject to the proviso in the previous sentence.
The Successor Company will be the successor to the Issuer and shall succeed to, and be substituted for, and may exercise every right and power
of, the Issuer under the Indenture, and the predecessor Issuer, except in the case of a lease, shall be released from all of its obligations under the Indenture and the Notes.
For all purposes of the Indenture, Subsidiaries of any Successor Company will, upon any transaction subject to this covenant, become
Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant to the Indenture, and all Indebtedness and Liens of the Successor Company and its Subsidiaries that were not Indebtedness or Liens on property or assets, as the case may be,
of the Issuer and its Subsidiaries immediately prior to such transaction shall be deemed to have been Incurred upon such transaction.
(b)
The Issuer will not permit any Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any Person unless:
|
(1)
|
except in the case of a Guarantor (x) all or substantially all of which has been disposed of in its entirety
to another Person (other than to the Issuer or an Affiliate of the Issuer), whether through a merger,
|
54
|
consolidation or sale of Capital Stock or assets or (y) that, as a result of the disposition or issuance of all or a portion of its Capital Stock, ceases to be a Subsidiary, the resulting,
surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United States of America, or any State thereof or
the District of Columbia, and such Person shall expressly assume, by a Guarantee Agreement, in a form satisfactory to the Trustee, all the obligations of such Subsidiary, if any, under its Subsidiary Guarantee;
|
|
(2)
|
immediately after giving effect to such transaction or transactions on a
pro forma
basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of
such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and
|
|
(3)
|
the successor Person (if other than such Guarantor) delivers to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such Guarantee Agreement,
if any, complies with the Indenture;
|
provided
,
however
, that this covenant will not be applicable to a Restricted Subsidiary
consolidating with, merging into or transferring all or part of its properties and assets to the Issuer or a Guarantor;
provided further
that a Guarantors Subsidiary Guarantee will be released concurrently with such transactions under
Subsidiary Guarantees. Subject to certain limitations described in the Indenture, the successor Person (if other than such Guarantor) will succeed to, and be substituted for, such Guarantor under the Indenture and such
Guarantors Guarantee.
Notwithstanding the foregoing, any Guarantor may:
|
(1)
|
merge, amalgamate or consolidate with or into, wind up or into or sell, assign, transfer, lease, convey or otherwise dispose of all or part of its properties and assets to another Guarantor or the Issuer,
|
|
(2)
|
merge with an Affiliate of the Issuer solely for the purpose of reincorporating the Guarantor in the United States, any state thereof, the District of Columbia or any territory thereof, and
|
|
(3)
|
convert into a corporation, partnership, limited partnership, limited liability company or trust organized or existing under the laws of the jurisdiction of organization of such Guarantor.
|
Future Subsidiary Guarantors
The
Issuer will not cause or permit (a) any of its Wholly-Owned Subsidiaries to Guarantee any Credit Facility Indebtedness or capital markets debt securities of the Issuer or any Guarantor or (b) any of its Restricted Subsidiaries (other than
a Foreign Subsidiary or a CFC Holdco) to Incur (other than any Guarantee) Credit Facility Indebtedness or capital markets debt securities (for the avoidance of doubt, other than the Convertible Notes), in each case, unless such Subsidiary is a
Guarantor or within 30 days thereof executes and delivers to the Trustee a Guarantee Agreement pursuant to which such Restricted Subsidiary will Guarantee payment of the Notes on the same terms and conditions as those set forth in the Indenture
and applicable to the other Guarantors and delivers to the Trustee an Opinion of Counsel (which may contain customary exceptions) that such Guarantee Agreement has been duly authorized, executed and delivered by such Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such Restricted Subsidiary.
The Issuer may elect, in its sole
discretion, to cause any Restricted Subsidiary that is not otherwise required to be a Guarantor to become a Guarantor, in which case such Restricted Subsidiary shall not be required to comply with the
30-day
period described in the paragraph above.
55
SEC Reports
Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Issuer will furnish to the Trustee
and, upon written request, the Holders, within the time periods specified in the SECs rules and regulations for
non-accelerated
filers:
|
(1)
|
all quarterly and annual reports that would be required to be filed with the SEC on Forms
10-Q
and
10-K
if the Issuer were required to file
such reports; and
|
|
(2)
|
all current reports that would be required to be filed with the SEC on Form
8-K
if the Issuer were required to file such reports;
|
provided
that the electronic filing of the foregoing reports by the Issuer on the SECs EDGAR system (or any successor system) shall be deemed to
satisfy the Issuers delivery obligations to the Trustee and any Holder, it being understood that the Trustee shall not be responsible for determining whether such filings have been made.
If, notwithstanding the foregoing, the SEC will not accept such filings for any reason, the Issuer will post the reports specified in the
preceding sentence on its website within the time periods that would apply if the Issuer were required to file those reports with the SEC as a
non-accelerated
filer.
Notwithstanding anything to the contrary, this covenant does not require the Issuer to comply with
Rule 3-10
or Rule
3-16
of Regulation
S-X
(or any successor provision), or to provide separate financial statements of any
Guarantor; provided that the Issuer will continue to provide qualitative information on
non-Guarantor
Subsidiaries substantially consistent with the information provided in the Offering Memorandum in the
reports required to be delivered pursuant to clause (1) above. At any time that any of the Issuers Subsidiaries are Unrestricted Subsidiaries and the EBITDA of such Unrestricted Subsidiaries (determined in a manner consistent with the
definition of EBITDA in the Indenture) account collectively for more than 1.0% of the Issuers corresponding consolidated amount, then the quarterly and annual financial information required by the preceding paragraph will include a reasonably
detailed quantitative presentation, either on the face of the financial statements or in the footnotes thereto, and in Managements Discussion and Analysis of Financial Condition and Results of Operations or elsewhere in reports
provided by the Issuer pursuant to this covenant of the financial condition and results of operations of the Issuer and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of
the Issuer.
In addition, at any time when the Issuer is not subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Issuer will furnish to the Holders and to prospective investors, upon the requests of such Holders, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as such Notes held by Persons
other than Affiliates of the Issuer are not freely transferable under Rule 144A under the Securities Act.
Delivery of any reports,
information and documents to the Trustee will be for informational purposes only and the Trustees receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein,
including the Issuers compliance with any of its covenants hereunder (as to which the Trustee will be entitled to rely exclusively on Officers Certificates).
Intercompany Transactions
Notwithstanding anything to the contrary, the Intercompany Transactions and any transactions that are related to the Intercompany Transactions,
including, but not limited to, the restructuring of certain Subsidiaries of the Issuer and subsequent steps to consolidate duplicative Subsidiaries in various countries, eliminate dormant or unnecessary entities, and rationalize and integrate the
supply chains, operations, and workforces, are expressly permitted hereunder.
56
Defaults
Each of the following is an Event of Default with respect to the Notes:
|
(1)
|
a default in the payment of interest on the Notes, when due, continued for 30 days;
|
|
(2)
|
a default in the payment of principal of Notes, when due at their Stated Maturity, upon optional redemption, upon required purchase, upon declaration of acceleration or otherwise;
|
|
(3)
|
the failure by the Issuer to comply with its obligations under Certain CovenantsMerger and Consolidation above;
|
|
(4)
|
the failure by the Issuer or any Guarantor to comply for 60 days (or with respect to its obligations in the covenant described under Certain CovenantsSEC Reports, 90 days) after notice with its
other covenants or agreements contained in the Indenture (other than a default referred to in clauses (1) through (3) above);
|
|
(5)
|
Indebtedness of the Issuer, any Guarantor or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total
principal amount of such Indebtedness unpaid or accelerated exceeds $225 million (the
cross acceleration provision
);
provided
that this clause (5) shall not apply to any Indebtedness represented by the Convertible
Notes;
|
|
(6)
|
certain events of bankruptcy, insolvency or reorganization of the Issuer or any Significant Subsidiary (the
bankruptcy provisions
);
|
|
(7)
|
any judgment or decree for the payment of money in excess of $225 million (other than any such judgment covered by insurance policies issued by reputable insurance companies (other than under a self-insurance
program) to the extent a claim therefor has been made in writing and liability therefore has not been denied by the insurer) is entered against the Issuer, any Guarantor or any Significant Subsidiary, remains outstanding for a period of 60
consecutive days following such judgment and is not discharged, waived or stayed (the
judgment default provision
);
|
|
(8)
|
any Subsidiary Guarantee ceases to be in full force and effect (other than in accordance with the terms of such Subsidiary Guarantee) or any Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee;
or
|
|
(9)
|
any default under the Credit Agreement arising from the failure by the Issuer or any Guarantor to comply with the covenant in the Credit Agreement regarding the consummation of the Intercompany Transactions.
|
However, a default under clause (3) or (4) will not constitute an Event of Default until the Trustee or the
Holders of 30% in principal amount of the outstanding Notes notify the Issuer of the default and the Issuer does not cure such default within the time specified after receipt of such notice. Any default for the failure to deliver any report within
the time periods prescribed in the covenant described under Certain CovenantsSEC Reports or to deliver any notice or certificate pursuant to any other provision of the Indenture shall be deemed to be cured upon the subsequent
delivery of any such report, notice or certificate, even though such delivery is not within the prescribed period specified.
If an Event
of Default occurs and is continuing with respect to the Notes, the Trustee by written notice to the Issuer, or the Holders of at least 30% in principal amount of the outstanding Notes by written notice to the Issuer and the Trustee, may declare the
principal of and accrued but unpaid interest on all such Notes to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default under clause (6) with respect to the Issuer,
any domestic Significant Subsidiary or Western Digital International Ltd. occurs and is continuing, the principal of and interest on all such Notes will
ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences involving the Notes.
57
In case an Event of Default occurs and is continuing with respect to the Indenture, the Trustee
will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity or security satisfactory to the Trustee against any
loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest not paid when due, no Holder may pursue any remedy with respect to the Indenture or the Notes unless:
|
(1)
|
such Holder has previously given the Trustee notice that an Event of Default is continuing with respect to the Notes;
|
|
(2)
|
Holders of at least 30% in principal amount of the outstanding Notes of have requested the Trustee to pursue the remedy;
|
|
(3)
|
such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense;
|
|
(4)
|
the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and
|
|
(5)
|
Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such
60-day
period.
|
Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes are given the right
to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law
or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability.
If a Default occurs, is continuing and is actually known to a Trust Officer, the Trustee must send electronically or mail to each Holder
notice of the Default within 90 days after being notified by the Issuer. Except in the case of a Default in the payment of principal of or interest on any Notes, the Trustee may withhold notice if and so long as the Trustee determines in good faith
that withholding notice is not opposed to the interest of the Holders. In addition, we are required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any
Default that occurred during the previous year. We are required to deliver to the Trustee, within 30 days after the Issuer obtains knowledge of the occurrence thereof, written notice of any event which would constitute certain Defaults, their status
and what action we are taking or propose to take in respect thereof.
Amendments and Waivers
Subject to certain exceptions, the Indenture may be amended with the consent of the Holders of a majority in principal amount of the Notes then
outstanding of the Notes (including consents obtained in connection with a tender offer or exchange for such Notes) and any past default or compliance with any provisions may also be waived with the consent of the Holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each Holder of an outstanding Note affected thereby, an amendment or waiver may not, among other things:
|
(1)
|
reduce the amount of such Notes whose Holders must consent to an amendment;
|
|
(2)
|
reduce the rate of or extend the time for payment of interest on any such Note;
|
|
(3)
|
reduce the principal of or change the Stated Maturity of any such Note;
|
|
(4)
|
change the provisions applicable to the redemption of any such Note as described under Optional Redemption;
|
|
(5)
|
make any such Note payable in money other than that stated in such Note;
|
58
|
(6)
|
modify the right of any Holder to receive payment of principal of and interest on such Holders Notes not paid when due on or after the due dates therefor or to institute suit for the enforcement of any such
payment;
|
|
(7)
|
make any change in the amendment provisions which require each Holders consent or in the waiver provisions;
|
|
(8)
|
make any change in the ranking or priority of any such Note that would adversely affect the Holders; or
|
|
(9)
|
make any change in, or release other than in accordance with the Indenture, any Subsidiary Guarantee that would adversely affect the Holders.
|
Notwithstanding the preceding, without the consent of any Holder, the Issuer, the Guarantors and Trustee may amend the Indenture:
|
(1)
|
to cure any ambiguity, omission, defect or inconsistency;
|
|
(2)
|
to provide for the assumption by a successor corporation of the obligations of the Issuer or any Guarantor under the Indenture, the Notes or a Subsidiary Guarantee, as applicable;
|
|
(3)
|
to provide for uncertificated Notes in addition to or in place of certificated Notes (
provided
that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code);
|
|
(4)
|
to add Guarantees with respect to the Notes, including any Subsidiary Guarantee, or to secure the Notes;
|
|
(5)
|
to add to the covenants or other obligations of the Issuer or any Guarantor for the benefit of the Holders or to surrender any right or power conferred upon the Issuer or any Guarantor;
|
|
(6)
|
to make any change that would provide additional rights or benefits to the Holders, or that does not adversely affect the rights of any Holder in any material respect;
|
|
(7)
|
to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act;
|
|
(8)
|
to conform the text of the Indenture, the Notes or any Subsidiary Guarantee to any provision of this Description of the Notes to the extent that such provision in this Description of the Notes
was intended to be a verbatim recitation of a provision of the Indenture, the Notes or such Subsidiary Guarantee;
|
|
(9)
|
to make any amendment to the provisions of the Indenture relating to the transfer and legending of Notes;
provided
,
however
, that (a) compliance with the Indenture as so amended would not result in
Notes being transferred in violation of the Securities Act or any other applicable securities law and (b) such amendment does not materially and adversely affect the rights of Holders to transfer Notes except as required to conform to
applicable securities laws;
|
|
(10)
|
to evidence and provide for the acceptance and appointment of a successor trustee under the Indenture pursuant to the requirements thereof; or
|
|
(11)
|
to provide for the issuance of Additional Notes in accordance with the terms of the Indenture.
|
The consent of the Holders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
Transfer
The Notes will be issued in registered form and will be transferable only upon the surrender of the Notes being transferred for registration of
transfer. We may require payment of a sum sufficient to cover any tax, assessment or other governmental charge payable in connection with certain transfers and exchanges.
59
Satisfaction and Discharge
When (1) we deliver to the Trustee all outstanding Notes (except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust) for cancellation or (2) all outstanding Notes (i) have become due and payable, whether at maturity or on a redemption date as a result of the mailing of notice of
redemption or (ii) will become due and payable within one year or are called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense of,
the Issuer, and, in the case of clause (2), we irrevocably deposit with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Notes, including interest thereon to maturity or such redemption date (and any intervening
interest payment between the date of deposit and such maturity or redemption date), and if in either case we pay all other sums payable under the Indenture by us, then the Indenture shall, subject to certain exceptions, cease to be of further
effect.
For any redemption referred to above that requires the payment of the Applicable Premium, the amount deposited shall be
sufficient for purpose of the Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium calculated as of the date of the notice of redemption, with any deficit on the date of redemption (any such amount,
the
Applicable Premium Deficit
) only required to be deposited with the Trustee on or prior to the date of redemption. Any Applicable Premium Deficit shall be set forth in an Officers Certificate delivered to the Trustee
simultaneously with the deposit of such Applicable Premium Deficit that confirms that such Applicable Premium Deficit shall be applied toward such redemption.
Defeasance
At any time, we may terminate
all our obligations under the Notes, the Subsidiary Guarantees and the Indenture
(
legal defeasance
)
, except for certain obligations, including those respecting the defeasance trust (as defined below) and obligations
to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes.
In addition, at any time we may terminate our obligations under Change of Control and under the covenants described under
Certain Covenants (other than clauses (1) and (4) of the first paragraph of the covenant described under Merger and Consolidation), the operation of the cross acceleration provision, the bankruptcy
provisions with respect to Significant Subsidiaries, the judgment default provision and the Subsidiary Guarantee provision described under Defaults above
(
covenant defeasance
)
.
We may exercise our legal defeasance option notwithstanding our prior exercise of our covenant defeasance option. If we exercise our legal
defeasance option with respect to the Notes, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If we exercise our covenant defeasance option with respect to the Notes, payment of the Notes may not be
accelerated because of an Event of Default specified in clause (3), (4), (5), (6) (with respect only to Significant Subsidiaries), (7) or (8) under Defaults above or because of the failure of the Issuer to comply
with clause (2) or (3) of the first paragraph under Certain CovenantsMerger and Consolidation above. If we exercise our legal defeasance option or our covenant defeasance option with respect to the Notes, each
Guarantor will be released from all of its obligations with respect to its Subsidiary Guarantee in respect of the Notes.
In order to
exercise either of our defeasance options, we must irrevocably deposit in trust (the
defeasance trust
) with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Notes to redemption or
maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for Federal income tax purposes as a result of
such deposit and defeasance and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel
60
must be based on a ruling of the Internal Revenue Service or other change in applicable Federal income tax law since the issuance of the Notes). For any redemption referred to above that requires
the payment of the Applicable Premium, the second paragraph under Satisfaction and Discharge shall apply.
Notwithstanding the foregoing, an Opinion of Counsel required by the immediately preceding paragraph with respect to legal defeasance need not
be delivered if all of the Notes not theretofore delivered to the Trustee for cancellation (x) have become due and payable or (y) will become due and payable within one year or are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer.
Concerning the Trustee
U.S. Bank
National Association is to be the Trustee under the Indenture. We have appointed U.S. Bank National Association as registrar and paying agent with regard to the Notes.
The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Issuer, to obtain payment of
claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions;
provided
,
however
, if it acquires any conflicting
interest it must either eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.
The
Holders of a majority in principal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions, with respect
to the Notes. If an Event of Default occurs (and is not cured), the Trustee will be required, in the exercise of its power vested under the Indenture, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to the Trustee
against any loss, liability or expense and then only to the extent required by the terms of the Indenture.
No provision of the Indenture
will require the Trustee to expend its own funds or otherwise incur financial liability in the performance of its duties thereunder or in the exercise of its rights or powers thereunder if the Trustee has reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk is not reasonably assured to it.
No Personal Liability of Directors, Officers, Employees and
Stockholders
No director, officer, employee, incorporator or stockholder of the Issuer or any Guarantor will have any liability for
any obligations of the Issuer or any Guarantor under the Notes, any Subsidiary Guarantee, the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting a Note waives and releases
all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver and release may not be effective to waive liabilities under the U.S. federal securities laws, and it is the view of the SEC that such a
waiver is against public policy.
Governing Law
The Indenture and the Notes will be governed by, and construed in accordance with, the laws of the State of New York.
Certain Definitions
Acquisition
means the acquisition of SanDisk Corporation by Western Digital Corporation, pursuant to the Merger
Agreement.
61
Acquisition Transaction
means:
|
(1)
|
an acquisition by the Issuer or a Restricted Subsidiary of a business or of assets constituting a business unit, line of business or business division of another Person, from a Person other than the Issuer or its
Restricted Subsidiaries that will be owned and operated by the Issuer and its Restricted Subsidiaries,
|
|
(2)
|
an acquisition of Capital Stock of a Person that becomes a Restricted Subsidiary as a result of such acquisition,
|
|
(3)
|
an acquisition of Capital Stock of a Restricted Subsidiary that constitutes an increase in the aggregate percentage of the Capital Stock of such Restricted Subsidiary owned collectively by the Issuer and its Restricted
Subsidiaries, and
|
|
(4)
|
a merger, amalgamation or consolidation of the Issuer or a Restricted Subsidiary with or into a Person that is not the Issuer or a Restricted Subsidiary, in which the Issuer or a Restricted Subsidiary is the surviving
company or which results in the surviving company becoming a Restricted Subsidiary of the Issuer or a Successor Company.
|
Additional Assets
means:
|
(1)
|
any property, plant, equipment or other long term tangible or Intellectual Property assets used or useful in a Related Business or any assets used or useful in the operations of the Issuer or its Subsidiaries;
|
|
(2)
|
the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Issuer or another Restricted Subsidiary; or
|
|
(3)
|
Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary;
|
provided
,
however
, that any such Restricted Subsidiary described in clause (2) or (3) above is primarily engaged in a Related
Business.
Additional Bridge Agreement
means that certain Bridge Loan Agreement dated May 12, 2016 by and
among Western Digital Technologies, Inc., the lenders party thereto, J.P. Morgan Chase Bank, N.A., as administrative agent and collateral agent and the other parties party thereto, as such agreement may be amended, supplemented, waived or otherwise
modified from time to time.
Additional Bridge Facility
means the collective reference to the Additional Bridge Loan
Documents, any notes issued pursuant thereto and any guarantee and collateral agreement, patent and trademark security agreement, mortgages and other guarantees, pledge agreements, security agreements and collateral documents, and other instruments
and documents, executed and delivered pursuant to or in connection with any of the foregoing, in each case as the same may be amended, supplemented, waived or otherwise modified from time to time;
provided
that the maturity date of all or any
portion thereof may not be extended other than by up to 30 days by each lender thereunder at its discretion.
Additional Bridge
Facility Administrative Agent
means JPMorgan Chase Bank, N.A., in its capacity as administrative agent under the Additional Bridge Facility.
Additional Bridge Loan Documents
means the Loan Documents (or comparable term) as defined in the Additional
Bridge Agreement, as the same may be amended, supplemented, waived, otherwise modified from time to time, but in any event not extended, renewed, refinanced or replaced;
provided
that they may be extended by up to 30 days by each lender
thereunder at its discretion.
Additional Notes
has the meaning given to it under Principal, Maturity and
Interest.
Affiliate
of any specified Person means any other Person, directly or indirectly, controlling or
controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition,
62
control when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms controlling and controlled have meanings correlative to the foregoing.
Applicable Premium
means, with respect to a Note on any date of redemption, the greater of:
|
(1)
|
1.0% of the principal amount of such Note; and
|
|
(2)
|
the excess, if any, of (a) the present value as of such date of redemption of (i) the redemption price of such Note on April 1, 2019 (such redemption price being described under Optional
Redemption) plus (ii) all required interest payments due on such Note through April 1, 2019 (excluding accrued but unpaid interest to the date of redemption), computed using a discount rate equal to the Treasury Rate as of such date
of redemption plus 50 basis points, over (b) the then-outstanding principal of such Note.
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The Trustee shall have no
obligation to calculate or verify the calculation of the Applicable Premium.
Applicable Premium Deficit
has the
meaning given to it under Satisfaction and Discharge.
Asset Disposition
means any sale, lease,
transfer or other disposition, including the exclusive license of (or series of related sales, leases, transfers, dispositions or exclusive licenses) by the Issuer or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this definition as a
disposition
), of:
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(1)
|
any shares of Capital Stock of a Restricted Subsidiary (other than any shares of Capital Stock of Restricted Subsidiaries issued in compliance with the covenant described under Certain CovenantsLimitation on
Indebtedness and directors qualifying shares or shares required by applicable law to be held by a Person other than the Issuer or a Restricted Subsidiary);
|
|
(2)
|
all or substantially all the assets of any division or line of business of the Issuer or any Restricted Subsidiary; or
|
|
(3)
|
any other assets (other than Capital Stock) of the Issuer or any Restricted Subsidiary outside of the ordinary course of business of the Issuer or such Restricted Subsidiary
|
other than, in the case of clauses (1), (2) and (3) above,
|
(A)
|
a disposition by a Restricted Subsidiary to the Issuer or by the Issuer or a Restricted Subsidiary to a Restricted Subsidiary;
|
|
(B)
|
for purposes of the covenant described under Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock only, (x) a disposition that constitutes a Restricted Payment or Permitted
Investment (or would constitute a Restricted Payment but for the exclusions from the definition thereof) and that is not prohibited by the covenant described under Certain CovenantsLimitation on Restricted Payments and
(y) a disposition of all or substantially all the assets of the Issuer in accordance with the covenant described under Certain CovenantsMerger and Consolidation;
|
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(C)
|
any disposition of assets of the Issuer or any Restricted Subsidiary or issuance or sale of Capital Stock of any Restricted Subsidiary, which assets or Capital Stock so disposed or issued in any single transaction or
series of related transactions have an aggregate Fair Market Value (as determined in good faith by the Issuer) of less than $60 million;
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(D)
|
a disposition or sale of cash, or Temporary Cash Investments;
|
|
(E)
|
the creation or foreclosure of a Lien;
provided
that the Net Available Cash received by the Issuer or any Restricted Subsidiary resulting from the foreclosure of a Lien shall be included in the calculation of Net
Available Cash for purposes of the covenant described under Limitation on Sales of Assets and Subsidiary Stock;
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63
|
(F)
|
the sale, lease or discount, in each case without recourse, of inventory, accounts receivable or notes arising in the ordinary course of business or the conversion of accounts receivable to notes receivable;
|
|
(G)
|
disposals or replacements of obsolete, worn out, uneconomical or surplus property or equipment or any property that is no longer useful in the Issuers or its Subsidiaries business;
|
|
(H)
|
sales by the Issuer or Restricted Subsidiaries of Receivables in connection with entering into a Permitted Receivables Financing;
|
|
(I)
|
dispositions of assets subject to any casualty, condemnation or expropriation proceeding or any similar action (including in lieu thereof);
|
|
(J)
|
dispositions of Investments in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between joint venture parties set forth in joint venture arrangements and similar binding
arrangements;
|
|
(K)
|
the licensing or sublicensing of Intellectual Property or other general intangibles and licenses (or cross-licenses), sublicenses (or cross-sublicenses), leases or subleases of other real or personal property in the
ordinary course of business;
|
|
(L)
|
the transfer of pension assets in connection with the permanent settling of the related pension obligations in an
arms-length
transaction with a Person that is not an
Affiliate of the Issuer (
provided
that such transaction is on commercially reasonable terms as reasonably determined in good faith by the Issuer);
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(M)
|
dispositions of property pursuant to one or more Sale/Leaseback Transactions in an amount not to exceed $230 million or leases of precious metals or commodities in connection with Indebtedness permitted pursuant to
subclause (b)(14)(ii) of the covenant described above under Limitation on Indebtedness;
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|
(N)
|
the sale, transfer or other disposition (i) of any assets required by any antitrust authority or other regulatory authority in connection with the Acquisition or (ii) that are part of any intercompany
restructuring in connection with requirements imposed by the Ministry of Commerce of the Peoples Republic of China within 24 months of the Escrow Release Date (the
MOFCOM Restructuring
);
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(O)
|
the unwinding of Hedging Obligations;
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|
(P)
|
the disposition of all or substantially all of the assets of the Issuer or a Restricted Subsidiary in a manner permitted pursuant to the provisions described above under Merger and Consolidation or any
disposition that constitutes a Change of Control pursuant to the Indenture;
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(Q)
|
the disposition of intellectual property rights (to the extent constituting discontinuing the use or maintenance of, failing to pursue, or otherwise abandon, allowing to lapse, terminating or putting into the public
domain, any intellectual property right), in each case, in the ordinary course of business or if the Issuer or any Restricted Subsidiary determines in its reasonable business judgment that such disposed of intellectual property is no longer
economical or of strategic benefit; and
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|
(R)
|
any surrender or waiver of contract rights or the settlement, release or surrender of contract rights or other litigation claims in the ordinary course of business.
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Asset Disposition Offer
has the meaning given to it under Certain CovenantsLimitation on Sales of Assets
and Subsidiary Stock.
Attributable Debt
in respect of a Sale/Leaseback Transaction means, as at the time
of determination, the present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of
64
the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended);
provided
,
however
, that if such Sale/Leaseback Transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of Capital Lease Obligation.
Average Life
means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by
dividing:
|
(1)
|
the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of or redemption or similar payment with respect to such Indebtedness multiplied
by the amount of such payment by
|
|
(2)
|
the sum of all such payments.
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Board of Directors
means the Board of
Directors of the Issuer or any committee thereof duly authorized to act on behalf of such Board or, in the case of a Person that is not a corporation, the group exercising the authority generally vested in a board of directors of a corporation.
Business Day
means each day which is not a Legal Holiday.
Capital Lease Obligation
means an obligation that is required to be classified and accounted for as a capital lease for
financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the
date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty;
provided
that, notwithstanding the foregoing, in no event
will any lease that would have been categorized as an operating lease as determined with GAAP as of the Issue Date be considered a capital lease (whether or not such lease was in effect on such date) regardless of any change in GAAP following the
Issue Date that would otherwise require such obligations to be recharacterized (on a prospective or retroactive basis or
otherwise) as a capital lease. For purposes of the covenant described under Certain CovenantsLimitation
on Liens, a Capital Lease Obligation will be deemed to be secured by a Lien on the property being leased.
Capital
Stock
of any Person means any and all shares, interests (including partnership interests), rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including
any Preferred Stock, but excluding any debt securities convertible into such equity.
Captive Insurance
Subsidiary
means any Subsidiary of the Issuer that is subject to regulation as an insurance company (or any Subsidiary thereof).
Cash Management Services
means any agreement or arrangement to provide cash management services, including treasury,
depository, overdraft, credit card processing or credit or debit card, purchase card, electronic funds transfer and other cash management arrangements.
CFC
means a controlled foreign corporation within the meaning of Section 957 of the Code.
CFC Holdco
means any Domestic Subsidiary with no material assets other than equity interests of one or more Foreign
Subsidiaries that are CFCs.
Change of Control
means the occurrence of any of the following:
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(1)
|
any person or group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the beneficial owner (as defined in Rules
13d-3
and
13d-5
under the Exchange Act), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Issuer; or
|
65
|
(2)
|
the merger or consolidation of the Issuer with or into another Person or the merger of another Person with or into the Issuer, or the sale of all or substantially all the assets of the Issuer (determined on a
consolidated basis) to another Person other than a transaction following which (A) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the Voting Stock of the Issuer immediately prior to such
transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least 50% of the voting power of the Voting Stock of the surviving Person in such merger or
consolidation transaction immediately after such transaction and (B) in the case of a sale of assets transaction, each transferee becomes an obligor in respect of the Notes and a Subsidiary of the transferor of such assets.
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Notwithstanding the foregoing:
|
(a)
|
the formation of a holding company for the Issuers Capital Stock will not constitute a Change of Control under clause (1) if it does not cause a Change of Control under clause (2), and
|
|
(b)
|
the entry into one or more agreements that, upon consummation of the transactions contemplated thereon would constitute a Change of Control, do not constitute a Change of Control until such consummation.
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Change of Control Offer
has the meaning given to it under Change of Control.
Charges
means any charge, expense, cost, accrual or reserve of any kind.
Code
means the Internal Revenue Code of 1986, as amended.
Consolidated Coverage Ratio
as of any date of determination means the ratio of (x) the aggregate amount of EBITDA for
the period of the most recent four consecutive fiscal quarters for which internal financial
statements of the Issuer are available to (y) Consolidated Interest Expense for such four fiscal quarters;
provided
,
however
,
that:
|
(1)
|
if the Issuer or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a
pro forma
basis to such Indebtedness as if such Indebtedness had been Incurred on the first
day of such period;
|
|
(2)
|
if the Issuer or any Restricted Subsidiary has repaid, repurchased, redeemed, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased,
defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a
pro forma
basis as if such discharge had occurred on the first day of such period and as if the Issuer or
such Restricted Subsidiary had not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness;
|
|
(3)
|
if since the beginning of such period the Issuer or any Restricted Subsidiary shall have made any Asset
Disposition, EBITDA for such period shall be reduced by an amount equal to EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to EBITDA (if
negative), directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Issuer or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Issuer and its continuing
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66
|
Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Issuer and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale);
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|
(4)
|
if since the beginning of such period the Issuer or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or
an acquisition of assets, including any acquisition of assets occurring in connection with a transaction requiring a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma
effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition had occurred on the first day of such period; and
|
|
(5)
|
if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Issuer or any Restricted Subsidiary since the beginning of such period) shall have made
any Asset Disposition, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (3) or (4) above if made by the Issuer or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving
pro forma
effect thereto as if such Asset Disposition, Investment or acquisition had occurred on the first day of such period.
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For purposes of this definition, whenever
pro forma
effect is to be given to an Acquisition Transaction or disposition of assets, the
amount of income, earnings or EBITDA relating thereto and the amount of
Consolidated Interest Expense associated with such transactions or any Indebtedness Incurred in connection therewith, the
pro forma
calculations shall be
determined in good faith by a responsible financial or accounting Officer of the Issuer (including any determinations made in respect of Pro Forma Adjustments). If any Indebtedness bears a floating rate of interest and is being given
pro forma
effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). If any Indebtedness is Incurred under a revolving credit facility and is being given
pro forma
effect, the interest on such Indebtedness shall be
calculated based on the average daily balance of such Indebtedness for the four fiscal quarters subject to the
pro forma
calculation to the extent that such Indebtedness was Incurred solely for working capital purposes.
Consolidated Interest Expense
means, for any period, the total interest expense of the Issuer and its Restricted
Subsidiaries calculated on a consolidated basis in accordance with GAAP (other than
non-cash
interest expense attributable to convertible indebtedness under Accounting Practices Bulletin
14-1
or any successor provision and amortization of debt issuance costs), plus, to the extent not included in such total interest expense, and to the extent Incurred by the Issuer or its Restricted Subsidiaries,
without duplication:
|
(1)
|
interest expense attributable to Capital Lease Obligations, the interest portion of rent expense associated with Attributable Debt in respect of the relevant lease giving rise thereto, determined as if such lease were a
capitalized lease in accordance with GAAP, and the interest component of any deferred payment obligations;
|
|
(2)
|
amortization of debt discount (including the amortization of original issue discount resulting from the issuance of Indebtedness at less than par);
provided
,
however
, that any amortization of bond premium
will be credited to reduce Consolidated Interest Expense unless, pursuant to GAAP, such amortization of bond premium has otherwise reduced Consolidated Interest Expense;
|
|
(3)
|
capitalized interest;
|
|
(4)
|
non-cash
interest expense;
provided
,
however
, that any
non-cash
interest expense or income attributable to the movement in
the mark to market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP shall be excluded from the calculation of Consolidated Interest Expense);
|
67
|
(5)
|
commissions, discounts and other fees and charges owed with respect to letters of credit and bankers acceptance financing Incurred as Credit Facility Indebtedness;
|
|
(6)
|
net cash payments pursuant to Hedging Obligations;
|
|
(7)
|
the product of (a) all dividends accrued in respect of all Disqualified Stock of the Issuer and all Preferred Stock of any Restricted Subsidiary, in each case, held by Persons other than the Issuer or a Restricted
Subsidiary (other than dividends payable solely in Capital Stock (other than Disqualified Stock) of the Issuer), times (b) a fraction of the numerator of which is one and the denominator of which is one minus the effective combined tax rate of
the issuer of such Disqualified Stock or Preferred Stock (expressed as a decimal) for such period (as estimated by the chief financial officer of the Issuer in good faith); and
|
|
(8)
|
solely to the extent it would be included in the total interest expense of the Issuer calculated on a consolidated basis in accordance with GAAP, interest accruing on any Indebtedness of any other Person to the extent
such indebtedness is Guaranteed by (or secured by a Lien on the assets of) the Issuer or any Restricted Subsidiary.
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Consolidated Leverage Ratio
as of any date of determination means the ratio of (x) the aggregate amount of
Consolidated Total Indebtedness of the Issuer and its Restricted Subsidiaries as of such date of determination to (y) EBITDA for the most recent four consecutive fiscal quarters for which financial statements of the Issuer are available (the
Reference Period
);
provided
,
however
, that:
|
(1)
|
if the transaction giving rise to the need to calculate the Consolidated Leverage Ratio is an Incurrence of Indebtedness, the amount of such Indebtedness shall be calculated after giving effect on a
pro forma
basis to such Indebtedness;
|
|
(2)
|
if the Issuer or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness that was outstanding as of the end of such fiscal quarter or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged on the date of the transaction giving rise to the need to calculate the Consolidated Leverage Ratio (other than, in each case, Indebtedness Incurred under any revolving credit agreement), the aggregate
amount of Indebtedness shall be calculated on a
pro forma
basis and EBITDA shall be calculated as if the Issuer or such Restricted Subsidiary had not earned the interest income, if any, actually earned during the Reference Period in respect
of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness;
|
|
(3)
|
if since the beginning of the Reference Period the Issuer or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for the Reference Period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such Asset Disposition for the Reference Period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for the Reference Period;
|
|
(4)
|
if since the beginning of the Reference Period the Issuer or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted
Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction requiring a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business,
EBITDA for the Reference Period shall be calculated after giving
pro forma
effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition had occurred on the first day of the Reference Period; and
|
|
(5)
|
if since the beginning of the Reference Period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Issuer or any Restricted Subsidiary since the beginning of such Reference
Period) shall have made any Asset Disposition, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (3) or (4) above if made by the Issuer or a Restricted Subsidiary during the Reference Period,
EBITDA for the Reference Period shall be calculated after giving
pro forma
effect thereto as if such Asset Disposition, Investment or acquisition had occurred on the first day of the Reference Period.
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68
For purposes of this definition, whenever
pro forma
effect is to be given to an
Acquisition Transaction, the amount of income, earnings or EBITDA relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma
calculations shall be
determined in good faith by a responsible financial or accounting Officer of the Issuer (including any determinations made in respect of Pro Forma Adjustments). If any Indebtedness bears a floating rate of interest and is being given
pro
forma
effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). If any Indebtedness is Incurred under a revolving credit facility and is being given
pro forma
effect, the interest on such Indebtedness shall be
calculated based on the average daily balance of such Indebtedness for the four fiscal quarters subject to the
pro forma
calculation to the extent such Indebtedness was Incurred solely for working capital purposes.
Consolidated Net Income
means, for any period, the net income (loss) attributable to the Issuer and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, excluding, without duplication, (a) the cumulative effect of a change in accounting principles during such period to the extent included in net income
(loss), (b) accruals and reserves that are established or adjusted as a result of the Transactions in accordance with GAAP or changes as a result of the adoption or modification of accounting policies during such period, (c) the income (or
loss) of any Person in which any other Person has an ownership interest other than a Restricted Subsidiary, except to the extent of the amount of dividends or other distributions actually paid to the Issuer or any of its Restricted Subsidiaries by
such Person during such period, (d) the income of any Restricted Subsidiary of the Issuer (other than any Guarantor) to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that
income is subject to an absolute prohibition during such period by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary (other
than any prohibition that has been waived or otherwise released), except to the extent of the amount of dividends or other distributions actually paid by such Restricted Subsidiary to the Issuer or any other Restricted Subsidiary that is not subject
to such prohibitions, (e) the income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary of the Issuer or is merged into or consolidated with the Issuer or any of its Restricted Subsidiaries or that
Persons assets are acquired by the Issuer or any of its Subsidiaries (except as provided in the
pro forma
adjustment provisions set forth in the definition of Consolidated Coverage Ratio), (f) after tax gains or Charges (less all
fees and expenses chargeable thereto) attributable to any asset dispositions outside the ordinary course of business (including asset retirement costs) or of returned surplus assets of any employee benefit plan, (g) any net gains or Charges
with respect to (i) disposed, abandoned, divested and/or discontinued assets, properties or operations (other than assets, properties or operations pending the disposal, abandonment, divestiture and/or termination thereof) and
(ii) facilities that have been closed during such period, (h) any net income or loss (less all fees and expenses or charges related thereto) attributable to the early extinguishment of Indebtedness, hedging obligations or other derivative
instruments and (i) any
write-off
or amortization made in such period of deferred financing costs and premiums paid or other expenses Incurred directly in connection with any early extinguishment of
Indebtedness, (j) any impairment charge or asset
write-off
or write-down, or asset
write-up,
related to intangible assets (including goodwill), long-lived assets
and Investments in debt and equity securities,
(k) Non-Cash
Compensation Expenses, (l) any unrealized gains and losses from Hedging Obligations or from the application of Accounting Standards
Codification Topic 815, Derivatives and Hedging, or any comparable regulation, (m) adjustments attributable to the application of recapitalization or acquisition accounting in relation to the Transactions or any other consummated Acquisition
Transaction, (n) any Charges (other than depreciation or amortization expense) related to any equity offering, investment, acquisition, disposition, recapitalization or the Incurrence or repayment of Indebtedness (including a refinancing or
amendment, waiver or other modification thereof) (whether or not successful), including in connection with the
Transactions, (o) (A) extraordinary Charges and (B) unusual or nonrecurring Charges, (p) all cash and
Non-Cash
Charges and expenses Incurred before the Issue Date with respect to the Seagate Arbitration to the extent that the aggregate amount of all such Charges and expenses do not exceed $32 million,
(q) transaction fees, costs and expenses Incurred to the extent reimbursable by third parties pursuant to indemnification provisions or insurance;
69
provided
that the Issuer in good faith expects to receive reimbursement for such fees, costs and expenses within the next four (4) fiscal quarters (it being understood that to the
extent not actually received within such fiscal quarters, such reimbursement amounts shall be deducted in calculating Consolidated Net Income at the end of such four fiscal quarter period), (r) casualty or business interruption insurance in an
amount representing the losses for the applicable period that such proceeds are intended to replace (whether or not yet received so long as the Issuer in good faith expects to receive the same within the next four (4) fiscal quarters (it being
understood that to the extent not actually received within such fiscal quarters, such proceeds shall be deducted in calculating Consolidated Net Income for such fiscal quarters in the future)) and (s) any net gain or loss resulting in such
period from currency translation gains or losses related to currency remeasurements of indebtedness (including any net loss or gain resulting from hedge agreements for currency exchange risk). Notwithstanding the foregoing, for the purposes of the
covenant described under Certain CovenantsLimitation on Restricted Payments only, there shall be excluded from
Consolidated Net
Income any repurchases, repayments or redemptions of Investments, proceeds realized on
the sale of Investments or return of capital to the Issuer or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted under such covenant pursuant to
clause (a)(3)(D) thereof.
Consolidated Secured Indebtedness
means, as of any date of determination, an amount
equal to the Consolidated Total Indebtedness as of such date that is then secured by Liens on property or assets of the Issuer or any Restricted Subsidiary (during any Suspension Period, such determination shall be made as if such covenant was in
effect at such time).
Consolidated Secured Leverage Ratio
means, as of any date of determination the ratio of
(a) Consolidated Secured Indebtedness to (b) the aggregate amount of EBITDA for the Issuers most recently ended four full fiscal quarters for which internal financial statements are available, in each case with such
pro forma
adjustments to Consolidated Secured Indebtedness and EBITDA as are consistent with the
pro forma
adjustment provisions set forth in the definition of Consolidated Coverage Ratio.
Consolidated Total Indebtedness
means, at any time the same is to be determined, the aggregate amount of all Indebtedness
under clauses (1), (2) and (4) (to the extent, in the case of clause (4), that such obligations are funded obligations that have not been reimbursed within two (2) Business Days following the funding thereof) of such definition of the
Issuer and its Restricted Subsidiaries as determined on a consolidated basis in accordance with GAAP.
Convertible
Notes
means any convertible senior notes issued under the SanDisk Indentures.
Coverage Indebtedness
has the
meaning given to it in clause (a) of Certain CovenantsLimitation on Indebtedness.
Credit
Agreement
means that certain Credit Agreement, dated April 29, 2016, as amended by Amendment No. 1, dated as of August 17, 2016, as amended by Amendment No. 2, dated as of September 22, 2016 (as further amended,
amended and restated, supplemented or otherwise modified from time to time), among the Issuer, the guarantors and lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith.
Credit Facilities
means (a) one
or more debt facilities (including the Credit Agreement or any other credit facility), commercial paper facilities, securities purchase agreements, indentures, fiscal agency agreements, any letter of credit facility or similar agreements or any
other financing agreement or arrangement, in each case, with agents, banks or other lenders, investors, trustees or fiscal agents providing for revolving loans, term loans, receivables financing (including through the sale of receivables to lenders
or to special purpose entities formed to borrow from lenders against such receivables) letters of credit, the issuance of securities or other long-term indebtedness, including any related notes, guarantees, collateral documents, instruments and
agreement executed in connection therewith, and (b), any amendments, restatements, replacements (whether upon or after
70
termination or otherwise), refinancings, refundings, supplements, modifications, extensions, renewals or other modifications
thereof (in whole or in part, and without limitation as to
amount, terms, conditions, covenants and other provisions) from time to time, including any one or more of the foregoing that increases the amount permitted to
be borrowed or issued thereunder or alters the maturity thereof (
provided
that any such increase in borrowings or issuances is permitted under Limitation on Indebtedness and, if applicable, Liens) or that add additional borrowers or guarantors thereunder, and whether with the same or
any other agent, trustee, fiscal agent, lender, investor, holder or group of agents, trustees, fiscal agents, lenders, investors or holders (any Indebtedness under any of the Credit Facilities described in clause (b), a
Refinancing Credit
Facility
).
Credit Facility Indebtedness
has the meaning given to it in clause (b)(1) of
Certain CovenantsLimitation on Indebtedness.
Currency Agreement
means any foreign
exchange contract, currency swap agreement or other similar agreement with respect to currency values.
Default
means any event which is, or after notice or passage of time or both would be, an Event of Default.
Designated Noncash
Consideration
means the Fair Market Value of
non-cash
consideration received by the Issuer or one of its Restricted Subsidiaries in connection with an Asset Disposition that is so designated as
Designated Noncash Consideration pursuant to an Officers Certificate setting forth the basis of such valuation, less the amount of cash or Temporary Cash Investments received in connection with a subsequent disposition of such Designated
Noncash Consideration.
Disqualified Stock
means, with respect to any Person, any Capital Stock which by its terms (or
by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event:
|
(1)
|
matures or is mandatorily redeemable (other than redeemable only for Capital Stock of such Person which is not itself Disqualified Stock) pursuant to a sinking fund obligation or otherwise;
|
|
(2)
|
is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock; or
|
|
(3)
|
is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part;
|
in each case on or prior to the day that is 91 days after the Stated Maturity;
provided
,
however
, that only the portion of Capital Stock which
so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable prior to such date will be deemed to be Disqualified Stock;
provided further
,
however
, that any Capital Stock that would constitute
Disqualified Stock solely because the holders thereof have the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an asset disposition or a change of control (each defined in a
substantially identical manner to the corresponding definitions in the Indenture) shall not constitute Disqualified Stock if the terms of such Capital Stock (and all such securities into which it is convertible or for which it is ratable or
exchangeable) provide that such Person may not repurchase or redeem any such Capital Stock (and all such securities into which it is convertible or for which it is ratable or exchangeable) pursuant to such provisions prior to compliance by such
Person with the provisions of the Indenture described under the captions Change of Control and Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock and such repurchase or redemption complies
with the covenants described under Certain CovenantsLimitation on Restricted Payments.
Domestic
Subsidiary
means each Subsidiary of the Issuer that is organized under the applicable laws of the United States, any state thereof, or the District of Columbia.
71
EBITDA
means, for any period, the Consolidated Net Income for such period,
plus
:
|
(a)
|
without duplication and to the extent already deducted (and not added back) in arriving at such Consolidated Net Income (other than in the case of clause (x) below), the sum of the following amounts for such
period:
|
|
(i)
|
Consolidated Interest Expense,
|
|
(ii)
|
provision for taxes based on income, profits or capital, including federal, foreign, state, franchise, excise and similar taxes paid or accrued during such period (including in respect of repatriated funds),
|
|
(iii)
|
depreciation and amortization, including amortization of intangible assets established through purchase accounting and amortization of deferred financing fees or costs,
|
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(v)
|
Charges attributable to the undertaking and/or implementation of cost savings initiatives, operating expense reductions and other restructuring, integration or transformational charges (including inventory optimization
expenses, business optimization expenses, transaction costs and costs related to the opening, closure, consolidation or separation of facilities and curtailments, costs related to entry into new markets, consulting fees, recruiter fees, signing
costs, retention or completion bonuses, transition costs, relocation costs, severance payments, and modifications to pension and post-retirement employee benefit plans);
provided
that amounts added back pursuant to this clause (v), together
with any amounts added back pursuant to clause (vii) below and the amount of any Pro Forma Adjustment to EBITDA for such period, shall not exceed the greater of $500 million and 15% of EBITDA for such period (calculated prior to giving
effect to any such
add-back);
provided further
that Charges relating to the Transactions and up to $800 million of the foregoing in connection with the MOFCOM Restructuring, in each case, added
back to EBITDA pursuant to this clause (v) for any period ending on or prior to the 24th month following the Escrow Release Date shall not be subject to the caps in the preceding proviso;
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(vi)
|
the amount of any minority interest expense consisting of subsidiary income attributable to minority equity interests of third parties in any
non-Wholly
Owned Subsidiary,
|
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(vii)
|
expected cost savings, operating expense reductions, restructuring charges and expenses and synergies (net of the amount of actual amounts realized) reasonably identifiable and factually supportable and reasonably
anticipated to be realized within 18 months of the date thereof (in the good faith determination of the Issuer) related to permitted asset sales, acquisitions, investments, dispositions, operating improvements, restructurings, cost savings
initiatives and certain other similar initiatives conducted after the Escrow Release Date;
provided
that amounts added back pursuant to this clause (vii), together with any amounts added back pursuant to clause (v) above and the amount
of any Pro Forma Adjustment to EBITDA for such period, shall not exceed the greater of $500 million and 15% of EBITDA for such period (calculated prior to giving effect to any such
add-back);
provided
further
that any of the foregoing in connection with (A) the Transactions and (B) up to $650 million of the foregoing in connection with the MOFCOM Restructuring, in each case, added back to EBITDA pursuant to this clause
(vii) for any period ending on or prior to the 24th month following the Escrow Release Date shall not be subject to the caps in the preceding proviso; and
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(viii)
|
earn-out
obligations incurred in connection with any acquisition or other investment and paid or accrued during the applicable period,
less
|
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(b)
|
without duplication and to the extent included in arriving at such Consolidated Net Income,
non-cash
gains for such period (excluding any
non-cash
gains for such period to the extent it represents the reversal of an accrual or reserve for a potential cash item that
reduced EBITDA in any prior period);
provided
, in each case, that, if any
non-cash
gain represents an accrual or asset for future cash items in
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72
|
any future period, the cash payment in respect thereof shall in such future period be added to EBITDA for such period to the extent excluded from EBITDA in any prior period,
|
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(c)
|
increased or decreased by (without duplication):
|
|
(i)
|
any net gain or loss resulting in such period from Hedging Obligations and the application of Accounting Standards Codification Topic 815 and International Accounting Standards No. 39 and their respective related
pronouncements and interpretations;
plus
or
minus
, as applicable,
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|
(ii)
|
any net gain or loss resulting in such period from currency translation gains or losses related to currency remeasurements of indebtedness (including any net loss or gain resulting from hedge agreements for currency
exchange risk), and
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(iii)
|
any adjustments resulting from the application of Accounting Standards Codification Topic 460, Guarantees, or any comparable regulation,
|
in each case, as determined on a consolidated basis for the Issuer and its Restricted Subsidiaries in accordance with GAAP.
Escrow Release Date
means May 12, 2016.
Exchange Act
means the U.S. Securities Exchange Act of 1934, as amended.
Excess Proceeds
has the meaning given to it under Certain CovenantsLimitation on Sales of Assets and
Subsidiary Stock.
Excluded Contributions
means any Net Cash Proceeds received by the Issuer from the
sale of its Qualified Capital Stock or a capital contribution with respect to its Qualified Capital Stock, which are designated as an Excluded Contribution pursuant to an Officers Certificate on or promptly after the date of receipt of such
Net Cash Proceeds and which shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) of the covenant described under Certain CovenantsLimitation on Restricted Payments.
Fair Market Value
means, with respect to any asset or liability, the fair market value of such asset or liability, as
reasonably determined in good faith by the management of the Issuer, which determination will be conclusive (unless otherwise provided in the Indenture).
Financing Fees
means, in connection with any Incurrence of Indebtedness, the aggregate amount of fees (including upfront,
commitment and ticking fees and original issue discount), underwriting discounts,
commissions and other costs and expenses Incurred in connection therewith, as well as, in the case of any Incurrence of Refinancing Indebtedness, any penalties
or premiums (including reasonable tender premiums), defeasance and satisfaction and discharge costs, accrued interest and other similar costs and expenses Incurred in respect of the Indebtedness being Refinanced.
First Tier Foreign Subsidiary
means a Foreign Subsidiary, the equity interests of which are directly owned by the Issuer or
a Domestic Subsidiary that is not a Subsidiary of a Foreign Subsidiary.
Fitch
means Fitch Investors Services, Inc. and
any successors to its rating agency.
Foreign Subsidiary
means each Subsidiary of the Issuer that is not a Domestic
Subsidiary.
Foreign Subsidiary Total Assets
means the total assets of the Foreign Subsidiaries of the Issuer, as
determined in accordance with GAAP in good faith by the Issuer without intercompany eliminations.
GAAP
means generally
accepted accounting principles in the United States of America as in effect from time to time. Notwithstanding the foregoing, the Issuer shall be permitted to treat any agreement or arrangement,
73
which would be accounted for on the Issue Date as an operating lease under GAAP, whether existing on the Issue Date or entered into thereafter, under the standards applicable to operating leases
under GAAP as in effect on the Issue Date.
Guarantee
means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any Person;
provided
,
however
, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term
Guarantee used as a verb has a corresponding meaning. The term Guarantor shall mean any Person Guaranteeing any obligation.
Guarantee Agreement
means a supplemental indenture to the Indenture, in a form reasonably satisfactory to the Trustee,
pursuant to which a Guarantor guarantees the Issuers obligations with respect to the Notes on the terms provided for in the Indenture; it being understood that the Issuer and the other Guarantors need not be a party thereto.
Guarantor
means each of Western Digital Technologies, Inc., HGST, Inc., WD Media, LLC, Western Digital (Fremont), LLC and
each other Subsidiary of the Issuer that guarantees the Notes pursuant to the terms of the Indenture.
Hedging
Obligations
of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement.
Holder
means the Person in whose name a Note is registered on the registrars books.
Incur
means issue, assume, Guarantee, Incur or otherwise become liable for;
provided
,
however
, that any
Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Restricted Subsidiary. The
term Incurrence when used as a noun shall have a correlative meaning. Solely for purposes of determining compliance with Certain CovenantsLimitation on Indebtedness and Liens:
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(1)
|
amortization of debt discount or the accretion of principal with respect to a
non-interest
bearing or other discount security;
|
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(2)
|
the payment of regularly scheduled interest in the form of additional Indebtedness of the same instrument or the payment of regularly scheduled dividends on Capital Stock in the form of additional Capital Stock of the
same class and with the same terms;
|
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(3)
|
the obligation to pay a premium in respect of Indebtedness arising in connection with the issuance of a notice of redemption or the making of a mandatory offer to purchase such Indebtedness;
|
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(4)
|
changes in the principal amount of any Indebtedness that is denominated in a currency other than U.S. dollars solely as a result of fluctuations in exchange rates or currency values; and
|
|
(5)
|
the reclassification of any outstanding Capital Stock as Indebtedness due to a change in accounting principles so long as such Capital Stock was issued prior to, and not in contemplation of, such accounting change
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will not be deemed to be the Incurrence of Indebtedness.
Indebtedness
means, with respect to any Person on any date of determination (without duplication):
|
(1)
|
the principal in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is
responsible or liable (but excluding any accounts payable or other liability to trade creditors arising in the ordinary course of business);
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74
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(2)
|
all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person;
|
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(3)
|
all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but
excluding (i) any accounts payable or other liability to trade creditors arising in the ordinary course of business and (ii) any
earn-out
obligations until such obligation becomes a liability on the
balance sheet of such Person in accordance with GAAP);
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(4)
|
all obligations of such Person for the reimbursement of any obligor on any letter of credit or bankers acceptance (other than obligations with respect to letters of credit, bankers acceptance on similar
credit transactions securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to
the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following payment on the letter of credit);
|
|
(5)
|
the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock of such Person or, with respect to any Preferred Stock of any Restricted Subsidiary of
such Person, the amount of such Preferred Stock to be determined in accordance with the Indenture (but excluding, in each case, any accrued dividends);
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(6)
|
all Guarantees by such Person of obligations of the type referred to in clauses (1) through (5) or dividends of other Persons;
|
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(7)
|
all obligations of the type referred to in clauses (1) through (6) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount
of such obligation being deemed to be the lesser of the Fair Market Value of such property or assets and the amount of the obligation so secured; and
|
|
(8)
|
to the extent not otherwise included in this definition, the net Hedging Obligations of such Person (the amount of any such obligations to be equal at any time to the termination value of such agreement or arrangement
giving rise to such obligation that would be payable by such Person at such time).
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Notwithstanding the foregoing,
(i) in connection with the purchase by the Issuer or any Restricted Subsidiary of any business, the term Indebtedness will exclude post-closing payment adjustments to which the seller may become entitled to the extent such payment
is determined by a final closing balance sheet or such payment depends on the performance of such business after the closing;
provided
,
however
, that, at the time of closing, the amount of any such payment is not determinable and, to
the extent such payment thereafter becomes fixed and determined, the amount is paid within 60 days thereafter and (ii) the term Indebtedness will exclude operating leases and any Guarantees thereof, including operating leases of
joint ventures.
The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all
obligations as described above;
provided
,
however
, that in the case of Indebtedness sold at a discount, the amount of such Indebtedness at any time will be the accreted value thereof at such time.
The amount of any Preferred Stock that has a fixed redemption, repayment or repurchase price will be calculated in accordance with the terms
of such Preferred Stock as if such Preferred Stock were redeemed, repaid or repurchased on any date on which the amount of such Preferred Stock is to be determined pursuant to the Indenture;
provided
,
however
, that if such Preferred
Stock could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price will be calculated as of the first date thereafter on which such Preferred Stock could be required to
be so redeemed, repaid or repurchased. If any Preferred Stock does not have a fixed redemption, repayment or repurchase price, the amount of such Preferred Stock will be its maximum liquidation value.
Independent Qualified Party
means an investment banking firm, accounting firm, appraisal firm or consultant of national
standing;
provided
,
however
, that such firm is not an Affiliate of the Issuer.
75
Initial Lien
has the meaning given to it under Certain
CovenantsLimitation on Liens.
Intellectual Property
means all intellectual and similar property of every
kind and nature now owned or hereafter acquired by the Issuer or any Subsidiary, including inventions, designs, patents, copyrights, trademarks, trade secrets, domain names, confidential or proprietary technical and business information,
know-how,
show-how
or other similar data or information, software and databases and all embodiments or fixations thereof and related documentation, all additions, improvements
and accessions to any of the foregoing and all registrations for any of the foregoing.
Intercompany Transactions
means
the intercompany transactions described under SummaryCorporate Structure in the Offering Memorandum.
Interest Rate Agreement
means any interest rate swap agreement, interest rate cap agreement or other financial agreement or
arrangement with respect to exposure to interest rates.
Investment
in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender or advances for the purpose of prepaying depreciation costs of joint ventures) or other
extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. The acquisition by the Issuer or any Restricted Subsidiary of a Person that holds an Investment in a third Person will be deemed to be an
Investment by the Issuer or such Restricted Subsidiary in such third Person at such time. Except as otherwise provided for herein, the outstanding amount of an Investment shall be the original cost at the time such Investment is made and without
giving effect to subsequent changes in value, but reduced by any dividend, distribution, interest payment, return of capital, repayment or other amount received in cash or the Fair Market Value of any property received by the Issuer or a Restricted
Subsidiary in respect of such Investment.
For purposes of the definitions of Unrestricted Subsidiary, the definition of
Restricted Payment and Permitted Investments and the covenant described under Certain CovenantsLimitation on Restricted Payments:
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(1)
|
Investment shall include the portion (proportionate to the Issuers equity interest in such Subsidiary) of the Fair Market Value of the net assets of any Subsidiary of the Issuer at the time that such
Subsidiary is designated an Unrestricted Subsidiary;
provided
,
however
, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to continue to have a permanent Investment in an
Unrestricted Subsidiary equal to an amount (if positive) equal to (A) the Issuers Investment in such Subsidiary at the time of such redesignation less (B) the portion (proportionate to the Issuers equity interest in
such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation; and
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(2)
|
any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer.
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Investment Grade Rating
means a rating equal to or higher than: (a) Baa3 (or equivalent) by Moodys,
(b) BBB-
(or equivalent) by Standard and Poors or
(c) BBB-
(or equivalent) by Fitch, in each case with a stable outlook.
Issue Date
means April 13, 2016.
Legal Holiday
means a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of
New York or a place of payment.
76
Lien
means any mortgage or deed of trust, charge, pledge, lien (statutory or
otherwise), privilege, security interest, assignment, easement, hypothecation, claim, preference, priority or other encumbrance upon or with respect to any property of any kind (including any conditional sale, capital lease or other title retention
agreement) real or personal, moveable or immovable, now owned or hereafter acquired;
provided
,
however
, that in no event shall an operating lease be deemed to constitute a Lien. A Person will be deemed to own subject to a Lien any
property which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease Obligation or other title retention agreement.
Merger Agreement
means the agreement and plan of merger by and among Western Digital Corporation, Schrader Acquisition
Corporation and SanDisk Corporation, dated October 21, 2015, as amended from time to time.
MOFCOM
Restructuring
has the meaning given to it in clause (N) of the definition of Asset Disposition.
Moodys
means Moodys Investors Service, Inc. and any successor to its rating agency business.
Net Available Cash
from an Asset Disposition means cash payments and the Fair Market Value of any Temporary Cash
Investments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities (other than
Temporary Cash Investments) received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person
of Indebtedness or other obligations relating to such
properties or assets or received in any other
non-cash
form), in each case net of:
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(1)
|
all legal, accounting and investment banking fees, title and recording tax expenses, commissions and other fees and expenses Incurred, and all Federal, state, provincial, foreign and local taxes paid or payable, as
consequence of such Asset Disposition, as determined before taking into account the application of any deductions, losses, credits and similar tax attributes (other than those deductions, losses, credits and attributes arising from such Asset
Disposition);
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(2)
|
all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets,
or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition;
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(3)
|
all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Disposition;
|
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(4)
|
the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset Disposition and retained by
the Issuer or any Restricted Subsidiary after such Asset Disposition; and
|
|
(5)
|
any portion of the purchase price from an Asset Disposition placed in escrow, whether as a reserve for adjustment of the purchase price, for satisfaction of indemnities in respect of such Asset Disposition or otherwise
in connection with that Asset Disposition;
provided
,
however
, that upon the termination of that escrow, Net Available Cash will be increased by any portion of funds in the escrow that are released to the Issuer or any Restricted
Subsidiary.
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Net Cash Proceeds
means, with respect to any issuance or sale of Capital Stock or
Indebtedness, the cash proceeds of such issuance or sale net of attorneys fees, accountants fees, underwriters or placement agents fees, discounts or commissions and brokerage, consultant and other fees actually Incurred in
connection with such issuance or sale and net of taxes paid or payable as a result thereof.
Non-Cash
Charges
means (a) any impairment charge or asset
write-off
or write-down related to intangible assets (including goodwill), long-lived assets and
Investments in debt and equity securities pursuant to GAAP,
77
(b) all
non-cash
losses from investments recorded using the equity method, (c) all
Non-Cash
Compensation
Expenses, (d) the
non-cash
impact of purchase or recapitalization accounting and (e) all other
non-cash
charges (provided that, in each case, if any
non-cash
charges represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from EBITDA to such extent, and excluding
amortization of a prepaid cash item that was paid in a prior period).
Non-Cash
Compensation Expense
means any
non-cash
expenses and costs that result from the issuance of stock-based awards, limited liability company or partnership interest-based awards and similar
incentive-based compensation awards or arrangements.
Obligations
means, with respect to any Indebtedness, all
obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements and other amounts payable pursuant to the documentation governing such Indebtedness.
Offering Memorandum
means the Offering Memorandum dated as of March 30, 2016 related to the offer and sale of the
Notes and the Secured Notes.
Officer
means the Chairman of the Board, the President, the Chief Executive
Officer, the Chief Financial Officer, any Executive Vice President, any Vice President, the Treasurer, the Assistant Treasurer, the Secretary or any Assistant Secretaries of the Issuer. Officer of any Subsidiary has a correlative meaning.
Officers Certificate
means a certificate signed by two Officers, at least one of whom must be the Chairman of
the Board, the President, the Chief Executive Officer, the Chief Financial Officer, any Executive Vice President, any Vice President, the Treasurer or the Secretary.
Opinion of Counsel
means a written opinion from legal counsel who is reasonably acceptable to the Trustee (which opinion
may be subject to customary exclusions and qualifications) who may be an employee of or counsel to the Issuer.
Permitted
Indebtedness
has the meaning given to it in clause (b) under Certain CovenantsLimitation on Indebtedness.
Permitted Investment
means an Investment by the Issuer or any Restricted Subsidiary in:
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(1)
|
the Issuer, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary;
|
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(2)
|
another Person if, as a result of such Investment, such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Issuer or a Restricted Subsidiary;
|
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(3)
|
cash and Temporary Cash Investments;
|
|
(4)
|
receivables owing to the Issuer or any Restricted Subsidiary if created or acquired in the ordinary course of business;
|
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(5)
|
payroll, travel, entertainment, moving and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary
course of business;
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(6)
|
loans and advances to, or Guarantees of debt on behalf of, officers, directors, employees and consultants of the Issuer or any of its Subsidiaries;
provided
that the aggregate amount of such loans, advances and
Guarantees outstanding at any time shall not exceed $10 million;
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(7)
|
stock, obligations, securities or other Investments received in settlement or satisfaction of debts created in the ordinary course of business and owing to the Issuer or any Restricted Subsidiary or in satisfaction of
judgments or as a result of the settlement, compromise or resolution of litigation, arbitration or other disputes;
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78
|
(8)
|
any Person to the extent such Investment represents the
non-cash
portion of the consideration received for (i) an Asset Disposition as permitted pursuant to the covenant
described under Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock or (ii) a disposition of assets not constituting an Asset Disposition;
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(9)
|
Investments (including debt obligations) received (a) in exchange for any other Investment or accounts receivable held by the Issuer or any such Restricted Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable, (b) in settlement of delinquent obligations of, and other disputes with, a Person arising in the ordinary course of business
or (c) as a result of a foreclosure by the Issuer or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
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(10)
|
any Person to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and lease, utility and workers compensation, performance and other similar deposits made in the
ordinary course of business by the Issuer or any Restricted Subsidiary;
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(11)
|
any Person to the extent such Investments consist of Hedging Obligations or Guarantees of Indebtedness otherwise permitted under the covenant described under Certain CovenantsLimitation on
Indebtedness (excluding Guarantees of the type referred to in clause (19) of this definition);
|
|
(12)
|
any Person to the extent such Investment exists on, or is contractually committed as of, or pursuant to an agreement executed on or before, the Issue Date and the Escrow Release Date, and any extension, modification,
reinvestment, replacement or renewal of any such Investments or contractual commitments existing on the Issue Date and on the Escrow Release Date, but only to the extent not involving additional advances, contributions or other Investments of cash
or other assets or other increases thereof (other than as a result of the accrual or accretion of interest or original issue discount or the issuance of
pay-in-kind
securities, in each case, pursuant to the terms of such Investment as in effect on the Issue Date);
provided
, that the amount of any such Investment or binding commitment may be increased (a) as required by the terms of such Investment
or binding commitment as in existence on the Issue Date and on the Escrow Release Date (including as a result of the accrual or accretion of interest or original issue discount or the issuance of
pay-in-kind
securities) or (b) as otherwise permitted under the Indenture;
|
|
(13)
|
any Person to the extent the payment for such Investment consists solely of an issuance of Capital Stock (other than Disqualified Stock) of the Issuer;
provided
,
however
, that such issuance of Capital
Stock shall not increase the amount available for Restricted Payments under clause (a)(3) under the covenant described under Certain CovenantsLimitation on Restricted Payments;
|
|
(14)
|
any Person to the extent such Investment consists of the licensing or contribution of Intellectual Property pursuant to joint marketing arrangements with other Persons;
|
|
(15)
|
any Person to the extent such Investment consists of guarantees of performance obligations of Foreign Subsidiaries under service contracts entered into in the ordinary course of business in accordance with the covenant
described under Certain CovenantsLimitation on Indebtedness;
|
|
(16)
|
any Person to the extent such Investments consist of (i) extensions of trade credit or advances in the ordinary course of business or (ii) Article 3 endorsements for collection or deposit and Article 4
customary trade arrangements with customers consistent with past practices, in each case in the ordinary course of business;
|
|
(17)
|
any Person to the extent such Investments consist of Investments of a Restricted Subsidiary acquired after the
Issue Date or of an entity merged into the Issuer or merged into or consolidated with a Restricted Subsidiary after the Issue Date in accordance with the covenant described under Certain CovenantsMerger and Consolidation, in
each case, to the extent that such Investments were not
|
79
|
made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation;
|
|
(18)
|
any Person to the extent such Investments consist of cash earnest money deposits required to be made by the Issuer or any Restricted Subsidiary in connection with a purchase agreement, letter of intent or other
acquisitions permitted under the Indenture;
|
|
(19)
|
any Persons to the extent such Investments, when taken together with all other Investments made pursuant to this clause (19) and outstanding on the date such Investment is made, do not exceed the greater of (x)
$900 million and (y) 3.0% of Total Assets;
|
|
(20)
|
Investments in Flash Partners Ltd., Flash Alliance Ltd. or Flash Forward Ltd. and similar joint ventures with Toshiba Corporation (or one of its Affiliates);
provided
that the use of such Investments by such
joint venture would have been classified, in accordance with GAAP, as a capital expenditure if such joint venture had been a Subsidiary of the Issuer;
|
|
(21)
|
Investments in any Subsidiary in connection with Cash Management Services in the ordinary course of business;
|
|
(22)
|
guarantees by the Issuer or any Restricted Subsidiary of leases (other than Capital Lease Obligations) or of other obligations that do not constitute indebtedness for borrowed money, in each case entered into in the
ordinary course of business and any guarantees by the Issuer or any Restricted Subsidiary of operating leases of joint ventures;
|
|
(23)
|
Investments permitted pursuant to the covenants described under Certain CovenantsLimitation on Indebtedness and Restricted Payments or permitted under the definitions of
Permitted Liens or Asset Dispositions;
|
|
(24)
|
the making of any Investment by the Issuer or any of its Restricted Subsidiaries if, at the time of making such Investment, and after giving effect thereto (including the Incurrence of any Indebtedness permitted to be
Incurred pursuant to the covenant described under Limitation on Indebtedness to finance such Investment) on the date of consummation of such Investment or, at the Issuers election to the extent such Investment is made in
connection with an Acquisition Transaction, on the date of the signing of any acquisition agreement with respect thereto, after giving effect thereto the Consolidated Leverage Ratio would not exceed 2.25:1.00 (calculated on a
pro forma
basis
as of the last day of the most recently ended period of four consecutive fiscal quarters for which financial statements of the Issuer are available);
provided
,
however
, that no Default has occurred and is continuing or would otherwise
result therefrom;
|
|
(25)
|
repurchases of the Notes;
|
|
(26)
|
any Investment by any Captive Insurance Subsidiary in connection with its provision of insurance to the Issuer or any of its Subsidiaries, which Investment is made in the ordinary course of business of such Captive
Insurance Subsidiary, or by reason of applicable law, rule, regulation or order, or that is required or approved by any regulatory authority having jurisdiction over such Captive Insurance Subsidiary or its business, as applicable and any Investment
in fixed income or other assets by any Captive Insurance Subsidiary consistent with customary practices of portfolio management; and
|
|
(27)
|
non-cash
contributions to joint ventures (including, without limitation, contributions of employees, intellectual property and/or services) in the ordinary course of business.
|
For purposes of this definition, in the event that a proposed Investment (or portion thereof) meets the criteria of more
than one of the categories of Permitted Investments described in clauses (1) through (27) above, the Issuer will be entitled to classify and may later reclassify (based on circumstances existing on the date of such reclassification) such
Investment (or portion thereof) in one or more of such categories set forth above.
80
Permitted Liens
means, with respect to any Person:
|
(1)
|
pledges or deposits by such Person under workers compensation laws, unemployment insurance laws or similar legislation or in connection with old age benefits, social security obligations, statutory obligations or
other similar charges (and pledges and deposits made in respect of letters of credit, surety bonds, bank guarantees or similar instruments supporting such obligations), in connection with bids, tenders, contracts or leases to which such Person is a
party, or deposits to secure public or statutory obligations of such Person or pledges or deposits to secure the performance of bids, trade contracts, leases, surety or appeal bonds, performance bonds or similar instruments (and pledges and deposits
made in respect of letters of credit, surety bonds, bank guarantees or similar instruments supporting such obligations) to which such Person is a party, or deposits as security for the payment of rent, in each case Incurred in the ordinary course of
business;
|
|
(2)
|
carriers, warehousemens and mechanics, materialmens, repairmens and other like Liens imposed by law, in each case for sums not overdue by more than 60 days or being contested in good faith
by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review and Liens arising solely by virtue of any
statutory or common law provision relating to bankers Liens, rights of
set-off
or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution;
provided
,
however
, that such deposit accounts or funds are not established or deposited for the purpose of providing collateral for any Indebtedness and are not subject to restrictions on access by such Person in excess of those
required by applicable banking regulations;
|
|
(3)
|
Liens for taxes not yet due and payable and Liens (or deposits as security) for taxes, which are being contested in good faith by appropriate proceedings and as to which appropriate reserves have been provided for in
accordance with GAAP;
|
|
(4)
|
Liens in favor of issuers of customs, stay, performance, bid, appeal or surety bonds, completion guarantees or letters of credit and other obligations of a like nature issued pursuant to the request of and for the
account of such Person in the ordinary course of its business;
|
|
(5)
|
minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses,
rights-of-way,
sewers,
electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which
were not Incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;
|
|
(6)
|
Liens securing Indebtedness Incurred under clause (14) of the covenant described under Certain CovenantsLimitation on Indebtedness;
provided
that no such Lien shall extend to or cover
other property of the Issuer or such Restricted Subsidiary other than the respective property so acquired or similar property acquired from the same lender or its Affiliates, and the principal amount of Indebtedness secured by any such Lien shall at
no time exceed the purchase price of all such property;
|
|
(7)
|
Liens to secure (A) Credit Facility Indebtedness (including any letter of credit facility related thereto); (B) the Secured Notes issued on the Issue Date and (C) the Additional Bridge Facility;
|
|
(8)
|
Liens existing on the Issue Date and on the Escrow Release Date;
|
|
(9)
|
Liens on property or shares of Capital Stock of another Person at the time the Issuer or any Restricted Subsidiary acquired the property of such other Person, including any acquisition by means of a merger or
consolidation with or into the Issuer or any of its Restricted Subsidiaries (other than a Lien Incurred in connection with, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of
transactions pursuant to which such Person becomes such a Subsidiary);
provided further
that the Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries (other than assets and property affixed or
appurtenant thereto and improvements, accessions, proceeds or distributions thereof);
|
81
|
(10)
|
Liens on property at the time such Person or any of its Subsidiaries acquires the property, including any acquisition by means of a merger or consolidation with or into such Person or a Subsidiary of such Person (other
than a Lien Incurred in connection with, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of transactions pursuant to which such Person or any of its Subsidiaries acquired such
property);
provided
,
however
, that the Liens may not extend to any other property owned by such Person and improvements, accessions, proceeds or distributions thereof) or any of its Restricted Subsidiaries (other than, in the case of
any merger or consolidation, the assets of any such Person or Restricted Subsidiary that is a party thereto or any assets and property affixed or appurtenant thereto and improvements, accessions, proceeds or distributions thereof);
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|
(11)
|
Liens securing Indebtedness or other obligations of a Subsidiary of such Person owing to such Person or a Wholly-Owned Subsidiary of such Person;
|
|
(12)
|
Liens securing Hedging Obligations so long as such Hedging Obligations are permitted to be Incurred under the Indenture;
|
|
(13)
|
Liens to secure any Refinancing (or successive Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien referred to in clauses (6), (7)(B), (8), (9) or (10) of this definition;
provided
,
however
, that:
|
|
(A)
|
such new Lien shall be limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements
and accessions to, such property or proceeds or distributions thereof); and
|
|
(B)
|
the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (x) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under
clause (6), (7)(B), (8), (9) or (10) at the time the original Lien became a Permitted Lien and (y) an amount necessary to pay any Financing Fees, related to such refinancing, refunding, extension, renewal or replacement;
|
|
(14)
|
Liens Incurred to secure cash management services in the ordinary course of business;
|
|
(15)
|
(a) customary rights and restrictions on Capital Stock or assets in connection with the sale or transfer of any such Capital Stock or assets in a transaction permitted under the provision in the Indenture described in
Certain CovenantsLimitation on Sales of Assets and Subsidiary Stock that are customarily included in agreements relating to such sale or transfer pending the completion thereof and (b) to the extent constituting a Lien,
encumbrances or restrictions permitted by clause (1)(K) of the covenant described under Certain CovenantsLimitation on Restrictions on Distributions from Restricted Subsidiaries;
|
|
(16)
|
Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto;
|
|
(17)
|
Liens on any cash earnest money deposits, escrow arrangements or similar arrangements made by the Issuer or any Restricted Subsidiary in connection with any letter of intent or purchase agreement in connection with a
transaction permitted under the Indenture;
|
|
(18)
|
Liens arising by virtue of Uniform Commercial Code financing statement filings (or similar filings under applicable law) regarding operating leases entered into by such Person in the ordinary course of business or
consignments entered into in connection with any transaction otherwise permitted under the Indenture;
|
|
(19)
|
interests or title of, or Lien securing interests of, a lessor, sublessor, licensor or sublicensor under a lease (other than a Capital Lease Obligation) entered into by the Issuer or any Restricted Subsidiary in the
ordinary course of business;
|
|
(20)
|
Liens deemed to exist in connection with Investments in repurchase agreements that are Permitted Investments;
|
82
|
(21)
|
Liens on property or assets of any Subsidiary that is not a Guarantor, which Liens secure Indebtedness of such Subsidiary permitted under the covenant described under Certain CovenantsLimitation on
Indebtedness;
provided
that in no event shall Indebtedness of
non-Guarantor
Subsidiaries be secured by Liens on intellectual property with an aggregate value in excess of $115 million as
reasonably determined by the Issuer;
|
|
(22)
|
Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods by any of the Subsidiaries in the ordinary course of business;
|
|
(23)
|
Liens arising under any Permitted Receivables Financing permitted by the covenant described under Certain CovenantsLimitation on Indebtedness;
|
|
(24)
|
leases, licenses, subleases or sublicenses, including
non-exclusive
software licenses, granted to others in the ordinary course of business that do not interfere in any material
respect with the business of the Issuer and the Restricted Subsidiaries, taken as a whole, or secure any Indebtedness;
|
|
(25)
|
Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; encumbrances or restrictions set forth in the organizational
documents (or any related joint venture, shareholders or similar agreement) of any
non-Wholly
Owned Subsidiary or any Person that is not a Subsidiary in respect of their respective Capital Stock;
|
|
(26)
|
other Liens securing Indebtedness in an aggregate amount not to exceed the greater of (x) $400 million and (y) 1.25% of Total Assets (measured at the time of any Incurrence in reliance on this clause (y))
outstanding at any time;
|
|
(27)
|
Liens in connection with Sale-Leaseback transactions securing Indebtedness permitted by the covenant described under Certain CovenantsLimitation on Indebtedness;
|
|
(28)
|
Liens on Capital Stock or other securities of:
|
|
(a)
|
an Unrestricted Subsidiary that secure Indebtedness or other obligations of an Unrestricted Subsidiary, or
|
|
(b)
|
a Person that is not a Subsidiary of the Issuer that secures Indebtedness or other obligations of such Person or such Persons Subsidiaries;
|
|
(29)
|
Liens in favor of the Issuer or a Guarantor;
|
|
(30)
|
ground leases or subleases, licenses or sublicenses in respect of real property on which facilities owned or leased by the Issuer or any of its Restricted Subsidiaries are located;
|
|
(31)
|
licenses, sublicenses, covenants not to sue or other grants of rights to intellectual property rights granted (i) in the ordinary course of business or (ii) in the reasonable business judgment of the Issuer or
the Restricted Subsidiaries in the conduct of its business (including in the settlement of litigation or entering into cross-licenses);
|
|
(32)
|
any zoning, building or similar law or right reserved to, or vested in, any governmental authority to control or regulate the use of any real property that does not materially interfere with the ordinary course of
conduct of the business of the Issuer and its Restricted Subsidiaries, taken as a whole;
|
|
(33)
|
Liens (i) of a collection bank arising under
Section 4-210
of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading
accounts or other commodity brokerage accounts Incurred in the ordinary course of business and (iii) in favor of a banking institution arising as a matter of law encumbering deposits (including the right to set off), which are within the
general parameters customary in the banking industry;
|
|
(34)
|
Liens that are contractual rights of
set-off
(i) relating to the
establishment of depository relations with banks not given in connection with the issuance of indebtedness, (ii) relating to pooled deposit,
|
83
|
automatic clearing house or sweep accounts of the Issuer or any Restricted Subsidiary to permit satisfaction of overdraft or similar obligations Incurred in the ordinary course of business of the
Issuer and its Restricted Subsidiaries, (iii) relating to purchase orders and other agreements entered into with customers of the Issuer or any Restricted Subsidiary in the ordinary course of business or (iv) relating to the credit cards
and credit accounts of the Issuer or any of its Restricted Subsidiaries in the ordinary course of business; and
|
|
(35)
|
Liens on specific items of inventory or other goods and the proceeds thereof of any Person securing such Persons obligations under any agreement to facilitate the purchase, shipment or storage of such inventory or
other goods, and pledges or deposits in the ordinary course of business securing inventory purchases from vendors.
|
Permitted Receivables Financing
means any transaction or series of transactions that may be entered into by the Issuer or
any Restricted Subsidiary pursuant to which it sells, conveys or contributes to capital or otherwise transfers (which sale, conveyance, contribution to capital or transfer may include or be supported by the grant of a security interest in)
Receivables or interests therein and all collateral securing such Receivables, all contracts and contract rights, purchase orders, security interests, financing statements or other documentation in respect of such Receivables, any guarantees,
indemnities, warranties or other obligations in respect of such Receivables, any other assets that are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions
involving receivables similar to such Receivables and any collections or proceeds of any of the foregoing (collectively, the
Related Assets
), all of
which such sales, conveyances, contributions to capital or transfers shall
be made by the transferor for fair value as reasonably determined by the Issuer (calculated in a manner typical for such transactions including a fair market discount from the face value of such Receivables) (a) to a trust, partnership,
corporation or other Person (other than the Issuer or any Subsidiary (other than any Receivables Financing Subsidiary)), which transfer is funded in whole or in part, directly or indirectly, by the Incurrence or issuance by the transferee or any
successor transferee of Indebtedness, fractional undivided interests or other securities that are to receive payments from, or that represent interests in, the cash flow derived from such Receivables and Related Assets or interests in such
Receivables and Related Assets, or (b) directly to one or more investors or other purchasers (other than the Issuer or any Subsidiary), it being understood that a Permitted Receivables Financing may involve (i) one or more sequential
transfers or pledges of the same Receivables and Related Assets, or interests therein (such as a sale,
conveyance or other transfer to any Receivables Financing Subsidiary followed by a pledge of the transferred Receivables and Related Assets
to secure Indebtedness Incurred by the Receivables Financing Subsidiary), and all such transfers, pledges and Indebtedness Incurrences shall be part of and constitute a single Permitted Receivables Financing, and (ii) periodic transfers or
pledges of Receivables and/or revolving transactions in which new Receivables and Related Assets, or interests therein, are transferred or pledged upon collection of previously transferred or pledged Receivables and Related Assets, or interests
therein,
provided
that any such transactions shall provide for recourse to such Subsidiary (other than any Receivables Financing Subsidiary) or the Issuer (as applicable) only in respect of the cash flows in respect of such Receivables and
Related Assets and to the extent of breaches of representations and warranties relating to the Receivables, dilution of the Receivables, customary indemnities and other customary securitization undertakings in the jurisdiction relevant to such
transactions.
Person
means any individual, corporation, partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
Preferred Stock
, as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such
Person.
84
principal
of a Note means the principal of such Note plus the premium, if any,
payable on such Note which is due or overdue or is to become due at the relevant time.
Pro Forma Adjustment
means, for any period with respect to any Acquisition Transaction or Asset Disposition, the
pro forma
increase in EBITDA projected by the Issuer in good faith based on the Issuers reasonable assumptions that are reasonably identifiable
and factually supportable cost savings, operating expense reductions and synergies to be achieved as a result thereof, within 18 months of the date of such Acquisition Transaction or Asset Disposition so long as the actions necessary to achieve such
cost savings, operating expense reductions or synergies have been taken or are reasonably expected to be taken within twelve months of such Acquisition Transaction or Asset Disposition. Any such
pro forma
increase to EBITDA shall be without
duplication for cost savings, operating expense reductions or synergies already included in EBITDA for such period. Notwithstanding the foregoing, any Pro Forma Adjustment to EBITDA for any period, together with any amounts added back pursuant to
clauses (v) and (vii) of the definition of EBITDA for such period, shall not exceed the greater of $500 million and 15% of EBITDA for such period (calculated prior to such
add-back).
Purchase Money Indebtedness
means Indebtedness (including Capital Lease Obligations (1) consisting of the
deferred purchase price of property, conditional sale obligations, obligations under any title retention agreement, other purchase money obligations and obligations in respect of industrial revenue bonds or similar Indebtedness, in each case where
the maturity of such Indebtedness does not exceed the anticipated useful life of the asset being financed or (2) Incurred to finance the construction, purchase, or lease by the Issuer or a Restricted Subsidiary of property, plant and equipment
(or the Capital Stock of a Person owning such assets),
including to replenish cash or repay revolving credit borrowings used to fund any such acquisition, lease, replacement or improvement, including additions and improvements;
provided
,
however
, that (x) such Indebtedness is Incurred within 270 days after such acquisition of such assets and (y) the principal amount of such Indebtedness does not exceed the cost of acquiring, constructing or
improving such asset.
Qualified Capital Stock
of a Person means Capital Stock of such Person other than
Disqualified Capital Stock;
provided
,
however
, that such Capital Stock shall not be deemed Qualified Capital Stock to the extent sold to a Subsidiary of such Person or financed, directly or indirectly, using funds (1) borrowed
from such Person or any Subsidiary of such Person or (2) contributed, extended, guaranteed or advanced by such Person or any Subsidiary of such Person (including, in respect of any employee stock ownership or benefit plan). Unless otherwise
specified, Qualified Capital Stock refers to Qualified Capital Stock of the Issuer.
Qualified Equity Offering
means any public issuance and sale of the Issuers common stock by the Issuer after the Escrow Release Date. Notwithstanding the foregoing, the term Qualified Equity Offering shall not include:
|
(1)
|
any issuance and sale with respect to common stock registered on Form
S-4
or Form
S-8;
or
|
|
(2)
|
any issuance and sale to any Subsidiary of the Issuer.
|
Rating Agency
means
Standard & Poors, Moodys and Fitch, or if Standard & Poors, Moodys or Fitch (or more than one of them) shall not make a rating on the Notes publicly available, a nationally recognized statistical rating
agency or agencies, as the case may be, selected by the Issuer which shall be substituted for Standard & Poors, Moodys or Fitch, as the case may be.
Receivables
means accounts receivable (including all rights to payment created by or arising from the sale of goods, leases
of goods or the rendition of services, no matter how evidenced (including in the form of a chattel paper)).
Receivables
Financing Subsidiary
means any Wholly Owned Subsidiary of the Issuer formed solely for the purpose of, and that engages only in, one or more Permitted Receivables Financings.
85
Refinance
means, in respect of any Indebtedness, to refinance, extend, renew,
refund, repay, prepay, purchase, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. Refinanced and Refinancing shall have correlative meanings.
Refinancing Indebtedness
means Indebtedness that Refinances any Indebtedness of the Issuer or any Restricted Subsidiary
existing on the Escrow Release Date or Incurred in compliance with the Indenture, including Indebtedness that Refinances Refinancing Indebtedness;
provided
,
however
, that except in the case of Refinancing Indebtedness Incurred under
clause (14), (16), (17) or (27) of the covenant described under Certain CovenantsLimitation on Indebtedness:
|
(1)
|
such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced;
|
|
(2)
|
such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced;
|
|
(3)
|
such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with
original issue discount, the aggregate accreted value) then outstanding plus related Financing Fees; and
|
|
(4)
|
if the Indebtedness being Refinanced is subordinated in right of payment to the Notes, such Refinancing Indebtedness is subordinated in right of payment to the Notes on terms no less favorable in any material respect to
the Holders than the Indebtedness being Refinanced;
|
provided further
,
however
, that Refinancing Indebtedness shall not
include (A) Indebtedness of a Subsidiary that is not a Guarantor that Refinances Indebtedness of the Issuer or a Guarantor or (B) Indebtedness of the Issuer or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted
Subsidiary.
Related Business
means any business conducted or proposed to be conducted (as described in the
Offering Memorandum) by the Issuer and its Restricted Subsidiaries on the Issue Date and other businesses reasonably ancillary, complementary or related thereto or reasonable extensions or expansions thereof.
Restricted Payment
with respect to any Person means:
|
(1)
|
the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar
payment to the direct or indirect holders of its Capital Stock other than:
|
|
(A)
|
dividends or distributions by such Person payable solely in its Capital Stock (other than Disqualified Stock),
|
|
(B)
|
dividends or distributions payable solely to the Issuer or a Restricted Subsidiary, and
|
|
(C)
|
dividends or other distributions made by a Restricted Subsidiary that is not a Wholly Owned Subsidiary in respect of any class of Capital Stock of such Restricted Subsidiary so long as the Issuer or a Restricted
Subsidiary receives at least its pro rata share of such dividends or distributions according to its proportionate ownership of such class of Capital Stock;
|
|
(2)
|
the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any Capital Stock of the Issuer held by any Person (other than by a Restricted Subsidiary) or of any Capital Stock of a
Restricted Subsidiary held by any Affiliate of the Issuer (other than by a Restricted Subsidiary or a Person (other than an Unrestricted Subsidiary) that is an Affiliate of the Issuer solely because the Issuer or a Restricted Subsidiary owns an
equity interest in or otherwise controls such Person), including in connection with any merger or consolidation and including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Issuer that is not
Disqualified Stock);
|
86
|
(3)
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the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations of the
Issuer or any Guarantor (other than (A) from the Issuer or a Restricted Subsidiary or (B) the purchase, repurchase, redemption, defeasance or other acquisition or retirement of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, repurchase, redemption, defeasance or other acquisition or retirement); or
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(4)
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the making of any Investment (other than a Permitted Investment) in any Person.
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The amount of
any Restricted Payment if made otherwise than in cash will be Fair Market Value of the assets subject thereto.
Restricted
Subsidiary
means any Subsidiary of the Issuer that is not an Unrestricted Subsidiary.
Sale/Leaseback
Transaction
means an arrangement relating to property owned by the Issuer or a Restricted Subsidiary on the Issue Date or thereafter acquired by the Issuer or a Restricted Subsidiary whereby the Issuer or a Restricted Subsidiary transfers
such property to a Person and the Issuer or a Restricted Subsidiary concurrently leases it from such Person or its Affiliates.
SanDisk Indentures
means (a) the indenture with respect to SanDisk Corporations 1.5% Convertible Senior Notes
due 2017, dated as of August 25, 2010, by and between SanDisk Corporation and The Bank of New York Mellon Trust Company, N.A. and (b) the indenture with respect to SanDisk Corporations 0.5% Convertible Senior Notes due 2020,
dated as of October 29, 2013, by and between SanDisk Corporation and The Bank of New York Mellon Trust Company, N.A. (each as amended, restated, supplemented or otherwise modified from time to time prior to the Issue Date).
Seagate Arbitration
means the arbitration between the Issuer and Seagate Technology, LLC and related matters based on the
actions initially filed by Seagate Technology, LLC on October 4, 2006.
SEC
means the Securities and Exchange
Commission.
Secured Indebtedness
means any Indebtedness of the Issuer or any of its Restricted Subsidiaries secured by
a Lien.
Secured Notes
means the Issuers 7.375% Senior Secured Notes due 2023.
Securities Act
means the U.S. Securities Act of 1933, as amended.
Senior Indebtedness
means with respect to any Person:
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(1)
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Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred; and
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(2)
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all other Obligations of such Person (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person whether or not post-filing interest is allowed in such
proceeding) in respect of Indebtedness described in clause (1) above,
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unless, in the case of clauses (1) and (2), in the
instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such Indebtedness or other Obligations are subordinate in right of payment to the Notes or the Subsidiary Guarantee of such Person, as the
case may be;
provided
,
however
, that Senior Indebtedness shall not include:
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(1)
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any obligation of such Person to the Issuer or any Subsidiary of the Issuer;
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(2)
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any liability for Federal, state, local or other taxes owed or owing by such Person;
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(3)
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any accounts payable or other liability to trade creditors arising in the ordinary course of business;
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(5)
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any Indebtedness or other Obligation of such Person which is subordinate or junior in any respect to any other Indebtedness or other Obligation of such Person;
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(6)
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that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of the Indenture;
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(7)
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any Indebtedness, which, when Incurred and without respect to any election under Section 111(b) of Title 11, United States Code, is without recourse to such Person;
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(8)
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any Indebtedness of or amounts owed by such Person for compensation to employees or for services rendered to another Person; and
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(9)
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Indebtedness of such Person to a Subsidiary or any other Affiliate or any such Affiliates Subsidiaries.
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Significant Subsidiary
means any Restricted Subsidiary that would be a Significant Subsidiary of the Issuer
within the meaning of Rule
1-02
under Regulation
S-X
promulgated by the SEC and, for purpose of determining whether an Event of Default has occurred, any group of
Restricted Subsidiaries that combined would be such a Significant Subsidiary.
Standard
&
Poors
means Standard & Poors, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.
Stated Maturity
means, with respect to any security, the date specified in such security as the fixed date on which the
final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
Subordinated Obligation
means, with respect to a
Person, any Indebtedness of such Person (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Notes or a Subsidiary Guarantee of such Person, as the case may be, pursuant to a
written agreement to that effect.
Subsidiary
means, with respect to any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by:
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(2)
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such Person and one or more Subsidiaries of such Person; or
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(3)
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one or more Subsidiaries of such Person.
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Subsidiary Guarantee
means a
Guarantee by a Guarantor of the Issuers obligations with respect to the Notes.
Temporary Cash Investments
means
any of the following:
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(1)
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any investment in direct obligations of the United States of America or any member of the European Union or any agency thereof or obligations guaranteed by the United States of America or any member of the European
Union or any agency thereof;
provided
that any such obligations shall mature within one (1) year of the date of issuance thereof;
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(2)
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investments in certificates of deposit or bankers acceptances by any domestic or foreign bank having capital and surplus of not less than $500.0 million in the case of U.S. banks and $100.0 million in
the case of
non-U.S.
banks which have a maturity of one (1) year or less;
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(3)
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repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause
(2) above;
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(4)
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investments in commercial paper rated at least
P-2
by Moodys or at least
A-2
by S&P (or, if at any time neither Moodys nor
S&P shall be rating such obligations, an equivalent rating from another nationally recognized rating service) maturing not more than one year from the date of issuance thereof;;
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(5)
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marketable short-term money market or similar securities having a rating of at least
P-2
by Moodys or
A-2
by S&P (or, if at any
time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized rating service);
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(6)
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investments in money market funds that invest at least 90.0% of their assets in securities of the types described in clauses (1) through (5) above; and
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(7)
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(i) dollars, Canadian dollars, pounds, euros or any national currency of any participating member state of the EMU; or (ii) in the case of any Foreign Subsidiary that is a Restricted Subsidiary or any jurisdiction
in which the Issuer and the Restricted Subsidiaries conduct business, such local currencies held by it from time to time in the ordinary course of business.
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In the case of investments by any Foreign Subsidiary that is a Restricted Subsidiary or investments made in a country outside the United
States of America, Temporary Cash Investments shall also include (i) investments of the type and maturity described in clauses (1) through (7) above of foreign obligors, which investments or obligors (or the parents of such obligors)
have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies and (ii) other short-term investments utilized by Foreign Subsidiaries that are Restricted Subsidiaries in accordance with normal investment
practices for cash management in investments analogous to the foregoing investments in clauses (1) through (7) and in this sentence. Notwithstanding the foregoing, Temporary Cash Investments shall include amounts denominated in currencies
other than those set forth in clause (7)(i) above; provided that such amounts are converted into any currency listed in clauses (7)(i) as promptly as practicable and in any event within ten (10) Business Days following the receipt of
such amounts.
Test Period
means, at any date of determination, the period of four consecutive fiscal quarters of the
Issuer then last ended.
Total Asset
s means, as of any date of determination, the total assets of the Issuer
and its Restricted Subsidiaries as shown on the most recently prepared consolidated balance sheet of the Issuer as of the end of the most recent fiscal quarter for which such balance sheet is available, prepared on a consolidated basis in accordance
with GAAP, with such
pro forma
adjustments for transactions consummated on or prior to or simultaneously with the date of the calculation as are consistent with the
pro forma
adjustment provisions set forth in the definition of
Consolidated Coverage Ratio.
Transactions
has the meaning set forth in the Offering Memorandum.
Treasury Rate
means the yield to maturity at the time of computation of U.S. Treasury securities with a constant maturity
(as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the period from the redemption date to April 1, 2019;
provided
,
however
, that if the period from the redemption date to April 1, 2019 is not equal to the
constant maturity of a U.S. Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth
of a year) from the
weekly average yields of U.S. Treasury securities for which such yields are given, except that if the period from the redemption date to April 1, 2019 is less than one year, the weekly average yield on actually traded U.S. Treasury securities
adjusted to a constant maturity of one year will be used.
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Trustee
means, with respect to the Indenture, U.S. Bank National Association
until a successor replaces it under the Indenture and, thereafter, means the successor under the Indenture.
Trust
Indenture Act
means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb), as amended.
Trust
Officer
means any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject and who, in each case, shall
have direct responsibility for the administration of the Indenture.
Unrestricted Subsidiary
means:
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(1)
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any Subsidiary of the Issuer that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; and
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(2)
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any Subsidiary of an Unrestricted Subsidiary.
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The Board of Directors may designate any
Subsidiary of the Issuer (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of,
the Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of the Subsidiary to be so designated;
provided
,
however
, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or
(B) if such Subsidiary has assets greater than $1,000, such designation would be permitted as an Investment under the covenant described under Certain CovenantsLimitation on Restricted Payments, or as a Permitted
Investment.
The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided
,
however
, that immediately after giving effect to such designation (A) the Issuer could Incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of the Certain CovenantsLimitation on Indebtedness
covenant on a
pro forma
basis taking into account such designation (such designation will be deemed to be an Incurrence of Indebtedness by a Restricted Subsidiary of any Indebtedness of such Unrestricted Subsidiary) and (B) no Default
shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly delivering to the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an
Officers Certificate certifying that such designation complied with the foregoing provisions. Notwithstanding the foregoing, Western Digital International, a Cayman Islands corporation, may not be designated as an Unrestricted Subsidiary.
U.S.
Dollar Equivalent
means with respect to any monetary amount in a currency other than
U.S. dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable
foreign currency as published in
The Wall Street Journal
in the Exchange Rates column under the heading Currency Trading on the date two Business Days prior to such determination.
Except as described under Certain CovenantsLimitation on Indebtedness, whenever it is necessary to determine whether
the Issuer has complied with any covenant in the Indenture or if a Default has occurred and an amount is expressed in a currency other than U.S. dollars, such amount will be treated as the U.S. Dollar Equivalent determined as of the date such
amount is initially determined in such currency.
U.S. Government Obligations
means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not
callable at the issuers option.
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Voting Stock
of a Person means all classes of Capital Stock of such Person
then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof.
Wholly Owned Subsidiary
means a Restricted Subsidiary all the Capital Stock of which (other than directors qualifying
shares) is owned by the Issuer or one or more other Wholly Owned Subsidiaries.
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FORM,
BOOK-ENTRY
PROCEDURES
AND TRANSFER
General
The New
Notes will be issued in fully registered global form. The New Notes initially will be represented by one or more global certificates without interest coupons (the global notes). The global notes will be deposited upon issuance with the
Trustee as custodians for DTC and registered in the name of DTC or its nominee for credit to the accounts of direct or indirect participants in DTC, as described below under Depositary Procedures.
The global notes will be deposited on behalf of the acquirers of the New Notes for credit to the respective accounts of the acquirers or to
such other accounts as they may direct. Except as described below, the global notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the global notes may
not be exchanged for the New Notes in certificated form except in the limited circumstances described below under Exchange of
Book-Entry
Notes for Certificated Notes.
Transfers of beneficial interests in the global notes will be subject to the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
Depositary Procedures
The following description of the operations and procedures of DTC is provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems and are subject to changes by them. We take no responsibility for these operations and procedures and urge investors to contact the systems or their participants directly
to discuss these matters.
DTC has advised us that it is:
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a limited purpose trust company organized under the New York Banking Law;
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a banking organization within the meaning of the New York Banking Law;
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a member of the U.S. Federal Reserve System;
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a clearing corporation within the meaning of the New York Uniform Commercial Code; and
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a clearing agency registered under Section 17A of the Exchange Act.
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DTC was
created to hold securities for its participating organizations (collectively, the participants) and facilitate the clearance and settlement of transactions in those securities between participants through electronic
book-entry
changes in accounts of its participants. The participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Access to DTCs system
is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly (collectively, the indirect participants).
Persons who are not participants may beneficially own securities held by or on behalf of DTC only through participants or indirect participants. DTC has no knowledge of the identity of beneficial owners of securities held by or on behalf of DTC.
DTCs records reflect only the identity of participants to whose accounts securities are credited. The ownership interests and transfer of ownership interests of each beneficial owner of each security held by or on behalf of DTC are recorded on
the records of the participants and indirect participants.
DTC has also advised us that, pursuant to procedures established by DTC,
ownership of interests in the global notes will be shown on, and the transfer of ownership of such interest will be effected only through, records maintained by DTC (with respect to the participants) or by the participants and the indirect
participants (with respect to other owners of beneficial interests in the global notes).
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Investors in the global notes may hold their interests therein directly through DTC if they are
participants in such system or indirectly through organizations that are participants or indirect participants in such system. All interests in the global notes will be subject to the procedures and requirements of DTC. The laws of some states
require that certain persons take physical delivery of certificates evidencing securities they own. Consequently, the ability to transfer beneficial interests in the global notes to such persons will be limited to that extent. Because DTC can act
only on behalf of participants, which in turn act on behalf of indirect participants, the ability of beneficial owners of interests in the global notes to pledge such interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the global notes will not have New Notes registered in their names, will not receive
physical delivery of the New Notes in certificated form and will not be considered the registered owners or holders thereof under the indenture for any purpose.
Payments in respect of the principal of and premium, if any, and interest on the global notes registered in the name of DTC or its nominee
will be payable by the Trustee (or the paying agents if other than the Trustee) to DTC in its capacity as the registered holder under the indenture. We and the Trustee will treat the persons in whose names the New Notes, including the global notes,
are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, none of us, the Trustee or any agent of ours or the Trustee has or will have any responsibility or liability
for:
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any aspect of DTCs records or any participants or indirect participants records relating to or payments made on account of beneficial ownership interests in the global notes, or for maintaining,
supervising or reviewing any of DTCs records or any participants or indirect participants records relating to the beneficial ownership interests in the global notes; or
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any other matter relating to the actions and practices of DTC or any of its participants or indirect participants.
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DTC has advised us that its current practice, upon receipt of any payment in respect of securities such as the New Notes (including principal
and interest), is to credit the accounts of the relevant participants with the payment on the payment date in amounts proportionate to their respective holdings in the principal amount of the relevant security as shown on the records of DTC, unless
DTC has reason to believe it will not receive payment on such payment date. Payments by the participants and the indirect participants to the beneficial owners of New Notes will be governed by standing instructions and customary practices and will
be the responsibility of the participants or the indirect participants and will not be the responsibility of DTC, the Trustee or us. Neither we nor the Trustee will be liable for any delay by DTC or any of its participants in identifying the
beneficial owners of the New Notes, and we and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes.
Interests in the global notes are expected to be eligible to trade in DTCs
Same-Day
Funds
Settlement System and secondary market trading activity in such interests will therefore settle in immediately available funds, subject in all cases to the rules and procedures of DTC and its participants.
DTC has advised us that it will take any action permitted to be taken by a holder of New Notes only at the direction of one or more
participants to whose account with DTC interests in the global notes are credited and only in respect of such portion of the aggregate principal amount of the New Notes as to which such participant or participants has or have given such direction.
Although DTC has agreed to the foregoing procedures to facilitate transfers of interests in the global notes among participants in DTC,
it is under no obligation to perform or to continue to perform such procedures, and the procedures may be discontinued at any time. Neither we nor the Trustee will have any responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures governing their operations.
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The information in this section concerning DTC and its
book-entry
system has been obtained from sources that we believe to be reliable, but we take no responsibility for the accuracy thereof.
Exchange of
Book-Entry
Notes for Certificated Notes
If (i) DTC is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by us within 90 days,
(ii) DTC has ceased to be a clearing agency registered under the Exchange Act and a successor depositary is not appointed by us within 90 days, (iii) we, at our option, notify the Trustee in writing that we elect to cause the issuance of
the New Notes in the form of certificated notes, or (iv) an Event of Default has occurred and is continuing, upon request by the holders of the New Notes, we will issue New Notes in certificated form in exchange for global securities. The
indenture permits us to determine at any time and in our sole discretion that notes shall no longer be represented by global securities. DTC has advised us that, under its current practices, it would notify its participants of our request, but will
only withdraw beneficial interests from the global security at the request of each DTC participant. We would issue definitive certificates in exchange for any beneficial interests withdrawn.
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